Item 1. Consolidated Financial Statements

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

			April 2, 2022						December 31, 2021
			(Unaudited)
Assets
Current assets:
Cash and cash equivalents			$	141					$	332
Accounts receivable, net of allowances for doubtful accounts of $1 million each as of April 2, 2022 and December 31, 2021			808						752
Inventories, net			469						491
Income tax receivable			14						8
Prepaid expenses and other current assets			137						106
Total Current assets			1,569						1,689
Property, plant and equipment, net			271						272
Right-of-use lease assets			133						131
Goodwill			3,266						3,265
Other intangibles, net			437						469
Deferred income taxes			226						192
Other long-term assets			227						197
Total Assets			$	6,129					$	6,215
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt			$	183					$	69
Accounts payable			691						700
Accrued liabilities			459						639
Deferred revenue			397						380
Income taxes payable			69						12
Total Current liabilities			1,799						1,800
Long-term debt			913						922
Long-term lease liabilities			122						121
Deferred income taxes			4						6
Long-term deferred revenue			318						315
Other long-term liabilities			67						67
Total Liabilities			3,223						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			487						462
Treasury stock at cost, 19,367,014 and 18,736,582 shares as of April 2, 2022 and December 31, 2021, respectively			(1,331)						(1,023)
Retained earnings			3,778						3,573
Accumulated other comprehensive loss			(29)						(29)
Total Stockholders’ Equity			2,906						2,984
Total Liabilities and Stockholders’ Equity			$	6,129					$	6,215

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
			April 2, 2022						April 3, 2021
Net sales:
Tangible products			$	1,207					$	1,153
Services and software			225						194
Total Net sales			1,432						1,347
Cost of sales:
Tangible products			681						591
Services and software			114						101
Total Cost of sales			795						692
Gross profit			637						655
Operating expenses:
Selling and marketing			152						134
Research and development			137						140
General and administrative			99						82
Amortization of intangible assets			33						26
Acquisition and integration costs			4						1
Total Operating expenses			425						383
Operating income			212						272
Other income, net:
Foreign exchange gain			8						2
Interest income, net			30						2
Total Other income, net			38						4
Income before income tax			250						276
Income tax expense			45						48
Net income			$	205					$	228
Basic earnings per share			$	3.86					$	4.26
Diluted earnings per share			$	3.83					$	4.22

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

			Three Months Ended
			April 2, 2022						April 3, 2021
Net income			$	205					$	228
Other comprehensive income (loss), net of tax:
Changes in unrealized gains on anticipated sales hedging transactions			5						32
Foreign currency translation adjustment			(5)						(3)
Comprehensive income			$	205					$	257

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, 2021						53,415,275						$	1					$	462					$	(1,023)					$	3,573					$	(29)					$	2,984
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						20,082						—						8						(2)						—						—						6
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(1,639)						—						—						(1)						—						—						(1)
Share-based compensation						—						—						17						—						—						—						17
Repurchases of common stock						(648,875)						—						—						(305)						—						—						(305)
Net income						—						—						—						—						205						—						205
Changes in unrealized gains and losses on anticipated sales hedging transactions (net of income taxes)						—						—						—						—						—						5						5
Foreign currency translation adjustment						—						—						—						—						—						(5)						(5)
Balance at April 2, 2022						52,784,843						$	1					$	487					$	(1,331)					$	3,778					$	(29)					$	2,906

