What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-10 compared with 2021-02-11 · 418 added, 465 removed, 864 unchanged (51% of the section changed)

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Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2021 and 2020

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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.

Critical Audit Matter

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 and 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 account or disclosure to which it relates.

Accounting for Income Taxes

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.

Description of the Matter As discussed in Note 16 of the financial statements, the Company earns a significant amount of its operating income across multiple jurisdictions and the Company’s organizational structure and transactional flows are designed to reflect strategic and operational business imperatives that change over time.

As the Company operates in a multinational tax environment and incurs income tax obligations in a number of jurisdictions, complexities and uncertainties can arise in the application of complex tax regulations to the Company’s multinational operations.

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This included controls over the Company’s evaluation of tax law changes, the evaluation of cross-jurisdictional transactions and the Company’s tax technical assessment over those changes and/or transactions.

We involved our tax professionals in the Company’s major operating jurisdictions to assist in the evaluation of the Company’s tax obligations.

We involved our tax professionals in the Company’s significant operating jurisdictions to assist in the evaluation of the Company’s tax obligations.

We evaluated the Company’s transactional flows to assess whether they aligned with the Company’s strategic and operational shifts.

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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

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Cash and cash equivalents $ 332 $ 168

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

Accounts receivable, net of allowances for doubtful accounts of $ 1 million each as of December 31, 2021 and 2020

Inventories, net 491 511

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Property, plant and equipment, net 272 274

Right-of-use lease asset 135 107

Right-of-use lease assets 131 135

Goodwill 3,265 2,988

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Long-term lease liabilities 121 129

Deferred income taxes 6 —

Long-term deferred revenue 315 273

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Interest expense, net ( 5 ) ( 76 ) ( 89 )

Other, net 3 1 10

Other (expense) income, net ( 1 ) 3 1

Total Other expenses, net ( 11 ) ( 91 ) ( 94 )

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Changes in unrealized gains and losses on anticipated sales hedging transactions 46 ( 30 ) ( 10 )

Changes in unrealized gains and losses on forward interest rate swap hedging transactions — — 9

Foreign currency translation adjustment ( 6 ) 5 1

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

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

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

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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) — — — — — 9 9

Foreign currency translation adjustment — — — — — 1 1

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Deferred income taxes ( 69 ) ( 40 ) ( 42 )

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

Unrealized (gain) loss on forward interest rate swaps ( 30 ) 33 19

Other, net ( 1 ) 1 ( 2 )

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Proceeds from the sale of long-term investments — 6 10

Purchases of short-term investments ( 1 ) — —

Purchases of long-term investments ( 34 ) ( 32 ) ( 22 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Description of Business

Note 1 Description of Business and Basis of Presentation

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

End-users of our products, solutions and services include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries around the world.

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

Effective January 1, 2021, the retail solutions product line, which provides a range of physical inventory management solutions with application in the retail industry, including solutions for full store physical inventories, cycle counts and analytics, moved from our Asset Intelligence & Tracking (“AIT”) segment into our Enterprise Visibility & Mobility (“EVM”) segment contemporaneous with a change in our organizational structure and management of the business.

Prior period results have been reclassified to conform to the current period’s presentation.

This change did not have an impact on the Consolidated Financial Statements.

See Note 20, Segment Information & Geographic Data for additional information related to each segment’s results.

Note 2 Significant Accounting Policies

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Interim fiscal quarters end on a Saturday and generally include 13 weeks of operating activity.

During the 2020 fiscal year, the Company’s quarter end dates were March 28, June 27, September 26 and December 31.

During the 2021 fiscal year, the Company’s quarter end dates were April 3, July 3, October 2 and December 31.

Use of Estimates

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Cash consists primarily of deposits with banks.

In addition, the Company considers highly liquid short-term investments with original maturities of less than three months to be cash equivalents.

These highly liquid short-term investments are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of a change in value because of changes in interest rates.

In addition, the Company considers highly liquid short-duration term deposits with banks, as well as other highly liquid short-term investments with original maturities of less than three months, to be cash equivalents.

Cash equivalents are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of a change in value because of changes in interest rates.

Accounts Receivable and Allowance for Doubtful Accounts

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Property, Plant and Equipment

Property, plant and equipment is stated at cost.

Depreciation is computed primarily using the straight-line method over the estimated useful lives of the various classes of property, plant and equipment, which are 30 years for buildings and range from 3 to 10 years for all other asset categories.

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or 10 years.

Property, plant and equipment is stated at cost less accumulated depreciation.

Depreciation is computed primarily using the straight-line method over the estimated useful lives of the various classes of property, plant and equipment, which are thirty years for buildings and range from three to ten years for all other asset categories.

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or ten years .

The Company recognizes right-of-use (“ROU”) assets and lease liabilities for its lease commitments with terms greater than one year.

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The Company classifies its balance sheet accounts by applying jurisdictional netting principles for locations where consolidated tax filing elections are in place.

The Tax Cut and Jobs Act (“the Act”, or “U.S.

Tax Reform”), enacted on December 22, 2017, contains the Global Intangible Low-Taxed Income (“GILTI”), Base Erosion Anti-Avoidance Tax (“BEAT”), and Deduction for Foreign-Derived Intangible Income (“FDII”) provisions, which relate to the taxation of certain foreign income and are effective for tax years beginning on or after January 1, 2018.

tax law 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.

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

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We estimate the fair value of reporting units with valuation techniques, including both the income and market approaches.

The income approach requires management to estimate a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows and discount rates.

The income approach requires management to estimate a number of factors for each reporting unit, including

projected future operating and cash flow results, economic projections, and discount rates.

The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry group.

Fair value determinations require judgment and are sensitive to changes in underlying assumptions, estimates, as well as market factors.

Estimating the fair value of reporting units requires that we make a number of assumptions and estimates regarding our long-term growth and cash flow expectations as well as overall industry and economic conditions.

These estimates and assumptions include, but are not limited to, projections of revenue and income growth rates, capital investments, competitive and customer trends, appropriate peer group selection, market-based discount rates and other market factors.

We most recently performed our annual goodwill impairment testing in the fourth quarter of 2021 using a quantitative approach which did not result in any impairments.

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

We believe our fair value estimates are reasonable.

If actual financial results differ materially from current estimates or there are significant negative changes in market factors beyond our control, there could be an impairment of goodwill in the future.

Other Intangible Assets

Other intangible assets consist primarily of technology and patent rights, customer and other relationships, and trade names.

These assets are recorded at cost and amortized on a straight-line basis over the asset’s useful life which typically range from 2 years to 10 years.

These assets, which are generally acquired through business combinations, are recorded at fair value upon acquisition and amortized on a straight-line basis over the asset’s useful life which typically range from two to ten years .

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

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The Company’s investments primarily include equity securities that are accounted for at cost, adjusted for impairment losses or changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

These investments are primarily in venture capital backed technology companies where the Company's ownership interest is less than 20% of each investee and the Company does not have the ability to exercise significant influence.

These investments are primarily in venture capital backed technology companies where the Company's ownership interest is less than 20% and the Company does not have the ability to exercise significant influence.

See Note 8, Investments for additional information.

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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.

