What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-11 compared with 2020-02-13 · 528 added, 398 removed, 801 unchanged (54% of the section changed)

28 unchanged sentences

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.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate 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 matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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.

Description of the Matter As discussed in Note 16 to the consolidated 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.

1 unchanged sentence

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.

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.

4 unchanged sentences

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.

Acquisition of Reflexis Systems, Inc.

- Valuation of intangible assets

Description of the Matter During 2020, the Company completed its acquisition of Reflexis Systems, Inc.

(“Reflexis”) for net consideration of $548 million, as disclosed in Note 5 to the consolidated financial statements.

The Company’s accounting for the acquisition required determining the fair value of the intangible assets acquired, including technology assets and customer relationships.

Auditing the Company’s accounting for the acquired intangible assets was complex and subjective due to the estimation required in management’s determination of the fair values of these assets.

The estimation was significant due to the sensitivity of the respective fair values to the underlying assumptions, including projected revenue growth rates and the selected discount rate.

These assumptions relate to the future performance of the acquired business, are forward-looking and could be affected by future economic and market conditions.

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 valuation of acquired intangible assets.

For example, we tested controls over management’s review of the valuation of the acquired intangibles assets, including the review of the valuation model and significant assumptions used in the valuation.

To test the fair value of the acquired intangible assets, our audit procedures included, among others, evaluating the appropriateness of the valuation methodologies used by management, evaluating the projected revenue growth rates and discount rate, and testing the completeness and accuracy of underlying data.

Evaluating the reasonableness of the projected revenue growth rates involved comparing the projections to historical results of the acquired business and current industry and market trends.

We involved our valuation specialists to assist in the evaluation of the Company’s discount rate by comparing it against a discount range that was independently developed using publicly available market data for comparable entities.

/s/ Ernst & Young LLP

7 unchanged sentences

Cash and cash equivalents $ 168 $ 30

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

Accounts receivable, net of allowances for doubtful accounts of $ 1 million and $ 2 million as of December 31, 2020 and 2019

Inventories, net 511 474

4 unchanged sentences

Right-of-use lease asset 135 107

Goodwill 2,988 2,622

Other intangibles, net 402 275

1 unchanged sentence

Other long-term assets 164 126

Total Assets $ 5,375 $ 4,711

Liabilities and Stockholders' Equity

8 unchanged sentences

Long-term lease liabilities 129 100

Deferred income taxes

Long-term deferred revenue 273 221

9 unchanged sentences

Treasury stock at cost, 18,689,775 and 18,148,925 shares as of December 31, 2020 and 2019, respectively

( 919 ) ( 689 )

Retained earnings 2,736 2,232

5 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(In millions, except per share data)

Year Ended December 31,

2020 2019 2018

Tangible products $ 3,813 $ 3,907 $ 3,685

5 unchanged sentences

Total Cost of sales 2,445 2,385 2,237

Gross profit 2,003 2,100 1,981

Operating expenses:

10 unchanged sentences

Interest expense, net ( 76 ) ( 89 ) ( 91 )

Other, net 3 1 10

Total Other expenses, net ( 91 ) ( 94 ) ( 86 )

1 unchanged sentence

Income tax expense 56 54 103

Net income $ 504 $ 544 $ 421

Basic earnings per share $ 9.43 $ 10.08 $ 7.86

5 unchanged sentences

Year Ended December 31,

2020 2019 2018

Net income $ 504 $ 544 $ 421

Other comprehensive income (loss), net of tax:

7 unchanged sentences

(In millions, except share data)

Class A Common Stock Shares

Comprehensive Loss

Class A Common Stock Shares Class A

Stock Value Additional

Capital Treasury

Stock Retained

Earnings Accumulated

Comprehensive Loss Total

Balance at December 31, 2017 53,236,095 $ 1 $ 257 $ ( 620 ) $ 1,248 $ ( 52 ) $ 834

Cumulative effect of change in accounting principle — — — — 19 — 19

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

Issuances of treasury shares related to share-based compensation plans, net of forfeitures 704,137 — ( 8 ) 18 — — 10

Shares withheld to fund withholding tax obligations related to share-based compensation plans ( 69,048 ) — — ( 11 ) — — ( 11 )

Share-based compensation — — 45 — — — 45

Net income — — — — 421 — 421

Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes) — — — — 21 21

2 unchanged sentences

Balance at December 31, 2018 53,871,184 $ 1 $ 294 $ ( 613 ) $ 1,688 $ ( 35 ) $ 1,335

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

Issuances of treasury shares related to share-based compensation plans, net of forfeitures 594,399 — ( 3 ) 14 — — 11

Shares withheld to fund withholding tax obligations related to share-based compensation plans ( 224,765 ) — — ( 43 ) — — ( 43 )

Share-based compensation — — 48 — — — 48

Repurchase of common stock ( 237,886 ) — — ( 47 ) — — ( 47 )

Net income — — — — 544 — 544

Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes) — — — — — ( 10 ) ( 10 )

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

Foreign currency translation adjustment — — — — — 1 1

Balance at December 31, 2019 54,002,932 $ 1 $ 339 $ ( 689 ) $ 2,232 $ ( 44 ) $ 1,839

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

Issuances of treasury shares related to share-based compensation plans, net of forfeitures 557,599 — 5 7 — — 12

Shares withheld to fund withholding tax obligations related to share-based compensation plans ( 149,709 ) — — ( 37 ) — — ( 37 )

Share-based compensation — — 51 — — — 51

Repurchase of common stock ( 948,740 ) — — ( 200 ) — — ( 200 )

Net income — — — — 504 — 504

Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes) — — — — — ( 30 ) ( 30 )

6 unchanged sentences

Year Ended December 31,

2020 2019 2018

Cash flows from operating activities:

Net income $ 504 $ 544 $ 421

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

Depreciation and amortization 146 175 175

Investment (gain) loss

Amortization of debt issuance costs and discounts 3 6 15

Share-based compensation 51 48 45

Debt extinguishment costs

Deferred income taxes ( 40 ) ( 42 ) 2

Unrealized loss (gain) on forward interest rate swaps 33 19 ( 8 )

Other, net 1 ( 2 ) ( 5 )

Changes in operating assets and liabilities:

1 unchanged sentence

Inventories, net ( 42 ) 51 ( 43 )

Other assets 11 ( 20 ) ( 12 )

Accounts payable 47 ( 5 ) 122

1 unchanged sentence

Deferred revenue 103 71 51

Income taxes ( 5 ) ( 31 ) 24

Other operating activities 4 ( 15 ) ( 6 )