						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

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

			Three Months Ended
			April 2, 2022						April 3, 2021
Cash flows from operating activities:
Net income			$	205					$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			52						44
Share-based compensation			17						16
Deferred income taxes			(37)						(2)
Unrealized gain on forward interest rate swaps			(38)						(12)
Other, net			(1)						(1)
Changes in operating assets and liabilities:
Accounts receivable, net			(56)						(15)
Inventories, net			22						(17)
Other assets			(19)						(18)
Accounts payable			(14)						(30)
Accrued liabilities			(143)						(47)
Deferred revenue			18						50
Income taxes			51						28
Other operating activities			(3)						—
Net cash provided by operating activities			54						224
Cash flows from investing activities:
Purchases of property, plant and equipment			(14)						(10)
Purchases of long-term investments			(5)						(13)
Net cash used in investing activities			(19)						(23)
Cash flows from financing activities:
Payments of long-term debt			(25)						(156)
Proceeds from issuance of long-term debt			130						—
Payments for repurchases of common stock			(305)						—
Net proceeds (payments) related to share-based compensation plans			5						(6)
Change in unremitted cash collections from servicing factored receivables			(25)						(19)
Net cash used in financing activities			(220)						(181)
Effect of exchange rate changes on cash and cash equivalents, including restricted cash			(2)						(2)
Net (decrease) increase in cash and cash equivalents, including restricted cash			(187)						18
Cash and cash equivalents, including restricted cash, at beginning of period			344						192
Cash and cash equivalents, including restricted cash, at end of period			$	157					$	210
Less restricted cash, included in Prepaid expenses and other current assets			(16)						(33)
Cash and cash equivalents at end of period			$	141					$	177
Supplemental disclosures of cash flow information:
Income taxes paid			$	29					$	22
Interest paid			$	8					$	9

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 software subscriptions, that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services. End-users of our products, solutions and services include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries. We provide our products, solutions and services globally through a direct sales force and an extensive network of channel partners.

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

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 April 2, 2022, the Consolidated Statements of Operations, Comprehensive Income, Stockholders’ Equity, and Cash Flows for the three months ended April 2, 2022 and April 3, 2021. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, 2022.

Effective January 1, 2022, the location solutions offering, which provides a range of real-time location systems (“RTLS”) and services that generate on-demand information about the physical location and status of assets, equipment, and people, moved from our Asset Intelligence & Tracking (“AIT”) segment into our Enterprise Visibility & Mobility (“EVM”) segment contemporaneous with a change in our organizational structure and management of the business. We have reported our results reflecting this change, including historical periods, on a comparable basis. This change does not have an impact to the Consolidated Financial Statements. See Note 15, Segment Information & Geographic Data for additional information related to each segment’s results.

Note 2 Significant Accounting Policies

For a discussion of our significant accounting policies, see Note 2, Significant Accounting Policies within Part II, Item 8. “Financial Statements and Supplementary Data” in the Annual Report on Form 10-K for the year ended December 31, 2021. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2021.

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 solution offerings are generally recognized over time by using an output or time-based method, assuming all other criteria for revenue recognition have been met. Revenues for software are recognized either upon delivery or over time using a time-based method, depending upon how control is transferred to the customer. In cases where a bundle of products, services, solutions and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue

The following table presents our Net sales disaggregated by product category for each of our segments, AIT and EVM, for the three months ended April 2, 2022 and April 3, 2021 (in millions):

			Three Months Ended
			April 2, 2022																		April 3, 2021
Segment			Tangible Products						Services and Software						Total						Tangible Products						Services and Software						Total
AIT			$	370					$	24					$	394					$	407					$	22					$	429
EVM			837						201						1,038						746						175						921
Corporate, eliminations(1)			—						—						—						—						(3)						(3)
Total			$	1,207					$	225					$	1,432					$	1,153					$	194					$	1,347

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

In addition, refer to Note 15, Segment Information & Geographic Data for Net sales to customers by geographic region.

Performance Obligations

The Company’s remaining performance obligations primarily relate to repair and support services, as well as solution offerings. The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $1,078 million and $1,033 million, inclusive of deferred revenue, as of April 2, 2022 and December 31, 2021, respectively. On average, remaining performance obligations as of April 2, 2022 and December 31, 2021 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 $10 million each as of April 2, 2022 and December 31, 2021. These contract assets result from timing differences between billing and satisfying performance obligations, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations. Contract assets are evaluated for impairment and no impairment losses have been recognized during the three months ended April 2, 2022 and April 3, 2021, respectively.

Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were $715 million and $695 million as of April 2, 2022 and December 31, 2021, respectively. During the three months ended April 2, 2022, the Company recognized $129 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2021. During the three months ended April 3, 2021, the Company recognized $110 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2020.

