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

Overview

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

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: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”).

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

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

In the first quarter of 2021, Retail Solutions, which provides a range of physical inventory management solutions with application in the retail industry, including solutions for full store physical inventories, cycle counts and analytics, moved from our AIT segment into our EVM segment contemporaneous with a change in our organizational structure and management of the business. We have reported our results reflecting this change, including historical periods, on a comparable basis. This change does not have an impact to the Consolidated Financial Statements.

Recent Developments

COVID-19 Outbreak

The global coronavirus (“COVID-19”or the “pandemic” ) situation continues to be complex and rapidly evolving. Governmental agencies, to varying degrees, have imposed, and continue to impose, several protocols and regulations restricting the physical movement or other activities of individuals in an effort to limit the spread of COVID-19. 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 gradually re-introducing office workers to a return to office, 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 continue to ease their restrictions and we continue to

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

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

Fetch Acquisition

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 this acquisition, the Company can help customers, primarily in the manufacturing, distribution, and fulfillment industries, optimize workflows through robotics automation. The operating results of Fetch are included within the EVM segment.

Adaptive Vision Acquisition

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 operating results of Adaptive Vision are included within the EVM segment.

Reflexis Acquisition

On September 1, 2020, the Company acquired Reflexis Systems, Inc. (“Reflexis”), a provider of task and workforce management, execution, and communication solutions for customers in the retail, food service, hospitality, and banking industries. Through this acquisition, the Company has enhanced its solutions offerings to customers in these industries by

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

Antuit Acquisition

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

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			October 2, 2021						September 26, 2020						$ Change						% Change						October 2, 2021						September 26, 2020						$ Change						% Change
Net sales:
Tangible products			$	1,240					$	972					$	268					27.6		%				$	3,585					$	2,684					$	901					33.6		%
Services and software			196						160						36						22.5		%				575						456						119						26.1		%
Total Net sales			1,436						1,132						304						26.9		%				4,160						3,140						1,020						32.5		%
Gross profit			646						493						153						31.0		%				1,959						1,385						574						41.4		%
Gross margin			45.0		%				43.6		%										140 bps						47.1		%				44.1		%										300 bps
Operating expenses			409						343						66						19.2		%				1,203						965						238						24.7		%
Operating income			$	237					$	150					$	87					58.0		%				$	756					$	420					$	336					80.0		%

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

			Three Months Ended																								Nine Months Ended
			October 2, 2021						September 26, 2020						$ Change						% Change						October 2, 2021						September 26, 2020						$ Change						% Change
North America			$	728					$	629					$	99					15.7		%				$	2,108					$	1,650					$	458					27.8		%
EMEA			504						340						164						48.2		%				1,458						1,034						424						41.0		%
Asia-Pacific			135						115						20						17.4		%				392						322						70						21.7		%
Latin America			69						48						21						43.8		%				202						134						68						50.7		%
Total Net sales			$	1,436					$	1,132					$	304					26.9		%				$	4,160					$	3,140					$	1,020					32.5		%

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

			Three Months Ended																								Nine Months Ended
			October 2, 2021						September 26, 2020						As a % of Net sales												October 2, 2021						September 26, 2020						As a % of Net sales
						2021						2020												2021						2020
Selling and marketing			$	148					$	119					10.3		%				10.5		%				$	430					$	350					10.3		%				11.1		%
Research and development			141						113						9.8		%				10.0		%				422						316						10.1		%				10.1		%
General and administrative			85						71						5.9		%				6.3		%				259						219						6.2		%				7.0		%
Amortization of intangible assets			29						20						NM						NM						81						52						NM						NM
Acquisition and integration costs			6						19						NM						NM						11						21						NM						NM
Exit and restructuring costs			—						1						NM						NM						—						7						NM						NM
Total Operating expenses			$	409					$	343					28.5		%				30.3		%				$	1,203					$	965					28.9		%				30.7		%

Consolidated Organic Net sales growth:

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

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

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

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

Third quarter 2021 compared to third quarter 2020

Total Net sales increased $304 million or 26.9% compared to the prior year primarily due to broad-based customer demand to digitize and automate their businesses across both of our segments and all our regions. EVM Net sales growth was 32.1% and AIT Net sales growth was 13.9% compared to the prior year. Excluding the effects of favorable currency changes and acquisitions, the increase in Consolidated Organic Net sales was 23.2%.

Gross margin increased to 45.0% for the current quarter compared to 43.6% for the prior year. Gross margins were higher than the prior year primarily due to favorable business mix and volume leverage, higher support service margins, and favorable currency changes. These benefits were partially offset by higher premium freight costs.

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

Operating income increased 58.0% to $237 million for the current quarter compared to $150 million for the prior year. The increase was due to higher Gross profit, which was partially offset by higher Operating expenses.

Net income increased 72% compared to the prior year due to higher Operating income and favorability in Other expenses, net, partially offset by higher income tax expense detailed as follows:

• Other expenses, net was $9 million in the current year compared to $12 million in the prior year primarily due to lower interest expense in the current year. The current year interest expense benefited from lower interest rates and average outstanding debt levels, as well as lower interest rate swaps losses compared to the prior year.

• The Company’s effective income tax rate for the three months ended October 2, 2021 and September 26, 2020 was 12.7% and 15.9%, respectively. The decrease in the effective tax rate was primarily due to a higher foreign-derived intangible income deduction in the third quarter of 2021, partially offset by increases in pre-tax income in jurisdictions with higher tax rates.