12 unchanged sentences

Payments for repurchases of common stock ( 200 ) ( 47 ) —

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 payments related to share-based compensation plans ( 25 ) ( 32 ) ( 1 )

Change in unremitted cash collections from servicing factored receivables 109 33 —

Net cash used in financing activities ( 157 ) ( 365 ) ( 661 )

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

Effect of exchange rate changes on cash and cash equivalents, including restricted cash ( 2 ) 1 ( 5 )

Net increase (decrease) in cash and cash equivalents, including restricted cash 162 ( 14 ) ( 18 )

Cash and cash equivalents, including restricted cash, at beginning of period 30 44 62

Cash and cash equivalents, including restricted cash, at end of period $ 192 $ 30 $ 44

Less restricted cash, included in Prepaid expenses and other current assets ( 24 ) — —

Cash and cash equivalents at end of period $ 168 $ 30 $ 44

Supplemental disclosures of cash flow information:

2 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATIONAND SUBSIDIARIES

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

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.

We design, manufacture, and sell a broad range of products and solutions, including cloud-based subscriptions, that capture and move data.

We also provide a full range of services, including maintenance, technical support, repair, and managed and professional services.

End-users of our products, solutions and services include those in retail and e-commerce, transportation and logistics, manufacturing, healthcare, hospitality, warehouse and distribution, energy and utilities, education, and banking industries around the world.

We provide our products, solutions and services globally through a direct sales force and an extensive network of channel partners.

Note 2 Significant Accounting Policies

11 unchanged sentences

the measurement of variable consideration and allocation of transaction price to performance obligations in revenue transactions;

inventory and product warranty reserves;

inventory valuation;

useful lives of our tangible and intangible assets;

9 unchanged sentences

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.

The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable that is based on expected credit losses.

Expected credit losses are estimated based on a number of factors, including historical loss experience, the durations of outstanding trade receivables, and expectations of the future economic environment.

Accounts are written off against the allowance account when they are determined to be no longer collectible.

16 unchanged sentences

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.

The Company’s lease agreements do not contain any significant 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.

10 unchanged sentences

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.

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.

The Company recognizes its GILTI, BEAT, and FDII inclusions, when applicable, within income tax expense in the year included in its U.S.

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.

7 unchanged sentences

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.

We most recently performed our annual goodwill impairment testing in the fourth quarter of 2020 using a quantitative approach which did not result in any impairments.

See Note 6, Goodwill and Other Intangibles for additional information.

14 unchanged sentences

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.

Revenues are primarily comprised of sales of hardware, supplies, services, solutions and software offerings.

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.

Substantially all revenues for tangible products, supplies and perpetual or term software licenses are recognized at a point in time, which is generally upon shipment, transfer of control and risks of ownership to the customer, for which the Company has contractual right to payment.

Our service offerings include 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.

Revenues for solutions, including Company-hosted software license and maintenance agreements, are typically recognized over time.

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.

19 unchanged sentences

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.

Our financial assets and liabilities that are accounted for at fair value 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.

Accounting for the gains and losses on our derivatives resulting from changes in fair value is dependent on the use of the derivative and whether it is designated and qualifies for hedge accounting.

The Company utilizes foreign currency forwards to hedge certain foreign currency exposures.

We use broker quotations or market transactions, in either the listed or over-the-counter markets, to value our foreign currency exchange contracts.

The Company also has interest rate swaps to hedge a portion of the variability in future cash flows on debt.

We use 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.

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.

3 unchanged sentences

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 has share-based compensation plans and an employee stock purchase plan under which shares of Class A Common Stock are available for future grant and purchase.

The Company recognizes compensation costs over the vesting period of up to 4 years, net of estimated forfeitures.

10 unchanged sentences

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.

Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from revenues and operating activities and the determination of 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

As Adjusted January 1, 2019

Prepaid expenses and other current assets (1)

Right-of-use assets

Accrued liabilities (2)

Long-term lease liabilities

Other long-term liabilities (1)

(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.

On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

It replaced the historical

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 was applied.

In order to determine the transition impact of ASU 2016-13, the Company considered historical loss experience, the short duration of its trade receivables and durations of other financial assets, and expectations of the future economic environment.

The adoption of ASU 2016-13 did not have a significant impact to the Company’s financial statements upon transition or for the year ended December 31, 2020.

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.

In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

Subject to meeting certain criteria, ASU 2020-04 provides optional expedients and exceptions to applying contract modification accounting under existing generally accepted accounting principles for contracts that are modified to address the expected phase out of the London Inter-bank Offered Rate (“LIBOR”).

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, while for others, the Company anticipates negotiating comparable replacement rates with its counterparties.

At this stage of its contract assessment, the Company does not expect ASU 2020-04 to have a material impact on its financial results.

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.

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.

3 unchanged sentences

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”).

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, solutions 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.

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 primarily with an expected cost-plus margin approach.

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.

5 unchanged sentences

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 .

Revenues for products are generally recognized upon shipment, whereas revenues for services and solutions offerings are generally recognized by using an output method or time-based method, assuming all other criteria for revenue recognition have been met.

Revenues for software are recognized either upon delivery or using a time-based method, depending upon how control is transferred to the customer.

In cases where a bundle of products, services, and software and solutions offerings 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 performance obligations primarily relate to repair and support services, as well as solutions offerings.

The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $ 974 million and $ 724 million, inclusive of deferred revenue, as of December 31, 2020 and 2019,

respectively.

On average, remaining performance obligations as of December 31, 2020 and 2019 are expected to be recognized over a period of approximately 2 years.

Disaggregation of Revenue

1 unchanged sentence

Year Ended December 31, 2020

Segment Tangible Products Services and Software Total

AIT $ 1,298 $ 128 $ 1,426

EVM 2,515 514 3,029

Corporate, eliminations (1)

— ( 7 ) ( 7 )

Total $ 3,813 $ 635 $ 4,448

Year Ended December 31, 2019

Tangible Products

Services and Software

Tangible Products

Services and Software

Segment Tangible Products Services and Software Total

AIT $ 1,347 $ 132 $ 1,479

EVM 2,560 446 3,006

Total $ 3,907 $ 578 $ 4,485

Year Ended December 31, 2018

Segment Tangible Products Services and Software Total

AIT $ 1,298 $ 125 $ 1,423

EVM 2,387 408 2,795

Total $ 3,685 $ 533 $ 4,218

(1) Amounts included in Corporate, eliminations consist of purchase accounting adjustments.

