Item 1. Consolidated Financial Statements

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

			October 2, 2021						December 31, 2020
			(Unaudited)
Assets
Current assets:
Cash and cash equivalents			$	307					$	168
Accounts receivable, net of allowances for doubtful accounts of $1 million as of October 2, 2021 and December 31, 2020, respectively			613						508
Inventories, net			438						511
Current income taxes			72						16
Prepaid expenses and other current assets			94						70
Total Current assets			1,524						1,273
Property, plant and equipment, net			274						274
Right-of-use lease assets			130						135
Goodwill			3,194						2,988
Other intangibles, net			456						402
Deferred income taxes			106						139
Other long-term assets			181						164
Total Assets			$	5,865					$	5,375
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt			$	51					$	364
Accounts payable			609						601
Accrued liabilities			550						559
Deferred revenue			363						308
Income taxes payable			8						19
Total Current liabilities			1,581						1,851
Long-term debt			940						881
Long-term lease liabilities			120						129
Long-term deferred revenue			318						273
Other long-term liabilities			90						97
Total Liabilities			3,049						3,231
Stockholders’ Equity:
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			1						1
Additional paid-in capital			447						395
Treasury stock at cost, 18,697,788 and 18,689,775 shares as of October 2, 2021 and December 31, 2020, respectively			(986)						(919)
Retained earnings			3,382						2,736
Accumulated other comprehensive loss			(28)						(69)
Total Stockholders’ Equity			2,816						2,144
Total Liabilities and Stockholders’ Equity			$	5,865					$	5,375

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)

			Three Months Ended												Nine Months Ended
			October 2, 2021						September 26, 2020						October 2, 2021						September 26, 2020
Net sales:
Tangible products			$	1,240					$	972					$	3,585					$	2,684
Services and software			196						160						575						456
Total Net sales			1,436						1,132						4,160						3,140
Cost of sales:
Tangible products			687						543						1,896						1,480
Services and software			103						96						305						275
Total Cost of sales			790						639						2,201						1,755
Gross profit			646						493						1,959						1,385
Operating expenses:
Selling and marketing			148						119						430						350
Research and development			141						113						422						316
General and administrative			85						71						259						219
Amortization of intangible assets			29						20						81						52
Acquisition and integration costs			6						19						11						21
Exit and restructuring costs			—						1						—						7
Total Operating expenses			409						343						1,203						965
Operating income			237						150						756						420
Other expenses:
Foreign exchange loss			(4)						(3)						(3)						(15)
Interest expense, net			(5)						(10)						(10)						(69)
Other (expense) income, net			—						1						(1)						8
Total Other expenses, net			(9)						(12)						(14)						(76)
Income before income tax			228						138						742						344
Income tax expense			29						22						96						39
Net income			$	199					$	116					$	646					$	305
Basic earnings per share			$	3.72					$	2.18					$	12.08					$	5.70
Diluted earnings per share			$	3.69					$	2.16					$	11.98					$	5.65

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

			Three Months Ended												Nine Months Ended
			October 2, 2021						September 26, 2020						October 2, 2021						September 26, 2020
Net income			$	199					$	116					$	646					$	305
Other comprehensive income (loss), net of tax:
Changes in unrealized gains (losses) on anticipated sales hedging transactions			12						(8)						46						(14)
Foreign currency translation adjustment			(2)						4						(5)						(4)
Comprehensive income			$	209					$	112					$	687					$	287

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

(Unaudited)