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, when control and the risks and rewards of ownership have transferred to the customer, and the Company has a contractual right to payment.

Revenues for our service offerings are recognized over time.

Our service offerings include repair and maintenance service contracts, as well as professional services such as installation, integration and provisioning that typically occur in the early stages of a project.

The average life of repair and maintenance service contracts is approximately three years.

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Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred, and include:

Research and development (“R&D”) costs include:

• Salaries, benefits, and other R&D personnel related costs;

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• Allocation of building and related costs.

Advertising is expensed as incurred.

Advertising costs totaled $ 25 million, $ 19 million, and $ 18 million for the years ended 2020, 2019 and 2018, respectively.

R&D costs are expensed as incurred, including those associated with developing and maintaining software within our customer offerings.

The Company typically applies a dynamic and iterative approach to developing customer product and software offerings as well as ongoing software feature and functionality enhancement releases, and accordingly, such costs do not meet capitalization criteria.

Advertising costs are expensed as incurred.

These costs totaled $ 35 million, $ 25 million, and $ 19 million for the years ended 2021, 2020 and 2019, respectively.

In general, the Company provides warranty coverage of one year on mobile computers, printers and batteries.

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The Company establishes a liability for loss contingencies when the loss is both probable and estimable.

In addition, for some matters for which a loss is probable or reasonably possible, an estimate of the amount of loss or range of loss is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

In addition, for some matters for which a loss is probable or reasonably possible, a reliable estimate of the amount of loss or range of loss is not possible, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

Fair Value of Financial Instruments

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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.

The Company recognizes compensation costs over the vesting period which is typically three years , net of estimated forfeitures.

Compensation costs associated with awards with graded vesting terms are recognized on a straight-line basis.

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We account for acquired businesses using the acquisition method of accounting.

This method requires that the purchase price be allocated to the identifiable assets acquired and liabilities assumed at their estimated fair values.

This method requires that the purchase price be allocated to the identifiable assets acquired and liabilities assumed, generally measured at their estimated fair values.

The excess of the purchase price over the identifiable assets acquired and liabilities assumed is recorded as goodwill.

The estimates used to determine the fair values of long-lived assets, such as intangible assets, can be complex and require judgment.

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 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.

Management’s estimates of fair value are based on estimates and assumptions utilized as part of the purchase price allocation process and are believed to be reasonable;

elements of these estimates and assumptions are inherently uncertain and subject to refinement during the measurement period, which is up to one year after the acquisition date.

Recently Adopted Accounting Pronouncements

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 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.

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) .

ASU 2021-08 requires contract assets and contract liabilities acquired in a business acquisition to be recognized and measured in accordance with ASC 606, Revenues from Contracts with Customers , which we generally expect will result in the recognition and measurement of contract assets and contract liabilities in a manner that is consistent with the acquiree.

Prior to the adoption of ASU 2021-08, the Company measured contract assets and contract liabilities acquired in business acquisitions at fair value.

The Company early adopted ASU 2021-08 in the fourth quarter of 2021, with applicability to the accounting for our 2021 business acquisitions and any future business acquisitions.

The application of ASU 2021-08 did not have a significant effect on the recognition and measurement of acquired assets and liabilities associated with our 2021 acquisitions.

In March 2020, the FASB issued Accounting Standards Update 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 phase out of the London Inter-bank Offered Rate (“LIBOR”).

The Company amended certain contracts in the fourth quarter of 2021 to replace LIBOR with alternative reference rates, primarily the Secured Overnight Financing Rate.

We adopted and applied ASU 2020-04 in the accounting for those amendments, which did not have a material impact on the consolidated financial statements.

We anticipate negotiating similar amendments to other contracts that include LIBOR tenors that are expected to be phased out by June 30, 2023, and do not expect those amendments to have a material impact on the consolidated financial statements.

Note 3 Revenues

The Company recognizes revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration which it expects to receive for providing those goods or services.

To determine total expected consideration, the Company estimates elements of variable consideration, which primarily include product rights of return, rebates, price protection and other incentives.

These estimates are developed using the expected value or the most likely amount method and are reviewed and updated, as necessary, at each reporting period.

To determine total expected consideration, the Company estimates elements of variable consideration, which primarily include product rights of return, rebates, and other incentives.

These estimates are developed using the expected value method and are reviewed and updated, as necessary, at each reporting period.

Revenues, inclusive of variable consideration, are recognized to the extent it is probable that a significant reversal in cumulative revenues recognized will not occur in future periods.

We enter into contract arrangements that may include various combinations of tangible products, services, solution and software offerings, which are generally capable of being distinct and accounted for as separate performance obligations.

We enter into contracts that may include various combinations of tangible products, services, solutions and software offerings, which are generally capable of being distinct and accounted for as separate performance obligations.

We evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract has more than one performance obligation.

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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.

Regional pricing, marketing strategies and business practices are evaluated to derive estimated standalone selling prices.

The Company recognizes revenue for each performance obligation upon transfer of control of the promised goods or services.

Control is deemed to have been transferred when the customer has the ability to direct the use of and has obtained substantially all of the remaining benefits from the goods and services.

The determination of whether control transfers at a point in time or over time requires judgment and includes consideration of the following:

1) the customer simultaneously receives and consumes the benefits provided as the Company performs its promises;

2) the Company’s performance creates or enhances an asset that is under control of the customer;

3) the Company’s performance does not create an asset with an alternative use to the Company;

and 4) the Company has an enforceable right to payment for its performance completed to date.

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.

The determination of whether control transfers at a point in time or over time requires judgment and includes our consideration of the following:

1) whether the customer simultaneously receives and consumes the benefits provided as the Company performs its promises;

2) whether the Company’s performance creates or enhances an asset that is under control of the customer;

and 3) whether the Company’s performance does not create an asset with an alternative use to the Company, while the Company has an enforceable right to payment for its performance completed to date.

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

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

In cases where a bundle of products, services, solutions and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue

The following table presents our Net sales disaggregated by product category for each of our segments, Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”), for the years ended December 31, 2020, 2019 and 2018 (in millions):

The following table presents our Net sales disaggregated by product category for each of our segments, AIT and EVM, for the years ended December 31, 2021, 2020 and 2019 (in millions):

Year Ended December 31, 2021

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EVM 2,515 548 3,063

Corporate, eliminations (1)

— ( 7 ) ( 7 )

Total $ 3,813 $ 635 $ 4,448

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

Performance Obligations

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 $ 1,033 million and $ 974 million, inclusive of deferred revenue, as of December 31, 2021 and 2020, respectively.

On average, remaining performance obligations as of December 31, 2021 and 2020 are expected to be recognized over a period of approximately two years .

Contract Balances

Progress on satisfying performance obligations under contracts with customers is reflected on the Consolidated Balance Sheets in Accounts receivable, net for billed revenues.

Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next 12-months, and Other long-term assets for revenues expected to be billed thereafter.

The total 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.

Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net.

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 twelve months, and Other long-term assets for revenues expected to be billed thereafter.

The total contract asset balances were $ 10 million each as of December 31, 2021 and 2020.

These contract assets result from timing differences between the billing and satisfying performance obligations, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations.

