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~~July 1, ~~2022~~2023


☐			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 28, 2022,~~July 25, 2023, there were ~~51,629,798~~51,338,364 shares of Class A Common Stock, $.01 par value, outstanding.

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

QUARTER ENDED ~~OCTOBER~~JULY 1, ~~2022~~2023

TABLE OF CONTENTS


		PAGE
PART I - FINANCIAL INFORMATION		3
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets as of ~~October~~July 1, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	3
	Consolidated Statements of Operations (unaudited) for the three and ~~nine~~ si x months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021~~2022	4
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021~~2022	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the three and ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021~~2022	6
	Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~ six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~ July 2, ~~2021~~2022	8
	Notes to Consolidated Financial Statements (unaudited)	8
	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 & Other Intangibles~~Investments	11
	Note 7: Exit and Restructuring Costs	11
	Note 8: Fair Value Measurements	11
	Note 9: Derivative Instruments	13
	Note ~~7: Investments~~10: Long-Term Debt	1415
	Note ~~8: Exit and Restructuring Costs~~11: Leases	1417
	Note 9 ~~: Fair Value Measurements~~12: Accrued Liabilities, Commitments and Contingencies	1417
	Note 1013 : ~~Derivative Instruments~~	16
	~~Note 1~~1Share ~~: Long-Term Debt~~-Based Compensation	18
	Note 1 24 : ~~Leases~~Income Taxes	20
	Note 1 3 ~~: Accrued Liabilities, Commitments and Contingencies~~	20
	~~Note 14: Income Taxes~~15: Earnings (Loss) Per Share	21
	Note ~~15: Earnings Per Share~~1 6 : Accumulated Other Comprehensive Income (Loss)	21
	Note 1 7 : Accounts Receivable Factoring	22
	Note ~~16: Accumulated Other Comprehensive Income (Loss)~~1	228
	~~Note 17: Accounts Receivable Factoring~~	23
	~~Note 18:~~: Segment Information & Geographic Data	2422
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2523
	Overview	2523
	Results of Operations	2725
	Results of Operations by Segment	3028
	Liquidity and Capital Resources	3230
	Significant Customers	3432
	Safe Harbor	3533
	New Accounting Pronouncements	3533
	Non-GAAP Measures	3533
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3634
Item 4.	Controls and Procedures	3634
Item 5.	Other Information	37
PART II - OTHER INFORMATION		3735
Item 1.	Legal Proceedings	3735
Item 1A.	Risk Factors	3735
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3836
Item 6.	Exhibits	3938
Signatures		4039

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 1, 2022		December 31, 2021			July 1, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	81	$	332	Cash and cash equivalents	$	68	$	105
Accounts receivable, net of allowances for doubtful accounts of $1 million each as of October 1, 2022 and December 31, 2021		804		752
Accounts receivable, net of allowances for doubtful accounts of $1 each as of July 1, 2023 and December 31, 2022						Accounts receivable, net of allowances for doubtful accounts of $1 each as of July 1, 2023 and December 31, 2022	663		768
Inventories, net	Inventories, net	814		491		Inventories, net	864		860
Income tax receivable	Income tax receivable	11		8		Income tax receivable	20		26
Prepaid expenses and other current assets	Prepaid expenses and other current assets	161		106		Prepaid expenses and other current assets	138		124
Total Current assets	Total Current assets	1,871		1,689		Total Current assets	1,753		1,883
Property, plant and equipment, net	Property, plant and equipment, net	272		272		Property, plant and equipment, net	301		278
Right-of-use lease assets	Right-of-use lease assets	172		131		Right-of-use lease assets	173		156
Goodwill	Goodwill	3,891		3,265		Goodwill	3,895		3,899
Other intangibles, net	Other intangibles, net	659		469		Other intangibles, net	578		630
Deferred income taxes	Deferred income taxes	304		192		Deferred income taxes	441		407
Other long-term assets	Other long-term assets	279		197		Other long-term assets	315		276
Total Assets	Total Assets	$	7,448	$	6,215	Total Assets	$	7,456	$	7,529
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	$	144	$	69	Current portion of long-term debt	$	166	$	214
Accounts payable	Accounts payable	835		700		Accounts payable	562		811
Accrued liabilities	Accrued liabilities	675		639		Accrued liabilities	583		744
Deferred revenue	Deferred revenue	401		380		Deferred revenue	443		425
Income taxes payable	Income taxes payable	18		12		Income taxes payable	16		138
Total Current liabilities	Total Current liabilities	2,073		1,800		Total Current liabilities	1,770		2,332
Long-term debt	Long-term debt	2,017		922		Long-term debt	2,042		1,809
Long-term lease liabilities	Long-term lease liabilities	150		121		Long-term lease liabilities	157		139
Deferred income taxes	Deferred income taxes	78		6		Deferred income taxes	75		75
Long-term deferred revenue	Long-term deferred revenue	323		315		Long-term deferred revenue	331		333
Other long-term liabilities	Other long-term liabilities	150		67		Other long-term liabilities	89		108
Total Liabilities	Total Liabilities	4,791		3,231		Total Liabilities	4,464		4,796
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	542		462		Additional paid-in capital	580		561
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)
Treasury stock at cost, 20,818,920 and 20,700,357 shares as of July 1, 2023 and December 31, 2022, respectively						Treasury stock at cost, 20,818,920 and 20,700,357 shares as of July 1, 2023 and December 31, 2022, respectively	(1,859)		(1,799)
Retained earnings	Retained earnings	3,850		3,573		Retained earnings	4,330		4,036
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(34)		(29)		Accumulated other comprehensive loss	(60)		(66)
Total Stockholders’ Equity	Total Stockholders’ Equity	2,657		2,984		Total Stockholders’ Equity	2,992		2,733
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	7,448	$	6,215	Total Liabilities and Stockholders’ Equity	$	7,456	$	7,529

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				Six Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021			July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net sales:	Net sales:									Net sales:
Tangible products	Tangible products	$	1,164	$	1,240	$	3,630	$	3,585	Tangible products	$	986	$	1,259	$	2,156	$	2,466
Services and software	Services and software	214		196		648		575		Services and software	228		209		463		434
Total Net sales	Total Net sales	1,378		1,436		4,278		4,160		Total Net sales	1,214		1,468		2,619		2,900
Cost of sales:	Cost of sales:									Cost of sales:
Tangible products	Tangible products	632		687		1,998		1,896		Tangible products	522		685		1,140		1,366
Services and software	Services and software	118		103		341		305		Services and software	111		109		231		223
Total Cost of sales	Total Cost of sales	750		790		2,339		2,201		Total Cost of sales	633		794		1,371		1,589
Gross profit	Gross profit	628		646		1,939		1,959		Gross profit	581		674		1,248		1,311
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	149		148		452		430		Selling and marketing	146		151		307		303
Research and development	Research and development	143		141		428		422		Research and development	130		148		276		285
General and administrative	General and administrative	92		85		288		259		General and administrative	69		97		168		196
Settlement and related costs	Settlement and related costs	—		—		372		—		Settlement and related costs	—		372		—		372
Amortization of intangible assets	Amortization of intangible assets	39		29		107		81		Amortization of intangible assets	26		35		52		68
Acquisition and integration costs	Acquisition and integration costs	1		6		19		11		Acquisition and integration costs	2		14		2		18
Exit and restructuring costs	Exit and restructuring costs	2		—		4		—		Exit and restructuring costs	14		2		24		2
Total Operating expenses	Total Operating expenses	426		409		1,670		1,203		Total Operating expenses	387		819		829		1,244
Operating income		202		237		269		756
Other income (loss), net:
Foreign exchange gain (loss)		—		(4)		5		(3)
Interest income (expense), net		21		(5)		48		(10)
Other (expense) income, net		(1)		—		(3)		(1)
Total Other income (expense), net		20		(9)		50		(14)
Income before income tax		222		228		319		742
Income tax expense		52		29		42		96
Net income		$	170	$	199	$	277	$	646
Basic earnings per share		$	3.28	$	3.72	$	5.29	$	12.08
Diluted earnings per share		$	3.26	$	3.69	$	5.25	$	11.98
Operating income (loss)										Operating income (loss)	194		(145)		419		67
Other (loss) income, net:										Other (loss) income, net:
Foreign exchange (loss) gain										Foreign exchange (loss) gain	(5)		(3)		(4)		5
Interest (expense) income, net										Interest (expense) income, net	(16)		(3)		(53)		27
Other (expense), net										Other (expense), net	(2)		(2)		(6)		(2)
Total Other (expense) income, net										Total Other (expense) income, net	(23)		(8)		(63)		30
Income (loss) before income tax										Income (loss) before income tax	171		(153)		356		97
Income tax expense (benefit)										Income tax expense (benefit)	27		(55)		62		(10)
Net income (loss)										Net income (loss)	$	144	$	(98)	$	294	$	107
Basic earnings (loss) per share										Basic earnings (loss) per share	$	2.80	$	(1.87)	$	5.72	$	2.04
Diluted earnings (loss) per share										Diluted earnings (loss) per share	$	2.78	$	(1.87)	$	5.68	$	2.02

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021			July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net income		$	170	$	199	$	277	$	646
Net income (loss)										Net income (loss)	$	144	$	(98)	$	294	$	107
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 on anticipated sales hedging transactions	Changes in unrealized gains on anticipated sales hedging transactions	(1)		12		11		46		Changes in unrealized gains on anticipated sales hedging transactions	4		7		1		12

Foreign currency translation adjustment	Foreign currency translation adjustment	(5)		(2)		(16)		(5)		Foreign currency translation adjustment	2		(6)		5		(11)
Comprehensive income		$	164	$	209	$	272	$	687
Comprehensive income (loss)										Comprehensive income (loss)	$	150	$	(97)	$	300	$	108

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			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
Balance at December 31, 2022															Balance at December 31, 2022	51,451,500	$	1	$	561	$	(1,799)	$	4,036	$	(66)	$	2,733

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	20,082	—		8		(2)		—		—		6		Issuances of treasury shares related to share-based compensation plans, net of forfeitures	29,784	—		5		—		—		—		5
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	(1,639)	—		—		(1)		—		—		(1)		Shares withheld to fund withholding tax obligations related to share-based compensation plans	(504)	—		—		—		—		—		—
Share-based compensation	Share-based compensation	—	—		17		—		—		—		17		Share-based compensation	—	—		18		—		—		—		18
Repurchases of common stock		(648,875)	—		—		(305)		—		—		(305)
Repurchase of common stock															Repurchase of common stock	(55,811)	—		—		(15)		—		—		(15)
Net income	Net income	—	—		—		—		205		—		205		Net income	—	—		—		—		150		—		150
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)	—	—		—		—		—		5		5		Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		(3)		(3)

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—		—		—		(5)		(5)		Foreign currency translation adjustment	—	—		—		—		—		3		3
Balance at April 2, 2022		52,784,843	$	1	$	487	$	(1,331)	$	3,778	$	(29)	$	2,906
Balance at April 1, 2023															Balance at April 1, 2023	51,424,969	$	1	$	584	$	(1,814)	$	4,186	$	(66)	$	2,891

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	70,821	—		—		1		—		—		1		Issuances of treasury shares related to share-based compensation plans, net of forfeitures	75,271	—		(6)		1		—		—		(5)
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	(56,431)	—		—		(22)		—		—		(22)		Shares withheld to fund withholding tax obligations related to share-based compensation plans	(28,795)	—		—		(9)		—		—		(9)
Share-based compensation	Share-based compensation	—	—		25		—		—		—		25		Share-based compensation	—	—		2		—		—		—		2
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
Repurchase of common stock															Repurchase of common stock	(138,508)	—		—		(37)		—		—		(37)
Net income															Net income	—	—		—		—		144		—		144

Changes in unrealized gains and losses on forward interest rate swap hedging transactions (net of income taxes)															Changes in unrealized gains and losses on forward interest rate swap hedging transactions (net of income taxes)	—	—		—		—		—		4		4
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—		—		—		(6)		(6)		Foreign currency translation adjustment	—	—		—		—		—		2		2
Balance at July 2, 2022		51,954,994	$	1	$	512	$	(1,652)	$	3,680	$	(28)	$	2,513
Balance at July 1, 2023															Balance at July 1, 2023	51,332,937	$	1	$	580	$	(1,859)	$	4,330	$	(60)	$	2,992

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

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, 2020		53,462,082	$	1	$	395	$	(919)	$	2,736	$	(69)	$	2,144
Balance at December 31, 2021															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	Issuances of treasury shares related to share-based compensation plans, net of forfeitures	48,584	—		(6)		—		—		—		(6)		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	Shares withheld to fund withholding tax obligations related to share-based compensation plans	(400)	—		—		—		—		—		—		Shares withheld to fund withholding tax obligations related to share-based compensation plans	(1,639)	—		—		(1)		—		—		(1)
Share-based compensation	Share-based compensation	—	—		16		—		—		—		16		Share-based compensation	—	—		17		—		—		—		17
Repurchases of common stock		(100)	—		—		—		—		—		—
Repurchase of common stock															Repurchase of common stock	(648,875)	—		—		(305)		—		—		(305)
Net income	Net income	—	—		—		—		228		—		228		Net income	—	—		—		—		205		—		205
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)	—	—		—		—		—		32		32		Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		5		5

