What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-16 · 210 added, 280 removed, 968 unchanged (34% of the section changed)

27 unchanged sentences

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

Critical Audit Matters

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

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates.

Accounting for Income Taxes

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

Description of the Matter As discussed in Note 16 of the financial statements, the Company earns a significant amount of its operating income across multiple jurisdictions.

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

Auditing the application of taxation legislation to the Company’s affairs is inherently complex, highly specialized and requires judgment.

These factors impact the Company’s estimation of tax exposures, valuation allowances and income tax provisions.

How We Addressed the Matter in Our

Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s identification of and accounting for the tax impact of changes in the business or significant changes in tax laws.

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

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

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.

Acquisition of Matrox Electronic Systems Ltd.

– Valuation of Intangible Assets

Description of the Matter During 2022, the Company completed its acquisition of Matrox Electronic Systems Ltd.

(“Matrox”) for net consideration of $881 million, as disclosed in Note 5 to the consolidated financial statements.

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.

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

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

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

Auditing the application of taxation legislation to the Company’s business operations and structure is inherently complex and requires judgment.

These factors impact the Company’s evaluation and estimation of uncertain tax positions.

How We Addressed the Matter in Our

Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of acquired intangible assets.

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

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

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

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

This included controls over the Company’s tax technical assessment of cross-jurisdictional transactions.

Our audit procedures included, among others, involving our tax professionals in the significant operating jurisdictions to test the Company’s tax provision and the application of significant tax laws to cross-jurisdictional transactions.

We evaluated the Company’s transfer pricing used in intercompany transactions to assess whether there was alignment with the Company’s operations.

We assessed the completeness of significant tax matters identified and the adequacy of the accounting for any potential uncertainty.

/s/ Ernst & Young LLP

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Foreign exchange loss ( 2 ) ( 3 ) ( 5 )

Interest income (expense), net 23 ( 5 ) ( 76 )

Other (expense) income, net ( 5 ) ( 1 ) 3

Total Other income (expense), net 15 ( 11 ) ( 91 )

Interest (expense) income, net ( 133 ) 23 ( 5 )

Other expense, net ( 12 ) ( 5 ) ( 1 )

Total Other (expense) income, net ( 147 ) 15 ( 11 )

Income before income tax 334 544 968

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Net income $ 296 $ 463 $ 837

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Changes in unrealized gains and losses on anticipated sales hedging transactions 6 ( 29 ) 46

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Depreciation and amortization 176 204 187

Amortization of debt issuance costs, extinguishment costs and discounts 4 2 3

Share-based compensation 55 88 76

Deferred income taxes ( 36 ) ( 210 ) ( 69 )

Unrealized (gain) loss on forward interest rate swaps ( 89 ) ( 30 ) 33

Unrealized loss (gain) on forward interest rate swaps 17 ( 89 ) ( 30 )

Other, net 3 5 1

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Income taxes ( 168 ) 108 1

Legal settlement liability 225 — —

Settlement liability ( 180 ) 225 —

Other operating activities 9 ( 13 ) ( 9 )

Net cash provided by operating activities 488 1,069 962

Net cash (used in) provided by operating activities ( 4 ) 488 1,069

Cash flows from investing activities:

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Purchases of property, plant and equipment ( 87 ) ( 75 ) ( 59 )

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

Purchases of short-term investments ( 4 ) — ( 1 )

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Effect of exchange rate changes on cash and cash equivalents, including restricted cash — — —

Net (decrease) increase in cash and cash equivalents, including restricted cash ( 227 ) 152 162

Net increase (decrease) in cash and cash equivalents, including restricted cash 21 ( 227 ) 152

Cash and cash equivalents, including restricted cash, at beginning of period 117 344 192

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

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.

We have reported our results reflecting this change, including historical periods, on a comparable basis.

This change does not have an impact to the Consolidated Financial Statements.

In the second quarter of 2023, our advanced location technology solutions business, which is primarily comprised of radio frequency identification devices (“RFID”) and real-time location solution offerings (“RTLS”), moved from our Enterprise Visibility & Mobility (“EVM”) segment into our Asset Intelligence & Tracking (“AIT”) segment contemporaneous with a change in our organizational structure and management of the business.

We have reported our segment results reflecting this change, including historical periods, on a comparable basis.

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

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

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

During the 2022 fiscal year, the Company’s quarter end dates were April 2, July 2, October 1, and December 31.

During the 2023 fiscal year, the Company’s quarter end dates were April 1, July 1, September 30, and December 31.

