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Opinion on the Financial Statements
−Removed: We have audited the accompanying consolidated balance sheets of Zebra Technologies Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).
+Added: We have audited the accompanying consolidated balance sheets of Zebra Technologies Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.
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We believe that our audits provide a reasonable basis for our opinion.
−Removed: Critical Audit Matter
−Removed: 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:
−Removed: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
−Removed: 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.
+Added: Critical Audit Matters
+Added: 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:
+Added: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
+Added: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Accounting for Income Taxes
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These factors impact the Company’s estimation of tax exposures, valuation allowances and income tax provisions.
−Removed: How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s identification of and accounting for the tax impact of changes in the business or significant changes in tax laws.
+Added: How We Addressed the Matter in Our
+Added: Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s identification of and accounting for the tax impact of changes in the business or significant changes in tax laws.
This included controls over the Company’s evaluation of tax law changes, the evaluation of cross-jurisdictional transactions and the Company’s tax technical assessment over those changes and/or transactions.
−Removed: We involved our tax professionals in the Company’s significant operating jurisdictions to assist in the evaluation of the Company’s tax obligations.
−Removed: We evaluated the Company’s transactional flows to assess whether they aligned with the Company’s strategic and operational shifts.
−Removed: We made inquiries of management and inspected internally and externally prepared documentation to understand current disputes and uncertain tax positions.
−Removed: We assessed the completeness of the tax matters identified and evaluated the Company’s assessment regarding the related status, potential exposure and risk of loss.
−Removed: 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.
+Added: We involved our tax professionals in the Company’s significant operating jurisdictions to assist in the evaluation of the Company’s tax obligations and the application of significant tax law changes.
+Added: We assessed the completeness of the tax matters identified, evaluated the Company’s assessment regarding the related status and potential exposure, assessed the Company’s computations resulting from significant tax law changes and evaluated the adequacy of the Company’s disclosures of tax and ongoing tax matters.
+Added: Acquisition of Matrox Electronic Systems Ltd.
+Added: – Valuation of Intangible Assets
+Added: Description of the Matter During 2022, the Company completed its acquisition of Matrox Electronic Systems Ltd.
+Added: (“Matrox”) for net consideration of $881 million, as disclosed in Note 5 to the consolidated financial statements.
+Added: The Company’s accounting for the acquisition required it to determine the fair value of the intangible assets acquired, including technology assets and customer relationships.
+Added: 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.
+Added: The estimation was significant due to the sensitivity of the respective fair values to the underlying assumptions, in particular, projected revenue growth rates and the selected discount rate.
+Added: These assumptions relate to the future performance of the acquired business, are forward-looking and could be affected by future economic and market conditions.
+Added: How We Addressed the Matter in Our
+Added: Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of acquired intangible assets.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: We involved our valuation specialists to assist in the evaluation of the Company’s discount rate by comparing it against a range of reasonable rates that was independently developed using publicly available market data for comparable entities.
/s/ Ernst & Young LLP
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General and administrative 375 348 304
+Added: Settlement and related costs 372 — —
Amortization of intangible assets 136 115 78
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Operating income 529 979 651
−Removed: Other expenses:
+Added: Other (loss) income, net:
Foreign exchange loss ( 3 ) ( 5 ) ( 18 )
−Removed: Interest expense, net ( 5 ) ( 76 ) ( 89 )
+Added: Interest income (expense), net 23 ( 5 ) ( 76 )
Other (expense) income, net ( 5 ) ( 1 ) 3
−Removed: Total Other expenses, net ( 11 ) ( 91 ) ( 94 )
+Added: Total Other income (expense), net 15 ( 11 ) ( 91 )
Income before income tax 544 968 560
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Net income $ 463 $ 837 $ 504
−Removed: Other comprehensive income (loss), net of tax:
+Added: Other comprehensive (loss) income, net of tax:
Changes in unrealized gains and losses on anticipated sales hedging transactions ( 29 ) 46 ( 30 )
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Depreciation and amortization 204 187 146
−Removed: Amortization of debt issuance costs and discounts 2 3 6
+Added: Amortization of debt issuance costs, extinguishment costs and discounts 4 2 3
Share-based compensation 88 76 51
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Income taxes 108 1 ( 5 )
+Added: Legal settlement liability 225 — —
Other operating activities ( 13 ) ( 9 ) 4
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Payments of long term-debt ( 247 ) ( 303 ) ( 342 )
−Removed: Payments of debt extinguishment costs — — ( 1 )
−Removed: Payments of debt issuance costs and discounts — ( 1 ) ( 6 )
+Added: Payment of debt issuance costs, extinguishment costs and discounts ( 8 ) — ( 1 )
Payments for repurchases of common stock ( 751 ) ( 57 ) ( 200 )
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Change in unremitted cash collections from servicing factored receivables ( 11 ) ( 1 ) 109
−Removed: Net cash used in financing activities ( 371 ) ( 157 ) ( 365 )
+Added: Net cash provided by (used in) financing activities 253 ( 371 ) ( 157 )
Effect of exchange rate changes on cash and cash equivalents, including restricted cash — — ( 2 )
−Removed: Net increase (decrease) in cash and cash equivalents, including restricted cash 152 162 ( 14 )
+Added: Net (decrease) increase in cash and cash equivalents, including restricted cash ( 227 ) 152 162
Cash and cash equivalents, including restricted cash, at beginning of period 344 192 30
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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.
−Removed: We design, manufacture, and sell a broad range of products and solutions, including cloud-based subscriptions, that capture and move data.
+Added: We design, manufacture, and sell a broad range of products and solutions, including cloud-based software subscriptions, that capture and move data.
We also provide a full range of services, including maintenance, technical support, repair, managed and professional services.
−Removed: 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.
+Added: 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.
We provide our products, solutions and services globally through a direct sales force and an extensive network of channel partners.
−Removed: 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.
−Removed: Prior period results have been reclassified to conform to the current period’s presentation.
−Removed: This change did not have an impact on the Consolidated Financial Statements.
+Added: Effective January 1, 2022, the location solutions offering, which provides a range of real-time location systems (“RTLS”) and services that generate on-demand information about the physical location and status of assets, equipment, and people, 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.
+Added: We have reported our results reflecting this change, including historical periods, on a comparable basis.
+Added: This change does not have an impact to the Consolidated Financial Statements.
See Note 20, Segment Information & Geographic Data for additional information related to each segment’s results.
