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8-K - FORM 8-K - Motorola Solutions, Inc.d434731d8k.htm

Exhibit 99.1

Motorola Solutions Reports Second-Quarter 2017 Financial Results

Company raises full-year revenue and earnings outlook

 

    Sales of $1.5 billion, up 5 percent from a year ago

 

    Products sales up 6 percent driven by growth in every region

 

    Backlog growth of $265 million from a year ago

 

    GAAP earnings per share (EPS) of $0.78, up 28 percent

 

    Non-GAAP EPS of $1.12, up 9 percent

 

    Acquiring Airbus DS Communications (Plant Holdings, Inc.), strengthening command center software portfolio

CHICAGO – Aug. 3, 2017 – Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the second quarter of 2017. Click here for a printable news release and financial tables.

SUPPORTING QUOTE

“Q2 was an outstanding quarter of revenue and EPS growth driven primarily by our land mobile radio (LMR) business,” said Greg Brown, chairman and CEO of Motorola Solutions. “Additionally, I’m pleased with our strong backlog position and recent acquisitions that provide the foundation for continued success.”

KEY FINANCIAL RESULTS (presented in millions, except per share data and percentages)

 

     Q2 2017     Q2 2016     % Change  

Sales

   $ 1,497     $ 1,430       5

GAAP

      

Operating Earnings

   $ 257     $ 224       15

% of Sales

     17.2     15.7  

EPS

   $ 0.78     $ 0.61       28

Non-GAAP

      

Operating Earnings

   $ 328     $ 324       1

% of Sales

     21.9     22.7  

EPS

   $ 1.12     $ 1.03       9

Product Segment

      

Sales

   $ 848     $ 801       6

GAAP Operating Earnings

   $ 168     $ 129       30

% of Sales

     19.8     16.1  

Non-GAAP Operating Earnings

   $ 193     $ 176       10

% of Sales

     22.8     22.0  

Services Segment

      

Sales

   $ 649     $ 629       3

GAAP Operating Earnings

   $ 89     $ 95       (6 )% 

% of Sales

     13.7     15.1  

Non-GAAP Operating Earnings

   $ 135     $ 148       (9 )% 

% of Sales

     20.8     23.5  

 

* Non-GAAP financial information excludes the after-tax impact of approximately $0.34 per diluted share related to share-based compensation, intangible assets amortization expense and highlighted items. Details on these non-GAAP adjustments and the use of non-GAAP measures are included later in this news release.


  Revenue Sales increased 5 percent driven by the Americas region. Products segment sales grew 6 percent with growth in every region, driven primarily by P25 LMR systems. The Services segment grew 3 percent driven by the Americas, with global Managed & Support Services growth of 3 percent despite $20 million of Airwave currency headwinds.

 

  Operating margin GAAP operating margin was 17.2 percent of sales, compared with 15.7 percent in the year-ago quarter. The improvement reflects higher sales volume and lower other costs. Non-GAAP operating margin was 21.9 percent of sales, compared with 22.7 percent in the year-ago quarter. As expected, the sales increase was offset by lower gross margin associated with higher systems mix in North America, as well as Airwave currency headwinds.

 

  Cash flow The company generated $173 million in operating cash, a decrease of $119 million from the year-ago quarter. Free cash flow2 was $120 million, down $81 million. Cash flow for the quarter was down due to timing of higher working capital primarily associated with the implementation of a new ERP system. Year-to-date operating cash flow and free cash flow were higher than the prior year driven by higher earnings.

 

  Capital Allocation The company ended the quarter with cash and cash equivalents of $805 million and a net debt position of approximately $3.7 billion3. The company repurchased approximately $80 million of its common stock and paid approximately $77 million in cash dividends. Additionally, the company announced the acquisition of Airbus DS Communications (Plant Holdings, Inc.), strengthening its command center software portfolio.

 

  Backlog The company ended the quarter with $8.5 billion of backlog, up $265 million from the year-ago quarter. Products segment backlog is up 15 percent or $204 million, and Services is up 1 percent or $61 million. LMR demand led by the Americas continues to drive the backlog growth.

KEY HIGHLIGHTS

Strategic wins and awards

 

    $160 million for a 10-year Managed & Support Services agreement in Canada

 

    $43 million for P25 devices in a major U.S. city

 

    $40 million for P25 system in Broward County, Florida

 

    $24 million for P25 system with a large utility in the northeastern U.S.

