ZEBRA TECHNOLOGIES CORP

The following commentary should be read in conjunction with the financial results of each reportable business segment as detailed in Note 17, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs.

Asset Intelligence & Tracking Segment (“AIT”)

AIT Organic Net sales decline:

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

Total Net sales for AIT decreased $62 million or 13.5% compared to the prior year primarily due to lower sales of printing and RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 14.4%.

Gross margin decreased to 47.1% in the current year compared to 49.0% for the prior year primarily due to higher inventory-related charges, volume deleveraging and unfavorable business mix, partially offset by favorable changes in foreign currency rates.

Operating income decreased 36.0% in the current year compared to the prior year primarily due to lower Gross profit.

Total Net sales for AIT decreased $192 million or 19.6% compared to the prior year primarily due to lower sales of printing products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 20.2%.

Gross margin decreased to 47.0% in the current year compared to 49.2% for the prior year primarily due to unfavorable business mix, volume deleveraging, and higher inventory-related charges, partially offset by lower freight rates and favorable changes in foreign currency rates.

Operating income decreased 38.7% in the current year compared to the prior year due to lower Gross profit, partially offset by lower Operating expenses.

Enterprise Visibility & Mobility Segment (“EVM”)

EVM Organic Net sales growth (decline):

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

Total Net sales for EVM increased $65 million or 8.6% compared to the prior year primarily due to higher sales of mobile computing products, partially offset by lower sales of data capture products. Excluding the impacts of foreign currency changes, EVM Organic Net sales increased by 8.2%.

Gross margin increased to 49.0% in the current year compared to 47.2% for the prior year primarily due to lower inventory-related charges, volume leverage, lower freight rates, and favorable changes in foreign currency rates.

Operating income for the current year increased by 0.8% compared to the prior year due to higher Gross profit, largely offset by higher Operating expenses.

Total Net sales for EVM decreased $35 million or 2.1% compared to the prior year primarily due to lower sales of data capture products, partially offset by higher sales of mobile computing products, and services and software. Excluding the impacts of foreign currency changes, EVM Organic Net sales decreased by 2.5%.

Gross margin increased to 48.7% in the current year compared to 46.7% for the prior year primarily due to higher service and software margins, lower freight rates, and favorable changes in foreign currency rates.

Operating income for the current year decreased by 4.7% compared to the prior year due to higher Operating expenses, partially offset by higher Gross profit.