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

2 unchanged sentences

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 .

The total contract asset balances were $ 10 million and $ 8 million as of December 31, 2020 and 2019, respectively.

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.

2 unchanged sentences

The combined short-term and long-term deferred revenue balances were $ 581 million and $ 459 million as of December 31, 2020 and 2019, 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 Company recognized $ 256 million, $ 219 million and $ 181 million in revenue that was previously included in the beginning balance of deferred revenue during the years ended December 31, 2020, 2019 and 2018, respectively.

Our payment terms vary by the type and location of our customer and the products, solutions or services offered.

The time between invoicing and when payment is due is not significant.

2 unchanged sentences

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 incremental costs to obtain a contract 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 $ 23 million and $ 21 million as of December 31, 2020 and 2019, 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.

Amortization of deferred commission costs, which is recorded in Selling and Marketing expense on the Consolidated Statements of Operations, was $ 14 million, $ 11 million and $ 10 million during the years ended December 31, 2020, 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.

1 unchanged sentence

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

2020 December 31,

Raw materials $ 117 $ 128

1 unchanged sentence

Finished goods 390 342

Total $ 511 $ 474

Note 5 Business Acquisitions

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.

On September 1, 2020, the Company acquired all of the equity interests in Reflexis Systems, Inc.

(“Reflexis”), a provider of task and workforce management, execution, and communication solutions for customers in the retail, food service, hospitality, and banking industries.

Through its acquisition of Reflexis, the Company intends to enhance its solution offerings to customers in these industries by combining Reflexis’ platform with its existing software solutions and its EVM product offerings.

The Reflexis acquisition was accounted for under the acquisition method of accounting for business combinations.

The Company’s cash purchase consideration was $ 548 million, net of Reflexis’ cash on-hand.

In connection with its acquisition of Reflexis, and in exchange for the cancellation of unvested Reflexis stock options, the Company granted replacement share-based compensation awards to certain Reflexis employees in the form of Zebra incentive stock options.

A total of 38,228 replacement stock options were granted, with a weighted average acquisition-date fair value per option of $ 230 .

The total fair value of approximately $ 9 million is primarily attributable to service to be rendered subsequent to acquisition and will be expensed over the remaining service period.

As of the acquisition date, the weighted average future service period associated with the replacement options was 1.7 years, and the weighted average remaining contractual life was 7.7 years.

See Note 15, Share-Based Compensation for additional details related to these options.

The Company incurred approximately $ 21 million of acquisition-related costs during 2020, which primarily consisted of payments to settle certain existing Reflexis share-based compensation awards whose vesting was accelerated at the discretion of Reflexis contemporaneously with the acquisition.

Those payments, as well as $ 7 million of other acquisition-related costs primarily related to third-party transaction and advisory fees, are included within Acquisition and integration costs on the Consolidated Statements of Operations.

The acquisition of Reflexis was funded, in part, by the issuance of a new term loan (the “2020 Term Loan”) in the amount of $ 200 million.

The acquisition of Reflexis was otherwise funded using the Company’s cash on hand and borrowing under the Company’s existing Revolving Credit Facility.

See additional details related to the Company’s debt arrangements in Note 12, Long-Term Debt.

The Company utilized estimated fair values as of September 1, 2020 to allocate the total purchase consideration to the identifiable assets acquired and liabilities assumed.

The fair value of the net assets acquired was based on several estimates and assumptions, as well as customary valuation techniques, primarily the excess earnings method for technology and patent intangible assets, as well as exit cost methodologies for liabilities such as deferred revenues.

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.

During the fourth quarter of 2020, the Company recorded measurement period adjustments relating to facts and circumstances existing as of the acquisition date.

The primary measurement period adjustment was related to the realizability of income tax net operating losses, resulting in a $ 12 million decrease in deferred tax liabilities and a $ 12 million decrease in goodwill.

primary fair value estimates still considered preliminary as of December 31, 2020 include 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 $ 204

Accounts receivable 20

Property, plant and equipment 10

Other assets acquired 17

Deferred revenue ( 16 )

Deferred tax liabilities ( 37 )

Other liabilities assumed ( 14 )

Net assets acquired $ 184

Goodwill on acquisition 364

Total purchase consideration $ 548

The $ 364 million of goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned integration of Reflexis’ solution offerings with the Company’s existing solution offerings as well as expansion in current and new markets, industries and product offerings.

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

Fair Value (in millions) Useful Life (in years)

Technology and patents $ 160 8

Customer and other relationships 43 2

Trade names 1 2

Total identifiable intangible assets $ 204

The Company has not included unaudited proforma results, as if Reflexis had been acquired as of January 1, 2019, as doing so would not yield materially different results.

The purchase consideration of $ 7 million was primarily allocated to technology-related intangible assets of $ 4 million and goodwill of $ 4 million based on the fair values of identifiable assets acquired and liabilities assumed.

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.

The goodwill, which will be non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the Company’s expansion of the Cortexica technologies into new markets, industries, and product offerings.

On May 31, 2019, the Company acquired 100 % of the equity interests of Profitect, Inc.

3 unchanged sentences

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.

This remeasurement resulted in a $ 4 million gain reflected within Other, net on the Consolidated Statements of Operations in 2019.

Additionally, we incurred $ 13 million of acquisition-related costs in 2019, which primarily consisted of payments to settle Profitect employee stock option awards, whose vesting was accelerated at the discretion of Profitect contemporaneously with the acquisition, 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.

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):

The purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date.

The fair value of intangible assets was derived utilizing a number of estimates and assumptions as well as customary valuation procedures and techniques, principally the excess earnings methodology.

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

Identifiable intangible assets $ 35

5 unchanged sentences

Total purchase consideration $ 79

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:

Fair Value (in millions)

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

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

Fair Value (in millions) Useful Life

Technology and patents $ 33 8

6 unchanged sentences

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.

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):

The purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date.

The fair value of intangible assets was derived utilizing a number of estimates and assumptions as well as customary valuation procedures and techniques, including the relief from royalty and excess earnings methodologies.

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

Inventory $ 14

Property, plant and equipment 10

6 unchanged sentences

Total purchase consideration $ 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:

(in millions)

The $ 74 million of goodwill, which is non-deductible for tax purposes, has been allocated to the AIT segment and principally relates to the Company’s expansion of its product offerings and technologies into current and new markets and industries.

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

(in millions) Useful Life

Customer and other relationships $ 79 8

Technology and patents 25 8

Trade Names 2 3

Total identifiable intangible assets $ 106

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.

