Zebra Annual Report 2019

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FY2019 Annual Report · Zebra

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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

+1 754 900 4050

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.

Annual Report 2019

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To Our Investors,
In 2019 we celebrated Zebra’s 50th anniversary by honoring all who have contributed to our
Company’s success over the past five decades. Zebra has never strayed from its innovative roots and
the entrepreneurial spirit on which Ed Kaplan and Gary Cless built the Company. By continuing this
spirit, we have made strong progress in advancing our Enterprise Asset Intelligence vision of enabling
every asset and worker to be visible, connected, and optimally utilized, so that our customers can gain
a performance edge.

Transforming Workflows in the On-Demand Economy
As a trusted strategic partner, we collaborate closely with our customers to optimize their end-to-end
workflows and improve their operational performance in an increasingly on-demand economy.
The value proposition we bring to the market has translated into continued sales growth in each
of our primary vertical markets that we serve:

• In healthcare, our fastest growing vertical, we address a broad set of challenges that hospital

systems face across their operations, ranging from the safe administration of bedside care to the
management of medical supplies and equipment throughout their supply chain.

• In the transportation and logistics space, our customers are experiencing a lack of available labor

to meet demand while their end-customers expect service and information instantly. We bring real-time visibility to the supply chain, which
enables our customers to increase productivity and improve their level of service.

• In retail and ecommerce, customers are making significant investments in the critical area of omnichannel fulfillment. As more items are

source-tagged at the point of manufacture, radio frequency identification (RFID) solutions have been gaining momentum, delivering close to
100% inventory accuracy.

• For manufacturers, Zebra helps to optimize field operations, improve plant floor productivity, and modernize their warehousing and distribution

networks through a broad set of innovative solutions.

Solid 2019 Financial Results
Our team executed well, driving solid profitable growth on top of an exceptional 2018 performance. Our diversified business enabled us to post
solid growth despite an uneven global macroeconomic environment. Highlights included:

• 6 percent sales growth, broad based across our vertical markets, with particularly strong double-digit growth in enterprise

mobile computing

• 90 basis point adjusted EBITDA margin* expansion through strong profitable sales growth and operating expense leverage

• 18 percent growth in non-GAAP diluted earnings per share* and free cash flow* of $624 million

Also in 2019, our Board of Directors approved a new $1 billion share repurchase authorization as a mechanism to return capital
to shareholders.

Fostering a Culture of Innovation
We continue to build upon our industry-leading core offerings by investing in innovative solutions that elevate our role in enabling the
Intelligent Enterprise. We are broadening our role as a strategic solutions provider engaging with our customers’ C-suite, and we are continuing
to invest in capabilities that digitize and automate enterprise operations and drive sustainable profitable growth. In 2019 we made three
strategic acquisitions:

• Cortexica Vision Systems accelerates our capabilities in computer vision. Its talented engineering team has been developing vision-based

analytics and artificial intelligence solutions that include object recognition through machine learning, image and video analysis, and
visual search.

• Profitect, now known as Zebra Prescriptive Analytics, can analyze massive data streams, utilizing machine learning to identify variations in the

data in real time. The most impactful recommendations are instantly prioritized and sent directly to workers’ mobile devices.

• Temptime Corporation enhances our supplies business and gives us a competitive advantage in the healthcare supply chain through a time-

temperature monitoring product portfolio.

Additionally, as a responsible corporate citizen, we are committed to strong corporate governance practices and environmental and social
initiatives that benefit all stakeholders. This includes a focus on improving the environmental impact of our operations, products, and solutions;
fostering an inclusive culture and diverse workforce; protecting and developing our employees; and investing in the communities where we
live and work.

Our strategic initiatives and investments, both organic and through acquisitions, drive Zebra’s positive momentum ensuring that the next
50 years will be as successful as our first 50 as we continue to create value for shareholders. I am both grateful and excited that our Zebra
team and trusted partners have positioned us well for continued success.

Sincerely,

Anders Gustafsson

*For a reconciliation of these non-GAAP measures to similar GAAP measures, please refer to Zebra’s 4Q 2019 earnings press release located at investors.zebra.com.

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

Michael H. Terzich

Senior Vice President,

Chief Administrative Officer

Stephen E. Williams

Global Supply Chain Officer

Colleen M. O’Sullivan

Vice President,

Chief Accounting Officer

Board of Directors

Michael A. Smith, Chairman 1,2,3

Chairman and Chief Executive Officer

FireVision, LLC

Richard L. Keyser 2,3

Chairman (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

(Retired)

Bay Networks

Ross W. Manire 1,3

Chief Executive Officer

(Retired)

ExteNet Systems, Inc.

Joachim Heel

Senior Vice President,

Global Sales

Cristen L. Kogl

Senior Vice President,

General Counsel and

Corporate Secretary

Jeffrey F. Schmitz

Senior Vice President,

Chief Marketing Officer

Executive Officers

Anders Gustafsson

Chief Executive Officer

Olivier C. Leonetti

Chief Financial Officer

William J. Burns

Chief Products and

Solutions Officer

Michael Cho

Senior Vice President,

Corporate Development

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

will be held on May 14, 2020,

at 10:30 a.m. (Central Time)

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

Zebra’s Annual Meeting of Stockholders

Louisville, KY 40202

Transfer Agent and Registrar

Form 10-K

Computershare

P.O. Box 505000

Louisville, KY 40233-5000

Overnight Delivery:

Computershare

462 South 4th Street, Suite 1600

Telephone:

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

TDD for hearing impaired:

Website:

www.computershare.com/investor

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.

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.

+1 800 231-5469 or +1 201 680-6610

Equal Employment Opportunities/

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

FORM 10-K

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

For the fiscal year ended December 31, 2019

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

For the transition period from to

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

Trading Symbol(s)
ZBRA

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

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

Exchange Act. Yes

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted 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 such files). Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer

Accelerated filer

Non-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 provided 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).
No

Yes

The aggregate market value of the shares of Class A Common Stock held by non-affiliates of the registrant, computed by

reference to the closing price of such stock as of the last business day of the registrant’s most recently completed second
quarter, June 29, 2019, was $11.2 billion.

As of February 4, 2020, there were 54,008,653 shares of Class A Common Stock, par value $.01 per share, outstanding.

Documents Incorporated by Reference
Certain sections of the Registrant’s definitive proxy statement for its Annual Meeting of Stockholders to be held on
May 14, 2020, are incorporated by reference into Part III of this report, as indicated herein. The definitive proxy statement shall
be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report
relates.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 2019
TABLE OF CONTENTS

PART I
Item 1.

Business

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

Item 6.

Item 7.

Selected Financial Data

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

Overview

Results of Operations

Critical Accounting Policies and Estimates

New Accounting Pronouncements

Liquidity and Capital Resources

Contractual Obligations

Non-GAAP Measures

Item 7A.

Item 8.

Quantitative and Qualitative Disclosures About Market Risk

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Note 1: Description of Business

Note 2: Significant Accounting Policies

Note 3: Revenues

Note 4: Inventories

Note 5: Business Acquisitions

Note 6: Goodwill and Other Intangibles

Note 7: Property, Plant and Equipment

Note 8: Investments

Note 9: Exit and Restructuring Costs

Note 10: Fair Value Measurements

Note 11: Derivative Instruments

Note 12: Long-Term Debt

Note 13: Leases

Note 14: Commitments and Contingencies

Note 15: Share-Based Compensation

Note 16: Income Taxes

PAGE

Note 17: Earnings Per Share

Note 18: Accumulated Other Comprehensive Income (Loss)

Note 19: Accounts Receivables Factoring

Note 20: Segment Information & Geographic Data

Note 21: Supplementary Financial Information

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.

Controls and Procedures

Item 9B.

Other Information

PART III
Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Item 12.

Item 13.

Item 14.

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.
Item 16.

Exhibits, Financial Statement Schedules

Form 10-K Summary

Signatures

Schedule II - Valuation and Qualifying Accounts

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 2020. 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,
Success of integrating acquisitions,
Interest rate and financial market conditions,

•
•
• Access to cash and cash equivalents held outside the U.S.,
• The effect of natural disasters, man-made disasters, public health issues, and cybersecurity incidents 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 providing Enterprise Asset Intelligence (“EAI”) solutions in the Automatic Identification and Data
Capture (“AIDC”) industry. 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, improved regulatory compliance, and better customer experiences.

We design, manufacture, and sell a broad range of AIDC products, including: mobile computers, barcode scanners and imagers,
RFID readers, specialty printers for barcode labeling and personal identification, real-time location systems (“RTLS”), related
accessories and supplies, such as 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, healthcare, hospitality, warehouse and distribution, energy and utilities, government, public safety, 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 approximately 180 countries, with 124 facilities
and approximately 8,200 employees worldwide.

Through innovative application of our technologies, we are leading an evolution of the traditional AIDC market into EAI,
which encompasses solutions that sense information from enterprise assets, including packages moving through a supply chain,
equipment in a factory, workers in a warehouse, and shoppers in a store. 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 is being driven by strong underlying secular trends in technology. These trends include the
internet of things (“IoT”), cloud-based data analytics, and mobility, as well as artificial intelligence and automation. The IoT is
enabling a proliferation of smart, connected devices. Newer solutions, which include these smart, connected devices, capture a
much broader range of information than is possible with traditional AIDC solutions and communicate this information in real-
time. 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. The continued rapid growth of mobile devices and applications are also significantly expanding
mobile computing use cases in the enterprise. With this expanded mobility, end-users can consume or act upon dynamic
enterprise data and information anytime and anywhere. Computer vision solutions, which enable the automatic extraction and
understanding of useful information from a digital image or video, are also driving the expansion of intelligent automation,
which leverages our sense-analyze-act framework to improve workflows with or without a human operator.

Zebra Technologies Corporation is incorporated under the laws of the State of Delaware as the successor to an Illinois
corporation, Data Specialties, Inc., organized in 1969. We changed our name from Data Specialties, Inc. to Zebra Technologies
Corporation on December 9, 1986. Our principal executive offices are located at 3 Overlook Point, Lincolnshire, Illinois 60069.

Acquisitions
Cortexica: On November 5, 2019, the Company acquired Cortexica Vision Systems Limited (“Cortexica”) for $7 million in
cash. Additionally, we incurred $2 million of acquisition-related costs in 2019. Cortexica is a provider of computer vision-
based artificial intelligence solutions primarily serving the retail industry, expanding upon the Company’s initiative to advance
our solutions offerings. The operating results of Cortexica are included within the EVM segment beginning November 5, 2019.

Profitect: On May 31, 2019, the Company acquired Profitect, Inc. (“Profitect”) for total purchase consideration of $79 million,
which consisted of $75 million in cash paid, net of cash acquired, and the fair value of the Company’s existing minority
ownership interest in Profitect of $4 million, as remeasured upon acquisition. The Company also incurred $13 million of
acquisition-related costs in 2019, primarily related to the settlement of Profitect employee stock option awards. The Profitect
business is a provider of prescriptive analytics primarily serving the retail industry. In acquiring Profitect, the Company seeks
to enhance its existing software solutions within the retail industry, with possible future applications in other industries. The
operating results of Profitect are included within the EVM segment beginning May 31, 2019.

Temptime: On February 21, 2019, the Company acquired Temptime Corporation (“Temptime”) for $180 million in cash, net of
cash acquired. Additionally, we incurred $3 million of acquisition-related costs in 2019. The Temptime business is a developer
and manufacturer of temperature-monitoring labels and devices. The Company intends to expand Temptime’s product offerings
within the healthcare industry, with possible future applications in other industries involving temperature-sensitive products.
The operating results of Temptime are included within the AIT segment beginning February 21, 2019.

Xplore: On August 14, 2018, the Company acquired Xplore Technologies Corporation (“Xplore”) for $87 million in cash,
which included $72 million for the net assets acquired, a $9 million payment of Xplore debt, as well as $6 million of other
Xplore transaction-related obligations. Additionally, we incurred $8 million of acquisition-related costs in 2018 and $2 million
of system integration costs in 2019. The Xplore business designs, integrates, markets and sells rugged tablets that are primarily
used by industrial, government, and field service organizations. The acquisition of Xplore is intended to expand the Company’s
portfolio of mobile computing devices to serve a wider range of customers. The operating results of Xplore are included within
the EVM segment beginning August 14, 2018.

See Note 5, Business Acquisitions in the Notes to Consolidated Financial Statements.

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.

Since closing the Enterprise acquisition, integration activities by the Company focused on creating “One Zebra” by integrating
the operations of Enterprise to create a single business across all functions. Our integration priorities centered on maintaining
business continuity while identifying and implementing cost synergies, operating efficiencies, and integration of functional
organizations and processes, in addition to concluding MSI-provided transition service agreements (“TSAs”).

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

Operations
Our operations consist of two reportable segments: (1) Asset Intelligence & Tracking (“AIT”), primarily comprised of barcode
and card printing, supplies, services, location solutions, and retail solutions; and (2) Enterprise Visibility & Mobility (“EVM”),
primarily 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, drivers’ licenses, and healthcare identification cards), access control (e.g. employee or student building
access), and financial cards (e.g. credit, debit and ATM cards) by financial institutions. Our RFID printers and 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 RFID tags 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 supplies with our printing equipment. Our supplies business also includes temperature-
monitoring labels, as well as self-laminating wristbands for use in laser printers.

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 Zebra MotionWorks® sports solution to track the location
and movement of personnel and objects in real-time during sporting events, as well as in training and practice activities.

Retail Solutions: The Company provides a range of physical inventory management solutions with application in the retail
industry, including solutions for full store physical inventories, cycle counts, and analytics. These solutions include the use of
barcode scanners or RFID readers, along with connected software.

Enterprise Visibility & Mobility
Mobile Computing: We design, manufacture, and sell rugged and enterprise-grade mobile computing products and accessories
in a variety of specialized form factors and designs to meet a wide variety of enterprise applications. Industrial applications
include inventory management in warehouses and distribution centers; field mobility applications include field service, post and
parcel, and direct store delivery; and retail and customer facing applications include e-commerce, omnichannel, mobile point of
sale, inventory look-up, staff collaboration, and analytics. Our products incorporate both Android™ and Microsoft® Windows®
operating systems and support local-area and wide-area voice and data communications. Our mobile computing products often
incorporate barcode scanning, global position system 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 transmitting 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 EAI, 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-users 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
Over time, we have developed and delivered improved, targeted end-to-end solutions for our customers. We remain committed
to leveraging our technology portfolio and expertise in the industries that we service to continue to develop innovative solutions
that meet the key needs of our customers.

Highly diversified business mix
We are highly diversified across business segments, end markets, geographies, and customers. 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 to 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 and 3D 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, accessories, and
software applications. 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
Our EAI vision is for every asset and worker to be connected, visible, and optimally utilized. We believe that secular
technology trends, particularly in IoT, cloud computing, intelligent automation, and mobility, advance our vision and are
transforming our customers’ businesses and our industry, providing 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. We plan to continue investing in the development of computer vision
and other technologies that will enable intelligent automation solutions, providing increased visibility into the enterprise, real-
time, actionable information, and improved customer experiences. Our solutions will also increasingly include advanced
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, organically or inorganically, 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.

Enhance financial strength and flexibility
We intend to continue to improve profitability and cash flow generation through operational execution and increased
productivity derived from continuous business process improvement, cost management, and focus on working capital
efficiency.

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, automation, and mobility, are some of the factors that are
creating growth opportunities for established and new competitors.

Key competitive factors include the breadth and quality of products, solutions and services, price, design, product performance,
durability, product and service global availability, warranty coverage, brand recognition, 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 and related services 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 and related services that are
suitable for most global market applications include Datalogic and Honeywell. 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 Net 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 Net sales during these years. See Note 20, Segment Information & Geographic Data
in the Notes to Consolidated Financial Statements for further information.

Customer A
Customer B
Customer C

Year Ended December 31,
2018

2017

2019

18.3%
13.7%
16.6%

20.3%
15.7%
14.1%

21.3%
14.2%
13.2%

Sales and Marketing
Sales: We sell our products, solutions, and services primarily through distributors (two-tier distribution), value added resellers
(“VARs”), 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
regional and channel marketing teams that interface closely with customers, partners, and sellers. Our marketing organization
also includes teams that support global strategies and communications, including portfolio marketing, digital marketing,
marketing operations and communications, and strategic marketing functions.

Manufacturing and Outsourcing
Final assembly of our hardware products is performed by third-parties, including electronics manufacturing services companies
(“EMSs”) and joint design manufacturers (“JDMs”). Our products are currently produced in facilities primarily located in
China, Mexico, and Brazil. In 2019, we commenced efforts to further diversify our product sourcing footprint to Taiwan,
Vietnam, and Malaysia, thereby reducing reliance on Chinese-based manufacturing. The EMSs and JDMs 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 third party logistics providers 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 U.S.
government. Production facilities for our supplies products are located in the U.S. 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 2019, 2018, and 2017 were $447 million, $444 million, and $389 million, or 10.0%, 10.5%
and 10.5% of Net sales, respectively. We have approximately 2,000 engineers and innovation and design experts 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 facilitate customers’ mission-critical applications and ensure secure
data transmission. 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, data analytics 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 UHF to
provide high speed, non-line of sight data capture from hundreds or thousands of RFID tags in near real-time. Using the 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
Extensible Markup Language (“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 and RFID labels, 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. Also included within our supplies business are temperature monitoring
labels, which incorporate chemical indicators that are designed to change color upon exceeding predefined time and/or
temperature thresholds.

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 U.S. and other countries. As of December 31, 2019,
the Company owned approximately 2,200 trademark registrations and trademark applications, and over 4,900 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
work-flows, 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, 2019, the Company had approximately 8,200 employees. Some portions of our business, primarily in
Europe, China, and India are subject to labor laws that differ significantly from those in the U.S. In Europe, for example, it is
common for a works council to represent employees when discussing matters such as compensation, benefits, restructurings
and layoffs. We 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
2019, 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.

Available Information
Our website address is www.zebra.com. The information on our website is not, and shall not be deemed to be, a part of this
annual report Form 10-K or incorporated into any other filings we make with the Securities and Exchange Commission
(“SEC”). Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments
to those reports, are made available free of charge on the Investor Relations page of our website as soon as reasonably
practicable after we electronically file them with or furnish them to the SEC.

Item 1A.

Risk Factors

Investors should carefully consider the risks, uncertainties, and other factors described below, as well as other disclosures in this
report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, because they could
have a material adverse effect on our business, financial condition, operating results, cash flows, and growth prospects. 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. No priority or significance is intended by, nor should be attached to,
the order in which the risk factors appear.