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

						Class A Common Stock Shares						Class A Common Stock Value						Additional Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Loss						Total
Balance at December 31, 2019						54,002,932						$	1					$	339					$	(689)					$	2,232					$	(44)					$	1,839
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						15,792						—						—						—						—						—						—
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(4,361)						—						—						(1)						—						—						(1)
Share-based compensation						—						—						7						—						—						—						7
Repurchases of common stock						(948,740)						—						—						(200)						—						—						(200)
Net income						—						—						—						—						89						—						89
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)						—						—						—						—						—						2						2
Foreign currency translation adjustment						—						—						—						—						—						(9)						(9)
Balance at March 28, 2020						53,065,623						$	1					$	346					$	(890)					$	2,321					$	(51)					$	1,727
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						399,634						—						(9)						13						—						—						4
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(142,206)						—						—						(34)						—						—						(34)
Share-based compensation						—						—						13						—						—						—						13
Net income						—						—						—						—						100						—						100
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)						—						—						—						—						—						(8)						(8)
Foreign currency translation adjustment						—						—						—						—						—						1						1
Balance at June 27, 2020						53,323,051						$	1					$	350					$	(911)					$	2,421					$	(58)					$	1,803
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						(22,960)						—						9						(6)						—						—						3
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(1,629)						—						—						—						—						—						—
Share-based compensation						—						—						13						—						—						—						13
Net income						—						—						—						—						116						—						116
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)						—						—						—						—						—						(8)						(8)
Foreign currency translation adjustment						—						—						—						—						—						4						4
Balance at September 26, 2020						53,298,462						$	1					$	372					$	(917)					$	2,537					$	(62)					$	1,931

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

			Nine Months Ended
			October 2, 2021						September 26, 2020
Cash flows from operating activities:
Net income			$	646					$	305
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			136						103
Share-based compensation			58						33
Deferred income taxes			(6)						(2)
Unrealized (gain) loss on forward interest rate swaps			(17)						37
Other, net			1						(3)
Changes in operating assets and liabilities:
Accounts receivable, net			(107)						96
Inventories, net			75						(7)
Other assets			(25)						3
Accounts payable			(2)						(7)
Accrued liabilities			42						(40)
Deferred revenue			101						58
Income taxes			(67)						(58)
Other operating activities			1						13
Net cash provided by operating activities			836						531
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired			(307)						(548)
Purchases of property, plant and equipment			(38)						(49)
Proceeds from sale of long-term investments			—						6
Purchases of long-term investments			(24)						(32)
Net cash used in investing activities			(369)						(623)
Cash flows from financing activities:
Payment of debt issuance costs and discounts			—						(1)
Payments of long-term debt			(277)						(103)
Proceeds from issuance of long-term debt			21						389
Payments for repurchases of common stock			(25)						(200)
Net payments related to share-based compensation plans			(48)						(28)
Change in unremitted cash collections from servicing factored receivables			(22)						73
Other financing activities			—						1
Net cash (used in) provided by in financing activities			(351)						131
Effect of exchange rate changes on cash and cash equivalents, including restricted cash			—						(1)
Net increase in cash and cash equivalents, including restricted cash			116						38
Cash and cash equivalents, including restricted cash, at beginning of period			192						30
Cash and cash equivalents, including restricted cash, at end of period			$	308					$	68
Less restricted cash, included in Prepaid expenses and other current assets			(1)						(29)
Cash and cash equivalents at end of period			$	307					$	39
Supplemental disclosures of cash flow information:
Income taxes paid			$	169					$	100
Interest paid			$	25					$	28

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 Description of Business and Basis of Presentation

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

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

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

Effective January 1, 2021, Retail Solutions, which provides a range of physical inventory management solutions with application in the retail industry, including solutions for full store physical inventories, cycle counts and analytics, moved from our Asset Intelligence & Tracking (“AIT”) segment into our Enterprise Visibility & Mobility (“EVM”) segment contemporaneous with a change in our organizational structure and management of the business. Prior period results have been reclassified to conform to the current period’s presentation. This change does not have an impact on the Consolidated Financial Statements. See Note 16, Segment Information & Geographic Data for additional information related to each segment’s results.