Xplore designs, integrates, markets and sells rugged tablets that are primarily used by industrial, government, and field service organizations.

The acquisition of Xplore expanded 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.

9 unchanged sentences

Goodwill on acquisition 29

Total consideration

Total purchase consideration $ 72

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.

1 unchanged sentence

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:

(in millions)

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

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

(in millions) Useful Life

Customer and other relationships $ 16 9

Technology and patents 15 7

Trade Names 1 3

Total identifiable intangible assets $ 32

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

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

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

AIT EVM Total

Goodwill as of December 31, 2018 $ 154 $ 2,341 $ 2,495

5 unchanged sentences

Goodwill as of December 31, 2019 $ 227 $ 2,395 $ 2,622

Temptime purchase price allocation adjustments 1 — 1

Reflexis acquisition — 364 364

Foreign exchange impact — 1 1

Goodwill as of December 31, 2020 $ 228 $ 2,760 $ 2,988

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 2020 utilizing a quantitative approach.

5 unchanged sentences

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

As of December 31, 2020 As of December 31, 2019

Gross Carrying Amount Accumulated

Amortization Net Gross Carrying Amount Accumulated

Amortization Net

Amortized intangible assets

1 unchanged sentence

Customer and other relationships 620 ( 431 ) 189 575 ( 371 ) 204

Trade Names 44 ( 43 ) 1 43 ( 42 ) 1

Total $ 1,403 $ ( 1,001 ) $ 402 $ 1,196 $ ( 921 ) $ 275

Amortization expense was $ 78 million, $ 103 million, and $ 97 million for fiscal years ended 2020, 2019 and 2018, respectively.

1 unchanged sentence

Year Ended December 31,

Thereafter 82

Note 7 Property, Plant and Equipment

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

Buildings $ 68 $ 63

Machinery and equipment 248 232

8 unchanged sentences

The carrying value of the Company’s investments was $ 77 million and $ 45 million as of December 31, 2020 and 2019, 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.

During the year ended December 31, 2020, the Company paid $ 32 million for the purchases of long-term investments, which primarily related to the acquisition of additional shares in an existing investment.

In connection with this additional investment, the Company identified an observable price change that resulted in a $ 7 million gain on its existing investment.

During the year ended December 31, 2020, the Company also received cash proceeds of $ 6 million related to the sale of a long-term investment.

Net gains related to the Company’s investments, which are included within Other, net on the Consolidated Statements of Operations, were $ 5 million, $ 3 million, and $ 10 million during the years ended December 31, 2020, 2019, and 2018, 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 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.

As of December 31, 2019, no significant obligations remain with respect to the 2017 Productivity Plan or the Acquisition Plan.

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.

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 were incremental to the Company’s 2017 exit and restructuring program (the “2017 Productivity Plan”).

The organizational design changes under the 2019 Productivity Plan, which principally occurred within the North America and Europe, Middle East, and Africa (“EMEA”) regions.

The 2019 Productivity Plan was completed in the fourth quarter of 2020.

Exit and restructuring charges, primarily related to employee severance and benefits, for the 2019 Productivity Plan were $ 11 million and $ 8 million during the years ended December 31, 2020 and 2019, respectively.

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 acquisition of the Enterprise business of Motorola Solutions, Inc.

(the “Acquisition Plan”).

Exit and restructuring charges relating to the 2017 Productivity Plan, which were completed in 2019, were $ 2 million and $ 11 million for the years ended December 31, 2019 and 2018, respectively.

As of December 31, 2020, the Company’s total remaining obligations under its exit and restructuring programs were $ 5 million, which are expected to be mostly settled within the next year and are reflected within Accrued liabilities on the Consolidated Balance Sheets.

Note 10 Fair Value Measurements

11 unchanged sentences

The Company’s financial assets and liabilities carried at fair value as of December 31, 2020, are classified below (in millions):

Foreign exchange contracts (1)

Level 1 Level 2 Level 3 Total

Money market investments related to the deferred compensation plan $ 30 $ — $ — $ 30

Total Assets at fair value $ 30 $ — $ — $ 30

Foreign exchange contracts (1)

$ 3 $ 34 $ — $ 37

Forward interest rate swap contracts (2)

2 unchanged sentences

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

Foreign exchange contracts (1)

Forward interest rate swap contracts (2)

$ — $ 3 $ — $ 3

Money market investments related to the deferred compensation plan 24 — — 24

Total Assets at fair value $ 24 $ 3 $ — $ 27

Forward interest rate swap contracts (2)

$ — $ 13 $ — $ 13

Liabilities related to the deferred compensation plan 24 — — 24

11 unchanged sentences

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):

The following table presents the fair value of its derivative instruments (in

Asset (Liability)

2 unchanged sentences

Derivative instruments designated as hedges:

Foreign exchange contracts

Prepaid expenses and other current assets

Foreign exchange contracts Prepaid expenses and other current assets $ — $ 3

Foreign exchange contracts Accrued liabilities ( 34 ) —

Total derivative instruments designated as hedges $ ( 34 ) $ 3

Derivative instruments not designated as hedges:

Foreign exchange contracts

Prepaid expenses and other current assets

Forward interest rate swaps

Prepaid expenses and other current assets

Forward interest rate swaps

Other long-term assets

Forward interest rate swaps

Accrued liabilities

Forward interest rate swaps

Other long-term liabilities

Foreign exchange contracts Accrued liabilities ( 3 ) —

Forward interest rate swaps Accrued liabilities ( 17 ) ( 5 )

Forward interest rate swaps Other long-term liabilities ( 29 ) ( 8 )

Total derivative instruments not designated as hedges $ ( 49 ) $ ( 13 )

Total net derivative (liability) asset

Total net derivative liability $ ( 83 ) $ ( 10 )

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

3 unchanged sentences

Derivative instruments not designated as hedges:

Foreign exchange contracts

Foreign exchange loss

Forward interest rate swaps

Interest expense, net

Foreign exchange contracts Foreign exchange loss $ ( 12 ) $ ( 3 ) $ 1

Forward interest rate swaps Interest expense, net ( 46 ) ( 19 ) 8

Total (loss) gain recognized in income $ ( 58 ) $ ( 22 ) $ 9

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

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

Credit and Market Risk Management

6 unchanged sentences

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.

We 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 unchanged as of December 31, 2020 and increased by $ 3 million as of December 31, 2019.

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 conducts business on a multinational basis in a variety of foreign currencies.

Exposure to market risk for changes in foreign currency exchange rates arises primarily 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 manages the exchange rate risk of anticipated Euro-denominated sales 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.

Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“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 Statements of Operations.

Realized amounts reclassified to Net sales were $ 6 million of losses for the year ending December 31, 2020, and $ 42 million and $ 13 million of gains for the years ending December 31, 2019 and 2018, respectively.

As of December 31, 2020 and 2019, the notional amounts of the Company’s foreign exchange cash flow hedges were € 585 million and € 564 million, respectively.

The Company has reviewed its cash flow hedges for effectiveness and determined they are highly effective .

The Company has reviewed its cash flow hedges for effectiveness and determined that 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.

1 unchanged sentence

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):

The notional values and the net fair value of these outstanding contracts are as follows (in millions):

Notional balance of outstanding contracts:

British Pound/U.S.

British Pound/Euro

Dollar £ 10 £ 14

Dollar € 123 € 36

Canadian Dollar/U.S.

Dollar $ — $ 1

Australian Dollar/U.S.

Dollar A$ — A$ 42

Japanese Yen/U.S.

Dollar ¥ 354 ¥ 264

Singapore Dollar/U.S.

Dollar S$ 12 S$ 19

Mexican Peso/U.S.

Chinese Yuan/U.S.

Dollar Mex$ 36 Mex$ 115

South African Rand/U.S.

Net fair value of assets of outstanding contracts

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.

Dollar R — R 42

Net fair value of liabilities of outstanding contracts $ 3 $ —

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.

The Company’s debt consists of borrowings under term loans (“Term Loan A” and the “2020 Term Loan”), Revolving Credit Facility, and Receivables Financing Facilities, which bear interest at variable rates plus applicable margins.

As a result, the Company is exposed to market risk associated with the variable interest rate payments on these borrowings.

See Note 12, Long-Term Debt for further details related to 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.

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 its 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 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 settlement terms, which started 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.

These 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.

During the fourth quarter of 2018, the Company terminated certain interest rate swaps.

As part of the termination, the Company settled all of the 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 swap that was designated as a cash flow hedge, 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 $ 917 $ 917

2020 Term Loan 100 —

Revolving Credit Facility — 103

Receivables Financing Facilities 235 266

Total debt $ 1,252 $ 1,286

Debt issuance costs ( 5 ) ( 6 )

5 unchanged sentences

All borrowings as of December 31, 2020 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.

The estimated fair value of the Company’s debt approximated $ 1.3 billion as of December 31, 2020 and 2019, 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 do not represent the settlement value of these liabilities to the Company.

The fair value of the debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in June 2021 and the majority due upon the August 9, 2024 maturity date.

The Company may make prepayments, in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions.

As of December 31, 2020, the Term Loan A interest rate was 1.41 %.

Interest payments are made monthly and are subject to variable rates plus an applicable margin.

2020 Term Loan

In September 2020, the Company entered into a new $ 200 million term loan (“2020 Term Loan”), with the proceeds used to partly fund the acquisition of Reflexis.

The Company repaid $ 100 million of principal during the fourth quarter of 2020, with the remaining principal due upon the August 31, 2021 maturity date.

The Company may make additional prepayments, in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions.

As of December 31, 2020, the 2020 Term Loan interest rate was 2.25 %.

Interest payments are made monthly and are subject to a variable rate plus an applicable margin.

Costs associated with issuing the 2020 Term Loan were approximately $ 1 million, which were capitalized and are being amortized over the term of the loan.

Revolving Credit Facility

The Revolving Credit Facility is available for working capital and other general business purposes, including letters of credit.

As of December 31, 2020, the Company had letters of credit totaling $ 5 million, which reduced funds available for borrowings under the Revolving Credit Facility from $ 1 billion to $ 995 million.

No borrowings were outstanding under the Revolving Credit Facility as of December 31, 2020.

Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin.

The Revolving Credit Facility matures on August 9, 2024.

Receivables Financing Facilities

The Company has two Receivables Financing Facilities with financial institutions that have a combined total borrowing limit of up to $ 280 million.

As collateral, the Company pledges perfected first-priority security interests in its U.S.

domestically originated accounts receivable.

The Company has accounted for transactions under its Receivables Financing Facilities as secured borrowings.

The Company’s first Receivables Financing Facility, which was originally entered into in December 2017 and was amended in May 2019, allows for borrowings of up to $ 180 million and will mature on March 29, 2021.

The Company’s second Receivable Financing Facility, which was entered into in May 2019 and was amended in May 2020, allows for borrowings of up to $ 100 million and will mature on May 17, 2021.

As of December 31, 2020, the Company’s Consolidated Balance Sheets included $ 441 million of receivables that were pledged under the two Receivables Financing Facilities.

As of December 31, 2020, $ 235 million had been borrowed, all of which was classified as current.

Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable margin.

As of December 31, 2020, the Receivables Financing Facilities had an average interest rate of 1.04 %.

Interest is paid on these borrowings on a monthly basis.

Uncommitted Short-Term Credit Facility

The Company also entered into an uncommitted short-term credit facility (“Uncommitted Facility”) in August 2020.

The Uncommitted Facility matures on August 26, 2021 and allows for borrowings of up to $ 20 million.

Each borrowing must be repaid within 90 days, or earlier if the facility matures beforehand, and bears interest at a variable rate plus an applicable margin.

Along with the Company’s Revolving Credit Facility, the Uncommitted Facility is available for working capital and other general business purposes.

As of December 31, 2020, the Company had no outstanding borrowings under the Uncommitted Facility.

In 2018, the Company entered into Amendment No.

1 to the Amended and Restated Credit Agreement (“Amendment No.

7 unchanged sentences

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.

In 2019, the Company entered into its second amendment to the Amended and Restated Credit Agreement (“Amendment No.

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.

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.

Amendment No.

2 also extended the maturities of Term Loan A and the Revolving Credit Facility to August 9, 2024.

Additionally, in conjunction with entering into Amendment No.

2, a payment of $ 445 million was made to fully pay off the Company’s Term Loan B.

The refinancing of the Company’s long-term credit facilities during 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.

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 U.S.

domestically originated accounts receivable.

The Company has accounted for transactions under the Receivables Financing Facility as secured borrowings.

As amended during the second quarter of 2019, the Receivables Financing Facility will mature on March 29, 2021 .

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.

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.

Each of the Company’s borrowing arrangements described above include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels.

The Company uses interest rate swaps to manage the interest rate risk associated with its debt.

3 unchanged sentences

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):

Remaining lease terms are up to 12 years, with certain leases containing renewal options and termination options.

