UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October ~~2, 2021~~1, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the transition period from to

Commission File Number: 000-19406

Zebra Technologies Corporation

(Exact name of registrant as specified in its charter)


Delaware			36-2675536
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3 Overlook Point, Lincolnshire, IL 60069

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 634-6700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Class A Common Stock, par value $.01 per share

ZBRA

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~26, 2021,~~28, 2022, there were ~~53,441,491~~51,629,798 shares of Class A Common Stock, $.01 par value, outstanding.

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

QUARTER ENDED OCTOBER ~~2, 2021~~1, 2022

TABLE OF CONTENTS


		PAGE
PART I - FINANCIAL INFORMATION		3
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets as of October ~~2, 2021~~1, 2022 (unaudited) and December 31, ~~2020~~2021	3
	Consolidated Statements of Operations (unaudited) for the three and nine months ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~	4
	Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~	6
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~	8
	Notes to Consolidated Financial Statements (unaudited)	98
	Note 1: Description of Business and Basis of Presentation	9
	Note 2: Significant Accounting Policies	9
	Note 3: Revenues	10
	Note 4: Inventories	11
	Note 5: Business Acquisitions	11
	Note 6: Goodwill ~~and~~& Other Intangibles	13
	Note 7: Investments	14
	Note 8: Exit and Restructuring Costs	14
	Note 9 : Fair Value Measurements	14
	Note 9:10 : Derivative Instruments	16
	Note 1 101 : Long-Term Debt	18
	Note ~~11: Commitments and Contingencies~~1	192
	~~Note 12: Income Taxes~~: Leases	20
	Note ~~13: Earnings Per Share~~1 3 : Accrued Liabilities, Commitments and Contingencies	20
	Note 14: Income Taxes	21
	Note 1 4 ~~: Accumulated Other Comprehensive Income (Loss)~~	21
	~~Note 1~~5 ~~: Accounts Receivable Factoring~~15: Earnings Per Share	22
	Note 116: Accumulated Other Comprehensive Income (Loss)	622
	~~: Segment Information & Geographic Data~~Note 17: Accounts Receivable Factoring	23
	Note ~~17: Subsequent Event~~18: Segment Information & Geographic Data	24
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425
	Overview	2425
	Results of Operations	2627
	Results of Operations by Segment	2830
	Liquidity and Capital Resources	3132
	Significant Customers	34
	Safe Harbor	3435
	New Accounting Pronouncements	35
	Non-GAAP Measures	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3536
Item 4.	Controls and Procedures	3536
PART II - OTHER INFORMATION		3637
Item 1.	Legal Proceedings	3637
Item 1A.	Risk Factors	3637
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3738
Item 6.	Exhibits	3839
Signatures		3940

Table of Contents

PART I - FINANCIAL INFORMATION


Item 1.			Consolidated Financial Statements

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


		October 2, 2021		December 31, 2020			October 1, 2022		December 31, 2021
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	307	$	168	Cash and cash equivalents	$	81	$	332
Accounts receivable, net of allowances for doubtful accounts of $1 million as of October 2, 2021 and December 31, 2020, respectively		613		508
Accounts receivable, net of allowances for doubtful accounts of $1 million each as of October 1, 2022 and December 31, 2021						Accounts receivable, net of allowances for doubtful accounts of $1 million each as of October 1, 2022 and December 31, 2021	804		752
Inventories, net	Inventories, net	438		511		Inventories, net	814		491
Current income taxes		72		16
Income tax receivable						Income tax receivable	11		8
Prepaid expenses and other current assets	Prepaid expenses and other current assets	94		70		Prepaid expenses and other current assets	161		106
Total Current assets	Total Current assets	1,524		1,273		Total Current assets	1,871		1,689
Property, plant and equipment, net	Property, plant and equipment, net	274		274		Property, plant and equipment, net	272		272
Right-of-use lease assets	Right-of-use lease assets	130		135		Right-of-use lease assets	172		131
Goodwill	Goodwill	3,194		2,988		Goodwill	3,891		3,265
Other intangibles, net	Other intangibles, net	456		402		Other intangibles, net	659		469
Deferred income taxes	Deferred income taxes	106		139		Deferred income taxes	304		192
Other long-term assets	Other long-term assets	181		164		Other long-term assets	279		197
Total Assets	Total Assets	$	5,865	$	5,375	Total Assets	$	7,448	$	6,215
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	51	$	364	Current portion of long-term debt	$	144	$	69
Accounts payable	Accounts payable	609		601		Accounts payable	835		700
Accrued liabilities	Accrued liabilities	550		559		Accrued liabilities	675		639
Deferred revenue	Deferred revenue	363		308		Deferred revenue	401		380
Income taxes payable	Income taxes payable	8		19		Income taxes payable	18		12
Total Current liabilities	Total Current liabilities	1,581		1,851		Total Current liabilities	2,073		1,800
Long-term debt	Long-term debt	940		881		Long-term debt	2,017		922
Long-term lease liabilities	Long-term lease liabilities	120		129		Long-term lease liabilities	150		121

Deferred income taxes						Deferred income taxes	78		6
Long-term deferred revenue	Long-term deferred revenue	318		273		Long-term deferred revenue	323		315
Other long-term liabilities	Other long-term liabilities	90		97		Other long-term liabilities	150		67
Total Liabilities	Total Liabilities	3,049		3,231		Total Liabilities	4,791		3,231
Stockholders’ Equity:	Stockholders’ Equity:					Stockholders’ Equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued	Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued	—		—		Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued	—		—
Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares	Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares	1		1		Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares	1		1
Additional paid-in capital	Additional paid-in capital	447		395		Additional paid-in capital	542		462
Treasury stock at cost, 18,697,788 and 18,689,775 shares as of October 2, 2021 and December 31, 2020, respectively		(986)		(919)
Treasury stock at cost, 20,336,198 and 18,736,582 shares as of October 1, 2022 and December 31, 2021, respectively						Treasury stock at cost, 20,336,198 and 18,736,582 shares as of October 1, 2022 and December 31, 2021, respectively	(1,702)		(1,023)
Retained earnings	Retained earnings	3,382		2,736		Retained earnings	3,850		3,573
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(28)		(69)		Accumulated other comprehensive loss	(34)		(29)
Total Stockholders’ Equity	Total Stockholders’ Equity	2,816		2,144		Total Stockholders’ Equity	2,657		2,984
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	5,865	$	5,375	Total Liabilities and Stockholders’ Equity	$	7,448	$	6,215

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net sales:	Net sales:									Net sales:
Tangible products	Tangible products	$	1,240	$	972	$	3,585	$	2,684	Tangible products	$	1,164	$	1,240	$	3,630	$	3,585
Services and software	Services and software	196		160		575		456		Services and software	214		196		648		575
Total Net sales	Total Net sales	1,436		1,132		4,160		3,140		Total Net sales	1,378		1,436		4,278		4,160
Cost of sales:	Cost of sales:									Cost of sales:
Tangible products	Tangible products	687		543		1,896		1,480		Tangible products	632		687		1,998		1,896
Services and software	Services and software	103		96		305		275		Services and software	118		103		341		305
Total Cost of sales	Total Cost of sales	790		639		2,201		1,755		Total Cost of sales	750		790		2,339		2,201
Gross profit	Gross profit	646		493		1,959		1,385		Gross profit	628		646		1,939		1,959
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	148		119		430		350		Selling and marketing	149		148		452		430
Research and development	Research and development	141		113		422		316		Research and development	143		141		428		422
General and administrative	General and administrative	85		71		259		219		General and administrative	92		85		288		259
Settlement and related costs										Settlement and related costs	—		—		372		—
Amortization of intangible assets	Amortization of intangible assets	29		20		81		52		Amortization of intangible assets	39		29		107		81
Acquisition and integration costs	Acquisition and integration costs	6		19		11		21		Acquisition and integration costs	1		6		19		11
Exit and restructuring costs	Exit and restructuring costs	—		1		—		7		Exit and restructuring costs	2		—		4		—
Total Operating expenses	Total Operating expenses	409		343		1,203		965		Total Operating expenses	426		409		1,670		1,203
Operating income	Operating income	237		150		756		420		Operating income	202		237		269		756
Other expenses:
Foreign exchange loss		(4)		(3)		(3)		(15)
Interest expense, net		(5)		(10)		(10)		(69)
Other income (loss), net:										Other income (loss), net:
Foreign exchange gain (loss)										Foreign exchange gain (loss)	—		(4)		5		(3)
Interest income (expense), net										Interest income (expense), net	21		(5)		48		(10)
Other (expense) income, net	Other (expense) income, net	—		1		(1)		8		Other (expense) income, net	(1)		—		(3)		(1)
Total Other expenses, net		(9)		(12)		(14)		(76)
Total Other income (expense), net										Total Other income (expense), net	20		(9)		50		(14)
Income before income tax	Income before income tax	228		138		742		344		Income before income tax	222		228		319		742
Income tax expense	Income tax expense	29		22		96		39		Income tax expense	52		29		42		96
Net income	Net income	$	199	$	116	$	646	$	305	Net income	$	170	$	199	$	277	$	646
Basic earnings per share	Basic earnings per share	$	3.72	$	2.18	$	12.08	$	5.70	Basic earnings per share	$	3.28	$	3.72	$	5.29	$	12.08
Diluted earnings per share	Diluted earnings per share	$	3.69	$	2.16	$	11.98	$	5.65	Diluted earnings per share	$	3.26	$	3.69	$	5.25	$	11.98

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net income	Net income	$	199	$	116	$	646	$	305	Net income	$	170	$	199	$	277	$	646
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Changes in unrealized gains (losses) on anticipated sales hedging transactions		12		(8)		46		(14)
Changes in unrealized gains on anticipated sales hedging transactions										Changes in unrealized gains on anticipated sales hedging transactions	(1)		12		11		46

Foreign currency translation adjustment	Foreign currency translation adjustment	(2)		4		(5)		(4)		Foreign currency translation adjustment	(5)		(2)		(16)		(5)
Comprehensive income	Comprehensive income	$	209	$	112	$	687	$	287	Comprehensive income	$	164	$	209	$	272	$	687

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

(Unaudited)


	Class A Common Stock Shares	Class A Common Stock Value		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at December 31, 2021	53,415,275	$	1	$	462	$	(1,023)	$	3,573	$	(29)	$	2,984

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	20,082	—		8		(2)		—		—		6
Shares withheld to fund withholding tax obligations related to share-based compensation plans	(1,639)	—		—		(1)		—		—		(1)
Share-based compensation	—	—		17		—		—		—		17
Repurchases of common stock	(648,875)	—		—		(305)		—		—		(305)
Net income	—	—		—		—		205		—		205
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		5		5

Foreign currency translation adjustment	—	—		—		—		—		(5)		(5)
Balance at April 2, 2022	52,784,843	$	1	$	487	$	(1,331)	$	3,778	$	(29)	$	2,906

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	70,821	—		—		1		—		—		1
Shares withheld to fund withholding tax obligations related to share-based compensation plans	(56,431)	—		—		(22)		—		—		(22)
Share-based compensation	—	—		25		—		—		—		25
Repurchases of common stock	(844,239)	—		—		(300)		—		—		(300)
Net loss	—	—		—		—		(98)		—		(98)
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		7		7

Foreign currency translation adjustment	—	—		—		—		—		(6)		(6)
Balance at July 2, 2022	51,954,994	$	1	$	512	$	(1,652)	$	3,680	$	(28)	$	2,513

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	20,587	—		2		—		—		—		2
Shares withheld to fund withholding tax obligations related to share-based compensation plans	(159)	—		—		—		—		—		—
Share-based compensation	—	—		28		—		—		—		28
Repurchases of common stock	(159,763)	—		—		(50)		—		—		(50)
Net income	—	—		—		—		170		—		170
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		(1)		(1)

Foreign currency translation adjustment	—	—		—		—		—		(5)		(5)
Balance at October 1, 2022	51,815,659	$	1	$	542	$	(1,702)	$	3,850	$	(34)	$	2,657

Class A Common Stock Shares Class A Common Stock Value Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Loss Total
Balance at December 31, 2020 53,462,082 $ 1 $ 395 $ (919) $ 2,736 $ (69) $ 2,144
Issuances of treasury shares related to share-based compensation plans, net of forfeitures 48,584 — (6) — — — (6)
Shares withheld to fund withholding tax obligations related to share-based compensation plans (400) — — — — — —
Share-based compensation — — 16 — — — 16
Repurchases of common stock (100) — — — — — —
Net income — — — — 228 — 228
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes) — — — — — 32 32
Foreign currency translation adjustment — — — — — (3) (3)
Balance at April 3, 2021 53,510,166 $ 1 $ 405 $ (919) $ 2,964 $ (40) $ 2,411
Issuances of treasury shares related to share-based compensation plans, net of forfeitures 27,226 — — — — — —
Shares withheld to fund withholding tax obligations related to share-based compensation plans (81,810) — — (40) — — (40)
Share-based compensation — — 22 — — — 22
Repurchases of common stock (52,289) — — (25) — — (25)
Net income — — — — 219 — 219
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes) — — — — — 2 2
Balance at July 3, 2021 53,403,293 $ 1 $ 427 $ (984) $ 3,183 $ (38) $ 2,589
Issuances of treasury shares related to share-based compensation plans, net of forfeitures 52,369 — — (1) — — (1)
Shares withheld to fund withholding tax obligations related to share-based compensation plans (1,593) — — (1) — — (1)
Share-based compensation — — 20 — — — 20
Net income — — — — 199 — 199
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes) — — — — — 12 12
Foreign currency translation adjustment — — — — — (2) (2)
Balance at October 2, 2021 53,454,069 $ 1 $ 447 $ (986) $ 3,382 $ (28) $ 2,816

Table of Contents


		Class A Common Stock Shares	Class A Common Stock Value		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total			Class A Common Stock Shares	Class A Common Stock Value		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at December 31, 2019		54,002,932	$	1	$	339	$	(689)	$	2,232	$	(44)	$	1,839
Balance at December 31, 2020															Balance at December 31, 2020	53,462,082	$	1	$	395	$	(919)	$	2,736	$	(69)	$	2,144

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	Issuances of treasury shares related to share-based compensation plans, net of forfeitures	15,792	—		—		—		—		—		—		Issuances of treasury shares related to share-based compensation plans, net of forfeitures	48,584	—		(6)		—		—		—		(6)
Shares withheld to fund withholding tax obligations related to share-based compensation plans	Shares withheld to fund withholding tax obligations related to share-based compensation plans	(4,361)	—		—		(1)		—		—		(1)		Shares withheld to fund withholding tax obligations related to share-based compensation plans	(400)	—		—		—		—		—		—
Share-based compensation	Share-based compensation	—	—		7		—		—		—		7		Share-based compensation	—	—		16		—		—		—		16
Repurchases of common stock	Repurchases of common stock	(948,740)	—		—		(200)		—		—		(200)		Repurchases of common stock	(100)	—		—		—		—		—		—
Net income	Net income	—	—		—		—		89		—		89		Net income	—	—		—		—		228		—		228
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		2		2		Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		32		32

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—		—		—		(9)		(9)		Foreign currency translation adjustment	—	—		—		—		—		(3)		(3)
Balance at March 28, 2020		53,065,623	$	1	$	346	$	(890)	$	2,321	$	(51)	$	1,727
Balance at April 3, 2021															Balance at April 3, 2021	53,510,166	$	1	$	405	$	(919)	$	2,964	$	(40)	$	2,411

Issuances of treasury shares related to share-based compensation plans, net of forfeitures															Issuances of treasury shares related to share-based compensation plans, net of forfeitures	27,226	—		—		—		—		—		—
Shares withheld to fund withholding tax obligations related to share-based compensation plans															Shares withheld to fund withholding tax obligations related to share-based compensation plans	(81,810)	—		—		(40)		—		—		(40)
Share-based compensation															Share-based compensation	—	—		22		—		—		—		22
Repurchases of common stock															Repurchases of common stock	(52,289)	—		—		(25)		—		—		(25)
Net income															Net income	—	—		—		—		219		—		219
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)															Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		2		2

Balance at July 3, 2021															Balance at July 3, 2021	53,403,293	$	1	$	427	$	(984)	$	3,183	$	(38)	$	2,589

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	Issuances of treasury shares related to share-based compensation plans, net of forfeitures	399,634	—		(9)		13		—		—		4		Issuances of treasury shares related to share-based compensation plans, net of forfeitures	52,369	—		—		(1)		—		—		(1)
Shares withheld to fund withholding tax obligations related to share-based compensation plans	Shares withheld to fund withholding tax obligations related to share-based compensation plans	(142,206)	—		—		(34)		—		—		(34)		Shares withheld to fund withholding tax obligations related to share-based compensation plans	(1,593)	—		—		(1)		—		—		(1)
Share-based compensation	Share-based compensation	—	—		13		—		—		—		13		Share-based compensation	—	—		20		—		—		—		20