General Business and Industry Risks

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 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;
• Managing parties to whom we have outsourced portions of our business operations;
• Managing administrative and operational burdens;
• Managing stakeholder interests including customer, investor and employee social responsibility matters;
• Maintaining and improving information technology infrastructure to support growth;
• Managing the integration of acquisitions;
• Managing logistical problems common to complex, expansive operations;
• Managing our international operations; and
• Attracting, developing and retaining individuals with the requisite technical expertise to develop new technologies and

introduce 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 inheritance of known, and the discovery of unknown, 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 operating results or cash flows could result in impairment

of goodwill or intangible assets acquired;

• The 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 changes such as potentially dilutive issuances of equity securities, the incurrence of
debt and contingent liabilities, and goodwill impairment charges.

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:

Frequent new product and service introductions;

• Evolving industry standards;
•
• 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:

Superior customer service;

• Technologically advanced systems that satisfy user demands;
•
• 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 or technologies. Increased
competition in mobile computing products, data capture products, radio frequency identification devices (“RFID”), printers, or
supplies may result in price reductions, lower gross profit margins, and loss of market share, and could require increased
spending on research and development, sales and marketing, and customer support. 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.

Operational Risks

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 affect 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:

Imposition of 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;
Limited intellectual property protection in certain countries may limit recourse against infringement on our

products or may cause us to refrain from selling in certain geographic territories;
Staffing may be difficult including higher than anticipated turnover;

A government-controlled exchange rate and limitations on the convertibility of currencies, including the Chinese

Yuan;

Transportation delays and customs related delays may affect production and distribution of our products;
Geopolitical uncertainty or turmoil could negatively affect our operations or those of our customers or suppliers;
Effectively managing and overseeing operations that are distant and remote from corporate headquarters; and

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

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 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 may cause us to incur 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 systems or restricting our access to such operating
systems 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 systems 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. Our
financial results could be negatively impacted by 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. We rely on information technology systems throughout the
Company to keep financial records, process orders, manage inventory, coordinate shipments to distributors and customers,
maintain confidential and proprietary information, and other technical activities, and operate other critical functions such as
internet connectivity, network communications, and email. 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. Despite our implementation of a variety of security measures, there is no assurance that such actions will
be sufficient to prevent a cybersecurity incident. 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. Any
failure on the part of us or our third-party service providers to maintain the security of data we are required to protect, including

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

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

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 damages or personal injury, in the
event damages arise from our products as a result of 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 seek to limit such
risk through product design, manufacturing quality control processes, product testing and contractual indemnification from
suppliers. However, due to the growing size of the Company’s installed product base and growing number of applications in
which our products can be used, an actual or alleged design or manufacturing defect could result in product recalls, customer
service costs or legal 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. Any future errors, defects, or bugs found in our software products
and related services may result in delays in, or loss of market acceptance of, our products and services; diversion of resources;
injury to 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 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.

A natural disaster, widespread public health issue or man-made disaster may cause supply disruptions that could adversely
affect our business and results of operations. Natural disasters or widespread public health issues 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 Company’s operations and facilities are subject to catastrophic loss due to fire, flood, terrorism, or
other natural or man-made disasters. If any of our facilities were to experience a catastrophic loss, it could disrupt our
operations, delay production, shipments and revenue, and result in large expenses to repair or replace the facility. Following an
interruption to our business, the Company could require substantial recovery time, experience significant expenditures to
resume operations, and lose significant sales. If such a disruption were to occur, we could breach agreements, our reputation
could be harmed, and our business and operating results could be adversely affected. The consequences of a 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. On January 31, 2020, the U.K. formally withdrew from the E.U. After withdrawal, the U.K. and E.U. entered into a
transition period that is due to end on December 31, 2020. During this transition period, the U.K. will negotiate the terms of its
future relationship with the E.U. 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. Our European business involves cross border transactions between the U.K. and the E.U. The
future trade relationship between the U.K. and the E.U. could adversely impact Zebra’s operations in the region by increasing
importation requirements or disrupting shipments between the E.U. to the U.K. or vice versa. The terms of the U.K.’s

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

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 that expose us to risks,
including among others: (i) technological risks, especially when contracts involve new technology; (ii) financial risks, including
the accuracy of estimates inherent in projecting costs associated with large, long-term contracts and the related impact on
operating results; and (iii) cybersecurity risks, especially in managed services contracts with customers that process personal
data. Recovery of front-loaded costs incurred on 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 our use of subcontractors has and may continue to increase as we expand
our global solutions and services business. 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 a subcontractor and the functionality, warranty and indemnities of products, software, and services
supplied by a 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 subcontractors. 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.

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. We are not able to directly control certain
business operations that we outsource. 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, our outsource partners’
actions may result in our being found to be in violation of laws or regulations, such as 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. Additionally, transitioning activities between new or existing
outsource partners or across different geographies as well as insourcing activities could result in additional cost, time and
management attention in order to effectively manage the transition, which could negatively impact our financial results.

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, including
those 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 salability 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, and their failure to effectively bring our
products to market may negatively affect our results of operation and financial results. In addition to our own sales force, we
offer our products through a variety of third-party dealers, distributors, and resellers who may also market other products that
compete with our products. Failure of one or more of our third-party 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. Any
changes to our channel program may cause some of our third-party dealers, distributors, or resellers to exit the program due to
modifications to the program structure, which may reduce our ability to bring products to market and could 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 resellers 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. From time to time we may diversify our product sourcing footprint, similar to the actions
we are currently taking with our efforts to reduce our reliance on Chinese-based manufacturing, which may result in additional
costs.

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 or unwilling to
meet our demand for other reasons, including as a result of natural disasters, public health issues, severe weather conditions, 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.

Financial and Market Risks

The impact of changes in customs duties and trade policies in the United States and corresponding actions by other countries in
which the Company does business could adversely affect our financial performance. The U.S. government has imposed
customs duties on various imports from China that are intended to address trade imbalances. These actions will result in
increased customs duties and will likely result in the renegotiation of some U.S. trade agreements. In response to such actions,
China has instituted customs duties on certain U.S. goods. Other governments could also institute customs duties on U.S. goods
similar to China’s actions in response to the U.S. government’s customs duties. The Company currently imports a significant
percentage of our products into the U.S. and China, and an increase in customs duties with respect to these imports could
negatively impact the Company’s financial performance. The Company commenced efforts to diversify its product sourcing
footprint in order to reduce its reliance on Chinese-based manufacturing and mitigate the impacts of related customs duties.
Failure to effectively manage transition activities associated with product sourcing diversification may negatively impact our
results of operations and financial performance. Such customs duties also may cause the U.S.’ trading partners, other than

China, to take actions with respect to U.S. imports or U.S. investment activities in their respective countries. Any potential
changes in trade policies in the U.S. and the potential corresponding actions by other countries in which the Company does
business could adversely affect the Company’s financial performance.

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

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.

Our indebtedness could adversely affect our business. As of December 31, 2019, we had $1.3 billion of outstanding debt, gross
of unamortized discounts and debt issuance costs. Our 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 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
and ability to collect cash from our customers, 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.

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 effect
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.

Our use of derivative financial instruments to reduce interest rate risk may result in added volatility in our 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, changes in the fair values of the swap contracts are reflected 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 swaps introduce additional volatility to our
operating results.

Legal and Regulatory Risks

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, business acquisition purchase price allocations,
impairment of goodwill and other intangible assets, inventories, 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.

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 various 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, the 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.

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.

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 we will see increased demand to meet voluntary criteria related to
reduction or elimination of certain constituents from products, increasing energy efficiency, and providing additional
accessibility.

Item 1B.

Unresolved Staff Comments

None.

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, 2019, the Company owned three laboratory and warehouse facilities located in the U.S., U.K., and Canada.

As of December 31, 2019, the Company had a total of 121 leased facilities with locations spread globally; 35 of which are
located in the U.S. and 86 are located in other countries. See Note 13, Leases in the Notes to Consolidated Financial Statements
for further details related to the Company’s lease arrangements.

We generally consider the productive capacity of our facilities 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 14, Commitments and Contingencies in the Notes to Consolidated Financial Statements.

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
Our Class A Common Stock is traded on the NASDAQ Stock Market, LLC under the symbol “ZBRA”.

As of February 4, 2020, the last reported price for the Company’s Class A Common Stock was $247.87 per share, and there
were 112 registered stockholders of record for Zebra’s Class A Common Stock.

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

Period

Total Number of
Shares
Purchased

Average Price
Paid per Share

Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)

Approximate
Dollar Value of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs (in
millions) (1)

September 29, 2019 - October 26, 2019

136,824

196.15

136,824

October 27, 2019 - November 23, 2019

November 24, 2019 - December 31, 2019

—

Total

136,824

196.15

136,824

953

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

Stock Performance Graph

The following graph compares the cumulative total stockholder return, calculated on a dividend-reinvested basis, in Zebra
Technologies Corporation Class A Common Stock, the RDG Technology Composite, and the NASDAQ Composite Market
Index for the five years ended December 31, 2019. The comparison assumes that $100 was invested in each of the Company’s
Class A Common Stock, the RDG Technology Composite and the NASDAQ Composite Market Index as of the market close on
December 31, 2014. Note that historic stock price performance is not necessarily indicative of future stock price performance.

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

12/14

12/15

12/16

12/17

12/18

12/19

Zebra Technologies Corporation

RDG Technology Composite

NASDAQ Composite

100.00

89.98

103.42

106.96

110.79

118.01

116.45

134.09

161.58

150.96

205.70

162.31

145.67

329.98

238.96

200.49

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)
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,

2019

2018

2017

2016

2015

4,485

2,100

544

10.08

9.97

4,218

1,981

421

7.86

7.76

3,722

1,710

0.33

0.32

3,574

1,642
(137)

(2.65)

3,650

1,644
(158)

(3.10)

53,991,249

54,594,417

53,591,655

54,299,812

53,021,761

53,688,832

51,579,112

50,996,297

Consolidated Balance Sheets (1)
Cash and cash equivalents
Total Assets

Long-term liabilities

Total Stockholders’ Equity

2019 (2)

2018

December 31,
2017

4,711

1,468

1,839

4,339

1,703

1,335

4,275

2,441

834

2016

2015

156

4,632

2,891

792

192

5,040

3,252

893

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

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

Item 7.

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

This section generally discusses fiscal 2019 and 2018 items and year-over-year comparisons between 2019 and 2018.
Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 are not included herein. Refer to
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for this discussion.

Overview
Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader respected for 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, including: mobile computers; barcode scanners and
imagers; radio frequency identification device (“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, 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. We provide products
and services in approximately 180 countries, with 124 facilities and approximately 8,200 employees worldwide.

Our customers have traditionally benefited from proven solutions that increase productivity and improve efficiency and asset
utilization. The Company is poised to drive, and capitalize on, the evolution of the data capture industry into the broader EAI
industry, based on important technology trends like the Internet of Things (“IoT”), ubiquitous mobility, automation and cloud
computing. EAI solutions offer additional benefits to our customers including real-time, data-driven insights that improve
operational visibility and drive workflow optimization.

Segments
The Company’s operations consist of two reportable segments: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility
& Mobility (“EVM”).

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, location solutions, and retail 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 (“EMEA”); Asia-Pacific; and Latin America.

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; EMEA; Asia-Pacific;
and Latin America.

Geographic Information
For the year ended December 31, 2019, the Company generated $4.5 billion of Net sales, of which approximately 50.4% were
attributable to North America; approximately 32.6% were attributable to EMEA; and approximately 17.0% were attributable to
other foreign locations. Relative Net sales attributable to each region is comparable with the prior year period.

Acquisitions and Integration
Acquisitions are accounted for under the acquisition method of accounting for business combinations, with results included in
the Company’s operating results beginning on each respective acquisition date. Recent acquisitions contributed 1.9% to the
current year consolidated Net sales growth.

On November 5, 2019, the Company acquired Cortexica Vision Systems Limited (“Cortexica”), a provider of computer vision-
based artificial intelligence solutions primarily serving the retail industry, for $7 million in cash. Additionally, we incurred
approximately $2 million of acquisition-related costs in 2019, which primarily included third-party transaction and advisory
fees and are reflected within Acquisition and integration costs on the Consolidated Statements of Operations. The operating
results of Cortexica are included within the EVM segment.

On May 31, 2019, the Company acquired Profitect, Inc. (“Profitect”), a provider of prescriptive analytics primarily serving the
retail industry. The Company’s total purchase consideration was $79 million, which consisted of $75 million in cash paid, net of
cash acquired, and the fair value of the Company’s existing minority ownership interest in Profitect of $4 million, as

remeasured upon acquisition. Included within Other, net on the Consolidated Statements of Operations is a $4 million gain
resulting from the remeasurement of the Company’s previously held ownership interest in Profitect. Additionally, we incurred
$13 million of acquisition-related costs in 2019, which primarily consisted of payments to settle Profitect employee stock
option awards, as well as third party transaction and advisory fees. Those acquisition-related costs are included within
Acquisition and integration costs on the Consolidated Statements of Operations. The operating results of Profitect are included
within the EVM segment.

On February 21, 2019, the Company acquired Temptime Corporation (“Temptime”), a developer and manufacturer of
temperature-monitoring labels and devices. In connection with this acquisition, the Company paid $180 million in cash, net of
cash acquired. Additionally, we incurred $3 million of acquisition-related costs in 2019, which primarily included third-party
transaction and advisory fees and are reflected within Acquisition and integration costs on the Consolidated Statements of
Operations. The operating results of Temptime are included within the AIT segment.

On August 14, 2018, the Company completed its tender offer to acquire all outstanding common stock of Xplore Technologies
Corporation (“Xplore”) for $6.00 per share. In connection with this acquisition, the Company paid $87 million in cash, which
included $72 million for the net assets acquired, a $9 million payment of Xplore debt, as well as $6 million of other Xplore
transaction-related obligations. Additionally, we incurred $8 million of acquisition-related costs in 2018, which primarily
included third-party transaction and advisory fees, and $2 million of system integration costs in 2019. These costs are reflected
within Acquisition and integration costs on the Consolidated Statements of Operations. The operating results of Xplore are
included within the EVM segment.

On October 27, 2014, the Company acquired the Enterprise business from Motorola Solutions, Inc. (“MSI”) and began
integration activities focused on creating “One Zebra”. Our integration priorities centered on maintaining business continuity
while identifying and implementing cost synergies, operating efficiencies, and integration of functional organizations and
processes, in addition to concluding MSI-provided transition service agreements (“TSAs”). During 2017, the Company
substantially completed its integration activities associated with the Enterprise acquisition, including the implementation of a
common enterprise resource planning system and exiting the TSAs.

Restructuring Programs
In the fourth quarter of 2019, the Company committed to certain organizational changes designed to generate operational
efficiencies (collectively referred to as the “2019 Productivity Plan”), which are incremental to the Company’s 2017 exit and
restructuring program (the “2017 Productivity Plan”). The organizational design changes under the 2019 Productivity Plan will
principally occur within the North America and EMEA regions, relate primarily to employee severance and related benefits, and
are expected to be substantially completed in fiscal 2020. Exit and restructuring charges for the 2019 Productivity Plan were $8
million for the year ended December 31, 2019. Estimated remaining costs to be incurred in fiscal 2020 under the 2019
Productivity Plan are expected to be up to $10 million.

The 2017 Productivity Plan, focused on organizational design changes, process improvements, and automation, built upon the
exit and restructuring initiatives specific to the October 2014 Enterprise acquisition (the “Acquisition Plan”). The Company
substantially completed all initiatives under the 2017 Productivity Plan and the Acquisition Plan in fiscal 2018 and 2017,
respectively. Exit and restructuring charges relating to the 2017 Productivity Plan were $2 million, $11 million and $12 million
for fiscal 2019, 2018 and 2017, respectively. Exit and restructuring charges relating to the Acquisition Plan were $4 million for
fiscal 2017. Cumulative costs associated with the 2017 Productivity Plan and the Acquisition Plan were $25 million and $69
million, respectively, and primarily consisted of severance and related benefits and lease exit costs.

When reviewing the Company’s results, our Chief Operating Decision Maker does not include Exit and restructuring costs in
the operating results of our segments; as such, these costs are reported as a component of Corporate.

See Note 9, Exit and Restructuring Costs in the Notes to Consolidated Financial Statements.

Impact of U.S. Tax Reform
Enacted on December 22, 2017, the Tax Cut and Jobs Act (“the Act”) reduced the U.S. federal corporate tax rate from 35% to
21%, requiring companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax
deferred. Based on current operations, the Company is subject to the Global Intangible Low-Taxed Income, Base Erosion Anti-
Avoidance Tax, and the Deduction for Foreign-Derived Intangible Income provisions of the Act, for which we recorded income
tax expense of $12 million and $10 million for the years ended December 31, 2019 and 2018, respectively. We are not currently
subject to the new limitations which defer U.S. interest deductions in excess of 30% of adjusted taxable income. However, the
application of the interest limitation may apply in the future, depending on changes in the Company’s business model.
Additionally, the Company is no longer able to deduct performance-based compensation for its covered employees which

exceeds the limitation under amended Internal Revenue Code Section 162(m). These impacts are included in the calculation of
the Company’s effective tax rate.

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

During 2018, the Company finalized its analysis of the Act, including the one-time transition tax and measurement of net
deferred tax assets, and recorded a $3 million income tax benefit as a result of differences between its final analysis and
provisional analysis from the prior year. The final analysis included both federal and state tax effects based on legislative
pronouncements through December 31, 2018. The Company also utilized a total of $28 million of available net operating
losses, research and development credits, alternative minimum tax credits, and foreign tax credits, in order to substantially
reduce its cash payments for the one-time transition tax.

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

See Note 16, Income Taxes in the Notes to Consolidated Financial Statements for further information.

Other Developments
In 2019, the Company incurred $5 million related to efforts to diversify its product sourcing footprint, to include sourcing
products from Taiwan, Vietnam, and Malaysia, thereby reducing its reliance on Chinese-based manufacturing and the impacts
of related customs duties (“tariffs”) on U.S. imports from China. These costs are primarily reflected within Operating expense
on the Consolidated Statements of Operations. The Company anticipates incurring additional one-time operating costs of up to
$25 million by the middle of fiscal year 2020 as well as incremental equipment purchases of approximately $10 million to $15
million. As a result of these actions, along with certain U.S. pricing actions and based on current economic and operating
conditions, the Company expects to substantially mitigate the ongoing financial impacts of Chinese tariffs.

