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8-K - 8-K - Motorola Solutions, Inc.d767855d8k.htm

Exhibit 99.1

Motorola Solutions Reports Second-Quarter 2014

Financial Results

 

    Sales of $1.4 billion, down 7 percent from a year ago

 

    GAAP earnings per share (EPS) from continuing operations* of $0.30

 

    Non-GAAP** EPS from continuing operations of $0.47

 

    Generated $118 million in operating cash flow

 

    Repurchased $416 million in shares; recently announced 10 percent increase to quarterly cash dividend

 

    Cost-reduction target increased from $200 million to approximately $300 million by end of 2015

SCHAUMBURG, Ill. – Aug. 5, 2014 – Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the second quarter of 2014. Click here for a printable news release and financial tables.

Motorola Solutions’ Enterprise business now is reflected in discontinued operations for both the current quarter and prior periods due to its planned divestiture by the end of 2014. All financials cited reflect the company’s ongoing operations, including iDEN, with its new reporting segments: Products and Services.

REVENUE

Sales declined 7 percent to $1.4 billion primarily reflecting lower sales in North America state and local markets as well as in Asia Pacific & the Middle East. Europe & Africa and Latin America sales grew double-digits. Product sales declined 10 percent driven primarily by lower subscriber and systems revenues, while Services declined 1 percent.

SUPPORTING QUOTE

“Second quarter results were in line with our expectations. Additionally, we made significant progress toward simplifying our operations and accelerating our cost reduction efforts,” said Greg Brown, chairman and CEO, Motorola Solutions. “We believe our continued focus on execution, targeted investments and capital return positions us well to grow and create long-term value for our shareholders.”

KEY FINANCIAL RESULTS

 

     Second Quarter     Change  
     2014     2013    

Motorola Solutions, Inc.

      

Sales ($M)

   $ 1,393      $ 1,497        -7

GAAP

      

Operating earnings ($M)

   $ 138      $ 203        -32

Percent of sales

     9.9     13.6  

EPS from continuing operations

   $ 0.30      $ 0.81        -63

Non-GAAP

      

Operating earnings ($M)

   $ 201      $ 248        -19

Percent of sales

     14.4     16.6  

EPS from continuing operations

   $ 0.47      $ 0.94        -50


Segments

      

Products

      

Sales ($M)

   $ 887      $ 986        -10

GAAP operating earnings ($M)

   $ 95      $ 125        -24

Percent of sales

     10.7     12.7  

Non-GAAP operating earnings ($M)

   $ 133      $ 154        -14

Percent of sales

     15.0     15.6  

Services

      

Sales ($M)

   $ 506      $ 511        -1

GAAP operating earnings ($M)

   $ 43      $ 78        -45

Percent of sales

     8.5     15.3  

Non-GAAP operating earnings ($M)

   $ 68      $ 94        -28

Percent of sales

     13.4     18.4  

Non-GAAP financial information excludes after-tax charges of approximately $0.17 per diluted share related to share-based compensation and highlighted items. Details on these non-GAAP adjustments and the use of non-GAAP measures are included later in this news release.

OTHER SELECTED FINANCIAL RESULTS

 

    Operating margin — GAAP operating margin was 9.9 percent of sales; non-GAAP operating margin was 14.4 percent. These results include $49 million in lower operating expenses compared with the second quarter of 2013 primarily due to ongoing cost-reduction initiatives. In the second quarter, the company achieved $75 million in cost reductions.

 

    Taxes — The 2014 GAAP effective tax rate was 20 percent compared with a negative effective tax rate in the second quarter of 2013. The 2014 non-GAAP effective tax rate was 25 percent compared with a negative tax rate in the second quarter of 2013. The GAAP and non-GAAP effective tax rates in the second quarter of 2013 were favorably impacted by benefits largely associated with excess foreign tax credits on undistributed foreign earnings in that quarter.

 

    Cash flow — The company generated $118 million in operating cash flow from continuing operations during the quarter. This is a $140 million improvement from the second quarter of 2013 primarily driven by improved collections and other improvements in working capital accounts.

 

    Cash and cash equivalents — The company ended the quarter with cash and cash equivalents of $2.9 billion while returning $495 million to shareholders through share repurchases and cash dividends. The company repurchased $416 million of its common stock in the second quarter, reflecting only two months of repurchase. On July 31, the company announced it would increase its quarterly cash dividend by 10 percent to 34 cents per share. The next quarterly dividend will be payable in cash on Oct. 15, 2014, to stockholders of record at the close of business on Sept. 15, 2014.