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—		—		—		(3)		(3)		Foreign currency translation adjustment	—	—		—		—		—		(5)		(5)
Balance at April 3, 2021		53,510,166	$	1	$	405	$	(919)	$	2,964	$	(40)	$	2,411
Balance at April 2, 2022															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	Issuances of treasury shares related to share-based compensation plans, net of forfeitures	27,226	—		—		—		—		—		—		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	Shares withheld to fund withholding tax obligations related to share-based compensation plans	(81,810)	—		—		(40)		—		—		(40)		Shares withheld to fund withholding tax obligations related to share-based compensation plans	(56,431)	—		—		(22)		—		—		(22)
Share-based compensation	Share-based compensation	—	—		22		—		—		—		22		Share-based compensation	—	—		25		—		—		—		25
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
Repurchase of common stock															Repurchase of common stock	(844,239)	—		—		(300)		—		—		(300)
Net loss															Net loss	—	—		—		—		(98)		—		(98)
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)	—	—		—		—		—		12		12		Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)	—	—		—		—		—		7		7

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—		—		—		(2)		(2)		Foreign currency translation adjustment	—	—		—		—		—		(6)		(6)
Balance at October 2, 2021		53,454,069	$	1	$	447	$	(986)	$	3,382	$	(28)	$	2,816
Balance at July 2, 2022															Balance at July 2, 2022	51,954,994	$	1	$	512	$	(1,652)	$	3,680	$	(28)	$	2,513

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


		Nine Months Ended					Six Months Ended
		October 1, 2022		October 2, 2021			July 1, 2023		July 2, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	277	$	646	Net income	$	294	$	107
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	158		136		Depreciation and amortization	88		103

Share-based compensation	Share-based compensation	70		58		Share-based compensation	20		42

Deferred income taxes	Deferred income taxes	(115)		(6)		Deferred income taxes	(29)		(124)
Unrealized gain on forward interest rate swaps		(92)		(17)
Unrealized loss (gain) on forward interest rate swaps						Unrealized loss (gain) on forward interest rate swaps	1		(52)
Other, net	Other, net	4		1		Other, net	2		3
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(58)		(107)		Accounts receivable, net	105		(170)
Inventories, net	Inventories, net	(293)		75		Inventories, net	(3)		(108)
Other assets	Other assets	(68)		(25)		Other assets	(22)		(52)
Accounts payable	Accounts payable	127		(2)		Accounts payable	(273)		121
Accrued liabilities	Accrued liabilities	(101)		42		Accrued liabilities	(107)		(77)
Deferred revenue	Deferred revenue	27		101		Deferred revenue	16		34
Income taxes	Income taxes	3		(67)		Income taxes	(116)		(9)
Legal Settlement Liability		270		—
Settlement liability						Settlement liability	(90)		320
Other operating activities	Other operating activities	12		1		Other operating activities	4		16
Net cash provided by operating activities		221		836
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(110)		154
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	(878)		(307)		Acquisition of businesses, net of cash acquired	—		(875)
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(51)		(38)		Purchases of property, plant and equipment	(34)		(31)

Purchases of long-term investments	Purchases of long-term investments	(12)		(24)		Purchases of long-term investments	(1)		(6)
Net cash used in investing activities	Net cash used in investing activities	(941)		(369)		Net cash used in investing activities	(35)		(912)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Payment of debt issuance costs, extinguishment costs and discounts	Payment of debt issuance costs, extinguishment costs and discounts	(8)		—		Payment of debt issuance costs, extinguishment costs and discounts	—		(8)
Payments of long-term debt	Payments of long-term debt	(210)		(277)		Payments of long-term debt	(183)		(119)
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	1,385		21		Proceeds from issuance of long-term debt	368		1,294

Payments for repurchases of common stock	Payments for repurchases of common stock	(655)		(25)		Payments for repurchases of common stock	(52)		(605)
Net payments related to share-based compensation plans		(14)		(48)
Net proceeds related to share-based compensation plans						Net proceeds related to share-based compensation plans	(9)		(16)
Change in unremitted cash collections from servicing factored receivables	Change in unremitted cash collections from servicing factored receivables	(28)		(22)		Change in unremitted cash collections from servicing factored receivables	(27)		(28)

Net cash provided by (used in) financing activities		470		(351)
Net cash provided by financing activities						Net cash provided by financing activities	97		518
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	(2)		—		Effect of exchange rate changes on cash and cash equivalents, including restricted cash	(1)		(6)
Net (decrease) increase in cash and cash equivalents, including restricted cash		(252)		116
Net decrease in cash and cash equivalents, including restricted cash						Net decrease in cash and cash equivalents, including restricted cash	(49)		(246)
Cash and cash equivalents, including restricted cash, at beginning of period	Cash and cash equivalents, including restricted cash, at beginning of period	344		192		Cash and cash equivalents, including restricted cash, at beginning of period	117		344
Cash and cash equivalents, including restricted cash, at end of period	Cash and cash equivalents, including restricted cash, at end of period	$	92	$	308	Cash and cash equivalents, including restricted cash, at end of period	$	68	$	98
Less restricted cash, included in Prepaid expenses and other current assets	Less restricted cash, included in Prepaid expenses and other current assets	(11)		(1)		Less restricted cash, included in Prepaid expenses and other current assets	—		—
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	81	$	307	Cash and cash equivalents at end of period	$	68	$	98
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Income taxes paid	Income taxes paid	$	152	$	169	Income taxes paid	$	212	$	120
Interest paid	Interest paid	$	34	$	25	Interest paid	$	50	$	15

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

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~~Automatic Identification and ~~data capture solutions~~Data Capture (“AIDC”) industry. We design, manufacture, and sell a broad range of products and solutions, as well as various workflow optimization solutions, including cloud-based software subscriptions ~~that capture~~ and ~~move data.~~robotic automation solutions. 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. 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, ~~2021.~~2022.

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~~July 1, ~~2022,~~2023, the Consolidated Statements of Operations, Comprehensive Income (Loss) and Stockholders’ Equity for the three and ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021,~~2022, and the Consolidated Statement of Cash Flows for the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021.~~2022. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, ~~2022.~~2023.

~~Effective January 1, 2022,~~In the second quarter, our advanced location technology solutions ~~offering,~~business, which ~~provides a range~~is primarily comprised of radio frequency identification devices (“RFID”) and real-time location ~~systems~~solution offerings (“RTLS”) ~~and services that generate on-demand information about the physical location and status of assets, equipment, and people,~~, moved from our Enterprise Visibility & Mobility (“EVM”) segment into our Asset Intelligence & Tracking (“AIT”~~) segment into our Enterprise Visibility & Mobility (“EVM”~~) segment contemporaneous with a change in our organizational structure and management of the business. We have reported our segment results reflecting this change, including historical periods, on a comparable basis. This change does not have an impact toon the Consolidated Financial Statements. ~~See Note 18,~~ ~~Segment Information & Geographic Data~~ ~~for additional information related to each segment’s results.~~

Note 2 Significant Accounting Policies

For a discussion of our significant accounting policies, see Note 2, Significant Accounting 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.~~2022. 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.~~2022.

Table of Contents

Note 3 Revenues

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

Revenues for products are generally recognized upon shipment, whereas revenues for services and solution offerings are generally recognized over time by using an output or time-based method, assuming all other criteria for revenue recognition have been met. Revenues for software are recognized either upon delivery or over time using a time-based method, depending upon how control is transferred to the customer. 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~~ (in millions):

Three Months Ended
October 1, 2022 October 2, 2021
Segment Tangible Products Services and Software Total Tangible Products Services and Software Total
AIT $ 392 $ 23 $ 415 $ 354 $ 24 $ 378
EVM 772 191 963 886 172 1,058
Corporate, eliminations(1)
— — — — — —
Total $ 1,164 $ 214 $ 1,378 $ 1,240 $ 196 $ 1,436
Nine Months Ended
October 1, 2022 October 2, 2021
Segment Tangible Products Services and Software Total Tangible Products Services and Software Total
AIT $ 1,184 $ 71 $ 1,255 $ 1,151 $ 70 $ 1,221
EVM 2,446 577 3,023 2,434 511 2,945
Corporate, eliminations(1)
— — — — (6) (6)
Total $ 3,630 $ 648 $ 4,278 $ 3,585 $ 575 $ 4,160

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


	Three Months Ended
	July 1, 2023						July 2, 2022
Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	$	432	$	27	$	459	$	441	$	26	$	467
EVM	554		201		755		818		183		1,001

Total	$	986	$	228	$	1,214	$	1,259	$	209	$	1,468

	Six Months Ended
	July 1, 2023						July 2, 2022
Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	$	927	$	54	$	981	$	824	$	54	$	878
EVM	1,229		409		1,638		1,642		380		2,022

Total	$	2,156	$	463	$	2,619	$	2,466	$	434	$	2,900

In addition, refer to Note 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 ~~solution offerings.~~software solutions. The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was ~~$1,056~~$1,130 million and ~~$1,033~~$1,105 million, inclusive of deferred revenue, as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. On average, remaining performance obligations as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021~~2022 are expected to be recognized over a period of approximately two years.

~~Table of Contents~~

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 $14 million and ~~$10~~$16 million as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. These contract assets result from timing differences between billing and satisfying performance obligations, as well as the impact ~~from~~of 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~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021,~~2022, 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 ~~$724~~$774 million and ~~$695~~$758 million as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. During the three and ~~nine~~six months ended ~~October~~July 1, 2023, the Company recognized $114 million and $249 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31,

Table of Contents

2022. During the three and six months ended July 2, 2022, the Company recognized ~~$92~~$108 million and ~~$329~~$237 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, which was previously included in the beginning balance of deferred revenue as of December 31, 2020.

Note 4 Inventories

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


		October 1, 2022		December 31, 2021			July 1, 2023		December 31, 2022
Raw materials(1)	Raw materials(1)	$	292	$	196	Raw materials(1)	$	345	$	293
Work in process	Work in process	3		3		Work in process	5		4
Finished goods	Finished goods	519		292		Finished goods	514		563
Total Inventories, net	Total Inventories, net	$	814	$	491	Total Inventories, net	$	864	$	860

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

Note 5 Business Acquisitions

Matrox

On June 3, 2022, the Company acquired Matrox Electronic Systems Ltd. (“Matrox”), a developer of advanced machine vision components and software. Through its acquisition of Matrox, the Company intends to expand its machine vision products and software offerings.

The acquisition was accounted for under the acquisition method of accounting for business combinations. The Company’s total purchase consideration was $878 million comprised of $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 third quarter of 2022.

The Company utilized estimated fair values as of the acquisition date to allocate the total purchase consideration to the identifiable assets acquired and liabilities assumed. The fair value of the net assets acquired was based on several estimates and assumptions, as well as customary valuation techniques, primarily the excess earnings method for 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 1, 2022 include intangible assets and income tax-related items.

~~Table of Contents~~

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


~~Identifiable intangible assets~~	$	~~297~~
~~Inventory~~	33

~~Other assets acquired~~	13
~~Deferred tax liabilities~~	~~(79)~~


~~Other liabilities assumed~~	~~(21)~~
~~Net assets acquired~~	$	~~243~~
~~Goodwill on acquisition~~	~~635~~
~~Total purchase price~~	$	~~878~~

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

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

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

~~In connection with the acquisition of Matrox, the Company granted $13 million of cash-settled RSUs to certain employees in~~ the second quarter ~~which are attributable to service to be rendered subsequent to the acquisition and will generally be expensed over a 3-year service period.~~

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

~~Fetch~~

~~During the third quarter of 2022,~~2023, the Company finalized the purchase price allocation for its acquisition of ~~Fetch Robotics, Inc.~~Matrox Electronic Systems Ltd. (“~~Fetch”~~Matrox”). The measurement period adjustments recorded in the current year, all relating to facts and circumstances existing as of the acquisition date, 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 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 October 1, 2022 relate to income tax items.

~~Acquisition and integration costs~~

The Company incurred approximately $19 million of acquisition-related costs during the nine months ended October 1, 2022, primarily related to third-party and advisory fees associated with the Matrox acquisition. For the three months ended October 1, 2022, acquisition-related costs were $1 million. These costs are included within Acquisition and integration costs on the Consolidated Statement of Operations.

~~Table of Contents~~

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, 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

~~Table of Contents~~

~~Note 7~~ Investments

The carrying value of the Company’s ~~venture~~long-term investments, ~~was $113 million and $101 million as of October 1, 2022 and December 31, 2021, respectively,~~ which are included in Other long-term assets on the Consolidated Balance ~~Sheets.~~Sheets, was $113 million as of both July 1, 2023 and December 31, 2022.

~~During the three and nine months ended October 1, 2022, the~~The Company paid $6$1 million and ~~$12~~$6 million for the ~~purchases~~purchase of long-term investments ~~respectively. Comparatively,~~ during the ~~three and nine~~six months ended ~~October~~July 1, 2023 and July 2, ~~2021, the Company paid $7 million and $24 million for the purchases of new long-term investments,~~2022, respectively.