On January 1, 2019, the Company adopted ASC 842, Leases (“ASC 842”), which resulted in the recognition of ROU assets and lease liabilities on the Consolidated Balance Sheets for operating leases with terms greater than one year.

Prior to the adoption

of ASC 842, the Company accounted for its lease arrangements under ASC Topic 840, Leases (“ASC 840”), with no ROU assets or lease liabilities being reflected on the Consolidated Balance Sheets.

The Company adopted ASC 842 under a modified retrospective approach.

Thus, results for reporting periods beginning after January 1, 2019 are prepared under ASC 842, whereas results prior to that have not been adjusted and continue to be reported in accordance with our historic accounting under ASC 840.

The following table presents activities associated with our operating leases (in millions):

Fixed lease expenses $ 35 $ 37

3 unchanged sentences

ROU assets obtained in exchange for lease obligations $ 55 $ 42

Reduction of ROU assets and lease liabilities

Reductions of ROU assets and lease liabilities ( 3 ) ( 16 )

Net non-cash increases to ROU assets and lease liabilities $ 52 $ 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.

Variable lease expenses incurred were not included in the measurement of the Company’s ROU assets and lease liabilities.

These 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 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 % .

ROU assets obtained in exchange for lease obligations primarily include new lease arrangements entered into by the Company.

ROU assets obtained in exchange for lease obligations also include contract modifications that extend lease terms and/or provide us additional rights, changes in assessments that render it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period, as well as lease arrangements obtained through acquisitions.

Reductions of the Company’s ROU assets and lease liabilities generally relate to modifications to lease agreements that result in a reduction to future minimum lease payments, as well as changes in assessments that render it no longer reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period.

The Company’s reduction of ROU assets and lease liabilities during 2019 primarily related to a modification to a distribution center lease agreement that resulted in a reduction to fixed future minimum lease payments.

The weighted average remaining term of the Company’s operating leases was approximately 6 years as of December 31, 2020 and 2019.

The weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 5 % and 6 % as of December 31, 2020 and 2019, respectively.

Future minimum lease payments under non-cancellable operating leases as of December 31, 2020 were as follows (in millions):

Thereafter 44

Total future minimum lease payments $ 186

Interest ( 27 )

Present value of lease liabilities $ 159

4 unchanged sentences

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.

Rent expense under the Company’s operating leases during the year ended December 31, 2018, prior to the Company’s adoption of ASC 842, was $ 33 million.

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

4 unchanged sentences

Balance at the beginning of the year $ 21 $ 22 $ 18

Acquisitions — — 1

Warranty expense 30 25 34

4 unchanged sentences

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.

Any legal proceedings are subject to inherent uncertainties, and the Company’s view of these matters and their 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.

In 2020, the Company received approval of its exclusion request of customs duties that had been paid on certain products under Section 301 of the U.S.

Trade Act of 1974 from September 1, 2019 through September 1, 2020 and commenced a process to request recovery of previously assessed amounts.

During the fourth quarter of 2020, the Company recorded recoveries of $ 12 million, of which $ 2 million and $ 10 million were initially incurred during the years ended December 31, 2020 and 2019, respectively.

Recoveries are recognized when the Company has completed all regulatory filing requirements and determined that receipt of amounts is virtually certain.

From a segment perspective, $ 4 million of the recovery related to AIT and $ 8 million related to EVM.

Both the initially incurred costs and related recoveries were included within Cost of sales for Tangible products on the Consolidated Statements of Operations.

The Company believes that additional import duties that were

previously paid are potentially recoverable;

however, the final amounts and the timings of any such additional recoveries remains uncertain and, therefore, the Company has not recorded any amounts related to potential future recoveries in its financial statements as of December 31, 2020.

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.

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.

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

Available for future grants as of December 31, 2019

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):

7 unchanged sentences

Income tax benefit $ 9 $ 9 $ 10

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 .

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.

Stock Appreciation Rights (“SARs”)

3 unchanged sentences

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

2020 2019 2018

SARs SARs Weighted-

Price SARs Weighted-

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 share-based compensation is estimated on the date of grant using a binomial model.

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.

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:

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 (in years)

Expected weighted-average life 4.00 4.02 4.11

Weighted-average grant date fair value of SARs granted

1 unchanged sentence

The following table summarizes information about SARs outstanding as of December 31, 2020:

Outstanding Exercisable

Aggregate intrinsic value (in millions) $ 173 $ 126

Weighted-average remaining contractual term (in years)

Weighted-average remaining contractual life 4.4 4.2

The intrinsic value for SARs exercised during fiscal 2020, 2019 and 2018 was $ 60 million, $ 58 million and $ 59 million, respectively.

5 unchanged sentences

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.

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 month of May.

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.

1 unchanged sentence

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 upon the grant date.

The shares vest immediately on the grant date.

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

Restricted Stock Awards

Weighted-Average

Grant Date Fair Value

Weighted-Average

Grant Date Fair Value

Weighted-Average

2020 2019 2018

RSAs 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

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

Weighted-Average

Grant Date Fair Value

Weighted-Average

Grant Date Fair Value

Weighted-Average

2020 2019 2018

PSAs 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

Other Award Types

Cash-settled awards

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.

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.

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

Exercise Price

Reflexis Replacement Options

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.

A summary of the Reflexis Replacement Options outstanding is as follows:

Reflexis Replacement Options Shares Weighted-

Exercise Price

Outstanding at beginning of year — $ —

Granted 38,228 57.82

Exercised ( 3,408 ) 55.79

Forfeited ( 396 ) 52.14

Outstanding at end of year 34,424 $ 58.09

Exercisable at end of year 6,716 $ 56.77

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.

The following table summarizes information about the Reflexis Replacement Options outstanding as of December 31, 2020:

Outstanding Exercisable

Aggregate intrinsic value (in millions) $ 11 $ 2

Weighted-average remaining contractual life 7.4 7.3

The intrinsic value of Reflexis Replacement Options exercised during fiscal 2020 was $ 1 million.

The total fair value of Reflexis Replacement Options vested during fiscal 2020 was $ 2 million.

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.

In May 2020, the Company’s stockholders approved the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”), which supersedes the 2011 Employee Stock Purchase Plan (“2011 ESPP”) and became effective on July 1, 2020.

Like the 2011 ESPP, the 2020 ESPP 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.

The aggregate number of shares that may be purchased under the 2020 ESPP is 1,500,000 shares.

As of December 31, 2020, 1,480,004 shares were available for future purchase.

