Company Quick10K Filing
Zebra Technologies
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 55 $10,932
10-Q 2019-10-30 Quarter: 2019-09-28
10-Q 2019-07-30 Quarter: 2019-06-29
10-Q 2019-04-30 Quarter: 2019-03-30
10-K 2019-02-14 Annual: 2018-12-31
10-Q 2018-11-06 Quarter: 2018-09-29
10-Q 2018-08-07 Quarter: 2018-06-30
10-Q 2018-05-08 Quarter: 2018-03-31
10-K 2018-02-22 Annual: 2017-12-31
10-Q 2017-11-07 Quarter: 2017-09-30
10-Q 2017-08-08 Quarter: 2017-07-01
10-Q 2017-05-09 Quarter: 2017-04-01
10-K 2017-02-27 Annual: 2016-12-31
10-Q 2016-11-15 Quarter: 2016-10-01
10-Q 2016-08-09 Quarter: 2016-07-02
10-Q 2016-05-10 Quarter: 2016-04-02
10-K 2016-02-29 Annual: 2015-12-31
10-Q 2015-11-12 Quarter: 2015-10-03
10-Q 2015-08-13 Quarter: 2015-07-04
10-Q 2015-05-14 Quarter: 2015-04-04
10-K 2015-03-17 Annual: 2014-12-31
10-Q 2014-11-05 Quarter: 2014-09-27
10-Q 2014-08-05 Quarter: 2014-06-28
10-Q 2014-05-06 Quarter: 2014-03-29
10-K 2014-02-20 Annual: 2013-12-31
10-Q 2013-11-05 Quarter: 2013-09-28
10-Q 2013-08-06 Quarter: 2013-06-29
10-Q 2013-05-02 Quarter: 2013-03-30
10-K 2013-02-21 Annual: 2012-12-31
10-Q 2012-11-07 Quarter: 2012-09-29
10-Q 2012-08-01 Quarter: 2012-06-30
10-Q 2012-05-02 Quarter: 2012-03-31
10-Q 2011-11-08 Quarter: 2011-10-01
10-Q 2011-08-05 Quarter: 2011-07-02
10-Q 2011-05-05 Quarter: 2011-04-02
10-K 2011-02-24 Annual: 2010-12-31
10-Q 2010-11-05 Quarter: 2010-10-02
10-Q 2010-08-05 Quarter: 2010-07-03
10-Q 2010-05-06 Quarter: 2010-04-03
10-K 2010-02-23 Annual: 2009-12-31
8-K 2019-11-01 Officers
8-K 2019-10-29 Earnings, Exhibits
8-K 2019-09-17 Enter Agreement, Off-BS Arrangement
8-K 2019-08-09 Enter Agreement
8-K 2019-07-30 Earnings, Other Events, Exhibits
8-K 2019-05-16 Shareholder Vote
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-02-14 Earnings, Exhibits
8-K 2018-12-20 Enter Agreement, Off-BS Arrangement
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-05-31 Enter Agreement, Other Events, Exhibits
8-K 2018-05-17 Officers, Shareholder Vote
8-K 2018-05-08 Earnings, Exhibits
8-K 2018-02-22 Earnings, Exhibits
ZBRA 2019-09-28
Part I - Financial Information
Item 1. Consolidated Financial Statements
Note 1 Description of Business and Basis of Presentation
Note 2 Significant Accounting Policies
Note 3 Revenues
Note 4 Inventories
Note 5 Business Acquisitions
Note 6 Fair Value Measurements
Note 7 Derivative Instruments
Note 8 Long-Term Debt
Note 9 Leases
Note 10 Commitments and Contingencies
Note 11 Income Taxes
Note 12 Earnings per Share
Note 13 Accumulated Other Comprehensive Income (Loss)
Note 14 Accounts Receivable Factoring
Note 15 Segment Information & Geographic Data
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 exhibit101amendmentno2.htm
EX-10.2 exhibit102conformedcre.htm
EX-10.3 exhibit103nonrecourser.htm
EX-31.1 a311exhibit-signedq320.htm
EX-31.2 a312exhibit-signedq320.htm
EX-32.1 a321exhibit-signedq320.htm
EX-32.2 a322exhibit-signedq320.htm