 

    $19 million for P25 system covering three Kentucky counties that includes a 10-year Managed & Support Services agreement

 

    $10 million for P25 devices in Australia

Innovation and investments in growth

 

    Announced acquisition of Airbus DS Communications (Plant Holdings, Inc.), strengthening the company’s command center software portfolio. Airbus DS Communications is a leading provider in North America of command center software for emergency call-handling

 

    Certified Public Safety LTE device LEX F10 for the AT&T FirstNet network

 

    Delivered 1,000th TETRA digital radio system and 25,000th base station

BUSINESS OUTLOOK

 

    Third-quarter 2017 – Motorola Solutions expects revenue growth of 3 to 4 percent compared with the third quarter of 2016. The company expects non-GAAP earnings in the range of $1.36 to $1.41 per share.

 

    Full-year 2017 – The company now expects revenue growth of approximately 3 to 4 percent versus the prior outlook of approximately 2 percent, and non-GAAP earnings per share now in the range of $5.20 to $5.30 from the prior outlook of $5.08 to $5.23. This assumes current foreign exchange rates and approximately 170 million fully diluted shares for the full year.


CONFERENCE CALL AND WEBCAST Motorola Solutions will host its quarterly conference call beginning at 4 p.m. U.S. Central Daylight Time (5 p.m. U.S. Eastern Daylight Time) on Thursday, Aug. 3. The conference call will be webcast live at www.motorolasolutions.com/investor.

CONSOLIDATED GAAP RESULTS (presented in millions, except per share data)

A comparison of results from operations is as follows:

 

     Q2 2017      Q2 2016  

Net sales

   $ 1,497      $ 1,430  

Gross margin

     690        676  

Operating earnings

     257        224  

Amounts attributable to Motorola Solutions, Inc. common stockholders

     

Net earnings

     131        107  

Diluted EPS

   $ 0.78      $ 0.61  

Weighted average diluted common shares outstanding

     169.0        174.8  

HIGHLIGHTED ITEMS AND SHARE-BASED COMPENSATION EXPENSE

The table below includes highlighted items, share-based compensation expense and intangible amortization for the second quarter of 2017.

 

(per diluted common share)

   Q2 2017  

GAAP Earnings

   $ 0.78  
  

 

 

 

Highlighted Items:

  

Share-based compensation expense

     0.07  

Reorganization of business charges

     0.02  

Intangibles amortization expense

     0.17  

Non-US pension settlement loss

     0.08  

Legal settlement

     (0.01

Sale of business

     0.01  
  

 

 

 

Total Highlighted Items

   $ 0.34  
  

 

 

 

Non-GAAP Diluted EPS

   $ 1.12  
  

 

 

 

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 including, but not limited to, acquisition-related transaction costs, tangible and intangible asset impairments, restructuring or reorganization of business charges, non-cash pension adjustments, significant litigation and other contingencies, significant gains and losses on investments, and the income tax effects of significant tax matters, 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. For the purposes of management’s internal analysis over operating performance, the company uses financial statements that exclude highlighted items, as these charges do not contribute to a meaningful evaluation of the company’s current operating performance or comparisons to the company’s past operating performance. Specifically in regards to its restructuring plans, the company has incurred significant reorganization of business charges as it reduced operating expenses over the past four years.

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 earnings measurements, primarily because it represents a 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 is significantly 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 news 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 2017 and the impact of acquisitions on our business. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 9 through 21 in Item 1A of Motorola Solutions 2016 Annual Report on Form 10-K 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 industry; (2) the impact of foreign currency fluctuations on the company; (3) the level of demand for the company’s products; (4) the company’s ability to refresh existing and introduce new products and technologies in a timely manner; (5) negative impact on the company’s business from global economic and political 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; (6) the impact of a security breach or other significant disruption in the company’s IT systems, those of its partners or suppliers or those it sells to or operates or maintains for its customers; (7) the outcome of ongoing and future tax matters; (8) the company’s ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions and reductions in the company’s purchasing power; (9) risks related to dependence on certain key suppliers, subcontractors, third-party distributors and other representatives; (10) the impact on the company’s performance and financial results from strategic acquisitions or divestitures; (11) risks related to the company’s manufacturing and business operations in foreign countries; (12) the creditworthiness of the company’s customers and distributors, particularly purchasers of large infrastructure systems; (13) 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; (14) the ownership of certain logos, trademarks, trade names and service marks including “MOTOROLA” by Motorola Mobility Holdings, Inc.; (15) 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; (16) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings; (17) the impact of the percentage of cash and cash equivalents held outside of the United States; (18) the ability of the company to pay future dividends due to possible adverse market conditions or adverse impacts on the company’s cash flow; (19) 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; (20) the impact of changes in governmental policies, laws or regulations; (21) negative consequences from the company’s use of third party vendors for various activities, including certain manufacturing operations, information technology and administrative functions; (22) the implementation of a new enterprise resource planning system; and (23) the company’s ability to settle the par value of its Senior Convertible Notes in cash. 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