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

United States $ 33 $ 83 $ ( 25 )

Outside United States 527 515 549

Total $ 560 $ 598 $ 524

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

Year Ended December 31,

2020 2019 2018

Federal $ 6 $ 16 $ 20

State 1 ( 1 ) 3

Foreign 89 81 77

Total current $ 96 $ 96 $ 100

Federal ( 25 ) ( 32 ) ( 11 )

State ( 5 ) ( 5 ) 5

Foreign ( 10 ) ( 5 ) 9

Total deferred $ ( 40 ) $ ( 42 ) $ 3

Total $ 56 $ 54 $ 103

The Company’s effective tax rates were 10.0 %, 9.0 % and 19.7 % for the years ended December 31, 2020, 2019 and 2018, respectively.

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

Provision computed at statutory rate 21.0 % 21.0 % 21.0 %

5 unchanged sentences

Foreign earnings subject to U.S.

taxation 1.5 1.8 2.0

Foreign rate differential ( 5.5 ) ( 0.7 ) ( 2.0 )

Intra-entity transactions

State income tax, net of federal tax benefit 0.4 ( 0.2 ) 0.8

Tax credits ( 2.9 ) ( 2.3 ) ( 1.9 )

Equity compensation deductions ( 3.2 ) ( 4.0 ) ( 2.0 )

Return to provision and other true ups ( 2.5 ) ( 2.0 ) 1.1

Permanent differences and other 1.8 ( 0.8 ) 0.8

Provision for income taxes 10.0 % 9.0 % 19.7 %

For the year ended December 31, 2020, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to lower tax rates in foreign jurisdictions, the generation of tax credits and the favorable impacts of share-based compensation benefits.

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.

6 unchanged sentences

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.

On March 27, 2020, the President of the United States signed into tax law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

The provisions of the CARES Act did not have a significant impact to our effective tax rate for the year ended December 31, 2020.

Management continues to monitor developments and guidance on the CARES Act and other coronavirus tax relief throughout the world for potential impacts.

The Company earns a significant amount of its operating income outside of the U.S that is taxed at rates different than the U.S.

federal statutory rate.

The Company’s principal foreign jurisdictions that provide sources of operating income are the United Kingdom, Singapore, and Luxembourg.

The Company has received an incentivized tax rate by the Singapore Economic Development Board, which reduces the income tax rate in that jurisdiction 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.

However, 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):

2 unchanged sentences

Deferred revenue 38 24

Tax credits 36 29

Net operating loss carryforwards 406 410

10 unchanged sentences

Depreciation and amortization 67 62

Unrealized gains and losses on securities and investments

Undistributed earnings 2 2

3 unchanged sentences

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.

As of December 31, 2020, the Company had approximately $ 406 million (tax effected) of net operating losses (“NOLs”) and $ 36 million of credit carryforwards.

Approximately $ 72 million of NOLs will expire beginning in 2021 through 2040, and $ 29 million of credits will expire beginning in 2021 through 2037, with the remaining amounts of NOLs and credit carryforwards having no expiration dates.

Impact of U.S.

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).

The Company is subject to the GILTI, BEAT and FDII provisions, for which we recorded income tax expense of $ 8 million, $ 12 million and $ 10 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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.

Effective 2019, the Company was 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

income tax on substantially all foreign earnings under the GILTI provisions, 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.

6 unchanged sentences

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

3 unchanged sentences

Additions for tax positions related to the current year — 1

Additions for tax positions related to prior years

Reductions for tax positions related to prior years — ( 5 )

7 unchanged sentences

state taxing jurisdictions.

In the fourth quarter of fiscal 2019, the Company settled and made payment for a tax dispute for $ 19 million .

In the fourth quarter of 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.

federal income tax audit years 2013, 2014 and 2015 lapsed, resulting in a total benefit of $ 20 million during 2019.

As of December 31, 2020, 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.

The Company recognized a net benefit of $ 2 million for interest and penalties related to income tax matters during the year ended December 31, 2020, and a net expense of $ 6 million and $ 8 million during the years ended December 31, 2019 and 2018, respectively.

The net benefit or expense associated with interest and penalties were reflected within Income tax expense on the Consolidated Statements of Operations.

The Company has included $ 6 million and $ 8 million of estimated interest and penalty obligations within Other long-term liabilities on the Consolidated Balance Sheets as of December 31, 2020 and 2019, respectively.

Note 17 Earnings Per Share

1 unchanged sentence

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.

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):

Year Ended December 31,

2020 2019 2018

Net income $ 504 $ 544 $ 421

Weighted-average shares outstanding 53,441,375 53,991,249 53,591,655

Basic earnings per share $ 9.43 $ 10.08 $ 7.86

Net income $ 504 $ 544 $ 421

Weighted-average shares outstanding 53,441,375 53,991,249 53,591,655

3 unchanged sentences

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 46,128 , 47,240 , and 72,856 shares that were anti-dilutive for the years ended December 31, 2020, 2019, and 2018, respectively.

1 unchanged sentence

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.

• Unrealized (loss) gain 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.

• Unrealized gain (loss) on forward interest rate swaps hedging transactions relates to certain interest rate swaps that the Company previously entered into as part of its strategy to mitigate interest rate risk exposure associated with its variable rate debt.

These particular interest rate swaps, which were designated as cash flow hedges, were terminated prior to 2019, with remaining losses being reclassified out of AOCI through the third quarter of 2019.

Pre-tax losses were reclassified into Interest expense, net on the Consolidated Statements of Operations.

See Note 11, Derivative Instruments for more details.

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

4 unchanged sentences

The changes in each component of AOCI during the three years ended December 31, 2020, 2019 and 2018 were as follows (in millions):

Unrealized gain (loss) on sales hedging

Unrealized gain (loss) on forward interest rate swaps

Foreign currency translation adjustments

Balance at December 31, 2016

Other comprehensive (loss) income before reclassifications

Amounts reclassified from AOCI (1)

Other comprehensive loss (income), net of tax

Unrealized (loss) gain on sales hedging Unrealized gain (loss) on forward interest rate swaps Foreign currency translation adjustments Total

Balance at December 31, 2017 $ ( 9 ) $ ( 9 ) $ ( 34 ) $ ( 52 )

1 unchanged sentence

Amounts reclassified from AOCI (1)

( 13 ) 4 — ( 9 )

Tax effect ( 4 ) ( 3 ) — ( 7 )

Other comprehensive income (loss), net of tax 21 9 ( 13 ) 17

2 unchanged sentences

Amounts reclassified from AOCI (1)

( 42 ) 2 — ( 40 )

Tax effect 2 ( 2 ) — —

Other comprehensive income (loss), net of tax ( 10 ) — 1 ( 9 )

Balance at December 31, 2019 2 — ( 46 ) ( 44 )

Other comprehensive (loss) income before reclassifications ( 43 ) — 5 ( 38 )

Amounts reclassified from AOCI (1)

Tax effect 7 — — 7

Other comprehensive income (loss), net of tax ( 30 ) — 5 ( 25 )

Balance at December 31, 2020 $ ( 28 ) $ — $ ( 41 ) $ ( 69 )

(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.