Use of Estimates

These consolidated financial statements were prepared using estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Examples of accounting estimates include:

cash flow projections and other valuation assumptions included in business acquisition purchase price allocations as well as annual goodwill impairment testing;

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

inventory valuation;

useful lives of our tangible and intangible assets;

and the recognition and measurement of income tax assets and liabilities.

The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances.

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Cash consists primarily of deposits with banks.

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

Cash equivalents include highly liquid short-term deposits with banks and other investments with original maturities of less than or equal to three months.

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

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of amounts due to us from our customers in the normal course of business.

Accounts Receivable

Accounts receivable consist primarily of amounts due to us from our customers, net of variable consideration and an allowance for doubtful accounts, in the normal course of business.

Collateral on trade accounts receivable is generally not required.

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Purchased inventory cost also includes internal purchasing overhead costs.

Raw material inventories largely consist of supplies used in repair operations.

Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values.

Inventory provisions are based on forecasted demand, experience with specific customers, the age and nature of the inventory, and the ability to redistribute inventory to other programs or to rework into other consumable inventory.

Raw material inventories primarily consist of product components as well as supplies used in repair operations.

Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values as well as to record liabilities on non-cancellable purchase commitments.

These provisions are based on forecasted demand, experience with specific customers or suppliers, the age and nature of the inventory or committed purchase, and the ability to redistribute inventory to other programs or rework it into other consumable inventory as well as renegotiate contractual terms with a supplier.

Property, Plant and Equipment

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Contractual options to extend or terminate lease agreements are reflected in the lease term when they are reasonably certain to be exercised.

The initial measurements of new ROU assets and lease liabilities are based on the present value of future lease payments over the lease term as of the commencement date.

The initial measurement of ROU assets and lease liabilities is based on the present value of future lease payments over the lease term as of the commencement date.

In determining future lease payments, the Company has elected not to separate lease and non-lease components.

As the Company’s lease arrangements do not provide an implicit interest rate, we apply the Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments.

Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, transaction currency of the lease, and the Company’s credit risk relative to risk-free market rates.

Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, the transaction currency of the lease, and the Company’s credit risk relative to risk-free market rates.

The Company’s ROU assets also include any initial direct costs incurred and exclude lease incentives.

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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.

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.

Goodwill is tested annually for impairment, or more frequently if indicators of impairment exist.

When evaluating goodwill for impairment as part of our annual assessment, we include consideration of current events and circumstances.

Our annual impairment testing also includes a comparison of the estimated fair value of each reporting unit to its carrying value.

If the carrying value of a reporting unit exceeds its estimated fair value, goodwill would be considered to be impaired and reduced to its implied fair value.

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

We estimate the fair value of reporting units by using a weighted combination of the income and market approaches.

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.

We most recently performed our annual goodwill impairment testing in the fourth quarter of 2022 using a quantitative approach which did not result in any impairments.

We most recently performed our annual goodwill impairment testing in the fourth quarter of 2023 which did not result in any impairment.

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

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

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

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.

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

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

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

Advertising costs are expensed as incurred.

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

In addition, for some matters for which a loss is probable or reasonably possible, 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.

See Note 14, Accrued Liabilities, Commitments and Contingencies for additional information.

Fair Value of Financial Instruments

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The Company did not adopt any material new accounting standards during the year ended December 31, 2023.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis.

Additionally, it requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”).

This ASU will be effective for the Company’s fiscal December 31, 2024 year-end and interim periods beginning in fiscal 2025, with early adoption permitted.

We are assessing the impact of this guidance on our disclosures;

it will not have an impact on our results of operations, cash flows, or financial condition.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires an annual tabular effective tax rate reconciliation disclosure including information for specified categories and jurisdiction levels, as well as, disclosure of income taxes paid, net of refunds received, disaggregated by federal, state/local, and significant foreign jurisdiction.

This ASU will be effective for the Company’s fiscal December 31, 2025 year-end, with early adoption permitted.

We are assessing the impact of this guidance on our disclosures;

it will not have an impact on our results of operations, cash flows, or financial condition.

Note 3 Revenues

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

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

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

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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.

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 tangible 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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EVM 2,128 805 2,933

Corporate eliminations (1)

Total $ 3,665 $ 919 $ 4,584

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EVM 3,187 757 3,944

Corporate eliminations (1)

— ( 6 ) ( 6 )

Total $ 4,915 $ 866 $ 5,781

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EVM 3,220 679 3,899

Corporate eliminations (1)

Corporate (1)

— ( 6 ) ( 6 )

Total $ 4,845 $ 782 $ 5,627

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

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

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

Performance Obligations

The Company’s remaining performance obligations primarily relate to repair and support services, as well as solution offerings.