Net income	Net income	—	—		—		—		100		—		100		Net income	—	—		—		—		199		—		199
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		(8)		(8)		Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		12		12

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—		—		—		1		1		Foreign currency translation adjustment	—	—		—		—		—		(2)		(2)
Balance at June 27, 2020		53,323,051	$	1	$	350	$	(911)	$	2,421	$	(58)	$	1,803

Issuances of treasury shares related to share-based compensation plans, net of forfeitures		(22,960)	—		9		(6)		—		—		3
Shares withheld to fund withholding tax obligations related to share-based compensation plans		(1,629)	—		—		—		—		—		—
Share-based compensation		—	—		13		—		—		—		13

Net income		—	—		—		—		116		—		116
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)		—	—		—		—		—		(8)		(8)

Foreign currency translation adjustment		—	—		—		—		—		4		4
Balance at September 26, 2020		53,298,462	$	1	$	372	$	(917)	$	2,537	$	(62)	$	1,931
Balance at October 2, 2021															Balance at October 2, 2021	53,454,069	$	1	$	447	$	(986)	$	3,382	$	(28)	$	2,816

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


		Nine Months Ended					Nine Months Ended
		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	646	$	305	Net income	$	277	$	646
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	136		103		Depreciation and amortization	158		136

Share-based compensation	Share-based compensation	58		33		Share-based compensation	70		58

Deferred income taxes	Deferred income taxes	(6)		(2)		Deferred income taxes	(115)		(6)
Unrealized (gain) loss on forward interest rate swaps		(17)		37
Unrealized gain on forward interest rate swaps						Unrealized gain on forward interest rate swaps	(92)		(17)
Other, net	Other, net	1		(3)		Other, net	4		1
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(107)		96		Accounts receivable, net	(58)		(107)
Inventories, net	Inventories, net	75		(7)		Inventories, net	(293)		75
Other assets	Other assets	(25)		3		Other assets	(68)		(25)
Accounts payable	Accounts payable	(2)		(7)		Accounts payable	127		(2)
Accrued liabilities	Accrued liabilities	42		(40)		Accrued liabilities	(101)		42
Deferred revenue	Deferred revenue	101		58		Deferred revenue	27		101
Income taxes	Income taxes	(67)		(58)		Income taxes	3		(67)
Legal Settlement Liability						Legal Settlement Liability	270		—
Other operating activities	Other operating activities	1		13		Other operating activities	12		1
Net cash provided by operating activities	Net cash provided by operating activities	836		531		Net cash provided by operating activities	221		836
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	(307)		(548)		Acquisition of businesses, net of cash acquired	(878)		(307)
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(38)		(49)		Purchases of property, plant and equipment	(51)		(38)
Proceeds from sale of long-term investments		—		6

Purchases of long-term investments	Purchases of long-term investments	(24)		(32)		Purchases of long-term investments	(12)		(24)
Net cash used in investing activities	Net cash used in investing activities	(369)		(623)		Net cash used in investing activities	(941)		(369)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Payment of debt issuance costs and discounts		—		(1)
Payment of debt issuance costs, extinguishment costs and discounts						Payment of debt issuance costs, extinguishment costs and discounts	(8)		—
Payments of long-term debt	Payments of long-term debt	(277)		(103)		Payments of long-term debt	(210)		(277)
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	21		389		Proceeds from issuance of long-term debt	1,385		21

Payments for repurchases of common stock	Payments for repurchases of common stock	(25)		(200)		Payments for repurchases of common stock	(655)		(25)
Net payments related to share-based compensation plans	Net payments related to share-based compensation plans	(48)		(28)		Net payments related to share-based compensation plans	(14)		(48)
Change in unremitted cash collections from servicing factored receivables	Change in unremitted cash collections from servicing factored receivables	(22)		73		Change in unremitted cash collections from servicing factored receivables	(28)		(22)
Other financing activities		—		1
Net cash (used in) provided by in financing activities		(351)		131

Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	470		(351)
Effect of exchange rate changes on cash and cash equivalents, including restricted cash	Effect of exchange rate changes on cash and cash equivalents, including restricted cash	—		(1)		Effect of exchange rate changes on cash and cash equivalents, including restricted cash	(2)		—
Net increase in cash and cash equivalents, including restricted cash		116		38
Net (decrease) increase in cash and cash equivalents, including restricted cash						Net (decrease) increase in cash and cash equivalents, including restricted cash	(252)		116
Cash and cash equivalents, including restricted cash, at beginning of period	Cash and cash equivalents, including restricted cash, at beginning of period	192		30		Cash and cash equivalents, including restricted cash, at beginning of period	344		192
Cash and cash equivalents, including restricted cash, at end of period	Cash and cash equivalents, including restricted cash, at end of period	$	308	$	68	Cash and cash equivalents, including restricted cash, at end of period	$	92	$	308
Less restricted cash, included in Prepaid expenses and other current assets	Less restricted cash, included in Prepaid expenses and other current assets	(1)		(29)		Less restricted cash, included in Prepaid expenses and other current assets	(11)		(1)
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	307	$	39	Cash and cash equivalents at end of period	$	81	$	307
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Income taxes paid	Income taxes paid	$	169	$	100	Income taxes paid	$	152	$	169
Interest paid	Interest paid	$	25	$	28	Interest paid	$	34	$	25

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 Description of Business and Basis of Presentation

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader providing innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry. We design, manufacture, and sell a broad range of products and solutions, including cloud-based software subscriptions, that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services. End-users of our products, solutions and services include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other ~~industries around the world.~~industries. We provide our products, solutions and services globally through a direct sales force and an extensive network of channel partners.

Management prepared these unaudited interim consolidated financial statements according to the rules and regulations of the Securities and Exchange Commission for interim financial information and notes. As permitted under Article 10 of Regulation S-X and the instructions of Form 10-Q, these consolidated financial statements do not include all the information and notes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements, although management believes that the disclosures made are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

In the opinion of the Company, these interim financial statements include all adjustments (of a normal, recurring nature) necessary to fairly present its Consolidated Balance Sheet as of October ~~2, 2021,~~1, 2022, the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and nine months ended October 1, 2022 and October 2, 2021, and ~~September 26, 2020, and~~ the Consolidated ~~Statements~~Statement of Cash Flows for the nine months ended October 1, 2022 and October 2, ~~2021 and September 26, 2020.~~2021. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, ~~2021.~~2022.

Effective January 1, ~~2021, Retail Solutions,~~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 ~~inventory management solutions with application in the retail industry, including solutions for full store physical inventories, cycle counts~~location and ~~analytics,~~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. ~~Prior period~~We have reported our results ~~have been reclassified to conform to the current period’s presentation.~~reflecting this change, including historical periods, on a comparable basis. This change does not have an impact onto the Consolidated Financial Statements. See Note ~~16,~~18, Segment Information & Geographic Data for additional information related to each segment’s results.

Note 2 Significant Accounting Policies

~~Recently Issued~~For a discussion of our significant accounting policies, see Note 2, Significant Accounting ~~Pronouncements Not Yet Adopted~~Policies within Part II, Item 8. “Financial Statements and Supplementary Data” in the Annual Report on Form 10-K for the year ended December 31, 2021. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2021.

~~In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update 2020-04,~~ ~~Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ (“ASU 2020-04”). Subject to meeting certain criteria, ASU 2020-04 provides optional expedients and exceptions to applying contract modification accounting under existing generally accepted accounting principles for contracts that are modified to address the expected phase out of the London Inter-bank Offered Rate (“LIBOR”). Some of the Company’s contracts with respect to its borrowings and interest rate swap contracts already contain comparable alternative reference rates that would automatically take effect upon the phasing out of LIBOR, while for others, the Company anticipates negotiating comparable replacement rates with its counterparties. At this stage of its contract assessment, the Company does not expect ASU 2020-04 to have a material impact on its consolidated financial statements.

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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.

Revenues for products are generally recognized upon shipment, whereas revenues for services and ~~solutions~~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. In cases where a bundle of products, services, solutions and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue

The following table presents our Net sales disaggregated by product category for each of our segments, AIT and EVM, for the three and nine months ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~ (in millions):


		Three Months Ended													Three Months Ended
		October 2, 2021						September 26, 2020							October 1, 2022						October 2, 2021
Segment	Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total		Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	AIT	$	358	$	28	$	386	$	314	$	25	$	339	AIT	$	392	$	23	$	415	$	354	$	24	$	378
EVM	EVM	882		168		1,050		658		137		795		EVM	772		191		963		886		172		1,058
Corporate, eliminations(1)	Corporate, eliminations(1)	—		—		—		—		(2)		(2)		Corporate, eliminations(1)	—		—		—		—		—		—
Total	Total	$	1,240	$	196	$	1,436	$	972	$	160	$	1,132	Total	$	1,164	$	214	$	1,378	$	1,240	$	196	$	1,436

		Nine Months Ended													Nine Months Ended
		October 2, 2021						September 26, 2020							October 1, 2022						October 2, 2021
Segment	Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total		Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	AIT	$	1,161	$	82	$	1,243	$	898	$	69	$	967	AIT	$	1,184	$	71	$	1,255	$	1,151	$	70	$	1,221
EVM	EVM	2,424		499		2,923		1,786		389		2,175		EVM	2,446		577		3,023		2,434		511		2,945
Corporate, eliminations(1)	Corporate, eliminations(1)	—		(6)		(6)		—		(2)		(2)		Corporate, eliminations(1)	—		—		—		—		(6)		(6)
Total	Total	$	3,585	$	575	$	4,160	$	2,684	$	456	$	3,140	Total	$	3,630	$	648	$	4,278	$	3,585	$	575	$	4,160

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

In addition, refer to Note ~~16,~~18, Segment Information & Geographic Data for Net sales to customers by geographic region.

Performance Obligations

The Company’s remaining performance obligations primarily relate to repair and support services, as well as ~~solutions~~solution offerings. The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was ~~$1,019~~$1,056 million and ~~$974~~$1,033 million, inclusive of deferred revenue, as of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively. On average, remaining performance obligations as of October ~~2, 2021~~1, 2022 and December 31, ~~2020~~2021 are expected to be recognized over a period of approximately two years.

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Contract Balances

Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net. Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next twelve months, and Other long-term assets for revenues expected to be billed thereafter. The total contract asset balances were ~~$11~~$14 million and $10 million as of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively. These contract assets result from timing differences between ~~the~~ billing and ~~delivery schedules of products, services and software,~~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 three and nine months ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020.~~respectively.

Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were ~~$681~~$724 million and ~~$581~~$695 million as of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively. During the three and nine months ended October 1, 2022, the Company recognized $92 million and $329 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2021. During the three and nine months ended October 2, 2021, the Company recognized $74 million and $259 million in revenue, ~~respectively,~~ which was previously included in the beginning balance of deferred revenue as of December 31, 2020. During the three and nine months ended September 26, 2020, the Company recognized $47 million and $204 million in revenue, respectively, which was previously included in the beginning balance of deferred revenue as of December 31, 2019.

Note 4 Inventories

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


		October 2, 2021		December 31, 2020			October 1, 2022		December 31, 2021
Raw materials	Raw materials	$	144	$	117	Raw materials	$	292	$	196
Work in process	Work in process	3		4		Work in process	3		3
Finished goods	Finished goods	291		390		Finished goods	519		292
Total Inventories, net	Total Inventories, net	$	438	$	511	Total Inventories, net	$	814	$	491

Note 5 Business Acquisitions

~~Fetch~~Matrox

On ~~August 9, 2021,~~June 3, 2022, the Company acquired ~~Fetch Robotics, Inc.~~Matrox Electronic Systems Ltd. (“~~Fetch”~~Matrox”), a ~~provider~~developer of ~~autonomous mobile robot solutions for customers who operate in the manufacturing~~advanced machine vision components and ~~warehousing markets.~~software. Through its acquisition of ~~Fetch,~~Matrox, the Company intends to expand its ~~automation solution offerings to customers in the manufacturing, distribution,~~machine vision products and ~~fulfillment industries.~~software offerings.

The acquisition was accounted for under the acquisition method of accounting for business combinations. The Company’s total purchase consideration was ~~$301~~$878 million ~~which consisted~~comprised of ~~$290~~$875 million in cash paid at closing, net of Matrox’s cash on-hand and an additional $3 million of cash that was paid in the ~~fair value~~third quarter 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.2022.

The Company utilized estimated fair values as of ~~August 9, 2021~~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 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.

During the third quarter of 2022, the Company recorded measurement period adjustments to increase customer relationship and technology intangible assets, as well as deferred tax liabilities by $36 million, $4 million and $11 million, respectively. These adjustments, relating to facts and circumstances existing as of the acquisition date, resulted in a $29 million reduction of goodwill. The primary fair value estimates still considered preliminary as of October ~~2, 2021~~1, 2022 include intangible assets and income tax-related items.

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

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Identifiable intangible assets	$	~~114~~297
~~Right-of-use lease asset~~Inventory	1133
~~Inventories~~	6
Other assets acquired	513
Deferred tax liabilities	~~(27)~~(79)
~~Lease liability~~	~~(11)~~

Other liabilities assumed	~~(4)~~(21)
Net assets acquired	$	94243
Goodwill on acquisition	~~207~~635
Total purchase price	$	~~301~~878

The ~~$207~~$635 million of goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned ~~geographic~~global expansion and integration of ~~Fetch~~Matrox into the Company’s ~~manufacturing and warehouse automation~~machine vision offerings.

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


		Fair Value (in millions)		Useful Life (in years)		Fair Value (in millions)		Useful Life (in years)
Customer and other relationships					Customer and other relationships	$	232	11
Technology and patents	Technology and patents	$	100	7	Technology and patents	63		7
Customer and other relationships		5		2
Trade names	Trade names	9		5	Trade names	2		2
Total identifiable intangible assets	Total identifiable intangible assets	$	114		Total identifiable intangible assets	$	297

In connection with the acquisition of ~~Fetch,~~Matrox, the Company granted ~~share-based compensation awards, principally as replacement awards for unvested Fetch stock options,~~$13 million of cash-settled RSUs to certain employees in the form of stock-settled restricted stock units (“stock-settled RSUs”). A total of 40,837 stock-settled RSUs were granted, each with a grant-date fair value of $563.98. The total fair value of approximately $23 million issecond quarter, which are attributable to service to be rendered subsequent to the acquisition and will generally be expensed over a 3-year service period.

The Company has not included unaudited pro forma results, as if ~~Fetch~~Matrox had been acquired as of January 1, ~~2020,~~2021, as doing so would not yield materially different results.

~~Adaptive Vision~~

On May 17, 2021, the Company acquired Adaptive Vision Sp. z o.o. (“Adaptive Vision”), a provider of graphical machine vision software with applications in the manufacturing industry, as well as a provider of libraries and other offerings for machine vision developers. The acquisition was accounted for under the acquisition method of accounting for business combinations. The Company’s cash purchase consideration of $18 million, net of cash on-hand, was primarily allocated to technology-related intangible assets of $13 million and associated deferred tax liabilities, and goodwill of $7 million. The technology-related intangible assets have an estimated useful life of eight years. 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 goodwill, which will be non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned expansion of the Adaptive Vision technologies into new product offerings and markets. The Company has not included unaudited pro forma results, as if Adaptive Vision had been acquired as of January 1, 2020, as doing so would not yield materially different results.

~~Reflexis~~Fetch

During the third quarter of ~~2021,~~2022, the Company finalized the purchase price allocation ~~related to~~for its ~~September 1, 2020~~ acquisition of ~~Reflexis Systems,~~Fetch Robotics, Inc. (“~~Reflexis”~~Fetch”). ~~Before finalizing the purchase price allocation, during the second quarter of 2021, the Company recorded~~The measurement period adjustments ~~consisting of a $9 million increase to~~recorded in the trade name intangible assets and a $4 million increase to deferred tax liabilities. During the third quarter of 2021, the Company recorded its final measurement period adjustment consisting of a $2 million decrease to deferred tax liabilities. These adjustments,current year, all relating to facts and circumstances existing as of the acquisition date, ~~resulted in~~were insignificant.

