Business Acquisition

On August 14, 2018, the Company acquired all outstanding equity interests of Xplore Technologies Corporation (“Xplore”). The Xplore business designs, integrates, and markets rugged tablets that are primarily used by industrial, government, and field service organizations. The acquisition of Xplore was intended to expand the Company’s portfolio of mobile computing devices to serve a wider range of customers.

The Xplore acquisition was accounted for under the acquisition method of accounting for business combinations. In connection with this acquisition, the Company paid $87 million in cash during the third quarter of 2018, which included, $72 million for the net assets acquired, a $9 million payment of Xplore debt as well as $6 million of other Xplore transaction-related obligations. Additionally, we incurred $6 million of cash acquisition-related costs during the third quarter (primarily third-party transaction and advisory fees), which are reflected as Acquisition and integration costs on the Consolidated Statements of Operations.

The Company utilized estimated fair values as of August 14, 2018 to allocate the total consideration paid to the net tangible and intangible assets acquired and liabilities assumed. The fair value of these net assets acquired was based on a number of estimates and assumptions as well as customary valuation procedures and techniques. While we believe these estimates provide a reasonable basis to record the net assets acquired, the purchase price allocation is considered preliminary and subject to adjustment during the measurement period, which is up to one year from the acquisition date of August 14, 2018. The primary fair value estimates considered preliminary are identifiable intangible assets, inventory, and income tax-related items.

The preliminary opening balance sheet of Xplore was included in the Company’s Consolidated Balance Sheet and operating results beginning August 14, 2018. The Company has not included unaudited pro forma results, as if Xplore had been acquired as of January 1, 2018, as it would not yield materially different results.

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



Accounts receivable	$	10
Inventory	23
Identifiable intangible assets	32
Other assets acquired	4
Debt	(9		)
Accounts payable	(8		)
Deferred revenues	(7		)
Other liabilities assumed	(6		)
Net Assets Acquired	$	39
Goodwill on acquisition	33
Total consideration	$	72

The $33 million of goodwill will be non-deductible for tax purposes. The goodwill principally relates to the planned expansion of the Xplore product offerings into current and new markets. This goodwill has been allocated to the EVM segment.

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



	Fair Value (in millions)		Life (in years)
Customer-related assets	$	16	9
Technology-based assets	15		7
Trademarks	1		3
Total identifiable intangible assets	$	32