Zebra Technologies Earnings 2019-09-28

ZBRA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
TRMB 11,115 5,876 3,051 2,452 1,761 317 441 12,658 72% 28.7 5%
ZBRA 10,932 4,701 3,142 4,392 2,065 481 838 12,629 47% 15.1 10%
LII 10,781 2,340 2,558 3,763 1,060 364 582 11,901 28% 20.5 16%
TDY 10,010 4,200 1,727 3,001 1,168 361 556 10,695 39% 19.2 9%
SNA 9,188 5,545 2,237 3,970 0 714 1,059 9,971 0% 9.4 13%
NDSN 8,489 3,492 1,945 2,178 1,181 321 540 9,713 54% 18.0 9%
CGNX 8,102 1,350 158 798 589 208 246 8,013 74% 32.6 15%
NSYS 7,976 65 46 114 12 -2 1 7,979 10% 6,896.7 -3%
ST 7,948 6,852 4,235 3,476 1,218 562 753 10,453 35% 13.9 8%
MIDD 7,407 4,887 3,088 2,918 1,086 329 619 9,321 37% 15.0 7%

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 000-19406
Zebra Technologies Corporation
(Exact name of registrant as specified in its charter)
Delaware
 
36-2675536
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3 Overlook Point, Lincolnshire, IL 60069
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (847634-6700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of exchange on which registered
Class A Common Stock, par value $.01 per share
 
ZBRA
 
The NASDAQ Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
 
Non-accelerated filer
Smaller reporting company
 
 
 
Emerging growth company

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


Table of Contents

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes     No  
As of October 22, 2019, there were 53,921,478 shares of Class A Common Stock, $.01 par value, outstanding.


Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
QUARTER ENDED SEPTEMBER 28, 2019
INDEX
 
 
 
PAGE
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
 
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

3

Table of Contents

PART I - FINANCIAL INFORMATION
 
Item 1.
Consolidated Financial Statements
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
 
September 28,
2019
 
December 31,
2018
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
33

 
$
44

Accounts receivable, net of allowances for doubtful accounts of $2 million and $3 million as of September 28, 2019 and December 31, 2018, respectively
588

 
520

Inventories, net
468

 
520

Income tax receivable
76

 
24

Prepaid expenses and other current assets
66

 
54

Total Current assets
1,231

 
1,162

Property, plant and equipment, net
249

 
249

Right-of-use lease asset
117

 

Goodwill
2,618

 
2,495

Other intangibles, net
290

 
232

Long-term deferred income taxes
83

 
114

Other long-term assets
120

 
87

Total Assets
$
4,708

 
$
4,339

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
205

 
$
157

Accounts payable
502

 
552

Accrued liabilities
314

 
322

Deferred revenue
230

 
210

Income taxes payable
55

 
60

Total Current liabilities
1,306

 
1,301

Long-term debt
1,314

 
1,434

Long-term lease liabilities
105

 

Long-term deferred income taxes
1

 
8

Long-term deferred revenue
202

 
172

Other long-term liabilities
86

 
89

Total Liabilities
3,014

 
3,004

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
324

 
294

Treasury stock at cost, 18,104,739 and 18,280,673 shares as of September 28, 2019 and December 31, 2018, respectively
(663
)
 
(613
)
Retained earnings
2,063

 
1,688

Accumulated other comprehensive loss
(31
)
 
(35
)
Total Stockholders’ Equity
1,694

 
1,335

Total Liabilities and Stockholders’ Equity
$
4,708

 
$
4,339

See accompanying Notes to Consolidated Financial Statements.