In December 2019, a strain of the coronavirus surfaced in Wuhan, China. In January 2020, a broad number of governmental
and commercial efforts commenced to contain the spread of the virus in China. As a result, many of our supply chain partners
in China temporarily suspended or modified their business operations beyond the normal Chinese Lunar New Year shutdown.
As of February 10, 2020, operations have resumed, to varying degrees, at many of our supply chain partners. The situation is
complex and rapidly-evolving. We are not yet able to fully ascertain its impact on our results of operations, either with respect
to its impact on our manufacturing operations in China or with respect to its impact on our sales to customers in China. Our
current expectation is the coronavirus outbreak could have a negative impact to our sales of between $0 and $50 million. This
expectation is based solely on facts as we understand them to be today. The impact could be significantly greater if the
coronavirus outbreak were to develop in a manner that is significantly worse than our current expectations.

Results of Operations: Year Ended 2019 versus 2018 and Year Ended 2018 versus 2017

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

Net sales

Gross profit

Gross margin
Operating expenses

Operating income

Year Ended December 31,

2019

2018

2017

Percent
Change
2019 vs 2018

Percent
Change
2018 vs 2017

4,485

2,100

46.8%

1,408

4,218

1,981

47.0%

1,371

692

610

3,722

1,710

45.9%

1,388

322

6.3%

6.0%
(20) bps

2.7%

13.4%

13.3 %

15.8 %
110 bps

(1.2)%

89.4 %

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

North America

EMEA

Asia-Pacific

Latin America

Total Net sales

Year Ended December 31,

2019

2018

2017

Percent
Change
2019 vs 2018

Percent
Change
2018 vs 2017

2,261

2,041

1,462

518
244
4,485

1,409

520
248
4,218

1,798

1,221

468
235
3,722

10.8 %

3.8 %

(0.4)%
(1.6)%
6.3 %

13.5%

15.4%

11.1%
5.5%
13.3%

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

Year Ended December 31,

As a Percentage of Net sales

2019

2018

2017

2019

2018

2017

Selling and marketing
Research and development
General and administrative
Amortization of intangible assets
Acquisition and integration costs
Exit and restructuring costs
Total Operating expenses

503
447
323
103
22
10

483
444
328
97
8
11

448
389
301
184
50
16

1,408

1,371

1,388

11.2%
10.0%
7.2%
NM
NM
NM

31.4%

11.5%
10.5%
7.8%
NM
NM
NM

32.5%

12.0%
10.5%
8.1%
NM
NM
NM

37.3%

Consolidated Organic Net sales growth:

Reported GAAP Consolidated Net sales growth
Adjustments:
Impact of foreign currency translations (1)
Impact of acquisitions (2)
Consolidated Organic Net sales growth

Year Ended December 31,

2019

2018

6.3 %

13.3 %

1.1 %
(1.9)%
5.5 %

(1.6)%
(0.6)%
11.1 %

Consolidated Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of
this item.

(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 the current period results at the currency exchange rates used in the
comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2) For purposes of computing Organic Net sales, amounts directly attributable to business acquisitions are excluded for twelve

months following their respective acquisition dates.

2019 compared to 2018
Net sales increased $267 million or 6.3% compared with the prior year, reflecting growth in the North America and EMEA
regions. Excluding the effects of acquisitions and unfavorable foreign currency changes, the increase in Consolidated Organic
Net sales was 5.5%, primarily due to higher sales of mobile computing products and support services, which were partially
offset by lower sales of data capture products.

Gross margin decreased to 46.8% in the current period compared to 47.0% in the prior year period. AIT gross margin was
slightly lower compared to the prior period, while EVM gross margin was unchanged.

Operating expenses for the years ended December 31, 2019 and 2018 were $1,408 million and $1,371 million, or 31.4% and
32.5% of Net sales, respectively. As a percentage of Net sales, operating costs continue to trend favorably, reflecting continued
operating leverage improvement. The current year Operating expenses include higher acquisition-related costs and costs
associated with the diversification of the Company’s product sourcing footprint, partially offset by lower incentive-based
compensation costs. The prior year Operating expenses included a $13 million legal settlement cost.

Operating income was $692 million for the current year compared to $610 million for the prior year. The increase was primarily
due to higher Net sales and Gross profit, which were partially offset by higher Operating expenses.

Total Other expenses, net was $94 million for the current year, compared to $86 million for the prior year. The current year
benefited from lower interest expense due to lower outstanding debt levels and lower amortization of debt issuance costs. The
current year also included a $19 million loss on interest rate swaps, $7 million of debt refinancing costs as well as $3 million in
investment gains. The prior year included $10 million in investment gains, an $8 million gain on interest rate swaps as well as
$7 million of debt refinancing costs.

The Company recognized income tax expense of $54 million and $103 million for the years ended December 31, 2019 and
2018, respectively. The Company’s effective tax rates were 9.0% and 19.7% as of December 31, 2019 and 2018, respectively.
The decrease in the effective tax rate compared to the prior year was primarily due to favorable changes in uncertain income tax
positions.

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 20, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent
applicable, segment results exclude purchase accounting adjustments, amortization of intangible assets, acquisition and
integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, and product sourcing
diversification costs.

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

Year Ended December 31,

2019

2018

2017

1,479

1,423

1,311

Percent
Change
2019 vs 2018
3.9 %

Percent
Change
2018 vs 2017
8.5%

736
49.8%

381

355

710
49.9%

385

325

640
48.8%

366

274

3.7 %
(10) bps

(1.0)%

9.2 %

10.9%
110 bps

5.2%

18.6%

Net sales

Gross profit

Gross margin

Operating expenses

Operating income

AIT Organic Net sales growth:

AIT Reported GAAP Net sales growth
Adjustments:
Impact of foreign currency translations(1)
Impact of acquisition(2)
AIT Organic Net sales growth

December 31,

2019

2018

3.9 %

8.5 %

1.0 %

(2.7)%
2.2 %

(1.5)%

— %
7.0 %

AIT Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

(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 the current period results at the currency exchange rates used in the comparable prior year period, inclusive of
the Company’s foreign currency hedging program.

(2) For purposes of computing Organic Net sales, amounts directly attributable to the Temptime acquisition are excluded for

twelve months following the February 21, 2019 acquisition date.

2019 compared to 2018

Net sales for AIT increased $56 million or 3.9% compared to the prior year, including the impacts of the Temptime acquisition
and unfavorable foreign currency changes. AIT Organic Net Sales growth of 2.2% was primarily due to increases in printing
products, support services, and supplies.

Gross margin decreased to 49.8% in the current year compared to 49.9% for the prior year, primarily due to the unfavorable
impacts of Chinese import tariffs and foreign currency changes, partially offset by favorable product mix.

Operating income increased 9.2% due to higher Net sales, Gross profit, and lower Operating expenses.

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

Net sales

Gross profit

Gross margin

Operating expenses

Operating income

EVM Organic Net sales growth:

EVM Reported GAAP Net sales growth
Adjustments:
Impact of foreign currency translations (1)
Impact of acquisitions (2)
EVM Organic Net sales growth

Year Ended December 31,

2019

2018

2017

3,006

1,371

45.6%

888

483

2,795

1,274

45.6%

870

404

2,414

1,073

44.4%

772

301

Percent
Change
2019 vs 2018

Percent
Change
2018 vs 2017

7.5%

7.6%
0 bps

2.1%

19.6%

15.8%

18.7%
120 bps

12.7%

34.2%

December 31,

2019

2018

7.5 %

15.8 %

1.1 %
(1.4)%
7.2 %

(1.6)%
(0.8)%
13.4 %

EVM Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

(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 the current period results at the currency exchange rates used in the
comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2) For purposes of computing Organic Net sales, amounts directly attributable to the Xplore, Profitect, and Cortexica

acquisitions are excluded for twelve months following their respective acquisition dates.

2019 compared to 2018
Net sales for EVM increased $211 million or 7.5% compared to the prior year, including the impacts of acquisitions and
unfavorable foreign currency changes. EVM Organic Net Sales growth of 7.2% was primarily attributable to higher mobile
computing product sales and support services, which were partially offset by lower sales of data capture products.

Gross margin was 45.6% in both the current and prior year periods, as the unfavorable impacts of product and business mix,
Chinese import tariffs, and foreign currency changes collectively offset operational efficiencies.

Operating income for the current year increased 19.6% due to higher Net sales and Gross profit, which were partially offset by
higher Operating expenses.

Critical Accounting Policies and Estimates
Management prepared the consolidated financial statements of the Company under accounting principles generally accepted in
the U.S. The application of these principles requires the use of estimates, judgments, and assumptions which affect the amounts
reported in our consolidated financial statements. We believe that our estimates, judgments, and assumptions are reasonable
based upon available information. Our more significant estimates and assumptions include those related to the recognition and
measurement of income tax assets and liabilities, development of reporting unit fair values as part of our annual goodwill
impairment testing, and the measurement of variable consideration and allocation of transaction price to performance
obligations in revenue transactions. See Note 2, Significant Accounting Policies in the Notes to Consolidated Financial
Statements for additional discussion of these as well as other accounting policies.

New Accounting Pronouncements
Effective January 1, 2019, the Company adopted a new accounting standard related to leases. See Note 2, Significant
Accounting Policies in the Notes to Consolidated Financial Statements for further information on this and other accounting
pronouncements.

Liquidity and Capital Resources
The primary factors that influence our liquidity include the amount and timing of our revenues, cash collections from our
customers, cash payments to our suppliers, capital expenditures, repatriation of foreign cash and investments, acquisitions, and
share repurchases. Management believes that our existing capital resources, inclusive of available borrowing capacity on debt
and other financing facilities, 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 change in cash and cash equivalents

Year Ended December 31,

2019

2018

2017

$ Change
2019 vs 2018

$ Change
2018 vs 2017

685
(335)
(365)
1
(14) $

785
(137)
(661)
(5)
(18) $

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

(100) $
(198)
296
6
4

307
(86)
(144)
(1)
76

2019 vs. 2018
The change in our cash and cash equivalents balance during the current year is reflective of the following:

• Cash flow provided by operating activities decreased by $100 million compared to the prior year. The decrease was
primarily due to timing of vendor payments, timing of accounts receivable collections, as well as higher income tax
and incentive compensation payments, which were partially offset by higher net income, reduced inventory levels, and
lower cash payments for interest.

• The increase in net cash used in investing activities was primarily driven by business acquisitions.

• The decrease in cash used in financing activities was primarily due to lower net debt repayments in the current year,

including amounts borrowed to fund acquisitions, partially offset by repurchases of common shares in the current year.

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

Term Loan A
Term Loan B
Revolving Credit Facility
Receivables Financing Facilities

Total debt

Less: Debt issuance costs
Less: Unamortized discounts
Less: Current portion of debt

Total long-term debt

December 31,

2019

2018

917
—
103
266
1,286
(6)
(3)
(197)
1,080

608
445
408
139
1,600
(5)
(4)
(157)
1,434

Credit Facilities
The Company’s debt includes borrowings under Term Loan A and a multi-currency Revolving Credit Facility, both maturing in
2024. Borrowings under the facilities bear interest at a variable rate plus an applicable margin, for which the Company has
entered into interest rate swap contracts to manage interest rate exposure. All borrowings under the credit facilities as of
December 31, 2019 were denominated in U.S. Dollars, except for €92 million in Euro-denominated borrowings under the
Revolving Credit Facility. The average interest rates as of December 31, 2019 for Term Loan A and the Revolving Credit
Facility were 3.01% and 1.25%, respectively. Interest is paid for each instrument on a monthly basis. The Company is required
to prepay certain amounts in the event of certain circumstances or transactions. Also, the Company may make prepayments
against Term Loan A, in whole or in part, without premium or penalty.

During the third quarter of 2019, the Company amended the terms of its credit facilities, which included increasing its
borrowing under Term Loan A from $608 million to $1 billion and increasing its borrowing capacity under the Revolving
Credit Facility from $800 million to $1 billion, while extending the maturities of each of these instruments to August 2024. In
conjunction with increasing its borrowing capacity under Term Loan A and the Revolving Credit Facility, the Company made a
payment of $445 million to extinguish Term Loan B. This debt refinancing reduces the Company’s future interest cost while
meeting anticipated capital requirements.

During the second quarter of 2018, the Company amended the terms of its credit facilities, which included the replacement of
existing Term Loan A with a new Term Loan A of $670 million, increasing the borrowing capacity under the Revolving Credit
Facility from $500 million to $800 million, and entering into a partial debt extinguishment of $300 million on Term Loan B.

See Note 12, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company’s
credit facilities and refinancing activities.

Receivables Financing Facilities
In December 2017, the Company entered into a Receivables Financing Facility with a financial institution that has a borrowing
limit of up to $180 million. As collateral, the Company pledges a perfected first-priority security interest in its domestically
originated accounts receivables. In May 2019, the Company entered into an Additional Receivables Financing Facility which
allows for additional borrowings of up to $100 million, increasing the Company’s total borrowing capacity to $280 million,
using receivables as collateral. Both facilities are accounted for as secured borrowings and bear interest at a variable rate. As of
December 31, 2019, the facilities had an average interest rate of 2.60% and the Company’s Consolidated Balance Sheets
included $545 million of receivables that were pledged, of which $266 million had been borrowed against. All borrowings
under the facilities were denominated in U.S. Dollars. The Receivable Financing Facility will mature on March 29, 2021 and
the Additional Receivables Financing Facility will mature on May 18, 2020.

Both the Revolving Credit Facility and Receivables Financing Facilities include terms and conditions that limit the incurrence
of additional borrowings and require that certain financial ratios be maintained at designated levels. As of December 31, 2019,
the Company was in compliance with all debt covenants.

See Note 12, Long-Term Debt in the Notes to Consolidated Financial Statements for further details.

Receivables Factoring
In addition to the Company’s borrowing arrangements described above, the Company has Receivables Factoring arrangements.
The first arrangement was entered into in December 2018, and a second arrangement was entered into in September 2019 under
similar terms as the first. Under the Receivables Factoring arrangements, the Company sells certain EMEA-originated
receivables to banks in exchange for cash without maintaining a beneficial interest in the receivables sold. At any time, the
banks’ purchase of eligible receivables is subject to a maximum of $125 million of uncollected receivables. The Company
services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to
the receivables. Transactions under the Receivables Factoring arrangements are accounted for as sales under Accounting
Standards Codification Topic 860, Transfers and Servicing of Financial Assets with related cash flows reflected in operating
cash flows. $60 million and $33 million of uncollected receivables were sold and removed from the Company’s Consolidated
Balance Sheets as of December 31, 2019 and 2018, respectively. The Company may enter into additional Receivables
Factoring arrangements in the future in order to provide additional liquidity.

See Note 19, Accounts Receivable Factoring in the Notes to Consolidated Financial Statements for further details.

Share Repurchases
On July 30, 2019, the Company announced that its Board of Directors authorized a share repurchase program for up to an
aggregate amount of $1 billion of its outstanding shares of common stock. The new share repurchase program supersedes the
Company’s prior share repurchase program, which was authorized in November 2011. The new share repurchase program does
not have a stated expiration date. The level of the Company’s repurchases depends on a number of factors, including its
financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors
management may deem relevant. The timing, volume and nature of repurchases are subject to market conditions, applicable
securities laws and other factors and may be amended, suspended or discontinued at any time. Repurchases may be effected
from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule
10b5-1(c) of the Securities Exchange Act of 1934. During the year ended December 31, 2019 the Company repurchased
237,886 shares of common stock for $47 million.

Cash and Cash Equivalents
Included in the Company’s Cash and cash equivalents are amounts held by foreign subsidiaries. The Company had $26 million
and $39 million of foreign cash and cash equivalents included in the Company’s total cash positions of $30 million and $44
million as of December 31, 2019 and 2018, respectively.

Contractual Obligations
Zebra’s contractual obligations as of December 31, 2019 were as follows (in millions):

Payments due by period

Total

Less than 1
year

1-3 years

3-5 years

More than 5
years

Operating lease obligations(1)
Deferred compensation liability(2)
Debt principal payments
Interest payments(3)
Purchase obligations(4)

Total

152
24
1,286
146
365
1,973

36
2
197
40
365
640

54
1
155
69
—
279

35
1
934
37
—
1,007

27
20
—
—
—
47

(1) Includes leases of facilities, distribution centers, and sales and administrative offices that are classified as operating leases.
The contractual obligations above include future minimum payments, including payments for those periods where renewal
options are reasonably certain to be exercised.

(2) Includes payments related to obligations under our deferred compensation plan. The deferred compensation plan allows

certain members of management and other highly-compensated employees to defer receipt of a portion of their
compensation. The amount in “More than 5 Years” includes the remaining total balance under the deferred compensation
plan to be paid to participants who have not terminated employment, since we cannot estimate the timings of those
terminations and withdrawals.

(3) Includes payments related to interest on the Company’s debt, as well as related settlements of interest rate swap

agreements. These payments are estimated based on applicable interest rates and margins along with the balance of

outstanding debt as of December 31, 2019. Future interest payments may increase or decrease based upon fluctuations in
market rates and/or the Company’s borrowing levels.

(4) Purchase obligations are for purchases made in the normal course of business to meet operational requirements, primarily
raw materials and finished goods. Purchase obligations included in the table above are based on quarterly forecasted
component and manufacturing requirements and typically provide for fulfillment within agreed upon lead-times and/or
commercially standard lead-times for products. The Company does not have contractual obligations related to take-or-pay
arrangements.

Uncertain tax benefits of $10 million have been excluded from the table above because we cannot reliably estimate the period
of cash settlement, if any, with the respective taxing authorities. See Note 16, Income Taxes in the Notes to Consolidated
Financial Statements for further information.

Non-GAAP Measures
The Company has provided reconciliations of the supplemental non-GAAP financial measures, as defined under the rules of the
Securities and Exchange Commission, presented herein to the most directly comparable financial measures calculated and
presented in accordance with GAAP.

These supplemental non-GAAP financial measures – Consolidated Organic Net sales growth, AIT Organic Net sales growth,
and EVM Organic Net sales growth – are presented because our management evaluates our financial results both including and
excluding the effects of business acquisitions and foreign currency translation, as applicable. Management believes that the
supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core
operating performance of our business from period to period and trends in our historical operating results. These supplemental
non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be
considered in conjunction with the GAAP financial measures presented.

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
primarily 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 the London Inter-
bank Offered Rate (“LIBOR”). From time to time, we use interest rate derivative contracts, including interest rate swaps, to
mitigate our exposure from interest rate changes on existing debt and future debt issuances, thereby reducing the volatility of
our financing costs and, based on current and projected market conditions, achieve a desired proportion of fixed versus floating-
rate debt. Generally, under these swaps, we agree with a counterparty to exchange floating-rate for fixed-rate interest amounts
with an agreed upon notional amount.