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Principles of Consolidation
−Removed: These accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States and include the accounts of Zebra and its wholly owned subsidiaries.
+Added: These accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the U.S.
+Added: and include the accounts of Zebra and its wholly owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in consolidation.
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The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable that is based on expected credit losses.
−Removed: Expected credit losses are estimated based on a number of factors, including historical loss experience, the durations of outstanding trade receivables, and expectations of the future economic environment.
+Added: Expected credit losses are estimated based on historical loss experience, the durations of outstanding trade receivables, and expectations of the future economic environment.
Accounts are written off against the allowance account when they are determined to be no longer collectible.
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The Company recognizes its GILTI, BEAT, and FDII inclusions, when applicable, within income tax expense in the year included in its U.S.
−Removed: Goodwill is not amortized, rather it is tested annually for impairment, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
+Added: Goodwill is tested annually for impairment, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired.
Our annual impairment testing consists of comparing the estimated fair value of each reporting unit to its carrying value.
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We estimate the fair value of reporting units with valuation techniques, including both the income and market approaches.
−Removed: The income approach requires management to estimate a number of factors for each reporting unit, including
−Removed: projected future operating and cash flow results, economic projections, and discount rates.
+Added: The income approach requires management to estimate 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.
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Other intangible assets consist primarily of technology and patent rights, customer and other relationships, and trade names.
−Removed: 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 .
+Added: 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 eleven years .
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of
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Revenues are primarily comprised of sales of hardware, supplies, services, solutions and software offerings.
−Removed: We recognize revenues when we transfer control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to receive, which includes estimates of variable consideration, in exchange for those goods or services.
+Added: We recognize revenues when we transfer control of promised goods or services to our customers in an amount that reflects the consideration that we expect to receive, which includes estimates of variable consideration, in exchange for those goods or services.
We are typically the principal in all elements of our transactions and record Net sales and Cost of sales on a gross basis.
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Revenues for solutions, including Company-hosted software license and maintenance agreements, are typically recognized over time.
−Removed: The Company elects to exclude from the transaction price sales and other taxes assessed by a governmental authority and collected by the Company from a customer.
−Removed: The Company also considers shipping and handling activities as part of its fulfillment costs and not as a separate performance obligation.
+Added: The Company elects to exclude sales and other governmental taxes that are collected by the Company from a customer, from the transaction price The Company also considers shipping and handling activities as part of its fulfillment costs and not as a separate performance obligation.
See Note 3, Revenues for additional information.
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These costs totaled $ 33 million, $ 35 million, and $ 25 million for the years ended 2022, 2021 and 2020, respectively.
−Removed: In general, the Company provides warranty coverage of one year on mobile computers, printers and batteries.
+Added: In general, the Company provides warranty coverage of one year on mobile computers and batteries.
+Added: Printers are warrantied from one to two years , depending on the model.
Advanced data capture products are warrantied from one to five years , depending on the product.
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The Company establishes a liability for loss contingencies when the loss is both probable and estimable.
−Removed: 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.
+Added: 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 cannot be determined, 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.
−Removed: The Company recognizes compensation costs over the vesting period which is typically three years , net of estimated forfeitures.
+Added: The Company recognizes compensation costs over the vesting period of awards, 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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The resulting translation gains or losses are recorded in Stockholders’ equity as a cumulative translation adjustment, which is a component of AOCI within the Consolidated Balance Sheets.
−Removed: We account for acquired businesses using the acquisition method of accounting.
−Removed: This method requires that the purchase price be allocated to the identifiable assets acquired and liabilities assumed, generally measured at their estimated fair values.
+Added: We account for acquired businesses using the acquisition method of accounting which 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.
−Removed: 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.
+Added: Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from revenues and the determination of discount rates.
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;
−Removed: 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.
+Added: however 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
−Removed: In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update 2021-08, Business Combinations (Topic 805):
−Removed: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) .
−Removed: 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.
−Removed: Prior to the adoption of ASU 2021-08, the Company measured contract assets and contract liabilities acquired in business acquisitions at fair value.
−Removed: 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.
−Removed: 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.
−Removed: 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”).
−Removed: 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”).
−Removed: The Company amended certain contracts in the fourth quarter of 2021 to replace LIBOR with alternative reference rates, primarily the Secured Overnight Financing Rate.
−Removed: 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.
−Removed: 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.
+Added: The Company did not adopt any material new accounting standards during the year ended December 31, 2022 .
Note 3 Revenues
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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.
−Removed: 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.
+Added: We enter into contracts that may include 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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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.
−Removed: 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.
+Added: Revenues for products are generally recognized upon shipment, whereas revenues for services and solution 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.
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Corporate eliminations (1)
−Removed: — ( 6 ) ( 6 )
Total $ 4,915 $ 866 $ 5,781
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EVM 2,527 559 3,086
+Added: Corporate eliminations (1)
+Added: — ( 7 ) ( 7 )
Total $ 3,813 $ 635 $ 4,448
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Performance Obligations
−Removed: The Company’s remaining performance obligations primarily relate to repair and support services, as well as solutions offerings.
+Added: The Company’s remaining performance obligations primarily relate to repair and support services, as well as solution offerings.
The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $ 1,105 million and $ 1,033 million, inclusive of deferred revenue, as of December 31, 2022 and 2021, respectively.
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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.
−Removed: The total contract asset balances were $ 10 million each as of December 31, 2021 and 2020.
−Removed: 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.
+Added: The total contract asset balances were $ 16 million and $ 10 million as of December 31, 2022 and 2021, respectively.
+Added: These contract assets result from timing differences between 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, 2022, 2021 and 2020.
Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance.
−Removed: The combined short-term and long-term deferred revenue balances were $ 695 million and $ 581 million as of December 31, 2021
−Removed: and 2020, respectively.
+Added: The combined short-term and long-term deferred revenue balances were $ 758 million and $ 695 million as of December 31, 2022 and 2021, respectively.
The Company recognized $ 399 million, $ 319 million and $ 256 million in revenue that was previously included in the beginning balance of deferred revenue during the years ended December 31, 2022, 2021 and 2020, respectively.
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Note 5 Business Acquisitions
+Added: On June 3, 2022, the Company acquired Matrox Electronic Systems Ltd.
+Added: (“Matrox”), a developer of advanced machine vision components and software.
+Added: Through its acquisition of Matrox, the Company significantly expanded its machine vision products and software offerings.