Net gains and losses related to the Company’s long-term investments are included within Other (expense) ~~income,~~, net on the Consolidated Statements of Operations. There were no net gains or losses during the three months ended July 1, 2023. The Company recognized net losses of $1 million during the six months ended July 1, 2023. The Company did not recognize any net gains or losses during the three and ~~nine~~six months ended ~~October 1,~~July 2, 2022. ~~The Company recognized net gains of $1 million during the three and nine months ended October 2, 2021.~~

Note 87 Exit and Restructuring Costs

InThe Company expanded the ~~third quarter~~scope of the 2022 ~~the Company committed~~Productivity Plan, which is still expected to ~~certain leased site rationalization and organizational changes designed~~be substantially completed in 2023, with a total cost now estimated to ~~generate structural cost efficiencies (collectively referred to as the “2022 Productivity Plan”).~~be at least $60 million. Total Exit and restructuring charges associated with the 2022 Productivity Plan to date were $36 million, including $14 million and $24 million recorded for the three and six months ended July 1, 2023, respectively. The Company’s obligations under the 2022 Productivity Plan are expected to be ~~at least $10~~substantially settled by the first quarter of 2024 and are primarily reflected within Accrued liabilities on the Consolidated Balance Sheets.

In addition, the Company initiated a voluntary retirement plan (“VRP”) applicable to retirement-eligible U.S. employees to generate incremental cost efficiencies. Employees who participate in the VRP agree to retire in 2023 in exchange for cash severance and other benefits that will be classified within Exit and restructuring on the Consolidated Statements of Operations. The Company estimates the total cost of the VRP will be approximately $45 million and will be ~~completed~~recorded in the third quarter aligned with the Company’s commitment to the VRP obligations. Payment obligations are expected to be substantially settled by the ~~end~~first quarter of ~~2023. For~~2024 and will be reflected within Accrued liabilities on the ~~three months ended October 1, 2022, the Company recorded $2 million primarily related to facility site exits and employee severance.~~Consolidated Balance Sheets.

Note 98 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~~ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

•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.

Table of Contents

•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.

~~Table of Contents~~

The Company’s financial assets and liabilities carried at fair value as of ~~October~~July 1, ~~2022,~~2023, are classified below (in millions):


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

Forward interest rate swap contracts (2)										Forward interest rate swap contracts (2)	$	—	$	108	$	—	$	108
Investments related to the deferred compensation plan										Investments related to the deferred compensation plan	38		—		—		38
Total Assets at fair value										Total Assets at fair value	$	38	$	108	$	—	$	146
Liabilities:										Liabilities:
Foreign exchange contracts (1)	Foreign exchange contracts (1)	$	5	$	37	$	—	$	42	Foreign exchange contracts (1)	$	2	$	13	$	—	$	15
Forward interest rate swap contracts (2)	Forward interest rate swap contracts (2)	—		76		—		76		Forward interest rate swap contracts (2)	—		36		—		36
Money market investments related to deferred compensation plan		32		—		—		32
Total Assets at fair value		$	37	$	113	$	—	$	150
Liabilities:

Liabilities related to the deferred compensation plan	Liabilities related to the deferred compensation plan	32		—		—		32		Liabilities related to the deferred compensation plan	38		—		—		38
Total Liabilities at fair value	Total Liabilities at fair value	$	32	$	—	$	—	$	32	Total Liabilities at fair value	$	40	$	49	$	—	$	89

The Company’s financial assets and liabilities carried at fair value as of December 31, ~~2021,~~2022, are classified below (in millions):


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

Forward interest rate swap contracts (2)										Forward interest rate swap contracts (2)	$	—	$	72	$	—	$	72
Investments related to the deferred compensation plan										Investments related to the deferred compensation plan	35		—		—		35
Total Assets at fair value										Total Assets at fair value	$	35	$	72	$	—	$	107
Liabilities:										Liabilities:
Foreign exchange contracts (1)	Foreign exchange contracts (1)	$	—	$	23	$	—	$	23	Foreign exchange contracts (1)	$	5	$	14	$	—	$	19

Money market investments related to deferred compensation plan		37		—		—		37
Total Assets at fair value		$	37	$	23	$	—	$	60
Liabilities:

Forward interest rate swap contracts (2)		$	—	$	16	$	—	$	16
Liabilities related to the deferred compensation plan	Liabilities related to the deferred compensation plan	37		—		—		37		Liabilities related to the deferred compensation plan	35		—		—		35
Total Liabilities at fair value	Total Liabilities at fair value	$	37	$	16	$	—	$	53	Total Liabilities at fair value	$	40	$	14	$	—	$	54

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

(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.

1512

Table of Contents

Note 109 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 1, 2022		December 31, 2021			Balance Sheets Classification	July 1, 2023		December 31, 2022
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	$	37	$	23	Foreign exchange contracts	Accrued liabilities	$	(13)	$	(14)

Total derivative instruments designated as hedges	Total derivative instruments designated as hedges		$	37	$	23	Total derivative instruments designated as hedges		$	(13)	$	(14)

Derivative instruments not designated as hedges:	Derivative instruments not designated as hedges:						Derivative instruments not designated as hedges:
Foreign exchange contracts		Prepaid expenses and other current assets	$	5	$	—

Forward interest rate swaps	Forward interest rate swaps	Prepaid expenses and other current assets	18		—		Forward interest rate swaps	Prepaid expenses and other current assets	$	40	$	25
Forward interest rate swaps	Forward interest rate swaps	Other long-term assets	58		—		Forward interest rate swaps	Other long-term assets	68		47

Foreign exchange contracts							Foreign exchange contracts	Accrued liabilities	(2)		(5)
Forward interest rate swaps	Forward interest rate swaps	Accrued liabilities	—		(15)		Forward interest rate swaps	Accrued liabilities	(14)		—
Forward interest rate swaps	Forward interest rate swaps	Other long-term liabilities	—		(1)		Forward interest rate swaps	Other long-term liabilities	(22)		—
Total derivative instruments not designated as hedges	Total derivative instruments not designated as hedges		$	81	$	(16)	Total derivative instruments not designated as hedges		$	70	$	67
Total net derivative asset	Total net derivative asset		$	118	$	7	Total net derivative asset		$	57	$	53

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


	Gains (Losses) Recognized in Income
		Three Months Ended				Six Months Ended
	Statements of Operations Classification	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Derivative instruments not designated as hedges:
Foreign exchange contracts	Foreign exchange gain (loss)	$	1	$	9	$	(4)	$	8
Forward interest rate swaps	Interest income (expense), net	18		11		11		45
Total net gain recognized in income		$	19	$	20	$	7	$	53

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

Table of Contents

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

~~Table of Contents~~

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 would have been ~~unchanged as of October 1, 2022 and~~ increased by $1 million and $4 million as of July 1, 2023 and December 31, ~~2021.~~2022, respectively.

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 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~~$7 million of losses and $5$27 million of gains for the three months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021,~~2022, respectively. Realized amounts reclassified to Net sales were ~~$72~~$10 million of losses and $43 million of gains ~~and $15 million of losses~~ for the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021,~~2022, respectively. As of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, the notional amounts of the Company’s foreign exchange cash flow hedges were ~~€405~~€754 million and ~~€675~~€549 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 values of these outstanding contracts were as follows (in millions):


		October 1, 2022		December 31, 2021			July 1, 2023		December 31, 2022
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	£	16	£	13	British Pound/U.S. Dollar	£	9	£	11
Euro/U.S. Dollar	Euro/U.S. Dollar	€	219	€	142	Euro/U.S. Dollar	€	152	€	191

Euro/Czech Koruna	Euro/Czech Koruna	€	15	€	16	Euro/Czech Koruna	€	16	€	15

Japanese Yen/U.S. Dollar						Japanese Yen/U.S. Dollar	¥	579	¥	—
Singapore Dollar/U.S. Dollar	Singapore Dollar/U.S. Dollar	S$	8	S$	16	Singapore Dollar/U.S. Dollar	S$	11	S$	5
Mexican Peso/U.S. Dollar	Mexican Peso/U.S. Dollar	Mex$	293	Mex$	64	Mexican Peso/U.S. Dollar	Mex$	138	Mex$	372

Polish Zloty/U.S. Dollar	Polish Zloty/U.S. Dollar	zł	25	zł	103	Polish Zloty/U.S. Dollar	zł	84	zł	47
Net fair value of assets of outstanding contracts		$	5	$	—
Net fair value of liabilities of outstanding contracts						Net fair value of liabilities of outstanding contracts	$	2	$	5

Table of Contents

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 ~~11,~~10, Long-Term Debt for further details ~~about~~related to these borrowings.

The Company manages its exposure to changes in interest rates by utilizing long-term forward interest rate swaps to hedge this exposure and to achieve a desired proportion of fixed versus ~~floating-rate~~variable-rate debt, based on current and projected market conditions.

~~Table of Contents~~

The Company 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, which is subject to monthly net cash settlements effective through December 2022.

The Company also previously held fixed LIBOR interest rate swaps with an $800 million total notional amount that were subject to net cash settlements effective between December 2022 and August 2024. In the first quarter of 2022, the Company terminated those interest rate swaps and entered into new interest rate swap agreements ~~that contain~~with a total notional amount of $800 million to lock into a fixed SOFR interest rate base, ~~and will be~~which are subject to monthly net cash settlements effective ~~in December 2022 and ending in~~through October 2027.

~~The Company’s~~In the second quarter, the Company entered into new interest rate ~~swaps~~swap agreements that contain a total notional amount of $400 million to lock into a variable interest rate base designed to offset a portion of the Company’s existing swap agreements. These agreements are ~~not designated as hedges~~subject to monthly cash settlements effective through October 2027. At the same time, the Company entered into additional new interest rate swap agreements that contain a total notional amount of $400 million to lock into a fixed SOFR interest rate base, which are subject to monthly cash settlements effective through June 2030. As a result of these transactions, the Company maintained fixed interest rates on a total notional amount of $800 million through October 2027 and ~~changes in fair value are recognized immediately as Interest income (expense), net~~a total notional amount of $400 million through June 2030. There was no cash settlement, or significant impact on the Consolidated ~~Statements~~Statement of ~~Operations.~~Operations, as a result of these transactions in the second quarter of 2023.

Note 1110 Long-Term Debt

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


		October 1, 2022		December 31, 2021			July 1, 2023		December 31, 2022
Term Loan A	Term Loan A	$	1,739	$	888	Term Loan A	$	1,684	$	1,728

Revolving Credit Facility	Revolving Credit Facility	248		—		Revolving Credit Facility	388		50
Receivables Financing Facilities	Receivables Financing Facilities	183		108		Receivables Financing Facilities	144		254

Total debt	Total debt	$	2,170	$	996	Total debt	$	2,216	$	2,032
Less: Debt issuance costs	Less: Debt issuance costs	(4)		(3)		Less: Debt issuance costs	(4)		(4)
Less: Unamortized discounts	Less: Unamortized discounts	(5)		(2)		Less: Unamortized discounts	(4)		(5)
Less: Current portion of debt	Less: Current portion of debt	(144)		(69)		Less: Current portion of debt	(166)		(214)
Total long-term debt	Total long-term debt	$	2,017	$	922	Total long-term debt	$	2,042	$	1,809

As of ~~October~~July 1, ~~2022,~~2023, the future maturities of debt are as follows (in millions):

2022 (remaining 3 months) $ 11
2023 144
2024 127
2025 66
2026 87
Thereafter 1,735
Total future debt maturities $ 2,170


2023 (6 months remaining)	$	—
2024	188
2025	66
2026	88
2027	1,874

Total future maturities of debt	$	2,216

All borrowings as of ~~October~~July 1, ~~2022~~2023 were denominated in U.S. Dollars.

The estimated fair value of the Company’s debt approximated $2.1 billion and ~~$1.0~~$2.0 billion as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

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.

1815

Table of Contents

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in ~~December 2022~~March 2024 and the majority due upon ~~the May 25, 2027~~ maturity ~~date.~~in 2027. The Company may make prepayments, as it did in the first quarter of 2023, 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~~July 1, ~~2022,~~2023, the Term Loan A interest rate was ~~3.10%~~6.20%. Interest payments are ~~generally~~ made monthly and are subject to variable rates plus an applicable margin.

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~~July 1, ~~2022,~~2023, the Company had letters of credit totaling $7$9 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to ~~$1,493~~$1,491 million. As of ~~October~~July 1, ~~2022,~~2023, the Revolving Credit Facility had an average interest rate of ~~4.17%~~6.15%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The 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~~During the second ~~Receivable~~quarter of 2023, the Company amended the second Receivables Financing Facility, which allows for borrowings of up to $100 million, ~~and matures on~~to extend the maturity to May ~~15, 2023.~~13, 2024, but otherwise did not substantially change the terms of the facility.

As of ~~October~~July 1, ~~2022,~~2023, the Company’s Consolidated Balance Sheets included ~~$773~~$621 million of receivables that were pledged under the two Receivables Financing Facilities. As of ~~October~~July 1, ~~2022, $183~~2023, $144 million had been borrowed ~~of which $100 million~~and was classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable margin. As of ~~October~~July 1, ~~2022,~~2023, the Receivables Financing Facilities had an average interest rate of ~~4.04%~~6.50%. Interest is paid monthly on these ~~borrowings on a monthly basis.~~borrowings.

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

The Company uses interest rate swaps to manage the interest rate risk associated with its debt. See Note 109, Derivative Instruments for further information.