KEY HIGHLIGHTS

 

    Secured significant Product wins such as a $23 million contract with the Ecuador Ministry of Interior for its nationwide public safety system, a $10 million system contract with Denton County in Texas and a $10 million system contract with Marathon Galveston Bay Refinery

 

    Continued progress in Services with multiyear lifecycle support wins including a $19 million contract with Montgomery County in Maryland and a $19 million contract with Butler County in Ohio, as well as an $8 million multiyear managed services contract with Queensland Gas Company in Australia

 

    Launched the Intelligent Data Portal, which gives first responders in the field instant access to enhanced situational awareness through mobile apps

BUSINESS OUTLOOK***

 

    Third quarter 2014 — Motorola Solutions expects a revenue decline of 7 to 9 percent compared with the third quarter of 2013, with non-GAAP earnings per share from continuing operations in the range of $0.35 to $0.41 per share.

 

    Full year 2014 — The company still expects a revenue decline of low- to mid- single digits, excluding IDEN, with non-GAAP operating margins from continuing operations of approximately 18.5 percent of sales, consistent with the previous outlook.

 

    The company has increased its target for cost reductions from $200 million to approximately $300 million by the end of 2015. This will result in a total reduction in operating expenses from $2 billion in 2013 to approximately $1.7 billion for 2015.

RESULTS FROM DISCONTINUED OPERATIONS

On April 15, Motorola Solutions announced that it had entered into a definitive agreement to sell its Enterprise business to Zebra Technologies in a $3.45 billion all-cash transaction, subject to customary closing conditions. The Enterprise business is reflected as discontinued operations.

Sales from discontinued operations were $560 million in the second quarter of 2014 compared with $610 million in the year-ago quarter. The sales decline reflects some supply chain and IT execution issues related to transitioning business processes as well as weaker demand in Asia.

CONFERENCE CALL AND WEBCAST

Motorola Solutions will host its quarterly conference call beginning at 7 a.m. U.S. Central Daylight Time (8 a.m. U.S. Eastern Daylight Time) Tuesday, Aug. 5. The conference call will be webcast live with audio and slides at www.motorolasolutions.com/investor.


CONSOLIDATED GAAP RESULTS

A comparison of results from operations is as follows:

 

     Second Quarter  
     2014      2013  

Net sales ($M)

   $ 1,393       $ 1,497   

Gross margin ($M)

     656         750   

Operating earnings ($M)

     138         203   

Earnings from continuing operations ($M)

     78         223   

Diluted EPS from continuing operations

   $ 0.30       $ 0.81   

Weighted average diluted common shares outstanding

     256.2         274.7   

HIGHLIGHTED ITEMS AND SHARE-BASED COMPENSATION EXPENSE

The table below includes highlighted items and share-based compensation expense for the second quarter of 2014.

 

     Second
Quarter
 
(per diluted common share)    2014  

GAAP Earnings from Continuing Operations

   $ 0.30   
  

 

 

 

Highlighted Items:

  

Reorganization of business charges

     0.08   

Legal settlement

     0.02   
  

 

 

 

Total Highlighted Items

     0.10   
  

 

 

 

Share-based compensation expense

     0.07   
  

 

 

 

Total Non-GAAP Adjustments

     0.17   
  

 

 

 

Non-GAAP Diluted EPS from Continuing Operations

   $ 0.47   
  

 

 

 

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the GAAP results included in this presentation, Motorola Solutions also has included non-GAAP measurements of results. The company has provided these non-GAAP measurements to help investors better understand its core operating performance, enhance comparisons of core operating performance from period to period and allow better comparisons of operating performance to its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of the businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP


measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with generally accepted accounting principles.

Highlighted items: The company has excluded the effects of highlighted items (and any reversals of highlighted items recorded in prior periods) from its non-GAAP operating expenses and net income measurements because the company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the company’s current operating performance or comparisons to the company’s past operating performance.

Share-based compensation expense: The company has excluded share-based compensation expense from its non-GAAP operating expenses and net income measurements. Although share-based compensation is a key incentive offered to the company’s employees and the company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues, the company continues to evaluate its performance excluding share-based compensation expense primarily because it represents a significant non-cash expense. Share-based compensation expense will recur in future periods.

Intangible assets amortization expense: The company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net income measurements, primarily because it represents a significant non-cash expense and because the company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but can be affected by the timing and size of the company’s acquisitions. Investors should note that the use of intangible assets contributed to the company’s revenues earned during the periods presented and will contribute to the company’s future period revenues as well. Intangible assets amortization expense will recur in future periods.

Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this press release.

BUSINESS RISKS

This press release contains “forward-looking statements” within the meaning of applicable federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. The company can give no assurance that any actual or future results or events discussed in these statements will be achieved. Any forward-looking statements represent the company’s views only as of today and should not be relied upon as representing the company’s views as of any subsequent date. Readers are cautioned that such forward-looking statements are subject to a variety of risks and uncertainties that could cause the company’s actual results to differ materially from the statements contained in this release. Such forward-looking statements include, but are not limited to, Motorola Solutions’ financial outlook for the third quarter and full year of 2014, and cost reduction targets and statements regarding the proposed transaction to sell the Enterprise business to Zebra Technologies. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 10 through 21 in Item 1A of


Motorola Solutions, Inc.‘s 2013 Annual Report on Form 10-K, on Page 31 in Part II, Item 1A of Motorola Solutions, Inc.’s Quarterly Report on Form 10-Q for the period ended March 29, 2014, and in its other SEC filings available for free on the SEC’s website at www.sec.gov and on Motorola Solutions’ website at www.motorolasolutions.com, could cause Motorola Solutions’ actual results to differ materially from those estimated or predicted in the forward-looking statements. Many of these risks and uncertainties cannot be controlled by Motorola Solutions and factors that may impact forward-looking statements include, but are not limited to: (1) the economic outlook for the government communications industries; (2) the level of demand for the company’s products, particularly if businesses and governments defer or cancel purchases in response to tighter credit or as a result of the pending transaction to sell the Enterprise business to Zebra Technologies; (3) the company’s ability to introduce new products and technologies in a timely manner; (4) negative impact on the company’s business from global economic conditions, which may include: (i) continued deferment or cancellation of purchase orders by customers; (ii) the inability of customers to obtain financing for purchases of the company’s products; (iii) increased demand to provide vendor financing to customers; (iv) increased financial pressures on third-party dealers, distributors and retailers; (v) the viability of the company’s suppliers that may no longer have access to necessary financing; (vi) counterparty failures negatively impacting the company’s financial position; (vii) changes in the value of investments held by the company’s pension plan and other defined benefit plans, which could impact future required or voluntary pension contributions; and (viii) the company’s ability to access the capital markets on acceptable terms and conditions; (5) the impact of foreign currency fluctuations on the company when competing for business in foreign markets; (6) the outcome of currently ongoing and future tax matters; (7) the company’s ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions; (8) risks related to dependence on certain key suppliers, subcontractors, third-party distributors and other representatives; (9) the impact on the company’s performance and financial results from strategic acquisitions or divestitures, including the sale of the Enterprise business and those that may occur in the future; (10) risks related to the company’s manufacturing and business operations in foreign countries; (11) the creditworthiness of the company’s customers and distributors, particularly purchasers of large infrastructure systems; (12) exposure under large systems and managed services contracts, including risks related to the fact that certain customers require that the company build, own and operate their systems, often over a multi-year period; (13) the ownership of certain logos, trademarks, trade names and service marks including “MOTOROLA” by Motorola Mobility Holdings, Inc.; (14) variability in income received from licensing the company’s intellectual property to others, as well as expenses incurred when the company licenses intellectual property from others; (15) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings; (16) the impact of the percentage of cash and cash equivalents held outside of the United States; (17) the ability of the company to pay future dividends due to possible adverse market conditions or adverse impacts on the company’s cash flow; (18) the ability of the company to repurchase shares under its repurchase program due to possible adverse market conditions or adverse impacts on the company’s cash flow; (19) the impact of changes in governmental policies, laws or regulations; (20) negative consequences from the company’s outsourcing of various activities, including certain business operations, information technology and administrative functions; (21) the impact of the company’s multi-year phased upgrade and consolidation of its enterprise resource planning systems into a single global platform; (22) the satisfaction of the conditions to closing the transaction to sell the Enterprise business to Zebra Technologies; (23) the expected timeline for completing such transaction; and (24) the ability of Motorola Solutions to return proceeds of the transaction to its shareholders and the timing thereof. Motorola Solutions undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.


DEFINITIONS

* Amounts attributable to Motorola Solutions, Inc. common shareholders.

** Non-GAAP financial information excludes from GAAP results the effects of share-based compensation expense, intangible assets amortization expense and highlighted items.

*** Business outlook excludes share-based compensation, intangible amortization and charges associated with items typically highlighted by the company in its quarterly earnings releases.