The Company has multiple Receivables Factoring arrangements, pursuant to which certain receivables are sold to banks without recourse in exchange for cash.

Transactions under the Receivables Factoring arrangements are accounted for as sales under ASC 860, Transfers and Servicing of Financial Assets , with the sold receivables removed from the Company’s balance sheet.

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 banks’ purchase of eligible receivables is subject to a maximum amount 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.

Sale proceeds that are representative of the fair value of factored receivables, less a factoring fee, are reflected in Net cash provided by operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Net cash provided by financing activities on the Consolidated Statements of Cash Flows.

In 2020, the Company entered into a new Receivables Factoring arrangement with a bank, which allows for the factoring of up to € 150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions.

The Company is required to maintain a portion of sales proceeds as deposits in a restricted cash account that is released to the Company as it satisfies its obligations as servicer of sold receivables, which totaled $ 24 million as of December 31, 2020 and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company’s other active Receivable Factoring arrangements, which were entered into in 2018 and 2019, also allow for the factoring of up to $ 125 million of uncollected receivables originated from the EMEA region.

During the years ended December 31, 2020, 2019 and 2018, the Company received cash proceeds of $ 1,291 million, $ 409 million and $ 33 million, respectively, from the sales of accounts receivables under its factoring arrangements.

As of December 31, 2020 and 2019, there were a total of $ 70 million and $ 60 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had $ 142 million and $ 33 million of obligations that were not yet remitted to banks as of December 31, 2020 and 2019, respectively.

These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash used in financing activities on the Consolidated Statements of Cash Flows.

Fees incurred in connection with these arrangements were not significant.

3 unchanged sentences

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.

3 unchanged sentences

Year Ended December 31,

2020 2019 2018

AIT $ 1,426 $ 1,479 $ 1,423

EVM 3,029 3,006 2,795

Total segment net sales 4,455 4,485 4,218

2 unchanged sentences

Operating income:

$ 322 $ 355 $ 325

Total segment operating income 788 838 729

Corporate, eliminations (1)

( 137 ) ( 146 ) ( 119 )

Total Operating income $ 651 $ 692 $ 610

Amounts included in Corporate, eliminations consist of purchase accounting adjustments related to the Enterprise Acquisition.

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.

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.

(1) 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.

(2) AIT and EVM segment operating income includes depreciation and share-based compensation expense.

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

Sales to significant customers

1 unchanged sentence

Year Ended December 31,

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.

2020 2019 2018

AIT EVM Total AIT EVM Total AIT EVM Total

Customer A 4.8 % 12.9 % 17.7 % 5.3 % 13.0 % 18.3 % 6.2 % 14.1 % 20.3 %

Customer B 4.9 % 9.0 % 13.9 % 4.7 % 9.0 % 13.7 % 5.6 % 10.1 % 15.7 %

Customer C 6.5 % 14.2 % 20.7 % 6.1 % 10.5 % 16.6 % 6.2 % 7.9 % 14.1 %

These customers accounted for 13.6 %, 6.7 %, and 20.4 %, respectively, of accounts receivable as of December 31, 2020, and 16.8 %, 7.8 % and 20.6 %, respectively, of accounts receivable as of December 31, 2019.

No other customer accounted for more than 10% of total Net sales during the years ended December 31, 2020, 2019 or 2018, or more than 10% of outstanding

accounts receivables as of December 31, 2020 or 2019.

All three of the above customers are distributors of the Company’s products and solutions and not end users.

Geographic data

1 unchanged sentence

Net sales amounts are attributed to geographic area based on customer location.

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

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

Year Ended December 31,

2020 2019 2018

North America $ 2,319 $ 2,261 $ 2,041

EMEA 1,495 1,462 1,409

Asia-Pacific 439 518 520

Latin America 195 244 248

1 unchanged sentence

The United States and Germany were the only countries that accounted for more than 10% of the Company’s net sales in 2020, 2019, and 2018.

Net sales during these years was as follows (in millions):

Net sales during these years were as follows (in millions):

Year Ended December 31,

2020 2019 2018

United States $ 2,291 $ 2,243 $ 2,020

Germany 595 523 523

Other 1,562 1,719 1,675

Total Net sales $ 4,448 $ 4,485 $ 4,218

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.

For the years ended December 31, 2020 and 2019, the Company presented revenues by major country on the same basis as revenues by region, which is based on customer location.

Prior to 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 year ended December 31, 2018 are presented above based on the location of customer, in order to conform to the same basis of presentation as the subsequent years.

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

Year Ended December 31,

2020 2019 2018

North America $ 289 $ 280 $ 225

EMEA 68 39 14

Asia-Pacific 45 40 7

Latin America 7 7 3

5 unchanged sentences

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

Accrued payroll and benefits $ 87 $ 63

Accrued incentive compensation 65 96

Customer reserves

Accrued payroll

Accrued warranty 24 21

Customer reserves 56 44

Current portion of lease liabilities 30 29

Unremitted cash collections due to banks on factored accounts receivable 142 33

Forward contracts liability 37 —

Short-term interest rate swaps 17 5

Accrued freight and duty 21 23

2 unchanged sentences

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

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total Year

Total Net sales $ 1,052 $ 956 $ 1,132 $ 1,308 $ 4,448

Gross profit 473 419 493 618 2,003

Net income 89 100 116 199 504

Net earnings per common share:

Basic earnings per share:

$ 1.66 $ 1.87 $ 2.18 $ 3.73 $ 9.43

Diluted earnings per share:

1.65 1.85 2.16 3.70 9.35

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total Year

Net sales $ 1,066 $ 1,097 $ 1,130 $ 1,192 $ 4,485

Gross profit 501 520 535 544 2,100

Net income 115 124 136 169 544

Net earnings per common share:

Basic earnings per share:

$ 2.14 $ 2.28 $ 2.52 $ 3.13 $ 10.08

Diluted earnings per share:

2.12 2.26 2.50 3.10 9.97

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data