As of ~~October~~July 1, ~~2022,~~2023, the Company was in compliance with all debt covenants.

1916

Table of Contents

Note 1211 Leases

During the ~~three~~six months ended ~~October~~July 1, ~~2022,~~2023, the Company recorded an additional ~~$14~~$38 million of right-of-use (“ROU”) assets obtained in exchange for lease obligations primarily related to the ~~extension~~commencement of ~~two distribution center lease agreements.~~a new office facility lease.

Future minimum lease payments under non-cancellable leases as of ~~October~~July 1, ~~2022~~2023 were as follows (in millions):


2022 (remaining 3 months)		$	8
2023		46
2023 (6 months remaining)				2023 (6 months remaining)	$	25
2024	2024	44		2024	48
2025	2025	32		2025	37
2026	2026	25		2026	32
2027				2027	25
Thereafter	Thereafter	64		Thereafter	76
Total future minimum lease payments	Total future minimum lease payments	$	219	Total future minimum lease payments	$	243
Less: Interest	Less: Interest	(34)		Less: Interest	(47)
Present value of lease liabilities	Present value of lease liabilities	$	185	Present value of lease liabilities	$	196

Reported as of October 1, 2022:
Reported as of July 1, 2023:				Reported as of July 1, 2023:
Current portion of lease liabilities	Current portion of lease liabilities	$	35	Current portion of lease liabilities	$	39
Long-term lease liabilities	Long-term lease liabilities	150		Long-term lease liabilities	157
Present value of lease liabilities	Present value of lease liabilities	$	185	Present value of lease liabilities	$	196

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

Note 1312 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

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


		October 1, 2022		December 31, 2021			July 1, 2023		December 31, 2022
Settlement and related costs		$	180	$	—
Settlement						Settlement	$	135	$	180
Unremitted cash collections due to banks on factored accounts receivable						Unremitted cash collections due to banks on factored accounts receivable	103		130
Payroll and benefits	Payroll and benefits	86		96		Payroll and benefits	88		90
Customer rebates						Customer rebates	42		55
Leases						Leases	39		37
Incentive compensation	Incentive compensation	78		155		Incentive compensation	29		100
Warranty	Warranty	27		26		Warranty	25		26
Customer rebates		44		51
Leases		35		33
Unremitted cash collections due to banks on factored accounts receivable		113		141

Foreign exchange contracts						Foreign exchange contracts	15		19
Short-term interest rate swaps	Short-term interest rate swaps	—		15		Short-term interest rate swaps	14		—
Freight and duty	Freight and duty	40		45		Freight and duty	12		19
Other	Other	72		77		Other	81		88
Accrued liabilities	Accrued liabilities	$	675	$	639	Accrued liabilities	$	583	$	744

Table of Contents

Warranties

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

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

~~Table of Contents~~


	Six Months Ended
	July 1, 2023		July 2, 2022
Balance at the beginning of the period	$	26	$	26
Warranty expense	13		15
Warranties fulfilled	(14)		(15)
Balance at the end of the period	$	25	$	26

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.

During the second quarter of 2022, the Company entered into a License and Settlement Agreement (“Settlement”) to resolve certain patent-related litigation. Under the Settlement, the Company and the counterparty each agreed to a mutual general release from all past claims asserted by the parties; entered into a covenant not to sue for patent infringement; agreed to a payment by the Company to the counterparty for past damages of $360 million and entered into a royalty-free cross-license with respect to each party’s existing patent portfolio for the lives of the licensed patents. Based on the terms of the Settlement and a relative fair value analysis of each of the settlement provisions, the Company concluded that no significant portion of the payment resulted in a future benefit, and as such, the full $360 million was recorded as a charge in the second quarter. That charge, along with $12 million of external legal fees, is reflected within Settlement and related costs on the Consolidated Statement of Operations. The payment terms under the Settlement consist of 8 quarterly payments of $45 million that began in the second ~~quarter.~~quarter of 2022. The ~~portion payable in~~remaining 3 quarterly amounts will be paid by the ~~next 12 months is~~first quarter of 2024 and are included within Accrued ~~liabilities, with the remaining amounts included within Other long-term~~ liabilities on the Consolidated Balance Sheets. ~~See Item~~

Note 13 Share-Based Compensation

The Company issues share-based compensation awards under the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”), approved by shareholders in 2018 which superseded and replaced all prior share-based incentive plans. Outstanding awards issued prior to the 2018 Plan are governed by the provisions of those plans until such awards have been exercised, forfeited, canceled, expired, or otherwise terminated in accordance with their terms. Awards available under the 2018 Plan include stock-settled awards, including stock-settled restricted stock units, stock-settled performance stock units, restricted stock awards, performance share awards, stock appreciation rights, incentive stock options, and non-qualified stock options.Awards available under the 2018 Plan also include cash-settled awards, including cash-settled stock appreciation rights, cash-settled restricted stock units, and cash-settled performance stock units. No awards remain available for future grants under previous plans.

The Company uses treasury shares as its source for issuing shares under the share-based compensation programs. As of July 1, 2023, the Company had 2,365,581 shares of Class A Common stock remaining available to be issued under the 2018 Plan.

The compensation expense from the Company’s share-based compensation plans and associated income tax benefit, excluding the effects of excess tax benefits or shortfalls, were included in the Consolidated Statements of Operations as follows (in millions):


	Three Months Ended				Six Months Ended
Compensation costs and related income tax benefit	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Cost of sales	$	2	$	1	$	3	$	2
Selling and marketing	1		6		7		10
Research and development	6		10		13		16
General and administration	(6)		10		3		16
Total compensation expense	$	3	$	27	$	26	$	44
Income tax benefit	$	3	$	5	$	7	$	8

~~Legal Proceedings~~

As of July 1, 2023, total unearned compensation cost related to the Company’s share-based compensation plans was $141 million, which will be recognized over the weighted average remaining service period of approximately 1.6 years.

Table of Contents

The majority of the Company’s share-based compensation awards are generally issued as part of its employee and non-employee director incentive program during the second quarter of each fiscal year. The Company also issues awards associated with business acquisitions or other off-cycle events. The majority of the Company’s share-based compensation is comprised of stock-settled awards.

Stock-settled awards

Beginning in 2021, the Company began issuing stock-settled restricted stock units (“stock-settled RSUs”) and stock-settled performance share units (“stock-settled PSUs”) for the majority of its share-based compensation awards. Prior to which, the Company primarily awarded restricted stock awards (“RSAs”), performance share awards (“PSAs”), and stock appreciation rights (“SARs”). The Company’s awards are typically time-vested with stock-settled RSUs and RSAs vesting ratably in three annual installments, stock-settled PSUs and PSAs vesting at the end of the three-year period, and SARs vesting ratably in four annual installments.

Vesting for each participant is subject to restrictions, such as continuous employment, except in certain cases as set forth in each stock agreement. Upon vesting, stock-settled RSUs and PSUs convert to shares of Class A Common Stock that are released to participants. RSAs and PSAs are considered participating securities, and as such, are included as part of the Company’s Class A Common Stock outstanding at the time of grant.

Compensation cost for the stock-settled RSUs, stock-settled PSUs, RSAs, and PSAs is expensed over each participant’s required service period. Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units or awards granted, net of estimated forfeitures. The expected attainment of the performance goals for the stock-settled PSUs and PSAs is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary. As a result of this assessment, the current quarter results include a $30 million reduction in compensation costs. Fair value and compensation cost for SARs are determined using a binomial model on the grant date.

The Company also issues RSAs to non-employee directors. The number of shares granted to each non-employee director is determined by dividing the value of the annual grant by the price of a share of the Company’s Class A Common Stock. New directors in any fiscal year earn a prorated amount. During the first six months of 2023, there were 6,640 shares granted to non-employee directors compared to 5,686 shares during the first six months of 2022. The shares vest immediately upon grant.

A summary of the Company’s restricted and performance stock-settled awards for the six months ended July 1, 2023 is as follows:


	RSUs			PSUs			RSAs			PSAs
	Units	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	242,732	$	404.19	105,928	$	406.89	46,971	$	271.92	35,246	$	245.79
Granted	279,224	265.58		104,446	258.63		6,640	271.77		—	—
Released	(74,829)	403.10		(64)	482.42		(45,129)	252.61		(34,525)	244.97
Forfeited	(11,198)	425.27		(1,096)	389.82		(1,375)	300.62		(75)	244.97
Outstanding at end of period	435,929	$	314.40	209,214	$	332.94	7,107	$	384.26	646	$	291.43

The Company did not issue any SARs during the six months ended July 1, 2023 and July 2, 2022. A summary of the Company’s SARs for the six months ended July 1, 2023 is as follows:

Table of Contents


	SARs	Weighted-Average Exercise Price
Outstanding at beginning of period	443,476	$	122.67
Granted	—	—
Exercised	(24,576)	98.86
Forfeited	(157)	239.89
Expired	—	—
Outstanding at end of period	418,743	$	124.02
Exercisable at end of period	403,092	$	118.58

The following table summarizes information about SARs outstanding as of July 1, 2023:


	Outstanding		Exercisable
Aggregate intrinsic value (in millions)	$	72	$	72
Weighted-average remaining contractual life (in years)	2.2		2.1

The intrinsic value of SARs exercised during the six months ended July 1, 2023 and July 2, 2022 was $5 million and $6 million, respectively. The total fair value of SARs that vested during the six months ended July 1, 2023 and July 2, 2022 was $2 million and $3 million, respectively.

Cash-settled awards

The Company also issues cash-settled share-based compensation awards, including cash-settled stock appreciation rights, cash-settled restricted stock units and cash-settled performance stock units that are classified as liability awards. These awards are expensed over the vesting period of the related award, which is typically three years. Compensation cost is calculated as the fair value on grant date multiplied by the number of share-equivalents granted. The expected attainment of the performance goals for the cash-settled performance stock units is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary. Cash settlement is based on the fair value of share equivalents at the time of vesting, which was $8 million and $4 million for the six months ended July 1, 2023 and July 2, 2022, respectively. Share-equivalents issued under these programs totaled 39,407 and 64,056 during the six months ended July 1, 2023 and July 2, 2022, respectively.

Employee Stock Purchase Plan

Eligible Zebra employees may purchase common stock at 95% of the fair market value at the date of purchase pursuant to the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”). Employees may make purchases by cash or payroll deductions up to certain limits. The aggregate number of shares that may be purchased under the 2020 ESPP is 1,500,000 shares. As of July 1, 2023, 1,365,953 shares remained available for ~~additional information.~~future purchase.

Note 14 Income Taxes

The Company’s effective tax rate for the three and ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 was ~~23.4%~~15.8% and ~~13.2%~~17.4%, respectively, compared to ~~12.7%~~35.9% and ~~12.9%~~(10.3)% for the three and ~~nine~~six months ended ~~October~~July 2, ~~2021,~~2022, respectively. ~~For~~In the ~~three months ended October 1, 2022,~~current period, the variance from the 21% federal statutory rate was primarily ~~attributable~~due to ~~unfavorable~~U.S. tax credits and the favorable impacts ~~from return~~of foreign earnings subject to ~~provision adjustments. For~~U.S. taxation. In the ~~nine months ended October 1, 2022,~~prior period, 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 of 2022, 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 deductionThe change in the U.S. The 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 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. The Company has received an incentivized tax rate from the Singapore Economic Development Board, which reduces the income tax rate in that jurisdiction effective for calendar years 2019 to 2023. The Company has committed to making additional investments in Singapore over the period 2019 to 2022. However, should the Company not make these investments in accordance with the agreement, any incentive benefit would have to be repaidprior three and six month periods was primarily due to the ~~Singapore~~one-time discrete tax ~~authorities.~~benefit from the Settlement in the prior period.

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 Global Intangible Low-Taxed Income, while any remaining foreign earnings are eligible for a dividends received deduction. As a result, future repatriation of earnings will not be subject to additional U.S. federal income tax but may be subject to currency translation gains or losses. Where required, the Company has recorded a deferred tax liability for foreign withholding taxes on current earnings. Additionally, gains and losses on any future taxable dispositions of U.S.-owned foreign affiliates continue to be subject to U.S. 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

Table of Contents

~~where, in the Company’s judgment, tax benefits are not expected to be realized. There were no significant changes to our valuation allowances during the three and nine months ended October 1, 2022.~~

~~Uncertain Tax Positions~~

The Company is currently undergoing U.S. federal income tax audits for tax years 2016 through 2018. Additionally, fiscal years 2009 through 2022 remain open to examination by multiple foreign and U.S. state taxing jurisdictions. As of October 1, 2022, management believes that it is reasonably possible that the recorded amount of unrecognized tax benefits may decrease by approximately $2 million within the next twelve 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 15 Earnings (Loss) Per Share

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

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021			July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Basic:	Basic:									Basic:
Net income		$	170	$	199	$	277	$	646
Net income (loss)										Net income (loss)	$	144	$	(98)	$	294	$	107
Weighted-average shares outstanding(1)	Weighted-average shares outstanding(1)	51,834,236		53,418,055		52,387,838		53,449,239		Weighted-average shares outstanding(1)	51,377,064		52,138,470		51,395,062		52,642,348
Basic earnings per share		$	3.28	$	3.72	$	5.29	$	12.08
Basic earnings (loss) per share										Basic earnings (loss) per share	$	2.80	$	(1.87)	$	5.72	$	2.04

Diluted:	Diluted:									Diluted:
Net income		$	170	$	199	$	277	$	646
Net income (loss)										Net income (loss)	$	144	$	(98)	$	294	$	107
Weighted-average shares outstanding(1)	Weighted-average shares outstanding(1)	51,834,236		53,418,055		52,387,838		53,449,239		Weighted-average shares outstanding(1)	51,377,064		52,138,470		51,395,062		52,642,348
Dilutive shares(2)	Dilutive shares(2)	323,616		448,504		368,793		462,574		Dilutive shares(2)	330,396		—		328,964		391,381
Diluted weighted-average shares outstanding	Diluted weighted-average shares outstanding	52,157,852		53,866,559		52,756,631		53,911,813		Diluted weighted-average shares outstanding	51,707,460		52,138,470		51,724,026		53,033,729
Diluted earnings per share		$	3.26	$	3.69	$	5.25	$	11.98
Diluted earnings (loss) per share										Diluted earnings (loss) per share	$	2.78	$	(1.87)	$	5.68	$	2.02

(1) In periods of a net loss, restricted stock and performance share awards, which are participating securities, are excluded from weighted-average shares outstanding.

