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Subsequent Events
9 Months Ended
Sep. 27, 2014
Subsequent Events [Abstract]  
Subsequent Events

Note 18 – Subsequent Events

Private Offering & New Credit Facilities

On October 15, 2014, Zebra completed its previously announced private offering of $1.05 billion aggregate principal amount of 7.25% Senior Notes due 2022 (the “Notes”). The Notes are governed by the terms of an indenture, dated as of October 15, 2014, by and among Zebra and U.S. Bank National Association, as trustee. Interest on the Notes will be payable in cash on April 15 and October 15 of each year, commencing on April 15, 2015.

On October 27, 2014, Zebra entered into a new credit agreement which provides for a term loan of $2.2 billion (the “Term Loan”) and a revolving credit facility of $250.0 million (the “Revolving Credit Facility”). Zebra is required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the Term Loan, with the balance due on the seventh anniversary of the closing date of the Acquisition (see below for further description of this acquisition). The Term Loan accrues interest at a variable rate of LIBOR (subject to a floor of 0.75% per annum) plus a margin of 4.0%.

Certain domestic subsidiaries of Zebra (the “Guarantors”) guarantee the Notes, the Term Loan and the Revolving Credit Facility on a senior unsecured basis beginning on the date of close of the acquisition of the Enterprise Business (see below for further description of this acquisition).

The indenture governing the Notes and the agreements governing Zebra’s other indebtedness impose certain operating and financial restrictions on our activities. Zebra will be required, during certain periods where outstanding revolving loans under the Revolving Credit Facility exceed a certain threshold, to maintain a total secured net leverage ratio calculated pursuant to a financial maintenance covenant under the senior credit agreement governing the Revolving Credit Facilities.

Business Combination

On October 27, 2014, Zebra completed its acquisition of the Enterprise Business under the terms of the previously announced Acquisition Agreements with Motorola Solutions Inc. (“MSI”) for a preliminary purchase price of $3.45 billion. This acquisition will transform Zebra into a leading provider of solutions that deliver greater intelligence and insights into our customers’ enterprises and extending value chains. The Enterprise Business will generate significant value for our shareholders by driving further product innovation and deeper engagement with our customers and partners. It positions Zebra as a leading technology innovator, with the accelerating convergence of mobility, data analytics and cloud computing. This transaction will enable Zebra to further sharpen its strategic focus on providing mission-critical solutions for its customers. On April 14, 2014, Zebra entered into the Acquisition Agreements with MSI pursuant to which we agreed to acquire the Enterprise Business. Certain assets historically associated with the Enterprise Business have been retained by MSI, including MSI’s iDEN infrastructure business, and other assets and certain liabilities as specified by the definitive agreement. The acquisition is structured as a combination of stock and asset sales and a merger of certain US entities, resulting in 100% ownership of the Enterprise Business.

At the closing of the Acquisition, the Term Loan was drawn in full and the Revolving Credit Facility remained undrawn. The proceeds from the Notes and Term Loan together with cash on hand were used to finance the Acquisition and related fees and expenses.

The final determination of the purchase price allocation is expected to be completed as soon as practicable after consummation of the Acquisition. Due to the limited time between the acquisition date and the filing of this Quarterly Report on Form 10-Q, it is not practicable for Zebra to disclose: (i) the allocation of purchase price to assets acquired and liabilities assumed as of the date of close, and (ii) pro forma revenues and earnings of the combined company for the period ended September 27, 2014.

Tax Event

During 2012, Zebra established a foreign holding company and restructured the structure of its foreign affiliates. The new structure introduced leverage which favorably impacted Zebra’s effective tax rate and the Company recorded a benefit of $5,900,000 during the first two quarters of 2014. However, due to the change in UK tax law, the Company has recorded a charge of $5,900,000 in the third quarter of 2014. As a result of the acquisition transaction of the Enterprise business of Motorola Solutions, Inc. closing on October 27, 2014, the Company will reverse this income tax charge in the fourth quarter of 2014. In addition, since the company did not record a benefit from interest expense in the third quarter, the related benefit of $2,600,000 will be recorded in the fourth quarter in addition to the benefit from fourth quarter interest expense.