The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced in 2017 that it intends to phase out
LIBOR by the end of 2021. Some of the Company’s contracts with respect to its borrowings and interest rate swap contracts
already contain comparable alternative reference rates that would automatically take effect upon the phasing out of LIBOR.
For certain other contracts that do not already contain sufficient alternative reference rate provisions, the Company anticipates
negotiating comparable replacement reference rates with its counterparties.

As of December 31, 2019, we had approximately $1.3 billion of debt outstanding under our debt facilities, which bears interest
determined by reference to a variable rate index. A one percentage point increase or decrease in interest rates would increase or
decrease annual interest expense by approximately $5 million. This exposure includes the impact of associated forward interest
rate swaps outstanding as of December 31, 2019. Refer to Note 11, Derivative Instruments in the Notes to Consolidated
Financial Statements for further discussion of these risk mitigation activities. Exposure to variable interest may increase or
decrease, to the extent that the Company’s borrowings under its Revolving Credit Facility or Receivables Financing Facilities
increase or decrease, respectively.

Foreign Exchange Risk
We provide products and services in approximately 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 11, Derivative
Instruments in the Notes to Consolidated Financial Statements for further discussions of hedging activities.

We are exposed to fluctuations in foreign currency exchange rates, primarily with respect to the Euro, British Pound Sterling,
Czech Koruna, Brazilian Real and Chinese Yuan. A one percentage point increase or decrease in exchange rates relative to the
U.S. Dollar would increase or decrease our pre-tax income by approximately $1 million. This amount is inclusive of the impact
of associated derivative contracts. 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 one month in maturity and are not designated as hedges.

Item 8.

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Operations for the years ended December 31, 2019, 2018, and 2017

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018, and 2017

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018, and 2017

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017

Notes to Consolidated Financial Statements

Page

40
41

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 and subsidiaries (the
“Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive
income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the
related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted
accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February 13, 2020 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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Income Taxes

Description of the
Matter

As discussed in Note 16 of the financial statements, the Company earns a
significant amount of its operating income across multiple jurisdictions and the
Company’s organizational structure and transactional flows are designed to
reflect strategic and operational business imperatives that change over time. As
the Company operates in a multinational tax environment and incurs income
tax obligations in a number of jurisdictions, complexities and uncertainties can
arise in the application of complex tax regulations to the Company’s
multinational operations.

Auditing the application of taxation legislation to the Company’s affairs is
inherently complex, highly specialized and requires judgment. These factors
impact the Company’s estimation of tax exposures, valuation allowances and
income tax provisions.

How We Addressed
the Matter in Our
Audit

We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over the Company’s identification of and accounting
for the tax impact of changes in the business or significant changes in tax laws.
This included controls over the Company’s evaluation of tax law changes, the
evaluation of cross-jurisdictional transactions and the Company’s tax technical
assessment over those changes and/or transactions.

We involved our tax professionals in the Company’s major operating
jurisdictions to assist in the evaluation of the Company’s tax obligations. We
evaluated the Company’s transactional flows to assess whether they aligned
with the Company’s strategic and operational shifts. We made inquiries of
management and inspected internally - and externally-prepared documentation
to understand current disputes and uncertain tax positions. We assessed the
completeness of the tax matters identified and evaluated the Company’s
assessment regarding the related status, potential exposure and risk of loss. We
assessed the consistency of assumptions used in estimating provisions for key
tax exposures and evaluated the adequacy of the Company’s disclosures of tax
and ongoing tax matters.

/s/ Ernst & Young LLP

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

Chicago, Illinois
February 13, 2020

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

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, net of allowances for doubtful accounts of $2 million and $3
million as of December 31, 2019 and 2018, respectively

Inventories, net
Income tax receivable
Prepaid expenses and other current assets

Total Current assets

Property, plant and equipment, net
Right-of-use lease asset
Goodwill
Other intangibles, net
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 lease liabilities
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, 18,148,925 and 18,280,673 shares as of December 31, 2019 and
2018, respectively
Retained earnings
Accumulated other comprehensive loss

Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity

See accompanying Notes to Consolidated Financial Statements.

December 31,

2019

2018

613
474
32
46
1,195
259
107
2,622
275
127
126
4,711

197
552
379
238

38
1,404
1,080
100
—
221
67
2,872

—

1
339

(689)
2,232
(44)
1,839
4,711

520
520
24
54
1,162
249
—
2,495
232
114
87
4,339

157
552
322
210

60
1,301
1,434
—
8
172
89
3,004

—

1
294

(613)
1,688
(35)
1,335
4,339

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

Net sales

Tangible products

Services and software

Total Net sales

Cost of sales:

Tangible products

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

Exit and restructuring costs

Total Operating expenses

Operating income

Other expenses:

Foreign exchange loss

Interest expense, net

Other, net

Total Other expenses, net

Income before income tax

Income tax expense

Net income

Basic earnings per share

Diluted earnings per share

2019

Year Ended December 31,
2018

2017

3,907

3,685

578

4,485

2,006

379

2,385

2,100

503
447

323

103

1,408

692

(6)
(89)
1
(94)
598

544

10.08

9.97

533

4,218

1,871

366

2,237

1,981

483
444

328

1,371

610

(5)
(91)
10
(86)
524

103

421

7.86

7.76

3,223

499

3,722

1,677

335

2,012

1,710

448
389

301

184

1,388

322

(1)
(227)
(6)
(234)
88

0.33

0.32

See accompanying Notes to Consolidated Financial Statements.

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

Year Ended December 31,
2018

2017

2019

Net income

544

421

Other comprehensive income (loss), net of tax:

Changes in unrealized gains and losses on anticipated sales
hedging transactions
Changes in unrealized gains and losses on forward interest
rate swap hedging transactions
Foreign currency translation adjustment

(10)

—

Comprehensive income

535

9
(13)
438

(15)

See accompanying Notes to Consolidated Financial Statements.

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

Class A
Common
Stock
Shares

Class A
Common
Stock
Amount

Additional
Paid-in
Capital

Treasury
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

210

(614) $

1,240

(45) $

—

(15)

Total

792

(6)

834

(11)

421

(13)

—

(9)

—

(6)

—

257

(620) $

1,248

(52) $

—

(8)

—

(11)

—

421

—

(13)

294

(613) $

1,688

(35) $

1,335

(3)

—

(43)

—

(47)

—

544

—

(10)

(43)

(47)

544

(10)

339

(689) $

2,232

(44) $

1,839

Balance at December 31, 2016

52,884,588

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

Share-based compensation

Net income

Changes in unrealized gains and losses on
anticipated sales hedging transactions (net of
income taxes)
Changes in unrealized gains and losses on forward
interest rate swap hedging transactions (net of
income taxes)
Foreign currency translation adjustment

410,239

(58,732)

—

Balance at December 31, 2017

53,236,095

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

704,137

(69,048)

Share-based compensation

Net income

Changes in unrealized gains and losses on
anticipated sales hedging transactions (net of
income taxes)

Changes in unrealized gains and losses on forward
interest rate swap hedging transactions (net of
income taxes)

Foreign currency translation adjustment

—

Balance at December 31, 2018

53,871,184

Share-based compensation

Repurchase of common stock

Net income

Changes in unrealized gains and losses on
anticipated sales hedging transactions (net of
income taxes)
Foreign currency translation adjustment

594,399

(224,765)

—

(237,886)

—

Balance at December 31, 2019

54,002,932

—

See accompanying Notes to Consolidated Financial Statements.

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

Year Ended December 31,
2018

2017

2019

Cash flows from operating activities:

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

544

421

Depreciation and amortization
Investment (gain) loss
Amortization of debt issuance costs and discounts
Share-based compensation
Debt extinguishment costs
Deferred income taxes
Unrealized loss (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

Net cash provided by operating activities

Cash flows from investing activities:

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

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of long-term debt
Payments of long term-debt
Payments of debt extinguishment costs
Payments of debt issuance costs and discounts
Payments for repurchases of common stock
Payments of taxes related to net settlements of equity awards, net of
proceeds from exercise of stock options and stock purchase plan purchases

Unremitted cash collections from servicing factored receivables
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.

$
$

175
(3)
6
48
1
(42)
19
—

(96)
51
(20)
(5)
(18)
71
(31)
(15)
685

(262)
(61)
10
(22)
(335)

637
(949)
(1)
(6)
(47)

(32)
33
(365)
1
(14)
44
30

140
63

175
(10)
15
45
1
2
(8)
4

(31)
(43)
(12)
122
35
51
24
(6)
785

(72)
(64)
2
(3)
(137)

909
(1,566)
(1)
(2)
—

(1)
—
(661)
(5)
(18)
62
44

76
90

$
$

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

161
(110)
16
(49)
13
17
26
(8)
478

—
(50)
—
(1)
(51)

1,371
(1,825)
(65)
(5)
—

7
—
(517)
(4)
(94)
156
62

65
195

ZEBRA TECHNOLOGIES CORPORATIONAND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Description of Business

Zebra Technologies Corporation and its 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 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
The Company’s fiscal year is a 52-week period ending on December 31. Interim fiscal quarters end on a Saturday and generally
include 13 weeks of operating activity. During the 2019 fiscal year, the Company’s quarter end dates were March 30, June 29,
September 28 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 accounting estimates include: cash
flow projections and other valuation assumptions included in business acquisition purchase price allocations as well as annual
goodwill impairment testing; the measurement of variable consideration and allocation of transaction price to performance
obligations in revenue transactions; inventory and product warranty reserves; useful lives of our tangible and intangible assets;
and the recognition and measurement of income tax assets and liabilities. 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.

Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable consist primarily of amounts due to us from our customers in the normal course of business. 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 historical experience and our assessment of delinquent accounts.
Accounts are written off against the allowance account when they are determined to be no longer collectible.

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

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.

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 10 years.

Leases
The Company recognizes Right-of-Use (“ROU”) assets and lease liabilities for its lease commitments with terms greater than
one year. Contractual options to extend or terminate lease agreements are reflected in the lease term when they are reasonably
certain to be exercised.

The initial measurements of new ROU assets and lease liabilities are based on the present value of future lease payments over
the lease term as of the commencement date. In determining future lease payments, the Company has elected not to separate
lease and non-lease components. As the Company’s lease arrangements do not provide an implicit interest rate, we apply the
Company’s incremental borrowing rate based on the information available at the commencement date in determining the
present value of future lease payments. Relevant information used in determining the Company’s incremental borrowing rate
includes the duration of the lease, transaction currency of the lease, and the Company’s credit risk relative to risk-free market
rates.

The Company’s ROU assets also include any initial direct costs incurred and exclude lease incentives. The Company’s lease
agreements do not contain any material residual value guarantees or restrictive covenants.

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

Income Taxes
The Company accounts for income taxes under the liability method in accordance with Accounting Standards Codification
(“ASC”) 740 Topic, 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 income tax effects
of non-inventory intra-entity asset transfers are recognized in the period in which the transfer occurs. The Company classifies
its balance sheet accounts by applying jurisdictional netting principles for locations where consolidated tax filing elections are
in place.

The Tax Cut and Jobs Act (“the Act”, or “U.S. Tax Reform”), enacted on December 22, 2017, contains the Global Intangible
Low-Taxed Income (“GILTI”), Base Erosion Anti-Avoidance Tax (“BEAT”), and Deduction for Foreign-Derived Intangible
Income (“FDII”) provisions, which relate to the taxation of certain foreign income and are effective for tax years beginning on
or after January 1, 2018. The Company recognizes its GILTI, BEAT, and FDII inclusions, when applicable, 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 in the period of enactment as a component of
income tax expense within continuing operations, even if they relate to items recorded within accumulated other comprehensive
income (loss) (“AOCI”). The Company elected to not reclassify the tax effects of these changes associated with the Act from
AOCI to retained earnings. Such tax effects are released into earnings when the underlying portfolio of assets or liabilities
giving rise to the AOCI position are fully derecognized.

Goodwill
Goodwill is not amortized, rather it is tested annually for impairment, 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. Our annual
impairment testing consists of comparing the estimated fair value of each reporting unit to its carrying value. If the carrying
value of a reporting unit exceeds its estimated fair value, goodwill would be considered to be impaired and reduced to its
implied fair value. We estimate the fair value of reporting units with valuation techniques, including 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 group.

Fair value determinations require judgment and are sensitive to changes in underlying assumptions, estimates, as well as market
factors. Estimating the fair value of reporting units requires that we make a number of assumptions and estimates regarding our
long-term growth and cash flow expectations as well as overall industry and economic conditions. These estimates and
assumptions include, but are not limited to, projections of revenue and income growth rates, capital investments, competitive
and customer trends, appropriate peer group selection, market-based discount rates and other market factors.

We performed our annual goodwill impairment testing in the fourth quarter of 2019 using a quantitative approach which did not
result in any impairments. See Note 6, Goodwill and Other Intangibles for additional information. We believe our fair value
estimates are reasonable. If actual financial results differ materially from current estimates or there are significant negative
changes in market factors beyond our control, there could be an impairment of goodwill in the future.

Other Intangible Assets
Other intangible assets consist primarily of technology and patent rights, customer and other relationships, and trade names.
These assets are recorded at cost and amortized on a straight-line basis over the asset’s useful life which typically 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 Topic 360, Property, Plant and
Equipment, which 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 the excess of the carrying amount over the fair value. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.

Investments in Securities
The Company’s investments primarily include equity securities that are accounted for at cost, adjusted for impairment losses or
changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same
issuer. These investments are primarily in venture capital backed technology companies where the Company's ownership
interest is less than 20% of each investee and the Company does not have the ability to exercise significant influence. See Note
8, Investments for additional information.

Revenue Recognition
Revenues are primarily comprised of sales of hardware, services, and supplies. The Company also generates revenues from its
solutions and software offerings, primarily licenses and maintenance. Our service offerings are principally product repair and
maintenance service contracts, which typically occur over time, and professional services such as installation, integration and
provisioning, which typically occur in the early stages of a project. The average life of repair and maintenance service contracts
is approximately three years. Professional service arrangements range in duration from a day to several weeks or months. We
recognize revenues when we transfer control of promised goods or services to our customers in an amount that reflects the
consideration to which we expect to receive, which includes estimates of variable consideration, in exchange for those goods or
services. We are typically the principal in all elements of our transactions and record Net sales and Cost of sales on a gross
basis.

The Company elects to exclude from the transaction price sales and other taxes assessed by a governmental authority and
collected by the Company from a customer. The Company also considers shipping and handling activities as part of its
fulfillment costs and not as a separate performance obligation. See Note 3, Revenues for additional information.

Research and Development Costs
Research and development (“R&D”) costs are expensed as incurred, and 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 $19 million, $18 million, and $18 million for the years ended
2019, 2018 and 2017, respectively.

Warranties

In general, the Company provides warranty coverage of one year on mobile computers, printers and batteries. Advanced data
capture products are warrantied from one to five years, depending on the product. Thermal printheads are warrantied for six
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 and expected warranty experience.

Contingencies
The Company establishes a liability for loss contingencies 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.

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 and fair value
measurement under the accounting guidance generally include our employee deferred compensation plan investments, foreign
currency forwards, and interest rate swaps. In accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”), 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 11, Derivative Instruments for additional
information on the Company’s derivatives and hedging activities.

The Company utilizes 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 securities held for its deferred compensation plans are measured at fair value using quoted prices in active
markets for identical assets. 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 those financial instruments. See Note 10, Fair Value Measurements for information related to financial assets and
liabilities carried at fair value.

Share-Based Compensation
The Company has share-based compensation plans and an employee stock purchase plan under which shares of Class A
Common Stock are available for future grants and sales. The Company recognizes compensation costs over the vesting period
of up to 4 years, net of estimated forfeitures. Compensation costs associated with awards with graded vesting terms are
recognized on a straight-line basis. See Note 15, Share-Based Compensation for additional information.

Foreign Currency Translation
The balance sheet accounts of the Company’s subsidiaries that have not designated the U.S. Dollar as its functional currency are
translated into U.S. Dollars using the period-end exchange rate, and statement of earnings items are translated using the average
exchange rate for the period. The resulting translation gains or losses are recorded in Stockholders’ equity as a cumulative
translation adjustment, which is a component of AOCI 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 values of long-lived assets, such as intangible assets, can be complex and require
judgment. We use information available to us to make fair value determinations and engage independent valuation specialists,
when necessary, to assist in the fair value determinations 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 during the measurement period, which is up to one year after the acquisition date. Critical estimates in valuing
certain intangible assets include, but are not limited to, future expected cash flows from revenues and operating activities,
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, we may record adjustments to the fair value of
assets acquired and liabilities assumed with a corresponding adjustment to goodwill.

Recently Adopted Accounting Pronouncements
On January 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842”), which increases the transparency and
comparability of organizations by recognizing ROU assets and lease 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 ROU assets and lease liabilities arising from operating leases were not previously recognized on the
Consolidated Balance Sheet. Results for reporting periods beginning after January 1, 2019 are reported under ASC 842, while
prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic
840, Leases (“ASC 840”). In transition, we elected a number of practical expedients, including the election to not reassess
existing or expired contracts to determine if such contracts contain a lease or if the lease classification would differ, as well as
the election to not separate lease and non-lease components for arrangements where the Company is a lessee.

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

As Reported
December 31,
2018

Adjustment

As Adjusted
January 1,
2019

Assets:

Prepaid expenses and other current assets(1)
Right-of-use assets

—

(1) $

110

Liabilities:

Accrued liabilities(2)
Long-term lease liabilities
Other long-term liabilities(1)

322

—

103
(22)

110

350

103

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

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

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This
ASU clarifies existing guidance related to implementation costs incurred in cloud computing arrangements, including the
recognition, subsequent measurement, and financial statement presentation of such costs. The standard was early adopted
prospectively by the Company during the second quarter of 2019 and did not have a material impact to the Company’s
consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses
on Financial Instruments. The ASU 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. With respect to the Company’s financial assets, including trade receivables and
contract assets, a cumulative effect transition approach will be applied. The standard will be effective for the Company in the
first quarter of 2020. Management has assessed the impact of the ASU and determined, based on current operations, that it will
not have a material impact to the Company’s consolidated financial statements or disclosures.

Note 3 Revenues

On January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), applying the
modified retrospective method to those contracts which were not completed as of January 1, 2018. Results for reporting
periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue
to be reported in accordance with our historic accounting under ASC Topic 605, Revenue Recognition (“ASC 605”). The
adoption of ASC 606 did not have a material effect on the Company’s consolidated financial statements or results of operations.