(2) In periods of net loss, all unvested share-based awards were anti-dilutive and therefore excluded from diluted shares.

Anti-dilutive share-based compensation awards are excluded from diluted earnings per share calculations. There were ~~195,922~~247,453 and ~~169,810~~151,872 shares that were anti-dilutive for the three and ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, respectively. There were ~~25,355~~630,182 and ~~8,391~~335,476 shares that were anti-dilutive for the three and ~~nine~~six months ended ~~October~~July 2, ~~2021,~~2022, respectively.

Note 16 Accumulated Other Comprehensive Income (Loss)

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

•Unrealized gain (loss) on anticipated sales hedging transactions relates to derivative instruments used to hedge the exposure related to currency exchange rates for forecasted Euro sales. These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs. See Note ~~10,~~9, 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~~translates 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.

2221

Table of Contents

The ~~components~~changes in each component of AOCI ~~for~~during the ~~nine~~six months ended ~~October~~July 1, 2023 and July 2, 2022 ~~and October 2, 2021 are~~were as follows (in millions):


		Unrealized gain (loss) on sales hedging transactions		Foreign currency translation adjustments		Total
Balance at December 31, 2020		$	(28)	$	(41)	$	(69)
Other comprehensive income (loss) before reclassifications		41		(5)		36
Amounts reclassified from AOCI(1)		15		—		15
Tax effect		(10)		—		(10)
Other comprehensive income (loss), net of tax		46		(5)		41
Balance at October 2, 2021		$	18	$	(46)	$	(28)
									Unrealized gain (loss) on sales hedging		Foreign currency translation adjustments		Total
Balance at December 31, 2021	Balance at December 31, 2021	$	18	$	(47)	$	(29)	Balance at December 31, 2021	$	18	$	(47)	$	(29)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	86		(16)		70		Other comprehensive income (loss) before reclassifications	57		(11)		46
Amounts reclassified from AOCI(1)	Amounts reclassified from AOCI(1)	(72)		—		(72)		Amounts reclassified from AOCI(1)	(43)		—		(43)
Tax effect	Tax effect	(3)		—		(3)		Tax effect	(2)		—		(2)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	11		(16)		(5)		Other comprehensive income (loss), net of tax	12		(11)		1
Balance at October 1, 2022		$	29	$	(63)	$	(34)
Balance at July 2, 2022								Balance at July 2, 2022	$	30	$	(58)	$	(28)

Balance at December 31, 2022								Balance at December 31, 2022	$	(11)	$	(55)	$	(66)
Other comprehensive (loss) income before reclassifications								Other comprehensive (loss) income before reclassifications	(9)		5		(4)
Amounts reclassified from AOCI(1)								Amounts reclassified from AOCI(1)	10		—		10

Other comprehensive income, net of tax								Other comprehensive income, net of tax	1		5		6
Balance at July 1, 2023								Balance at July 1, 2023	$	(10)	$	(50)	$	(60)

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

Note 17 Accounts Receivable Factoring

The Company ~~has Receivables Factoring arrangements, pursuant to which~~transfers certain receivables ~~are sold~~ to banks without recourse ~~in exchange for cash. Transactions under the Receivables Factoring arrangements~~as part of its credit and cash management activities. Such transfers are accounted for as sales ~~under ASC 860,~~ ~~Transfers~~ and ~~Servicing of Financial Assets, with~~ the ~~sold~~related receivables are 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~~Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in ~~Net cash used in~~Cash flows from financing activities on the Consolidated Statements of Cash Flows.

The Company currently has two active Receivables Factoring arrangements. One arrangement allows for the factoring of up to $25 million of uncollected receivables originated from the 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 may be required to maintain a portion of sales proceeds as deposits in a restricted cash account that is released to the Company as it satisfies its obligations as servicer of sold receivables, which totaled ~~$11~~$0 million and $12 million as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

During the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021,~~2022, the Company received cash proceeds of ~~$1,135~~$751 million and ~~$1,161~~$765 million, respectively, from the sales of accounts receivables under its factoring arrangements. As of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, there were a total of ~~$55~~$54 million and ~~$24~~$61 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 ~~$113~~$103 million and ~~$141~~$130 million of obligations that were not yet remitted to banks as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, 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)~~Cash flows from financing activities on the Consolidated Statements of Cash ~~Flows.Fees incurred in connection with these arrangements were not significant.~~Flows.

~~Table of Contents~~

Note 18 Segment Information & Geographic Data

The Company’s operations consist of two 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 related~~ costs in the ~~current~~prior year). Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

~~Effective January 1, 2022,~~

Table of Contents

In the second quarter, our advanced location technology solutions ~~offering,~~business, which ~~provides a range~~is primarily comprised of RFID devices and RTLS ~~and services that generate on-demand information about the physical location and status of assets, equipment, and people,~~offerings, moved from our ~~AIT~~EVM segment into our ~~EVM~~AIT segment contemporaneous with a change in our organizational structure and management of the business. We have reported our segment results reflecting this change, including historical periods, on a comparable basis. This change ~~did~~does not have an impact toon the Consolidated Financial Statements.

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021			July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net sales:	Net sales:									Net sales:
AIT	AIT	$	415	$	378	$	1,255	$	1,221	AIT	$	459	$	467	$	981	$	878
EVM	EVM	963		1,058		3,023		2,945		EVM	755		1,001		1,638		2,022
Total segment Net sales		1,378		1,436		4,278		4,166
Corporate, eliminations(1)		—		—		—		(6)

Total Net sales	Total Net sales	$	1,378	$	1,436	$	4,278	$	4,160	Total Net sales	$	1,214	$	1,468	$	2,619	$	2,900
Operating income:	Operating income:									Operating income:
AIT(2)	AIT(2)	$	83	$	78	$	240	$	289	AIT(2)	$	114	$	94	$	243	$	150
EVM(2)	EVM(2)	161		194		531		565		EVM(2)	122		184		255		377
Total segment operating income	Total segment operating income	244		272		771		854		Total segment operating income	236		278		498		527
Corporate eliminations(1)	Corporate eliminations(1)	(42)		(35)		(502)		(98)		Corporate eliminations(1)	(42)		(423)		(79)		(460)
Total Operating income		$	202	$	237	$	269	$	756
Total Operating income (loss)										Total Operating income (loss)	$	194	$	(145)	$	419	$	67

(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 related~~ costs in the ~~current~~prior 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 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.~~

~~Table of Contents~~

~~Geographic data for~~ Net sales isby region were as follows (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021			July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
North America	North America	$	690	$	728	$	2,103	$	2,108	North America	$	642	$	714	$	1,367	$	1,413
EMEA	EMEA	456		504		1,477		1,458		EMEA	374		521		817		1,021
Asia-Pacific	Asia-Pacific	158		135		459		392		Asia-Pacific	122		152		276		301
Latin America	Latin America	74		69		239		202		Latin America	76		81		159		165
Total Net sales	Total Net sales	$	1,378	$	1,436	$	4,278	$	4,160	Total Net sales	$	1,214	$	1,468	$	2,619	$	2,900


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

Table of Contents

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~~Automatic Identification and ~~data capture solutions~~Data Capture (“AIDC”) 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~~devices and printers (“RFID”) ~~readers;~~and real-time location systems (“RTLS”); 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, repair, managed and professional 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 within the 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 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, RFID and RTLS offerings, and supplies, including temperature-monitoring labels and 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, and workflow optimization solutions. Our workflow optimization solutions include cloud-based software subscriptions, retail solutions, and robotic automation solutions.

In the ~~first~~second quarter, our advanced location technology solutions business, which is primarily comprised of ~~2022, the location solutions offering, which provides a range of~~RFID devices and RTLS ~~and services that generate on-demand information about the physical location and status of high-valued assets, equipment, and people,~~offerings, moved from our ~~AIT~~EVM segment into our ~~EVM~~AIT segment contemporaneous with a change in our organizational structure and management of the business. We have reported our segment results reflecting this change, including historical periods, on a comparable basis. This change ~~did~~does not have an impact toon the Consolidated Financial Statements.

We are a market leader in our core businesses, which are generally considered to be comprised of our mobile computing and data capture products, printing products and supplies, as well as support and repair services. We continue to focus on growth opportunities within adjacent and expansion markets by scaling and integrating our recent business acquisitions, inclusive of our $881 million acquisition of Matrox Electronic Systems Ltd. (“Matrox”) in the second quarter of 2022.

Second Quarter 2023 Financial Highlights and Other Recent Developments

~~Restructuring Program~~

In•Net sales were $1,214 million in the ~~third quarter~~current year compared to $1,468 million in the prior year.

•Operating income was $194 million in the current year compared to an operating loss of ~~2022,~~$145 million in the ~~Company committed~~prior year, inclusive of the $372 million prior year Settlement charge.

•Net income was $144 million, or $2.78 per diluted share in the current year, compared to ~~certain leased site rationalization and organizational changes designed~~a net loss of $98 million, or $(1.87) per diluted share in the prior year, inclusive of the prior year Settlement charge.

•Net cash used in operating activities was $110 million in the current year compared to ~~generate structural cost efficiencies (collectively referred to as~~net cash provided by operating activities of $154 million in 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~~prior year.

2524

Table of Contents

~~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 beganLate 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~~quarter, we began to experience a more broad-based moderation of demand across many of our core product offerings. Demand declines were most pronounced 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 theour mobile computing business within our 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 authorizationsegment which was ~~announced in July 2019.~~

~~Russia~~primarily due to fewer large order deployments as we believe large enterprises are absorbing significant capacity built-out over recent years, while they are also experiencing tighter capital spending budgets. This, coupled with a general trend of distributors reducing inventory levels, has negatively impacted our current year results. We expect these trends to continue through at least the remainder of 2023. We are partially mitigating the financial impacts of operating headwinds through a combination of targeted list price increases and ~~Ukraine War~~

~~On March 5, 2022, we announced the suspension of~~operating cost management. As 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”) pandemic~~overall supply chain continues to ~~evolve. Governmental agencies, to varying degrees, have imposed,~~recover, with improvements in both component part availability and ~~continue to impose, several protocols and regulations restricting activities~~costs of individuals in an effort to limit the spread of 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 returning to 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 return to our offices, with modified business practices, consistent with government regulations and current medical guidance.

~~The limited availability of certain product components has resulted in lengthened lead times and higher input costs, including freight, and in some cases, has impacted~~transportation, our ability to meet customer demand. The Company expects input costs to remain elevated for some period of time, which we believe will be partially mitigated through higher pricing where permitted by market conditions. The limited availability of 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, benefited from pent-up demand ~~from customers who we believe had previously delayed purchases due~~has improved as compared to the ~~pandemic, as well as the resulting acceleration of the underlying trend to digitize and automate workflows.~~prior year.

~~Table~~As a result of ~~Contents~~

~~Other Acquisitions~~

~~Antuit.ai:~~ ~~On October 7, 2021,~~the impacts on our business discussed above, the Company ~~acquired Antuit Holdings Pte. Ltd. (“Antuit”)~~expanded the scope of its 2022 Productivity Plan. The Company estimates the total cost of the 2022 Productivity Plan to now be at least $60 million which will be reflected within Exit and restructuring charges, with $36 million incurred to date, including $14 million and $24 million recorded for ~~$145 million in cash, net~~the three and six months ended July 1, 2023, respectively. The Company’s obligations under the 2022 Productivity Plan are expected to be substantially settled by the first quarter of ~~cash acquired. Antuit is a provider of demand-sensing~~2024 and ~~pricing optimization software solutions for retail and consumer products companies. Through this acquisition,~~are primarily reflected within Accrued liabilities on 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.Consolidated Balance Sheets.