ABOUT MOTOROLA SOLUTIONS

Motorola Solutions is a leading provider of mission-critical communication solutions and services for enterprise and government customers. Through leading-edge innovation and communications technology, it is a global leader that enables its customers to be their best in the moments that matter. Motorola Solutions trades on the New York Stock Exchange under the ticker “MSI.” To learn more, visit www.motorolasolutions.com. For ongoing news, please visit our newsroom or subscribe to our news feed.

MEDIA CONTACT

Kurt Ebenhoch

Motorola Solutions

+1 847-576-1341

kurt.ebenhoch@motorolasolutions.com

INVESTOR CONTACTS

Shep Dunlap

Motorola Solutions

+1 847-576-6899

shep.dunlap@motorolasolutions.com

Chris Kutsor

Motorola Solutions

+1 847-576-4995

chris.kutsor@motorolasolutions.com

MOTOROLA, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license. All other trademarks are the property of their respective owners. ©2014 Motorola Solutions, Inc. All rights reserved.


GAAP-1

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

 

     Three Months Ended  
     June 28, 2014     June 29, 2013  

Net sales from products

   $ 887      $ 986   

Net sales from services

     506        511   
  

 

 

   

 

 

 

Net sales

     1,393        1,497   

Costs of products sales

     400        435   

Costs of services sales

     337        312   
  

 

 

   

 

 

 

Costs of sales

     737        747   
  

 

 

   

 

 

 

Gross margin

     656        750   
  

 

 

   

 

 

 

Selling, general and administrative expenses

     308        339   

Research and development expenditures

     176        195   

Other charges

     33        13   

Intangibles amortization

     1        —     
  

 

 

   

 

 

 

Operating earnings

     138        203   
  

 

 

   

 

 

 

Other expense:

    

Interest expense, net:

     (29     (32

Losses on sales of investments and businesses, net

     (4     —     

Other

     (7     (3
  

 

 

   

 

 

 

Total other expense

     (40     (35
  

 

 

   

 

 

 

Earnings from continuing operations before income taxes

     98        168   

Income tax expense (benefit)

     20        (59
  

 

 

   

 

 

 

Earnings from continuing operations

     78        227   

Earnings from discontinued operations, net of tax

     746        35   
  

 

 

   

 

 

 

Net earnings

     824        262   

Less: Earnings attributable to noncontrolling interests

     —          4   
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

   $ 824      $ 258   
  

 

 

   

 

 

 

Amounts attributable to Motorola Solutions, Inc. common shareholders

    

Earnings from continuing operations, net of tax

   $ 78      $ 223   

Earnings from discontinued operations, net of tax

     746        35   
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

   $ 824      $ 258   
  

 

 

   

 

 

 

Earnings per common share

    

Basic:

    

Continuing operations

   $ 0.31      $ 0.83   

Discontinued operations

     2.94        0.13   
  

 

 

   

 

 

 
   $ 3.25      $ 0.96   
  

 

 

   

 

 

 

Diluted:

    

Continuing operations

   $ 0.30      $ 0.81   

Discontinued operations

     2.92        0.13   
  

 

 

   

 

 

 
   $ 3.22      $ 0.94   
  

 

 

   

 

 

 

Weighted average common shares outstanding

    

Basic

     253.7        269.5   

Diluted

     256.2        274.7   
     Percentage of Net Sales*  

Net sales from products

     63.7     65.9

Net sales from services

     36.3     34.1
  

 

 

   

 

 

 

Net sales

     100     100
  

 

 

   

 

 

 

Costs of products sales

     45.1     44.1

Costs of services sales

     66.6     61.1
  

 

 

   

 

 

 

Costs of sales

     52.9     49.9
  

 

 

   

 

 

 

Gross margin

     47.1     50.1
  

 

 

   

 

 

 

Selling, general and administrative expenses

     22.1     22.6

Research and development expenditures

     12.6     13.0

Other charges

     2.4     0.9

Intangibles amortization

     0.1     0.0
  

 

 

   

 

 

 

Operating earnings

     9.9     13.6
  

 

 

   

 

 

 

Other expense:

    

Interest expense, net:

     -2.1     -2.1

Losses on sales of investments and businesses, net

     -0.3     0.0

Other

     -0.5     -0.2
  

 

 

   

 

 

 

Total other expense

     -2.9     -2.3
  

 

 

   

 

 

 

Earnings from continuing operations before income taxes

     7.0     11.2

Income tax expense (benefit)

     1.4     -3.9
  

 

 

   

 

 

 