Antuit.ai

During the third quarter of 2022, the Company recorded measurement period adjustments relating to its acquisition of Antuit Holdings Pte. Ltd. (“Antuit”). The measurement period adjustments, all relating to facts and circumstances existing as of the acquisition date, consisted of a $7 million ~~reduction~~decrease to deferred tax liabilities, a $2 million increase to accounts payable, with an offsetting $5 million decrease to goodwill. The primary fair value estimates still considered preliminary as of ~~goodwill.~~

~~During the second quarter of 2021, the Company also received escrow proceeds of $1 million related~~October 1, 2022 relate to ~~resolution of contractual items resulting from the Reflexis acquisition. These proceeds were reflected as a reduction in purchase price with a corresponding decrease of goodwill.~~

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income tax items.

Acquisition and integration costs

WeThe Company incurred approximately ~~$6 million and $11~~$19 million of acquisition-related costs during the nine months ended October 1, 2022, primarily related to third-party ~~transaction~~ and advisory fees ~~during~~associated with the Matrox acquisition. For the three ~~and nine~~ months ended October ~~2, 2021, respectively, associated with our business acquisitions.~~1, 2022, acquisition-related costs were $1 million. These costs are included within Acquisition and integration costs on the Consolidated ~~Statements~~Statement of Operations.

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Note 6 Goodwill and Other Intangibles

Goodwill

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

AIT EVM Total
Goodwill as of December 31, 2020 $ 228 $ 2,760 $ 2,988
Retail Solutions move to EVM segment, effective January 1, 2021 (59) 59 —
Fetch acquisition — 207 207
Adaptive Vision acquisition — 7 7
Reflexis purchase price allocation adjustments — (7) (7)
Reflexis purchase price reduction — (1) (1)
Goodwill as of October 2, 2021 $ 169 $ 3,025 $ 3,194

~~Other Intangibles, net~~

~~The balances in Other Intangibles, net consisted of the following (in millions):~~

As of October 2, 2021 As of December 31, 2020
Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net
Amortized intangible assets:
Technology and patents $ 851 $ (553) $ 298 $ 739 $ (527) $ 212
Customer and other relationships 624 (484) 140 620 (431) 189
Trade names 63 (45) 18 44 (43) 1
Total $ 1,538 $ (1,082) $ 456 $ 1,403 $ (1,001) $ 402

During the three months ended October 2, 2021 and September 26, 2020, the Company recognized amortization expense of $29 million and $20 million, respectively. During the nine months ended October 2, 2021 and September 26, 2020, the Company recognized amortization expense of $81 million and $52 million, respectively.

~~As of October 2, 2021, estimated future intangible asset amortization expense is as follows (in millions):~~

2021 (remaining 3 months) $ 31
2022 110
2023 64
2024 62
2025 62
Thereafter 127
Total $ 456


	AIT		EVM		Total
Goodwill as of December 31, 2021	$	169	$	3,096	$	3,265
Matrox acquisition	—		635		635
Fetch purchase price allocation adjustments	—		2		2
Antuit purchase price allocation adjustments	—		(5)		(5)
Foreign exchange impact	—		(6)		(6)
Goodwill as of October 1, 2022	$	169	$	3,722	$	3,891

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

Other Intangibles, net

The balances in Other Intangibles, net consisted of the following (in millions):


	As of October 1, 2022						As of December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Technology and patents	$	950	$	(605)	$	345	$	889	$	(566)	$	323
Customer and other relationships	859		(562)		297		631		(503)		128
Trade names	66		(49)		17		64		(46)		18
Total	$	1,875	$	(1,216)	$	659	$	1,584	$	(1,115)	$	469

Amortization expense was $39 million and $29 million during the three months ended October 1, 2022 and October 2, 2021, respectively, and $107 million and $81 million during the nine months ended October 1, 2022 and October 2, 2021, respectively.

As of October 1, 2022, estimated future intangible asset amortization expense is as follows (in millions):



2022 (remaining 3 months)	$	29
2023	102
2024	98
2025	96
2026	93
Thereafter	241
Total	$	659

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Note 7 Investments

The carrying value of the Company’s venture investments was ~~$91~~$113 million and ~~$77~~$101 million as of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively, which are included in Other long-term assets on the Consolidated Balance Sheets.

During the three and nine months ended October 1, 2022, the Company paid $6 million and $12 million for the purchases of long-term investments, respectively. Comparatively, during the three and nine months ended October 2, 2021, the Company paid $7 million and $24 million for the purchases of new long-term investments, respectively. Comparatively, during the nine months ended September 26, 2020, the Company paid $32 million for the purchases of long term investments, which primarily related to the acquisition of additional shares in an existing investment in the second quarter of 2020. In connection with that additional investment, during the second quarter of 2020, the Company identified an observable price change that resulted in a $7 million gain.

Net gains and losses related to the Company’s investments are included within Other (expense) income, net on the Consolidated Statements of Operations. The Company ~~recognized~~did not recognize any net gains ~~of $1 million each~~or losses during the three and nine months ended October ~~2, 2021 and September 26, 2020, respectively.~~1, 2022. The Company recognized net gains of $1 million ~~and $8 million~~ during the three and nine months ended October 2, ~~2021 and September 26, 2020, respectively.~~2021.

Note 8 Exit and Restructuring Costs

In the third quarter of 2022, the Company committed to certain leased site rationalization and organizational changes designed to generate structural cost efficiencies (collectively referred to as the “2022 Productivity Plan”). Exit and restructuring charges associated with the 2022 Productivity Plan are expected to be at least $10 million and be completed by the end of 2023. For the three months ended October 1, 2022, the Company recorded $2 million primarily related to facility site exits and employee severance.

Note 89 Fair Value Measurements

Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with Accounting Standards Codification (“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. It establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

•Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs (e.g. U.S. Treasuries and money market funds).

•Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.

•Level 3: Unobservable inputs are used when little or no market data is available. 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 addition, the Company considers counterparty credit risk in the assessment of fair value.

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The Company’s financial assets and liabilities carried at fair value as of October ~~2, 2021,~~1, 2022, are classified below (in millions):


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Foreign exchange contracts (1)	Foreign exchange contracts (1)	$	—	$	22	$	—	$	22	Foreign exchange contracts (1)	$	5	$	37	$	—	$	42

Forward interest rate swap contracts (2)										Forward interest rate swap contracts (2)	—		76		—		76
Money market investments related to deferred compensation plan	Money market investments related to deferred compensation plan	35		—		—		35		Money market investments related to deferred compensation plan	32		—		—		32
Total Assets at fair value	Total Assets at fair value	$	35	$	22	$	—	$	57	Total Assets at fair value	$	37	$	113	$	—	$	150
Liabilities:	Liabilities:									Liabilities:
Foreign exchange contracts (1)		$	1	$	—	$	—	$	1
Forward interest rate swap contracts (2)		—		29		—		29

Liabilities related to the deferred compensation plan	Liabilities related to the deferred compensation plan	35		—		—		35		Liabilities related to the deferred compensation plan	32		—		—		32
Total Liabilities at fair value	Total Liabilities at fair value	$	36	$	29	$	—	$	65	Total Liabilities at fair value	$	32	$	—	$	—	$	32

The Company’s financial assets and liabilities carried at fair value as of December 31, ~~2020,~~2021, are classified below (in millions):


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:

Foreign exchange contracts (1)										Foreign exchange contracts (1)	$	—	$	23	$	—	$	23

Money market investments related to deferred compensation plan	Money market investments related to deferred compensation plan	$	30	$	—	$	—	$	30	Money market investments related to deferred compensation plan	37		—		—		37
Total Assets at fair value	Total Assets at fair value	$	30	$	—	$	—	$	30	Total Assets at fair value	$	37	$	23	$	—	$	60
Liabilities:	Liabilities:									Liabilities:
Foreign exchange contracts (1)		$	3	$	34	$	—	$	37

Forward interest rate swap contracts (2)	Forward interest rate swap contracts (2)	—		46		—		46		Forward interest rate swap contracts (2)	$	—	$	16	$	—	$	16
Liabilities related to the deferred compensation plan	Liabilities related to the deferred compensation plan	30		—		—		30		Liabilities related to the deferred compensation plan	37		—		—		37
Total Liabilities at fair value	Total Liabilities at fair value	$	33	$	80	$	—	$	113	Total Liabilities at fair value	$	37	$	16	$	—	$	53

(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 hedges against net assets is calculated at the period-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at year end (Level 2). If this is the case, the fair value is calculated at the rate at which the hedge is being settled (Level 1).

(2)The fair value of forward interest rate swaps is based upon a valuation model that uses relevant observable market inputs at the quoted intervals, such as forward yield curves, and is adjusted for the Company’s credit risk and the interest rate swap terms.

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Note 910 Derivative Instruments

In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. The Company does not hold or issue derivatives for trading or speculative purposes.

In accordance with ASC 815, the Company recognizes derivative instruments as either assets or liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its derivative instruments (in millions):


		Asset (Liability)						Asset (Liability)
			Fair Values as of						Fair Values as of
		Balance Sheet Classification	October 2, 2021		December 31, 2020			Balance Sheet Classification	October 1, 2022		December 31, 2021
Derivative instruments designated as hedges:	Derivative instruments designated as hedges:						Derivative instruments designated as hedges:
Foreign exchange contracts	Foreign exchange contracts	Prepaid expenses and other current assets	$	22	$	—	Foreign exchange contracts	Prepaid expenses and other current assets	$	37	$	23
Foreign exchange contracts		Accrued liabilities	—		(34)

Total derivative instruments designated as hedges	Total derivative instruments designated as hedges		$	22	$	(34)	Total derivative instruments designated as hedges		$	37	$	23

Derivative instruments not designated as hedges:	Derivative instruments not designated as hedges:						Derivative instruments not designated as hedges:

Foreign exchange contracts	Foreign exchange contracts	Accrued liabilities	$	(1)	$	(3)	Foreign exchange contracts	Prepaid expenses and other current assets	$	5	$	—
Forward interest rate swaps	Forward interest rate swaps	Accrued liabilities	(17)		(17)		Forward interest rate swaps	Prepaid expenses and other current assets	18		—
Forward interest rate swaps	Forward interest rate swaps	Other long-term liabilities	(12)		(29)		Forward interest rate swaps	Other long-term assets	58		—

Forward interest rate swaps							Forward interest rate swaps	Accrued liabilities	—		(15)
Forward interest rate swaps							Forward interest rate swaps	Other long-term liabilities	—		(1)
Total derivative instruments not designated as hedges	Total derivative instruments not designated as hedges		$	(30)	$	(49)	Total derivative instruments not designated as hedges		$	81	$	(16)
Total net derivative liability			$	(8)	$	(83)
Total net derivative asset							Total net derivative asset		$	118	$	7

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


		Gains (Losses) Recognized in Income										Gains (Losses) Recognized in Income
			Three Months Ended				Nine Months Ended						Three Months Ended				Nine Months Ended
		Statements of Operations Classification	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			Statements of Operations Classification	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Derivative instruments not designated as hedges:	Derivative instruments not designated as hedges:										Derivative instruments not designated as hedges:
Foreign exchange contracts	Foreign exchange contracts	Foreign exchange loss	$	1	$	(1)	$	1	$	(9)	Foreign exchange contracts	Foreign exchange gain (loss)	$	9	$	1	$	17	$	1
Forward interest rate swaps	Forward interest rate swaps	Interest expense, net	(1)		(4)		4		(46)		Forward interest rate swaps	Interest income (expense), net	39		(1)		84		4
Total gains (losses) recognized in income			$	—	$	(5)	$	5	$	(55)
Total gain (loss) recognized in income											Total gain (loss) recognized in income		$	48	$	—	$	101	$	5

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

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Credit and Market Risk Management

Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The Company’s counterparties are commercial banks with expertise in derivative financial instruments. The Company evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by considering

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reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of the Company’s credit policies are designed to mitigate concentrations of credit risk.

The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. We present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place, on a net basis on the Consolidated Balance Sheets. If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions ~~each~~ would have been unchanged as of October ~~2, 2021~~1, 2022 and increased by $1 million as of December 31, ~~2020.~~2021.

Foreign Currency Exchange Risk Management

The Company conducts business on a multinational basis in a variety of foreign currencies. Exposure to market risk for changes in foreign currency exchange rates arises primarily from Euro-denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets ~~to the fullest extent possible~~ and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.

The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations. Realized amounts reclassified to Net sales were $29 million and $5 million of gains ~~and $8 million of losses~~ for the three months ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ respectively. Realized amounts reclassified to Net sales were $72 million of gains and $15 million of losses ~~and $6 million of gains~~ for the nine months ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ respectively. As of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, the notional amounts of the Company’s foreign exchange cash flow hedges were ~~€637~~€405 million and ~~€585~~€675 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined that they are highly effective.

The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to net assets denominated in foreign currencies. These forward contracts typically mature within one month after execution. Monetary gains and losses on these forward contracts are recorded in income and are generally offset by the transaction gains and losses related to their net asset positions. The notional values and the net fair ~~value~~values of these outstanding contracts ~~are~~were as follows (in millions):


		October 2, 2021		December 31, 2020			October 1, 2022		December 31, 2021
Notional balance of outstanding contracts:	Notional balance of outstanding contracts:					Notional balance of outstanding contracts:
British Pound/U.S. Dollar	British Pound/U.S. Dollar	£	2	£	10	British Pound/U.S. Dollar	£	16	£	13
Euro/U.S. Dollar	Euro/U.S. Dollar	€	91	€	123	Euro/U.S. Dollar	€	219	€	142

Euro/Czech Koruna	Euro/Czech Koruna	€	17	€	—	Euro/Czech Koruna	€	15	€	16

Japanese Yen/U.S. Dollar		¥	—	¥	354

Singapore Dollar/U.S. Dollar	Singapore Dollar/U.S. Dollar	S$	15	S$	12	Singapore Dollar/U.S. Dollar	S$	8	S$	16
Mexican Peso/U.S. Dollar	Mexican Peso/U.S. Dollar	Mex$	85	Mex$	36	Mexican Peso/U.S. Dollar	Mex$	293	Mex$	64

Polish Zloty/U.S. Dollar	Polish Zloty/U.S. Dollar	zł	96	zł	—	Polish Zloty/U.S. Dollar	zł	25	zł	103
Net fair value of liabilities of outstanding contracts		$	1	$	3
Net fair value of assets of outstanding contracts						Net fair value of assets of outstanding contracts	$	5	$	—

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Interest Rate Risk Management

The Company’s debt consists of borrowings under a term loan (“Term Loan A”), Revolving Credit Facility, and Receivables Financing Facilities, which bear interest at variable rates plus applicable margins. As a result, the Company is exposed to market risk associated with the variable interest rate payments on these borrowings. See Note ~~10,~~11, Long-Term Debt for further details about 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.

~~In December 2017, the~~

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The Company ~~entered into a~~has 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, ~~for its debt facilities~~which is subject to monthly net cash settlements effective through December 2022.

The Company also previously held fixed LIBOR interest ~~payments. Under the terms of the agreement,~~rate swaps with an $800 million ~~in variable-rate debt will be swapped for a fixed~~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 ~~with net settlement terms starting in December 2018~~swaps and ~~ending in December 2022. During the third quarter of 2019, the Company~~ entered into ~~additional long-term forward~~new interest rate swap agreements ~~with~~that contain a total notional amount of $800 million ~~containing~~to lock into a fixed SOFR interest rate base and will be subject to monthly net ~~settlement terms, which start~~cash settlements effective in December 2022 and ~~end~~ending in ~~August 2024.~~ October 2027.

The ~~additional interest rate swap agreements effectively extend the risk management initiative of the Company to coincide with the maturities of Term Loan A and the Revolving Credit Facility. These~~Company’s interest rate swaps are not designated as hedges and changes in fair value are recognized immediately as Interest ~~expense,~~income (expense), net on the Consolidated Statements of Operations.

Note 1011 Long-Term Debt

The following table shows the carrying value of the Company’s debt (in millions):


		October 2, 2021		December 31, 2020			October 1, 2022		December 31, 2021
Term Loan A	Term Loan A	$	888	$	917	Term Loan A	$	1,739	$	888
2020 Term Loan		—		100

Revolving Credit Facility						Revolving Credit Facility	248		—
Receivables Financing Facilities	Receivables Financing Facilities	108		235		Receivables Financing Facilities	183		108

Total debt	Total debt	$	996	$	1,252	Total debt	$	2,170	$	996
Less: Debt issuance costs	Less: Debt issuance costs	(3)		(5)		Less: Debt issuance costs	(4)		(3)
Less: Unamortized discounts	Less: Unamortized discounts	(2)		(2)		Less: Unamortized discounts	(5)		(2)
Less: Current portion of debt	Less: Current portion of debt	(51)		(364)		Less: Current portion of debt	(144)		(69)
Total long-term debt	Total long-term debt	$	940	$	881	Total long-term debt	$	2,017	$	922

As of October ~~2, 2021,~~1, 2022, the future maturities of debt are as follows (in millions):


2021		$	—
2022		70
2022 (remaining 3 months)				2022 (remaining 3 months)	$	11
2023	2023	81		2023	144
2024	2024	845		2024	127

2025				2025	66
2026				2026	87
Thereafter				Thereafter	1,735
Total future debt maturities	Total future debt maturities	$	996	Total future debt maturities	$	2,170

All borrowings as of October ~~2, 2021~~1, 2022 were denominated in U.S. Dollars.