 

1  Q2 Non-GAAP financial information excludes the after-tax impact of approximately $0.34 per diluted share related to share-based compensation, intangible assets amortization expense and highlighted items for the fourth-quarter. Details on these non-GAAP adjustments and the use of non-GAAP measures are included in this news release.
2 Free cash flow represents operating cash flow less capital expenditures
3  Net debt represents cash and cash equivalents less long-term debt, including current portion


ABOUT MOTOROLA SOLUTIONS

Motorola Solutions (NYSE: MSI) creates innovative, mission-critical communication solutions and services that help public safety and commercial customers build safer cities and thriving communities. For ongoing news, visit www.motorolasolutions.com/newsroom or subscribe to a news feed.

MEDIA CONTACT

Tama McWhinney

Motorola Solutions

+1 847-538-1865

tama.mcwhinney@motorolasolutions.com

INVESTOR CONTACT

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. ©2017 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  
     July 1, 2017     July 2, 2016  

Net sales from products

   $ 848     $ 801  

Net sales from services

     649       629  
  

 

 

   

 

 

 

Net sales

     1,497       1,430  

Costs of products sales

     392       361  

Costs of services sales

     415       393  
  

 

 

   

 

 

 

Costs of sales

     807       754  
  

 

 

   

 

 

 

Gross margin

     690       676  
  

 

 

   

 

 

 

Selling, general and administrative expenses

     242       240  

Research and development expenditures

     138       138  

Other charges

     16       36  

Intangibles amortization

     37       38  
  

 

 

   

 

 

 

Operating earnings

     257       224  
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense, net

     (51     (54

Gains (losses) on sales of investments and businesses, net

     (1     1  

Other

     —         (4
  

 

 

   

 

 

 

Total other expense

     (52     (57
  

 

 

   

 

 

 

Net earnings before income taxes

     205       167  

Income tax expense

     73       59  
  

 

 

   

 

 

 

Net earnings

     132       108  

Less: Earnings attributable to noncontrolling interests

     1       1  
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

   $ 131     $ 107  
  

 

 

   

 

 

 

Earnings per common share:

    

Basic

   $ 0.80     $ 0.62  

Diluted

   $ 0.78     $ 0.61  

Weighted average common shares outstanding:

    

Basic

     163.1       171.9  

Diluted

     169.0       174.8  
     Percentage of Net Sales*  

Net sales from products

     56.6     56.0

Net sales from services

     43.4     44.0
  

 

 

   

 

 

 

Net sales

     100.0     100.0

Costs of products sales

     46.2     45.1

Costs of services sales

     63.9     62.5
  

 

 

   

 

 

 

Costs of sales

     53.9     52.7
  

 

 

   

 

 

 

Gross margin

     46.1     47.3
  

 

 

   

 

 

 

Selling, general and administrative expenses

     16.2     16.8

Research and development expenditures

     9.2     9.7

Other charges

     1.1     2.5

Intangibles amortization

     2.5     2.7
  

 

 

   

 

 

 

Operating earnings

     17.2     15.7
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense, net

     (3.4 )%      (3.8 )% 

Gains (losses) on sales of investments and businesses, net

     (0.1 )%      0.1

Other

     —       (0.3 )% 
  

 

 

   

 

 

 

Total other expense

     (3.5 )%      (4.0 )% 
  

 

 

   

 

 

 

Net earnings before income taxes

     13.7     11.7

Income tax expense

     4.9     4.1
  

 

 

   

 

 

 

Net earnings

     8.8     7.6
  

 

 

   

 

 

 

Less: Earnings attributable to noncontrolling interests

     0.1     0.1

Net earnings attributable to Motorola Solutions, Inc.