+Added: The acquisition was accounted for under the acquisition method of accounting for business combinations.
+Added: The Company’s final purchase consideration was $ 881 million comprised of cash paid, net of Matrox’s cash on-hand.
+Added: 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.
+Added: 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 customer relationships as well as the relief from royalty method for technology and patent intangible assets.
+Added: 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.
+Added: The primary fair value estimates still considered preliminary as of December 31, 2022 include intangible assets and income tax-related items.
+Added: The preliminary purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):
+Added: Identifiable intangible assets $ 297
+Added: Other assets acquired 24
+Added: Deferred tax liabilities ( 79 )
+Added: Other liabilities assumed ( 32 )
+Added: Net assets acquired $ 241
+Added: Goodwill on acquisition 640
+Added: Total purchase price $ 881
+Added: The $ 640 million of goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned global expansion and integration of Matrox into the Company’s machine vision offerings.
+Added: The preliminary purchase price allocation to identifiable intangible assets acquired was as follows:
+Added: Fair Value (in millions) Useful Life (in years)
+Added: Customer and other relationships $ 232 11
+Added: Technology and patents 63 7
+Added: Trade names 2 2
+Added: Total identifiable intangible assets $ 297
+Added: In connection with the acquisition of Matrox, the Company granted $ 13 million of cash-settled RSUs to certain employees in the second quarter, which are attributable to service to be rendered subsequent to the acquisition and will generally be expensed over a 3-year service period.
On October 7, 2021, the Company acquired Antuit Holdings Pte.
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The acquisition was accounted for under the acquisition method of accounting for business combinations.
−Removed: The Company’s cash purchase consideration was $ 145 million in cash paid, net of Antuit’s cash on-hand.
+Added: The Company’s 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.
−Removed: 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.
−Removed: The primary fair value estimates still considered preliminary as of December 31, 2021 include intangible assets and income tax-related items.
−Removed: The preliminary purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):
+Added: The purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):
Identifiable intangible assets $ 47
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The $ 101 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.
−Removed: The preliminary purchase price allocation to identifiable intangible assets acquired was as follows:
+Added: The purchase price allocation to identifiable intangible assets acquired was as follows:
Fair Value (in millions) Useful Life (in years)
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The total fair value of the awards is attributable to post-acquisition service and will generally be expensed over a three-year service period.
−Removed: 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.
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The acquisition was accounted for under the acquisition method of accounting for business combinations.
−Removed: 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.
+Added: The Company’s 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.
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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.
−Removed: 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.
−Removed: The primary fair value estimates still considered preliminary as of December 31, 2021 include intangible assets and income tax-related items.
−Removed: The preliminary purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):
+Added: The purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):
Identifiable intangible assets $ 114
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The $ 176 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.
−Removed: 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.
−Removed: 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.
−Removed: The preliminary purchase price allocation to identifiable intangible assets acquired was as follows:
+Added: The purchase price allocation to identifiable intangible assets acquired was as follows:
Fair Value (in millions) Useful Life (in years)
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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.
−Removed: 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
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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.
−Removed: 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.
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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.
−Removed: 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.
−Removed: The acquisition of Reflexis was otherwise funded using the Company’s cash on hand and borrowing under the Company’s existing Revolving Credit Facility.
−Removed: See additional details related to the Company’s debt arrangements in Note 12, Long-Term Debt.
−Removed: 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.
+Added: 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
+Added: stock options.
The total fair value of approximately $ 9 million is primarily attributable to post-acquisition service and expensed over the remaining service period.
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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.
−Removed: 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:
4 unchanged sentences
Total identifiable intangible assets $ 213
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: On May 31, 2019, the Company acquired Profitect, Inc.
−Removed: (“Profitect”), a provider of prescriptive analytics primarily for the retail industry.
−Removed: 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.
−Removed: The Profitect acquisition was accounted for under the acquisition method of accounting for business combinations.
−Removed: 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.
−Removed: This remeasurement resulted in a $ 4 million gain reflected within Other (expense) income, net on the Consolidated Statements of Operations in 2019.
−Removed: The purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date.
−Removed: 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.
−Removed: The purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):
−Removed: Identifiable intangible assets $ 35
−Removed: Other assets acquired 4
−Removed: Deferred tax liabilities ( 4 )
−Removed: Other liabilities assumed ( 10 )
−Removed: Net Assets Acquired $ 25
−Removed: Goodwill on acquisition 54
−Removed: Total purchase consideration $ 79
−Removed: 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.
−Removed: The purchase price allocation to identifiable intangible assets acquired was:
−Removed: Fair Value (in millions) Useful Life
−Removed: Technology and patents $ 33 8
−Removed: Customer and other relationships 2 1
−Removed: Total identifiable intangible assets $ 35
−Removed: On February 21, 2019, the Company acquired Temptime Corporation (“Temptime”), a developer and manufacturer of temperature-monitoring labels and devices.
−Removed: The Temptime acquisition was accounted for under the acquisition method of accounting for business combinations.
−Removed: The Company paid $ 180 million in cash, net of cash on-hand, to acquire Temptime.
−Removed: The purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date.
−Removed: 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.
−Removed: The purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):
−Removed: Inventory $ 14
−Removed: Property, plant and equipment 10
−Removed: Identifiable intangible assets 106
−Removed: Other assets acquired 11
−Removed: Deferred tax liabilities ( 23 )
−Removed: Other liabilities assumed ( 12 )
−Removed: Net Assets Acquired $ 106
−Removed: Goodwill on acquisition 74
−Removed: Total purchase consideration $ 180
−Removed: 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.
−Removed: The purchase price allocation to identifiable intangible assets acquired was:
−Removed: (in millions) Useful Life
−Removed: Customer and other relationships $ 79 8
−Removed: Technology and patents 25 8
−Removed: Trade names 2 3
−Removed: Total identifiable intangible assets $ 106
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.
+Added: The Company has not included unaudited pro forma results for the year preceding each acquisition, as doing so would not yield materially different results.
Acquisition and integration costs
−Removed: 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.
+Added: The Company incurred $ 21 million of acquisition-related costs in 2022, primarily related to third-party and advisory fees associated with the Matrox acquisition.
These costs are included within Acquisition and integration costs on the Consolidated Statements of Operations.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: The Company incurred $ 25 million of acquisition-related costs during 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.