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

Year to date 2021 compared to Year to date 2020

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

Gross margin increased to 47.1% for the current year compared to 44.1% for the prior year. Gross margins were higher than the prior year primarily due to favorable business mix and volume leverage, higher support service margins, favorable currency changes, partial recovery of Chinese import tariffs in the current year, the mitigation of Chinese import tariffs as of the fourth quarter of 2020, and contributions from our recent higher margin EVM acquisitions. These benefits were partially offset by higher premium freight costs.

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

Operating income increased 80.0% to $756 million for the current year compared to $420 million for the prior year. The increase was due to higher Gross profit, which was partially offset by higher Operating expenses.

Net income increased 112% compared to the prior year due to higher Operating income and favorability in Other expenses, net, partially offset by higher income tax expense detailed as follows:

• Other expenses, net was $14 million in the current year compared to $76 million in the prior year primarily due to lower foreign exchange losses and lower interest expense in the current year. The current year interest expense benefited from a $4 million gain on interest rate swaps compared to a $46 million loss in the prior year, lower interest rates and lower average outstanding debt levels. The current year also included a $1 million net investment gain compared to $8 million in the prior year.

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

Diluted earnings per share increased to $11.98 as compared to $5.65 in the prior year primarily due to higher Net income.

Results of Operations by Segment

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

Asset Intelligence & Tracking Segment (“AIT”)

(in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			October 2, 2021						September 26, 2020						$ Change						% Change						October 2, 2021						September 26, 2020						$ Change						% Change
Net sales:
Tangible products			$	358					$	314					$	44					14.0		%				$	1,161					$	898					$	263					29.3		%
Services and software			28						25						3						12.0		%				82						69						13						18.8		%
Total Net sales			386						339						47						13.9		%				1,243						967						276						28.5		%
Gross profit			168						158						10						6.3		%				579						454						125						27.5		%
Gross margin			43.5		%				46.6		%										(310) bps						46.6		%				46.9		%										(30) bps
Operating expenses			91						80						11						13.8		%				296						242						54						22.3		%
Operating income			$	77					$	78					$	(1)					(1.3)		%				$	283					$	212					$	71					33.5		%

AIT Organic Net sales growth:

			Three Months Ended						Nine Months Ended
			October 2, 2021						October 2, 2021
AIT Reported GAAP Net sales growth			13.9		%				28.5		%
Adjustments:
Impact of foreign currency translation (1)			(1.8)		%				(1.9)		%
AIT Organic Net sales growth (2)			12.1		%				26.6		%

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

Third quarter 2021 compared to third quarter 2020

Total Net sales for AIT increased $47 million or 13.9% compared to the prior year primarily due to higher sales of printing products and supplies reflecting broad-based customer demand across most of our regions, as well as favorable currency changes. Excluding the impact of foreign currency changes, AIT Organic Net sales growth was 12.1%.

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

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

Year to date 2021 compared to Year to date 2020

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

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

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

Enterprise Visibility & Mobility Segment (“EVM”)

(in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			October 2, 2021						September 26, 2020						$ Change						% Change						October 2, 2021						September 26, 2020						$ Change						% Change
Net sales:
Tangible products			$	882					$	658					$	224					34.0		%				$	2,424					$	1,786					$	638					35.7		%
Services and software			168						137						31						22.6		%				499						389						110						28.3		%
Total Net sales			1,050						795						255						32.1		%				2,923						2,175						748						34.4		%
Gross profit			478						338						140						41.4		%				1,386						937						449						47.9		%
Gross margin			45.5		%				42.5		%										300 bps						47.4		%				43.1		%										430 bps
Operating expenses			283						217						66						30.4		%				815						632						183						29.0		%
Operating income			$	195					$	121					$	74					61.2		%				$	571					$	305					$	266					87.2		%

EVM Organic Net sales growth:

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

(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 EVM Organic Net sales growth, amounts directly attributable to the acquisitions of Reflexis, Adaptive Vision, and Fetch are excluded for twelve months following their respective acquisitions.

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

Third quarter 2021 compared to third quarter 2020

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

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

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

Year to date 2021 compared to Year to date 2020

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

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

Operating income for the current year increased 87.2% compared to the prior year period. The increase was due to higher Gross profit, which was partially offset by higher 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
Cash flows provided by (used in):			October 2, 2021						September 26, 2020						$ Change
Operating activities			$	836					$	531					$	305
Investing activities			(369)						(623)						254
Financing activities			(351)						131						(482)
Effect of exchange rates on cash balances			—						(1)						1
Net increase in cash and cash equivalents, including restricted cash			$	116					$	38					$	78

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

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

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

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

Company 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

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.

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

Receivables 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 Accounting Standards Codifications 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.

In May 2021, one of the Company’s Receivables Factoring arrangements that was no longer actively utilized expired. As of October 2, 2021, the Company has two remaining active Receivables Factoring arrangements. One arrangement allows for the factoring of up to $50 million of uncollected receivables originated from the EMEA region. The second arrangement allows for the factoring of up to €150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions.

As of October 2, 2021 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.

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

Share Repurchases

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

Significant Customers

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

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

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

Safe Harbor

Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors, which could cause actual results to differ materially from those expressed or implied in such forward-looking statements. When used in this document and documents referenced, the words “anticipate,” “believe,” “intend,” “estimate,” “will,” and “expect” and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements but are not the exclusive means of identifying these statements. The forward-looking statements include, but are not limited to, the Company’s financial outlook for the full year of 2021. 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 and solution offerings and competitors’ offerings and the potential effects of technological changes,

• 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 foreign exchange rates 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 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,

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