The estimated fair value of the Company’s debt approximated ~~$1.0~~$2.1 billion and ~~$1.3~~$1.0 billion as of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of ~~the~~ debt ~~may~~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. 3”). 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.

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Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in ~~March~~December 2022 and the majority due upon the ~~August 9, 2024~~May 25, 2027 maturity date. The Company may make prepayments, in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions. As of October ~~2, 2021,~~1, 2022, the Term Loan A interest rate was ~~1.33%~~3.10%. Interest payments are generally made monthly and are subject to variable rates plus an applicable margin.

Revolving Credit Facility

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

~~2020 Term Loan~~

~~In September 2020,~~credit. As of October 1, 2022, the Company ~~entered into a new $200~~had letters of credit totaling $7 million, ~~term loan (“2020 Term Loan”), with~~which reduced funds available for borrowings under the ~~proceeds used~~Revolving Credit Facility from $1,500 million to ~~partly fund~~$1,493 million. As of October 1, 2022, the ~~acquisition~~Revolving Credit Facility had an average interest rate of ~~Reflexis.~~4.17%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The ~~Company repaid $100 million of principal in the fourth quarter of 2020 and repaid the remaining $100 million of principal in the first quarter of 2021.~~Revolving Credit Facility matures on May 25, 2027.

Receivables Financing Facilities

The Company has 2two Receivables Financing Facilities with financial institutions that have a combined total borrowing limit of up to $280 million. As collateral, the Company pledges perfected first-priority security interests in its U.S. domestically originated accounts receivable. The Company has accounted for transactions under its Receivables Financing Facilities as secured borrowings. The Company’s first Receivables Financing Facility allows for borrowings of up to $180 million and matures on March 19, 2024. The Company’s second Receivable Financing Facility allows for borrowings of up to $100 million and matures on May ~~16, 2022.~~15, 2023.

As of October ~~2, 2021,~~1, 2022, the Company’s Consolidated Balance Sheets included ~~$605~~$773 million of receivables that were pledged under the 2two Receivables Financing Facilities. As of October ~~2, 2021, $108~~1, 2022, $183 million had been borrowed, of which ~~$13~~$100 million was classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable margin. As of October ~~2, 2021,~~1, 2022, the Receivables Financing Facilities had an average interest rate of ~~0.96%~~4.04%. Interest is paid on these borrowings on a monthly basis.

~~Revolving Credit Facility~~

The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of October 2, 2021, the Company had letters of credit totaling $7 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1 billion to $993 million. No borrowings were outstanding under the Revolving Credit Facility as of October 2, 2021. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The Revolving Credit Facility matures on August 9, 2024.

~~Uncommitted Short-Term Credit Facility~~

The Company had also entered into an uncommitted short-term credit facility (“Uncommitted Facility”) in August 2020 allowing for borrowings of up to $20 million. The Uncommitted Facility matured on August 26, 2021 and was not utilized by the Company.

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

The Company uses interest rate swaps to manage the interest rate risk associated with its debt. See Note 910, Derivative Instruments for further information.

As of October ~~2, 2021,~~1, 2022, the Company was in compliance with all debt covenants.

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Note 1112 Leases

During the three months ended October 1, 2022, the Company recorded an additional $14 million of right-of-use (“ROU”) assets obtained in exchange for lease obligations primarily related to the extension of two distribution center lease agreements.

Future minimum lease payments under non-cancellable leases as of October 1, 2022 were as follows (in millions):


2022 (remaining 3 months)	$	8
2023	46
2024	44
2025	32
2026	25
Thereafter	64
Total future minimum lease payments	$	219
Less: Interest	(34)
Present value of lease liabilities	$	185

Reported as of October 1, 2022:
Current portion of lease liabilities	$	35
Long-term lease liabilities	150
Present value of lease liabilities	$	185

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

Note 13 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

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


	October 1, 2022		December 31, 2021
Settlement and related costs	$	180	$	—
Payroll and benefits	86		96
Incentive compensation	78		155
Warranty	27		26
Customer rebates	44		51
Leases	35		33
Unremitted cash collections due to banks on factored accounts receivable	113		141

Short-term interest rate swaps	—		15
Freight and duty	40		45
Other	72		77
Accrued liabilities	$	675	$	639

Warranties

The following table is a summary of the Company’s accrued warranty obligations ~~which are included in Accrued liabilities on the Consolidated Balance Sheets~~ (in millions):

Nine Months Ended
October 2,
2021 September 26,
2020
Balance at the beginning of the period $ 24 $ 21
Warranty expense 25 22
Warranties fulfilled (23) (20)
Balance at the end of the period $ 26 $ 23


	Nine Months Ended
	October 1, 2022		October 2, 2021
Balance at the beginning of the period	$	26	$	24
Warranty expense	23		25
Warranties fulfilled	(22)		(23)
Balance at the end of the period	$	27	$	26

1920

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Contingencies

The Company is subject to a variety of investigations, claims, suits, and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort, and breach of contract matters. The Company currently believes that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on its business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and the Company’s view of these matters and their potential effects may change in the future. The Company records a liability for contingencies when a loss is deemed to be probable and the loss can be reasonably estimated.

~~In 2020,~~During the second quarter of 2022, the Company ~~received approval~~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 ~~its exclusion request of customs duties that had been paid on certain products under Section 301~~$360 million and entered into a royalty-free cross-license with respect to each party’s existing patent portfolio for the lives of the ~~U.S. Trade Act~~licensed patents. Based on the terms of ~~1974 from September 1, 2019 through September 1, 2020~~the Settlement and ~~commenced~~ a ~~process to request recovery~~relative fair value analysis of ~~previously assessed amounts. Recoveries are recognized when~~each of the settlement provisions, the Company ~~has completed all regulatory filing requirements~~concluded that no significant portion of the payment resulted in a future benefit, and ~~determined that receipt of amounts is virtually certain. Recoveries totaling~~as such, the full $360 million was recorded as a charge in the second quarter. That charge, along with $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. During the nine months ended October 2, 2021, the Company recorded recoveries of $16 million, of which $9 million related to our AIT segment and $7 million related to our EVM segment. Recoveries during the three months ended October 2, 2021 were not significant. Both the initially incurred costsexternal legal fees, is reflected within Settlement and related ~~recoveries were included within Cost of sales for Tangible products~~costs on the Consolidated ~~Statements~~Statement of Operations. The ~~Company believes~~payment terms under the Settlement consist of 8 quarterly payments of $45 million that ~~it has recovered substantially all of~~began in the ~~import duties that it expects to receive~~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 ~~previously paid amounts. The final amounts and~~ the ~~timings of any~~Consolidated Balance Sheets. See Item 1, Legal Proceedings for additional ~~recoveries remain uncertain and, therefore, the Company has not recorded any amounts related to potential future recoveries in its financial statements as of October 2, 2021.~~information.

Note 1214 Income Taxes

The Company’s effective tax rate for the three and nine months ended October ~~2, 2021~~1, 2022 was ~~12.7%~~23.4% and ~~12.9%~~13.2%, respectively, compared to ~~15.9%~~12.7% and ~~11.3%, respectively,~~12.9% for the ~~comparable periods~~three and nine months ended ~~September 26, 2020. In both~~October 2, 2021, respectively. For the ~~current and prior year periods,~~three months ended October 1, 2022, the variance from the 21% federal statutory rate was primarily attributable to unfavorable impacts from return to provision adjustments. For the ~~benefits of~~nine months ended October 1, 2022, the variance from the 21% federal statutory rate was primarily attributable to a discrete tax benefit resulting from the Settlement and related costs recorded in the second quarter, lower tax rates on foreign earnings, and U.S. tax credits. In the prior period, the variance from the 21% federal statutory rate was primarily attributable to share-based compensation deductions, lower tax rates on foreign earnings and U.S. tax credits. In addition, the three and nine months ended October 2, 2021 include the benefit of a foreign-derived intangible income deduction in the U.S. The ~~nine month~~nine-month period ended October 2, 2021 also benefited from the remeasurement of deferred tax assets associated with the enactment of a corporate tax rate increase in the U.K. during the second quarter of 2021.

The Company ~~is continually monitoring~~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 year. Management continues to monitor guidance regarding these laws and developments related to other coronavirus tax relief throughout the world for potential impacts.

The Company earns a significant amount of its operating income outside of the U.S that is taxed at rates different than the U.S. federal statutory rate. The Company’s principal foreign jurisdictions that provide sources of operating income are the U.K. and Singapore. During the second quarter of 2021, the U.K. government enacted a change in law that increases the corporate tax rate from 19% to 25%, with such rate change becoming effective in April 2023. Upon enactment, we remeasured our deferred tax assets to reflect the 25% statutory rate to the extent such tax benefits are expected to be realized in the future at the amended statutory rate. In addition, theThe Company has received an incentivized tax rate from the Singapore Economic Development Board, which reduces the income tax rate in that jurisdiction effective for calendar years 2019 to 2023. The Company has committed to making additional investments in Singapore over the period 2019 to 2022. 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 is not permanently reinvested with respect to its U.S. directly-owned foreign subsidiaries. The Company is subject to U.S. income tax on substantially all foreign earnings under ~~the~~ Global Intangible Low-Taxed Income, ~~provisions of the Tax Cuts and Jobs Act (the “Act”),~~ while any remaining foreign earnings are eligible for a dividends received ~~deduction under the Act.~~deduction. As a result, future repatriation of earnings will not be subject to additional U.S. federal income tax but may be subject to currency translation gains or losses. Where required, the Company has recorded a deferred tax liability for foreign withholding taxes on current earnings. Additionally, gains and losses on any future taxable dispositions of U.S.-owned foreign affiliates continue to be subject to U.S. income tax.

Management evaluates all jurisdictions based on historical pre-tax earnings and taxable income to determine the need for valuation allowances on a quarterly basis. Based on this analysis, a valuation allowance has been recorded for any jurisdictions

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where, in the Company’s judgment, tax benefits are not expected to be realized. There were no significant changes to our valuation ~~allowance~~allowances during the three and nine months ended October ~~2, 2021.~~

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1, 2022.

Uncertain Tax Positions

The Company is currently undergoing U.S. federal income tax audits for tax years ~~2017 and~~2016 through 2018. Additionally, fiscal years ~~2004~~2009 through ~~2018~~2022 remain open to examination by multiple foreign and U.S. state taxing jurisdictions. As of October ~~2, 2021, no significant uncertain~~1, 2022, management believes that it is reasonably possible that the recorded amount of unrecognized tax ~~positions are expected to be settled~~benefits may decrease by approximately $2 million within the next twelve ~~months.~~months as a result of concluding various domestic tax matters. 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.

Note 1315 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. Diluted earnings per share is computed by dividing net income by the weighted average number of shares assuming dilution. Dilutive common shares outstanding is computed using the Treasury Stock method and, in periods of income, reflects the additional shares that would be outstanding if dilutive share-based compensation awards were converted into common shares during the period.

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Basic:	Basic:									Basic:
Net income	Net income	$	199	$	116	$	646	$	305	Net income	$	170	$	199	$	277	$	646
Weighted-average shares outstanding	Weighted-average shares outstanding	53,418,055		53,300,036		53,449,239		53,460,891		Weighted-average shares outstanding	51,834,236		53,418,055		52,387,838		53,449,239
Basic earnings per share	Basic earnings per share	$	3.72	$	2.18	$	12.08	$	5.70	Basic earnings per share	$	3.28	$	3.72	$	5.29	$	12.08

Diluted:	Diluted:									Diluted:
Net income	Net income	$	199	$	116	$	646	$	305	Net income	$	170	$	199	$	277	$	646
Weighted-average shares outstanding	Weighted-average shares outstanding	53,418,055		53,300,036		53,449,239		53,460,891		Weighted-average shares outstanding	51,834,236		53,418,055		52,387,838		53,449,239
Dilutive shares	Dilutive shares	448,504		416,270		462,574		486,895		Dilutive shares	323,616		448,504		368,793		462,574
Diluted weighted-average shares outstanding	Diluted weighted-average shares outstanding	53,866,559		53,716,306		53,911,813		53,947,786		Diluted weighted-average shares outstanding	52,157,852		53,866,559		52,756,631		53,911,813
Diluted earnings per share	Diluted earnings per share	$	3.69	$	2.16	$	11.98	$	5.65	Diluted earnings per share	$	3.26	$	3.69	$	5.25	$	11.98

Anti-dilutive share-based compensation awards are excluded from diluted earnings per share calculations. There were 195,922 and 169,810 shares that were anti-dilutive for the three and nine months ended October 1, 2022, respectively. There were 25,355 and 8,391 shares that were anti-dilutive for the three and nine months ended October 2, ~~2021. There were 74,588 and 105,219 shares that were anti-dilutive for the three and nine months ended September 26, 2020,~~2021, respectively.

Note 1416 Accumulated Other Comprehensive Income (Loss)

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

•Unrealized gain (loss) on anticipated sales hedging transactionsrelates 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 9,10, 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. Dollar. The Company is required to translate the subsidiary functional currency financial statements to U.S. Dollars using a combination of historical, period end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of AOCI.

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The components of AOCI for the nine months ended October 1, 2022 and October 2, 2021 ~~and September 26, 2020~~ are 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 income (loss) before reclassifications		(11)		(4)		(15)
Amounts reclassified from AOCI(1)		(6)		—		(6)
Tax effect		3		—		3
Other comprehensive loss, net of tax		(14)		(4)		(18)
Balance at September 26, 2020		$	(12)	$	(50)	$	(62)
									Unrealized gain (loss) on sales hedging transactions		Foreign currency translation adjustments		Total
Balance at December 31, 2020	Balance at December 31, 2020	$	(28)	$	(41)	$	(69)	Balance at December 31, 2020	$	(28)	$	(41)	$	(69)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	41		(5)		36		Other comprehensive income (loss) before reclassifications	41		(5)		36
Amounts reclassified from AOCI(1)	Amounts reclassified from AOCI(1)	15		—		15		Amounts reclassified from AOCI(1)	15		—		15
Tax effect	Tax effect	(10)		—		(10)		Tax effect	(10)		—		(10)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	46		(5)		41		Other comprehensive income (loss), net of tax	46		(5)		41
Balance at October 2, 2021	Balance at October 2, 2021	$	18	$	(46)	$	(28)	Balance at October 2, 2021	$	18	$	(46)	$	(28)

Balance at December 31, 2021								Balance at December 31, 2021	$	18	$	(47)	$	(29)
Other comprehensive income (loss) before reclassifications								Other comprehensive income (loss) before reclassifications	86		(16)		70
Amounts reclassified from AOCI(1)								Amounts reclassified from AOCI(1)	(72)		—		(72)
Tax effect								Tax effect	(3)		—		(3)
Other comprehensive income (loss), net of tax								Other comprehensive income (loss), net of tax	11		(16)		(5)
Balance at October 1, 2022								Balance at October 1, 2022	$	29	$	(63)	$	(34)

(1) See Note 9,10, Derivative Instruments regarding timing of reclassifications to operating results.

Note 1517 Accounts Receivable Factoring

The Company has Receivables Factoring arrangements, pursuant to which certain receivables are sold to banks without recourse in exchange for cash. Transactions under the Receivables Factoring arrangements are accounted for as sales under ASC 860, Transfers and Servicing of Financial Assets, with the sold receivables removed from the Company’s balance sheet. Under these Receivables Factoring arrangements, the Company does not maintain any beneficial interest in the receivables sold. The banks’ purchase of eligible receivables is subject to a maximum amount of uncollected receivables. The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables. 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) provided by~~used in financing activities on the Consolidated Statements of Cash Flows.

~~During the second quarter of 2021, 1 of the Company’s Receivables Factoring arrangements that was no longer actively utilized expired.~~The Company currently has ~~2 remaining~~two active Receivables Factoring arrangements. One arrangement allows for the factoring of up to ~~$50~~$25 million of uncollected receivables originated from the ~~EMEA~~Europe, Middle East, and Africa (“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 ismay 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$11 million and ~~$24~~$12 million as of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

During the nine months ended October 1, 2022 and October 2, 2021, ~~and September 26, 2020,~~ the Company received cash proceeds of ~~$1,161~~$1,135 million and ~~$857~~$1,161 million, respectively, from the sales of accounts receivables under its factoring arrangements.As of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, there were a total of ~~$23~~$55 million and ~~$70~~$24 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had ~~$120~~$113 million and ~~$142~~$141 million of obligations that were not yet remitted to banks as of October ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively. 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) ~~provided by~~ financing activities on the Consolidated Statements of Cash ~~Flows.~~

~~Fees~~Flows.Fees incurred in connection with these arrangements were not significant.