Earnings from continuing operations

     5.6     15.2

Earnings from discontinued operations, net of tax

     53.6     2.3
  

 

 

   

 

 

 

Net earnings

     59.2     17.5

Less: Earnings attributable to noncontrolling interests

     0.0     0.3
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

     59.2     17.2
  

 

 

   

 

 

 

 

* Percentages may not add up due to rounding


GAAP-2

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

 

     Six Months Ended  
     June 28, 2014     June 29, 2013  

Net sales from products

   $ 1,640      $ 1,899   

Net sales from services

     982        994   
  

 

 

   

 

 

 

Net sales

     2,622        2,893   

Costs of products sales

     751        840   

Costs of services sales

     638        610   
  

 

 

   

 

 

 

Costs of sales

     1,389        1,450   
  

 

 

   

 

 

 

Gross margin

     1,233        1,443   
  

 

 

   

 

 

 

Selling, general and administrative expenses

     615        665   

Research and development expenditures

     350        382   

Other charges

     21        20   

Intangibles amortization

     2        —     
  

 

 

   

 

 

 

Operating earnings

     245        376   
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense, net:

     (54     (57

Gains on sales of investments and businesses, net

     4        7   

Other

     (9     (3
  

 

 

   

 

 

 

Total other expense

     (59     (53
  

 

 

   

 

 

 

Earnings from continuing operations before income taxes

     186        323   

Income tax expense (benefit)

     23        (61
  

 

 

   

 

 

 

Earnings from continuing operations

     163        384   

Earnings from discontinued operations, net of tax

     788        70   
  

 

 

   

 

 

 

Net earnings

     951        454   

Less: Earnings attributable to noncontrolling interests

     —          4   
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

   $ 951      $ 450   
  

 

 

   

 

 

 

Amounts attributable to Motorola Solutions, Inc. common shareholders

    

Earnings from continuing operations, net of tax

   $ 163      $ 380   

Earnings from discontinued operations, net of tax

     788        70   
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

   $ 951      $ 450   
  

 

 

   

 

 

 

Earnings per common share

    

Basic:

    

Continuing operations

   $ 0.64      $ 1.40   

Discontinued operations

     3.11        0.26   
  

 

 

   

 

 

 
   $ 3.75      $ 1.66   
  

 

 

   

 

 

 

Diluted:

    

Continuing operations

   $ 0.63      $ 1.37   

Discontinued operations

     3.07        0.25   
  

 

 

   

 

 

 
   $ 3.70      $ 1.62   
  

 

 

   

 

 

 

Weighted average common shares outstanding

    

Basic

     253.8        271.9   

Diluted

     257.2        277.7   
     Percentage of Net Sales*  

Net sales from products

     62.5     65.6

Net sales from services

     37.5     34.4
  

 

 

   

 

 

 

Net sales

     100     100
  

 

 

   

 

 

 

Costs of products sales

     45.8     44.2

Costs of services sales

     65.0     61.4
  

 

 

   

 

 

 

Costs of sales

     53.0     50.1
  

 

 

   

 

 

 

Gross margin

     47.0     49.9
  

 

 

   

 

 

 

Selling, general and administrative expenses

     23.5     23.0

Research and development expenditures

     13.3     13.2

Other charges

     0.8     0.7

Intangibles amortization

     0.1     0.0
  

 

 

   

 

 

 

Operating earnings

     9.3     13.0
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense, net:

     -2.1     -2.0

Gains on sales of investments and businesses, net

     0.2     0.2

Other

     -0.3     -0.1
  

 

 

   

 

 

 

Total other expense

     -2.3     -1.8
  

 

 

   

 

 

 

Earnings from continuing operations before income taxes

     7.1     11.2

Income tax expense (benefit)

     0.9     -2.1
  

 

 

   

 

 

 

Earnings from continuing operations

     6.2     13.3

Earnings from discontinued operations, net of tax

     30.1     2.4
  

 

 

   

 

 

 

Net earnings

     36.3     15.7

Less: Earnings attributable to noncontrolling interests

     0.0     0.1
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

     36.3     15.6
  

 

 

   

 

 

 
    

 

* Percentages may not add up due to rounding


GAAP-3

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In millions)

 

     June 28,
2014
     December 31,
2013
 

Assets

     

Cash and cash equivalents

   $ 2,876       $ 3,225   

Accounts receivable, net

     1,185         1,369   

Inventories, net

     330         347   

Deferred income taxes

     1,205         451   

Other current assets

     527         635   

Current assets held for sale

     943         993   
  

 