Contract assets are evaluated for impairment and no impairment losses have been recognized during the years ended December 31, 2021, 2020 and 2019.

Deferred revenue on the Consolidated Balance Sheets consist of payments and billings in advance of our performance.

The combined short-term and long-term deferred revenue balances were $ 581 million and $ 459 million as of December 31, 2020 and 2019, respectively.

Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance.

The combined short-term and long-term deferred revenue balances were $ 695 million and $ 581 million as of December 31, 2021

and 2020, respectively.

The Company recognized $ 319 million, $ 256 million and $ 219 million in revenue that was previously included in the beginning balance of deferred revenue during the years ended December 31, 2021, 2020 and 2019, respectively.

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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 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 incremental costs to obtain a contract are derived at a portfolio level and amortized on a straight-line basis.

The total ending balance of deferred commission costs, which are recorded in Prepaid expenses and other current assets or Other long-term assets on the Consolidated Balance Sheets, depending on the timing of expected amortization, was $ 28 million and $ 23 million as of December 31, 2021 and 2020, respectively.

Amortization of deferred commission costs, which is recorded in Selling and Marketing expense on the Consolidated Statements of Operations, was $ 18 million, $ 14 million and $ 11 million during the years ended December 31, 2021, 2020 and 2019, respectively.

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Finished goods 292 390

Total $ 511 $ 474

Total Inventories, net $ 491 $ 511

Note 5 Business Acquisitions

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

On October 7, 2021, the Company acquired Antuit Holdings Pte.

(“Antuit”), a provider of demand-sensing and pricing optimization software solutions for retail and consumer products companies.

Through this acquisition, the Company intends to enhance its solution offerings to customers in these industries by combining Antuit’s platform with its existing software solutions and EVM products.

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

The Company’s cash purchase consideration was $ 145 million in cash paid, net of Antuit’s cash on-hand.

The Company utilized estimated fair values as of the acquisition date 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.

While we believe these estimates provide a reasonable basis to record the net assets acquired, the purchase price allocation is considered preliminary and subject to adjustment during the measurement period, which is up to one year from the acquisition date.

The primary fair value estimates still considered preliminary as of December 31, 2021 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 $ 47

Accounts receivable 9

Other assets acquired 4

Deferred tax liabilities ( 11 )

Other liabilities assumed ( 9 )

Net assets acquired $ 40

Goodwill on acquisition 105

Total purchase price $ 145

The $ 105 million of goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned expansion of Antuit’s portfolio and integration with the Company’s existing solution offerings as well as expansion into current and new markets, industries and product offerings.

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

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

Technology and patents $ 39 8

Customer and other relationships 7 2

Trade names 1 2

Total identifiable intangible assets $ 47

In connection with the acquisition of Antuit, the Company also granted share-based compensation awards in the form of stock and cash-settled restricted stock units with an approximate fair value of $ 5 million.

The total fair value of the awards is attributable to post-acquisition service and will generally be expensed over a three-year service period.

The Company has not included unaudited pro forma results, as if Antuit had been acquired as of January 1, 2020, as doing so would not yield materially different results.

On August 9, 2021, the Company acquired Fetch Robotics, Inc.

(“Fetch”), a provider of autonomous mobile robot solutions for customers who operate in the manufacturing, distribution, and fulfillment industries, enabling customers to optimize workflows through robotic automation.

Through this acquisition, the Company intends to expand its automation solution offerings within these industries.

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

The total purchase consideration was $ 301 million, which consisted of $ 290 million in cash paid, net of Fetch’s cash on-hand, and the fair value of the Company’s existing ownership interest in Fetch of $ 11 million, as remeasured upon acquisition.

This remeasurement resulted in a $ 1 million gain reflected in Other (expense) income, net on the Consolidated Statements of Operations.

The Company utilized estimated fair values as of the acquisition date to allocate the total purchase consideration to the identifiable assets acquired and liabilities assumed.

The primary fair value estimates still considered preliminary as of December 31, 2021 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 $ 114

Right-of-use lease asset 11

Inventories 6

Deferred tax assets 6

Other assets acquired 5

Lease liability ( 11 )

Other liabilities assumed ( 4 )

Net assets acquired $ 127

Goodwill on acquisition 174

Total purchase price $ 301

The $ 174 million of goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned geographic expansion and integration of Fetch into the Company’s manufacturing and warehouse automation offerings.

During the fourth quarter of 2021, the Company recorded measurement period adjustments relating to facts and circumstances existing as of the acquisition date, which are included in the preliminary purchase price allocation above.

The primary measurement period adjustment was related to the realizability of income tax net operating losses, resulting in a $ 33 million increase in net deferred tax assets and a corresponding decrease in goodwill.

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

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

Technology and patents $ 100 7

Customer and other relationships 5 2

Trade names 9 5

Total identifiable intangible assets $ 114

In connection with the acquisition of Fetch, the Company granted share-based compensation awards, principally as a replacement for unvested Fetch stock options, in the form of stock-settled restricted stock units.

The total fair value of approximately $ 23 million is attributable to post-acquisition service and will generally be expensed over a three-year service period.

The Company has not included unaudited pro forma results, as if Fetch had been acquired as of January 1, 2020, as doing so would not yield materially different results.

Adaptive Vision

On May 17, 2021, the Company acquired Adaptive Vision Sp.

(“Adaptive Vision”), a provider of graphical machine vision software with applications in the manufacturing industry, as well as a provider of libraries and other offerings for machine vision developers.

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

The Company’s cash purchase consideration of $ 18 million, net of cash on-hand, was primarily allocated to technology-related intangible assets of $ 13 million and associated deferred tax liabilities, and goodwill of $ 7 million.

The technology-related intangible assets have an estimated useful life of eight years .

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 Adaptive Vision technologies into new product offerings and markets.

The Company has not included unaudited pro forma results, as if Adaptive Vision had been acquired as of January 1, 2020, as doing so would not yield materially different results.

On September 1, 2020, the Company acquired 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.

Through its acquisition of Reflexis, the Company enhanced 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 Company’s final cash purchase consideration was $ 547 million, net of Reflexis’ cash on-hand and including resolution of contractual matters that resulted in escrow proceeds of $ 1 million being received by the Company in 2021.

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.

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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 total fair value of approximately $ 9 million is primarily attributable to post-acquisition service and expensed over the remaining service period.

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

The Company utilized estimated fair values as of the acquisition date to allocate the total purchase consideration to the identifiable assets acquired and liabilities assumed.

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):

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

Identifiable intangible assets $ 213

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The $ 356 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:

In 2021, the Company finalized the purchase price allocation and recorded measurement period adjustments consisting of a $ 9 million increase to the trade name intangible asset and a $ 2 million increase to deferred tax liabilities resulting in a $ 7 million reduction of goodwill.

The purchase price allocation to identifiable intangible assets acquired was:

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

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Total identifiable intangible assets $ 213

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.

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.

On November 5, 2019, the Company acquired Cortexica Vision Systems Limited (“Cortexica”), a provider of computer vision-based artificial intelligence solutions primarily for the retail industry.

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 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.

On May 31, 2019, the Company acquired Profitect, Inc.