2223

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Note 1618 Segment Information & Geographic Data

The Company’s operations consist of 2two reportable segments: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”). The reportable segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources among the Company’s segments. The CODM reviews adjusted operating income to assess segment profitability. 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 and ~~product sourcing diversification costs.~~related costs in the current year). Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Effective January 1, ~~2021, Retail Solutions~~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. ~~Prior period~~We have reported our results ~~have been revised to conform to the current segment presentation.~~reflecting this change, including historical periods, on a comparable basis. This change ~~does~~did not have an impact onto the Consolidated Financial Statements.

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net sales:	Net sales:									Net sales:
AIT	AIT	$	386	$	339	$	1,243	$	967	AIT	$	415	$	378	$	1,255	$	1,221
EVM	EVM	1,050		795		2,923		2,175		EVM	963		1,058		3,023		2,945
Total segment Net sales	Total segment Net sales	1,436		1,134		4,166		3,142		Total segment Net sales	1,378		1,436		4,278		4,166
Corporate, eliminations(1)	Corporate, eliminations(1)	—		(2)		(6)		(2)		Corporate, eliminations(1)	—		—		—		(6)
Total Net sales	Total Net sales	$	1,436	$	1,132	$	4,160	$	3,140	Total Net sales	$	1,378	$	1,436	$	4,278	$	4,160
Operating income:	Operating income:									Operating income:
AIT(2)	AIT(2)	$	77	$	78	$	283	$	212	AIT(2)	$	83	$	78	$	240	$	289
EVM(2)	EVM(2)	195		121		571		305		EVM(2)	161		194		531		565
Total segment operating income	Total segment operating income	272		199		854		517		Total segment operating income	244		272		771		854
Corporate, eliminations(1)		(35)		(49)		(98)		(97)
Corporate eliminations(1)										Corporate eliminations(1)	(42)		(35)		(502)		(98)
Total Operating income	Total Operating income	$	237	$	150	$	756	$	420	Total Operating income	$	202	$	237	$	269	$	756

(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 and ~~product sourcing diversification costs.~~related costs in the current year).

(2)AIT and EVM segment operating income includes depreciation and share-based compensation expense. The amounts of depreciation and share-based compensation expense attributable to AIT and EVM are proportionate to each segment’s Net sales.

Information regarding the Company’s operations by geographic area is contained in the following ~~table.~~tables. Net sales amounts are attributed to geographic area based on customer location. We manage our business based on regions rather than by individual countries.

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Geographic data for Net sales is as follows (in millions):

Three Months Ended Nine Months Ended
October 2,
2021 September 26,
2020 October 2,
2021 September 26,
2020
North America $ 728 $ 629 $ 2,108 $ 1,650
EMEA 504 340 1,458 1,034
Asia-Pacific 135 115 392 322
Latin America 69 48 202 134
Total Net sales $ 1,436 $ 1,132 $ 4,160 $ 3,140

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~~Note 17 Subsequent Event~~

On October 7, 2021, the Company acquired Antuit Holdings Pte. Ltd. (“Antuit”), a provider of demand-sensing and pricing optimization software solutions for retail and consumer products companies. The purchase consideration was approximately $145 million, net of cash acquired, which was funded with cash on hand. The acquired business will become part of the EVM segment.


	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
North America	$	690	$	728	$	2,103	$	2,108
EMEA	456		504		1,477		1,458
Asia-Pacific	158		135		459		392
Latin America	74		69		239		202
Total Net sales	$	1,378	$	1,436	$	4,278	$	4,160


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader respected for innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry. We design, manufacture, and sell a broad range of products and solutions, including cloud-based software subscriptions, that capture and move data. These products and solutions include mobile computers; barcode scanners and imagers; radio frequency identification device (“RFID”) readers; specialty printers for barcode labeling and personal identification; fixed industrial scanning and machine vision; real-time location systems (“RTLS”); related accessories and supplies, such as self-adhesive labels and other consumables; and related software applications. We also provide a full range of services, including maintenance, technical support, ~~and~~ repair, managed and professional ~~services.~~services, as well as various workflow optimization solutions, including cloud-based software subscriptions and robotic automation solutions. End-users of our products, solutions and services include those in the retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries ~~around~~within the ~~world.~~following regions: North America; Europe, Middle East, and Africa (“EMEA”); Asia-Pacific; and Latin America.

Our customers have traditionally benefited from proven solutions that increase productivity and improve asset efficiency and utilization. The Company is poised to drive, and capitalize on, the evolution of the data capture industry into the broader EAI industry, supported by technology trends including the Internet of Things (“IoT”), ubiquitous mobility, automation, cloud computing, and the increasingly on-demand global economy. EAI solutions offer additional benefits to our customers including real-time, data-driven insights that improve operational visibility and drive workflow optimization.

The Company’s operations consist of two reportable ~~segments:~~segments that provide complementary offerings to our customers: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”).

•The AIT segment is an industry leader in barcode printing and asset tracking technologies. Its major product lines include barcode and card printers, supplies, ~~services,~~including temperature-monitoring labels, and location solutions. Industries served include retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other end markets within the following regions: North America; Europe, Middle East, and Africa (“EMEA”); Asia-Pacific; and Latin America.services.

•The EVM segment is an industry leader in automatic information and data capture solutions. Its major product lines include mobile computing, data capture, location solutions, RFID, fixed industrial scanning and machine vision, services, ~~software-based~~and workflow optimization solutions. Our workflow optimization solutions include cloud-based software subscriptions, retail solutions, and ~~retail~~robotic automation solutions. Industries served include retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other end markets within the following regions: North America; EMEA; Asia-Pacific; and Latin America.

In the first quarter of ~~2021, Retail Solutions,~~2022, the location solutions offering, which provides a range of RTLS and services that generate on-demand information about the physical ~~inventory management solutions with application in the retail industry, including solutions for full store physical inventories, cycle counts~~location and ~~analytics,~~status of high-valued 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 ~~does~~did not have an impact to the Consolidated Financial Statements.

Recent Developments

Restructuring Program

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three months ended October 1, 2022, the Company recorded $2 million primarily related to facility site exits and employee severance.

License and Settlement Agreement

On June 30, 2022, the Company announced it entered into a License and Settlement Agreement (“Settlement”) resulting in a $372 million pre-tax charge, inclusive of $12 million of external legal fees, within Operating expenses on the Consolidated Statement of Operations. Under the Settlement, Zebra agreed to pay $360 million to the counterparty in eight quarterly payments of $45 million which began in the second quarter. See Item 1, Legal Proceedings and Note 13, Accrued Liabilities, Commitments, and Contingencies for additional information.

Matrox Acquisition

On June 3, 2022, the Company acquired Matrox Electronic Systems, Ltd. (“Matrox”) for $878 million in cash, net of Matrox’s cash on-hand. Matrox is a leading provider of advanced machine vision components and software serving a number of end-markets. Through its acquisition of Matrox, the Company intends to expand its machine vision products and software offerings. The operating results of Matrox are included in the EVM segment.

Debt Refinancing

On May 26, 2022, the Company announced that it amended its long-term credit facilities which increased its borrowing under Term Loan A from $875 million to $1.75 billion and also its borrowing capacity under the Revolving Credit Facility from $1 billion to $1.5 billion. As part of the refinancing, the Company extended the maturities of its long-term credit facilities to May 25, 2027 and replaced LIBOR with SOFR as the benchmark reference rate.

Share Repurchase

On May 17, 2022, the Company announced that its Board of Directors authorized an incremental $1 billion share repurchase program of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced in July 2019.

Russia and Ukraine War

On March 5, 2022, we announced the suspension of our business operations in Russia. Neither Russia nor Ukraine comprises a material portion of our business, and therefore, the war thus far has not had a significant effect on our results of operations. Additionally, the war has not significantly affected our ability to source supplies or deliver our products and services to our customers in the surrounding EMEA region. We will continue to monitor this for potential future adverse impacts on our business.

COVID-19 Outbreak

The global coronavirus (“COVID-19”~~or the “pandemic”~~ ) ~~situation~~pandemic continues to ~~be complex and rapidly evolving.~~evolve. Governmental agencies, to varying degrees, have imposed, and continue to impose, several protocols and regulations restricting ~~the physical movement or other~~ activities of individuals in an effort to limit the spread of ~~COVID-19.~~COVID-19 when rates of infection rise, with some relaxation of these measures when infections rates are relatively low. We have implemented a number of measures in an effort to protect our employees’ health and well-being over the course of the pandemic tailored to address the local impacts, including having the majority of office workers work remotely during the height of the pandemic and high risk times and gradually ~~re-introducing office workers~~returning to ~~a return to office,~~offices as restrictions are lifted when risks decrease, limiting employee travel, and implementing more strenuous health and safety measures for hosting and attending in-person industry events. Throughout the pandemic, distribution centers and repair centers have remained open at varying capacity levels to ensure continued support to our customers, many of whom provide essential goods and services to communities. As governments have eased their restrictions, our employees continue to ~~ease their restrictions and we continue~~return to

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~~allow our employees to come back to work in~~ our offices, ~~in a controlled approach, we have~~with modified ~~our~~ business practices, ~~including masking and social distancing protocols~~ consistent with government regulations ~~vaccine verification, health screening, office capacity restrictions~~ and ~~tracking and tracing protocols where applicable, increasing air exchange/ventilation and extensively and frequently disinfecting our workspaces.~~current medical guidance.

The ~~negative impacts~~limited availability of certain product components has resulted in lengthened lead times and higher input costs, including freight, and in some cases, has impacted our ability to ~~Net sales from the pandemic, including declines in~~meet customer ~~demand and supply chain disruptions, were most pronounced in the first half~~demand. The Company expects input costs to remain elevated for some period of ~~2020 and lessened later in 2020 as the global economic recovery took shape. While the ultimate duration~~time, which we believe will be partially mitigated through higher pricing where permitted by market conditions. The limited availability of ~~the pandemic and timing of recovery in each region remains highly uncertain, the~~certain component parts may continue to negatively impact our ability to meet forecasted customer demand. The Company’s 2021 sales and profitability, particularly in the first half of the year, ~~have~~ benefited from pent-up demand from customers who we believe had previously delayed purchases ~~in 2020~~ due to the pandemic, as well as the resulting acceleration of the underlying trend to digitize and automate workflows. The level of demand for certain product components has resulted in lengthened lead times and higher input costs in the current year, including freight, which have become more significant during the year and, in some cases, have impacted our ability to meet customer demand. The Company expects input costs to remain elevated for some period of time. The availability of certain component parts may include the potential for product shortages which could negatively impact our ability to meet forecasted customer demand should suppliers of necessary parts no longer be able to provide such parts or sufficiently allocate supply among their customers, including the Company.

~~Fetch Acquisition~~

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Other Acquisitions

Antuit.ai: On October 7, 2021, the Company acquired Antuit Holdings Pte. Ltd. (“Antuit”) for $145 million in cash, net of cash acquired. Antuit is a provider of demand-sensing and pricing optimization software solutions for retail and consumer products companies. Through this acquisition, the Company expands its portfolio of software solution offerings to customers in these industries by combining Antuit’s platform with its existing software solutions and EVM products. The operating results of Antuit are included in the EVM segment.

Fetch: On August 9, 2021, the Company acquired Fetch Robotics, Inc. (“Fetch”), for total purchase consideration of $301 million, which consisted of $290 million in cash paid, net of cash acquired, and the fair value of the Company’s existing minority ownership interest in Fetch of $11 million, as remeasured upon acquisition. Fetch is a provider of autonomous mobile robot solutions for customers who operate in the manufacturing, distribution, and ~~warehousing markets.~~fulfillment industries, enabling customers to optimize workflows through robotic automation. Through this acquisition, the Company ~~can help customers, primarily in the manufacturing, distribution, and fulfillment industries, optimize workflows through robotics automation.~~intends to expand its automation solution offerings within these industries. The operating results of Fetch are included within the EVM segment.

Adaptive ~~Vision Acquisition~~

Vision:On May 17, 2021, the Company acquired Adaptive Vision Sp. z o.o. (“Adaptive Vision”), for $18 million in cash, net of cash acquired. Adaptive Vision is a provider of graphical machine vision software with applications in the manufacturing industry, as well as a provider of libraries and other offerings for machine vision developers. The operating results of Adaptive Vision are included within the EVM segment.

~~Reflexis Acquisition~~

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 this acquisition, the Company has enhanced its solutions offerings to customers in these industries by

combining Reflexis’ platform with its existing software solutions and product offerings, further empowering front line workers to execute the next best action using real time data. The operating results of Reflexis are included within the EVM segment.

~~Antuit Acquisition~~

Subsequent to the end of the third quarter, on October 7, 2021, the Company acquired Antuit Holdings Pte. Ltd. (“Antuit”), a provider of demand-sensing and pricing optimization software solutions for retail and consumer products companies. Through this acquisition, the Company further expands its portfolio of software solution offerings to the retail end market, as well as expands its offerings to consumer products companies. The operating results of Antuit will be included in the EVM segment.

~~Table of Contents~~

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)


		Three Months Ended										Nine Months Ended											Three Months Ended										Nine Months Ended
		October 2, 2021			September 26, 2020			$ Change		% Change		October 2, 2021			September 26, 2020			$ Change		% Change			October 1, 2022			October 2, 2021			$ Change		% Change		October 1, 2022			October 2, 2021			$ Change		% Change
Net sales:	Net sales:																					Net sales:
Tangible products	Tangible products	$	1,240		$	972		$	268	27.6	%	$	3,585		$	2,684		$	901	33.6	%	Tangible products	$	1,164		$	1,240		$	(76)	(6.1)	%	$	3,630		$	3,585		$	45	1.3	%
Services and software	Services and software	196			160			36		22.5	%	575			456			119		26.1	%	Services and software	214			196			18		9.2	%	648			575			73		12.7	%
Total Net sales	Total Net sales	1,436			1,132			304		26.9	%	4,160			3,140			1,020		32.5	%	Total Net sales	1,378			1,436			(58)		(4.0)	%	4,278			4,160			118		2.8	%
Gross profit	Gross profit	646			493			153		31.0	%	1,959			1,385			574		41.4	%	Gross profit	628			646			(18)		(2.8)	%	1,939			1,959			(20)		(1.0)	%
Gross margin	Gross margin	45.0		%	43.6		%			140 bps		47.1		%	44.1		%			300 bps		Gross margin	45.6		%	45.0		%			60 bps		45.3		%	47.1		%			(180) bps
Operating expenses	Operating expenses	409			343			66		19.2	%	1,203			965			238		24.7	%	Operating expenses	426			409			17		4.2	%	1,670			1,203			467		38.8	%
Operating income		$	237		$	150		$	87	58.0	%	$	756		$	420		$	336	80.0	%
Operating (loss) income																						Operating (loss) income	$	202		$	237		$	(35)	(14.8)	%	$	269		$	756		$	(487)	(64.4)	%

Net sales to customers by geographic region were as follows (amounts in millions, except percentages):


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		October 2, 2021		September 26, 2020		$ Change		% Change		October 2, 2021		September 26, 2020		$ Change		% Change			October 1, 2022		October 2, 2021		$ Change		% Change		October 1, 2022		October 2, 2021		$ Change		% Change
North America	North America	$	728	$	629	$	99	15.7	%	$	2,108	$	1,650	$	458	27.8	%	North America	$	690	$	728	$	(38)	(5.2)	%	$	2,103	$	2,108	$	(5)	(0.2)	%
EMEA	EMEA	504		340		164		48.2	%	1,458		1,034		424		41.0	%	EMEA	456		504		(48)		(9.5)	%	1,477		1,458		19		1.3	%
Asia-Pacific	Asia-Pacific	135		115		20		17.4	%	392		322		70		21.7	%	Asia-Pacific	158		135		23		17.0	%	459		392		67		17.1	%
Latin America	Latin America	69		48		21		43.8	%	202		134		68		50.7	%	Latin America	74		69		5		7.2	%	239		202		37		18.3	%
Total Net sales	Total Net sales	$	1,436	$	1,132	$	304	26.9	%	$	4,160	$	3,140	$	1,020	32.5	%	Total Net sales	$	1,378	$	1,436	$	(58)	(4.0)	%	$	4,278	$	4,160	$	118	2.8	%