The Company’s remaining performance obligations relate to repair and support services, as well as software solutions.

The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $ 1,127 million and $ 1,105 million, inclusive of deferred revenue, as of December 31, 2023 and 2022, 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.

The total contract asset balances were $ 16 million and $ 10 million as of December 31, 2022 and 2021, respectively.

The total contract asset balances were $ 16 million as of December 31, 2023 and 2022.

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.

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

The total ending balance of deferred commission costs, which are recorded in Prepaid expenses and other current assets or Other long-term assets on the Consolidated Balance Sheets, depending on the timing of expected amortization, was $ 35 million and $ 28 million as of December 31, 2022 and 2021, respectively.

Amortization of deferred commission costs, which is recorded in Selling and Marketing expense on the Consolidated Statements of Operations, was $ 21 million, $ 18 million and $ 14 million during the years ended December 31, 2022, 2021 and 2020, respectively.

The total ending balance of deferred costs to obtain a contract, which are recorded in Prepaid expenses and other current assets or Other long-term assets on the Consolidated Balance Sheets, depending on the timing of expected amortization, was $ 42 million and $ 35 million as of December 31, 2023 and 2022, respectively.

Amortization expense, which is recorded in Selling and Marketing expense on the Consolidated Statements of Operations, was $ 26 million, $ 21 million and $ 18 million during the years ended December 31, 2023, 2022 and 2021, respectively.

Incremental costs of obtaining a contract are expensed as incurred if the amortization period would otherwise be one year or less.

Note 4 Inventories

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

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

2023 December 31,

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Total Inventories, net (2)

(1) Raw material inventories primarily consist of product components as well as supplies used in repair operations.

(2) Categories of inventories for the period ended December 31, 2022 include a change to correct an immaterial misclassification without impact to Inventories, net as presented on the Consolidated Balance Sheets.

Note 5 Business Acquisitions

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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 customer relationships as well as the relief from royalty method for technology and patent intangible assets.

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

The primary fair value estimates still considered preliminary as of December 31, 2022 include intangible assets and income tax-related items.

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

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

Identifiable intangible assets $ 297

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The $ 639 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.

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

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

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

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Total identifiable intangible assets $ 297

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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Total identifiable intangible assets $ 47

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

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

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

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

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

The goodwill, which will be non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned expansion of the Adaptive Vision technologies into new product offerings and markets.

On September 1, 2020, the Company acquired Reflexis Systems, Inc.

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

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

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

The Company’s 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.

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.

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

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

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

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

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

Identifiable intangible assets $ 213

Accounts receivable 20

Property, plant and equipment 10

Other assets acquired 17

Deferred revenue ( 16 )

Deferred tax liabilities ( 39 )

Other liabilities assumed ( 14 )

Net assets acquired $ 191

Goodwill on acquisition 356

Total purchase consideration $ 547

The $ 356 million of goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned integration of Reflexis’ solution offerings with the Company’s existing solution offerings as well as expansion in current and new markets, industries and product offerings.

The purchase price allocation to identifiable intangible assets acquired was:

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

Technology and patents $ 160 8

Customer and other relationships 43 2

Trade names 10 8

Total identifiable intangible assets $ 213

The goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned expansion of the Adaptive Vision technologies into new product offerings and markets.

The 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.

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Acquisition and integration costs

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.

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.

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

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.

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

The Company incurred $ 6 million, $ 21 million and $ 25 million of acquisition related costs during the years ended December 31, 2023, 2022 and 2021 , respectively.

These costs are included within Acquisition and integration costs on the Consolidated Statements of Operations and are primarily related to third-party transaction and advisory fees, and integration activities associated with our business acquisitions .

Note 6 Goodwill and Other Intangibles

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Goodwill as of December 31, 2021 $ 169 $ 3,096 $ 3,265

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

Antuit acquisition — 105 105

Fetch acquisition — 174 174

Adaptive Vision acquisition — 7 7

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

Reflexis purchase price reduction — ( 1 ) ( 1 )

Foreign exchange impact — ( 1 ) ( 1 )

Goodwill as of December 31, 2021 $ 169 $ 3,096 $ 3,265

Matrox acquisition — 640 640

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Goodwill as of December 31, 2022 $ 169 $ 3,730 $ 3,899

Advanced location technology business move to AIT, effective April 2, 2023 60 ( 60 ) —

Matrox purchase price allocation adjustments — ( 1 ) ( 1 )

Foreign exchange impact — ( 3 ) ( 3 )

Goodwill as of December 31, 2023 $ 229 $ 3,666 $ 3,895

See Note 5, Business Acquisitions for further details related to the Company’s acquisitions and purchase price allocation adjustments.

