Intangible Assets and Goodwill

The Company accounts for acquisitions using purchase accounting with the results of operations for each acquiree included in the Company's condensed consolidated financial statements for the period subsequent to the date of acquisition.

Recent Acquisitions

On March 11, 2019, the Company announced that it acquired Avtec, Inc. ("Avtec"), a provider of dispatch communications for U.S. public safety and commercial customers for a purchase price of $136 million in cash, net of cash acquired. This acquisition expands the Company's commercial portfolio with new capabilities, allowing it to offer an enhanced platform for customers to communicate, coordinate resources, and secure their facilities. The business will be a part of both the Products and Systems Integration and Services and Software segments. The Company recognized $73 million of identifiable intangible assets, $59 million of goodwill, and $4 million of net assets. The goodwill is deductible for tax purposes. The identifiable intangible assets were classified as $49 million of completed technology and $24 million of customer relationship intangibles and will be amortized over a period of 15 years. The purchase accounting is not yet complete and as such the final allocation between deferred income tax accounts, intangible assets, goodwill, and net assets may be subject to change based on the finalization of assumptions and settlement of working capital considerations.

On January 7, 2019, the Company announced that it acquired VaaS International Holdings ("VaaS"), a company that is a global provider of data and image analytics for vehicle location for $445 million, inclusive of share-based compensation withheld at a fair value of $38 million that will be expensed over an average service period of one year. The acquisition was settled with $231 million of cash, net of cash acquired, and 1.4 million of shares issued at a fair value of $160 million for a purchase price of $391 million to be utilized in the purchase price allocation. This acquisition expands the Company's command center software portfolio under the Services and Software segment. The Company recognized $271 million of goodwill, $141 million of identifiable intangible assets and $21 million of net liabilities. The goodwill is not deductible for tax purposes. The identifiable intangible assets were classified as $99 million of completed technology that will be amortized over a period of ten years and $42 million of customer relationship intangibles that will be amortized over a period of 15 years. The purchase accounting is not yet complete and as such the final allocation between deferred income tax accounts, goodwill, intangible assets, and net liabilities may be subject to change based on the finalization of assumptions and settlement of working capital considerations.

The pro forma effects of these acquisitions are not significant.

Avigilon Corporation

On March 28, 2018, the Company completed the acquisition of Avigilon Corporation, a provider of advanced security and video solutions including video analytics, network video management hardware and software, video cameras and access control solutions. The purchase price of $974 million, consisted of cash payments of $980 million for outstanding common stock, restricted stock units and employee held stock options, net of cash acquired of $107 million, debt assumed of $75 million and transaction costs of $26 million. Prior to the end of the first quarter of 2018, $35 million of the assumed debt was repaid with the remaining $40 million repaid during the second quarter of 2018.

The acquisition of Avigilon has been accounted for at fair value as of the acquisition date, based on the fair value of the total consideration transferred which has been attributed to all identifiable assets acquired and liabilities assumed and measured at fair value. The purchase accounting has been completed as of March 30, 2019. The following table summarizes fair values of assets acquired and liabilities assumed as of the March 28, 2018 acquisition date:



Accounts receivable, net	$	67
Inventory	93
Other current assets	18
Property, plant and equipment, net	33
Deferred income taxes	4
Accounts payable	(21		)
Accrued liabilities	(28		)
Deferred income tax liabilities	(124		)
Goodwill	434
Intangible assets	498
Total consideration	$	974

Acquired intangible assets consist of $110 million of customer relationships, $380 million of developed technology and $8 million of trade names and will have useful lives of two to twenty years. The fair values of all intangible assets were estimated using the income approach. Customer relationships and developed technology were valued under the excess earnings method which assumes that the value of an intangible asset is equal to the present value of the incremental after-tax cash flows attributable specifically to the intangible asset. Trade names were valued under the relief from royalty method, which assumes value to the extent that the acquired company is relieved of the obligation to pay royalties for the benefits received from them.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. The goodwill is not deductible for tax purposes.

The pro forma effect of this acquisition was not significant.

Other Acquisitions

On March 7, 2018, the Company completed the acquisition of Plant Holdings, Inc., the parent company of Airbus DS Communications for a purchase price of $237 million in cash, net cash acquired. This acquisition expanded the Company's software portfolio in the command center with additional solutions for Next Generation 9-1-1. The Company recognized $160 million of goodwill, $80 million of identifiable intangible assets, and $3 million of net liabilities. The goodwill is not deductible for tax purposes. The identifiable intangible assets were classified as $41 million of customer-related intangibles, $27 million of completed technology and $12 million of trade names. The identifiable intangible assets will be amortized over a period of ten to twenty years. The pro forma effect of this acquisition was not significant.

Intangible Assets

Amortized intangible assets were comprised of the following:



	March 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Completed technology	$	707	$	105	$	558	$	92
Patents	2		2		2		2
Customer-related	1,187		414		1,085		364
Other intangibles	75		34		74		31
	$	1,971	$	555	$	1,719	$	489

Amortization expense on intangible assets was $50 million for the three months ended March 30, 2019 and $41 million for the three months ended March 31, 2018. As of March 30, 2019, annual amortization expense is estimated to be $205 million in 2019 and 2020, $202 million in 2021, $200 million in 2022, $99 million in 2023, and $73 million in 2024.

Amortized intangible assets were comprised of the following by segment:



	March 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Products and Systems Integration	$	559	$	46	$	510	$	38
Services and Software	1,412		509		1,209		451
	$	1,971	$	555	$	1,719	$	489

Goodwill

The following table displays a rollforward of the carrying amount of goodwill by segment from January 1, 2019 to March 30, 2019:



	Products and Systems Integration		Services and Software		Total
Balance as of January 1, 2019	$	722	$	792	$	1,514
Goodwill acquired	47		283		330
Purchase accounting adjustments	—		9		9
Foreign currency	—		7		7
Balance as of March 30, 2019	$	769	$	1,091	$	1,860