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Operating expenses are summarized below (amounts in millions, except percentages):


		Three Months Ended														Nine Months Ended											Three Months Ended											Nine Months Ended
		October 2, 2021		September 26, 2020				As a % of Net sales								October 2, 2021			September 26, 2020		As a % of Net sales						October 1, 2022				October 2, 2021		As a % of Net sales					October 1, 2022				October 2, 2021		As a % of Net sales
						2021				2020								2021			2020								2022				2021								2022			2021
Selling and marketing	Selling and marketing	$	148			$	119			10.3	%			10.5	%				$	430	$	350		10.3	%			11.1	%	Selling and marketing	$	149	$	148		10.8	%	10.3		%		$	452	$	430		10.6	%	10.3	%
Research and development	Research and development	141		113				9.8	%			10.0	%			422			316		10.1		%	10.1	%	Research and development	143				141		10.4		%	9.8	%	428				422		10.0		%	10.1	%
General and administrative	General and administrative	85		71				5.9	%			6.3	%			259			219		6.2		%	7.0	%	General and administrative	92				85		6.7		%	5.9	%	288				259		6.7		%	6.2	%
Settlement and related costs																										Settlement and related costs	—				—		NM			NM		372				—		NM			NM
Amortization of intangible assets	Amortization of intangible assets	29		20				NM				NM				81			52		NM			NM		Amortization of intangible assets	39				29		NM			NM		107				81		NM			NM
Acquisition and integration costs	Acquisition and integration costs	6		19				NM				NM				11			21		NM			NM		Acquisition and integration costs	1				6		NM			NM		19				11		NM			NM
Exit and restructuring costs	Exit and restructuring costs	—		1				NM				NM				—			7		NM			NM		Exit and restructuring costs	2				—		NM			NM		4				—		NM			NM
Total Operating expenses	Total Operating expenses	$	409	$	343			28.5	%			30.3	%			$	1,203		$	965	28.9		%	30.7	%	Total Operating expenses	$	426			$	409	30.9		%	28.5	%	$	1,670			$	1,203	39.0		%	28.9	%

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Consolidated Organic Net sales growth:


		Three Months Ended		Nine Months Ended			Three Months Ended		Nine Months Ended
		October 2, 2021		October 2, 2021			October 1, 2022		October 1, 2022
Reported GAAP Consolidated Net sales growth	Reported GAAP Consolidated Net sales growth	26.9	%	32.5	%	Reported GAAP Consolidated Net sales growth	(4.0)	%	2.8	%
Adjustments:	Adjustments:					Adjustments:
Impact of foreign currency translation (1)	Impact of foreign currency translation (1)	(2.4)	%	(2.3)	%	Impact of foreign currency translation (1)	2.9	%	1.6	%
Impact of acquisitions (2)	Impact of acquisitions (2)	(1.3)	%	(1.4)	%	Impact of acquisitions (2)	(2.1)	%	(1.5)	%
Consolidated Organic Net sales growth (3)	Consolidated Organic Net sales growth (3)	23.2	%	28.8	%	Consolidated Organic Net sales growth (3)	(3.2)	%	2.9	%

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2)For purposes of computing Organic Net sales growth, amounts directly attributable to the acquisitions of ~~Reflexis,~~ Adaptive Vision, Fetch, Antuit, and ~~Fetch~~Matrox are excluded for twelve months following their respective acquisitions.

(3)Consolidated Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Third quarter ~~2021~~2022 compared to third quarter ~~2020~~2021

Total Net sales ~~increased $304~~decreased $58 million or 26.9% compared to the prior year primarily due to broad-based customer demand to digitize and automate their businesses across both of our segments and all our regions. EVM Net sales growth was 32.1% and AIT Net sales growth was 13.9%4.0% compared to the prior year. EVM Net sales decline was partially offset by AIT Net sales growth. Current year EVM Net sales were negatively impacted by supply chain bottlenecks associated with component shortages for certain products and execution challenges as we transition to a new distribution center in North America, as well as orders from large customers being deferred. Excluding the effects of ~~favorable~~ currency changes and acquisitions, the ~~increase~~decrease in Consolidated Organic Net sales was ~~23.2%~~3.2%.

As we enter the fourth quarter, we are taking actions to address the current supply chain challenges, both related to component shortages and the extension of the planned transition of our North America distribution center, and proactively preparing for softer customer demand in an uncertain macroenvironment.

Gross margin increased to ~~45.0%~~45.6% for the current quarter compared to ~~43.6%~~45.0% for the prior year. Gross margin was higher in our EVM segment, which more than offset lower gross margin in our AIT segment. Gross margins ~~were higher than the prior year primarily due to~~of both segments benefited from favorable business mix, as well as lower net impacts of premium freight and ~~volume leverage, higher support service margins, and favorable currency changes.~~component part costs. These benefits were partially offset by ~~higher premium freight costs.~~the negative impact of foreign currency changes, as well as lower volume leverage and support service margins.

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Operating expenses for the ~~quarter~~quarters ended October 1, 2022 and October 2, 2021 were $426 million and ~~September 26, 2020, were~~ $409 million, or 30.9% and ~~$343 million, or~~ 28.5% ~~and 30.3%~~ of Net sales, respectively. The increase in Operating expenses over the prior ~~year~~quarter was primarily due to higher employee compensation costs associated with higher incentive-based compensation related to improved financial performance in the current year, as well as prior year temporary salary reductions that began late in the second quarter; the inclusion of operating expenses and amortization of intangible assets associated with recently acquired ~~businesses; and increased investment in research and development program projects, principally within our EVM segment. These increases~~businesses, which were partially offset by lower ~~Acquisition and integration costs in the current year, as well as the prior year including costs associated with the diversification of the Company’s product sourcing footprint.~~employee incentive-based compensation.

Operating income ~~increased 58.0%~~decreased 14.8% to ~~$237~~$202 million for the current quarter compared to ~~$150~~$237 million for the prior year. The ~~increase~~decrease was due to ~~higher~~lower Gross profit ~~which was partially offset by~~and higher Operating expenses.

Net income ~~increased 72%~~decreased 14.6% compared to the prior year due to ~~higher~~lower Operating income and higher Income tax expense, which were partially offset by favorability in Other ~~expenses,~~income (expense), net ~~partially offset by higher income tax expense detailed~~ as follows:

•Other ~~expenses,~~income (expense), net was $9income of $20 million in the current year compared to ~~$12~~an expense of $9 million in the prior year primarily due to ~~lower~~the current year benefiting from a $39 million gain on interest ~~expense~~rate swaps compared to a $1 million loss in the ~~current year. The current~~prior year, ~~interest expense benefited from lower interest rates and~~which was partially offset by higher average outstanding debt levels ~~as well as lower~~and interest ~~rate swaps losses compared to the prior year.~~rates.

•The Company’s effective income tax rate for the three months ended October 1, 2022 and October 2, 2021 was 23.4% and ~~September 26, 2020 was~~ 12.7% ~~and 15.9%~~, respectively. The ~~decrease~~increase in the effective ~~tax~~ rate was primarily due to ~~a higher foreign-derived intangible income deduction~~unfavorable discrete items recorded in the ~~third~~current quarter ~~of 2021, partially offset by increases in pre-tax income in jurisdictions with higher~~primarily related to return to provision adjustments and uncertain tax ~~rates.~~positions.

Diluted earnings per share ~~increased~~decreased to ~~$3.69~~$3.26 as compared to ~~$2.16~~$3.69 in the prior year ~~primarily~~ due to ~~higher~~lower Net ~~income.~~

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income, partially offset by lower average shares outstanding.

Year to date ~~2021~~2022 compared to Year to date ~~2020~~2021

Total Net ~~Sales~~sales increased ~~$1,020~~$118 million or ~~32.5%~~2.8% compared to the prior year ~~primarily due to broad-based customer demand~~as our customers continue to digitize and automate their ~~businesses.~~workflows. Net sales ~~growth~~grew across both of our segments and ~~all~~most of our ~~regions included~~regions. Current year Net sales of both segments were negatively impacted by supply chain bottlenecks, which were particularly pronounced in our EVM segment. Prior year Net sales of both segments benefited from pent-up demand from customers who we believe ~~had~~ delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Net sales for the prior year included the negative impacts of supply chain disruptions within our EVM segment resulting from the temporary closure of a key distribution center supplying the Americas late in the first quarter. EVM Net sales growth was 34.4% and AIT Net sales growth was 28.5% compared to the prior year. Excluding the effects of ~~favorable~~acquisitions and currency changes, ~~and acquisitions,~~ the increase in Consolidated Organic Net sales was ~~28.8%~~2.9%.

Gross margin ~~increased~~decreased to ~~47.1%~~45.3% for the current ~~year~~period compared to ~~44.1%~~47.1% for the prior year. Gross margins were ~~higher than the prior year~~lower in both of our segments primarily due to ~~favorable business mix~~higher net premium freight and ~~volume leverage,~~component part costs, as well as the negative impact of foreign currency changes, which were partially offset by higher support service ~~margins, favorable currency changes,~~margins. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs in the current year, the mitigation of Chinese import tariffs as of the fourth quarter of 2020, and contributions from our recent higher margin EVM acquisitions. These benefits were partially offset by higher premium freight costs.tariffs.

Operating expenses for the period ended October 1, 2022 and October 2, 2021 were $1,670 million and ~~September 26, 2020, were~~ $1,203 million, or 39.0% and ~~$965 million, or~~ 28.9% ~~and 30.7%~~ of Net sales, respectively. ~~The increase in~~Excluding the Settlement charge, Operating expenses were 30.3% of Net sales for the period ended October 1, 2022, with an increase over the prior year ~~was~~ primarily due to higher employee compensation costs associated with higher incentive-based compensation related to improved financial performance in the current year, as well as prior year temporary salary reductions that began late in the second quarter; the inclusion of operating expenses and amortization of intangible assets associated with recently acquired ~~businesses;~~businesses, increased employee travel, as well as higher Acquisition and ~~increased investment in research and development program projects, principally within our EVM segment.~~integration costs. These increases were partially offset by lower Acquisition and integration costs in the current year, as well as the prior year including costs associated with the diversification of the Company’s product sourcing footprint and our 2019 Productivity Plan.employee incentive-based compensation.

Operating income ~~increased 80.0%~~decreased 64.4% to ~~$756~~$269 million for the current year compared to ~~$420~~$756 million for the prior year. The ~~increase~~decrease was primarily due to higher ~~Gross profit, which was partially offset by higher~~ Operating ~~expenses.~~expenses, inclusive of the $372 million Settlement charge recorded in the second quarter of the current year.

Net income ~~increased 112%~~decreased 57.1% compared to the prior year due to ~~higher~~lower Operating income, ~~and~~which was partially offset by favorability in Other ~~expenses,~~income (expense), net ~~partially offset by higher income~~and Income tax expense ~~detailed~~ as follows:

•Other ~~expenses,~~income (expense), net was ~~$14~~income of $50 million in the current year compared to ~~$76~~an expense of $14 million in the prior year primarily due to ~~lower foreign exchange losses and lower interest expense in~~ the current ~~year. The current~~ year ~~interest expense benefited~~benefiting from ~~a $4~~an $84 million gain on interest rate swaps compared to a ~~$46~~$4 million ~~loss~~gain in the prior year, ~~lower interest rates and lower~~which was partially offset by higher average outstanding debt ~~levels. The current year also included a $1 million net investment gain compared to $8 million in the prior year.~~levels and interest rates.

•The Company’s effective income tax rate for the nine months ended October 1, 2022 and October 2, 2021 was 13.2% and ~~September 26, 2020 was~~ 12.9% ~~and 11.3%~~, respectively. The increase in the effective tax rate compared to the prior year was primarily due to increases in pre-tax income in jurisdictions with higher tax rates, partially offset by a higher foreign-derived intangible income deduction in the third quarter of 2021, higher share-based compensation deductions, and the benefit of the enacted U.K. corporate tax rate increase from 19% to 25% on the Company’s deferred tax assets.

Diluted earnings per share ~~increased~~decreased to ~~$11.98~~$5.25 as compared to ~~$5.65~~$11.98 in the prior year ~~primarily~~ due to ~~higher~~lower Net ~~income.~~income, partially offset by lower average diluted shares outstanding.

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Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each operating business segment as detailed in Note ~~16,~~18, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment results exclude purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, and exit and restructuring costs, as well as certain other non-recurring costs (such as the Settlement and ~~product sourcing diversification costs.~~related costs in the current year).

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Asset Intelligence & Tracking Segment (“AIT”)

(in millions, except percentages)


		Three Months Ended										Nine Months Ended											Three Months Ended										Nine Months Ended
		October 2, 2021			September 26, 2020			$ Change		% Change		October 2, 2021			September 26, 2020			$ Change		% Change			October 1, 2022			October 2, 2021			$ Change		% Change		October 1, 2022			October 2, 2021			$ Change		% Change
Net sales:	Net sales:																					Net sales:
Tangible products	Tangible products	$	358		$	314		$	44	14.0	%	$	1,161		$	898		$	263	29.3	%	Tangible products	$	392		$	354		$	38	10.7	%	$	1,184		$	1,151		$	33	2.9	%
Services and software	Services and software	28			25			3		12.0	%	82			69			13		18.8	%	Services and software	23			24			(1)		(4.2)	%	71			70			1		1.4	%
Total Net sales	Total Net sales	386			339			47		13.9	%	1,243			967			276		28.5	%	Total Net sales	415			378			37		9.8	%	1,255			1,221			34		2.8	%
Gross profit	Gross profit	168			158			10		6.3	%	579			454			125		27.5	%	Gross profit	179			165			14		8.5	%	528			571			(43)		(7.5)	%
Gross margin	Gross margin	43.5		%	46.6		%			(310) bps		46.6		%	46.9		%			(30) bps		Gross margin	43.1		%	43.7		%			(60) bps		42.1		%	46.8		%			(470) bps
Operating expenses	Operating expenses	91			80			11		13.8	%	296			242			54		22.3	%	Operating expenses	96			87			9		10.3	%	288			282			6		2.1	%
Operating income	Operating income	$	77		$	78		$	(1)	(1.3)	%	$	283		$	212		$	71	33.5	%	Operating income	$	83		$	78		$	5	6.4	%	$	240		$	289		$	(49)	(17.0)	%

AIT Organic Net sales growth:


		Three Months Ended		Nine Months Ended			Three Months Ended		Nine Months Ended
		October 2, 2021		October 2, 2021			October 1, 2022		October 1, 2022
AIT Reported GAAP Net sales growth	AIT Reported GAAP Net sales growth	13.9	%	28.5	%	AIT Reported GAAP Net sales growth	9.8	%	2.8	%
Adjustments:	Adjustments:					Adjustments:
Impact of foreign currency translation (1)	Impact of foreign currency translation (1)	(1.8)	%	(1.9)	%	Impact of foreign currency translation (1)	2.6	%	1.5	%

AIT Organic Net sales growth (2)	AIT Organic Net sales growth (2)	12.1	%	26.6	%	AIT Organic Net sales growth (2)	12.4	%	4.3	%

(2)AIT Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Third quarter ~~2021~~2022 compared to third quarter ~~2020~~2021

Total Net sales for AIT increased ~~$47~~$37 million or ~~13.9%~~9.8% compared to the prior year primarily due to higher sales of printing products (contributing the majority of the total increase) and supplies, ~~reflecting broad-based customer demand across most of our regions, as well as favorable currency changes.~~and targeted list price increases. Excluding the impact of foreign currency changes, AIT Organic Net sales ~~growth was 12.1%~~increased 12.4%.

Gross margin decreased to ~~43.5%~~43.1% for the current quarter compared to ~~46.6%~~43.7% for the prior year primarily due to ~~higher premium freight costs, which were~~the negative impact of foreign currency changes, partially offset by favorable business mix and volume ~~leverage, and favorable foreign currency changes.~~leverage.

Operating income ~~decreased 1.3%~~increased 6.4% in the current quarter compared to the prior year ~~period. The decrease was due to higher Operating expenses, partially offset by higher Gross profit.~~

~~Year to date 2021 compared to Year to date 2020~~

Total Net sales for AIT increased $276 million or 28.5% compared to the prior year primarily due to higher sales of printing products and supplies reflecting broad-based customer demand across all of our regions, inclusive of pent-up demand from customers who we believe had delayed purchases in fiscal 2020 due to the COVID-19 pandemic, as well as favorable currency changes. Excluding the impact of foreign currency changes, AIT Organic Net sales growth was 26.6%.