Note 4 Inventories

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

			April 2, 2022						December 31, 2021
Raw materials			$	200					$	196
Work in process			2						3
Finished goods			267						292
Total Inventories, net			$	469					$	491

Note 5 Business Acquisitions

On March 14, 2022, the Company entered into a definitive agreement to acquire Matrox Electronic Systems Ltd., a developer of advanced machine vision components and systems. The purchase price of approximately $875 million is expected to be funded with a combination of cash on hand and financing from our credit facility. The transaction is subject to customary closing conditions and is expected to close mid 2022. The acquired business will become part of the EVM segment.

Note 6 Investments

The carrying value of the Company’s venture investments was $106 million and $101 million as of April 2, 2022 and December 31, 2021, respectively, which are included in Other long-term assets on the Consolidated Balance Sheets.

The Company paid $5 million and $13 million for the purchases of long-term investments during the three months ended April 2, 2022 and April 3, 2021, respectively.

Net gains and losses related to the Company’s investments are included within Other income, net on the Consolidated Statements of Operations. The Company recognized net gains of $0 million and $1 million during the three months ended April 2, 2022 and April 3, 2021, respectively.

Note 7 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 April 2, 2022, are classified below (in millions):

			Level 1						Level 2						Level 3						Total
Assets:
Foreign exchange contracts (1)			$	1					$	29					$	—					$	30
Forward interest rate swap contracts (2)			—						27						—						27
Money market investments related to deferred compensation plan			38						—						—						38
Total Assets at fair value			$	39					$	56					$	—					$	95
Liabilities:
Forward interest rate swap contracts (2)			$	—					$	5					$	—					$	5
Liabilities related to the deferred compensation plan			38						—						—						38
Total Liabilities at fair value			$	38					$	5					$	—					$	43

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

			Level 1						Level 2						Level 3						Total
Assets:
Foreign exchange contracts (1)			$	—					$	23					$	—					$	23
Money market investments related to deferred compensation plan			$	37					$	—					$	—					$	37
Total Assets at fair value			$	37					$	23					$	—					$	60
Liabilities:
Forward interest rate swap contracts (2)			$	—					$	16					$	—					$	16
Liabilities related to the deferred compensation plan			37						—						—						37
Total Liabilities at fair value			$	37					$	16					$	—					$	53

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

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

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

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

Note 8 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						April 2, 2022						December 31, 2021
Derivative instruments designated as hedges:
Foreign exchange contracts			Prepaid expenses and other current assets						$	29					$	23
Total derivative instruments designated as hedges									$	29					$	23
Derivative instruments not designated as hedges:
Foreign exchange contracts			Prepaid expenses and other current assets						$	1					$	—
Forward interest rate swaps			Prepaid expenses and other current assets						2						—
Forward interest rate swaps			Other long-term assets						25						—
Forward interest rate swaps			Accrued liabilities						(5)						(15)
Forward interest rate swaps			Other long-term liabilities						—						(1)
Total derivative instruments not designated as hedges									$	23					$	(16)
Total net derivative asset									$	52					$	7

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

			Gains (Losses) Recognized in Income
									Three Months Ended
			Statements of Operations Classification						April 2, 2022						April 3, 2021
Derivative instruments not designated as hedges:
Foreign exchange contracts			Foreign exchange gain						$	(1)					$	6
Forward interest rate swaps			Interest income, net						34						8
Total gains recognized in income									$	33					$	14

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 would have been unchanged as of April 2, 2022 and increased by $1 million as of December 31, 2021.

Foreign Currency Exchange Risk Management

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

The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations. Realized amounts reclassified to Net sales were $16 million of gains and $12 million of losses for the three months ended April 2, 2022 and April 3, 2021, respectively. As of April 2, 2022 and December 31, 2021, the notional amounts of the Company’s foreign exchange cash flow hedges were €602 million and €675 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined that they are highly effective.

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

			April 2, 2022						December 31, 2021
Notional balance of outstanding contracts:
British Pound/U.S. Dollar			£	17					£	13
Euro/U.S. Dollar			€	94					€	142
Euro/Czech Koruna			€	16					€	16
Singapore Dollar/U.S. Dollar			S$	20					S$	16
Mexican Peso/U.S. Dollar			Mex$	98					Mex$	64
Polish Zloty/U.S. Dollar			zł	7					zł	103
Net fair value of assets of outstanding contracts			$	1					$	—

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 9, Long-Term Debt for further details about these borrowings.

