Business Acquisition and Divestiture

Acquisition

On August 14, 2018, the Company acquired all outstanding equity interests of Xplore Technologies Corporation (“Xplore”). The Xplore business designs, integrates, markets and sells rugged tablets that are primarily used by industrial, government, and field service organizations. The acquisition of Xplore is 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 $8 million of cash acquisition-related costs during 2018 (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, including relief from royalty and excess earnings methodologies. During the fourth quarter of 2018, the Company recorded measurement period adjustments relating to facts and circumstances existing as of the acquisition date. The primary measurement period adjustments were $1 million increase in other liabilities assumed, $1 million decrease in inventory and $2 million increase in goodwill. 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 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 proforma 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, reflecting interim measurement period adjustments, to assets acquired and liabilities assumed was as follows (in millions):



Accounts receivable	$	10
Inventory	22
Identifiable intangible assets	32
Other assets acquired	4
Debt	(9		)
Accounts payable	(8		)
Deferred revenues	(7		)
Other liabilities assumed	(7		)
Net Assets Acquired	$	37
Goodwill on acquisition	35
Total consideration	$	72

The $35 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 relationships	$	16	9
Current technology	15		7
Trade names	1		3
Total identifiable intangible assets	$	32

Divestiture

On September 13, 2016, the Company entered into an Asset Purchase Agreement with Extreme Networks, Inc. to dispose of the Company’s wireless LAN (“WLAN”) business. On October 28, 2016, the Company completed the disposition of WLAN and recorded net proceeds of $39 million. In 2017, the Company and Extreme Networks, Inc. finalized the net working capital amounts for the Divestiture Group. The finalized amount did not differ materially from the original estimate.

The Company incurred a non-cash pre-tax charge related to the disposal group during the third quarter of 2016. This charge, which totaled $62 million, consisted of impairments of goodwill for $32 million and other intangibles for $30 million and is shown separately on the Consolidated Statements of Operations for the year ended December 31, 2016.

WLAN operating results are reported in the EVM segment through the closing date of the WLAN divestiture of October 28, 2016. Within the fiscal year ended December 31, 2016 Consolidated Statement of Operations, the Company generated revenue and gross profit from these assets of $106 million and $47 million, respectively.