+Added: These costs are included within Acquisition and integration costs on the Consolidated Statements of Operations.
+Added: The Company incurred $ 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, as well as other third-party transaction and advisory fees associated with our business acquisitions.
+Added: These costs are included within Acquisition and integration costs on the Consolidated Statements of Operations.
Note 6 Goodwill and Other Intangibles
2 unchanged sentences
Goodwill as of December 31, 2020 $ 228 $ 2,760 $ 2,988
−Removed: Reflexis acquisition — 364 364
−Removed: Temptime purchase price allocation adjustments 1 — 1
−Removed: Foreign exchange impact — 1 1
−Removed: Goodwill as of December 31, 2020 $ 228 $ 2,760 $ 2,988
Retail Solutions move to EVM segment, effective January 1, 2021 ( 59 ) 59 —
6 unchanged sentences
Goodwill as of December 31, 2021 $ 169 $ 3,096 $ 3,265
+Added: Matrox acquisition — 640 640
+Added: Fetch purchase price allocation adjustments — 2 2
+Added: Antuit purchase price allocation adjustments — ( 4 ) ( 4 )
+Added: Foreign exchange impact — ( 4 ) ( 4 )
+Added: Goodwill as of December 31, 2022 $ 169 $ 3,730 $ 3,899
See Note 5, Business Acquisitions for further details related to the Company’s acquisitions and purchase price allocation adjustments.
1 unchanged sentence
The Company completed its annual goodwill impairment testing during the fourth quarter of 2022 utilizing a quantitative approach.
−Removed: The estimated fair value of each reporting unit continues to significantly exceed its carrying value.
+Added: The estimated fair value of each reporting unit significantly exceeds its carrying value.
However, there is risk of future impairment to the extent that an individual reporting unit’s performance does not meet projections.
30 unchanged sentences
The Company paid $ 12 million, $ 34 million, and $ 32 million for the purchases of long-term investments during the years ended December 31, 2022, 2021, and 2020, respectively.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Net gains and losses related to the Company’s long-term investments are included within Other (expense) income, net on the Consolidated Statements of Operations.
+Added: There were no net gains in the year ended December 31, 2022.
+Added: Net gains were $ 2 million and $ 5 million during the years ended December 31, 2021 and 2020, respectively.
Note 9 Exit and Restructuring Costs
−Removed: 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.
−Removed: 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.
−Removed: Estimated remaining costs under the 2021 Productivity Plan, which is expected to be completed by 2022, are expected to be up to $ 3 million.
−Removed: 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.
−Removed: The 2019 Productivity Plan was completed in 2020.
−Removed: 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.
+Added: In the third quarter of 2022, the Company committed to certain organizational changes and leased site rationalization designed to generate structural cost efficiencies (collectively referred to as the “2022 Productivity Plan”).
+Added: The total cost under the 2022 Productivity Plan, which is expected to be completed in 2023, is estimated to be approximately $ 25 million.
+Added: Exit and restructuring charges associated with the 2022 Productivity Plan were $ 12 million for the year ended December 31, 2022.
+Added: The Company incurred Exit and restructuring costs, under previously announced programs of $ 2 million, $ 7 million and $ 11 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Note 10 Fair Value Measurements
Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with ASC Topic 820, Fair Value Measurements .
−Removed: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
−Removed: It establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:
+Added: Fair value is defined as the price that would be received to sell an asset or paid to transfer
+Added: a liability in an orderly transaction between market participants at the measurement date.
+Added: ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:
Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
8 unchanged sentences
Level 1 Level 2 Level 3 Total
−Removed: Foreign exchange contracts (1)
+Added: Forward interest rate swap contracts (2)
$ — $ 72 $ — $ 72
−Removed: Money market investments related to the deferred compensation plan 37 — — 37
+Added: Investments related to the deferred compensation plan 35 — — 35
Total Assets at fair value $ 35 $ 72 $ — $ 107
−Removed: Forward interest rate swap contracts (2)
+Added: Foreign exchange contracts (1)
$ 5 $ 14 $ — $ 19
3 unchanged sentences
Level 1 Level 2 Level 3 Total
−Removed: Money market investments related to the deferred compensation plan $ 30 $ — $ — $ 30
−Removed: Total Assets at fair value $ 30 $ — $ — $ 30
Foreign exchange contracts (1)
$ — $ 23 $ — $ 23
+Added: Investments related to the deferred compensation plan 37 — — 37
+Added: Total Assets at fair value $ 37 $ 23 $ — $ 60
Forward interest rate swap contracts (2)
+Added: $ — $ 16 $ — $ 16
Liabilities related to the deferred compensation plan 37 — — 37
2 unchanged sentences
• Fair value of regular forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points.
−Removed: • 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).
+Added: • Fair value of hedges against net assets denominated in foreign currencies 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).
15 unchanged sentences
Derivative instruments not designated as hedges:
+Added: Forward interest rate swaps Prepaid expenses and other current assets $ 25 $ —
+Added: Forward interest rate swaps Other long-term assets 47 —
Foreign exchange contracts Accrued liabilities ( 5 ) —
2 unchanged sentences
Total derivative instruments not designated as hedges $ 67 $ ( 16 )
−Removed: Total net derivative asset (liability) $ 7 $ ( 83 )
+Added: Total net derivative asset $ 53 $ 7
The following table presents the net gains (losses) from changes in fair values of derivatives that are not designated as hedges (in millions):
3 unchanged sentences
Derivative instruments not designated as hedges:
−Removed: Foreign exchange contracts Foreign exchange loss $ 7 $ ( 12 ) $ ( 3 )
−Removed: Forward interest rate swaps Interest expense, net 13 ( 46 ) ( 19 )
+Added: Foreign exchange contracts Foreign exchange gain (loss) $ 2 $ 7 $ ( 12 )
+Added: Forward interest rate swaps Interest income (expense), net 83 13 ( 46 )
Total gain (loss) recognized in income $ 85 $ 20 $ ( 58 )
9 unchanged sentences
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.
−Removed: 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.
+Added: If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would have been increased by $ 4 million as of December 31, 2022 and would have been increased by $ 1 million as of December 31, 2021.
Foreign Currency Exchange Risk Management
1 unchanged sentence
Exposure to market risk for changes in foreign currency exchange rates arises primarily from Euro-denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities.
−Removed: The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.
+Added: The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.
The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution.