(“Profitect”), a provider of prescriptive analytics primarily for the retail industry.

In acquiring Profitect, the Company seeks to enhance its existing software solutions within the retail industry, with possible future applications in other industries, markets and product offerings.

In acquiring Profitect, the Company enhanced its existing software solutions within the retail industry, with possible future applications in other industries, markets and product offerings.

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

The total purchase consideration was $ 79 million, which consisted of $ 75 million in cash paid, net of cash on-hand, and the fair value of the Company’s existing ownership interest in Profitect of $ 4 million , as remeasured upon acquisition.

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

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

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):

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 for technology and patent intangible assets.

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

Identifiable intangible assets $ 35

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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:

The purchase price allocation to identifiable intangible assets acquired was:

Fair Value (in millions) Useful Life

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Total identifiable intangible assets $ 35

On February 21, 2019, the Company acquired 100 % of the equity interests of Temptime Corporation (“Temptime”), a developer and manufacturer of temperature-monitoring labels and devices.

The Company intends to expand Temptime’s product offerings within the healthcare industry, with possible future applications in other industries involving temperature-sensitive products.

On February 21, 2019, the Company acquired Temptime Corporation (“Temptime”), a developer and manufacturer of temperature-monitoring labels and devices.

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

The Company paid $ 180 million in cash, net of cash on-hand, to acquire Temptime.

Additionally, we incurred $ 3 million of acquisition-related costs in 2019, which primarily included third-party transaction and advisory fees that are included within Acquisition and integration costs on the Consolidated Statements of Operations.

The 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):

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 excess earnings and relief from royalties methodologies.

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

Inventory $ 14

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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”).

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.

The Company paid $ 72 million in cash, net of cash on-hand, to acquire Xplore.

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

Accounts receivable $ 10

Identifiable intangible assets 32

Other assets acquired 10

Accounts payable ( 8 )

Deferred revenues ( 7 )

Other liabilities assumed ( 7 )

Net Assets Acquired $ 43

Goodwill on acquisition 29

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.

Additionally, we incurred $ 8 million of acquisition-related costs in 2018, which primarily included third-party transaction and advisory fees, and we incurred $ 2 million of system integration costs in 2019.

These costs are reflected within Acquisition and integration costs on the Consolidated Statements of Operations.

The $ 29 million of goodwill, which 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:

The purchase price allocation to identifiable intangible assets acquired was:

(in millions) Useful Life

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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.

Acquisition and integration costs

The Company incurred approximately $ 25 million of acquisition-related costs in 2021, primarily related to third-party transaction and advisory fees associated with our business acquisitions, as well as transaction bonuses paid to existing Antuit option holders.

These costs are included within Acquisition and integration costs on the Consolidated Statements of Operations.

The Company incurred approximately $ 23 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 $ 9 million of other acquisition-related costs primarily related to third-party transaction and advisory fees associated with our business acquisitions, are included within Acquisition and integration costs on the Consolidated Statements of Operations.

The Company incurred approximately $ 22 million of acquisition-related costs during 2019, which primarily consisted of payments to settle certain existing Profitect share-based compensation awards whose vesting was accelerated at the discretion of Profitect contemporaneously with the acquisition.

Note 6 Goodwill and Other Intangibles

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

Xplore purchase price allocation adjustments — ( 6 ) ( 6 )

Temptime acquisition 73 — 73

Profitect acquisition — 54 54

Cortexica acquisition — 4 4

Reflexis acquisition — 364 364

Temptime purchase price allocation adjustments 1 — 1

Foreign exchange impact — 1 1

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

Temptime purchase price allocation adjustments 1 — 1

Reflexis acquisition — 364 364

Retail Solutions move to EVM segment, effective January 1, 2021 ( 59 ) 59 —

Antuit acquisition — 105 105

Fetch acquisition — 174 174

Adaptive Vision acquisition — 7 7

Reflexis purchase price allocation adjustments — ( 7 ) ( 7 )

Reflexis purchase price reduction — ( 1 ) ( 1 )

Foreign exchange impact — ( 1 ) ( 1 )

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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 Company’s goodwill balance consists of four reporting units.

The Company completed its annual goodwill impairment testing during the fourth quarter of 2021 utilizing a quantitative approach.

The estimated fair value of each reporting unit exceeded its carrying value by at least 80 %.

There is risk of future impairment to the extent that an individual reporting unit’s performance does not meet projections.

The estimated fair value of each reporting unit continues to significantly exceed its carrying value.

However, there is risk of future impairment to the extent that an individual reporting unit’s performance does not meet projections.

Additionally, if our current assumptions and estimates, including projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors are not met, or if other valuation factors outside of our control change unfavorably, the estimated fair value of our reporting units could be adversely affected, leading to a potential impairment in the future.

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Note 8 Investments

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.

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.

The carrying value of the Company’s long-term investments was $ 101 million and $ 77 million as of December 31, 2021 and 2020, respectively, which are included in Other long-term assets on the Consolidated Balances Sheets.

The Company paid $ 34 million, $ 32 million, and $ 22 million for the purchases of long-term investments during the years ended December 31, 2021, 2020, and 2019, respectively.

The Company’s payments for the purchases of long-term investments during 2020 primarily related to the acquisition of additional shares in an existing investment and was considered an observable price change resulting in a $ 7 million gain.

The Company also received cash proceeds of $ 6 million and $ 10 million related to the sale of a long-term investments during the years ended December 31, 2020 and 2019, respectively.

Net gains related to the Company’s long-term investments, which are included within Other (expense) income, net on the Consolidated Statements of Operations, were $ 2 million, $ 5 million, and $ 3 million during the years ended December 31, 2021, 2020, and 2019, 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 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.

In the fourth quarter of 2021, the Company committed to organizational design changes intended to better meet its strategic objectives and improve cost efficiency (referred to as the “2021 Productivity Plan”), principally within the Europe, Middle East, and Africa (“EMEA”) and North America regions.

Exit and restructuring charges associated with the 2021 Productivity Plan, which primarily related to employee benefits and severance, were $ 7 million during the year ended December 31, 2021.

Estimated remaining costs under the 2021 Productivity Plan, which is expected to be completed by 2022, are expected to be up to $ 3 million.

In the fourth quarter of 2019, the Company committed to certain organizational changes designed to generate operational efficiencies (referred to as the “2019 Productivity Plan”), principally in the North America and EMEA regions.

The 2019 Productivity Plan was completed in 2020.

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

Note 10 Fair Value Measurements

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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)

$ — $ 23 $ — $ 23

Money market investments related to the deferred compensation plan 37 — — 37

Total Assets at fair value $ 37 $ 23 $ — $ 60

Forward interest rate swap contracts (2)

$ — $ 16 $ — $ 16

Liabilities related to the deferred compensation plan 37 — — 37

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Level 1 Level 2 Level 3 Total

Foreign exchange contracts (1)

$ — $ 3 $ — $ 3

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

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

Forward interest rate swap contracts (2)

Foreign exchange contracts (1)

$ 3 $ 34 $ — $ 37

Forward interest rate swap contracts (2)

Liabilities related to the deferred compensation plan 30 — — 30

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

• Fair value of regular forward contracts associated with forecasted sales hedges is calculated using the year-end exchange rate adjusted for current forward points.