~~Fetch: On August 9, 2021,~~In addition, the Company ~~acquired Fetch Robotics, Inc.~~initiated a voluntary retirement plan (“~~Fetch”~~VRP”) applicable to retirement-eligible U.S. employees to generate incremental cost efficiencies. Employees who participate in the VRP agree to retire in 2023 in exchange for cash severance and other benefits that will be classified within Exit and restructuring on the Consolidated Statements of Operations. The Company estimates the total ~~purchase consideration of $301 million, which consisted of $290 million in cash paid, net of cash acquired, and the fair value~~cost of the ~~Company’s existing minority ownership interest in Fetch of $11~~VRP will be approximately $45 million ~~as remeasured upon acquisition. Fetch is a provider of autonomous mobile robot solutions for customers who operate~~and will be recorded in the ~~manufacturing, distribution,~~third quarter aligned with the Company’s commitment to the VRP obligations. Payment obligations are expected to be substantially settled by the first quarter of 2024 and ~~fulfillment industries, enabling customers to optimize workflows through robotic automation. Through this acquisition,~~will be reflected within Accrued liabilities on the ~~Company intends to expand its automation solution offerings within these industries. The operating results of Fetch are included within the EVM segment.~~Consolidated Balance Sheets.

~~Adaptive Vision:~~ ~~On May 17, 2021,~~The total costs of the ~~Company acquired Adaptive Vision Sp. z o.o. (“Adaptive Vision”) for $18 million~~2022 Productivity Plan and VRP are expected to be $105 million. These actions are expected to impact greater than 7% of our global employee base and are estimated to result in ~~cash,~~annualized net cost savings, primarily within Operating expenses, 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.approximately $85 million.

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)


		Three Months Ended										Nine Months Ended											Three Months Ended										Six Months Ended
		October 1, 2022			October 2, 2021			$ Change		% Change		October 1, 2022			October 2, 2021			$ Change		% Change			July 1, 2023			July 2, 2022			$ Change		% Change		July 1, 2023			July 2, 2022			$ Change		% Change
Net sales:	Net sales:																					Net sales:
Tangible products	Tangible products	$	1,164		$	1,240		$	(76)	(6.1)	%	$	3,630		$	3,585		$	45	1.3	%	Tangible products	$	986		$	1,259		$	(273)	(21.7)	%	$	2,156		$	2,466		$	(310)	(12.6)	%
Services and software	Services and software	214			196			18		9.2	%	648			575			73		12.7	%	Services and software	228			209			19		9.1	%	463			434			29		6.7	%
Total Net sales	Total Net sales	1,378			1,436			(58)		(4.0)	%	4,278			4,160			118		2.8	%	Total Net sales	1,214			1,468			(254)		(17.3)	%	2,619			2,900			(281)		(9.7)	%
Gross profit	Gross profit	628			646			(18)		(2.8)	%	1,939			1,959			(20)		(1.0)	%	Gross profit	581			674			(93)		(13.8)	%	1,248			1,311			(63)		(4.8)	%
Gross margin	Gross margin	45.6		%	45.0		%			60 bps		45.3		%	47.1		%			(180) bps		Gross margin	47.9		%	45.9		%			200 bps		47.7		%	45.2		%			250 bps
Operating expenses	Operating expenses	426			409			17		4.2	%	1,670			1,203			467		38.8	%	Operating expenses	387			819			(432)		(52.7)	%	829			1,244			(415)		(33.4)	%
Operating (loss) income		$	202		$	237		$	(35)	(14.8)	%	$	269		$	756		$	(487)	(64.4)	%
Operating income (loss)																						Operating income (loss)	$	194		$	(145)		$	339	233.8	%	$	419		$	67		$	352	525.4	%

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

Three Months Ended Nine Months Ended
October 1,
2022 October 2,
2021 $ Change % Change October 1,
2022 October 2,
2021 $ Change % Change
North America $ 690 $ 728 $ (38) (5.2) % $ 2,103 $ 2,108 $ (5) (0.2) %
EMEA 456 504 (48) (9.5) % 1,477 1,458 19 1.3 %
Asia-Pacific 158 135 23 17.0 % 459 392 67 17.1 %
Latin America 74 69 5 7.2 % 239 202 37 18.3 %
Total Net sales $ 1,378 $ 1,436 $ (58) (4.0) % $ 4,278 $ 4,160 $ 118 2.8 %

2725

Table of Contents


	Three Months Ended								Six Months Ended
	July 1, 2023		July 2, 2022		$ Change		% Change		July 1, 2023		July 2, 2022		$ Change		% Change
North America	$	642	$	714	$	(72)	(10.1)	%	$	1,367	$	1,413	$	(46)	(3.3)	%
EMEA	374		521		(147)		(28.2)	%	817		1,021		(204)		(20.0)	%
Asia-Pacific	122		152		(30)		(19.7)	%	276		301		(25)		(8.3)	%
Latin America	76		81		(5)		(6.2)	%	159		165		(6)		(3.6)	%
Total Net sales	$	1,214	$	1,468	$	(254)	(17.3)	%	$	2,619	$	2,900	$	(281)	(9.7)	%

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


		Three Months Ended														Nine Months Ended											Three Months Ended											Six Months Ended
		October 1, 2022		October 2, 2021				As a % of Net sales								October 1, 2022			October 2, 2021		As a % of Net sales						July 1, 2023				July 2, 2022		As a % of Net sales					July 1, 2023				July 2, 2022		As a % of Net sales
						2022				2021								2022			2021								2023				2022								2023			2022
Selling and marketing	Selling and marketing	$	149			$	148			10.8	%			10.3	%				$	452	$	430		10.6	%			10.3	%	Selling and marketing	$	146	$	151		12.0	%	10.3		%		$	307	$	303		11.7	%	10.4	%
Research and development	Research and development	143		141				10.4	%			9.8	%			428			422		10.0		%	10.1	%	Research and development	130				148		10.7		%	10.1	%	276				285		10.5		%	9.8	%
General and administrative	General and administrative	92		85				6.7	%			5.9	%			288			259		6.7		%	6.2	%	General and administrative	69				97		5.7		%	6.6	%	168				196		6.4		%	6.8	%
Settlement and related costs	Settlement and related costs	—		—				NM				NM				372			—		NM			NM		Settlement and related costs	—				372		NM			NM		—				372		NM			NM
Amortization of intangible assets	Amortization of intangible assets	39		29				NM				NM				107			81		NM			NM		Amortization of intangible assets	26				35		NM			NM		52				68		NM			NM
Acquisition and integration costs	Acquisition and integration costs	1		6				NM				NM				19			11		NM			NM		Acquisition and integration costs	2				14		NM			NM		2				18		NM			NM
Exit and restructuring costs	Exit and restructuring costs	2		—				NM				NM				4			—		NM			NM		Exit and restructuring costs	14				2		NM			NM		24				2		NM			NM
Total Operating expenses	Total Operating expenses	$	426	$	409			30.9	%			28.5	%			$	1,670		$	1,203	39.0		%	28.9	%	Total Operating expenses	$	387			$	819	31.9		%	55.8	%	$	829			$	1,244	31.7		%	42.9	%

Consolidated Organic Net sales ~~growth:~~growth (decline):

Three Months Ended Nine Months Ended
October 1, 2022 October 1, 2022
Reported GAAP Consolidated Net sales growth (4.0) % 2.8 %
Adjustments:
Impact of foreign currency translation (1)
2.9 % 1.6 %
Impact of acquisitions (2)
(2.1) % (1.5) %
Consolidated Organic Net sales growth (3)
(3.2) % 2.9 %


	Three Months Ended		Six Months Ended
	July 1, 2023		July 1, 2023
Reported GAAP Consolidated Net sales growth (decline)	(17.3)	%	(9.7)	%
Adjustments:
Impact of foreign currency translations (1)	1.9	%	2.5	%
Impact of acquisitions (2)	(0.6)	%	(1.0)	%
Consolidated Organic Net sales growth (decline) (3)	(16.0)	%	(8.2)	%

(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 Consolidated Organic Net sales growth (decline), amounts directly attributable to ~~the~~business acquisitions ~~of Adaptive Vision, Fetch, Antuit, and Matrox~~ are excluded for twelve months following their respective acquisitions.

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

~~Third~~Second quarter ~~2022~~2023 compared to ~~third~~Second quarter ~~2021~~2022

Total Net sales decreased ~~$58~~$254 million or ~~4.0%~~17.3% compared to the prior ~~year.~~year reflecting declines in both of our segments resulting from a broad-based moderation of demand and fewer EVM ~~Net sales decline was partially offset by AIT Net sales growth.~~large mobile computer deployments. 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 currency changes and acquisitions, the decrease in Consolidated Organic Net sales was 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 45.6% for the current quarter compared to 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 of both segments ~~benefited from favorable business mix, as well as lower net impacts~~included the benefit of ~~premium freight and component part costs. These benefits were~~targeted list price increases, partially offset by the negative ~~impact~~effects of foreign currency ~~changes, as well as lower volume leverage and support service margins.~~

~~Table of Contents~~

Operating expenses for the quarters ended October 1, 2022 and October 2, 2021 were $426 million and $409 million, or 30.9% and 28.5% of Net sales, respectively. The increase in Operating expenses over the prior quarter was primarily due to the inclusion of operating expenses and amortization of intangible assets associated with recently acquired businesses, which were partially offset by lower employee incentive-based compensation.

~~Operating income decreased 14.8% to $202 million for the current quarter compared to $237 million for the prior year. The decrease was due to lower Gross profit and higher Operating expenses.~~

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

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

•The Company’s effective income tax rate for the three months ended October 1, 2022 and October 2, 2021 was 23.4% and 12.7%, respectively. The increase in the effective rate was primarily due to unfavorable discrete items recorded in the current quarter primarily related to return to provision adjustments and uncertain tax positions.

~~Diluted earnings per share decreased to $3.26 as compared to $3.69 in the prior year due to lower Net income, partially offset by lower average shares outstanding.~~

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

Total Net sales increased $118 million or 2.8% compared to the prior year as our customers continue to digitize and automate their workflows. Net sales grew across both of our segments and most of our regions. Currentchanges. Prior 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 delayed purchases in fiscal 2020 due to the COVID-19 pandemic.~~ Excluding the effects of ~~acquisitions and~~ currency changes and acquisitions, the ~~increase~~decrease in Consolidated Organic Net sales was ~~2.9%~~16.0%.

Table of Contents

Gross margin ~~decreased~~increased to ~~45.3%~~47.9% for the current ~~period~~year compared to ~~47.1%~~45.9% for the prior year. As compared to the prior year, Gross ~~margins were~~margin was significantly higher in our AIT segment and slightly higher in our EVM segment. Both segments, particularly AIT, benefited from lower ~~in both of our segments primarily due to higher net~~ premium freight and component part costs as well as the negative impact of foreign currency changes, which were partially offset by higher support service margins. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs.

Operating expenses for the period ended October 1, 2022 and October 2, 2021 were $1,670 million and $1,203 million, or 39.0% and 28.9% of Net sales, respectively. Excluding the Settlement charge, Operating expenses were 30.3% of Net sales for the period ended October 1, 2022, with an increase overcompared to the prior year primarily due to the inclusion of operating expenses and amortization of intangible assets associated with recently acquired businesses, increased employee travel, as well as higher Acquisition and integration costs. These increases were partially offset by lower employee incentive-based compensation.year.

Operating expenses for the quarters ended July 1, 2023 and July 2, 2022 were $387 million and $819 million, or 31.9% and 55.8% of Net sales, respectively. Excluding the Settlement charge in the prior year, Operating expenses would have been 30.4% of Net sales. Current year Operating expenses were lower than the prior year, excluding the Settlement charge, primarily due to lower employee incentive compensation, Acquisition and integration costs, and Amortization of intangible assets, partially offset by higher Exit and restructuring costs. The increase as a percentage of Net sales over the prior year results from cost deleveraging.

Operating income ~~decreased 64.4%~~increased to ~~$269~~$194 million for the current year compared to ~~$756~~an operating loss of $145 million ~~for~~in the prior year. The ~~decrease~~increase was primarily due to ~~higher~~lower Operating expenses, ~~inclusive of~~as the prior period included the $372 million Settlement charge, ~~recorded in the second quarter of the current year~~.partially offset by lower Gross profit.

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

•Other income (expense), net was income of $50 million in the current year compared to an expense of $14 million in the prior year primarily due to the current year benefiting from an $84 million gain on interest rate swaps compared to a $4 million gain in the prior year, which was partially offset by higher ~~average outstanding debt levels~~income tax expense and ~~interest rates.~~Other (expense) income, net.

•The Company’s effective ~~income~~tax rates for the three months ended July 1, 2023 and July 2, 2022 were 15.8% and 35.9%, respectively. The change in the effective tax rate was primarily due to the discrete tax benefit recorded in the prior year related to the Settlement.

•Other (expense) income, net was an expense of $23 million for the ~~nine months ended October 1, 2022~~current year, compared to $8 million in the prior year. The increase was primarily due to higher interest expense associated with higher interest rates and ~~October 2, 2021~~average outstanding debt levels, which was ~~13.2% and 12.9%, respectively.~~partially offset by higher interest rate swap gains in the current year.

Diluted earnings per share ~~decreased~~increased to ~~$5.25~~$2.78 as compared to ~~$11.98~~$(1.87) in the prior year due to ~~lower~~higher Net income ~~partially offset by~~and lower average ~~diluted~~ shares outstanding.