4

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net sales:
 
 
 
 
 
 
 
Tangible products
$
981

 
$
959

 
$
2,868

 
$
2,687

Services and software
149

 
133

 
425

 
394

Total Net sales
1,130

 
1,092

 
3,293

 
3,081

Cost of sales:
 
 
 
 
 
 
 
Tangible products
497

 
495

 
1,456

 
1,368

Services and software
98

 
92

 
281

 
271

Total Cost of sales
595

 
587

 
1,737

 
1,639

Gross profit
535

 
505

 
1,556

 
1,442

Operating expenses:
 
 
 
 
 
 
 
Selling and marketing
124

 
120

 
373

 
361

Research and development
110

 
113

 
329

 
323

General and administrative
78

 
75

 
244

 
239

Amortization of intangible assets
26

 
25

 
84

 
71

Acquisition and integration costs
12

 
6

 
20

 
8

Exit and restructuring costs

 
4

 
2

 
9

Total Operating expenses
350

 
343

 
1,052

 
1,011

Operating income
185

 
162

 
504

 
431

Other expenses:
 
 
 
 
 
 
 
Foreign exchange gain (loss)
2

 
(1
)
 
(2
)
 
(5
)
Interest expense, net
(28
)
 
(18
)
 
(85
)
 
(52
)
Other, net

 

 
2

 
2

Total Other expenses, net
(26
)
 
(19
)
 
(85
)
 
(55
)
Income before income tax
159

 
143

 
419

 
376

Income tax expense
23

 
16

 
44

 
70

Net income
$
136

 
$
127

 
$
375

 
$
306

Basic earnings per share
$
2.52

 
$
2.37

 
$
6.95

 
$
5.72

Diluted earnings per share
$
2.50

 
$
2.34

 
$
6.87

 
$
5.64

See accompanying Notes to Consolidated Financial Statements.

5

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net income
$
136

 
$
127

 
$
375

 
$
306

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Changes in unrealized gains and losses on anticipated sales hedging transactions
15

 

 
7

 
22

Changes in unrealized gains and losses on forward interest rate swap hedging transactions
(1
)
 
1

 

 
8

Foreign currency translation adjustment
(5
)
 

 
(3
)
 
(7
)
Comprehensive income
$
145

 
$
128

 
$
379

 
$
329

See accompanying Notes to Consolidated Financial Statements.

6

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except share data)
(Unaudited)
 
 
Three Months Ended September 28, 2019
 
 
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 June 29, 2019
 
54,107,829

 
$
1

 
$
314

 
$
(643
)
 
$
1,927

 
$
(40
)
 
$
1,559

Cumulative effect of change in accounting principle
 

 

 

 

 

 

 

Issuance of treasury shares upon exercise of stock options, purchases under stock purchase plan and grants of restricted stock awards, net of cancellations
 
44,215

 

 
(2
)
 
1

 

 

 
(1
)
Shares withheld related to net share settlement
 
(3,864
)
 

 

 
(1
)
 

 

 
(1
)
Share-based compensation
 

 

 
12

 

 

 

 
12

Repurchase of common stock
 
(101,062
)
 

 

 
(20
)
 

 

 
(20
)
Net income
 

 

 

 

 
136

 

 
136

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

 

 

 

 

 
15

 
15

Changes in unrealized gains and losses on forward interest rate swaps hedging transactions (net of income taxes)
 

 

 

 

 

 
(1
)
 
(1
)
Foreign currency translation adjustment
 

 

 

 

 

 
(5
)
 
(5
)
Balance at September 28, 2019
 
54,047,118

 
$
1

 
$
324

 
$
(663
)
 
$
2,063

 
$
(31
)
 
$
1,694

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 28, 2019
 
 
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, 2018
 
53,871,184

 
$
1

 
$
294

 
$
(613
)
 
$
1,688

 
$
(35
)
 
$
1,335

Cumulative effect of change in accounting principle
 

 

 

 

 

 

 

Issuance of treasury shares upon exercise of stock options, purchases under stock purchase plan and grants of restricted stock awards, net of cancellations
 
499,664

 

 
(6
)
 
13

 

 