• Fair value of hedges against net assets is calculated at the year-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at year end (Level 2).

• Fair value of regular forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points.

• Fair value of hedges against net assets is calculated at the period-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at year end (Level 2).

If this is the case, the fair value is calculated at the rate at which the hedge is being settled (Level 1).

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In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates.

The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC 815.

The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC Topic 815, Derivatives and Hedging (“ASC 815”).

The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions.

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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

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

Asset (Liability)

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Total derivative instruments not designated as hedges $ ( 16 ) $ ( 49 )

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):

(Loss) Gain Recognized in Income

Year Ended December 31,

Statements of Operations Classification 2020 2019 2018

Total net derivative asset (liability) $ 7 $ ( 83 )

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

Gain (Loss) Recognized in Income

Statements of Operations Classification Year Ended December 31,

2021 2020 2019

Derivative instruments not designated as hedges:

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Forward interest rate swaps Interest expense, net 13 ( 46 ) ( 19 )

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

Total gain (loss) recognized in income $ 20 $ ( 58 ) $ ( 22 )

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

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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.

If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would have increased by $ 1 million as of December 31, 2021 and would have been unchanged as of December 31, 2020.

Foreign Currency Exchange Risk Management

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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.

Realized amounts reclassified to Net sales were $ 2 million and $ 6 million of losses for the years ended December 31, 2021 and 2020, respectively, and $ 42 million of gains for the year ended December 31, 2019.

As of December 31, 2021 and 2020, the notional amounts of the Company’s foreign exchange cash flow hedges were € 675 million and € 585 million, respectively.

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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 are as follows (in millions):

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

Notional balance of outstanding contracts:

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Dollar € 142 € 123

Canadian Dollar/U.S.

Dollar $ — $ 1

Australian Dollar/U.S.

Dollar A$ — A$ 42

Euro/Czech Koruna € 16 € —

Japanese Yen/U.S.

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Dollar Mex$ 64 Mex$ 36

South African Rand/U.S.

Dollar R — R 42

Polish Zloty/U.S.

Dollar zł 103 zł —

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

Interest Rate Risk Management

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.

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 applicable margins.

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

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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 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.

The Company has entered into long-term forward interest rate swap agreements with a total 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 agreements, $ 800 million in variable-rate debt will be swapped for a fixed interest rate.

The Company has made, and will continue to make, monthly net settlements on its interest rate swaps through August 2024, coinciding 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

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2020 Term Loan — 100

Revolving Credit Facility — 103

Receivables Financing Facilities 108 235

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Total long-term debt $ 922 $ 881

As of December 31, 2020, the future maturities of debt, excluding debt discounts and issuance costs, are as follows (in millions):

As of December 31, 2021, the future maturities of debt are as follows (in millions):

Total future maturities of debt $ 996

All borrowings as of December 31, 2021 were denominated in U.S.

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 estimated fair value of the Company’s debt approximated $ 1.0 billion and $ 1.3 billion as of December 31, 2021 and 2020, 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 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 March 2022 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.

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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.

The Company repaid $ 100 million of principal during the fourth quarter of 2020 and the remaining $ 100 million of principal in the first quarter of 2021.

Receivables Financing Facilities

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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.

The Company’s first Receivables Financing Facility allows for borrowings of up to $ 180 million and matures on March 19, 2024.

The Company’s second Receivable Financing Facility allows for borrowings of up to $ 100 million and matures on May 16, 2022.

As of December 31, 2021, the Company’s Consolidated Balance Sheets included $ 643 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.

As of December 31, 2021, $ 108 million had been borrowed, of which $ 13 million was classified as current.

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

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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.

Amendment No.

1 resulted in a new Term Loan A with principal of $ 670 million and increased the Revolving Credit Facility from $ 500 million to $ 800 million.

Also, as part of Amendment No.

1, the Company had a partial early debt extinguishment of $ 300 million and repricing of its Term Loan B.

Amendment No.

1 resulted in $ 6 million of non-cash accelerated amortization of debt issuance costs and $ 1 million of one-time charges related to third party fees, both of which were reflected in Interest Expense, net on the Consolidated Statements of Operations.

Amendment No.

1 also resulted in $ 2 million of third party fees for arranger, legal, and other services that were capitalized.

Revolving Credit Facility

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

As of December 31, 2021, the Company had letters of credit totaling $ 7 million, which reduced funds available for borrowings under the Revolving Credit Facility from $ 1 billion to $ 993 million.

No borrowings were outstanding under the Revolving Credit Facility as of December 31, 2021 or 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.

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.

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.

2”), which 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.

Additionally, a payment of $ 445 million was made to fully pay off a previously outstanding term loan.

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.

Additionally, issuance costs of $ 6 million incurred related to this debt refinancing were capitalized and are amortized over the remaining term of Term Loan A and the Revolving Credit Facility.

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.

As of December 31, 2021, the Company was in compliance with all debt covenants.

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

See Note 11, Derivative Instruments for further information.

As of December 31, 2020, the Company was in compliance with all debt covenants.

Note 13 Leases

The Company leases certain manufacturing facilities, distribution centers, sales and administrative offices, equipment, and vehicles, which are accounted for as operating leases.

Remaining lease terms are up to 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):

The Company leases various manufacturing and repair facilities, distribution centers, research facilities, sales and administrative offices, equipment, and vehicles.

All leases are classified as operating leases with remaining terms of up to 11 years, with certain leases containing renewal options and termination options.

The Company records ROU assets and lease liabilities on the Consolidated Balance Sheets associated with the fixed lease and non-lease payments of leases with terms greater than one year.

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

2021 2020 2019

Fixed lease expenses $ 39 $ 35 $ 37

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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.

Cash payments for 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 primarily include new lease arrangements entered into by the Company.

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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):

The Company’s reduction of ROU assets and lease liabilities during 2021 and 2020 were not significant, whereas the 2019 reduction was 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 leases was approximately 6 years each as of December 31, 2021, 2020 and 2019.

The weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 5 % as of December 31, 2021 and 2020, and 6 % as of December 31, 2019.

Future minimum lease payments under non-cancellable leases as of December 31, 2021 were as follows (in millions):

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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 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.

Note 14 Commitments and Contingencies

As of December 31, 2021, the Company had future fixed payments of approximately $ 40 million related to a new distribution center lease agreement that had not yet commenced.

This new lease agreement is expected to commence in 2022 and has a 5 year term.

Revenues earned from lease arrangements under which the Company is a lessor during the years ended December 31, 2021, 2020 and 2019 were not significant.

Note 14 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

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

Accrued payroll and benefits $ 96 $ 87

Accrued incentive compensation 155 65

Accrued warranty 26 24

Customer reserves 51 56

Current portion of lease liabilities 33 30

Unremitted cash collections due to banks on factored accounts receivable 141 142

Forward contract liabilities — 37

Short-term interest rate swaps 15 17

Accrued freight and duty 45 21

Other accrued expenses 77 80

Accrued liabilities $ 639 $ 559

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

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Balance at the beginning of the year $ 24 $ 21 $ 22

Acquisitions — — 1

Warranty expense 33 30 25

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Balance at the end of the year $ 26 $ 24 $ 21

In the fourth quarter of 2021, we entered into certain multi-year inventory and service-related purchase commitments which contain minimum purchase requirements and are non-cancellable.