2 unchanged sentences
The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations.
−Removed: 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.
+Added: Realized amounts reclassified to Net sales were $ 87 million of gains for the year ended December 31, 2022, and $ 2 million and $ 6 million of losses for the years ended December 31, 2021 and 2020, respectively.
As of December 31, 2022 and 2021, the notional amounts of the Company’s foreign exchange cash flow hedges were € 549 million and € 675 million, respectively.
9 unchanged sentences
Euro/Czech Koruna € 15 € 16
−Removed: Japanese Yen/U.S.
−Removed: Dollar ¥ — ¥ 354
Singapore Dollar/U.S.
9 unchanged sentences
See Note 12, Long-Term Debt for further details related to these borrowings.
−Removed: 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.
−Removed: 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.
−Removed: Under the terms of the agreements, $ 800 million in variable-rate debt will be swapped for a fixed interest rate.
−Removed: 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.
−Removed: 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.
+Added: The Company manages its exposure to changes in interest rates by utilizing long-term forward 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.
+Added: The Company had one active long-term forward interest rate swap agreement with a notional amount of $ 800 million to lock into a fixed LIBOR interest rate base, which expired in December 2022.
+Added: In addition, the Company previously held fixed LIBOR interest rate swaps with an $ 800 million total notional amount that were subject to net cash settlements effective between December 2022 and August 2024.
+Added: In the first quarter of 2022, the Company terminated those interest rate swaps and entered into new interest rate swap agreements that contain a total notional amount of $ 800 million to lock into a fixed SOFR interest rate base, which is subject to monthly net cash settlements effective in December 2022 and ending in October 2027.
Note 12 Long-Term Debt
1 unchanged sentence
Term Loan A $ 1,728 $ 888
−Removed: 2020 Term Loan — 100
+Added: Revolving Credit Facility 50 —
Receivables Financing Facilities 254 108
8 unchanged sentences
The estimated fair value of the Company’s debt approximated $ 2.0 billion and $ 1.0 billion as of December 31, 2022 and 2021, respectively.
−Removed: These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy,
−Removed: 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.
+Added: 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.
−Removed: 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.
+Added: In May 2022, the Company refinanced its long-term credit facilities by entering into its third amendment to the Amended and Restated Credit Agreement (“Amendment No.
+Added: Amendment No.
+Added: 3 increased the Company’s borrowing under Term Loan A from $ 875 million to $ 1.75 billion and increased the Company’s borrowing capacity under the Revolving Credit Facility from $ 1 billion to $ 1.5 billion.
+Added: Amendment No.
+Added: 3 also extended the maturities of Term Loan A and the Revolving Credit Facility to May 25, 2027 and replaced LIBOR with SOFR as the benchmark reference rate.
+Added: This refinancing resulted in one-time charges of $ 2 million, which included certain third-party fees and the accelerated amortization of previously deferred issuance costs.
+Added: These items are included in Interest income (expense), net on the Consolidated Statements of Operations.
+Added: Additionally, $ 6 million of new issuance costs and fees were deferred and will be amortized over the remaining term of Term Loan A and the Revolving Credit Facility.
+Added: The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in March 2023 and the majority due upon maturity in 2027.
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.
1 unchanged sentence
Interest payments are made monthly and are subject to variable rates plus an applicable margin.
−Removed: 2020 Term Loan
−Removed: 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.
−Removed: 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.
+Added: Revolving Credit Facility
+Added: The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit.
+Added: As of December 31, 2022, the Company had letters of credit totaling $ 7 million, which reduced funds available for borrowings under the Revolving Credit Facility from $ 1,500 million to $ 1,493 million.
+Added: As of December 31, 2022, the Revolving Credit Facility had an average interest rate of 5.71 %.
+Added: Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin.
+Added: The Revolving Credit Facility matures on May 25, 2027.
Receivables Financing Facilities
10 unchanged sentences
Interest is paid on these borrowings on a monthly basis.
−Removed: Revolving Credit Facility
−Removed: The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit.
−Removed: 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.
−Removed: No borrowings were outstanding under the Revolving Credit Facility as of December 31, 2021 or December 31, 2020.
−Removed: Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin.
−Removed: The Revolving Credit Facility matures on August 9, 2024.
−Removed: In 2019, the Company entered into its second amendment to the Amended and Restated Credit Agreement (“Amendment No.
−Removed: 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.
−Removed: Additionally, a payment of $ 445 million was made to fully pay off a previously outstanding term loan.
−Removed: 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.
−Removed: These items are included in Interest Expense, net on the Consolidated Statements of Operations.
−Removed: 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.
−Removed: 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.
+Added: As of December 31, 2022, the Company was in compliance with all debt covenants.
Note 13 Leases
15 unchanged sentences
Cash payments for leases are included within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.
−Removed: ROU assets obtained in exchange for lease obligations primarily include new lease arrangements entered into by the Company.
−Removed: ROU assets obtained in exchange for lease obligations also include contract modifications that extend lease terms and/or provide us additional rights, changes in assessments that render it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period, as well as lease arrangements obtained through acquisitions.
+Added: ROU assets obtained in exchange for lease obligations include new lease arrangements entered into by the Company as well as contract modifications that extend lease terms and/or provide us additional rights, changes in assessments that render it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period, as well as lease arrangements obtained through acquisitions.
Reductions of the Company’s ROU assets and lease liabilities generally relate to modifications to lease agreements that result in a reduction to future minimum lease payments, as well as changes in assessments that render it no longer reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period.
−Removed: 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.
+Added: The Company’s reduction of ROU assets and lease liabilities during 2022, 2021 and 2020 were not significant.
The weighted average remaining term of the Company’s leases was approximately 6 years each as of December 31, 2022, 2021 and 2020.
−Removed: 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.
+Added: The weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 5 % each as of December 31, 2022, 2021, and 2020.
Future minimum lease payments under non-cancellable leases as of December 31, 2022 were as follows (in millions):
8 unchanged sentences
The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.
−Removed: 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.
+Added: As of December 31, 2022, the Company had future fixed payments of approximately $ 36 million related to a new office facility lease agreement that had not yet commenced.
This new lease agreement is expected to commence in 2023 and has a 10 -year term.
