On May 17, 2018, shareholders approved the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”), which authorizes for additional awards to be granted in the future. The 2018 Plan superseded and replaced the Zebra Technologies Corporation Long-Term Incentive Plan (“2015 Plan”) on the approval date, except that the 2015 Plan shall remain in effect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 (“SARs”), Restricted Stock Awards (“RSAs”), Performance Share Awards (“PSAs”), Cash-settled Stock Appreciation Rights (“CSRs”), Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”). Non-qualified stock options are not authorized for grant under the 2018 Plan or 2015 Plan.

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



Available for future grants at December 31, 2017	—
Newly authorized options	3,800,000
Granted	(10,200	)
Cancellation and forfeitures	—
Plan termination	—
Available for future grants at December 31, 2018	3,789,800

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



Available for future grants at December 31, 2017	1,437,435
Newly authorized options	—
Granted	(360,999	)
Cancellation and forfeitures	—
Plan termination	(1,076,436	)
Available for future grants at December 31, 2018	—

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



	Year Ended December 31,
Compensation costs and related income tax benefit	2018		2017		2016
Cost of sales	$	4	$	3	$	2
Selling and marketing	13		8		6
Research and development	15		11		9
General and administration	21		16		11
Total compensation expense	$	53	$	38	$	28
Income tax benefit	$	10	$	11	$	9

As of December 31, 2018, total unearned compensation costs related to the Company’s share-based compensation plans was $57 million, which will be amortized to expense over the weighted average remaining service period of 1.5 years.

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

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. SARs typically vest over a period of 4 years.

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



	2018				2017				2016
SARs	Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	1,817,991		$	65.73	1,740,786		$	56.15	1,397,611		$	56.78
Granted	88,042		149.75		402,029		98.87		627,971		52.13
Exercised	(598,249	)	55.93		(250,326	)	48.66		(160,946	)	35.37
Forfeited	(46,161	)	80.41		(66,550	)	75.38		(115,215	)	65.74
Expired	(438	)	108.20		(7,948	)	108.20		(8,635	)	88.65
Outstanding at end of year	1,261,185		$	75.71	1,817,991		$	65.73	1,740,786		$	56.15
Exercisable at end of year	595,086		$	60.85	874,942		$	50.86	828,754		$	45.14

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:



	2018	2017	2016
Expected dividend yield	0%	0%	0%
Forfeiture rate	8.40%	9.37%	9.01%
Volatility	35.93%	35.49%	43.14%
Risk free interest rate	2.96%	1.77%	1.29%
Range of interest rates	1.68%-3.00%	0.71%-2.41%	0.25%-1.75%
Expected weighted-average life (in years)	4.11	4.13	5.33
Weighted-average grant date fair value of SARs granted (per underlying share)	$47.63	$29.86	$20.18

The following table summarizes information about SARs outstanding as of December 31, 2018:



	Outstanding		Exercisable
Aggregate intrinsic value (in millions)	$	105	$	59
Weighted-average remaining contractual term (in years)	5.6		4.8

The intrinsic value for SARs exercised in fiscal 2018, 2017 and 2016 was $59 million, $14 million and $6 million, respectively. The total fair value of SARs vested in fiscal 2018, 2017 and 2016 was $12 million, $8 million and $3 million, respectively.

Restricted Stock Awards (“RSAs”) and Performance Share Awards (“PSAs”)

The Company’s restricted stock grants consist of time-vested restricted stock awards (“RSAs”) and performance vested restricted stock awards (“PSAs”). The RSAs and PSAs hold voting rights and therefore are considered participating securities. The outstanding RSAs and PSAs are included as part of the Company’s Class A Common Stock outstanding. The RSAs and PSAs vest at each vesting date subject to restrictions such as continuous employment except in certain cases as set forth in each stock agreement. The Company’s 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 as an equity retainer fee, were vested 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.

The Company also issues stock awards to non-employee directors. Each director receives an equity grant of shares every year during the month of May. The number of shares granted to each director is determined by dividing the value of the annual grant by the price of a share of common stock. In fiscal 2018, there were 7,980 shares granted to non-employee directors compared to 12,488 shares and 25,088 shares in fiscal 2017 and 2016, respectively. New directors in any fiscal year earned a prorated amount. The shares vest immediately upon the grant date.

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



	2018				2017				2016
Restricted Stock Awards	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at beginning of year	628,642		$	77.70	622,814		$	70.19	566,447		$	77.68
Granted	206,922		150.60		199,629		98.90		389,193		51.93
Released	(154,878	)	107.22		(165,846	)	75.90		(275,229	)	59.39
Forfeited	(22,962	)	88.77		(27,955	)	72.81		(57,597	)	70.50
Outstanding at end of year	657,724		$	93.45	628,642		$	77.70	622,814		$	70.19

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:



	2018				2017				2016
Performance Share Awards	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at beginning of year	265,747		$	77.04	379,226		$	70.14	332,630		$	73.40
Granted	59,849		146.83		79,423		98.97		172,024		51.01
Released	(57,074	)	107.31		(2,029	)	62.70		(111,325	)	46.58
Forfeited	(8,795	)	81.07		(190,873	)	73.09		(14,103	)	75.73
Outstanding at end of year	259,727		$	86.41	265,747		$	77.04	379,226		$	70.14

Other Award Types

The Company also has cash-settled compensation awards including cash-settled Stock Appreciation Rights (“CSRs”), Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”) (the “Awards”) that are expensed over the vesting period of the related award, which is not more than 4 years. Compensation cost is calculated at the 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 $2 million, $2 million and $1 million in 2018, 2017 and 2016, respectively. Share-equivalents issued under these programs totaled 20,393, 45,781 and 95,210 in fiscal 2018, 2017 and 2016, respectively.

Non-qualified Stock Options

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



	2018				2017				2016
Non-qualified Options	Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	15,705		$	26.34	154,551		$	35.96	204,434		$	36.66
Granted	—		—		—		—		—		—
Exercised	(15,705	)	26.34		(132,905	)	36.86		(47,393	)	38.60
Forfeited	—		—		—		—		—		—
Expired	—		—		(5,941	)	41.25		(2,490	)	43.35
Outstanding at end of year	—		$	—	15,705		$	26.34	154,551		$	35.96
Exercisable at end of year	—		$	—	15,705		$	26.34	154,551		$	35.96

As of December 31, 2018, there were no non-qualified stock options remaining outstanding.

The intrinsic value for non-qualified options exercised in fiscal 2018, 2017 and 2016 was $2 million, $8 million and $2 million, respectively. There were no non-qualified options vested in fiscal 2018, 2017 and 2016.

Cash received from the exercise of non-qualified options was less than $1 million during fiscal 2018 compared to $5 million and $2 million during fiscal years 2017 and 2016, respectively. The related income tax benefit realized in fiscal 2018, 2017 and 2016 was $2 million, $2 million and $1 million, respectively.

Employee Stock Purchase Plan

The Zebra Technologies Corporation 2011 Employee Stock Purchase Plan (“2011 Plan”), which became effective in fiscal 2011, permits eligible employees to purchase common stock at 95% of the fair market value at the date of purchase. Employees may make purchases by cash or payroll deductions up to certain limits. The aggregate number of shares that may be purchased under this plan is 1.5 million shares. At December 31, 2018, 840,262 shares were available for future purchase.