 

    

 

 

 

Total current assets

     7,066         7,020   
  

 

 

    

 

 

 

Property, plant and equipment, net

     682         695   

Investments

     236         232   

Deferred income taxes

     1,909         1,990   

Goodwill

     383         361   

Other assets

     128         89   

Noncurrent assets held for sale

     1,464         1,464   
  

 

 

    

 

 

 

Total assets

   $ 11,868       $ 11,851   
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Current portion of long-term debt

   $ 4       $ 4   

Accounts payable

     453         583   

Accrued liabilities

     1,615         1,763   

Current liabilities held for sale

     852         870   
  

 

 

    

 

 

 

Total current liabilities

     2,924         3,220   
  

 

 

    

 

 

 

Long-term debt

     2,446         2,457   

Other liabilities

     2,151         2,314   

Noncurrent liabilities held for sale

     178         171   

Total Motorola Solutions, Inc. stockholders’ equity

     4,139         3,659   

Noncontrolling interests

     30         30   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $     11,868       $     11,851   
  

 

 

    

 

 

 

Financial Ratios:

     

Net cash*

   $ 426       $ 764   

 

* Net cash = Total cash—Current portion of long-term debt—Long-term debt


GAAP-4

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In millions)

 

     Three Months Ended  
     June 28, 2014     June 29, 2013  

Operating

    

Net earnings attributable to Motorola Solutions, Inc.

   $ 824      $ 258   

Earnings attributable to noncontrolling interests

     —          4   
  

 

 

   

 

 

 

Net earnings

     824        262   

Earnings from discontinued operations, net of tax

     746        35   
  

 

 

   

 

 

 

Earnings from continuing operations, net of tax

     78        227   

Adjustments to reconcile Earnings from continuing operations to Net cash provided by operating activities:

    

Depreciation and amortization

     46        40   

Non-cash other income

     (1     (6

Share-based compensation expense

     25        27   

Loss on sales of investments and businesses, net

     4        —     

Deferred income taxes

     (16     (167

Changes in assets and liabilities, net of effects of acquisitions and dispositions:

    

Accounts receivable

     30        (108

Inventories

     29        8   

Other current assets

     60        61   

Accounts payable and accrued liabilities

     (124     (113

Other assets and liabilities

     (13     9   
  

 

 

   

 

 

 

Net cash provided by (used for) operating activities from continuing operations

     118        (22
  

 

 

   

 

 

 

Investing

    

Acquisitions and investments, net

     (6     (5

Proceeds from sales of investments and businesses, net

     10        2   

Capital expenditures

     (42     (37

Proceeds from sales of property, plant and equipment

     —          15   

Proceeds from sales of Sigma Fund and short-term investments, net

     —          489   
  

 

 

   

 

 

 

Net cash provided by (used for) investing activities from continuing operations

     (38     464   
  

 

 

   

 

 

 

Financing

    

Repayment of debt

     (1     (1

Issuance of common stock

     71        60   

Repurchase of common stock

     (416     (550

Excess tax benefit from share-based compensation

     1        9   

Payments of dividends

     (79     (71

Distributions from discontinued operations

     74        95   
  

 

 

   

 

 

 

Net cash used for financing activities from continuing operations

     (350     (458
  

 

 

   

 

 

 

Discontinued Operations

    

Net cash provided by operating activities from discontinued operations

     55        105   

Net cash provided by (used for) investing activities from discontinued operations

     19        (12

Net cash used for financing activities from discontinued operations

     (74     (95

Effect of exchange rate changes on cash and cash equivalents from discontinued operations

     —          2   
  

 

 

   

 

 

 

Net cash provided by discontinued operations

     —          —     
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents from continuing operations

     5        3   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (265     (13

Cash and cash equivalents, beginning of period

     3,141        1,470   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 2,876      $ 1,457   
  

 

 

   

 

 

 

Financial Ratios:

    

Free cash flow*

   $ 76      $ (59

 

* Free cash flow = Net cash provided by operating activities—Capital expenditures


GAAP-5

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In millions)

 

     Six Months Ended  
     June 28, 2014     June 29, 2013  

Operating

    

Net earnings attributable to Motorola Solutions, Inc.