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The Company completed its annual goodwill impairment testing during the fourth quarter of 2023 utilizing a quantitative approach.

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.

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

The estimated fair value of each reporting unit exceeded its carrying value by at least 40 %.

No events occurred during the fiscal years ended 2023, 2022 or 2021 that indicated it was more likely than not that our goodwill was impaired.

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Projects in progress 44 48

Property, plant and equipment, gross $ 731 $ 685

Less accumulated depreciation ( 422 ) ( 407 )

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Depreciation expense was $ 72 million, $ 68 million and $ 72 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company retired a significant level of substantially depreciated assets in the current year.

Note 8 Investments

The carrying value of the Company’s long-term investments was $ 113 million and $ 101 million as of December 31, 2022 and 2021, respectively, which are included in Other long-term assets on the Consolidated Balances Sheets.

The carrying value of the Company’s long-term investments was $ 113 million as of both December 31, 2023 and 2022, which are included in Other long-term assets on the Consolidated Balances Sheets.

The Company paid $ 1 million, $ 12 million and $ 34 million for the purchases of long-term investments during the years ended December 31, 2023, 2022 and 2021, respectively.

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.

There were no net gains in the year ended December 31, 2022.

Net gains were $ 2 million and $ 5 million during the years ended December 31, 2021 and 2020, respectively.

Net gains and losses related to the Company’s long-term investments are included within Other expense, net on the Consolidated Statements of Operations and were not significant for the years ended December 31, 2023, 2022 and 2021.

Note 9 Exit and Restructuring Costs

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”).

The total cost under the 2022 Productivity Plan, which is expected to be completed in 2023, is estimated to be approximately $ 25 million.

Exit and restructuring charges associated with the 2022 Productivity Plan were $ 12 million for the year ended December 31, 2022.

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.

In the current year, the Company expanded the scope of the 2022 Productivity Plan and also initiated a voluntary retirement plan (“VRP”) applicable to retirement-eligible U.S.

Employees who participated in the VRP agreed to retire in 2023 in exchange for cash severance and other benefits.

During the first quarter of 2024, the Company committed to additional actions under the 2022 Productivity Plan which will bring the total expected cost of the programs to approximately $ 130 million.

Total charges associated with these programs, which are classified within Exit and restructuring on the Consolidated Statements of Operations, were $ 110 million to date, including $ 98 million and $ 12 million for the years ended December 31, 2023 and 2022, respectively.

The actions under the VRP have been completed in the current year and the remaining actions under the 2022 Productivity Plan are expected to be substantially completed in the first half of 2024.

The Company’s payment obligations as of December 31, 2023 are reflected within Accrued liabilities on the Consolidated Balance Sheets.

These obligations are expected to be settled by the first quarter of 2024.

The Company’s liability associated with Exit and restructuring was:

Balance as of December 31, 2022 $ 9

Exit and restructuring charges 98

Non-cash utilization ( 13 )

Cash payments ( 72 )

Balance as of December 31, 2023 $ 22

The Company incurred Exit and restructuring costs, under previously announced programs of $ 2 million and $ 7 million for the years ended December 31, 2022 and 2021, 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 .

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.

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:

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.

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.

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The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs to the extent possible.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs.

In addition, the Company considers counterparty credit risk in the assessment of fair value.

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$ 1 $ 6 $ — $ 7

Forward interest rate swap contracts (2)

Liabilities related to the deferred compensation plan 41 — — 41

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Level 1 Level 2 Level 3 Total

Foreign exchange contracts (1)

Forward interest rate swap contracts (2)

$ — $ 72 $ — $ 72

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Total Assets at fair value $ 35 $ 72 $ — $ 107

Forward interest rate swap contracts (2)

Foreign exchange contracts (1)

$ 5 $ 14 $ — $ 19

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

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

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

• Fair value of hedges against net assets 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).