Note 2 Significant Accounting Policies

Recently Issued Accounting Pronouncements Not Yet Adopted

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

Note 3 Revenues

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

Revenues for products are generally recognized upon shipment, whereas revenues for services and solutions offerings are generally recognized 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 using a time-based method, depending upon how control is transferred to the customer. In cases where a bundle of products, services, 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 2, 2021 and September 26, 2020 (in millions):

			Three Months Ended
			October 2, 2021																		September 26, 2020
Segment			Tangible Products						Services and Software						Total						Tangible Products						Services and Software						Total
AIT			$	358					$	28					$	386					$	314					$	25					$	339
EVM			882						168						1,050						658						137						795
Corporate, eliminations(1)			—						—						—						—						(2)						(2)
Total			$	1,240					$	196					$	1,436					$	972					$	160					$	1,132
			Nine Months Ended
			October 2, 2021																		September 26, 2020
Segment			Tangible Products						Services and Software						Total						Tangible Products						Services and Software						Total
AIT			$	1,161					$	82					$	1,243					$	898					$	69					$	967
EVM			2,424						499						2,923						1,786						389						2,175
Corporate, eliminations(1)			—						(6)						(6)						—						(2)						(2)
Total			$	3,585					$	575					$	4,160					$	2,684					$	456					$	3,140

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

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

Performance Obligations

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

Contract Balances

Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net. Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next twelve months, and Other long-term assets for revenues expected to be billed thereafter. The total contract asset balances were $11 million and $10 million as of October 2, 2021 and December 31, 2020, respectively. These contract assets result from timing differences between the billing and delivery schedules of products, services and software, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations. Contract assets are evaluated for impairment and no impairment losses have been recognized during the three and nine months ended October 2, 2021 and September 26, 2020.

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

Note 4 Inventories

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

			October 2, 2021						December 31, 2020
Raw materials			$	144					$	117
Work in process			3						4
Finished goods			291						390
Total Inventories, net			$	438					$	511

Note 5 Business Acquisitions

Fetch

On August 9, 2021, the Company acquired Fetch Robotics, Inc. (“Fetch”), a provider of autonomous mobile robot solutions for customers who operate in the manufacturing and warehousing markets. Through its acquisition of Fetch, the Company intends to expand its automation solution offerings to customers in the manufacturing, distribution, and fulfillment industries.

The acquisition was accounted for under the acquisition method of accounting for business combinations. The total purchase consideration was $301 million, which consisted of $290 million in cash paid, net of cash on-hand, and the fair value of the Company’s existing ownership interest in Fetch of $11 million, as remeasured upon acquisition. This remeasurement resulted in a $1 million gain reflected in Other (expense) income, net on the Consolidated Statements of Operations.

The Company utilized estimated fair values as of August 9, 2021 to allocate the total purchase consideration to the identifiable assets acquired and liabilities assumed. The fair value of the net assets acquired was based on several estimates and assumptions, as well as customary valuation techniques, primarily the excess earnings method for technology and patent intangible assets. While we believe these estimates provide a reasonable basis to record the net assets acquired, the purchase price allocation is considered preliminary and subject to adjustment during the measurement period, which is up to one year from the acquisition date. The primary fair value estimates still considered preliminary as of October 2, 2021 include intangible assets and income tax-related items.

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

Identifiable intangible assets			$	114
Right-of-use lease asset			11
Inventories			6
Other assets acquired			5
Deferred tax liabilities			(27)
Lease liability			(11)
Other liabilities assumed			(4)
Net assets acquired			$	94
Goodwill on acquisition			207
Total purchase price			$	301

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

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

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

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

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

Adaptive Vision

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

Reflexis

During the third quarter of 2021, the Company finalized the purchase price allocation related to its September 1, 2020 acquisition of Reflexis Systems, Inc. (“Reflexis”). Before finalizing the purchase price allocation, during the second quarter of 2021, the Company recorded measurement period adjustments consisting of a $9 million increase to the trade name intangible assets and a $4 million increase to deferred tax liabilities. During the third quarter of 2021, the Company recorded its final measurement period adjustment consisting of a $2 million decrease to deferred tax liabilities. These adjustments, relating to facts and circumstances existing as of the acquisition date, resulted in a $7 million reduction of goodwill.

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

Acquisition and integration costs

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

Note 6 Goodwill and Other Intangibles

Goodwill

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

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

Other Intangibles, net

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

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

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

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

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

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

Note 7 Investments

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

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

Net gains and losses related to the Company’s investments are included within Other (expense) income, net on the Consolidated Statements of Operations. The Company recognized net gains of $1 million each during the three months ended October 2, 2021 and September 26, 2020, respectively. The Company recognized net gains of $1 million and $8 million during the nine months ended October 2, 2021 and September 26, 2020, respectively.