Year to date 2023 compared to Year to date 2022

Total Net sales decreased $281 million or 9.7% compared to the prior year as growth in our AIT segment was more than offset by a decline in our EVM segment primarily due to fewer large mobile computer deployments. Current year Net sales of both segments included the benefit of targeted list price increases, substantially offset by the negative effects of foreign currency changes. Prior year Net sales of both segments were negatively impacted by supply chain bottlenecks. Excluding the effects of currency changes and acquisitions, the decrease in Consolidated Organic Net sales was 8.2%.

Gross margin increased to 47.7% for the current year compared to 45.2% for the prior year. As compared to the prior year, Gross margin was significantly higher in our AIT segment, while Gross margin of our EVM segment was slightly lower. Both segments, particularly AIT, benefited from lower premium freight and component part costs compared to the prior year.

Operating expenses for the periods ended July 1, 2023 and July 2, 2022 were $829 million and $1,244 million, or 31.7% and 42.9% of Net sales, respectively. Excluding the Settlement charge in the prior year, Operating expenses would have been 30.1% of Net sales. Current year Operating expenses were lower than the prior year, excluding the Settlement charge, primarily due to lower employee incentive compensation, Acquisition and integration costs, and Amortization of intangible assets, partially offset by higher Exit and restructuring costs and the inclusion of operating expenses associated with recently acquired businesses. The increase as a percentage of Net sales over the prior year results from cost deleveraging.

Operating income increased to $419 million for the current year compared to $67 million for the prior year. The increase was primarily due to lower Operating expenses, as the prior period included the $372 million Settlement charge, partially offset by lower Gross profit.

Net income increased compared to the prior year due to higher Operating income, partially offset by higher Other (expense) income, net and income tax expense.

•Other (expense) income, net was an expense of $63 million for the current year, compared to income of $30 million in the prior year. The increase was primarily due to higher interest expense associated with higher interest rates and average outstanding debt levels as well as lower interest rate swap gains in the current year.

Table of Contents

•The Company’s effective tax rates for the six months ended July 1, 2023 and July 2, 2022 were 17.4% and (10.3)%, respectively. The change in the effective tax rate compared to the prior year was primarily due to the discrete tax benefit recorded in the prior year related to the Settlement.

Diluted earnings per share increased to $5.68 as compared to $2.02 in the prior year due to higher Net income and lower average shares outstanding.

Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each ~~operating~~reportable business segment as detailed in Note 18, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment ~~results exclude~~operating income excludes business acquisition 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 related~~ costs in the ~~current~~prior year).

Asset Intelligence & Tracking Segment (“AIT”)

(amounts in millions, except percentages)


		Three Months Ended										Nine Months Ended											Three Months Ended										Six Months Ended
		October 1, 2022			October 2, 2021			$ Change		% Change		October 1, 2022			October 2, 2021			$ Change		% Change			July 1, 2023			July 2, 2022			$ Change		% Change		July 1, 2023			July 2, 2022			$ Change		% Change
Net sales:	Net sales:																					Net sales:
Tangible products	Tangible products	$	392		$	354		$	38	10.7	%	$	1,184		$	1,151		$	33	2.9	%	Tangible products	$	432		$	441		$	(9)	(2.0)	%	$	927		$	824		$	103	12.5	%
Services and software	Services and software	23			24			(1)		(4.2)	%	71			70			1		1.4	%	Services and software	27			26			1		3.8	%	54			54			—		—	%
Total Net sales	Total Net sales	415			378			37		9.8	%	1,255			1,221			34		2.8	%	Total Net sales	459			467			(8)		(1.7)	%	981			878			103		11.7	%
Gross profit	Gross profit	179			165			14		8.5	%	528			571			(43)		(7.5)	%	Gross profit	225			204			21		10.3	%	483			364			119		32.7	%
Gross margin	Gross margin	43.1		%	43.7		%			(60) bps		42.1		%	46.8		%			(470) bps		Gross margin	49.0		%	43.7		%			530 bps		49.2		%	41.5		%			770 bps
Operating expenses	Operating expenses	96			87			9		10.3	%	288			282			6		2.1	%	Operating expenses	111			110			1		0.9	%	240			214			26		12.1	%
Operating income	Operating income	$	83		$	78		$	5	6.4	%	$	240		$	289		$	(49)	(17.0)	%	Operating income	$	114		$	94		$	20	21.3	%	$	243		$	150		$	93	62.0	%

AIT Organic Net sales ~~growth:~~growth (decline):

Three Months Ended Nine Months Ended
October 1, 2022 October 1, 2022
AIT Reported GAAP Net sales growth 9.8 % 2.8 %
Adjustments:
Impact of foreign currency translation (1)
2.6 % 1.5 %
AIT Organic Net sales growth (2)
12.4 % 4.3 %


	Three Months Ended		Six Months Ended
	July 1, 2023		July 1, 2023
AIT Reported GAAP Net sales growth (decline)	(1.7)	%	11.7	%
Adjustments:
Impact of foreign currency translations (1)	1.9	%	2.7	%

AIT Organic Net sales growth (decline) (2)	0.2	%	14.4	%

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

~~Third~~

Table of Contents

Second quarter ~~2022~~2023 compared to ~~third~~Second quarter ~~2021~~2022

Total Net sales for AIT decreased $8 million or 1.7% compared to the prior year primarily due to a decline in printing products, partially offset by higher sales of RFID offerings, and supplies. Current year Net sales included the benefit of targeted list price increases, partially offset by the negative effects of foreign currency changes. Excluding the impact of foreign currency changes, AIT Organic Net sales increased by 0.2%.

Gross margin increased to 49.0% in the current year compared to 43.7% for the prior year primarily due to lower premium freight and component part costs, pricing and favorable business mix, partially offset by the negative impact of foreign currency changes.

Operating income increased 21.3% in the current year compared to the prior year primarily due to higher Gross profit.

Year to date 2023 compared to Year to date 2022

Total Net sales for AIT increased ~~$37~~$103 million or ~~9.8%~~11.7% compared to the prior year primarily due to higher sales of printing products (contributing the majority of the total increase), RFID offerings, and ~~supplies, and~~supplies. Current year Net sales included the benefit of targeted list price ~~increases.~~increases, partially offset by the negative effects of foreign currency changes. Excluding the impact of foreign currency changes, AIT Organic Net sales increased ~~12.4%~~by 14.4%.

Gross margin ~~decreased~~increased to ~~43.1% for~~49.2% in the current ~~quarter~~year compared to ~~43.7%~~41.5% for the prior year primarily due to lower premium freight and component part costs, pricing and favorable business mix, partially offset by the negative impact of foreign currency ~~changes, partially offset by favorable business mix and volume leverage.~~changes.

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

~~Table of Contents~~

~~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%~~62.0% in the current year compared to the prior year ~~period. The decrease was primarily~~ due to ~~lower~~higher Gross ~~profit.~~profit, partially offset by higher Operating expenses.

Enterprise Visibility & Mobility Segment (“EVM”)

(amounts in millions, except percentages)


		Three Months Ended										Nine Months Ended											Three Months Ended										Six Months Ended
		October 1, 2022			October 2, 2021			$ Change		% Change		October 1, 2022			October 2, 2021			$ Change		% Change			July 1, 2023			July 2, 2022			$ Change		% Change		July 1, 2023			July 2, 2022			$ Change		% Change
Net sales:	Net sales:																					Net sales:
Tangible products	Tangible products	$	772		$	886		$	(114)	(12.9)	%	$	2,446		$	2,434		$	12	0.5	%	Tangible products	$	554		$	818		$	(264)	(32.3)	%	$	1,229		$	1,642		$	(413)	(25.2)	%
Services and software	Services and software	191			172			19		11.0	%	577			511			66		12.9	%	Services and software	201			183			18		9.8	%	409			380			29		7.6	%
Total Net sales	Total Net sales	963			1,058			(95)		(9.0)	%	3,023			2,945			78		2.6	%	Total Net sales	755			1,001			(246)		(24.6)	%	1,638			2,022			(384)		(19.0)	%
Gross profit	Gross profit	449			481			(32)		(6.7)	%	1,411			1,394			17		1.2	%	Gross profit	356			470			(114)		(24.3)	%	765			947			(182)		(19.2)	%
Gross margin	Gross margin	46.6		%	45.5		%			110 bps		46.7		%	47.3		%			(60) bps		Gross margin	47.2		%	47.0		%			20 bps		46.7		%	46.8		%			(10) bps
Operating expenses	Operating expenses	288			287			1		0.3	%	880			829			51		6.2	%	Operating expenses	234			286			(52)		(18.2)	%	510			570			(60)		(10.5)	%
Operating income	Operating income	$	161		$	194		$	(33)	(17.0)	%	$	531		$	565		$	(34)	(6.0)	%	Operating income	$	122		$	184		$	(62)	(33.7)	%	$	255		$	377		$	(122)	(32.4)	%

EVM Organic Net sales ~~growth:~~growth (decline):

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


	Three Months Ended		Six Months Ended
	July 1, 2023		July 1, 2023
EVM Reported GAAP Net sales growth (decline)	(24.6)	%	(19.0)	%
Adjustments:
Impact of foreign currency translations (1)	1.9	%	2.4	%
Impact of acquisitions (2)	(0.9)	%	(1.5)	%
EVM Organic Net sales growth (decline) (3)	(23.6)	%	(18.1)	%

Table of Contents

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

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

~~Table of Contents~~

~~Third~~Second quarter ~~2022~~2023 compared to ~~third~~Second quarter ~~2021~~2022

Total Net sales for EVM decreased ~~$95~~$246 million or ~~9.0%~~24.6% compared to the prior year primarily due to lower sales of mobile computing products largely attributed to fewer large order deployments and ~~unfavorable~~an overall moderation of demand for our core products as distributors reset inventory levels, which were partially offset by higher sales of services and software, data capture products, and contributions from our recent acquisitions. Current year Net sales included the benefit of targeted list price increases, partially offset by the negative effects of foreign currency changes. Excluding the impacts of foreign currency changes and acquisitions, EVM Organic Net sales decline was 23.6%.

Gross margin increased to 47.2% in the current year compared to 47.0% for the prior year. The benefits of favorable business mix and pricing, and lower premium freight and component part costs were substantially offset by volume deleveraging, the negative impact of foreign currency changes, and inventory-related charges.

Operating income for the current year decreased by 33.7% compared to the prior year primarily due to lower Gross profit, partially offset by lower Operating expenses.

Year to date 2023 compared to Year to date 2022

Total Net sales for EVM decreased $384 million or 19.0% compared to the prior year primarily due to lower sales of mobile computing products largely attributed to fewer large order deployments and an overall moderation of demand for our core products as distributors reset inventory levels, 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 $78 million or 2.6% compared to the prior year primarily due to higher sales of data capture products, contributions from our recent acquisitions,~~ and higher sales of ~~support~~ services ~~which were partially offset by unfavorable foreign currency changes~~ and ~~lower sales of mobile computing products.~~software. Current year Net sales included the benefit of targeted list price increases, substantially offset by the negative ~~impact~~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.~~foreign currency changes. Excluding the impacts of ~~acquisitions and~~ foreign currency changes and acquisitions, EVM Organic Net sales ~~growth~~decline was ~~2.4%~~18.1%.

Gross margin decreased to 46.7% in the current ~~period~~year compared to ~~47.3% in~~46.8% for the prior ~~year primarily due to higher net premium freight~~year. The negative impact of foreign currency changes, volume deleveraging, and ~~component part costs, which~~inventory-related charges were ~~partially~~substantially offset by favorable business mix and ~~higher support service margins. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs.~~pricing, and lower premium freight and component part costs.

Operating income for the current ~~quarter~~year decreased ~~6.0%~~by 32.4% compared to the prior year ~~period. The decrease was~~primarily due to ~~higher Operating expenses,~~lower Gross profit, partially offset by ~~higher Gross profit.~~lower Operating expenses.

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							Six Months Ended
Cash flows provided by (used in):		October 1, 2022		October 2, 2021		$ Change
Cash flow (used in) provided by:								Cash flow (used in) provided by:	July 1, 2023		July 2, 2022		$ Change
Operating activities	Operating activities	$	221	$	836	$	(615)	Operating activities	$	(110)	$	154	$	(264)
Investing activities	Investing activities	(941)		(369)		(572)		Investing activities	(35)		(912)		877
Financing activities	Financing activities	470		(351)		821		Financing activities	97		518		(421)
Effect of exchange rates on cash balances	Effect of exchange rates on cash balances	(2)		—		(2)		Effect of exchange rates on cash balances	(1)		(6)		5
Net (decrease) increase in cash and cash equivalents, including restricted cash		$	(252)	$	116	$	(368)
Net decrease in cash and cash equivalents, including restricted cash								Net decrease in cash and cash equivalents, including restricted cash	$	(49)	$	(246)	$	197

Table of Contents

The change in our cash and cash equivalents balance during the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 compared to the prior year ~~period~~ is reflective of the following:

•~~The decrease in cash provided by~~$264 million of operating activities ~~compared to the prior year was~~ primarily due to higher cash payments for inventory ~~levels, current year payments associated with~~purchases, income taxes, the Settlement, and ~~higher incentive compensation payments. These items were~~interest, partially offset by ~~higher accounts payable, primarily associated with inventory purchases, as well as~~ favorability in the timing of customer ~~transactions~~collections and ~~accounts receivable factoring activity in the current period.~~

~~Table of Contents~~

•Cash used in investing activities was higher than the prior year primarily due to the acquisition of Matrox, while the prior year includes cash payments of $307 million for the acquisitions of Fetch and Adaptive Vision.lower employee incentive compensation payments.