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Derivative instruments designated as hedges:

Foreign exchange contracts Prepaid expenses and other current assets $ — $ 23

Foreign exchange contracts Accrued liabilities $ ( 6 ) $ ( 14 )

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Total net derivative asset $ 48 $ 53

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

Gain (Loss) Recognized in Income

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

(Losses) Gains Recognized in Income

Statements of Operations Classification Year Ended December 31,

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Derivative instruments not designated as hedges:

Foreign exchange contracts Foreign exchange gain (loss) $ 2 $ 7 $ ( 12 )

Forward interest rate swaps Interest income (expense), net 83 13 ( 46 )

Total gain (loss) recognized in income $ 85 $ 20 $ ( 58 )

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

Foreign exchange contracts Foreign exchange loss $ ( 4 ) $ 2 $ 7

Forward interest rate swaps Interest (expense) income, net 9 83 13

Total net gain recognized in income $ 5 $ 85 $ 20

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

Credit and Market Risk Management

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We present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place, on a net basis on the Consolidated Balance Sheets.

If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions 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.

If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would have been increased by $ 1 million and $ 4 million as of December 31, 2023 and December 31, 2022, respectively.

Foreign Currency Exchange Risk Management

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The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations.

Realized amounts reclassified to Net sales were $ 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.

Realized amounts reclassified to Net sales were $ 15 million of losses for the year ended December 31, 2023, $ 87 million of gains for the year ended December 31, 2022 and $ 2 million of losses for the year ended December 31, 2021.

As of December 31, 2023 and 2022, the notional amounts of the Company’s foreign exchange cash flow hedges were € 485 million and € 549 million, respectively.

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Euro/Czech Koruna € 17 € 15

Japanese Yen/U.S.

Dollar ¥ 685 ¥ —

Singapore Dollar/U.S.

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

The Company manages its exposure to changes in interest rates by utilizing 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.

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.

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.

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.

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 variable-rate debt, based on current and projected market conditions.

The Company has interest rate swap agreements with a total notional amount of $ 800 million to lock into a fixed SOFR interest rate base, which are subject to monthly net cash settlements effective through October 2027.

In the second quarter, the Company entered into new interest rate swap agreements that contain a total notional amount of $ 400 million to lock into a variable interest rate base designed to offset a portion of the Company’s existing swap agreements.

These agreements are subject to monthly cash settlements effective through October 2027.

At the same time, the Company entered into additional new interest rate swap agreements that contain a total notional amount of $ 400 million to lock into a fixed SOFR interest rate base, which are subject to monthly cash settlements effective through June 2030.

As a result of these transactions, the Company maintained fixed interest rates on a total notional amount of $ 800 million through October 2027 and a total notional amount of $ 400 million through June 2030.

There was no cash settlement, or significant impact on the Consolidated Statement of Operations upon entering into these agreements.

Note 12 Long-Term Debt

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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.

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.

Amendment No.

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.

Amendment No.

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.

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.

These items are included in Interest income (expense), net on the Consolidated Statements of Operations.

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.

In May 2022, the Company refinanced its long-term credit facilities by entering into its third amendment to the Amended and Restated Credit Agreement, which increased the Company’s borrowing under Term Loan A from $ 875 million to $ 1.75 billion and the Company’s borrowing capacity under the Revolving Credit Facility from $ 1 billion to $ 1.5 billion, extended the maturities of the facilities to May 25, 2027, and replaced LIBOR with SOFR as the benchmark reference rate.

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in March 2024 and the majority due upon maturity in 2027.

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domestically originated accounts receivable.

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

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

The Company’s second Receivable Financing Facility allows for borrowings of up to $ 100 million and matures on May 15, 2023.

As of December 31, 2022, the Company’s Consolidated Balance Sheets included $ 785 million of receivables that were pledged under the two Receivables Financing Facilities.

As of December 31, 2022, $ 254 million had been borrowed, of which $ 171 million was classified as current.

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

As of December 31, 2022, the Receivables Financing Facilities had an average interest rate of 5.33 %.

Interest is paid on these borrowings on a monthly basis.

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

The Company has accounted for transactions under its facilities as secured borrowings.

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

The Company’s second facility allows for borrowings of up to $ 100 million and matures on May 13, 2024.

As of December 31, 2023, the Company’s Consolidated Balance Sheets included $ 483 million of gross receivables that were pledged under the facilities.

As of December 31, 2023, $ 129 million had been borrowed and was classified as current.

Borrowings under the facilities bear interest at a variable rate plus an applicable margin.

As of December 31, 2023, the facilities had an average interest rate of 6.81 %.

Interest is paid monthly on these borrowings.

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

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

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Expenses related to short-term leases were not significant.