Note 8 Fair Value Measurements

Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

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

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

• Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs to the extent possible. In addition, the Company considers counterparty credit risk in the assessment of fair value.

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

			Level 1						Level 2						Level 3						Total
Assets:
Foreign exchange contracts (1)			$	—					$	22					$	—					$	22
Money market investments related to deferred compensation plan			35						—						—						35
Total Assets at fair value			$	35					$	22					$	—					$	57
Liabilities:
Foreign exchange contracts (1)			$	1					$	—					$	—					$	1
Forward interest rate swap contracts (2)			—						29						—						29
Liabilities related to the deferred compensation plan			35						—						—						35
Total Liabilities at fair value			$	36					$	29					$	—					$	65

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

			Level 1						Level 2						Level 3						Total
Assets:
Money market investments related to deferred compensation plan			$	30					$	—					$	—					$	30
Total Assets at fair value			$	30					$	—					$	—					$	30
Liabilities:
Foreign exchange contracts (1)			$	3					$	34					$	—					$	37
Forward interest rate swap contracts (2)			—						46						—						46
Liabilities related to the deferred compensation plan			30						—						—						30
Total Liabilities at fair value			$	33					$	80					$	—					$	113

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

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

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

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

Note 9 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)
									Fair Values as of
			Balance Sheet Classification						October 2, 2021						December 31, 2020
Derivative instruments designated as hedges:
Foreign exchange contracts			Prepaid expenses and other current assets						$	22					$	—
Foreign exchange contracts			Accrued liabilities						—						(34)
Total derivative instruments designated as hedges									$	22					$	(34)
Derivative instruments not designated as hedges:
Foreign exchange contracts			Accrued liabilities						$	(1)					$	(3)
Forward interest rate swaps			Accrued liabilities						(17)						(17)
Forward interest rate swaps			Other long-term liabilities						(12)						(29)
Total derivative instruments not designated as hedges									$	(30)					$	(49)
Total net derivative liability									$	(8)					$	(83)

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 2, 2021						September 26, 2020						October 2, 2021						September 26, 2020
Derivative instruments not designated as hedges:
Foreign exchange contracts			Foreign exchange loss						$	1					$	(1)					$	1					$	(9)
Forward interest rate swaps			Interest expense, net						(1)						(4)						4						(46)
Total gains (losses) recognized in income									$	—					$	(5)					$	5					$	(55)

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

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

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

Foreign Currency Exchange Risk Management

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

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

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

			October 2, 2021						December 31, 2020
Notional balance of outstanding contracts:
British Pound/U.S. Dollar			£	2					£	10
Euro/U.S. Dollar			€	91					€	123
Euro/Czech Koruna			€	17					€	—
Japanese Yen/U.S. Dollar			¥	—					¥	354
Singapore Dollar/U.S. Dollar			S$	15					S$	12
Mexican Peso/U.S. Dollar			Mex$	85					Mex$	36
Polish Zloty/U.S. Dollar			zł	96					zł	—
Net fair value of liabilities of outstanding contracts			$	1					$	3

Interest Rate Risk Management

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

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

In December 2017, the Company entered into a long-term forward interest rate swap agreement with a notional amount of $800 million to lock into a fixed LIBOR interest rate base for its debt facilities subject to monthly interest payments. Under the terms of the agreement, $800 million in variable-rate debt will be swapped for a fixed interest rate with net settlement terms starting in December 2018 and ending in December 2022. During the third quarter of 2019, the Company entered into additional long-term forward interest rate swap agreements with a total notional amount of $800 million, containing net settlement terms, which start in December 2022 and end in August 2024. The additional interest rate swap agreements effectively extend the risk management initiative of the Company to coincide with the maturities of Term Loan A and the Revolving Credit Facility. These interest rate swaps are not designated as hedges and changes in fair value are recognized immediately as Interest expense, net on the Consolidated Statements of Operations.