3 unchanged sentences
The components of Accrued liabilities are as follows (in millions):
−Removed: Accrued payroll and benefits $ 96 $ 87
−Removed: Accrued incentive compensation 155 65
−Removed: Accrued warranty 26 24
−Removed: Customer reserves 51 56
−Removed: Current portion of lease liabilities 33 30
+Added: Settlement $ 180 $ —
+Added: Payroll and benefits 90 96
+Added: Incentive compensation 100 155
+Added: Warranty 26 26
+Added: Customer rebates 55 51
Unremitted cash collections due to banks on factored accounts receivable 130 141
−Removed: Forward contract liabilities — 37
+Added: Foreign exchange contracts 19 —
Short-term interest rate swaps — 15
−Removed: Accrued freight and duty 45 21
−Removed: Other accrued expenses 77 80
+Added: Freight and duty 19 45
Accrued liabilities $ 744 $ 639
6 unchanged sentences
Balance at the end of the year $ 26 $ 26 $ 24
−Removed: 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.
−Removed: Long-term commitments under these contracts are as follows (in millions):
+Added: The Company has a limited number of multi-year purchase commitments, primarily related to semiconductors and cloud-services, which contain minimum purchase requirements and are non-cancellable.
+Added: Commitments under these contracts are as follows (in millions):
Contingencies
2 unchanged sentences
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.
+Added: The Company records a liability for contingencies when a loss is deemed to be probable and the loss can be reasonably estimated.
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.
1 unchanged sentence
Recoveries are recognized when the Company has completed all regulatory filing requirements and determined that receipt of amounts is virtually certain.
−Removed: 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.
+Added: Recoveries recorded during the current year were insignificant.
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.
+Added: 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.
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 it has recovered substantially all of the import duties that it expects to receive on previously paid amounts.
−Removed: 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.
+Added: During the second quarter of 2022, the Company entered into a License and Settlement Agreement (“Settlement”) to resolve certain patent-related litigation.
+Added: Under the Settlement, the Company and the counterparty each agreed to a mutual general release from all past claims asserted by the parties;
+Added: entered into a covenant not to sue for patent infringement;
+Added: agreed to a payment by the Company to the counterparty for past damages of $ 360 million and entered into a royalty-free cross-license with respect to each party’s existing patent portfolio for the lives of the licensed patents.
+Added: Based on the terms of the Settlement and a relative fair value analysis of each of the settlement provisions, the Company concluded that no significant portion of the payment resulted in a future benefit, and as such, the full $ 360 million was recorded as a charge in the second quarter.
+Added: That charge, along with $ 12 million of external legal fees, is reflected within Settlement and related costs on the Consolidated Statement of Operations.
+Added: The payment terms under the Settlement consist of 8 quarterly payments of $ 45 million that began in the second quarter.
+Added: The portion payable in the next 12 months is included within Accrued liabilities, with the remaining amounts included within Other long-term liabilities on the Consolidated Balance Sheets.
+Added: See Item 3, Legal Proceedings for additional information.
Note 15 Share-Based Compensation
−Removed: In May 2018, the Company’s stockholders approved the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”).
−Removed: 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.
+Added: The Company issues share-based compensation awards under the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”), approved by shareholders in 2018 which superseded and replaced all prior share-based incentive plans.
+Added: Outstanding awards issued prior to the 2018 Plan are governed by the provisions of 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.
−Removed: No awards remain available for future grants under the 2015 Plan or previous plans.
+Added: No awards remain available for future grants under previous plans.
The Company uses treasury shares as its source for issuing shares under the share-based compensation programs.
22 unchanged sentences
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.
−Removed: These awards are considered participating securities.
−Removed: The outstanding RSAs and PSAs are included as part of the Company’s Class A Common Stock outstanding.
+Added: These awards are considered participating securities, and as such, are included as part of the Company’s Class A Common Stock outstanding.
The RSAs and PSAs vest at each vesting date, subject to restrictions such as continuous employment, except in certain cases as set forth in each stock agreement.
1 unchanged sentence
Compensation cost for the Company’s RSAs and PSAs is expensed over each participant’s required service period.
−Removed: 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.
+Added: 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 awards 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 .
−Removed: The Company also issues Class A Common Stock to non-employee directors.
+Added: The Company also issues RSAs 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.
1 unchanged sentence
During fiscal 2022, there were 5,686 shares granted to non-employee directors compared to 2,877 and 6,314 during fiscal 2021 and 2020, respectively.
−Removed: The shares vest immediately on the grant date.
+Added: The shares vest immediately upon grant.
A summary of the Company’s restricted and performance stock-settled awards for the years ended December 31, 2022, 2021 and 2020 is as follows:
8 unchanged sentences
Year Ended December 31, 2021
−Removed: Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value
+Added: RSUs PSUs RSAs PSAs
+Added: 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
12 unchanged sentences
SARs were previously granted primarily as part of the Company’s annual share-based compensation incentive program.
−Removed: 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.
−Removed: 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.
+Added: Beginning in 2021, the Company no longer included SARs in its annual share based compensation award issuances and did no t issue any SARs during the years ended December 31, 2022 and 2021.
+Added: The total fair value of SARs granted during the year ended December 31, 2020 was $ 6 million, which was estimated on the respective dates of grant using a binomial model.
A summary of the Company’s SARs is as follows:
13 unchanged sentences
The intrinsic value of SARs exercised during fiscal 2022, 2021 and 2020 was $ 8 million, $ 69 million and $ 60 million, respectively.
−Removed: The total fair value of SARs vested during fiscal 2021, 2020 and 2019 was $ 5 million, $ 8 million and $ 9 million, respectively.
+Added: The total fair value of SARs that vested during fiscal 2022, 2021 and 2020 was $ 3 million, $ 5 million and $ 8 million, respectively.
Reflexis Replacement Options
−Removed: In connection with the Company’s September 2020 acquisition of Reflexis, the Company assumed the 2016 Stock Incentive Plan of Reflexis Systems, Inc.
+Added: In connection with the Company’s acquisition of Reflexis in 2020, 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.
−Removed: 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.