 
7

Shares withheld related to net share settlement
 
(222,668
)
 

 

 
(43
)
 

 

 
(43
)
Share-based compensation
 

 

 
36

 

 

 

 
36

Repurchase of common stock
 
(101,062
)
 

 

 
(20
)
 

 

 
(20
)
Net income
 

 

 

 

 
375

 

 
375

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

 

 

 

 

 
7

 
7

Changes in unrealized gains and losses on forward interest rate swaps hedging transactions (net of income taxes)
 

 

 

 

 

 

 

Foreign currency translation adjustment
 

 

 

 

 

 
(3
)
 
(3
)
Balance at September 28, 2019
 
54,047,118

 
$
1

 
$
324

 
$
(663
)
 
$
2,063

 
$
(31
)
 
$
1,694












7

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except share data)
(Unaudited)

 
 
Three Months Ended September 29, 2018
 
 
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 June 30, 2018
 
53,691,978

 
$
1

 
$
273

 
$
(617
)
 
$
1,446

 
$
(30
)
 
$
1,073

Cumulative effect of change in accounting principle
 

 

 

 

 

 

 

Issuance of treasury shares upon exercise of stock options, purchases under stock purchase plan and grants of restricted stock awards, net of cancellations
 
112,778

 

 
(1
)
 
3

 

 

 
2

Shares withheld related to net share settlement
 
(2,114
)
 

 

 

 

 

 

Share-based compensation
 

 

 
10

 

 

 

 
10

Repurchase of common stock
 

 

 

 

 

 

 

Net income
 

 

 

 

 
127

 

 
127

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

 

 

 

 

 

 

Changes in unrealized gains and losses on forward interest rate swaps hedging transactions (net of income taxes)
 

 

 

 

 

 
1

 
1

Foreign currency translation adjustment
 

 

 

 

 

 

 

Balance at September 29, 2018
 
53,802,642

 
$
1

 
$
282

 
$
(614
)
 
$
1,573

 
$
(29
)
 
$
1,213

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 29, 2018
 
 
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, 2017
 
53,236,095

 
$
1

 
$
257

 
$
(620
)
 
$
1,248

 
$
(52
)
 
$
834

Cumulative effect of change in accounting principle
 

 

 

 

 
19

 

 
19

Issuance of treasury shares upon exercise of stock options, purchases under stock purchase plan and grants of restricted stock awards, net of cancellations
 
634,363

 

 
(9
)
 
16

 

 

 
7

Shares withheld related to net share settlement
 
(67,816
)
 

 

 
(10
)
 

 

 
(10
)
Share-based compensation
 

 

 
34

 

 

 

 
34

Repurchase of common stock
 

 

 

 

 

 

 

Net income
 

 

 

 

 
306

 

 
306

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

 

 

 

 

 
22

 
22

Changes in unrealized gains and losses on forward interest rate swaps hedging transactions (net of income taxes)
 

 

 

 

 

 
8

 
8

Foreign currency translation adjustment
 

 

 

 

 

 
(7
)
 
(7
)
Balance at September 29, 2018
 
53,802,642

 
$
1

 
$
282

 
$
(614
)
 
$
1,573

 
$
(29
)
 
$
1,213


See accompanying Notes to Consolidated Financial Statements.


8

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Nine Months Ended
 
September 28,
2019
 
September 29,
2018
Cash flows from operating activities:
 
 
 
Net income
$
375

 
$
306

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
139

 
131

Amortization of debt issuance costs and discounts
6

 
12

Share-based compensation
36

 
34

Deferred income taxes

 
17

Unrealized loss (gain) on forward interest rate swaps
28

 
(24
)
Other, net
(4
)
 
3

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(73
)
 
(93
)
Inventories, net
65

 
(16
)
Other assets
(20
)
 
(10
)
Accounts payable
(51
)
 
69

Accrued liabilities
(62
)
 
(5
)
Deferred revenue
43

 
28

Income taxes
(58
)
 
2

Other operating activities
(4
)
 