Note 10 Long-Term Debt

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

			October 2, 2021						December 31, 2020
Term Loan A			$	888					$	917
2020 Term Loan			—						100
Receivables Financing Facilities			108						235
Total debt			$	996					$	1,252
Less: Debt issuance costs			(3)						(5)
Less: Unamortized discounts			(2)						(2)
Less: Current portion of debt			(51)						(364)
Total long-term debt			$	940					$	881

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

2021						$	—
2022						70
2023						81
2024						845
Total future debt maturities						$	996

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

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

Term Loan A

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

2020 Term Loan

In September 2020, the Company entered into a new $200 million term loan (“2020 Term Loan”), with the proceeds used to partly fund the acquisition of Reflexis. The Company repaid $100 million of principal in the fourth quarter of 2020 and repaid the remaining $100 million of principal in the first quarter of 2021.

Receivables Financing Facilities

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

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

Revolving Credit Facility

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

Uncommitted Short-Term Credit Facility

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

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

The Company uses interest rate swaps to manage the interest rate risk associated with its debt. See Note 9**,** Derivative Instruments for further information.

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

Note 11 Commitments and Contingencies

Warranties

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

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

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.

In 2020, the Company received approval of its exclusion request of customs duties that had been paid on certain products under Section 301 of the U.S. Trade Act of 1974 from September 1, 2019 through September 1, 2020 and commenced a process to request recovery of previously assessed amounts. Recoveries are recognized when the Company has completed all regulatory filing requirements and determined that receipt of amounts is virtually certain. Recoveries totaling $12 million were recorded in the fourth quarter of 2020, of which $4 million related to our AIT segment and $8 million related to our EVM segment. During the nine months ended October 2, 2021, the Company recorded recoveries of $16 million, of which $9 million related to our AIT segment and $7 million related to our EVM segment. Recoveries during the three months ended October 2, 2021 were not significant. Both the initially incurred costs and related recoveries were included within Cost of sales for Tangible products on the Consolidated Statements of Operations. The Company believes that it has recovered substantially all of the import duties that it expects to receive on previously paid amounts. The final amounts and the timings of any additional recoveries remain uncertain and, therefore, the Company has not recorded any amounts related to potential future recoveries in its financial statements as of October 2, 2021.

Note 12 Income Taxes

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

The Company is continually monitoring the provisions of the American Rescue Plan Act, signed into law on March 11, 2021; the Consolidated Appropriations Act of 2021, signed into law on December 27, 2020; and the Coronavirus Aid, Relief and Economic Security Act, signed into law on March 27, 2020. The provisions of these laws did not have a significant impact to our effective tax rate in either the current or prior year. Management continues to monitor guidance regarding these laws and developments related to other coronavirus tax relief throughout the world for potential impacts.

The Company earns a significant amount of its operating income outside of the U.S that is taxed at rates different than the U.S. federal statutory rate. The Company’s principal foreign jurisdictions that provide sources of operating income are the U.K. and Singapore. During the second quarter of 2021, the U.K. government enacted a change in law that increases the corporate tax rate from 19% to 25%, with such rate change becoming effective in April 2023. Upon enactment, we remeasured our deferred tax assets to reflect the 25% statutory rate to the extent such tax benefits are expected to be realized in the future at the amended statutory rate. In addition, the Company has received an incentivized tax rate from the Singapore Economic Development Board, which reduces the income tax rate in that jurisdiction effective for calendar years 2019 to 2023. The Company has committed to making additional investments in Singapore over the period 2019 to 2022. However, should the Company not make these investments in accordance with the agreement, any incentive benefit would have to be repaid to the Singapore tax authorities.

The Company is not permanently reinvested with respect to its U.S. directly-owned foreign subsidiaries. The Company is subject to U.S. income tax on substantially all foreign earnings under the Global Intangible Low-Taxed Income provisions of the Tax Cuts and Jobs Act (the “Act”), while any remaining foreign earnings are eligible for a dividends received deduction under the Act. As a result, future repatriation of earnings will not be subject to 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 where, in the Company’s judgment, tax benefits are not expected to be realized. There were no changes to our valuation allowance during the three and nine months ended October 2, 2021.