Cash payments for leases are included within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.

Cash payments for leases are included within Net cash (used in) provided by operating activities on the Consolidated Statements of Cash Flows.

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.

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The weighted average remaining term of the Company’s leases was approximately 6 years each as of December 31, 2023, 2022 and 2021.

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.

The weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 6 % as of December 31, 2023, and 5 % as of December 31, 2022 and 2021.

Future minimum lease payments under non-cancellable leases as of December 31, 2023 were as follows (in millions):

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The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

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.

Revenues earned from lease arrangements under which the Company is a lessor during the years ended December 31, 2023, 2022 and 2021 were not significant.

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

Settlement $ 180 $ —

Unremitted cash collections due to banks on factored accounts receivable $ 112 $ 130

Payroll and benefits 83 90

Settlement 45 180

Current portion of lease liabilities 42 37

Customer rebates 40 55

Incentive compensation 47 107

Warranty 27 26

Customer rebates 55 51

Unremitted cash collections due to banks on factored accounts receivable 130 141

Foreign exchange contracts 19 —

Short-term interest rate swaps — 15

Exit and restructuring 22 9

Freight and duty 10 19

Foreign exchange contracts 7 19

Accrued liabilities $ 504 $ 744

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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.

Commitments under these contracts are as follows (in millions):

Commitments under these multi-year contracts, which exclude routine purchase orders for goods and services, are as follows (in millions):

We record a liability for non-cancellable purchase commitments for quantities in excess of our forecasted demand consistent with the assessment of net realizable value of our inventory.

As of December 31, 2023 , the liability for these purchase commitments wa s $ 11 million and is included within Current liabilities on the Consolidated Balance Sheets.

In addition, the Company recorded a $ 10 million charge in the current year, associated with the partial cancellation of a purchase commitment, which is also included within Current liabilities on the Consolidated Balance Sheets as of December 31, 2023.

There were no significant liabilities related to purchase commitments as of December 31, 2022.

Contingencies

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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.

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

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

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.

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.

During the second quarter of 2022, the Company entered into a License and Settlement Agreement (“Settlement”) to resolve certain patent-related litigation.

Under the Settlement, the Company and the counterparty each agreed to a mutual general release from all past claims asserted by the parties;

entered into a covenant not to sue for patent infringement;

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.

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.

That charge, along with $ 12 million of external legal fees, is reflected within Settlement and related costs on the Consolidated Statement of Operations.

The payment terms under the Settlement consist of 8 quarterly payments of $ 45 million that began in the second quarter.

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.

See Item 3, Legal Proceedings for additional information.

The payment terms under the Settlement consisted of 8 quarterly payments of $ 45 million that began in the second quarter of 2022.

The final remaining quarterly payment will be paid in the first quarter of 2024 and is included within Accrued liabilities on the Consolidated Balance Sheets.

Note 15 Share-Based Compensation

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Income tax benefit $ 13 $ 17 $ 14

As of December 31, 2022, total unearned compensation costs related to the Company’s share-based compensation plans was $ 111 million, which will be recognized over the weighted average remaining service period of approximately 1.4 years.

As of December 31, 2023, total unearned compensation cost related to the Company’s share-based compensation plans was $ 92 million, which will be recognized over the weighted average remaining service period of approximately 1.4 years.

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

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

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

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

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

The majority of the Company’s share-based compensation is comprised of stock-settled awards.

Stock-settled awards

Beginning in 2021, the Company began issuing stock-settled restricted stock units (“stock-settled RSUs”) and stock-settled performance share units (“stock-settled PSUs”) for the majority of its share-based compensation awards.

Prior to 2021, the Company primarily awarded restricted stock awards (“RSAs”) and performance share awards (“PSAs”).

The Company’s awards are typically time-vested with stock-settled RSUs and RSAs vesting ratably in three annual installments and stock-settled PSUs and PSAs vesting at the end of the three-year period.

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

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

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

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

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

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

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

These awards are considered participating securities, 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.

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

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

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

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

RSAs and PSAs are considered participating securities, and as such, are included as part of the Company’s Class A Common Stock outstanding at the time of grant.

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

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

The expected attainment of the performance goals for the stock-settled PSUs and PSAs is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary.

The Company also issues RSAs to non-employee directors.

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Forfeited (1)

( 45,684 ) 332.66 ( 14,552 ) 313.74 ( 1,483 ) 335.98 ( 75 ) 244.97

Outstanding at end of year 437,379 $ 299.19 195,932 $ 334.59 433 $ 477.74 — $ —

(1) The increase in forfeitures for RSUs and PSUs as compared to previous years was primarily due to the Company’s 2022 Productivity Plan and VRP.