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

The Company has one active long-term forward interest rate swap agreement with a notional amount of $800 million to lock into a fixed LIBOR interest rate base, which is subject to monthly net cash settlements effective through December 2022.

The Company also previously held fixed LIBOR interest rate swaps with an $800 million total notional amount that were subject to net cash settlements effective between December 2022 and August 2024. In the first quarter of 2022, the Company terminated those interest rate swaps and entered into new interest rate swap agreements that contain a total notional amount of $800 million to lock into a fixed SOFR interest rate base and will be subject to monthly net cash settlements effective in December 2022 and ending in October 2027. There was no cash settlement, or significant impact on the Consolidated Statement of Operations, as a result of these transactions in the first quarter of 2022.

The Company’s 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 9 Long-Term Debt

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

			April 2, 2022						December 31, 2021
Term Loan A			$	875					$	888
Revolving Credit Facility			10						—
Receivables Financing Facilities			216						108
Total debt			$	1,101					$	996
Less: Debt issuance costs			(3)						(3)
Less: Unamortized discounts			(2)						(2)
Less: Current portion of debt			(183)						(69)
Total long-term debt			$	913					$	922

As of April 2, 2022, the future maturities of debt are as follows (in millions):

2022						$	164
2023						81
2024						856
Total future debt maturities						$	1,101

All borrowings as of April 2, 2022 were denominated in U.S. Dollars.

The estimated fair value of the Company’s debt approximated $1.1 billion and $1.0 billion as of April 2, 2022 and December 31, 2021, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in June 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 April 2, 2022, the Term Loan A interest rate was 1.49%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

Revolving Credit Facility

The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of April 2, 2022, 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. As of April 2, 2022, the Revolving Credit Facility had an average interest rate of 1.69%. 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.

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 April 2, 2022, the Company’s Consolidated Balance Sheets included $692 million of receivables that were pledged under the two Receivables Financing Facilities. As of April 2, 2022, $216 million had been borrowed, of which $121 million was classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable margin. As of April 2, 2022, the Receivables Financing Facilities had an average interest rate of 1.36%. Interest is paid on these borrowings on a monthly basis.

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

The Company uses interest rate swaps to manage the interest rate risk associated with its debt. See Note 8**,** Derivative Instruments for further information.

As of April 2, 2022, the Company was in compliance with all debt covenants.

Note 10 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

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

			April 2, 2022						December 31, 2021
Accrued payroll and benefits			$	80					$	96
Accrued incentive compensation			51						155
Accrued warranty			26						26
Customer reserves			44						51
Current portion of lease liabilities			33						33
Unremitted cash collections due to banks on factored accounts receivable			116						141
Short-term interest rate swaps			5						15
Accrued freight and duty			31						45
Other accrued expenses			73						77
Accrued liabilities			$	459					$	639

Warranties

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

			Three Months Ended
			April 2, 2022						April 3, 2021
Balance at the beginning of the period			$	26					$	24
Warranty expense			8						8
Warranties fulfilled			(8)						(8)
Balance at the end of the period			$	26					$	24

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.

Note 11 Income Taxes

The Company’s effective tax rate for the three months ended April 2, 2022 and April 3, 2021 was 18.0% and 17.4%, respectively. In the current period, the variance from the 21% federal statutory rate was primarily attributable to lower tax rates on foreign earnings and U.S. tax credits. In the prior period, the variance from the 21% federal statutory rate was primarily attributable to share-based compensation deductions, lower tax rates on foreign earnings and U.S. tax credits.

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

Management evaluates all jurisdictions based on historical pre-tax earnings and taxable income to determine the need for valuation allowances on a quarterly basis. Based on this analysis, a valuation allowance has been recorded for any jurisdictions 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 months ended April 2, 2022.