Uncertain Tax Positions

The Company is currently undergoing U.S. federal income tax audits for tax years 2017 and 2018. Additionally, fiscal years 2004 through 2018 remain open to examination by multiple foreign and U.S. state taxing jurisdictions. As of October 2, 2021, no significant uncertain tax positions are expected to be settled within the next twelve months. Due to uncertainties in any tax audit or litigation outcome, the Company’s estimates of the ultimate settlements of uncertain tax positions may change and the actual tax benefits may differ significantly from estimates.

Note 13 Earnings Per Share

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

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

						Three Months Ended												Nine Months Ended
						October 2, 2021						September 26, 2020						October 2, 2021						September 26, 2020
Basic:
Net income						$	199					$	116					$	646					$	305
Weighted-average shares outstanding						53,418,055						53,300,036						53,449,239						53,460,891
Basic earnings per share						$	3.72					$	2.18					$	12.08					$	5.70
Diluted:
Net income						$	199					$	116					$	646					$	305
Weighted-average shares outstanding						53,418,055						53,300,036						53,449,239						53,460,891
Dilutive shares						448,504						416,270						462,574						486,895
Diluted weighted-average shares outstanding						53,866,559						53,716,306						53,911,813						53,947,786
Diluted earnings per share						$	3.69					$	2.16					$	11.98					$	5.65

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

Note 14 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 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 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.

The components of AOCI for the nine months ended October 2, 2021 and September 26, 2020 are as follows (in millions):

						Unrealized gain (loss) on sales hedging												Foreign currency translation adjustments						Total
Balance at December 31, 2019						$	2											$	(46)					$	(44)
Other comprehensive income (loss) before reclassifications						(11)												(4)						(15)
Amounts reclassified from AOCI(1)						(6)												—						(6)
Tax effect						3												—						3
Other comprehensive loss, net of tax						(14)												(4)						(18)
Balance at September 26, 2020						$	(12)											$	(50)					$	(62)
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)

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

Note 15 Accounts Receivable Factoring

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

During the second quarter of 2021, one of the Company’s Receivables Factoring arrangements that was no longer actively utilized expired. The Company currently has two remaining active Receivables Factoring arrangements. One arrangement allows for the factoring of up to $50 million of uncollected receivables originated from the EMEA region. The second arrangement allows for the factoring of up to €150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions. With respect to the second arrangement, the Company is required to maintain a portion of sales proceeds as deposits in a restricted cash account that is released to the Company as it satisfies its obligations as servicer of sold receivables, which totaled $1 million and $24 million as of October 2, 2021 and December 31, 2020, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

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

As servicer of sold receivables, the Company had $120 million and $142 million of obligations that were not yet remitted to banks as of October 2, 2021 and December 31, 2020, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash (used in) provided by financing activities on the Consolidated Statements of Cash Flows.

Fees incurred in connection with these arrangements were not significant.

Note 16 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, and product sourcing diversification costs. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Effective January 1, 2021, Retail Solutions moved from our AIT segment into our EVM segment contemporaneous with a change in our organizational structure and management of the business. Prior period results have been revised to conform to the current segment presentation. This change does not have an impact on the Consolidated Financial Statements.

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

			Three Months Ended												Nine Months Ended
			October 2, 2021						September 26, 2020						October 2, 2021						September 26, 2020
Net sales:
AIT			$	386					$	339					$	1,243					$	967
EVM			1,050						795						2,923						2,175
Total segment Net sales			1,436						1,134						4,166						3,142
Corporate, eliminations(1)			—						(2)						(6)						(2)
Total Net sales			$	1,436					$	1,132					$	4,160					$	3,140
Operating income:
AIT(2)			$	77					$	78					$	283					$	212
EVM(2)			195						121						571						305
Total segment operating income			272						199						854						517
Corporate, eliminations(1)			(35)						(49)						(98)						(97)
Total Operating income			$	237					$	150					$	756					$	420

(1)To the extent applicable, amounts included in Corporate, eliminations consist of business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, and product sourcing diversification costs.

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

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

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

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

Note 17 Subsequent Event

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