Year Ended December 31, 2022

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Year Ended December 31, 2021

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

RSUs PSUs RSAs PSAs

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

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

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

Beginning in 2021, the Company no longer included SARs in its annual share based compensation award issuances and did no t issue any SARs during the years ended December 31, 2022 and 2021.

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 years ended December 31, 2023, 2022 or 2021.

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.

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2023 2022 2021

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

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

Outstanding at beginning of year 443,476 $ 122.67 474,151 $ 121.05 638,124 $ 113.98

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The total fair value of SARs that vested during fiscal 2023, 2022 and 2021 was $ 2 million, $ 3 million and $ 5 million, respectively.

Reflexis Replacement Options

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.

As of December 31, 2022, there were 17,457 outstanding Reflexis Replacement Options, of which 16,148 were exercisable.

The outstanding awards have a weighted average exercise price and remaining contractual life of $ 58.20 and 5.4 years, respectively.

The awards that are exercisable have a weighted average exercise price and remaining contractual life of $ 56.69 and 5.3 years, respectively.

The intrinsic value of Reflexis Replacement Options exercised during fiscal 2022, 2021 and 2020 was $ 2 million, $ 4 million and $ 1 million, respectively.

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

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

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

The fair value is remeasured at the end of each reporting period based on the Company’s stock price, with remeasurements reflected as an adjustment to compensation expense in the Consolidated Statements of Operations.

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

The expected attainment of the performance goals for the cash-settled performance stock units is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary.

Cash settlement is based on the fair value of share equivalents at the time of vesting, which was $ 9 million, $ 5 million and $ 11 million in 2023, 2022 and 2021, respectively.

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Employee Stock Purchase Plan

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

Like the 2011 ESPP, the 2020 ESPP permits eligible employees to purchase common stock at 95 % of the fair market value at the date of purchase.

Eligible Zebra employees may purchase common stock at 95 % of the fair market value at the date of purchase pursuant to the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”).

Employees may make purchases by cash or payroll deductions up to certain limits.

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Provision for income taxes 11.4 % 14.9 % 13.5 %

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

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.

The Company evaluated the provisions of the Inflation Reduction Act of 2022, signed into law on August 16, 2022;

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

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

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

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

Management continues to monitor guidance regarding these laws and developments related to other coronavirus tax relief throughout the world for potential impacts.

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%.

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.

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.

For the year ended December 31, 2023, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefit related to foreign earnings subject to U.S.

taxation, remeasurements of deferred taxes, and the generation of tax credits.

For the year ended December 31, 2022, the Company’s effective tax rate was lower than the federal statutory rate of 21% due to lower tax rates in foreign jurisdictions, the generation of tax credits and the favorable impacts of foreign earnings subject to U.S.

For the year ended December 31, 2021, 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.

Several member countries have enacted Pillar Two provisions that are effective in 2024.

The Company believes it will qualify for safe harbor exemptions in many of these jurisdictions and any remaining 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.

federal statutory rate.

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and Singapore.

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.

However, should the Company not make these investments in accordance with the agreement, any incentive benefit would have to be repaid to the Singapore tax authorities.

The Company had an incentivized tax rate from the Singapore Economic Development Board, which reduced the income tax rate in that jurisdiction effective for calendar years 2019 to 2023.

The Company has not renewed the incentivized tax rate for future years, which did not have a significant impact on our current year effective tax rate nor is it expected to have a significant impact on future year effective tax rates.

Tax effects of temporary differences that resulted in deferred tax assets and liabilities are as follows (in millions):

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tax purposes.

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 effect of this new provision is an increase of approximately $ 100 million and $ 130 million to deferred tax assets for the years ended December 31, 2023 and 2022, respectively, with corresponding increases to the current tax liabilities.

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.

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Approximately $ 171 million of NOLs will expire beginning in 2024 through 2039, and $ 34 million of credits will expire beginning in 2024 through 2041, with the remaining amounts of NOLs and credit carryforwards having no expiration dates.

The Company is subject to the GILTI, BEAT and FDII provisions, for which we recorded 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.

The Company is subject to the GILTI, BEAT and FDII provisions, for which we recorded an income tax benefit of $ 16 million, $ 19 million and $ 20 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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Balance at beginning of year $ 7 $ 7

Additions for tax positions related to the current year 11 —

Additions for tax positions related to prior years — 3

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Balance at end of year $ 17 $ 7

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.