Long-term commitments under these contracts are as follows (in millions):

Contingencies

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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.

Recoveries totaling $ 12 million were recorded in the fourth quarter of 2020, of which $ 4 million related to our AIT segment and $ 8 million related to our EVM segment.

Recoveries totaling $ 19 million were recorded during the year ended December 31, 2021, of which $ 10 million related to our AIT segment and $ 9 million related to our EVM segment.

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.

The Company believes that it has recovered substantially all of the import duties that it expects to receive on previously paid amounts.

The final amounts and the timings of any additional recoveries remain uncertain and, therefore, the Company has not recorded any amounts related to potential future recoveries in its financial statements as of December 31, 2021.

Note 15 Share-Based Compensation

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.

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 appreciation rights that were granted under those plans until such awards have been exercised, forfeited, cancelled, expired or otherwise terminated in accordance with their terms.

Awards available under the 2018 Plan include stock-settled awards, including stock-settled restricted stock units, stock-settled performance stock units, restricted stock awards, performance share awards, stock appreciation rights, incentive stock options, and non-qualified stock options.

Awards available under the 2018 Plan also include cash-settled awards, including cash-settled stock appreciation rights, cash-settled restricted stock units, and cash-settled performance stock units.

No awards remain available for future grants under the 2015 Plan or previous plans.

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

As of December 31, 2020, the Company had 3,339,322 shares of Class A Common stock available to be issued under the 2018 Plan.

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

As of December 31, 2021, the Company had 3,148,831 shares of Class A Common stock remaining 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):

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Income tax benefit $ 14 $ 9 $ 9

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”)

Upon exercise of SARs, the Company issues whole shares of Class A Common Stock to participants based on the difference between the fair market value of the stock at the time of exercise and the exercise price.

Fractional shares are settled in cash upon exercise.

The grant date fair value of SARs is expensed over the 4 -year vesting period of the related awards.

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

2020 2019 2018

SARs SARs Weighted-

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 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 4.00 4.02 4.11

Weighted-average grant date fair value of SARs granted

(per underlying share) $ 79.47 $ 64.17 $ 47.63

The 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 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.

The total fair value of SARs vested during fiscal 2020, 2019 and 2018 was $ 8 million, $ 9 million and $ 12 million, respectively.

As of December 31, 2021, total unearned compensation costs related to the Company’s share-based compensation plans was $ 105 million, which will be recognized over the weighted average remaining service period of approximately 1.4 years.

The majority of the Company’s share-based compensation awards are generally issued as part of its employee and non-employee director incentive program during the second quarter of each fiscal year.

The Company also issues awards associated with business acquisitions or other off-cycle events.

Stock-Settled Restricted Stock Units (“stock-settled RSUs”) and Stock-Settled Performance Share Units (“stock-settled PSUs”)

The Company began issuing stock-settled RSUs and stock-settled PSUs in the second quarter of 2021.

Stock-settled RSUs and stock-settled PSUs each typically vest over a three-year service period, with stock-settled RSUs vesting ratably in three annual installments and stock-settled PSUs vesting at the end of the three-year period.

Vesting for each participant is subject to restrictions, such as continuous employment, except in certain cases as set forth in each stock agreement.

Upon vesting, stock-settled RSUs and stock-settled PSUs are converted into shares of Class A Common Stock that are released to participants.

Compensation cost for the Company’s stock-settled RSUs and stock-settled PSUs is expensed over each participant’s required service period.

Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units granted, net of estimated forfeitures.

The fair value of PSUs also includes assumptions around achievement of certain Company-wide financial performance goals.

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

The Company’s restricted stock grants consist of time-vested RSAs and PSAs, which hold voting rights and therefore are considered participating securities.

Prior to 2021, the Company’s restricted stock grants consisted of time-vested RSAs and PSAs as part of the Company’s annual incentive program.

These awards are considered participating securities.

The outstanding RSAs and PSAs are included as part of the Company’s Class A Common Stock outstanding.

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Upon vesting, RSAs and PSAs are released to holders and are no longer subject to restrictions.

The Company’s RSAs and PSAs are expensed over the vesting period of the related award, which is typically 3 years.

Some awards, including those granted annually to non-employee directors as an equity retainer fee, vest upon grant.

PSA targets are set based on certain Company-wide financial metrics.

Compensation cost is calculated as the market date fair value of the Company’s Class A Common Stock on grant date multiplied by the number of shares granted, net of estimated forfeitures.

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

The Company also issues stock awards to non-employee directors.

Each director receives an equity grant of shares annually in the second quarter.

The number of shares granted to each director is determined by dividing the value of the annual grant by the price of a share of the Company’s Class A Common Stock.

Compensation cost for the Company’s RSAs and PSAs is expensed over each participant’s required service period.

Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units granted, net of estimated forfeitures.

The fair value of PSAs also includes assumptions around achievement of certain Company-wide financial performance goals.

The total required service period is typically three years .

The Company also issues Class A Common Stock to non-employee directors.

The number of shares granted to each non-employee director is determined by dividing the value of the annual grant by the price of a share of the Company’s Class A Common Stock.

New directors in any fiscal year earn a prorated amount.

During fiscal 2020, there were 6,314 shares granted to non-employee directors compared to 7,371 and 7,980 shares granted during fiscal 2019 and 2018, respectively.

During fiscal 2021, there were 2,877 shares granted to non-employee directors compared to 6,314 and 7,371 during fiscal 2020 and 2019, respectively.

The shares vest immediately on the grant date.

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

2020 2019 2018

RSAs Shares Weighted-Average

Grant Date Fair Value Shares Weighted-Average

Grant Date Fair Value

A summary of the Company’s restricted and performance stock-settled awards for the years ended December 31, 2021, 2020 and 2019 is as follows:

Year Ended December 31, 2021

RSUs PSUs RSAs PSAs

Units Weighted-Average Grant Date Fair Value Units Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value

Outstanding at beginning of year — $ — — $ — 318,565 $ 228.08 126,022 $ 199.77

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Outstanding at end of year 130,009 $ 518.80 37,691 $ 482.42 154,322 $ 253.54 74,032 $ 225.34

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

2020 2019 2018

PSAs Shares Weighted-Average

Grant Date Fair Value Shares Weighted-Average

Grant Date Fair Value

Year Ended December 31, 2020

Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value

Outstanding at beginning of year 434,641 $ 151.52 170,749 $ 144.47

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Outstanding at end of year 318,565 $ 228.08 126,022 $ 199.77

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.

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.

Year Ended December 31, 2019

Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value

Outstanding at beginning of year 657,724 $ 93.45 259,727 $ 86.41

Granted 170,502 204.26 150,224 206.04

Released ( 372,075 ) 73.71 ( 231,513 ) 120.86

Forfeited ( 21,510 ) 141.29 ( 7,689 ) 102.42

Outstanding at end of year 434,641 $ 151.52 170,749 $ 144.47

Stock Appreciation Rights (“SARs”)

SARs were previously granted primarily as part of the Company’s annual share-based compensation incentive program.