6

Net cash provided by operating activities
420

 
460

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(44
)
 
(48
)
Acquisition of businesses, net of cash acquired
(255
)
 
(72
)
Proceeds from sale of long-term investments
10

 
2

Purchases of long-term investments
(21
)
 
(2
)
Net cash used in investing activities
(310
)
 
(120
)
Cash flows from financing activities:
 
 
 
Payment of debt issuance costs and discounts
(5
)
 
(2
)
Payments of long-term debt
(661
)
 
(1,307
)
Proceeds from issuance of long-term debt
593

 
961

Payments of debt extinguishment costs
(1
)
 
(1
)
Payments for repurchases of common stock
(20
)
 

Payments of taxes related to net settlements of equity awards, net of proceeds from exercise of stock options and stock purchase plan purchases
(36
)
 
(2
)
Other financing activities
10

 

Net cash used in financing activities
(120
)
 
(351
)
Effect of exchange rate changes on cash
(1
)
 
(6
)
Net decrease in cash and cash equivalents
(11
)
 
(17
)
Cash and cash equivalents at beginning of period
44

 
62

Cash and cash equivalents at end of period
$
33

 
$
45

Supplemental disclosures of cash flow information:
 
 
 
Income taxes paid
$
102

 
$
46

Interest paid
$
49

 
$
73

See accompanying Notes to Consolidated Financial Statements.

9

Table of Contents

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Description of Business and Basis of Presentation

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader providing innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry. We design, manufacture, and sell a broad range of products that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, and managed services, including cloud-based subscriptions. End-users of our products and services include those in retail and e-commerce, transportation and logistics, manufacturing, healthcare, hospitality, warehouse and distribution, energy and utilities, and education industries around the world. We provide our products 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 (“SEC”) 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 consolidated 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, 2018.

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 September 28, 2019, the Consolidated Statements of Operations, Comprehensive Income, and Stockholders’ Equity for the three and nine months ended September 28, 2019 and September 29, 2018, and the Consolidated Statements of Cash Flows for the nine months ended September 28, 2019 and September 29, 2018. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, 2019.

Note 2 Significant Accounting Policies

Recently Adopted Accounting Pronouncements
On January 1, 2019, the Company adopted Accounting Standards Codification 842, Leases (“ASC 842”), which increases the transparency and comparability of organizations by recognizing Right-of-Use (“ROU”) assets and lease liabilities on the Consolidated Balance Sheets and disclosing key quantitative and qualitative information about leasing arrangements. The principal difference from previous guidance is that the ROU assets and lease liabilities arising from operating leases were not previously recognized on the Consolidated Balance Sheet. Results for reporting periods beginning after January 1, 2019 are reported under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 840, Leases (“ASC 840”). In transition, we elected a number of practical expedients, including the election to not reassess existing or expired contracts to determine if they contain a lease or if the lease classification would differ, as well as the election to not separate lease and non-lease components for arrangements where the Company is a lessee.
The impact of the adoption of ASC 842 to the Company’s Consolidated Balance Sheet as of January 1, 2019 was as follows (in millions):
 
As Reported December 31, 2018
 
Adjustment
 
As Adjusted January 1, 2019
Assets:
 
 
 
 
 
Prepaid expenses and other current assets(1)
$
54

 
$
(1
)
 
$
53

Right-of-use assets

 
110

 
110

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Accrued liabilities(2)
322

 
28

 
350

Long-term lease liabilities

 
103

 
103

Other long-term liabilities(1)
89

 
(22
)
 
67


(1) Reflects an adjustment related to prepaid and accrued rent balances, which are included in the measurement of ROU assets.
(2) Reflects the current portion of the lease liabilities.

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As a result of the transition, there was no impact to the Company’s Consolidated Statements of Operations or Cash Flows for the nine months ended September 28, 2019, compared to what would have been reported in accordance with ASC 840.

The Company recognizes ROU assets and lease liabilities for its lease commitments with terms greater than one year. Contractual options to extend or terminate lease agreements are reflected in the lease term when they are reasonably certain to be exercised.