Uncertain Tax Positions

The Company is currently undergoing U.S. federal income tax audits for tax years 2017 and 2018. Additionally, fiscal years 2009 through 2022 remain open to examination by multiple foreign and U.S. state taxing jurisdictions. As of April 2, 2022, 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 12 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
			April 2, 2022						April 3, 2021
Basic:
Net income			$	205					$	228
Weighted-average shares outstanding			53,021,423						53,484,265
Basic earnings per share			$	3.86					$	4.26
Diluted:
Net income			$	205					$	228
Weighted-average shares outstanding			53,021,423						53,484,265
Dilutive shares			425,317						480,065
Diluted weighted-average shares outstanding			53,446,740						53,964,330
Diluted earnings per share			$	3.83					$	4.22

Anti-dilutive share-based compensation awards are excluded from diluted earnings per share calculations. There were 40,771 and 570 shares that were anti-dilutive for the three months ended April 2, 2022 and April 3, 2021, respectively.

Note 13 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 8, 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 three months ended April 2, 2022 and April 3, 2021 are as follows (in millions):

						Unrealized gain (loss) on sales hedging												Foreign currency translation adjustments						Total
Balance at December 31, 2020						$	(28)											$	(41)					$	(69)
Other comprehensive income (loss) before reclassifications						27												(3)						24
Amounts reclassified from AOCI(1)						12												—						12
Tax effect						(7)												—						(7)
Other comprehensive income (loss), net of tax						32												(3)						29
Balance at April 3, 2021						$	4											$	(44)					$	(40)
Balance at December 31, 2021						$	18											$	(47)					$	(29)
Other comprehensive income (loss) before reclassifications						22												(5)						17
Amounts reclassified from AOCI(1)						(16)												—						(16)
Tax effect						(1)												—						(1)
Other comprehensive income (loss), net of tax						5												(5)						—
Balance at April 2, 2022						$	23											$	(52)					$	(29)

(1) See Note 8, Derivative Instruments regarding timing of reclassifications to operating results.

Note 14 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 financing activities on the Consolidated Statements of Cash Flows.

The Company currently has two active Receivables Factoring arrangements. One arrangement allows for the factoring of up to $25 million of uncollected receivables originated from the Europe, Middle East, and Africa (“EMEA”) region. The second arrangement allows for the factoring of up to €150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions. With respect to the second arrangement, the Company 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 $16 million and $12 million as of April 2, 2022 and December 31, 2021, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

During the three months ended April 2, 2022 and April 3, 2021, the Company received cash proceeds of $408 million and $413 million, respectively, from the sales of accounts receivables under its factoring arrangements. As of April 2, 2022 and December 31, 2021, there were a total of $68 million and $24 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had $116 million and $141 million of obligations that were not yet remitted to banks as of April 2, 2022 and December 31, 2021, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash used in financing activities on the Consolidated Statements of Cash Flows.

Fees incurred in connection with these arrangements were not significant.

Note 15 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, and exit and restructuring costs. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Effective January 1, 2022, the location solutions offering, which provides a range of RTLS and services that generate on-demand information about the physical location and status of assets, equipment, and people, moved from our AIT segment into our EVM segment contemporaneous with a change in our organizational structure and management of the business. We have reported our results reflecting this change, including historical periods, on a comparable basis. This change did not have an impact to the Consolidated Financial Statements.

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

			Three Months Ended
			April 2, 2022						April 3, 2021
Net sales:
AIT			$	394					$	429
EVM			1,038						921
Total segment Net sales			1,432						1,350
Corporate, eliminations(1)			—						(3)
Total Net sales			$	1,432					$	1,347
Operating income:
AIT(2)			$	60					$	111
EVM(2)			189						191
Total segment operating income			249						302
Corporate, eliminations(1)			(37)						(30)
Total Operating income			$	212					$	272

(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, and exit and restructuring 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 tables. Net sales amounts are attributed to geographic area based on customer location. We manage our business based on regions rather than by individual countries.

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

			Three Months Ended
			April 2, 2022						April 3, 2021
North America			$	699					$	673
EMEA			500						490
Asia-Pacific			149						120
Latin America			84						64
Total Net sales			$	1,432					$	1,347