   $ 951      $ 450   

Earnings attributable to noncontrolling interests

     —          4   
  

 

 

   

 

 

 

Net earnings

     951        454   

Earnings from discontinued operations, net of tax

     788        70   
  

 

 

   

 

 

 

Earnings from continuing operations, net of tax

     163        384   

Adjustments to reconcile Earnings from continuing operations to Net cash provided by operating activities:

    

Depreciation and amortization

     86        76   

Gain on sale of building and land

     (21     —     

Non-cash other income

     (5     (7

Share-based compensation expense

     54        62   

Gains on sales of investments and businesses, net

     (4     (7

Deferred income taxes

     6        (193

Changes in assets and liabilities, net of effects of acquisitions and dispositions:

    

Accounts receivable

     190        78   

Inventories

     17        14   

Other current assets

     76        (23

Accounts payable and accrued liabilities

     (299     (479

Other assets and liabilities

     (133     (5
  

 

 

   

 

 

 

Net cash provided by (used for) operating activities from continuing operations

     130        (100
  

 

 

   

 

 

 

Investing

    

Acquisitions and investments, net

     (11     (8

Proceeds from sales of investments and businesses, net

     21        21   

Capital expenditures

     (82     (79

Proceeds from sales of property, plant and equipment

     24        15   

Proceeds from sales of Sigma Fund and short-term investments, net

     —          376   
  

 

 

   

 

 

 

Net cash provided by (used for) investing activities from continuing operations

     (48     325   
  

 

 

   

 

 

 

Financing

    

Repayment of debt

     (2     (2

Net proceeds from issuance of debt

     4        593   

Issuance of common stock

     85        99   

Repurchase of common stock

     (473     (907

Excess tax benefit from share-based compensation

     6        18   

Payments of dividends

     (158     (143

Distributions from discontinued operations

     100        137   
  

 

 

   

 

 

 

Net cash used for financing activities from continuing operations

     (438     (205
  

 

 

   

 

 

 

Discontinued Operations

    

Net cash provided by operating activities from discontinued operations

     89        152   

Net cash provided by (used for) investing activities from discontinued operations

     11        (17

Net cash used for financing activities from discontinued operations

     (100     (137

Effect of exchange rate changes on cash and cash equivalents from discontinued operations

     —          2   
  

 

 

   

 

 

 

Net cash provided by discontinued operations

     —          —     
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents from continuing operations

     7        (31
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (349     (11

Cash and cash equivalents, beginning of period

     3,225        1,468   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 2,876      $ 1,457   
  

 

 

   

 

 

 

Financial Ratios:

    

Free cash flow*

   $ 48      $ (179

 

* Free cash flow = Net cash provided by operating activities—Capital expenditures


GAAP-6

Motorola Solutions, Inc. and Subsidiaries

Segment Information

(In millions)

Net Sales

 

     Three Months Ended  
     June 28,
2014
     June 29,
2013
     % Change  

Products

   $ 887       $ 986         -10

Services

     506         511         -1
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 1,393       $ 1,497         -7
  

 

 

    

 

 

    
     Six Months Ended  
     June 28,      June 29,         
     2014      2013      % Change  

Products

   $ 1,640       $ 1,899         -14

Services

     982         994         -1
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 2,622       $ 2,893         -9
  

 

 

    

 

 

    

Operating Earnings

 

     Three Months Ended  
     June 28,
2014
     June 29,
2013
     % Change  

Products

   $ 95       $ 125         -24

Services

     43         78         -45
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 138       $ 203         -32
  

 

 

    

 

 

    
     Six Months Ended  
     June 28,
2014
     June 29,
2013
     % Change  

Products

   $ 134       $ 231         -42

Services

     111         145         -23
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 245       $ 376         -35
  

 

 

    

 

 

    

Operating Earnings %

 

     Three Months Ended  
     June 28,
2014
    June 29,
2013
 

Products

     10.7     12.7

Services

     8.5     15.3

Total Motorola Solutions

     9.9     13.6
     Six Months Ended  
     June 28,
2014
    June 29,
2013
 

Products

     8.2     12.2

Services

     11.3     14.6

Total Motorola Solutions

     9.3     13.0


Non-GAAP-1

Motorola Solutions, Inc. and Subsidiaries

Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)

 

Q1 2014  

Highlighted Items

  

Statement Line

   PBT
(Inc)/Exp
    Tax
Inc/(Exp)
    PAT
(Inc)/Exp
    EPS
impact
 

Intangibles amortization expense

   Intangibles amortization    $ 1      $ —        $ 1      $ —     

Share-based compensation expense

   Cost of sales, SG&A and R&D      29        9        20        0.08   

Reorganization of business charges

   Cost of sales and Other charges      10        2        8        0.03   

Gain on sale of building and land

   Other charges      (21     (8     (13     (0.05

Recognition of previously unrecognized income tax benefits

   Income tax expense      —          29        (29     (0.11
     

 