−Removed: A summary of the Reflexis Replacement Options outstanding is as follows:
−Removed: Reflexis Replacement Options Options Weighted-Average Exercise Price Options Weighted-Average Exercise Price
−Removed: Outstanding at beginning of year 34,424 $ 58.09 — $ —
−Removed: Granted — — 38,228 57.82
−Removed: Exercised ( 9,318 ) 59.68 ( 3,408 ) 55.79
−Removed: Forfeited ( 1,529 ) 63.01 ( 396 ) 52.14
−Removed: Outstanding at end of year 23,577 $ 57.06 34,424 $ 58.09
−Removed: Exercisable at end of year 18,232 $ 54.50 6,716 $ 56.77
−Removed: The following table summarizes information related to the Reflexis Replacement Options outstanding as of December 31, 2021:
−Removed: Outstanding Exercisable
−Removed: Aggregate intrinsic value (in millions) $ 13 $ 10
−Removed: Weighted-average remaining contractual life (in years) 6.3 5.9
−Removed: The intrinsic value of Reflexis Replacement Options exercised during fiscal 2021 and 2020 was $ 4 million and $ 1 million, respectively.
−Removed: The total fair value of Reflexis Replacement Options vested during fiscal 2021 and 2020 was $ 5 million and $ 2 million, respectively.
+Added: As of December 31, 2022, there were 17,457 outstanding Reflexis Replacement Options, of which 16,148 were exercisable.
+Added: The outstanding awards have a weighted average exercise price and remaining contractual life of $ 58.20 and 5.4 years, respectively.
+Added: The awards that are exercisable have a weighted average exercise price and remaining contractual life of $ 56.69 and 5.3 years, respectively.
+Added: The intrinsic value of Reflexis Replacement Options exercised during fiscal 2022, 2021 and 2020 was $ 2 million, $ 4 million and $ 1 million, respectively.
+Added: The total fair value of Reflexis Replacement Options that vested during fiscal 2022, 2021 and 2020 was $ 1 million, $ 5 million and $ 2 million, respectively.
Cash-settled awards
−Removed: 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.
+Added: The Company also issues 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 .
10 unchanged sentences
Note 16 Income Taxes
−Removed: The geographical sources of income before income taxes were as follows (in millions):
+Added: The geographical sources of income (loss) before income taxes were as follows (in millions):
Year Ended December 31,
2022 2021 2020
−Removed: United States $ 328 $ 33 $ 83
−Removed: Outside United States 640 527 515
+Added: $ ( 69 ) $ 328 $ 33
Total $ 544 $ 968 $ 560
28 unchanged sentences
Return to provision and other true ups 1.5 ( 0.9 ) ( 2.5 )
+Added: Settlements with tax authorities 2.0 0.0 0.0
Permanent differences and other 1.2 2.2 1.8
Provision for income taxes 14.9 % 13.5 % 10.0 %
+Added: For the year ended December 31, 2022, 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 foreign
+Added: earnings subject to U.S.
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.
−Removed: 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.
−Removed: These benefits were partially offset by the impacts of foreign earnings and deemed royalties taxed in the U.S.
−Removed: The Company evaluated the provisions of the American Rescue Plan Act, signed into law on March 11, 2021;
+Added: The Company evaluated the provisions of the Inflation Reduction Act of 2022, signed into law on August 16, 2022;
+Added: 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.
−Removed: The provisions of these laws did not have a significant impact to our effective tax rate in either the current or prior year.
+Added: The provisions of these laws did not have a significant impact to our effective tax rate in either the current or prior years.
Management continues to monitor guidance regarding these laws and developments related to other coronavirus tax relief throughout the world for potential impacts.
+Added: In December of 2021, the Organization for Economic Co-operation and Development (“OECD”) released Pillar Two Model Rules defining the global minimum tax rules, which contemplate a minimum tax rate of 15%.
+Added: The OECD continues to release additional guidance on these rules and the framework calls for law enactment by OECD members to take effect in 2024.
+Added: The Company will continue to monitor developments but believes the impact to future effective tax rates and corporate tax liability will be minimal.
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.
2 unchanged sentences
and Singapore.
−Removed: During the second quarter of 2021, the U.K.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: 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 2023.
10 unchanged sentences
Share-based compensation expense 14 12
−Removed: Unrealized gains and losses on securities and investments — 19
+Added: Legal accrual 55 2
+Added: Lease liabilities 23 12
Valuation allowance ( 420 ) ( 422 )
4 unchanged sentences
Undistributed earnings 2 4
+Added: Right of use lease assets 20 11
Total deferred tax liabilities $ 168 $ 108
Net deferred tax assets $ 332 $ 186
+Added: For tax years beginning in 2022, the Tax Cuts and Jobs Act of 2017 imposed a requirement that all R&D expenses be capitalized and amortized for U.S.
+Added: tax purposes.
+Added: The effect of this new provision is an increase of approximately $ 130 million to deferred tax assets with a corresponding increase to the current tax liability.
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.
4 unchanged sentences
Approximately $ 183 million of NOLs will expire beginning in 2023 through 2040, and $ 25 million of credits will expire beginning in 2023 through 2037, with the remaining amounts of NOLs and credit carryforwards having no expiration dates.
−Removed: 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.
+Added: The Company is subject to the GILTI, BEAT and FDII provisions, for which we recorded an income tax benefit of $ 19 million and $ 20 million for the years ended December 31, 2022 and 2021, respectively, and an income tax expense of $ 8 million for the year ended December 31, 2020.
These impacts are included in the calculation of the Company’s effective tax rate.
14 unchanged sentences
Balance at beginning of year $ 7 $ 8
+Added: Additions for tax positions related to prior years 3 —
Settlements for tax positions ( 2 ) —
1 unchanged sentence
Balance at end of year $ 7 $ 7
−Removed: As of December 31, 2021 and December 31, 2020, there were $ 7 million and $ 8 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.
−Removed: The Company is currently undergoing U.S.
−Removed: federal income tax audits for tax years 2017 and 2018.
+Added: As of December 31, 2022 and December 31, 2021, there were $ 7 million of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.
Additionally, fiscal years 2009 through 2022 remain open to examination by multiple foreign and U.S.
2 unchanged sentences
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.
−Removed: The Company recognized no net tax expense associated with interest and penalties related to income tax matters during the year ended December 31, 2021.
−Removed: 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.
−Removed: The net benefit or expense associated with interest and penalties was reflected within Income tax expense on the Consolidated Statements of Operations.
−Removed: 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.
+Added: The Company recognized less than $ 1 million of net tax benefit associated with interest and penalties related to income tax matters during the year ended December 31, 2022.
+Added: The Company recognized no net tax benefit and a tax benefit of $ 2 million for interest and penalties during the years ended December 31, 2021 and 2020, respectively.
+Added: The expense or benefit associated with interest and penalties was reflected within Income tax expense on the Consolidated Statements of Operations.