As of December 31, 2023 and December 31, 2022, there were $ 9 million and $ 7 million of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

Additionally, fiscal years 2009 through 2023 remain open to examination by multiple foreign and U.S.

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Due to uncertainties in any tax audit or litigation outcome, the Company’s estimates of the ultimate settlements of uncertain tax positions may change and the actual tax benefits may differ significantly from estimates.

The Company recognized 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.

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.

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

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.

The Company recognized less than $ 1 million of net tax benefit associated with interest and penalties related to income tax matters during the years ended December 31, 2023 and 2022.

The Company recognized no expense or benefit for interest and penalties during the year ended December 31, 2021.

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

The Company has included $ 4 million and $ 5 million of estimated interest and penalty obligations within Other long-term liabilities on the Consolidated Balance Sheets each as of December 31, 2023 and 2022 , respectively.

Note 17 Earnings Per Share

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There were 129,856 , 173,519 and 8,000 shares that were anti-dilutive for the years ended December 31, 2023, 2022 and 2021, respectively.

Note 18 Accumulated Other Comprehensive Income (Loss)

Note 18 Accumulated Other Comprehensive (Loss) Income

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

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

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

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

These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs.

See Note 11, Derivative Instruments for more details.

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

subsidiary companies that have designated a functional currency other than the U.S.

The Company is required to translate the subsidiary functional currency financial statements to U.S.

The Company translates the subsidiary functional currency financial statements to U.S.

Dollars using a combination of historical, period-end, and average foreign exchange rates.

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The changes in each component of AOCI during the three years ended December 31, 2023, 2022 and 2021 were as follows (in millions):

Unrealized gain (loss) on sales hedging Foreign currency translation adjustments Total

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

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

Amounts reclassified from AOCI (1)

Tax effect 7 — 7

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

Unrealized (loss) gain on sales hedging Foreign currency translation adjustments Total

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

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Tax effect 8 — 8

Other comprehensive (loss) income, net of tax ( 29 ) ( 8 ) ( 37 )

Other comprehensive (loss), net of tax ( 29 ) ( 8 ) ( 37 )

Balance at December 31, 2022 ( 11 ) ( 55 ) ( 66 )

Other comprehensive (loss) income before reclassifications ( 7 ) 6 ( 1 )

Amounts reclassified from AOCI (1)

Tax effect ( 2 ) — ( 2 )

Other comprehensive income, net of tax 6 6 12

Balance at December 31, 2023 $ ( 5 ) $ ( 49 ) $ ( 54 )

(1) See Note 11, Derivative Instruments regarding timing of reclassifications to operating results.

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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.

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.

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.

The Company has two Receivables Factoring arrangements.

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

In the third quarter, the Company amended its second arrangement to allow the factoring of uncollected receivables originated from the EMEA region from up to $ 25 million to $ 50 million.

Otherwise, the amendment did not substantially change the terms of the 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 $ 1 million and $ 12 million as of December 31, 2023 and December 31, 2022, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

During the years ended December 31, 2023, 2022 and 2021, the Company received cash proceeds of $ 1,404 million, $ 1,496 million and $ 1,504 million, respectively, from the sales of accounts receivables under its factoring arrangements.

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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.

Fees incurred in connection with these arrangements are included within Other expense, net on the Consolidated Statements of Operations and were $ 11 million, $ 5 million and $ 3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Note 20 Segment Information & Geographic Data

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The CODM reviews adjusted operating income to assess segment profitability.

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.

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.

We have reported our results reflecting this change, including historical periods, on a comparable basis.

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

In the second quarter of 2023, our advanced location technology solutions business, which is primarily comprised of RFID devices and RTLS offerings, moved from our EVM segment into our AIT segment contemporaneous with a change in our organizational structure and management of the business.

We have reported our segment results reflecting this change, including historical periods, on a comparable basis.

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

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

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Total segment Net sales 4,584 5,781 5,633

Corporate eliminations (1)

— ( 6 ) ( 7 )

Corporate (1)

Total Net sales $ 4,584 $ 5,781 $ 5,627

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Total segment operating income 689 1,072 1,132

Corporate eliminations (1)

Corporate (1)

( 208 ) ( 543 ) ( 153 )

Total Operating income $ 481 $ 529 $ 979

(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).

(1) To the extent applicable, amounts included in Corporate 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 costs in the prior year).

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

42 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data