The Company recognizes revenue to depict the transfer of goods or services to a customer at an amount that reflects the
consideration which it expects to receive for providing those goods or services. To determine total expected consideration, the
Company estimates elements of variable consideration, which primarily include product rights of return, rebates, price

protection and other incentives. These estimates are developed using the expected value or the most likely amount method and
are reviewed and updated, as necessary, at each reporting period. Revenues, inclusive of variable consideration, are recognized
to the extent it is probable that a significant reversal in cumulative revenues recognized will not occur in future periods.

We enter into contract arrangements that may include various combinations of tangible products, services, solution and software
offerings, which are generally capable of being distinct and accounted for as separate performance obligations. We evaluate
whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single
contract has more than one performance obligation. This evaluation requires judgment, and the decision to combine a group of
contracts or separate the combined or single contract into multiple distinct performance obligations may impact the amount of
revenue recorded in a reporting period. We deem performance obligations to be distinct if the customer can benefit from the
product or service on its own or together with readily available resources (“capable of being distinct”) and if the transfer of
products or services is separately identifiable from other promises in the contract (“distinct within the context of the contract”).

For contract arrangements that include multiple performance obligations, we allocate the total transaction price to each
performance obligation in an amount based on the estimated relative standalone selling prices for each performance obligation.
In general, standalone selling prices are observable for tangible products and software licenses, while standalone selling prices
for professional services, repair and maintenance services, and solutions are developed with an expected cost-plus margin or
residual approach. When the residual approach cannot be applied, regional pricing, marketing strategies and business practices
are evaluated to derive the estimated standalone selling price using a cost-plus margin methodology.

The Company recognizes revenue for each performance obligation upon transfer of control of the promised goods or services.
Control is deemed to have been transferred when the customer has the ability to direct the use of and has obtained substantially
all of the remaining benefits from the goods and services. The determination of whether control transfers at a point in time or
over time requires judgment and includes consideration of the following : 1) the customer simultaneously receives and
consumes the benefits provided as the Company performs its promises; 2) the Company’s performance creates or enhances an
asset that is under control of the customer; 3) the Company’s performance does not create an asset with an alternative use to the
Company; and 4) the Company has an enforceable right to payment for its performance completed to date. Substantially all
revenue for tangible products and perpetual or term software licenses is recognized at a point in time, which is generally upon
shipment, transfer of control and risks of ownership to the customer, and the Company having contractual right to payment.
Revenue for services and Company-hosted software license and maintenance agreements, as well as solutions, is predominantly
recognized over time.

Assuming all other criteria for revenue recognition have been met, for products and services sold on a standalone basis, revenue
is generally recognized upon shipment and by using an output method or time-based method, respectively. In cases where a
bundle of products and services are delivered to the customer, judgment is required to select the method of progress which best
reflects the transfer of control.

The Company’s remaining obligations that are greater than one year in duration relate primarily to repair and support services.
The aggregated transaction price allocated to remaining performance obligations related to these types of service arrangements,
inclusive of deferred revenue, was $724 million and $489 million as of December 31, 2019 and 2018, respectively. On average,
remaining performance obligations as of December 31, 2019 and 2018 are expected to be recognized over a period of
approximately two years.

Disaggregation of Revenue
The following table presents our Net sales disaggregated by product category for each of our segments, Asset Intelligence &
Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”), for the years ended December 31, 2019 and 2018 (in
millions):

Segment
AIT

EVM

Total

Year Ended December 31, 2019
Services and
Software

Tangible
Products

Total

Year Ended December 31, 2018
Services and
Software

Tangible
Products

Total

1,347

2,560

3,907

132

446

578

1,479

3,006

4,485

1,298

2,387

3,685

125

408

533

1,423

2,795

4,218

In addition, refer to Note 20, Segment Information & Geographic Data for Net sales to customers by geographic region.

Contract Balances

Progress on satisfying performance obligations under contracts with customers is reflected on the Consolidated Balance Sheets
in Accounts receivable, net for billed revenues. Progress on satisfying performance obligations under contracts with customers
related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other
current assets for revenues expected to be billed within the next 12-months, and Other long-term assets for revenues expected to
be billed thereafter. The total closing contract asset balances were $8 million and $5 million as of December 31, 2019 and
2018, respectively. The opening contract asset balance upon the Company’s transition to ASC 606 as of January 1, 2018 was $7
million. These contract assets result from timing differences between the billing and delivery schedules of products, services
and software, as well as the impact from the allocation of the transaction price among performance obligations for contracts that
include multiple performance obligations. Contract assets are evaluated for impairment and no impairment losses have been
recognized during the years ended December 31, 2019 and 2018.

Deferred revenue on the Consolidated Balance Sheets consist of payments and billings in advance of our performance. The
combined short-term and long-term deferred revenue balances were $459 million and $382 million as of December 31, 2019
and 2018, respectively. The Company recognized $219 million and $181 million in revenue that was previously included in the
beginning balance of deferred revenue during the years ended December 31, 2019 and 2018, respectively.

Our payment terms vary by the type and location of our customer and the products or services offered. The time between
invoicing and when payment is due is not significant. In instances where the timing of revenue recognition differs from the
timing of invoicing, we have determined that our contracts do not include a significant financing component.

Costs to Obtain a Contract
Our incremental direct costs of obtaining a contract, which consist of sales commissions and incremental fringe benefits, are
deferred and amortized over the weighted-average contract term. The incremental costs to obtain a contract, which were
previously expensed as incurred under ASC 605, as well as the determination of the amortization period, are derived at a
portfolio level and amortized on a straight-line basis. The ending balance of deferred commission costs, which are recorded in
Other long-term assets on the Consolidated Balance Sheets, was $21 million and $15 million as of December 31, 2019 and
2018, respectively. The opening deferred commission balance upon the Company’s transition to ASC 606 as of January 1, 2018
was $12 million. Amortization of deferred commission costs, which are recorded in Selling and Marketing expense on the
Consolidated Statements of Operations, was $11 million and $10 million during the years ended December 31, 2019 and 2018,
respectively. Incremental costs of obtaining a contract are expensed as incurred if the amortization period would otherwise be
one year or less.

Note 4 Inventories

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

Raw materials

Work in process

Finished goods

Total

Note 5 Business Acquisitions

December 31,
2019

December 31,
2018

128

342
474

125

392
520

Cortexica
On November 5, 2019, the Company acquired 100% of the equity interests in Cortexica Vision Systems Limited (“Cortexica”),
a provider of computer vision-based artificial intelligence solutions primarily for the retail industry. The purchase consideration
was $7 million, which was primarily allocated to technology-related intangible assets of $4 million and goodwill of $4 million
based on the estimated fair values of identifiable assets acquired and liabilities assumed. While we believe these estimates
provide a reasonable basis to record the net assets acquired, the purchase price allocation is considered preliminary and subject
to adjustment during the measurement period, which is up to one year from the acquisition date. Additionally, we incurred
approximately $2 million of acquisition-related costs in 2019, which are included within Acquisition and integration costs on
the Consolidated Statements of Operations. The goodwill, which will be non-deductible for tax purposes, has been allocated to
the EVM segment and principally relates to the planned expansion of the Cortexica technologies into new markets, industries,
and product offerings.

Profitect

On May 31, 2019, the Company acquired 100% of the equity interests of Profitect, Inc. (“Profitect”), a provider of prescriptive
analytics primarily for the retail industry. In acquiring Profitect, the Company seeks to enhance its existing software solutions
within the retail industry, with possible future applications in other industries, markets and product offerings.

The Profitect acquisition was accounted for under the acquisition method of accounting for business combinations. The total
purchase consideration was $79 million, which consisted of $75 million in cash paid, net of cash on-hand, and the fair value of
the Company’s existing ownership interest in Profitect of $4 million, as remeasured upon acquisition. This remeasurement
resulted in a $4 million gain reflected within Other, net on the Consolidated Statements of Operations. Additionally, we
incurred $13 million of acquisition-related costs in 2019, which primarily consisted of payments to settle Profitect employee
stock option awards, as well as third party transaction and advisory fees. Those acquisition-related costs are included within
Acquisition and integration costs on the Consolidated Statements of Operations.

The Company utilized estimated fair values as of May 31, 2019 to allocate the total purchase consideration to the net tangible
and intangible assets acquired and liabilities assumed. The fair value of the net assets acquired was based on a number of
estimates and assumptions as well as customary valuation procedures and techniques, principally the excess earnings
methodology. While we believe these estimates provide a reasonable basis to record the net assets acquired, the purchase price
allocation is considered preliminary and subject to adjustment during the measurement period, which is up to one year from the
acquisition date. The primary fair value estimates considered preliminary include identifiable intangible assets and income tax-
related items.

The preliminary purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):

Identifiable intangible assets

Other assets acquired

Deferred tax liabilities

Other liabilities assumed

Net Assets Acquired

Goodwill on acquisition

Total purchase consideration

4
(4)
(10)
25

The $54 million of goodwill, which will be non-deductible for tax purposes, has been allocated to the EVM segment and
principally relates to the planned expansion of the Profitect software offerings and technologies into current and new markets,
industries and product offerings.

The preliminary purchase price allocation to identifiable intangible assets acquired was:

Technology and patents

Customer and other relationships

Total identifiable intangible assets

Fair Value (in
millions)

Useful Life
(in years)

Temptime
On February 21, 2019, the Company acquired 100% of the equity interests of Temptime Corporation (“Temptime”), a developer
and manufacturer of temperature-monitoring labels and devices. The Company intends to expand Temptime’s product offerings
within the healthcare industry, with possible future applications in other industries involving temperature-sensitive products.

The Temptime acquisition was accounted for under the acquisition method of accounting for business combinations. The
Company paid $180 million in cash, net of cash on-hand, to acquire Temptime. Additionally, we incurred $3 million of
acquisition-related costs in 2019, which primarily included third-party transaction and advisory fees that are included within
Acquisition and integration costs on the Consolidated Statements of Operations.

The Company utilized estimated fair values as of February 21, 2019 to allocate the total consideration paid to the net tangible
and intangible assets acquired and liabilities assumed. The fair value of the net assets acquired was based on a number of
estimates and assumptions as well as customary valuation procedures and techniques, including the relief from royalty and
excess earnings methodologies. While we believe these estimates provide a reasonable basis to record the net assets acquired,
the purchase price allocation is considered preliminary and subject to adjustment during the measurement period, which is up to
one year from the acquisition date. The primary fair value estimates considered preliminary are income tax-related items.

The preliminary purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):

Inventory

Property, plant and equipment

Identifiable intangible assets

Other assets acquired

Deferred tax liabilities

Other liabilities assumed

Net Assets Acquired

Goodwill on acquisition

Total purchase consideration

106

13
(24)
(12)
107

180

The $73 million of goodwill, which will be non-deductible for tax purposes, has been allocated to the AIT segment and
principally relates to the planned expansion of its product offerings and technologies into current and new markets and
industries.

The preliminary purchase price allocation to identifiable intangible assets acquired was:

Customer and other relationships
Technology and patents

Trade Names

Total identifiable intangible assets

Fair Value
(in millions)

Useful Life
(in years)

79
25

106

8
8

Xplore
On August 14, 2018, the Company acquired Xplore Technologies Corporation (“Xplore”). The Xplore business designs,
integrates, markets and sells rugged tablets that are primarily used by industrial, government, and field service organizations.
The acquisition of Xplore is intended to expand the Company’s portfolio of mobile computing devices to serve a wider range of
customers.

The Xplore acquisition was accounted for under the acquisition method of accounting for business combinations. The Company
paid $72 million in cash, net of cash on-hand, to acquire Xplore.

The final purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):

Accounts receivable

Inventory

Identifiable intangible assets

Other assets acquired

Debt

Accounts payable

Deferred revenues

Other liabilities assumed

Net Assets Acquired

Goodwill on acquisition

Total consideration

10
(9)
(8)
(7)
(7)
43

At closing, in connection with the acquisition, the Company also made a $9 million payment of Xplore debt and $6 million in
payments of other Xplore transaction-related obligations. Additionally, we incurred $8 million of acquisition-related costs in
2018, which primarily included third-party transaction and advisory fees, and we incurred $2 million of system integration costs
in 2019. These costs are reflected within Acquisition and integration costs on the Consolidated Statements of Operations.

The $29 million of goodwill, which will be non-deductible for tax purposes, has been allocated to the EVM segment and
principally relates to the planned expansion of the Xplore product offerings into current and new markets.

Included within the final purchase price allocation are measurement period adjustments relating to facts and circumstances
existing as of the acquisition date, primarily an increase to deferred tax assets and a corresponding decrease to goodwill of $6
million, which were recorded during 2019. The Xplore purchase price allocation was finalized in the second quarter of 2019.

The purchase price allocation to identifiable intangible assets acquired was:

Customer and other relationships

Technology and patents

Trade names

Total identifiable intangible assets

Fair Value
(in millions)

Useful Life
(in years)

The operating results of each acquired company have been included in the Company’s Consolidated Balance Sheets and
Statements of Operations beginning on their respective acquisition dates. The Company has not included unaudited proforma
results, as if each of these companies had been acquired as of January 1, 2018, as doing so would not yield materially different
results.

Note 6 Goodwill and Other Intangibles

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

Goodwill as of December 31, 2017

Xplore acquisition

Foreign exchange impact

Goodwill as of December 31, 2018

Xplore purchase price allocation adjustments

Temptime acquisition

Profitect acquisition

Cortexica acquisition

Foreign exchange impact

AIT

EVM

Total

154

2,311

—

154

—

35
(5)
2,341
(6)
—

2,465

35
(5)
2,495
(6)
73

Goodwill as of December 31, 2019

227

2,395

2,622

See Note 5, Business Acquisitions for further details related to the Company’s acquisitions and purchase price allocation
adjustments.

The Company’s goodwill balance consists of five reporting units. The majority of the goodwill relates to the acquisition of the
Enterprise Business of Motorola Solutions, Inc. (“Enterprise”). The Company completed its annual goodwill impairment testing
during the fourth quarter of 2019 utilizing a quantitative approach. The estimated fair value of each reporting unit exceeded its
carrying value by at least 55%. There is risk of future impairment to the extent that an individual reporting unit’s performance
does not meet projections. Additionally, if our current assumptions and estimates, including projected revenues and income
growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors,
are not met, or if other valuation factors outside of our control change unfavorably, the estimated fair value of our reporting
units could be adversely affected, leading to a potential impairment in the future.

No events occurred during the fiscal years ended 2019, 2018, or 2017 that indicated it was more likely than not that our
goodwill was impaired.

Other Intangibles, net
The balances in Other Intangibles, net consisted of the following (in millions):

As of December 31, 2019

As of December 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net

Gross
Carrying
Amount

Accumulated
Amortization

Net

Amortized intangible assets
Technology and patents
Customer and other
relationships

Trade Names
Total

578

(508) $

514

(470) $

575
43
1,196

(371)
(42)
(921) $

204
1
275

493
41
1,048

(305)
(41)
(816) $

Amortization expense was $103 million, $97 million, and $184 million for fiscal years ended 2019, 2018 and 2017,
respectively.

Estimated future intangible asset amortization expense is as follows (in millions):

Year Ended December 31,
2020
2021
2022
2023
2024
Thereafter
Total

Note 7 Property, Plant and Equipment

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,

2019

2018

63
7
232
20
168
84
36
610
(351)
259

188
—
232

64
60
54
23
23
51
275

57
7
204
18
161
75
24
546
(297)
249

Depreciation expense was $72 million, $78 million and $79 million for the years ended December 31, 2019, 2018 and 2017,
respectively.

Note 8 Investments

The carrying value of the Company’s investments was $45 million and $25 million as of December 31, 2019 and 2018,
respectively, which are included in Other long-term assets on the Consolidated Balances Sheets.

The Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities (“ASU 2016-01”) on January 1, 2018. In conjunction therewith, the Company has
elected to measure equity investments without readily determinable fair values at cost, adjusted only for impairment losses or
for observable changes in orderly transactions for the identical or similar investment of the same issuer for periods beginning
after January 1, 2018. Prior to the adoption of ASU 2016-01, such equity investments were measured at cost, adjusted only for
impairment losses.

Net gains (losses) related to the Company’s investments, which are included within Other, net on the Consolidated Statements
of Operations, were $3 million, $10 million, and $(1) million during the years ended December 31, 2019, 2018, and 2017,
respectively.

Note 9 Exit and Restructuring Costs

In the fourth quarter of 2019, the Company committed to certain organizational changes designed to generate operational
efficiencies (collectively referred to as the “2019 Productivity Plan”), which are incremental to the Company’s 2017 exit and
restructuring program (the “2017 Productivity Plan”). The organizational design changes under the 2019 Productivity Plan will
principally occur within the North America and Europe, Middle East, and Africa (“EMEA”) regions, relate primarily to
employee severance and related benefits, and are expected to be substantially completed in fiscal 2020. Exit and restructuring
charges for the 2019 Productivity Plan were $8 million for the year ended December 31, 2019. Estimated remaining costs to be
incurred in fiscal 2020 under the 2019 Productivity Plan are expected to be up to $10 million.

The Company’s total remaining obligations under its exit and restructuring programs as of December 31, 2019 were
approximately $9 million, which are expected to be settled primarily within the next year and reflected within Accrued
liabilities on the Consolidated Balance Sheets.

Note 10 Fair Value Measurements

Financial assets and liabilities are 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: 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).

Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.

Level 3: 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 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, 2019, 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

— $

—

— $

—

— $

—

— $

The Company’s financial assets and liabilities carried at fair value as of December 31, 2018, are classified below (in millions):

Level 1

Level 2

Level 3

Total

Assets:

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

Total Assets at fair value

Liabilities:

Liabilities related to the deferred compensation plan $
$

Total Liabilities at fair value

—

— $

—

— $

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

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

exchange rate adjusted for current forward points.

b. Fair value of hedges against net assets is calculated at the year-end exchange rate adjusted for current forward points
unless the hedge has been traded but not settled at year 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).

(2) The fair value of forward interest rate swaps is based upon a valuation model that uses relevant observable market inputs at

the quoted intervals, such as forward yield curves, and is adjusted for the Company’s credit risk and the interest rate swap
terms.

Note 11 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. The Company formally documents all
relationships between designated hedging instruments and hedged items as well as its risk management objectives and
strategies for undertaking hedge transactions. The Company does not hold or issue derivatives for trading or speculative
purposes.