     8.8     7.5
  

 

 

   

 

 

 

 

* 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  
     July 1, 2017     July 2, 2016  

Net sales from products

   $ 1,551     $ 1,503  

Net sales from services

     1,226       1,120  
  

 

 

   

 

 

 

Net sales

     2,777       2,623  

Costs of products sales

     739       726  

Costs of services sales

     778       718  
  

 

 

   

 

 

 

Costs of sales

     1,517       1,444  
  

 

 

   

 

 

 

Gross margin

     1,260       1,179  
  

 

 

   

 

 

 

Selling, general and administrative expenses

     475       475  

Research and development expenditures

     273       274  

Other charges

     6       55  

Intangibles amortization

     73       52  
  

 

 

   

 

 

 

Operating earnings

     433       323  
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense, net

     (102     (103

Gains (losses) on sales of investments and businesses, net

     2       (20

Other

     (9     (11
  

 

 

   

 

 

 

Total other expense

     (109     (134
  

 

 

   

 

 

 

Net earnings before income taxes

     324       189  

Income tax expense

     114       64  
  

 

 

   

 

 

 

Net earnings

     210       125  

Less: Earnings attributable to noncontrolling interests

     2       1  
  

 

 

   

 

 

 

Net earnings attributable to Motorola Solutions, Inc.

   $ 208     $ 124  
  

 

 

   

 

 

 

Earnings per common share:

    

Basic

   $ 1.27     $ 0.72  

Diluted

   $ 1.23     $ 0.71  

Weighted average common shares outstanding:

    

Basic

     163.7       173.0  

Diluted

     169.5       175.7  
  

 

 

   

 

 

 
     Percentage of Net Sales*  

Net sales from products

     55.9     57.3

Net sales from services

     44.1     42.7
  

 

 

   

 

 

 

Net sales

     100.0     100.0

Costs of products sales

     47.6     48.3

Costs of services sales

     63.5     64.1
  

 

 

   

 

 

 

Costs of sales

     54.6     55.1
  

 

 

   

 

 

 

Gross margin

     45.4     44.9
  

 

 

   

 

 

 

Selling, general and administrative expenses

     17.1     18.1

Research and development expenditures

     9.8     10.4

Other charges

     0.2     2.1

Intangibles amortization

     2.6     2.0
  

 

 

   

 

 

 

Operating earnings

     15.6     12.3
  

 

 

   

 

 

 

Other income (expense):

    

Interest expense, net

     (3.7 )%      (3.9 )% 

Gains (losses) on sales of investments and businesses, net

     0.1     (0.8 )% 

Other

     (0.3 )%      (0.4 )% 
  

 

 

   

 

 

 

Total other expense

     (3.9 )%      (5.1 )% 
  

 

 

   

 

 

 

Net earnings before income taxes

     11.7     7.2

Income tax expense

     4.1     2.4
  

 

 

   

 

 

 

Net earnings

     7.6     4.8
  

 

 

   

 

 

 

Less: Earnings attributable to noncontrolling interests

     0.1     —  

Net earnings attributable to Motorola Solutions, Inc.

     7.5     4.7
  

 

 

   

 

 

 

 

* Percentages may not add up due to rounding


GAAP-3

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In millions)

 

     July 1, 2017     December 31, 2016  

Assets

    

Cash and cash equivalents

   $ 742     $ 967  

Restricted cash

     63       63  
  

 

 

   

 

 

 

Total cash and cash equivalents

     805       1,030  
  

 

 

   

 

 

 

Accounts receivable, net

     1,211       1,410  

Inventories, net

     391       273  

Other current assets

     804       755  
  

 

 

   

 

 

 

Total current assets

     3,211       3,468  
  

 

 

   

 

 

 

Property, plant and equipment, net

     859       789  

Investments

     248       238  

Deferred income taxes

     2,160       2,219  

Goodwill

     749       728  

Intangible Assets

     868       821  

Other assets

     200       200  
  

 

 

   

 

 

 

Total assets

   $ 8,295     $ 8,463  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current portion of long-term debt

   $ 46     $ 4  

Accounts payable

     440       553  

Accrued liabilities

     1,924       2,111  
  

 

 

   

 

 

 

Total current liabilities

     2,410       2,668  
  

 

 

   

 

 

 

Long-term debt

     4,421       4,392  

Other liabilities

     2,440       2,355  

Total Motorola Solutions, Inc. stockholders’ equity (deficit)

     (988     (964

Noncontrolling interests

     12       12  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 8,295     $ 8,463  
  

 

 

   

 

 

 

Financial Ratios:

    

Net cash (debt)*

   $ (3,662   $ (3,366

 

* Net cash (debt) = 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  
     July 1, 2017     July 2, 2016  

Operating

    

Net earnings attributable to Motorola Solutions, Inc.