•~~Cash provided by~~$877 million of investing activities primarily due to cash payments for the acquisition of Matrox in the prior year.

•$421 million of financing activities ~~during the year was~~ primarily 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 activitiesdue to increased borrowings in the prior year ~~was primarily comprised~~as a result of ~~$256 million net debt repayments, $48 million net payments related to share-based compensation, and $25 million of~~the Company refinancing its long-term credit facilities, partially offset by lower common stock ~~repurchases.~~repurchases in the current year.

Company Debt

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

October 1,
2022 December 31,
2021
Term Loan A $ 1,739 $ 888
Revolving Credit Facility 248 —
Receivables Financing Facilities 183 108
Total debt $ 2,170 $ 996
Less: Debt issuance costs (4) (3)
Less: Unamortized discounts (5) (2)
Less: Current portion of debt (144) (69)
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.


	July 1, 2023		December 31, 2022
Term Loan A	$	1,684	$	1,728

Revolving Credit Facility	388		50
Receivables Financing Facilities	144		254

Total debt	$	2,216	$	2,032
Less: Debt issuance costs	(4)		(4)
Less: Unamortized discounts	(4)		(5)
Less: Current portion of debt	(166)		(214)
Total long-term debt	$	2,042	$	1,809

Term Loan A

Revolving Credit Facility

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 ~~15, 2023.~~13, 2024. During the second quarter of 2023, the Company amended the second Receivables Financing Facility to extend the maturity, but otherwise did not substantially change the terms of the facility.

~~Table of Contents~~

applicable margin. As of ~~October~~July 1, ~~2022,~~2023, the Receivables Financing Facilities had an average interest rate of ~~4.04%~~6.50%. Interest is paid monthly on these ~~borrowings on a monthly basis.~~borrowings.

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

Table of Contents

Receivables Factoring

The Company ~~currently has two Receivables Factoring arrangements, pursuant to which~~transfers certain receivables ~~are sold~~ to banks without recourse ~~in exchange for cash.One arrangement allows for the factoring~~as part 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 EMEAits credit and ~~Asia-Pacific regions. Transactions under the Receivables Factoring arrangements~~cash management activities. Such transfers are accounted for as sales ~~under Accounting Standards Codification 860,~~ ~~Transfers~~ and ~~Servicing of Financial Assets, with~~ the ~~sold~~related receivables are 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~~Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in ~~Net cash used in~~Cash flows from financing activities on the Consolidated Statements of Cash Flows.

As of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, there were a total of ~~$55~~$54 million and ~~$24~~$61 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

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

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

Share Repurchases

On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to $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 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~~six months of ~~2022,~~2023, the Company repurchased ~~1,652,877~~194,319 shares of common stock for approximately ~~$655~~$52 million. As of ~~October~~July 1, ~~2022,~~2023, the Company has cumulatively repurchased ~~2,948,618~~3,517,602 shares of common stock for approximately ~~$958 million,~~$1.1 billion, resulting in a remaining amount of share repurchases authorized under the plans of ~~$1,042~~$893 million. ~~Subsequent to the third quarter, the Company has repurchased 187,024 shares of common stock for approximately $50 million through October 28, 2022.~~

Significant Customers

~~The Company has~~End-users of our products, solutions and services are diversified across a wide variety of industries. We have three customers, who are distributors of the Company’s products ~~services~~ and solutions, that individually accounted for more than 10% of ~~total Company~~our 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 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 %


	Six Months Ended
	July 1, 2023						July 2, 2022
	AIT		EVM		Total		AIT		EVM		Total
Significant customers as a % of Net sales	18.3	%	32.4	%	50.7	%	15.7	%	29.9	%	45.6	%

~~Table of Contents~~

These customers accounted for ~~55.1%~~48.1% of accounts receivable as of ~~October~~July 1, ~~2022.~~2023. No other customer accounted for more than 10% of total Net sales during the ~~periods~~period ended ~~October~~July 1, ~~2022 and October 2, 2021.~~2023.

Table of Contents

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 full year of ~~2022.~~2023. 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 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.

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 (decline), AIT Organic Net sales growth (decline), and EVM Organic Net sales growth (decline) – 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

~~Table of Contents~~

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.

Table of Contents


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~~July 1, ~~2022.~~2023. 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, ~~2021.~~2022.


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~~July 1, ~~2022.~~2023. Based on this assessment and those criteria, our management believes that, as of ~~October~~July 1, ~~2022,~~2023, our disclosure controls were effective.

Changes in Internal ~~Controls~~Control over Financial Reporting

During the quarter ended ~~October~~July 1, ~~2022,~~2023, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls 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 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.

3634

Table of Contents

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 ~~13,~~12, 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, ~~2021,~~2022, 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, ~~2021,~~2022, other than as described ~~below.~~below:

Cybersecurity incidents could disrupt business operations.We rely on information technology systems throughout the Company to keep financial records, process orders, manage inventory, coordinate shipments to distributors and customers, maintain confidential and proprietary information, and other technical activities, and operate other critical functions such as internet connectivity, network communications, and email. The Company stores confidential and proprietary information through cloud-based services that are hosted by third parties where we have less influence over security protocols. In addition, our customers may use certain of our products and solutions to transmit and/or process personal data and other sensitive information. Like many companies, we continually strive to meet industry information security standards relevant to our business. We periodically perform vulnerability assessments, remediate vulnerabilities, review log/access, perform system maintenance, manage network perimeter protection, implement and manage disaster recovery testing, and provide periodic educational sessions to our employees to foster awareness of schemes to access sensitive information. Despite our implementation of a variety of security controls and measures, as well as those of our third-party vendors, there is no assurance that such actions will be sufficient to prevent a cybersecurity incident. Further, as cybercrime and threats continue to rapidly evolve and become increasingly more difficult to detect and defend against, our current security controls and measures may not be effective in preventing cybersecurity incidents and we may not have the capabilities to detect certain vulnerabilities. A cybersecurity incident could include an attempt to gain unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Phishing and other types of attempts to obtain unauthorized information or access are often sophisticated and difficult to detect or defeat.

Cybersecurity incidents can take a variety of forms including, unintentional events as well as deliberate attacks by individuals, groups and sophisticated organizations, such as state sponsored organizations or nation-state actors. Further, certain of our third party vendors have limited access to our employee and customer data and may use this data in unauthorized ways. Any such cybersecurity incident or misuse of our employees’ or customers’ data may lead to a material disruption of our core business systems, the loss or corruption of confidential business information, and/or the disclosure of personal data that in each case could result in an adverse business impact as well as possible damage to our brand. This could also lead to a public disclosure or theft of private intellectual property and a possible loss of customer confidence.

While we have experienced and expect to continue to experience these types of threats and incidents, there have been no material incidents incurred to-date at the Company. If our core business operations, or that of one of our third-party service providers, were to be breached, this could affect the confidentiality, integrity, and availability of our systems and data. Any failure on the part of us or our third-party service providers to maintain the security of data we are required to protect, including via the penetration of our network security and the misappropriation of confidential and proprietary information, could result in: business disruption; damage to our reputation; financial obligations to third parties; fines, penalties, regulatory proceedings; private litigation with potentially large costs; deterioration in our suppliers’, distributors’, and customers’ confidence in us; as well as other competitive disadvantages. Such failures to maintain the security of data could have a material adverse effect on our business, financial condition, and results of operations. While we continue to perform security due diligence, there is always the possibility of a significant breach. In addition, any failure on the part of one of our contract manufacturers, distributors or resellers to maintain the security of its systems or data, including via the penetration of their network security or ransomware, could result in business disruption to us and damage to our reputation.

We rely on third-party dealers, distributors, and resellers to sell many of our products, services and solutions, and their failure to effectively bring our products, services and solutions to market may negatively affect our results of operation and financial results.In addition to our own sales force, we offer our products, services and solutions through a variety of third-party dealers, distributors, and resellers who may also market other products, services and solutions that compete with ours. Failure of one or more of our third-party dealers, distributors, or resellers to effectively promote our offerings could affect our ability to bring

Table of Contents

products, services and solutions to market and have a negative impact on our results of operations. Any changes to our channel program may cause some of our third-party dealers, distributors, or resellers to exit the program due to modifications to the program structure, which may reduce our ability to bring products and solutions to market and could have a negative impact on our results of operations.

Third-party dealers, distributors or resellers could also face additional costs or credit concerns resulting from an uncertain economic environment that would cause such parties to reduce purchases of our products, thereby causing a negative impact on our financial results. Some of these third-parties are smaller and more likely to be impacted by a significant decrease in available credit that could result from a weakness in the financial markets. If credit pressures or other financial difficulties result in insolvency for third-party dealers, distributors, or resellers and we are unable to successfully transition end-customers to purchase our products and solutions from other third-parties or from us directly, it may cause, and in some cases, has caused, a negative impact on our financial results.

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, or change in customer demand could have a negative impact on our results of ~~operations.~~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, 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.~~declines, and may require that we purchase inventory that exceeds our forecasted demand. In addition, volatility in customer demand, product availability, and costs to transport products, may result in increased operating input ~~costs.~~costs, elevated inventory levels, as well as inventory-related losses. 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~~Economic conditions 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~~

~~Table of Contents~~

~~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~~financial market disruptions may adversely 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~~Adverse economic conditions or reduced and/or changes in the timing and amount of information technology spending may negatively impact 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 consequencesbusiness.General disruption 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~~a related general economic downturn or uncertainty could adversely affect our business and financial condition through a reduction in demand for our products, solutions or services by our customers. If a slowdown were severe enough, it could require further impairment testing and write-downs of goodwill and other intangible assets. Cost reduction actions have been and may be necessary in the future resulting in restructuring charges as well as changes in staffing levels which may strain our resources. A tightening of financial credit or increase in the cost of borrowing could adversely affect our customers, suppliers, outsourced manufacturers, and channel partners (e.g., distributors and resellers) from obtaining adequate credit for the financing of significant purchases. An economic downturn could also result in a ~~negative impact on~~decrease in or cancellation of orders for our products, solutions and services; negatively impacting the ability to ~~sell~~collect accounts receivable on a timely basis; result in additional reserves for uncollectible accounts receivable; and ~~ship products, collect payments from~~require additional reserves for inventory obsolescence. Higher volatility and ~~support customers~~fluctuations in ~~certain regions,~~foreign exchange rates for the U.S. Dollar against currencies such as the Euro, British Pound Sterling and Czech Koruna could ~~increase the costs, risks~~negatively impact product sales, margins, and ~~adverse impacts from supply chain and logistics challenges.~~cash flows.


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~~July 1, ~~2022:~~2023:

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

Table of Contents


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)
April 2, 2023 - April 29, 2023	—	$	—	—	$	930
April 30, 2023 - May 27, 2023	138,508	270.73		138,508	893
May 28, 2023 - July 1, 2023	—	—		—	893
Total	138,508	$	270.73	138,508	$	893

(1)On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to $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. As of ~~October~~July 1, ~~2022,~~2023, the Company has cumulatively repurchased ~~2,948,618~~3,517,602 shares of common stock for approximately ~~$958 million,~~$1.1 billion, resulting in a remaining amount of share repurchases authorized under the plans of ~~$1,042~~$893 million.


Item 5.			Other Information

None of our directors or executive officers had in effect, adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the second quarter of 2023.

Table of Contents


Item 6.			Exhibits


10.1			Form of 2023 performance-vested restricted stock unit agreement for all employees (including the CEO)

10.2			Form of 2023 time-restricted stock unit agreement for all employees (including the CEO)

10.3			Form of 2023 stock-settled stock appreciation rights agreement for all employees (including the CEO)

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~~July 1, ~~2022,~~2023, 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~~July 1, ~~2022,~~2023 formatted in Inline XBRL (included in Exhibit 101).

3938

Table of Contents

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~~August 1, ~~2022~~2023	By:	/s/ ~~Anders Gustafsson~~William J. Burns
		~~Anders Gustafsson~~William J. Burns
		Chief Executive Officer



Date: ~~November~~August 1, ~~2022~~2023	By:	/s/ Nathan Winters
		Nathan Winters
		Chief Financial Officer

4039


	Three Months Ended
	October 1, 2022						October 2, 2021
Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	$	392	$	23	$	415	$	354	$	24	$	378
EVM	772		191		963		886		172		1,058
Corporate, eliminations(1)	—		—		—		—		—		—
Total	$	1,164	$	214	$	1,378	$	1,240	$	196	$	1,436

	Nine Months Ended
	October 1, 2022						October 2, 2021
Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	$	1,184	$	71	$	1,255	$	1,151	$	70	$	1,221
EVM	2,446		577		3,023		2,434		511		2,945
Corporate, eliminations(1)	—		—		—		—		(6)		(6)
Total	$	3,630	$	648	$	4,278	$	3,585	$	575	$	4,160


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


	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


	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