In accordance with ASC 815, 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)

Fair Values as of December 31,

Balance Sheets Classification

2019

2018

Derivative instruments designated as hedges:
Foreign exchange contracts

Total derivative instruments designated as hedges

Derivative instruments not designated as hedges:
Foreign exchange contracts

Forward interest rate swaps

Total derivative instruments not designated as hedges

Total net derivative (liability) asset

Prepaid expenses and other current
assets

Prepaid expenses and other current
assets
Prepaid expenses and other current
assets

Other long-term assets

Accrued liabilities

Other long-term liabilities

— $

—

—
(5)
(8)

(13) $
(10) $

—

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

(Loss) Gain Recognized in Income

Year Ended December 31,

Statements of Operations
Classification

2019

2018

2017

Derivative instruments not designated as
hedges:

Foreign exchange contracts

Forward interest rate swaps

Foreign exchange loss

Interest expense, net

Total (loss) gain recognized in income

(3) $
(19)
(22) $

(24)
2
(22)

Activities related to derivative instruments are included within Net cash provided by operating activities on the Statements of
Cash Flows.

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 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
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 policies are designed to mitigate concentrations of credit risk.

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. We elect to
present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place,
on a net basis on the Consolidated Balance Sheets. If the derivative financial instruments had been presented gross on the
Consolidated Balance Sheets, the asset and liability positions each would have been increased by $3 million and $1 million as
of December 31, 2019 and 2018, respectively.

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 manages 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, as deemed appropriate.

The Company manages the exchange rate risk of anticipated Euro-denominated sales by using forward contracts, 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 AOCI 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 gains (losses) reclassified to Net sales were $42 million, $13 million, and $(8)
million for the years ending December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019 and 2018, the notional
amounts of the Company’s foreign exchange cash flow hedges were €564 million and €496 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 net
assets denominated in foreign currencies. These forward contracts typically mature within one month after execution. Monetary
gains and losses on these forward contracts are recorded in income and are generally offset by the transaction gains and losses
related to their net asset positions. The notional values and the net fair value of these outstanding contracts were as follows (in
millions):

Notional balance of outstanding contracts:

British Pound/U.S. Dollar

Euro/U.S. Dollar

British Pound/Euro

Canadian Dollar/U.S. Dollar

Australian Dollar/U.S. Dollar

Japanese Yen/U.S. Dollar

Singapore Dollar/U.S. Dollar

Mexican Peso/U.S. Dollar

Chinese Yuan/U.S. Dollar

South African Rand/U.S. Dollar

Net fair value of assets of outstanding contracts

December 31,

2019

2018

— £

1 C$

42 A$

264

19 S$

Mex$

115 Mex$

— ¥

42 R

— $

396

225

The Company’s use of non-designated forward contracts to manage Euro currency exposure is limited, as Euro-denominated
borrowings under the Revolving Credit Facility naturally hedge part of such risk. See Note 12, Long-Term Debt for further
discussion of Euro-denominated borrowings.

Interest Rate Risk Management
The Company’s debt consists of borrowings under a term loan (“Term Loan A”), Revolving Credit Facility, and Receivables
Financing Facilities, which bear interest at variable rates plus an applicable margin. See Note 12, Long-Term Debt for further
details related to these borrowings. As a result, the Company is exposed to market risk associated with the variable interest rate
payments on these borrowings.

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.

In December 2017, the Company entered into a long-term forward interest rate swap agreement with a notional amount of $800
million to lock into a fixed LIBOR interest rate base for debt facilities subject to monthly interest payments. 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 starting in December 2018 and ending in December 2022. During the third quarter of 2019, the Company entered into
additional long-term forward interest rate swap agreements with a total notional amount of $800 million, containing net
settlements effective starting in December 2022 and ending in August 2024. The additional interest rate swap agreements
effectively extend the risk management initiative of the Company to coincide with the maturities of Term Loan A and the
Revolving Credit Facility, as amended. The Company’s interest rate swaps are not designated as hedges and changes in fair
value are recognized immediately as Interest expense, net on the Consolidated Statements of Operations.

The Company previously had a floating-to-fixed interest rate swap, which was designated as a cash flow hedge. This swap was
terminated, and hedge accounting treatment was discontinued in 2014. The Company reclassified $2 million and $2 million of
losses to Interest expense, net on the Consolidated Statements of Operations during the years ended December 31, 2019 and
2018, respectively. No losses remain to be amortized as of December 31, 2019.

During the fourth quarter of 2018, the Company terminated three interest rate swaps. The first swap was entered into with a
syndicated group of commercial banks for the purpose of fixing the interest rate on the Company’s floating-rate debt. The
second swap largely offset the first swap, causing interest payments to again be exposed to rate fluctuations. Neither of these
instruments were designated as accounting hedges, with changes in fair value recognized in Interest expense, net on the
Consolidated Statements of Operations. The third interest rate swap converted the floating-rate debt to fixed-rate debt and was
designated as a cash flow hedge. As part of the termination, the Company settled all three swaps resulting in a $7 million cash
payment to counterparties that was classified within Net cash provided by operating activities. Hedge accounting treatment was
discontinued on the third swap, which had less than $1 million of pretax losses remaining in AOCI at the time of termination.

Note 12 Long-Term Debt

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

€
€
Term Loan A
Term Loan B
Revolving Credit Facility
Receivables Financing Facilities

Total debt

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

917
—
103
266
1,286
(6)
(3)
(197)
1,080

As of December 31, 2019, the future maturities of debt, excluding debt discounts and issuance costs, are as follows (in
millions):

2020

2021

2022
2023

2024

Thereafter

Total future maturities of debt

December 31,

2019

2018

608
445
408
139
1,600
(5)
(4)
(157)
1,434

197

56
81

853

—

1,286

All borrowings as of December 31, 2019 were denominated in U.S. Dollars, except for €92 million under the Revolving Credit
Facility that was borrowed in Euros.

The estimated fair value of our debt approximated $1.3 billion and $1.6 billion as of December 31, 2019 and 2018, respectively.
These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, 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 a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit
ratings.

Credit Facilities
On July 26, 2017, the Company entered into an Amended and Restated Credit Agreement which provided for the issuance of
Term Loan A and increased funding available under the Revolving Credit Facility to $500 million. In conjunction therewith, the
Company partially paid down and repriced Term Loan B. As part of these refinancing activities, the Company capitalized $5
million of debt issuance costs and recorded $6 million of pre-tax charges related to third-party fees for arranger, legal and other
services and accelerated amortization of debt issuance costs and discounts within Other, net on the Company’s Consolidated
Statements of Operations. During 2017, the Company also fully redeemed $1.1 billion of outstanding principal of other debt
obligations which had a scheduled maturity in 2022. In accounting for the early termination, the Company applied debt
extinguishment accounting and recognized a $65 million make whole premium and $16 million acceleration of debt issuance
costs within Interest expense, net on the Company’s Consolidated Statements of Operations.

On May 31, 2018, the Company entered into Amendment No. 1 to the Amended and Restated Credit Agreement (“Amendment
No. 1”). Amendment No. 1 resulted in a new Term Loan A with principal of $670 million and increased the Revolving Credit
Facility from $500 million to $800 million. Also, as part of Amendment No. 1, the Company had a partial early debt
extinguishment of $300 million and repricing of its Term Loan B. Amendment No. 1 resulted in $6 million of non-cash
accelerated amortization of debt issuance costs and $1 million of one-time charges related to third party fees, both of which
were reflected in Interest Expense, net on the Consolidated Statements of Operations. Amendment No. 1 also resulted in $2
million of third party fees for arranger, legal, and other services that were capitalized.

On August 9, 2019, the Company entered into Amendment No. 2 to the Amended and Restated Credit Agreement
(“Amendment No. 2”). Amendment No. 2 increased the Company’s borrowing under Term Loan A from $608 million to $1
billion and increased the Company’s borrowing capacity under the Revolving Credit Facility from $800 million to $1 billion.
Term Loan A and the Revolving Credit Facility will continue to bear interest at variable rates plus an applicable margin. The

maturities of Term Loan A and the Revolving Credit Facility were each extended to August 9, 2024. In conjunction with
entering into Amendment No. 2, a payment of $445 million was made to fully pay off Term Loan B.

The refinancing of the Company’s debt during the third quarter of 2019 resulted in non-cash accelerated amortization of debt
discount and debt issuance costs of $4 million and one-time charges of $3 million, which included certain third party fees and
the accelerated amortization of losses on terminated interest rate swaps released from AOCI. These items are included in
Interest Expense, net on the Consolidated Statements of Operations. Additionally, issuance costs of $6 million incurred related
to this debt refinancing were capitalized and will be amortized over the remaining term of Term Loan A and the Revolving
Credit Facility.

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in July 2021 and the
majority due upon its August 9, 2024 maturity. The Company may make prepayments against the amended Term Loan A, in
whole or in part, without premium or penalty. The Company would be required to prepay certain outstanding amounts in the
event of certain circumstances or transactions. As of December 31, 2019, the Term Loan A interest rate was 3.01%. Interest
payments are made monthly.

The Revolving Credit Facility is available for working capital and other general corporate purposes, including letters of credit.
As of December 31, 2019, the Company had letters of credit totaling $5 million, which reduced funds available for borrowings
under the agreement from $1 billion to $995 million. As of December 31, 2019, the Revolving Credit Facility had an average
interest rate of 1.25%. Interest payments are made monthly. All remaining principal is due upon the Revolving Credit Facility’s
maturity on August 9, 2024.

During the second quarter of 2019, the Company entered into an Additional Receivable Financing Facility with another
financial institution, which allows for additional borrowings of up to $100 million, and thus total borrowings of up to $280
million, using U.S. domestically originated accounts receivables as collateral. The Company has also accounted for transactions
under this Additional Receivables Financing Facility as secured borrowings. The Additional Receivables Financing Facility will
mature on May 18, 2020.

As of December 31, 2019, the Company’s Consolidated Balance Sheets included $545 million of receivables that were pledged
under the two Receivables Financing Facilities. As of December 31, 2019, $266 million had been borrowed, of which $197 million
is classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable
margin. As of December 31, 2019, the Receivables Financing Facilities had an average interest rate of 2.60% and require monthly
interest payments.

The Company uses interest rate swaps to manage the interest rate risk associated with its debt. See Note 11, Derivative
Instruments for further information.

As of December 31, 2019, the Company was in compliance with all debt covenants.

Note 13 Leases

The Company leases certain manufacturing facilities, distribution centers, sales and administrative offices, equipment, and
vehicles, which are accounted for as operating leases. Remaining lease terms are up to 13 years, with certain leases containing
renewal options.

The following table presents activities associated with our operating leases during the year ended December 31, 2019 (in
millions):

Fixed lease expenses

Variable lease expenses

Total lease expenses

Cash paid for leases

ROU assets obtained in exchange for lease obligations

Reduction of ROU assets and lease liabilities

Net non-cash increases to ROU assets and lease liabilities

42
(16)
26

The variable lease expenses incurred during the year were not included in the measurement of the Company’s ROU assets and
lease liabilities. Variable lease expenses consisted primarily of distribution center service costs that were based on product
distribution volumes, as well as non-fixed common area maintenance, real estate taxes, and other operating costs associated
with various facility leases. Expenses incurred during the year related to short term leases were not significant.

Cash payments for operating leases are included within Net cash provided by operating activities on the Consolidated
Statements of Cash Flows.

ROU assets obtained in exchange for lease obligations includes new lease arrangements entered into by the Company during
the year, as well as lease arrangements obtained through acquisitions. Additionally, ROU assets obtained in exchange for lease
obligations include contract modifications that occurred during the year, as well as changes in assessments made during the
year rendering it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose
during the year.

Reductions in the Company’s ROU assets and lease liabilities were primarily related to a modification to one of the Company’s
distribution center lease agreements during the fourth quarter of 2019, resulting in a reduction to fixed future lease payments.
That amendment is not, however, expected to significantly affect total future lease costs, inclusive of variable lease payments.

As of December 31, 2019, the weighted average remaining term of the Company’s operating leases was approximately 6 years,
and the weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 6%.

Future minimum lease payments under non-cancellable operating leases as of December 31, 2019 were as follows (in millions):

2020

2021

2022

2023

2024

Thereafter

Total future minimum lease payments

Less: Interest

Present value of lease liabilities

Reported as of December 31, 2019:

Current portion of lease liabilities

Long-term lease liabilities

Present value of lease liabilities

152
(23)
129

100

129

The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

Rent expense under the Company’s operating leases during the years ended December 31, 2018 and 2017, prior to the
Company’s adoption of ASC 842, was $33 million and $34 million, respectively. The Company’s total future minimum lease
obligations under non-cancellable operating leases as of December 31, 2018 was comparable to those as of December 31, 2019.

Revenues earned from lease arrangements under which the Company is a lessor were not significant.

Note 14 Commitments and Contingencies

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

Warranty Reserve
Balance at the beginning of the year
Acquisitions
Warranty expense
Warranties fulfilled

Balance at the end of the year

Year Ended December 31,
2018

2019

2017

22
—
25
(26)
21

18
1
34
(31)
22

21
—
28
(31)
18

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.

During 2018, the Company settled in its entirety a commercial lawsuit resulting in a $13 million pre-tax charge reflected within
General and administrative expenses on the Consolidated Statements of Operations.

Note 15 Share-Based Compensation

On May 17, 2018, shareholders approved the Zebra Technologies Corporation 2018 Long-Term Incentive Plan (“2018 Plan”).
The 2018 Plan superseded and replaced the Zebra Technologies Corporation 2015 Long-Term Incentive Plan (“2015 Plan”) on
the approval date, except that the 2015 Plan remains in effect with respect to outstanding awards under the 2015 Plan until such
awards have been exercised, forfeited, canceled, expired or otherwise terminated in accordance with their terms. Together, the
2018 Plan and 2015 Plan provide for incentive compensation to the Company’s non-employee directors, officers, and
employees. The awards available under the plans include stock appreciation rights, restricted stock awards, performance share
awards, cash-settled stock appreciation rights, restricted stock units, performance stock units, incentive stock options, and non-
qualified stock options.

The Company uses outstanding treasury shares as its source for issuing shares under the share-based compensation programs.

A summary of the equity awards available for future grants under the 2018 Plan is as follows:

Available for future grants as of December 31, 2018

Granted

Available for future grants as of December 31, 2019

3,789,800
(304,840)
3,484,960

The compensation expense from the Company’s share-based compensation plans and associated income tax benefit, excluding
the effects of excess tax benefits or shortfalls, 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,
2018

2017

2019

4
17
16
23
60
9

$
$

4
13
15
21
53
10

$
$

3
8
11
16
38
11

$
$

As of December 31, 2019, total unearned compensation costs related to the Company’s share-based compensation plans was
$62 million, which will be amortized to expense over the weighted average remaining service period of 1.4 years.

Stock Appreciation Rights (“SARs”)
Upon exercise of SARs, the Company issues whole shares of Class A Common Stock to participants based on the difference
between the fair market value of the stock at the time of exercise and the exercise price. Fractional shares are settled in cash
upon exercise. The grant date fair value of SARs is expensed over the 4-year vesting period of the related awards.

A summary of the Company’s SARs outstanding is as follows:

SARs
Outstanding at beginning of year

Granted

Exercised

Forfeited
Expired

Outstanding at end of year

Exercisable at end of year

2019

2018

2017

Weighted-
Average
Exercise
Price

SARs

Weighted-
Average
Exercise
Price

SARs

1,261,185

75.71

1,817,991

65.73

1,740,786

70,141

(395,015)

(39,388)
—

896,923

489,357

205.12

66.82

92.72
—

89.05

70.37

88,042
(598,249)
(46,161)
(438)
1,261,185

595,086

149.75

55.93

80.41
108.20

75.71

60.85

402,029
(250,326)
(66,550)
(7,948)
1,817,991

874,942

56.15

98.87

48.66

75.38
108.20

65.73

50.86

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.

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:

Expected dividend yield

Forfeiture rate

Volatility

Risk free interest rate

Expected weighted-average life (in years)

Weighted-average grant date fair value of SARs granted
(per underlying share)

2019

8.20%

36.79%

2.28%

4.02

2018

8.40%

35.93%

2.96%

4.11

2017

9.37%

35.49%

1.77%

4.13

$64.17

$47.63

$29.86

The following table summarizes information about SARs outstanding as of December 31, 2019:

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

Outstanding

Exercisable

149
4.9

91
4.5

The intrinsic value for SARs exercised during fiscal 2019, 2018 and 2017 was $58 million, $59 million and $14 million,
respectively. The total fair value of SARs vested during fiscal 2019, 2018 and 2017 was $9 million, $12 million and $8 million,
respectively.

Restricted Stock Awards (“RSAs”) and Performance Share Awards (“PSAs”)
The Company’s restricted stock grants consist of time-vested RSAs and PSAs, which 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. Upon vesting, RSAs and PSAs are released to holders and are no longer
subject to restrictions. The Company’s RSAs and PSAs 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, such as an equity retainer fee, vest
upon grant. PSA targets are set based on certain Company-wide financial metrics. Compensation cost is calculated as the
market date fair value of the Company’s Class A Common Stock on grant date multiplied by the number of shares granted, net
of estimated forfeitures.

The Company also issues stock awards to non-employee directors. Each director receives an equity grant of shares annually in
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 the Company’s Class A Common Stock. New directors in any fiscal year earn a prorated amount. During
fiscal 2019, there were 7,371 shares granted to non-employee directors compared to 7,980 and 12,488 shares granted during
fiscal 2018 and 2017, respectively. The shares vest immediately upon the grant date.

A summary of information relative to the Company’s RSAs is as follows:

Restricted Stock Awards

2019

2018

2017

Weighted-
Average
Grant Date
Fair Value

Outstanding at beginning of
year
Granted
Released

Forfeited

657,724

170,502
(372,075)

(21,510)

Outstanding at end of year

434,641

93.45

204.26
73.71

141.29

151.52

628,642

206,922
(154,878)
(22,962)
657,724

77.70

150.60
107.22

88.77

93.45

622,814

199,629
(165,846)
(27,955)
628,642

70.19

98.90
75.90

72.81

77.70

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

Performance Share Awards

2019

2018

2017

Weighted-
Average
Grant Date
Fair Value

Outstanding at beginning of
year
Granted

Released

Forfeited

259,727

150,224

(231,513)

(7,689)

Outstanding at end of year

170,749

86.41

206.04

120.86

102.42

144.47

265,747

59,849
(57,074)
(8,795)
259,727

77.04

146.83

107.31

81.07

86.41

379,226

79,423
(2,029)
(190,873)
265,747

70.14

98.97

62.70

73.09

77.04

Other Award Types
The Company also has cash-settled compensation awards, including cash-settled stock appreciation rights, restricted stock units
and performance stock units, which are expensed over the vesting period of the related award, which is up to 4 years.
Compensation cost is calculated at the 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 based on the Company’s stock price. Cash settlement is based on the
fair value of share equivalents at the time of vesting, which was $6 million, $2 million and $2 million in 2019, 2018 and 2017,
respectively. Share-equivalents issued under these programs totaled 17,207, 20,393 and 45,781 in fiscal 2019, 2018 and 2017,
respectively.