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Gross margin decreased to 46.6% for the current year compared to 46.9% for the prior year, primarily due to higher premium freight costs, partially offset by favorable business mix and volume leverage, favorable currency changes, partial recovery of Chinese import tariffs in the current year, and the mitigation of Chinese import tariffs as of the fourth quarter of 2020.

~~Operating income increased 33.5% in the current year compared to the prior year. The increase was~~period due to higher Gross profit, which was partially offset by higher Operating expenses.

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Year to date 2022 compared to Year to date 2021

Total Net sales for AIT increased $34 million or 2.8% compared to the prior year primarily due to higher sales of printing products and supplies. Current year Net sales included the negative effects of supply chain bottlenecks, while prior year Net sales benefited from pent-up demand from customers who we believe delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Excluding the impact of foreign currency changes, AIT Organic Net sales increased 4.3%.

Gross margin decreased to 42.1% for the current period compared to 46.8% for the prior year primarily due to higher net premium freight and component part costs, as well as unfavorable business mix. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs.

Operating income decreased 17.0% in the current year compared to the prior year period. The decrease was primarily due to lower Gross profit.

Enterprise Visibility & Mobility Segment (“EVM”)

(in millions, except percentages)


		Three Months Ended										Nine Months Ended											Three Months Ended										Nine Months Ended
		October 2, 2021			September 26, 2020			$ Change		% Change		October 2, 2021			September 26, 2020			$ Change		% Change			October 1, 2022			October 2, 2021			$ Change		% Change		October 1, 2022			October 2, 2021			$ Change		% Change
Net sales:	Net sales:																					Net sales:
Tangible products	Tangible products	$	882		$	658		$	224	34.0	%	$	2,424		$	1,786		$	638	35.7	%	Tangible products	$	772		$	886		$	(114)	(12.9)	%	$	2,446		$	2,434		$	12	0.5	%
Services and software	Services and software	168			137			31		22.6	%	499			389			110		28.3	%	Services and software	191			172			19		11.0	%	577			511			66		12.9	%
Total Net sales	Total Net sales	1,050			795			255		32.1	%	2,923			2,175			748		34.4	%	Total Net sales	963			1,058			(95)		(9.0)	%	3,023			2,945			78		2.6	%
Gross profit	Gross profit	478			338			140		41.4	%	1,386			937			449		47.9	%	Gross profit	449			481			(32)		(6.7)	%	1,411			1,394			17		1.2	%
Gross margin	Gross margin	45.5		%	42.5		%			300 bps		47.4		%	43.1		%			430 bps		Gross margin	46.6		%	45.5		%			110 bps		46.7		%	47.3		%			(60) bps
Operating expenses	Operating expenses	283			217			66		30.4	%	815			632			183		29.0	%	Operating expenses	288			287			1		0.3	%	880			829			51		6.2	%
Operating income	Operating income	$	195		$	121		$	74	61.2	%	$	571		$	305		$	266	87.2	%	Operating income	$	161		$	194		$	(33)	(17.0)	%	$	531		$	565		$	(34)	(6.0)	%

EVM Organic Net sales growth:


		Three Months Ended		Nine Months Ended			Three Months Ended		Nine Months Ended
		October 2, 2021		October 2, 2021			October 1, 2022		October 1, 2022
EVM Reported GAAP Net sales growth	EVM Reported GAAP Net sales growth	32.1	%	34.4	%	EVM Reported GAAP Net sales growth	(9.0)	%	2.6	%
Adjustments:	Adjustments:					Adjustments:
Impact of foreign currency translation (1)	Impact of foreign currency translation (1)	(2.6)	%	(2.5)	%	Impact of foreign currency translation (1)	3.0	%	1.8	%
Impact of acquisitions (2)	Impact of acquisitions (2)	(1.6)	%	(2.1)	%	Impact of acquisitions (2)	(2.8)	%	(2.0)	%
EVM Organic Net sales growth (3)	EVM Organic Net sales growth (3)	27.9	%	29.8	%	EVM Organic Net sales growth (3)	(8.8)	%	2.4	%

(2)For purposes of computing EVM Organic Net sales growth, amounts directly attributable to the acquisitions of ~~Reflexis,~~ Adaptive Vision, Fetch, Antuit, and ~~Fetch~~Matrox are excluded for twelve months following their respective acquisitions.

(3)EVM Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

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Third quarter ~~2021~~2022 compared to third quarter ~~2020~~2021

Total Net sales for EVM decreased $95 million or 9.0% compared to the prior year primarily due to lower sales of mobile computing products and unfavorable foreign currency changes, which were partially offset by higher sales of data capture products, contributions from our recent acquisitions, higher sales of support services, and targeted list price increases. Current year mobile computing Net sales were lower than the prior year primarily due lower sales to large customers, as well as the negative impact of supply chain bottlenecks related to component shortages for certain products and execution challenges as we transition to a new distribution center in North America. Excluding the impacts of acquisitions and foreign currency changes, EVM Organic Net sales decreased 8.8%.

Gross margin increased to 46.6% in the current quarter compared to 45.5% in the prior year primarily due to favorable business mix, as well as lower net impacts of net premium freight and component costs, which were partially offset by the negative impact of foreign currency changes, as well as lower volume leverage and support service margins.

Operating income for the current quarter decreased 17.0% compared to the prior year period, primarily due to lower Gross Profit.

Year to date 2022 compared to Year to date 2021

Total Net sales for EVM increased ~~$255~~$78 million or ~~32.1%~~2.6% compared to the prior year primarily due to higher sales of ~~mobile computing~~data capture products, ~~and support services reflecting broad-based customer demand across all of our regions. In addition,~~contributions from our recent acquisitions, ~~contributed to the growth~~and higher sales of ~~Services and software Net sales in the current year. Excluding the impacts of~~support services, which were partially offset by unfavorable foreign currency changes and ~~acquisitions, EVM Organic Net sales growth was 27.9%.~~

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Gross margin increased to 45.5% in the current quarter compared to 42.5% in the prior year, primarily due to favorable business mix and volume leverage, higher support service margins, and favorable currency changes. These benefits were partially offset by higher premium freight costs.

~~Operating income for the current quarter increased 61.2% compared to the prior year period. The increase was due to higher Gross profit, which was partially offset by higher Operating expenses.~~

~~Year to date 2021 compared to Year to date 2020~~

~~Total Net sales for EVM increased $748 million or 34.4% compared to the prior year primarily due to higher~~lower sales of mobile computing ~~and data capture products, as well as support services reflecting broad-based customer demand across all~~products. Current year Net sales included the negative impact of ~~our regions, inclusive of~~supply chain bottlenecks, while prior year Net sales benefited from pent-up demand from customers who we believe ~~had~~ delayed purchases in fiscal 2020 due to the COVID-19 pandemic. In addition, our recent acquisitions contributed to the growth of Services and software Net sales in the current year. Net Sales for the prior year included the negative impacts of supply chain disruptions that primarily impacted our North America mobile computing business late in the first quarter. Excluding the impacts of ~~favorable~~acquisitions and foreign currency changes, ~~and acquisitions,~~ EVM Organic Net ~~Sales~~sales growth was ~~29.8%~~2.4%.

Gross margin ~~increased~~decreased to ~~47.4%~~46.7% in the current ~~year~~period compared to ~~43.1%~~47.3% in the prior year primarily due to higher net premium freight and component part costs, which were partially offset by favorable business mix and ~~volume leverage,~~ higher support service ~~margins, favorable currency changes,~~margins. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs in the current year, the mitigation of Chinese import tariffs as of the fourth quarter of 2020, and contributions from our recent higher margin acquisitions. These benefits were partially offset by higher premium freight costs.tariffs.

Operating income for the current ~~year increased 87.2%~~quarter decreased 6.0% compared to the prior year period. The ~~increase~~decrease was due to higher ~~Gross profit, which was~~Operating expenses, partially offset by higher ~~Operating expenses.~~Gross profit.

Liquidity and Capital Resources

The primary factors that influence our liquidity include the amount and timing of our revenues, cash collections from our customers, cash payments to our suppliers, capital expenditures, repatriation of foreign cash, acquisitions, and share repurchases. Management believes that our existing capital resources, inclusive of available borrowing capacity on debt and other financing facilities and funds generated from operations, are sufficient to meet anticipated capital requirements and service our indebtedness. The following table summarizes our cash flow activities for the periods indicated (in millions):


		Nine Months Ended							Nine Months Ended
Cash flows provided by (used in):	Cash flows provided by (used in):	October 2, 2021		September 26, 2020		$ Change		Cash flows provided by (used in):	October 1, 2022		October 2, 2021		$ Change
Operating activities	Operating activities	$	836	$	531	$	305	Operating activities	$	221	$	836	$	(615)
Investing activities	Investing activities	(369)		(623)		254		Investing activities	(941)		(369)		(572)
Financing activities	Financing activities	(351)		131		(482)		Financing activities	470		(351)		821
Effect of exchange rates on cash balances	Effect of exchange rates on cash balances	—		(1)		1		Effect of exchange rates on cash balances	(2)		—		(2)
Net increase in cash and cash equivalents, including restricted cash		$	116	$	38	$	78
Net (decrease) increase in cash and cash equivalents, including restricted cash								Net (decrease) increase in cash and cash equivalents, including restricted cash	$	(252)	$	116	$	(368)

The change in our cash and cash equivalents balance during the nine months ended October ~~2, 2021~~1, 2022 compared to the prior year period is reflective of the following:

•The ~~increase~~decrease in cash provided by operating activities compared to the prior year was primarily ~~attributed~~due to higher ~~operating income, lower~~ inventory levels, current year payments associated with the Settlement, and ~~lower employee~~higher incentive compensation payments. These ~~benefits~~items were partially offset by higher accounts ~~receivable balances reflecting~~payable, primarily associated with inventory purchases, as well as favorability in the timing of customer transactions ~~within the period~~ and ~~reduced benefits from our~~ accounts receivable factoring ~~programs, as well as higher payments of income taxes.~~

•~~The decrease~~activity in ~~cash used in investing activities compared to~~ the ~~prior year was primarily due to lower cash paid for acquisitions. The~~ current year includes cash payments of $290 million and $18 million for the acquisitions of Fetch and Adaptive Vision, respectively, whereas the prior year includes a $548 million cash payment for the acquisition of Reflexis.period.

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•~~The Company had a net usage~~Cash used in investing activities was higher than the prior year primarily due to the acquisition of Matrox, while the prior year includes cash inpayments of $307 million for the acquisitions of Fetch and Adaptive Vision.

•Cash provided by financing activities during the ~~current~~ year was primarily ~~due to~~comprised of $1,175 net debt proceeds primarily in connection with the Company's debt refinancing activities in the second quarter, which were partially offset by $655 million of common stock repurchases. Net cash used in financing activities in the prior year was primarily comprised of $256 million net debt repayments, ~~of $256~~$48 million net payments related to share-based compensation, ~~plans of $48 million, share repurchases of~~and $25 million ~~and a $22 million use~~ of cash associated with the timing of factored receivables servicing activities. In the prior year, the Company had net cash provided by financing activities primarily due to net borrowings of $286 million that, in part, funded our acquisition of Reflexis, as well as a $73 million source of cash associated with the timing of factored receivables servicing activities. The Company’s net cash provided by financing activities in the prior year were partially offset by common stock ~~repurchases of $200 million and net payments related to share-based compensation plans of $28 million.~~repurchases.

Company Debt

The following table shows the carrying value of the Company’s debt (in millions):


		October 2, 2021		December 31, 2020			October 1, 2022		December 31, 2021
Term Loan A	Term Loan A	$	888	$	917	Term Loan A	$	1,739	$	888
2020 Term Loan		—		100

Revolving Credit Facility						Revolving Credit Facility	248		—
Receivables Financing Facilities	Receivables Financing Facilities	108		235		Receivables Financing Facilities	183		108

Total debt	Total debt	$	996	$	1,252	Total debt	$	2,170	$	996
Less: Debt issuance costs	Less: Debt issuance costs	(3)		(5)		Less: Debt issuance costs	(4)		(3)
Less: Unamortized discounts	Less: Unamortized discounts	(2)		(2)		Less: Unamortized discounts	(5)		(2)
Less: Current portion of debt	Less: Current portion of debt	(51)		(364)		Less: Current portion of debt	(144)		(69)
Total long-term debt	Total long-term debt	$	940	$	881	Total long-term debt	$	2,017	$	922

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 (expense) income, 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.

Term Loan A

~~2020 Term Loan~~Revolving Credit Facility

~~In September 2020,~~The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of October 1, 2022, the Company ~~entered into a new $200~~had letters of credit totaling $7 million, ~~term loan (“2020 Term Loan”), with~~which reduced funds available for borrowings under the ~~proceeds used~~Revolving Credit Facility from $1,500 million to ~~partly fund~~$1,493 million. As of October 1, 2022, the ~~acquisition~~Revolving Credit Facility had an average interest rate of ~~Reflexis.~~4.17%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The ~~Company repaid $100 million of principal in the fourth quarter of 2020 and repaid the remaining $100 million of principal in the first quarter of 2021.~~Revolving Credit Facility matures on May 25, 2027.

Receivables Financing Facilities

The Company has two Receivables Financing Facilities with financial institutions that have a combined total borrowing limit of up to $280 million. As collateral, the Company pledges perfected first-priority security interests in its U.S. domestically originated accounts receivable. The Company has accounted for transactions under its Receivables Financing Facilities as secured borrowings. The Company’s first Receivables Financing Facility allows for borrowings of up to $180 million and matures on March 19, 2024. The Company’s second Receivable Financing Facility allows for borrowings of up to $100 million and matures on May ~~16, 2022.~~15, 2023.

As of October ~~2, 2021,~~1, 2022, the Company’s Consolidated Balance Sheets included ~~$605~~$773 million of receivables that were pledged under the two Receivables Financing Facilities. As of October ~~2, 2021, $108~~1, 2022, $183 million had been borrowed, of which ~~$13~~$100 million was classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an

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applicable margin. As of October ~~2, 2021,~~1, 2022, the Receivables Financing Facilities had an average interest rate of ~~0.96%~~4.04%. Interest is paid on these borrowings on a monthly basis.

~~Revolving Credit Facility~~

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~~Uncommitted Short-Term Credit Facility~~

See Note ~~10,~~11, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company’s debt instruments.

Receivables Factoring

The Company currently has two Receivables Factoring arrangements, pursuant to which certain receivables are sold to banks without recourse in exchange for cash. 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. Transactions under the Receivables Factoring arrangements are accounted for as sales under Accounting Standards ~~Codifications~~Codification 860, Transfers and Servicing of Financial Assets, with the sold receivables removed from the Company’s balance sheet. Under these Receivables Factoring arrangements, the Company does not maintain any beneficial interest in the receivables sold. The banks’ purchase of eligible receivables is subject to a maximum amount of uncollected receivables. The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables. 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) provided by~~used in financing activities on the Consolidated Statements of Cash Flows.

~~In May 2021, one of the Company’s Receivables Factoring arrangements that was no longer actively utilized expired.~~ As of October 2, 2021, the Company has two remaining active Receivables Factoring arrangements. One arrangement allows for the factoring of up to $50 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.

~~As of October 2, 2021~~1, 2022 and December 31, ~~2020~~2021, there were a total of ~~$23~~$55 million and ~~$70~~$24 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

See Note ~~15,~~17, Accounts Receivable Factoring in the Notes to Consolidated Financial Statements for further details.

Share Repurchases

On ~~July 30, 2019,~~May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to ~~an aggregate amount of~~ $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. The newly authorized share repurchase program does not have a stated expiration date. The level of the Company’s repurchases depends on a number of factors, including its financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors its management may deem relevant. The timing, volume, and nature of repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time. Repurchases may be ~~effected~~affected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. During the first nine months of ~~2021,~~2022, the Company repurchased ~~52,389~~1,652,877 shares of common stock for ~~$25 million, primarily in the second quarter. Comparatively,~~approximately $655 million. As of October 1, 2022, the Company has cumulatively repurchased ~~948,740~~2,948,618 shares of common stock for ~~$200~~approximately $958 million, ~~during the first nine months of 2020. As of October 2, 2021, the Company has cumulatively repurchased 1,239,015 shares of common stock for $272 million under the plan,~~ resulting in a remaining amount of share repurchases authorized under the ~~plan~~plans of ~~$728~~$1,042 million. Subsequent to the third quarter, the Company has repurchased 187,024 shares of common stock for approximately $50 million through October 28, 2022.