Beginning in 2021, the Company no longer included SARs in its annual share based compensation award issuances and did not issue any SARs during the year ended December 31, 2021.

The total fair value of SARs granted during the years ended December 31, 2020 and 2019 was $ 6 million and $ 5 million, respectively, which were estimated on the respective dates of grant using a binomial model.

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

2021 2020 2019

SARs SARs Weighted-Average Grant Date Exercise Price SARs Weighted-Average Grant Date Exercise Price SARs Weighted-Average Grant Date Exercise Price

Outstanding at beginning of year 638,124 $ 113.98 896,923 $ 89.05 1,261,185 $ 75.71

Granted — — 69,742 253.62 70,141 205.12

Exercised ( 159,035 ) 89.87 ( 295,770 ) 67.96 ( 395,015 ) 66.82

Forfeited ( 4,938 ) 213.80 ( 31,193 ) 149.09 ( 39,388 ) 92.72

Expired — — ( 1,578 ) 166.52 — —

Outstanding at end of year 474,151 $ 121.05 638,124 $ 113.98 896,923 $ 89.05

Exercisable at end of year 383,273 $ 97.29 417,856 $ 81.88 489,357 $ 70.37

The following table summarizes information about SARs outstanding as of December 31, 2021:

Outstanding Exercisable

Aggregate intrinsic value (in millions) $ 225 $ 191

Weighted-average remaining contractual life (in years) 3.6 3.3

The intrinsic value of SARs exercised during fiscal 2021, 2020 and 2019 was $ 69 million, $ 60 million and $ 58 million, respectively.

The total fair value of SARs vested during fiscal 2021, 2020 and 2019 was $ 5 million, $ 8 million and $ 9 million, respectively.

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”).

In connection with the Company’s September 2020 acquisition of Reflexis, the Company assumed the 2016 Stock Incentive Plan of Reflexis Systems, Inc.

(the “Reflexis Plan”) and replaced certain unvested options under the Reflexis Plan with 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.

The total grant-date fair value of options granted during the year ended December 31, 2020 was $ 9 million, which was estimated using a Black-Scholes valuation model.

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

Reflexis Replacement Options Shares Weighted-

Exercise Price

Reflexis Replacement Options Options Weighted-Average Exercise Price Options Weighted-Average Exercise Price

Outstanding at beginning of year 34,424 $ 58.09 — $ —

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Exercisable at end of year 18,232 $ 54.50 6,716 $ 56.77

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

The following table summarizes information related to the Reflexis Replacement Options outstanding as of December 31, 2021:

Outstanding Exercisable

Aggregate intrinsic value (in millions) $ 13 $ 10

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.

Weighted-average remaining contractual life (in years) 6.3 5.9

The intrinsic value of Reflexis Replacement Options exercised during fiscal 2021 and 2020 was $ 4 million and $ 1 million, respectively.

The total fair value of Reflexis Replacement Options vested during fiscal 2021 and 2020 was $ 5 million and $ 2 million, respectively.

Cash-settled awards

The Company also has cash-settled share-based compensation awards, including cash-settled stock appreciation rights, cash-settled restricted stock units and cash-settled performance stock units that are classified as liability awards.

These awards are expensed over the vesting period of the related award, which is typically three years .

Compensation cost is calculated at the fair value on grant date multiplied by the number of share-equivalents granted.

Cash settlement is based on the fair value of share equivalents at the time of vesting, which was $ 11 million, $ 9 million and $ 6 million in 2021, 2020 and 2019, respectively.

Share-equivalents issued under these programs totaled 11,644 , 40,166 and 17,207 in fiscal 2021, 2020 and 2019, respectively.

Employee Stock Purchase Plan

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.

In May 2020, the Company’s stockholders approved the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”), which superseded 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.

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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.

As of December 31, 2021, 1,448,956 shares remained available for future purchase.

Note 16 Income Taxes

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

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

Year Ended December 31,

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Provision computed at statutory rate 21.0 % 21.0 % 21.0 %

Tax Reform - one-time transition tax — — ( 0.6 )

Remeasurement of deferred taxes ( 1.0 ) ( 0.6 ) 0.2

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Provision for income taxes 13.5 % 10.0 % 9.0 %

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 years ended December 31, 2021 and 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.

These benefits were partially offset by the impacts of foreign earnings and deemed royalties taxed in the U.S.

For the year ended December 31, 2018, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to lower tax rates in foreign jurisdictions and the generation of tax credits.

These benefits were partially offset by increases related to foreign earnings subject to U.S.

taxation, the U.S.

impact of the Enterprise acquisition and certain discrete items.

The discrete items included the favorable impacts of reductions in valuation allowances and share-based compensation benefits, which were offset by audit settlements with the U.S.

Internal Revenue Service for the fiscal years 2013, 2014 and 2015 and an increase in uncertain tax positions resulting from interpretive guidance issued during the year.

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 evaluated the provisions of the American Rescue Plan Act, signed into law on March 11, 2021;

the Consolidated Appropriations Act of 2021, signed into law on December 27, 2020;

and the Coronavirus Aid, Relief and Economic Security Act, signed into law on March 27, 2020.

The provisions of these laws did not have a significant impact to our effective tax rate in either the current or prior year.

Management continues to monitor guidance regarding these laws and developments related to 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’s principal foreign jurisdictions that provide sources of operating income are the U.K.

and Singapore.

During the second quarter of 2021, the U.K.

government enacted a change in law that increases the corporate tax rate from 19% to 25%, with such rate change becoming effective in April 2023.

Upon enactment, we remeasured our deferred tax assets to reflect the 25% statutory rate to the extent such tax benefits are expected to be realized in the future at the amended statutory rate.

In addition, the Company has received an incentivized tax rate from 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.

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Inventory items 15 17

Capitalized software costs — 2

Sales return/rebate reserve 61 46

Share-based compensation expense 12 9

Accrued bonus 1 7

Unrealized gains and losses on securities and investments — 19

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Depreciation and amortization 84 67

Unrealized gains and losses on securities and investments 5 —

Undistributed earnings 4 2

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Net deferred tax assets $ 186 $ 139

In 2019, the Company reorganized its Luxembourg holding company structure which resulted in a taxable gain in Luxembourg that was offset by operating loss carryforwards.

There was no net impact to the provision for income taxes as these activities also resulted in the realization of deferred tax liabilities related to depreciation and amortization and a corresponding increase in valuation allowances.

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

The Company’s valuation allowance primarily relates to Luxembourg reorganization activities in 2019, which had resulted in the realization of deferred tax liabilities and a corresponding increase in valuation allowances related to depreciation and amortization.

The Company’s valuation allowance also consists of certain net operating loss (“NOL”) and credit carryforwards for which the Company believes it is more likely than not that a tax benefit will not be realized.

With respect to all other deferred tax assets, the Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize a tax benefit.

There were no significant adjustments to the Company’s valuation allowance during the year ended December 31, 2021.

As of December 31, 2021, the Company had approximately $ 438 million (tax effected) of “NOLs” and $ 37 million of credit carryforwards.