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

Non-qualified Options

2019

2018

2017

Weighted-
Average
Exercise Price

Outstanding at beginning
of year

Granted

Exercised

Forfeited

Expired

Outstanding at end of
year

Exercisable at end of
year

— $

—

— $

—

15,705

—
(15,705)
—

—

— $

26.34

—

26.34

—

154,551

—
(132,905)
—
(5,941)

15,705

35.96

—

36.86

—

41.25

26.34

The last remaining non-qualified stock options were exercised in 2018. The intrinsic value for non-qualified options exercised
in fiscal 2018 and 2017 was $2 million and $8 million, respectively. Cash received from the exercise of non-qualified options
was less than $1 million and approximately $5 million during fiscal 2018 and 2017, respectively. The related income tax benefit
realized was $2 million and $2 million during fiscal 2018 and 2017, respectively.

No non-qualified options vested during fiscal 2019, 2018 or 2017, as all such options had previously become fully vested.

Employee Stock Purchase Plan
The Zebra Technologies Corporation 2011 Employee Stock Purchase Plan (“2011 Plan”) 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 the 2011 Plan is 1,500,000
shares. As of December 31, 2019, 774,186 shares were available for future purchase.

Note 16 Income Taxes

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

United States
Outside United States

Total

2019

Year Ended December 31,
2018

2017

83
515
598

(25) $
549
524

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

2019

Year Ended December 31,
2018

2017

Current:

Federal
State
Foreign
Total current
Deferred:

Federal
State
Foreign

Total deferred

Total

$
$

16
(1)
81
96

(32)
(5)
(5)
(42) $
$
54

20
3
77
100

(11)
5
9
3
103

$
$

(152)
240
88

10
8
62
80

20
(10)
(19)
(9)
71

The Company’s effective tax rates were 9.0%, 19.7% and 80.7% for the years ended December 31, 2019, 2018 and 2017,
respectively.

A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate is provided below:

2019

Year Ended December 31,
2018

2017

Provision computed at statutory rate
U.S. Tax Reform - one-time transition tax
Remeasurement of deferred taxes
Change in valuation allowance
U.S. 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

21.0%
—
0.2
(1.7)
1.0
(3.3)
1.8
(0.7)
—
(0.2)
(2.3)
(4.0)
(2.0)
(0.8)
9.0%

21.0%
(0.6)
0.7
(4.5)
1.1
3.2
2.0
(2.0)
—
0.8
(1.9)
(2.0)
1.1
0.8
19.7%

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%

For the year ended December 31, 2019, the Company’s effective tax rate was lower than the federal statutory rate of 21%
primarily due to the favorable impacts of share-based compensation benefits, lapses of the statute of limitations on uncertain tax
positions, and the generation of tax credits. These benefits were partially offset by the impacts of foreign earnings and deemed
royalties taxed in the U.S.

For the year ended December 31, 2018, the Company’s effective tax rate was lower than the federal statutory rate of 21%
primarily due to lower tax rates in foreign jurisdictions and the generation of tax credits. These benefits were partially offset by
increases related to foreign earnings subject to U.S. taxation, the U.S. impact of the Enterprise acquisition and certain discrete
items. The discrete items included the favorable impacts of reductions in valuation allowances and share-based compensation
benefits, which were offset by audit settlements with the U.S. Internal Revenue Service for the fiscal years 2013, 2014, and
2015 and an increase in uncertain tax positions resulting from interpretive guidance issued during the year.

For the year ended December 31, 2017, the Company’s effective tax rate was higher than the federal statutory rate of 35%,
primarily due to an increase in valuation allowance on foreign deferred tax assets, the one-time transition tax and
remeasurement of net U.S. deferred tax assets under the Act, the U.S. impact of the Enterprise acquisition, and an increase in
uncertain tax benefits. These expenses were partially offset by remeasurement of foreign net deferred tax assets, the benefit of
lower tax rates in foreign jurisdictions, the recognition of deferred tax assets on intercompany asset transfers, the generation of
tax credits and share-based compensation benefits.

The Company earns a significant amount of its operating income outside of the U.S., primarily in the United Kingdom,
Singapore, and Luxembourg, with statutory rates of 19%, 17%, and 25%, respectively. During 2018, the Company applied for
and was granted a second extension of its incentivized tax rate by the Singapore Economic Development Board. The incentive
reduces the income tax rate to 10.5% from the statutory rate of 17% and is effective for calendar years 2019 to 2023. The
Company has committed to making additional investments in Singapore over the period 2019 to 2022; should the Company not
make these investments in accordance with the agreement, any incentive benefit would have to be repaid to the Singapore tax
authorities.

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

December 31,

2019

2018

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
Unrealized gains and losses on securities and investments
Undistributed earnings
Total deferred tax liabilities
Net deferred tax assets

$
$

37
24
29
410
21
18
2
48
12
7
4
(421)
191

62
—
2
64
127

$
$

28
21
28
394
20
20
8
41
15
3
—
(56)
522

411
2
3
416
106

In 2019, the Company reorganized its Luxembourg holding company structure which resulted in a taxable gain in Luxembourg
that was offset by operating loss carryforwards. There was no net impact to the Provision for income taxes as these activities
also resulted in the realization of deferred tax liabilities related to depreciation and amortization and a corresponding increase in
valuation allowances.

As of December 31, 2019, the Company had approximately $410 million (tax effected) of net operating losses (“NOLs”) and
approximately $29 million of credit carryforwards. Approximately $161 million of NOLs will expire beginning in 2020 through
2033, and $15 million of credits will expire beginning in 2023 through 2032, with the remaining amounts of NOLs and credit
carryforwards having no expiration dates.

Impact of U.S. Tax Reform
Overview
Enacted on December 22, 2017, the Act reduced the U.S. federal corporate tax rate from 35% to 21%, requiring companies to
pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. Based on current
operations, the Company is subject to the GILTI, BEAT and FDII provisions of the Act, for which we recorded income tax
expense of $12 million and $10 million for the years ended December 31, 2019 and 2018, respectively. We are not currently
subject to the new limitation which defers U.S. interest deductions in excess of 30% of adjusted taxable income. However, the
application of the interest limitations may apply in the future, depending on changes in the Company’s business model.
Additionally, the Company is no longer able to deduct performance-based compensation for its covered employees which
exceeds the limitation under amended Internal Revenue Code Section 162(m). These impacts are included in the calculation of
the Company’s effective tax rate.

Foreign Tax Effects
As part of the Act, the Company recognized a one-time transition tax based on its total post-1986 earnings and profits that were
previously deferred from U.S. income taxes and recorded a provision related to deemed foreign inclusions through December
31, 2017 as a result of the transition tax.

As of December 31, 2019, the Company is no longer permanently reinvested with respect to its U.S. directly-owned foreign
subsidiary earnings. For periods after 2017, the Company is subject to U.S. income tax on substantially all foreign earnings
under the GILTI provisions of the Act, while any remaining foreign earnings are eligible for the new dividends received

deduction. As a result, future repatriation of earnings will no longer be subject to U.S. income tax but may be subject to
currency translation gains or losses. Where required, the Company has recorded a deferred tax liability for foreign withholding
taxes on current earnings. Additionally, gains and losses on any future taxable dispositions of U.S.-owned foreign affiliates
continue to be subject to U.S. income tax. Thus, as a result of these changes, the assertion of permanent reinvestment is no
longer applicable under current U.S. tax laws.

The Company has not recognized deferred tax liabilities in the U.S. with respect to its outside basis differences in its directly-
owned foreign affiliates. It is not practicable to determine the amount of unrecognized deferred tax liabilities on these
indefinitely reinvested earnings.

Performance-Based Executive Compensation
The Act amended the rules related to the exclusion of performance-based compensation under Internal Revenue Code 162(m).
The Company is no longer be able to claim a deduction for compensation accrued after January 1, 2018 for any covered
employee exceeding $1 million, unless the compensation is earned in relation to a binding contract in existence on November 2,
2017 (“Grandfathered Contracts”). The Company has remeasured 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. Additionally, the
Company has determined that its short-term bonus plan does not qualify for the grandfathered contract provisions, and thus any
associated deferred tax assets have been derecognized.

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

During 2018, the Company finalized its analysis of the Act, including the one-time transition tax and measurement of net
deferred tax assets, and recorded a $3 million income tax benefit as a result of differences between its final analysis and
provisional analysis from the prior year. The final analysis included both federal and state tax effects based on legislative
pronouncements through December 31, 2018. The Company also utilized a total of $28 million of available net operating
losses, research and development credits, alternative minimum tax credits, and foreign tax credits in order to reduce its future
cash payments for the one-time transition tax.

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

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

Year ended December 31,

2019

2018

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
Lapse of statutes
Balance at end of year

50
1
—
(5)
(16)
(20)
10

51
1
22
(11)
(13)
—
50

As of December 31, 2019 and December 31, 2018, there were $9 million and $48 million, respectively, of unrecognized tax
benefits that, if recognized, would affect the annual effective tax rate. The Company is currently undergoing U.S. federal
income tax audits for the tax years 2016 and 2017. Fiscal 2004 through 2018 remain open to examination by multiple foreign
and U.S. state taxing jurisdictions.

In the fourth quarter of fiscal 2019, the Company settled and made payment for a tax dispute for $19 million. Additionally, the
statute of limitations on the U.S. federal income tax audit years 2013, 2014 and 2015 lapsed, resulting in a total benefit of $20
million during fiscal 2019. As of December 31, 2019, no other significant uncertain tax positions are expected to be settled
within the next twelve months. Due to uncertainties in any tax audit or litigation outcome, the Company’s estimates of the
ultimate settlement or other uncertain tax positions may change and the actual tax benefits may differ significantly from
estimates.

The Company recognized $6 million, $8 million and $2 million of interest and penalties related to income tax matters as part of
Income tax expense on the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017,
respectively. The Company had included $8 million and $14 million of estimated interest and penalty obligations within Income
taxes payable on the Consolidated Balance Sheets as of December 31, 2019 and 2018, respectively.

Note 17 Earnings Per Share

Basic net earnings per share is calculated by dividing net income by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed by dividing net income 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 per share (in millions, except share data):

Basic:
Net income
Weighted-average shares outstanding
Basic earnings per share

Diluted:
Net income
Weighted-average shares outstanding
Dilutive shares
Diluted weighted-average shares outstanding
Diluted earnings per share

Year Ended December 31,
2018

2017

2019

544
53,991,249
10.08

544
53,991,249
603,168
54,594,417
9.97

421
53,591,655
7.86

421
53,591,655
708,157
54,299,812
7.76

17
53,021,761
0.33

17
53,021,761
667,071
53,688,832
0.32

Anti-dilutive options to purchase common shares are excluded from diluted earnings per share calculations. Anti-dilutive
options consist primarily of SARs with an exercise price greater than the average market closing price of the Class A Common
Stock. There were 47,240, 72,856, and 259,142 shares that were anti-dilutive for the years ended December 31, 2019, 2018, and
2017, respectively.

Note 18 Accumulated Other Comprehensive Income (Loss)

Stockholders’ equity includes certain items classified as AOCI, including:

• Unrealized gain (loss) on anticipated sales hedging transactions relates 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 11, Derivative Instruments for more details.

• Unrealized gain (loss) on forward interest rate swaps hedging transactions refers to the hedging of the interest rate
risk exposure associated with the Company’s variable rate debt. As a result of the Company’s debt refinancing during
the third quarter of 2019, remaining losses associated with terminated interest rate swaps were recognized as a
component of Interest expense, net on the Consolidated Statements of Operations. See Note 12, Long-Term Debt for
more details.

• Foreign currency translation adjustments relate to the Company’s non-U.S. subsidiary companies that have

designated a functional currency other than the U.S. Dollar. The Company is required to translate the subsidiary
functional currency financial statements to U.S. 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
AOCI.

The changes in each component of AOCI during the three years ended December 31, 2019, 2018 and 2017 were as follows (in
millions):

Unrealized
gain (loss) on
sales hedging

Unrealized
gain (loss) on
forward
interest rate
swaps

Foreign
currency
translation
adjustments

Total

Balance at December 31, 2016

(15) $

(36) $

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

Other comprehensive loss (income), net of tax

Balance at December 31, 2017

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

Other comprehensive income (loss), net of tax

Balance at December 31, 2018

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

Other comprehensive income (loss), net of tax

Balance at December 31, 2019

(26)
8

3
(15)
(9)

38
(13)
(4)
21

30
(42)
2
(10)
2

8
(3)
6
(9)

4
(3)
9

—

2
(2)
—

— $

—

2
(34)

(13)
—

—
(13)
(47)
1

—

1
(46) $

(45)

(23)
16

—
(7)
(52)

33
(9)
(7)
17
(35)
31
(40)
—
(9)
(44)

(1) See Note 11, Derivative Instruments regarding timing of reclassifications to operating results.

Note 19 Accounts Receivable Factoring

In 2018, the Company entered into a Receivables Factoring arrangement, pursuant to which certain receivables originated from
the EMEA region are sold to a bank in exchange for cash. In the third quarter of 2019, the Company entered into an additional
Receivables Factoring arrangement, which provides for additional sales of EMEA-originated receivables to a bank under
similar terms. Under these Receivables Factoring arrangements, the Company does not maintain any beneficial interest in the
receivables sold. The banks’ purchase of eligible receivables is subject to a maximum of $125 million of uncollected
receivables. The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing
involvement with respect to the receivables. Transactions under the Receivables Factoring arrangements are accounted for as
sales under ASC 860 with related cash flows reflected in operating cash flows. As of December 31, 2019 and December 31,
2018 there were $60 million and $33 million, respectively, of uncollected receivables that had been sold and removed from the
Company’s Consolidated Balance Sheets.

In its capacity as servicer of factored receivables, the Company had $33 million of cash collections that were not yet remitted to
the banks as of December 31, 2019 due to the timing of collection processing activities. These amounts, whose use is not
legally restricted, are included within Accrued liabilities on the Consolidated Balance Sheets and reflected within financing
activities on the Consolidated Statements of Cash Flows. No liability existed as of December 31, 2018. Changes in such
unremitted cash collection liabilities are reflected within financing cash flows.

Fees incurred in connection with these arrangements were not significant.

Note 20 Segment Information & Geographic Data

Segment results
The Company’s operations consist of two reportable segments: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility
& Mobility (“EVM”). The reportable segments have been identified based on the financial data utilized by the Company’s
Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources

among the Company’s segments. The CODM reviews adjusted operating income to assess segment profitability. To the extent
applicable, segment operating income excludes purchase accounting adjustments, amortization of intangible assets, acquisition
and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, and product sourcing
diversification costs. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

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(2)(3)
EVM(2)(3)
Total segment operating income
Corporate, eliminations(4)

Total Operating income

Year Ended December 31,
2018

2017

2019

1,479
3,006
4,485
—
4,485

355
483
838
(146)
692

1,423
2,795
4,218
—
4,218

325
404
729
(119)
610

1,311
2,414
3,725
(3)
3,722

274
301
575
(253)
322

(1) Amounts included in Corporate, eliminations consist of purchase accounting adjustments related to the Enterprise

Acquisition.

(2) During 2018, the Company revised its methodology for allocating certain operating expenses across its two reportable

segments to more accurately reflect where these operating costs are being incurred. The reallocations relate primarily to
facilities, information technology, marketing and human resources expenses. All periods are presented on a comparable
basis and reflect these changes which reclassified operating expenses from AIT to EVM of $14 million for the year ended
December 31, 2017. There was no impact to the Consolidated Financial Statements as a result of these reallocations.
(3) AIT and EVM segment operating income includes depreciation and share-based compensation expense. The amounts of

depreciation and share-based compensation attributable expense to AIT and EVM are proportionate to each segment’s Net
sales.

(4) To the extent applicable, amounts included in Corporate, eliminations consist of purchase accounting adjustments,

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

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

2019

2018

2017

Year Ended December 31,

Customer A

Customer B

Customer C

AIT

EVM

Total

AIT

EVM

Total

AIT

EVM

Total

5.3%

4.7%

6.1%

13.0%

9.0%

10.5%

18.3%

13.7%

16.6%

6.2%

5.6%

6.2%

14.1%

10.1%

7.9%

20.3%

15.7%

14.1%

6.3%

5.3%

6.2%

15.0%

8.9%

7.0%

21.3%

14.2%

13.2%

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.

The Company’s three largest customers accounted for 16.8%, 7.8%, and 20.6%, respectively, of accounts receivable as of
December 31, 2019, and 23.0%, 16.9% and 14.6%, respectively, of accounts receivable as of December 31, 2018. No other
customer accounted for more than 10% of accounts receivable.

Geographic data

Information regarding the Company’s operations by geographic area is contained in the following tables. Net sales amounts are
attributed to geographic area based on customer location.

Net sales by region was as follows (in millions):

North America
EMEA
Asia-Pacific
Latin America

Total Net sales

Year Ended December 31,
2018

2017

2019

2,261
1,462
518
244
4,485

2,041
1,409
520
248
4,218

1,798
1,221
468
235
3,722

The United States and Germany were the only countries that accounted for more than 10% of the Company’s net sales in 2019,
2018, and 2017. Net sales during these years was as follows (in millions):

United States
Germany
Other

Total Net sales

Year Ended December 31,

2019

2018

2017

2,243
523
1,719
4,485

2,020
523
1,675
4,218

1,746
439
1,537
3,722

For the year ended December 31, 2019, the Company presented revenues by major country on the same basis as revenues by
region, based on customer location. Prior to fiscal 2019, the Company presented revenues by major country based on the
country where products, solutions, and services were invoiced from. Revenues by major country for the years ended December
31, 2018 and December 31, 2017 are presented above based on the location of customer, in order to conform to the same basis
of presentation as the current year.

Geographic data for long-lived assets is as follows (in millions):

North America
EMEA
Asia-Pacific
Latin America

Total long-lived assets

Year Ended December 31,
2018

2017

2019

280
39
40
7
366

225
14
7
3
249

238
14
9
3
264

Long-lived assets are defined by the Company as property, plant and equipment as well as ROU assets. ROU assets were
recognized upon adoption of ASC 842 in 2019, prior to which, there were no long-lived assets related to leasing activities.
Primarily all of the Company’s long-lived assets in the North America region are located in the United States.