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Significant Customers

The Company has three customers, who are distributors of the Company’s products, services and solutions, that individually accounted for more than 10% of total Company Net sales for the periods presented. In the aggregate, the approximate percentage of our segment and Company total Net sales was as follows:

Nine Months Ended
October 2, 2021 September 26, 2020
AIT EVM Total AIT EVM Total
Significant customers as a % of Net sales 15.9 % 33.6 % 49.5 % 15.5 % 31.8 % 47.3 %


	Nine Months Ended
	October 1, 2022						October 2, 2021
	AIT		EVM		Total		AIT		EVM		Total
Significant customers as a % of Net sales	15.8	%	30.0	%	45.8	%	15.9	%	33.6	%	49.5	%

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These customers accounted for 55.1% of accounts receivable as of October ~~2, 2021.~~1, 2022. No other customer accounted for more than 10% of total Net sales during the periods ended October ~~2, 2021~~1, 2022 and ~~September 26, 2020, or more than 10% of total outstanding accounts receivables as of~~ October 2, 2021.

Safe Harbor

Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors, which could cause actual results to differ materially from those expressed or implied in such forward-looking statements. When used in this document and documents referenced, the words “anticipate,” “believe,” “intend,” “estimate,” “will,” and “expect” and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements but are not the exclusive means of identifying these statements. The forward-looking statements include, but are not limited to, the Company’s financial outlook for ~~the~~ full year of ~~2021.~~2022. These forward-looking statements are based on current expectations, forecasts and assumptions, and are subject to the risks and uncertainties inherent in the Company’s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include:

•Market acceptance of the Company’s products, services and solution offerings and competitors’ offerings and the potential effects of ~~technological~~emerging technologies and changes in customer requirements,

•The effect of global market conditions, including the North America; EMEA; Latin America; and Asia-Pacific regions in which we do business,

•The impact of changes in foreign exchange rates, customs duties and trade policies due to the large percentage of our sales and operations being outside the U.S.,

•Our ability to control manufacturing and operating costs,

•Risks related to the manufacturing of the Company’s products and conducting business operations in non-U.S. countries, including the risk of depending on key suppliers who are also in non-U.S. countries,

•The Company’s ability to purchase sufficient materials, parts, and components, our ability to provide services, software, and products to meet customer demand, particularly in light of global economic conditions,

•The availability of credit and the volatility of capital markets, which may affect our suppliers, customers, and ourselves,

•Success of integrating acquisitions,

•Our ability to attract, retain, develop, and motivate key personnel,

•Interest rate and financial market conditions,

•Access to cash and cash equivalents held outside the U.S.,

•The effect of natural disasters, man-made disasters, public health issues (including pandemics), and cybersecurity incidents on our business,

•The impact of changes in foreign and domestic governmental policies, laws, or regulations,

•The outcome of litigation in which the Company may be involved, particularly litigation or claims related to infringement of third-party intellectual property rights, and

•The outcome of any future tax matters or tax law changes.

We encourage readers of this report to review Part II, Item 1A, “Risk Factors” in this report for further discussion of issues that could affect the Company’s future results. We undertake no obligation, other than as may be required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason after the date of this report.

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New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material impact to our consolidated financial statements.

Non-GAAP Measures

The Company has provided reconciliations of the supplemental non-GAAP financial measures, as defined under the rules of the Securities and Exchange Commission, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP.

These supplemental non-GAAP financial measures – Consolidated Organic Net sales growth, AIT Organic Net sales growth, and EVM Organic Net sales growth – are presented because our management evaluates our financial results both including and excluding the effects of business acquisitions and foreign currency translation, as applicable. Management believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of our business from period to period and trends in our historical operating results. These supplemental

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non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with the GAAP financial measures presented.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in the Company’s market risk during the quarter ended October ~~2, 2021.~~1, 2022. For additional information on market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.


Item 4.			Controls and Procedures

Management’s Report on Disclosure Controls

Our management is responsible for establishing and maintaining adequate disclosure controls as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management assessed the effectiveness of our disclosure controls as of October ~~2, 2021.~~1, 2022. Based on this assessment and those criteria, our management believes that, as of October ~~2, 2021,~~1, 2022, our disclosure controls were effective.

Changes in Internal Controls over Financial Reporting

During the quarter ended October ~~2, 2021,~~1, 2022, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Inherent Limitations on the Effectiveness of Controls

~~The Company’s~~Our management, including ~~the~~our Chief Executive Officer and Chief Financial Officer, does not expect that ~~the~~our disclosure controls and procedures or ~~the~~our internal controls ~~over financial reporting~~ will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within ~~the Company~~Zebra have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II - OTHER INFORMATION


Item 1.			Legal Proceedings

Beginning in September 2021, Honeywell filed patent infringement lawsuits against Zebra in multiple jurisdictions, including the International Trade Commission and Federal District Court in the Western District of Texas in the United States, as well as foreign courts in the United Kingdom, Germany, Netherlands, and China. Honeywell made substantially similar allegations of patent infringement in all cases filed. The technology addressed in the various actions generally includes aspects of data capture, barcode reading, and scanning. The allegedly infringing Zebra products identified in the actions were described as barcode scanners, mobile computers with barcode scanning capabilities, scan engines, and components thereof. The remedies sought in these lawsuits included damages and injunctive relief. The same Zebra products and technology were implicated in all of the lawsuits. Zebra vigorously defended against these infringement allegations. In February 2022, Zebra filed patent infringement lawsuits against Honeywell in multiple jurisdictions, including the International Trade Commission and Federal District Court in the Eastern District of New York in the United States, as well as foreign courts in the United Kingdom, Germany and China. Zebra’s allegations against Honeywell in each case varied based on the underlying technology in the Zebra patent that is alleged to have been infringed by Honeywell. The technology addressed in the various actions includes scan engine functionality generally, distance scanning, power management and security. The Honeywell products that are accused of infringing Zebra’s patents in the various actions include scan engines and components thereof, barcode scanners, mobile computers, RFID printers and other wireless devices. The remedies sought in these lawsuits included damages and injunctive relief. In June 2022, the parties resolved their disputes and entered into a License and Settlement Agreement (“Settlement”). All pending matters between the parties were dismissed. The following are the relevant terms disclosed in Zebra’s Form 8-K filed on June 30, 2022: Under the Settlement, the Company and Honeywell each deny liability and agreed to a mutual general release from all past claims; entered into a covenant not to sue for patent infringement; agreed to a payment by the Company to Honeywell for past damages of $360 million which was charged in the Company’s second quarter results and will be paid in equal quarterly installments over eight quarters; and entered into a royalty-free cross-license with respect to each party’s existing patent portfolio for the lives of the licensed patents.

See Note ~~11,~~13, Accrued Liabilities, Commitments and Contingencies in the Notes to Consolidated Financial Statements included in this report.


Item 1A.			Risk Factors

In addition to the other information included in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and the factors identified under “Safe Harbor” in Part I, Item 2 of this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, cash flows, or results of operations. The risks described in the Annual Report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently considers immaterial also may materially adversely affect its business, financial condition, and/or operating results. There have been no material changes to the risk factors included in our Annual Report for the year ended December 31, ~~2020,~~2021, other than as described below.

~~The effectsof the COVID-19 pandemic have and may continue to adversely affect our business, financial results, and results of operations.~~ The coronavirus (“COVID-19”) pandemic has been, and continues to be, complex and rapidly evolving, and has adversely impacted our business, most recently, primarily related to supply chain disruption (including higher fulfillment costs and component shortages) and labor constraints. The duration and extent of the impact of the COVID-19 pandemic on our business, operations and financial results depends on factors that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the extent and effectiveness of containment actions, the extent to which vaccines and/or other medical treatments are developed and made available to and accepted by the public, and the impact of these and other factors on our employees, customers, industry partners, transportation providers, suppliers and third party dealers, distributors, and resellers.

The U.S. federal, state, and local governments as well as non-U.S. governments, to varying degrees, have imposed, and continue to impose, several protocols and regulations restricting the physical movement or other activities of individuals in an effort to limit the spread of COVID-19. Over the course of the pandemic we have implemented a number of measures in an effort to protect the health and well-being of our employees, customers and suppliers, including having the majority of office workers work remotely during the height of the pandemic and gradually returning to offices as restrictions are lifted, limiting employee travel, and implementing more strenuous health and safety measures for hosting and attending in-person industry events. The extent and duration of ongoing workplace restrictions and limitations, particularly in sites with significant headcount, could adversely impact our operations and our ability to execute on strategic imperatives for our business. As governments ease their restrictions and we allow our employees to come back to work in our offices in a controlled approach, we have modified our business practices, including implementing social distancing protocols consistent with government regulations, vaccine verification, health screening, office capacity restrictions and tracking and tracing protocols where applicable, provision of personal protective equipment, increasing air exchange/ventilation and extensively and frequently disinfecting our workspaces. However, there is no guarantee that such protocols will be successful in preventing the spread of COVID-19 amongst our employees. In late 2020, certain vaccines were authorized by major regulatory bodies to help fight the infection of COVID-19, and certain other vaccines are in the late stages of development to provide such treatment. Vaccine and testing mandates may be announced in jurisdictions in which our businesses operate. Our implementation of these mandates may result in attrition, including attrition of critically skilled labor, and may cause difficulty securing future labor needs, which could have a material adverse effect on our business, financial condition, and results of operations. Further, we have experienced higher than normal employee absentee rates for employees who are unable to work from home, and even as employees return to our offices, we may be prevented from conducting business activities at full capacity for an indefinite period of time. The potential negative effects to our operations, including reductions in production levels, research and development activities, and increased efforts to mitigate the impact of COVID-19, may adversely affect our ability to deliver our products, solutions and services.

Further, the conditions caused by COVID-19 have affected, and may continue to affect, the overall demand environment for our products, solutions and services. The level of demand for certain product components has resulted in, and may continue to result in, lengthened lead times and higher input costs, including freight. This has impacted, and may continue to impact, our ability to meet customer demand as well as profitability. An inability to meet customer demand may also adversely affect our customers’ ability or willingness to purchase our products, solutions or services.

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If COVID-19 or its variants become more prevalent in the locations where our customers, suppliers, or we conduct business, we may experience more pronounced disruptions in our operations. If we are not able to respond to and manage the impact of such events effectively, our business and results of operations in future periods may be adversely affected. Moreover, the impacts of the COVID-19 pandemic may exacerbate other pre-existing risks, such as global economic conditions, political, regulatory, social, financial, operational and cybersecurity as well as similar risks relating to our suppliers and customers, any of which could have a material adverse effect on our business.

Our future operating results depend on our ability to purchase a sufficient amount of materials, parts, and components, as well as services and software to meet the demands of customers. We source some of our components from sole source suppliers. Any disruption to our suppliers or significant increase in the price of supplies, inclusive of transportation costs, ~~to transport,~~ could have a negative impact on our results of operations. Our ability to meet customers’ demands depends, in part, on our ability to obtain in a timely manner an adequate delivery of quality materials, parts, and components, as well as services and software from our ~~suppliers.~~suppliers, and our ability to deliver products, services and software to our customers. In addition, certain supplies are available only from a single source or limited sources and we may not be able to diversify sources in a timely manner. If demand for our products, solutions or services increases from our current expectations or if suppliers are unable or unwilling to meet our demand for other reasons, including as a result of natural disasters, public health issues, severe weather conditions, or financial issues, we could experience an interruption in supplies or a significant increase in the price of supplies that could have a negative impact on our business. We have experienced shortages in the past that have negatively impacted our results of operations and may experience such shortages in the future. At times we have and may continue to execute multi-year purchase commitments with suppliers that contain minimum spend thresholds, which we are obligated to fulfill even if customer demand declines. In addition, ~~such~~ volatility in customer demand, product availability, and costs to transport products, may result in increased operating input costs. ~~Credit~~Also, credit constraints at our suppliers could cause us to accelerate payment of accounts payable by us, impacting our cash flow.

The Company has substantial operations and sells a significant portion of our products, solutions and services outside of the U.S. and purchases important components, including final products, from suppliers located outside the U.S., many of whom with operations concentrated in China. Shipments to non-U.S. customers are expected to continue to account for a material

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portion of Net sales. We also expect to continue the use of third-party contract manufacturing services with non-U.S. production and assembly operations for our products.

Risks associated with operations, sales, and purchases outside the United States include:

•Fluctuating foreign currency rates could restrict sales, increase costs of purchasing, and affect collection of receivables outside of the U.S.;

•Volatility in foreign credit markets may affect the financial well-being of our customers and suppliers;

•Violations of anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery Act, could result in large fines and penalties;

•Adverse changes in, or uncertainty of, local business laws or practices, including the following:

•Imposition of burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions;

•Restrictions on the export or import of technology may reduce or eliminate the ability to sell in, or purchase from, certain markets;

•Political and economic instability may reduce demand for our products or put our non-U.S. assets at risk;

•Limited intellectual property protection in certain countries may limit recourse against infringement on our products or may cause us to refrain from selling in certain geographic territories;

•Staffing may be difficult including higher than anticipated turnover;

•A government-controlled exchange rate and limitations on the convertibility of currencies, including the Chinese Yuan;

•Transportation delays and customs related delays may affect production and distribution of our products;

•Geopolitical uncertainty or turmoil could negatively affect our operations or those of our customers or suppliers;

•Difficulty in effectively managing and overseeing operations that are distant and remote from corporate headquarters; and

•Integration and enforcement of laws varies significantly among jurisdictions and may change over time.

Further, the war between Russia and Ukraine and the global response to this war could have an adverse impact on our business and results of operations. On March 5, 2022, we suspended our business operations in Russia. While this suspension has not had, and is not expected to have, a material impact on our operating results, it is not possible to predict the broader or long-term consequences of the war between Russia and Ukraine, which may include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, cybersecurity conditions, currency exchange rates, financial markets and energy markets. Such geopolitical instability and uncertainty could have a negative impact on our ability to sell and ship products, collect payments from and support customers in certain regions, and could increase the costs, risks and adverse impacts from supply chain and logistics challenges.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to repurchases of the Company’s common stock for the three months ended October ~~2, 2021:~~1, 2022:

~~Period~~

~~Total Number of Shares Purchased~~

~~Average Price Paid per Share~~

~~Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs~~ ~~(1)~~

~~Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)~~ ~~(1)~~

~~July 4, 2021 - July 31, 2021~~

—

~~728~~

~~August 1, 2021 - August 28, 2021~~

—

~~728~~

~~August 29, 2021 - October 2, 2021~~

—

~~728~~

~~Total~~

—

~~728~~


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)
July 3, 2022 - July 30, 2022	152,846	$	310.75	152,846	$	1,044
July 31, 2022 - Aug 27, 2022	6,917	361.42		6,917	1,042
Aug 28, 2022 - Oct 1, 2022	—	—		—	1,042
Total	159,763	$	312.94	159,763	$	1,042

(1)On ~~July 30, 2019,~~May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to ~~an aggregate amount of~~ $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. Repurchases may be effected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. ~~The program does not have~~As of October 1, 2022, the Company has cumulatively repurchased 2,948,618 shares of common stock for approximately $958 million, resulting in a ~~stated expiration date.~~

remaining amount of share repurchases authorized under the plans of $1,042 million.

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Item 6.			Exhibits


31.1			Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2			Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1			Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2			Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101			The following financial information from Zebra Technologies Corporation Quarterly Report on Form 10-Q, for the quarter ended October ~~2, 2021,~~1, 2022, formatted in Inline XBRL: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Stockholders’ Equity; (v) the Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because Inline XBRL tags are embedded in the iXBRL document.

104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended October ~~2, 2021,~~1, 2022, formatted in Inline XBRL (included in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ZEBRA TECHNOLOGIES CORPORATION

Date: November ~~2, 2021~~1, 2022	By:	/s/ Anders Gustafsson
		Anders Gustafsson
		Chief Executive Officer



Date: November ~~2, 2021~~1, 2022	By:	/s/ Nathan Winters
		Nathan Winters
		Chief Financial Officer

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	AIT		EVM		Total
Goodwill as of December 31, 2020	$	228	$	2,760	$	2,988
Retail Solutions move to EVM segment, effective January 1, 2021	(59)		59		—
Fetch acquisition	—		207		207
Adaptive Vision acquisition	—		7		7
Reflexis purchase price allocation adjustments	—		(7)		(7)
Reflexis purchase price reduction	—		(1)		(1)

Goodwill as of October 2, 2021	$	169	$	3,025	$	3,194


	As of October 2, 2021						As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Technology and patents	$	851	$	(553)	$	298	$	739	$	(527)	$	212
Customer and other relationships	624		(484)		140		620		(431)		189
Trade names	63		(45)		18		44		(43)		1
Total	$	1,538	$	(1,082)	$	456	$	1,403	$	(1,001)	$	402


2021 (remaining 3 months)	$	31
2022	110
2023	64
2024	62
2025	62
Thereafter	127
Total	$	456