Approximately $ 186 million of NOLs will expire beginning in 2022 through 2040, and $ 30 million of credits will expire beginning in 2022 through 2037, with the remaining amounts of NOLs and credit carryforwards having no expiration dates.

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.

The Company is subject to the GILTI, BEAT and FDII provisions, for which we recorded an income tax benefit of $ 20 million for the year ended December 31, 2021, and an income tax expense of $ 8 million and $ 12 million for the years ended December 31, 2020 and 2019, respectively.

These impacts are included in the calculation of the Company’s effective tax rate.

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, while any remaining foreign earnings are eligible for the new dividends received deduction.

As a result, future repatriation of earnings will no longer be subject to U.S.

income tax but may be subject to currency translation gains or losses.

The Company is not permanently reinvested with respect to its U.S.

directly-owned foreign subsidiaries.

The Company is subject to U.S.

income tax on substantially all foreign earnings under GILTI, while any remaining foreign earnings are eligible for a dividends received deduction.

As a result, future repatriation of earnings will not be subject to additional U.S.

federal income tax but may be subject to currency translation gains or losses.

Where required, the Company has recorded a deferred tax liability for foreign withholding taxes on current earnings.

Additionally, gains and losses on any future taxable dispositions of U.S.-owned foreign affiliates continue to be subject to U.S.

Thus, as a result of these changes, the assertion of permanent reinvestment is no longer applicable under current U.S.

The Company has not recognized deferred tax liabilities in the U.S.

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Balance at beginning of year $ 8 $ 10

Additions for tax positions related to the current year — 1

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

Settlements for tax positions — ( 1 )

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The Company is currently undergoing U.S.

federal income tax audits for the tax years 2017 and 2018.

Fiscal 2004 through 2018 remain open to examination by multiple foreign and U.S.

federal income tax audits for tax years 2017 and 2018.

Additionally, fiscal years 2009 through 2021 remain open to examination by multiple foreign and U.S.

state taxing jurisdictions.

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 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 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.

As of December 31, 2021, no 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 settlements of uncertain tax positions may change and the actual tax benefits may differ significantly from estimates.

The Company recognized no net tax expense associated with interest and penalties related to income tax matters during the year ended December 31, 2021.

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

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

The Company has included $ 6 million of estimated interest and penalty obligations within Other long-term liabilities on the Consolidated Balance Sheets each as of December 31, 2021 and 2020.

Note 17 Earnings Per Share

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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 share-based compensation awards were converted into common shares during the period.

Earnings per share (in millions, except share data):

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Diluted earnings per share $ 15.52 $ 9.35 $ 9.97

Anti-dilutive options to purchase common shares are excluded from diluted earnings per share calculations.

Anti-dilutive share-based compensation awards are excluded from diluted earnings per share calculations.

There were 8,000 , 46,128 , and 47,240 shares that were anti-dilutive for the years ended December 31, 2021, 2020, and 2019, respectively.

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

• 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 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.

• Unrealized gain (loss) on anticipated sales hedging transactions relates to derivative instruments used to hedge the exposure related to currency exchange rates for forecasted Euro sales.

These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs See Note 11, Derivative Instruments for more details.

• Unrealized gain (loss) on forward interest rate swap 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 into Interest expense, net on the Consolidated Statements of Operations in 2019.

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

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The changes in each component of AOCI during the three years ended December 31, 2021, 2020 and 2019 were as follows (in millions):

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

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

Balance at December 31, 2018 $ 12 $ — $ ( 47 ) $ ( 35 )

Other comprehensive income (loss) before reclassifications 38 8 ( 13 ) 33

Other comprehensive income before reclassifications 30 — 1 31

Amounts reclassified from AOCI (1)

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

Other comprehensive income before reclassifications 30 — 1 31

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

Amounts reclassified from AOCI (1)

( 42 ) 2 — ( 40 )

Tax effect 7 — — 7

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

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

Other comprehensive income (loss) before reclassifications 55 — ( 6 ) 49

Amounts reclassified from AOCI (1)

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Note 19 Accounts Receivable Factoring

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

The Company has 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.

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The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables.

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.

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 used in financing activities on the Consolidated Statements of Cash Flows.

During the second quarter of 2021, one of the Company’s Receivables Factoring arrangements that was no longer actively utilized expired.

The Company currently has two remaining active Receivables Factoring arrangements.

One arrangement allows for the factoring of up to $ 25 million of uncollected receivables originated from the EMEA region.

The second arrangement allows for the factoring of up to € 150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions.

With respect to the second arrangement, 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 $ 12 million and $ 24 million as of December 31, 2021 and December 31, 2020, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

During the years ended December 31, 2021, 2020 and 2019, the Company received cash proceeds of $ 1,504 million, $ 1,291 million and $ 409 million, respectively, from the sales of accounts receivables under its factoring arrangements.

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The CODM reviews adjusted operating income to assess segment profitability.

To the extent applicable, segment operating income excludes purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, and product sourcing diversification costs.

To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, and product sourcing diversification costs.

Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Effective January 1, 2021, retail solutions product line, which provides a range of physical inventory management solutions with application in the retail industry, including solutions for full store physical inventories, cycle counts and analytics, moved from our AIT segment into our EVM segment contemporaneous with a change in our organizational structure and management of the business.

Prior period results have been revised to conform to the current segment presentation.

This change did not have an impact on the Consolidated Financial Statements.

Financial information by segment is presented as follows (in millions):

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Corporate, eliminations (1)

( 6 ) ( 7 ) —

Total Net sales $ 5,627 $ 4,448 $ 4,485

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Total Operating income $ 979 $ 651 $ 692

(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.

(1) To the extent applicable, amounts included in Corporate, eliminations consist of business acquisition 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.

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Sales to significant customers

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

The Company has three customers, who are distributors of the Company’s products and solutions, that individually accounted for more than 10% of total Company Net sales during the years ended December 31, 2021, 2020 and 2019.

The approximate percentage of our segment and Company total Net sales to these customers were as follows:

Year Ended December 31,

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These customers accounted for 22.7 %, 13.4 %, and 14.8 %, respectively, of accounts receivable as of December 31, 2021, and 20.4 %, 6.7 % and 13.6 %, respectively, of accounts receivable as of December 31, 2020.

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.

No other customer accounted for more than 10% of total Net sales during the years ended December 31, 2021, 2020 or 2019, or more than 10% of outstanding accounts receivables as of December 31, 2021 or 2020.

Geographic data

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

We manage our business based on regions rather than by individual countries.

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

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Total Net sales $ 5,627 $ 4,448 $ 4,485

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):

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Total long-lived assets $ 403 $ 409 $ 366

Long-lived assets are defined by the Company as property, plant and equipment as well as ROU assets.

ROU assets were recognized upon adoption of ASC 842 in 2019, prior to which, there were no long-lived assets related to leasing activities.

Long-lived assets are defined by the Company as property, plant and equipment and ROU assets.

Primarily all of the Company’s long-lived assets in the North America region are located in the United States.

Note 21 Supplementary Financial Information

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

Accrued payroll and benefits $ 87 $ 63

Accrued incentive compensation 65 96

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

Accrued other expenses 80 65

Accrued liabilities $ 559 $ 379

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