Note 21 Supplementary Financial Information

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

Accrued incentive compensation
Customer reserves
Accrued payroll
Accrued warranty
Current portion of lease liabilities
Unremitted cash collections due to banks on factored accounts receivable
Accrued freight and duty
Accrued other expenses
Accrued liabilities

Summary of Quarterly Results of Operations (unaudited, in millions):

December 31,

2019

2018

96
44
63
21
29
33
23
70
379

127
45
55
22
—
—
7
66
322

2019

Total Net sales
Gross profit
Net income

Net earnings per common share:
Basic earnings per share:
Diluted earnings per share:

Net sales
Gross profit
Net income

Net earnings per common share:
Basic earnings per share:
Diluted earnings per share:

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total Year

1,066
501
115

2.14
2.12

1,097
520
124

2.28
2.26

1,130
535
136

2.52
2.50

1,192
544
169

3.13
3.10

4,485
2,100
544

10.08
9.97

2018

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total Year
4,218
$
1,981
421

1,137
539
115

2.14
2.11

7.86
7.76

977
465
109

2.04
2.01

1,012
472
70

1.31
1.29

1,092
505
127

2.37
2.34

Item 9.

None.

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

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, 2019.
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, 2019, 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 in the latter portion of this Item 9A.

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 2019, which were
identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the
Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.

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 and subsidiaries internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Zebra
Technologies Corporation (the “Company”) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Zebra Technologies Corporation as of December 31, 2019 and
2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows,
for each of the three years in the period ended December 31, 2019, and the related notes and financial statement
schedule listed in the Index at Item 15 and our report dated February 13, 2020 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 13, 2020

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 (“Code of Ethics”) that applies to Zebra’s Chief Executive
Officer, Chief Financial Officer and the Chief Accounting Officer. The Code of Ethics is posted on the Investor Relations –
Governance Documents page of Zebra’s Internet web site, www.zebra.com, and is available for download. Any waiver from the
Code of Ethics and any amendment to the Code of Ethics will be disclosed on such page of Zebra’s web site.

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

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 Compensation,” “Director Compensation,” “Executive 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 “Executive Compensation – 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 sections entitled “Corporate
Governance – Related Party Transactions,” “Corporate Governance – Director Independence,” “Election of Directors,” and
“Committees of the Board.”

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 Schedules

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Operations for the years ended December 31, 2019, 2018, and 2017

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018,
and 2017

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018, and
2017

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017

Notes to Consolidated Financial Statements

Index to Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts

All other financial statement schedules are omitted because they are not applicable to the Company.

Index to Exhibits

Incorporated by Reference

PAGE
37

PAGE
83

Exhibit
Number Exhibit Description
3.1(i)

Restated Certificate of Incorporation of the Company.

3.1(ii)

Amended and Restated By-laws of Zebra Technologies
Corporation, as amended as of January 7, 2013.

Form
8-K

8-K

Exhibit
Number
3.1(i)

3(ii)

Specimen stock certificate representing Class A Common
Stock.

10-K

4.1

Description of Securities Registered Under Section 12 of the
Securities Exchange Act

Filing Date or
Period End Date
August 16, 2012

January 10,
2013

December 31,
2017

Filed or
Furnished
Within

4.1

4.2

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

Employment Agreement between the Company and Michael
H. Terzich, dated November 16, 2007. +

10-K

10.25

Employment Agreement between Olivier Leonetti and the
Company dated October 31, 2016. +

10-K

10.3

December 31,
2008

December 31,
2016

Form of Amendment No. 1 to Employment Agreement by and
between the Company and certain executive officers dated
December 30, 2008.+

Form of indemnification agreement between Zebra
Technologies Corporation and each director and executive
officer.

Form of Director Stock Option Agreement (1-Year Vesting)
under the 2006 Incentive Compensation Plan for awards
granted to directors on or after May 22, 2008 and prior to
December 2, 2008. +

Amendment to outstanding Stock Option Agreements under
the 2006 Incentive Compensation Plan, dated December 2,
2008. +

2006 Incentive Compensation Plan. +

Amendment to the 2006 Incentive Compensation Plan dated
December 2, 2008. +

8-K

10.3

January 5, 2009

10-K

10.6

December 31,
2016

8-K

10.4

May 29, 2008

8-K

10.2

8-K

10.1

December 8,
2008

May 15, 2006

December 8,
2008

Exhibit
Number Exhibit Description
10.9

2011 Long-Term Incentive Plan (Amended and Restated as of
May 15, 2014). +

10.10

2015 Long-Term Incentive Plan. +

2018 Long-Term Incentive Plan. +
2005 Executive Deferred Compensation Plan, as amended. +

Form of Amendment to Employment Agreement between
Zebra Technologies Corporation and executive officers. +

Amended and Restated Employment Agreement between
Zebra Technologies Corporation and Anders Gustafsson dated
as of May 6, 2010. +

Letter Agreement between Zebra Technologies Corporation
and Anders Gustafsson dated as of May 6, 2010. +

Form of 2012 time-vested stock appreciation rights agreement
for employees other than CEO. +

Form of 2013-16 time-vested stock appreciation rights
agreement for employees other than CEO. +

Filed or
Furnished
Within

Incorporated by Reference

Form
10-Q

Exhibit
Number
10.1

Filing Date or
Period End Date
June 28, 2014

10-K

10.11

S-8

10-Q

4.1

10.4

10.1

December 31,
2017

June 1, 2018

March 29, 2008

October 2, 2010

10-Q

10.10

April 3, 2010

10-Q

10.11

April 3, 2010

10-Q

10.1

June 30, 2012

10-Q

10.1

March 30, 2013

Form of 2017 time-vested stock appreciation rights agreement
for employees other than CEO. +

10-Q

10.1

April 1, 2017

Form of 2018 stock appreciation rights agreement for
employees other than the CEO. +

Form of 2019 stock appreciation rights agreement for
employees other than the CEO. +

10-Q

10.2

June 30, 2018

10-Q

10.2

June 29, 2019

Form of 2012 time-vested stock appreciation rights agreement
for CEO. +

10-Q

10.4

June 30, 2012

Form of 2013-16 time-vested stock appreciation rights
agreement for CEO. +

Form of 2017 time-vested stock appreciation rights agreement
for CEO. +

Form of 2018 stock appreciation rights agreement for CEO. +

Form of 2019 stock appreciation rights agreement for CEO. +
Form of 2010 time-vested stock appreciation rights agreement
for non-employee directors. +

Form of 2011 time-vested stock appreciation rights agreement
for non-employee directors. +

Form of 2012 time-vested stock appreciation rights agreement
for non-employee directors. +

Form of 2016-2017 time-vested restricted stock agreement for
employees other than CEO. +

Form of 2018 time-vested restricted stock agreement for
employees other than the CEO. +

Form of 2019 time-vested restricted stock agreement for
employees other than the CEO. +
Form of 2016-2017 performance-vested equity agreement for
employees other than CEO. +

Form of 2018 performance-vested restricted stock agreement
for employees other than CEO. +

Form of 2019 performance-vested restricted stock agreement
for employees other than CEO. +
Form of 2016-17 time-vested restricted stock agreement for
CEO. +

10-Q

10.4

March 30, 2013

10-Q

10.2

April 1, 2017

10-Q

10.5

10.8

June 30, 2018

June 29, 2019

April 3, 2010

8-K

10.3

May 20, 2011

10-Q

10.7

June 30, 2012

10-Q

10.2

March 29, 2014

10-Q

10.3

June 30, 2018

10-Q

10.3

June 29, 2019

10-Q

10.2

July 4, 2015

10-Q

10.1

June 30, 2018

10-Q

10.1

June 29, 2019

10-Q

10.5

March 30, 2013

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

Exhibit
Number Exhibit Description
10.36

Form of 2018 time-vested restricted stock agreement for
CEO. +

Incorporated by Reference

Form
10-Q

Exhibit
Number
10.6

Filing Date or
Period End Date
June 30, 2018

Filed or
Furnished
Within

10-Q

10.6

June 29, 2019

10-Q

10.1

July 4, 2015

10-Q

10.4

June 30, 2018

10-Q

10.4

June 29, 2019

10-Q

10.1

July 1, 2017

10-Q

10.7

June 30, 2018

10-Q

10.1

September 28,
2019

10-Q

10.2

September 28,
2019

10-K

10.34

December 31,
2017

10-K

10.35

December 31,
2017

10-K

10.36

10-K

10.37

December 31,
2017

10-K

10.43

December 31,
2018

10-Q

10.3

September 28,
2019

10.37

10.38

10.39

10.40

10.41

10.42

10.43

10.44

10.45

10.46

10.47

10.48

10.49

10.50

21.1

23.1

Form of 2019 time-vested restricted stock agreement for
CEO. +
Form of 2016-2017 performance-vested equity agreement for
CEO. +

Form of 2018 performance-vested restricted stock agreement
for CEO. +

Form of 2019 performance-vested restricted stock agreement
for CEO. +
Amended and Restated Credit Agreement, dated July 26, 2017
(originally dated as of October 27, 2014), by and among
Zebra, the lenders and issuing banks party thereto, JPMorgan
Chase Bank, N.A., and Morgan Stanley Senior Funding, Inc.

Amendment No. 1, dated May 31, 2018, to the Amended and
Restated Credit Agreement of July 26, 2017 (originally dated
as of October 27, 2014), by and among Zebra, the lenders and
issuing banks party thereto, JPMorgan Chase Bank, N.A., and
Morgan Stanley Senior Funding, Inc.

Amendment No. 2, dated August 9, 2019, to the Amended and
Restated Credit Agreement of July 26, 2017 (originally dated
as of October 27, 2014 and amended by Amendment No. 1
dated May 31, 2018), by and among, Zebra, the lenders party
thereto, JPMorgan Chase Bank, N.A.

Conformed Amended and Restated Credit Agreement, dated
July 26, 2017 (originally dated as of October 27, 2014 and
amended by Amendment No. 1 dated May 31, 2018 and
Amendment No. 2 dated August 9, 2019), by and among
Zebra, the lenders party thereto, JPMorgan Chase Bank, N.A.
Office Lease dated November 14, 2013 between Griffin
Capital Corporation (as assignee from Northwestern Mutual
Life Insurance Company) and Zebra Technologies
Corporation.

First Amendment to Lease dated June 6, 2014 between Griffin
Capital Corporation (as assignee from Northwestern Mutual
Life Insurance Company) and Zebra Technologies
Corporation.

Receivables Purchase Agreement dated as of December 1,
2017 among Zebra Technologies International, LLC, as the
Originator, and Zebra Technologies RSC, LLC, as Buyer.

Receivables Financing Agreement, dated as of December 1,
2017, by and among Zebra Technologies RSC, LLC, the
lenders from time to time party thereto, PNC Bank, National
Association, Zebra Technologies, LLC, and PNC Capital
Markets, LLC.

Master Accounts Receivable Purchase Agreement dated
December 19, 2018 among Zebra Technologies Europe
Limited, Zebra Technologies Corporation, and MUFG Bank,
Ltd.

Master Non-Recourse Receivables Purchase Agreement dated
September 17, 2019 among Zebra Technologies Europe
Limited, Zebra Technologies Corporation, and BNP Paribas
Commercial Finance Limited

Subsidiaries of the Company.

Consent of Ernst & Young LLP, independent registered public
accounting firm.

Incorporated by Reference

Form

Exhibit
Number

Filing Date or
Period End Date

Filed or
Furnished
Within

Exhibit
Number Exhibit Description
31.1

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive
Officer.

31.2

32.1

32.2

101

Rule 13a-14(a)/15d-14(a) Certification of Principal Financial
Officer.

Certification of Principal Executive Officer Pursuant to 18
U.S.C Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to 18
U.S.C Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.

The following financial information from Zebra Technologies
Corporation Annual Report on Form 10-K, for the year ended
December 31, 2019, formatted in Inline XBRL: (i) the
Consolidated Balance Sheets; (ii) the Consolidated Statements
of Operations; (iii) the Consolidated Statements of
Comprehensive Income; (iv) the Consolidated Statements of
Stockholders’ Equity; (v) the Consolidated Statements of
Cash Flows; and (vi) Notes to Consolidated Financial
Statements. The instance document does not appear in the
interactive data file because Inline XBRL tags are embedded
in the iXBRL document.

104

The cover page from the Company’s Annual Report on Form
10-K for the year ended December 31, 2019, formatted in
Inline XBRL (included in Exhibit 101).

+
Form 10-K.

Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on

Item 16. Form 10-K Summary

None.

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, thereunto duly authorized, on the 13th day of February 2020.

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 M. O’Sullivan

Colleen M. 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

Date

February 13, 2020

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

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

Description
Valuation account for accounts receivable:
Year ended December 31, 2019
Year ended December 31, 2018
Year ended December 31, 2017

Valuation account for deferred tax assets:
Year ended December 31, 2019
Year ended December 31, 2018
Year ended December 31, 2017

Additions

Balance at
Beginning
of Period

Charged to
Costs and
Expenses

Charged to
Other
Accounts(1) Deductions

Balance at
End of
Period

3
3
3

56
134
47

— $
1
1

6
—
91

— $
—
—

375
—
—

1
1
1

16
78
4

2
3
3

421
56
134

(1) This amount relates to our 2019 Luxembourg reorganization activities, which resulted in the realization of deferred tax

liabilities related to depreciation and amortization and a corresponding increase in valuation allowances, with no net impact
to our provision for income taxes. See Note 16, Income Taxes in the Notes to Consolidated Financial Statements for
further information.

See accompanying report of independent registered public accounting firm.

To Our Investors,

In 2019 we celebrated Zebra’s 50th anniversary by honoring all who have contributed to our

Company’s success over the past five decades. Zebra has never strayed from its innovative roots and

the entrepreneurial spirit on which Ed Kaplan and Gary Cless built the Company. By continuing this

spirit, we have made strong progress in advancing our Enterprise Asset Intelligence vision of enabling

every asset and worker to be visible, connected, and optimally utilized, so that our customers can gain

a performance edge.

Transforming Workflows in the On-Demand Economy

As a trusted strategic partner, we collaborate closely with our customers to optimize their end-to-end

workflows and improve their operational performance in an increasingly on-demand economy.

The value proposition we bring to the market has translated into continued sales growth in each

of our primary vertical markets that we serve:

• In healthcare, our fastest growing vertical, we address a broad set of challenges that hospital

systems face across their operations, ranging from the safe administration of bedside care to the

management of medical supplies and equipment throughout their supply chain.

• In the transportation and logistics space, our customers are experiencing a lack of available labor

to meet demand while their end-customers expect service and information instantly. We bring real-time visibility to the supply chain, which

enables our customers to increase productivity and improve their level of service.

• In retail and ecommerce, customers are making significant investments in the critical area of omnichannel fulfillment. As more items are

source-tagged at the point of manufacture, radio frequency identification (RFID) solutions have been gaining momentum, delivering close to

100% inventory accuracy.

• For manufacturers, Zebra helps to optimize field operations, improve plant floor productivity, and modernize their warehousing and distribution

networks through a broad set of innovative solutions.

Solid 2019 Financial Results

Our team executed well, driving solid profitable growth on top of an exceptional 2018 performance. Our diversified business enabled us to post

solid growth despite an uneven global macroeconomic environment. Highlights included:

• 6 percent sales growth, broad based across our vertical markets, with particularly strong double-digit growth in enterprise

mobile computing

• 90 basis point adjusted EBITDA margin* expansion through strong profitable sales growth and operating expense leverage

• 18 percent growth in non-GAAP diluted earnings per share* and free cash flow* of $624 million

Also in 2019, our Board of Directors approved a new $1 billion share repurchase authorization as a mechanism to return capital

to shareholders.

Fostering a Culture of Innovation

We continue to build upon our industry-leading core offerings by investing in innovative solutions that elevate our role in enabling the

Intelligent Enterprise. We are broadening our role as a strategic solutions provider engaging with our customers’ C-suite, and we are continuing

to invest in capabilities that digitize and automate enterprise operations and drive sustainable profitable growth. In 2019 we made three

• Cortexica Vision Systems accelerates our capabilities in computer vision. Its talented engineering team has been developing vision-based

analytics and artificial intelligence solutions that include object recognition through machine learning, image and video analysis, and

• Profitect, now known as Zebra Prescriptive Analytics, can analyze massive data streams, utilizing machine learning to identify variations in the

data in real time. The most impactful recommendations are instantly prioritized and sent directly to workers’ mobile devices.

• Temptime Corporation enhances our supplies business and gives us a competitive advantage in the healthcare supply chain through a time-

temperature monitoring product portfolio.

Additionally, as a responsible corporate citizen, we are committed to strong corporate governance practices and environmental and social

initiatives that benefit all stakeholders. This includes a focus on improving the environmental impact of our operations, products, and solutions;

fostering an inclusive culture and diverse workforce; protecting and developing our employees; and investing in the communities where we

Our strategic initiatives and investments, both organic and through acquisitions, drive Zebra’s positive momentum ensuring that the next

50 years will be as successful as our first 50 as we continue to create value for shareholders. I am both grateful and excited that our Zebra

team and trusted partners have positioned us well for continued success.

strategic acquisitions:

visual search.

live and work.

Sincerely,

Anders Gustafsson

*For a reconciliation of these non-GAAP measures to similar GAAP measures, please refer to Zebra’s 4Q 2019 earnings press release located at investors.zebra.com.

Board of Directors

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

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

Anders Gustafsson
Chief Executive Officer
Zebra Technologies Corporation

Chirantan J. Desai 2
Chief Product Officer
ServiceNow

Executive Officers

Anders Gustafsson
Chief Executive Officer

Olivier C. Leonetti
Chief Financial Officer

William J. Burns
Chief Products and
Solutions Officer

Michael Cho
Senior Vice President,
Corporate Development

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

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

Joachim Heel
Senior Vice President,
Global Sales

Cristen L. Kogl
Senior Vice President,
General Counsel and
Corporate Secretary

Jeffrey F. Schmitz
Senior Vice President,
Chief Marketing Officer

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

Michael H. Terzich
Senior Vice President,
Chief Administrative Officer

Stephen E. Williams
Global Supply Chain Officer

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 14, 2020,
at 10:30 a.m. (Central Time)

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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zebra.com

NA and Corporate Headquarters
+1 847 634 6700

Asia-Pacific Headquarters
+65 6858 0722

EMEA Headquarters
+44 1628 556000

Latin America Headquarters
+1 754 900 4050

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.
©2020 ZIH Corp and/or its affiliates. All rights reserved.

Annual Report 2019

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