+Added: The Company has included $ 5 million and $ 6 million of estimated interest and penalty obligations within Other long-term liabilities on the Consolidated Balance Sheets each as of December 31, 2022 and 2021.
Note 17 Earnings Per Share
Basic net earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period.
−Removed: Diluted earnings per share is computed by dividing net income by the weighted average number of shares assuming dilution.
−Removed: 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.
+Added: Diluted earnings per share is computed by dividing net income by the weighted average number of diluted common shares outstanding.
+Added: Diluted 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):
15 unchanged sentences
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.
−Removed: • 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.
−Removed: 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.
4 unchanged sentences
The changes in each component of AOCI during the three years ended December 31, 2022, 2021, and 2020 were as follows (in millions):
−Removed: Unrealized gain (loss) on sales hedging Unrealized gain (loss) on forward interest rate swaps Foreign currency translation adjustments Total
+Added: Unrealized gain (loss) on sales hedging Foreign currency translation adjustments Total
Balance at December 31, 2019 $ 2 $ ( 46 ) $ ( 44 )
−Removed: Other comprehensive income before reclassifications 30 — 1 31
+Added: Other comprehensive (loss) income before reclassifications ( 43 ) 5 ( 38 )
Amounts reclassified from AOCI (1)
−Removed: ( 42 ) 2 — ( 40 )
Tax effect 7 — 7
−Removed: Other comprehensive income (loss), net of tax ( 10 ) — 1 ( 9 )
+Added: Other comprehensive (loss) income, net of tax ( 30 ) 5 ( 25 )
Balance at December 31, 2020 ( 28 ) ( 41 ) ( 69 )
−Removed: Other comprehensive (loss) income before reclassifications ( 43 ) — 5 ( 38 )
+Added: Other comprehensive income (loss) before reclassifications 55 ( 6 ) 49
Amounts reclassified from AOCI (1)
4 unchanged sentences
Amounts reclassified from AOCI (1)
+Added: ( 87 ) — ( 87 )
Tax effect 8 — 8
−Removed: Other comprehensive income (loss), net of tax 46 — ( 6 ) 40
+Added: Other comprehensive (loss) income, net of tax ( 29 ) ( 8 ) ( 37 )
Balance at December 31, 2022 $ ( 11 ) $ ( 55 ) $ ( 66 )
6 unchanged sentences
The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables.
−Removed: 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.
−Removed: During the second quarter of 2021, one of the Company’s Receivables Factoring arrangements that was no longer actively utilized expired.
−Removed: The Company currently has two remaining active Receivables Factoring arrangements.
+Added: Sale proceeds that are representative of the fair value of factored receivables, less a factoring fee, are reflected in Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Cash flows from financing activities on the Consolidated Statements of Cash Flows.
+Added: The Company currently has two 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.
−Removed: 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.
+Added: With respect to the second arrangement, the Company may be 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 each as of December 31, 2022 and 2021, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.
During the years ended December 31, 2022, 2021 and 2020, the Company received cash proceeds of $ 1,496 million, $ 1,504 million and $ 1,291 million, respectively, from the sales of accounts receivables under its factoring arrangements.
1 unchanged sentence
As servicer of sold receivables, the Company had $ 130 million and $ 141 million of obligations that were not yet remitted to banks as of December 31, 2022 and 2021, respectively.
−Removed: These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash used in financing activities on the Consolidated Statements of Cash Flows.
+Added: These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash provided by (used in) financing activities on the Consolidated Statements of Cash Flows.
Fees incurred in connection with these arrangements were not significant.
5 unchanged sentences
The CODM reviews adjusted operating income to assess segment profitability.
−Removed: 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.
+Added: To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs (such as the Settlement in the current year).
Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.
−Removed: 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.
−Removed: Prior period results have been revised to conform to the current segment presentation.
−Removed: This change did not have an impact on the Consolidated Financial Statements.
+Added: Effective January 1, 2022, the location solutions offering, which provides a range of RTLS and services that generate on-demand information about the physical location and status of assets, equipment, and people, moved from our AIT segment into our EVM segment contemporaneous with a change in our organizational structure and management of the business.
+Added: We have reported our results reflecting this change, including historical periods, on a comparable basis.
+Added: This change did not have an impact to the Consolidated Financial Statements.
Financial information by segment is presented as follows (in millions):
13 unchanged sentences
Total Operating income $ 529 $ 979 $ 651
−Removed: (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.
+Added: (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, as well as certain other non-recurring costs (such as the Settlement in the current year).
(2) AIT and EVM segment operating income includes depreciation and share-based compensation expense.
−Removed: The amounts of depreciation and share-based compensation expense attributable to AIT and EVM are proportionate to each segment’s Net sales.
+Added: The amounts of depreciation and share-based compensation expense are proportionate to each segment’s Net sales.
Sales to significant customers
8 unchanged sentences
These customers accounted for 21.7 %, 19.5 %, and 17.8 %, respectively, of accounts receivable as of December 31, 2022, and 22.7 %, 13.4 % and 14.8 %, respectively, of accounts receivable as of December 31, 2021.
−Removed: 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.
+Added: No other customer accounted for more than 10% of total Net sales during the years ended December 31, 2022, 2021 or 2020, or more than 10% of outstanding accounts receivable as of December 31, 2022 or 2021.
Geographic data
1 unchanged sentence
Net sales amounts are attributed to geographic area based on customer location.
−Removed: We manage our business based on regions rather than by individual countries.
Net sales by region were as follows (in millions):
6 unchanged sentences
Total Net sales $ 5,781 $ 5,627 $ 4,448
−Removed: The United States and Germany were the only countries that accounted for more than 10% of the Company’s net sales in 2021, 2020, and 2019.
+Added: and Germany were the only countries that accounted for more than 10% of the Company’s net sales in 2022, 2021, and 2020.
Net sales during these years were as follows (in millions):
1 unchanged sentence
2022 2021 2020
−Removed: United States $ 2,784 $ 2,291 $ 2,243
+Added: $ 2,840 $ 2,784 $ 2,291
Germany 949 901 595
10 unchanged sentences
Long-lived assets are defined by the Company as property, plant and equipment and ROU assets.
−Removed: Primarily all of the Company’s long-lived assets in the North America region are located in the United States.
+Added: Primarily all of the Company’s long-lived assets in the North America region are located in the U.S.
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.