Subsequent to transition, the initial measurements of new ROU assets and lease liabilities are based on the present value of future lease payments over the lease term as of the commencement date. As the Company’s leases normally do not provide an implicit interest rate, we apply the Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments. Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, transaction currency of the lease, and the Company’s credit risk relative to risk-free market rates.

The ROU assets also include any initial direct costs incurred and exclude lease incentives. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

All leases of the Company are classified as operating leases, with lease expense being recognized on a straight-line basis.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU clarifies existing guidance related to implementation costs incurred in cloud computing arrangements, including the recognition, subsequent measurement, and financial statement presentation of such costs. The standard was early adopted prospectively by the Company during the second quarter of 2019 and did not have a material impact to the Company’s consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. It replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. With respect to the Company’s financial instruments, a cumulative effect transition approach will be applied. The standard will be effective for the Company in the first quarter of 2020. Management has assessed the impact of adoption of the new standard and determined, based on current operations, that there will be no material impacts to the Company's consolidated financial statements or disclosures.

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 the entity expects to receive in exchange for those goods or services.

Disaggregation of Revenue
The following table presents our Net sales disaggregated by product category for each of our segments, Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”), for the three and nine months ended September 28, 2019 and September 29, 2018 (in millions):

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Three Months Ended
 
September 28, 2019
 
September 29, 2018
Segment
Tangible Products
 
Services and Software
 
Total
 
Tangible Products
 
Services and Software
 
Total
AIT
$
337

 
$
36

 
$
373

 
$
325

 
$
28

 
$
353

EVM
644

 
113

 
757

 
634

 
105

 
739

Total
$
981

 
$
149

 
$
1,130

 
$
959

 
$
133

 
$
1,092

 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
September 28, 2019
 
September 29, 2018
Segment
Tangible Products
 
Services and Software
 
Total
 
Tangible Products
 
Services and Software
 
Total
AIT
$
1,001

 
$
99

 
$
1,100

 
$
960

 
$
96

 
$
1,056

EVM
1,867

 
326

 
2,193

 
1,727

 
298

 
2,025

Total
$
2,868

 
$
425

 
$
3,293

 
$
2,687

 
$
394

 
$
3,081


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

We recognize revenue arising from performance obligations outlined in contracts with our customers that are satisfied at a point in time and over time. Substantially all revenue for tangible products is recognized at a point in time, whereby revenue for services and software is predominantly recognized over time.

Performance Obligations
The Company’s remaining obligations that are greater than one year in duration relate primarily to repair and support services. The aggregated transaction price allocated to remaining performance obligations for these types of service arrangements, inclusive of deferred revenue, was $665 million and $489 million as of September 28, 2019 and December 31, 2018, respectively. These remaining performance obligations as of September 28, 2019 and December 31, 2018 are expected to be recognized over a period of approximately two years.

Contract Balances
Progress on satisfying performance obligations under contracts with customers is recorded on the Consolidated Balance Sheets in Accounts receivable, net and Prepaid expenses and other current assets for billed and unbilled revenues, respectively. The contract asset balances for unbilled revenues were $9 million and $5 million as of September 28, 2019 and December 31, 2018, respectively. These contract assets result from timing differences between the billing and delivery schedules of products, services and software, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations.

Deferred revenue on the Consolidated Balance Sheets consist of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were $432 million and $382 million as of September 28, 2019 and December 31, 2018, respectively. During the three and nine months ended September 28, 2019 the Company recognized $41 million and $168 million in revenue, respectively, which was previously included in the beginning balance of deferred revenue as of December 31, 2018. During the three and nine months ended September 29, 2018 the Company recognized $32 million and $152 million in revenue, respectively, which was previously included in the beginning balance of deferred revenue as of December 31, 2017.

Note 4 Inventories

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

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September 28,
2019
 
December 31,
2018
Raw material
$
138

 
$
125

Work in process
4

 
3

Finished goods
326

 
392

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