In May 2018, the Company’s stockholders approved the Zebra Technologies 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 The 2018 Plan superseded and replaced the Zebra Technologies Corporation 2015 Long-Term Incentive Plan (“2015 Plan”) on the approval date, except that the 2015 Plan, as well as the Zebra Technologies Corporation 2011 Long-Term Incentive Plan that was previously superseded by the 2015 Plan, remain in effect with respect to outstanding stock appreciate rights that were granted under those plans until such awards have been exercised, forfeited, cancelled, expired or otherwise terminated in accordance with their terms. The awards available under the 2018 Plan 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. No awards remain available for future grants under the 2015 Plan or previous plans.

The Company uses outstanding treasury shares as its source for issuing shares under the share-based compensation programs. As of December 31, 2020, the Company had 3,339,322 shares of Class A Common stock available to be issued under the 2018 Plan.

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):


	Year Ended December 31,
Compensation costs and related income tax benefit	2020		2019		2018
Cost of sales	$	6	$	4	$	4
Selling and marketing	16		17		13
Research and development	16		16		15
General and administration	21		23		21
Total compensation expense	$	59	$	60	$	53
Income tax benefit	$	9	$	9	$	10

As of December 31, 2020, total unearned compensation costs related to the Company’s share-based compensation plans was $82 million, which will be recognized over the weighted average remaining service period of 1.7 years.

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:


	2020			2019			2018
SARs	SARs	Weighted- Average Exercise Price		SARs	Weighted- Average Exercise Price		SARs	Weighted- Average Exercise Price
Outstanding at beginning of year	896,923	$	89.05	1,261,185	$	75.71	1,817,991	$	65.73
Granted	69,742	253.62		70,141	205.12		88,042	149.75
Exercised	(295,770)	67.96		(395,015)	66.82		(598,249)	55.93
Forfeited	(31,193)	149.09		(39,388)	92.72		(46,161)	80.41
Expired	(1,578)	166.52		—	—		(438)	108.20
Outstanding at end of year	638,124	$	113.98	896,923	$	89.05	1,261,185	$	75.71
Exercisable at end of year	417,856	$	81.88	489,357	$	70.37	595,086	$	60.85

The fair value of SARs 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.


	2020	2019	2018
Expected dividend yield	0%	0%	0%
Forfeiture rate	8.00%	8.20%	8.40%
Volatility	42.51%	36.79%	35.93%
Risk free interest rate	0.24%	2.28%	2.96%
Expected weighted-average life	4.00	4.02	4.11
Weighted-average grant date fair value of SARs granted (per underlying share)	$79.47	$64.17	$47.63

The intrinsic value for SARs exercised during fiscal 2020, 2019 and 2018 was $60 million, $58 million and $59 million, respectively. The total fair value of SARs vested during fiscal 2020, 2019 and 2018 was $8 million, $9 million and $12 million, respectively.

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 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 fair value of each PSA granted includes assumptions around the Company’s performance goals.

The Company also issues stock awards to non-employee directors. Each director receives an equity grant of shares annually in the second quarter. 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 2020, there were 6,314 shares granted to non-employee directors compared to 7,371 and 7,980 shares granted during fiscal 2019 and 2018, respectively. The shares vest immediately on the grant date.


	2020			2019			2018
RSAs	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	434,641	$	151.52	657,724	$	93.45	628,642	$	77.70
Granted	178,150	265.06		170,502	204.26		206,922	150.60
Released	(275,318)	133.43		(372,075)	73.71		(154,878)	107.22
Forfeited	(18,908)	199.04		(21,510)	141.29		(22,962)	88.77
Outstanding at end of year	318,565	$	228.08	434,641	$	151.52	657,724	$	93.45


	2020			2019			2018
PSAs	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	170,749	$	144.47	259,727	$	86.41	265,747	$	77.04
Granted	98,820	239.79		150,224	206.04		59,849	146.83
Released	(131,943)	160.18		(231,513)	120.86		(57,074)	107.31
Forfeited	(11,604)	194.23		(7,689)	102.42		(8,795)	81.07
Outstanding at end of year	126,022	$	199.77	170,749	$	144.47	259,727	$	86.41

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. The fair value is remeasured at the end of each reporting period based on the Company’s stock price, with remeasurements reflected as an adjustment to compensation expense in the Consolidated Statements of Operations. Cash settlement is based on the fair value of share equivalents at the time of vesting, which was $9 million, $6 million and $2 million in 2020, 2019 and 2018, respectively. Share-equivalents issued under these programs totaled 40,166, 17,207 and 20,393 in fiscal 2020, 2019 and 2018, respectively.

In connection with the Company’s September 2020 acquisition of Reflexis, and in exchange for the cancellation of unvested Reflexis stock options, the Company granted awards to certain Reflexis employees in the form of Zebra incentive stock options (“Reflexis Replacement Options”). Upon exercise of Reflexis Replacement Options, the Company receives cash proceeds equal to the exercise price and issues whole shares of Class A Common Stock to participants. The grant date fair value, which was approximately $230 per award and totaled approximately $9 million, is expensed over the vesting period of the related awards, which averages 1.7 years. The fair value of the Reflexis replacement awards was estimated on the date of grant using the Black-Scholes valuation model, based upon the following weighted average assumptions: no expected dividend yield; a volatility factor of 39.75%; a risk-free interest rate of 0.14%; and an expected life of 2.78 years. See Note 5, Business Acquisitions for additional details related to the Reflexis Acquisition.


	2020
Reflexis Replacement Options	Shares	Weighted- Average Exercise Price
Outstanding at beginning of year	—	$	—
Granted	38,228	57.82
Exercised	(3,408)	55.79
Forfeited	(396)	52.14
Expired	—	—
Outstanding at end of year	34,424	$	58.09
Exercisable at end of year	6,716	$	56.77