 

   

 

 

   

 

 

   

 

 

 

Total impact on Net earnings

      $ 19      $ 32      $ (13   $ (0.05
Q2 2014  

Highlighted Items

  

Statement Line

   PBT
(Inc)/Exp
    Tax
Inc/(Exp)
    PAT
(Inc)/Exp
    EPS
impact
 

Intangibles amortization expense

   Intangibles amortization    $ 1      $ —        $ 1      $ —     

Share-based compensation expense

   Cost of sales, SG&A and R&D      26        9        17      $ 0.07   

Reorganization of business charges

   Cost of sales and Other charges      28        8        20      $ 0.08   

Legal settlement

   Other charges      8        3        5      $ 0.02   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total impact on Net earnings

      $ 63      $ 20      $ 43      $ 0.17   


Non-GAAP-2

Motorola Solutions, Inc. and Subsidiaries

Non-GAAP Segment Information

(In millions)

Net Sales

 

     Three Months Ended  
     June 28,
2014
     June 29,
2013
     % Change  

Products

   $ 887       $ 986         -10

Services

     506         511         -1
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 1,393       $ 1,497         -7
  

 

 

    

 

 

    
     Six Months Ended  
     June 28,
2014
     June 29,
2013
     % Change  

Products

   $ 1,640       $ 1,899         -14

Services

     982         994         -1
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 2,622       $ 2,893         -9
  

 

 

    

 

 

    
Non-GAAP Operating Earnings  
     Three Months Ended  
     June 28,
2014
     June 29,
2013
     % Change  

Products

   $ 133       $ 154         -14

Services

     68         94         -28
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 201       $ 248         -19
  

 

 

    

 

 

    
     Six Months Ended  
     June 28,
2014
     June 29,
2013
     % Change  

Products

   $ 185       $ 288         -36

Services

     142         176         -19
  

 

 

    

 

 

    

Total Motorola Solutions

   $ 327       $ 464         -30
  

 

 

    

 

 

    

Non-GAAP Operating Earnings %

 

     Three Months Ended  
     2014     2013  

Products

     15.0     15.6

Services

     13.4     18.4

Total Motorola Solutions

     14.4     16.6
     Six Months Ended  
     June 28,
2014
    June 29,
2013
 

Products

     11.3     15.2

Services

     14.5     17.7

Total Motorola Solutions

     12.5     16.0


Non-GAAP-3

Motorola Solutions, Inc. and Subsidiaries

Operating Earnings after Non-GAAP Adjustments

 

Q1 2014  
     TOTAL     Products     Services  

Net sales

   $ 1,228      $ 753      $ 475   

Operating earnings (“OE”)

   $ 107      $ 39      $ 68   
  

 

 

   

 

 

   

 

 

 

Above-OE non-GAAP adjustments:

      

Share-based compensation expense

     29        19        10   

Reorganization of business charges

     10        6        4   

Intangibles amortization expense

     1        1        —     

Gain on sale of building and land

     (21     (14     (7
  

 

 

   

 

 

   

 

 

 

Total above-OE non-GAAP adjustments

     19        12        7   
  

 

 

   

 

 

   

 

 

 

Operating earnings after non-GAAP adjustments

   $ 126      $ 51      $ 75   
  

 

 

   

 

 

   

 

 

 

Operating earnings as a percentage of net sales—GAAP

     8.7     5.2     14.3

Operating earnings as a percentage of net sales—after non-GAAP adjustments

     10.3     6.8     15.8
Q2 2014  
     TOTAL     Products     Services  

Net sales

   $ 1,393      $ 887      $ 506   

Operating earnings (“OE”)

   $ 138      $ 95      $ 43   
  

 

 

   

 

 

   

 

 

 

Above-OE non-GAAP adjustments:

      

Share-based compensation expense

     26        14        12   

Reorganization of business charges

     28        18        10   

Intangibles amortization expense

     1        1        —     

Legal settlement

     8        5        3   
  

 

 

   

 

 

   

 

 

 

Total above-OE non-GAAP adjustments

     63        38        25   
  

 

 

   

 

 

   

 

 

 

Operating earnings after non-GAAP adjustments

   $ 201      $ 133      $ 68   
  

 

 

   

 

 

   

 

 

 

Operating earnings as a percentage of net sales—GAAP

     9.9     10.7     8.5

Operating earnings as a percentage of net sales—after non-GAAP adjustments

     14.4     15.0     13.4