   $ 131     $ 107  

Earnings attributable to noncontrolling interests

     1       1  
  

 

 

   

 

 

 

Net earnings

     132       108  

Adjustments to reconcile Net earnings to Net cash provided by operating activities:

    

Depreciation and amortization

     86       82  

Non-cash other charges

     6       24  

Non-U.S. pension settlement loss

     16       —    

Share-based compensation expense

     16       18  

Losses (gains) on sales of investments and businesses, net

     1       (1

Deferred income taxes

     40       35  

Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:

    

Accounts receivable

     (117     50  

Inventories

     (43     2  

Other current assets

     38       (22

Accounts payable and accrued liabilities

     (33     1  

Other assets and liabilities

     31       (5
  

 

 

   

 

 

 

Net cash provided by operating activities

     173       292  
  

 

 

   

 

 

 

Investing

    

Acquisitions and investments, net

     (34     (67

Proceeds from sales of investments and businesses, net

     19       72  

Capital expenditures

     (53     (91

Proceeds from sales of property, plant and equipment

     —         46  
  

 

 

   

 

 

 

Net cash used for investing activities

     (68     (40
  

 

 

   

 

 

 

Financing

    

Repayment of debt

     (5     (1

Proceeds from financing through capital leases

     7       —    

Issuance of common stock

     6       (1

Purchase of common stock

     (80     (555

Payment of dividends

     (77     (72

Payment of dividend to non-controlling interest

     (2     —    
  

 

 

   

 

 

 

Net cash used for financing activities

     (151     (629
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     22       (18
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (24     (395

Cash and cash equivalents, beginning of period

     829       1,940  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 805     $ 1,545  
  

 

 

   

 

 

 

Financial Ratios:

    

Free cash flow*

   $ 120     $ 201  

 

* 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  
     July 1, 2017     July 2, 2016  

Operating

    

Net earnings attributable to Motorola Solutions, Inc.

   $ 208     $ 124  

Earnings attributable to noncontrolling interests

     2       1  
  

 

 

   

 

 

 

Net earnings

     210       125  

Adjustments to reconcile Net earnings to Net cash provided by operating activities:

    

Depreciation and amortization

     166       144  

Non-cash other charges

     21       35  

Non-U.S. pension settlement loss

     25       —    

Share-based compensation expense

     33       35  

Losses (gains) on sales of investments and businesses, net

     (2     20  

Deferred income taxes

     63       71  

Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:

    

Accounts receivable

     251       327  

Inventories

     (112     (2

Other current assets

     (21     (65

Accounts payable and accrued liabilities

     (340     (362

Other assets and liabilities

     21       (24
  

 

 

   

 

 

 

Net cash provided by operating activities

     315       304  
  

 

 

   

 

 

 

Investing

    

Acquisitions and investments, net

     (140     (1,120

Proceeds from sales of investments and businesses, net

     72       553  

Capital expenditures

     (121     (143

Proceeds from sales of property, plant and equipment

     —         46  
  

 

 

   

 

 

 

Net cash used for investing activities

     (189     (664
  

 

 

   

 

 

 

Financing

    

Repayment of debt

     (6     (2

Net proceeds from issuance of debt

     —         673  

Proceeds from financing through capital leases

     7       —    

Issuance of common stock

     28       40  

Purchase of common stock

     (258     (619

Payment of dividends

     (154     (143

Payment of dividend to non-controlling interest

     (2     —    
  

 

 

   

 

 

 

Net cash used for financing activities

     (385     (51
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     34       (24
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (225     (435

Cash and cash equivalents, beginning of period

     1,030       1,980  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 805     $ 1,545  
  

 

 

   

 

 

 

Financial Ratios:

    

Free cash flow*

   $ 194     $ 161  

 

* 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        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 848     $ 801       6

Services

     649       629       3
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 1,497     $ 1,430       5
  

 

 

   

 

 

   
     Six Months Ended        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 1,551     $ 1,503       3

Services

     1,226       1,120       9
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 2,777     $ 2,623       6
  

 

 

   

 

 

   

Operating Earnings

 
     Three Months Ended        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 168     $ 129       30

Services

     89       95       (6 )% 
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 257     $ 224       15
  

 

 

   

 

 

   
     Six Months Ended        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 257     $ 179       44

Services

     176       144       22
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 433     $ 323       34
  

 

 

   

 

 

   

Operating Earnings %

 
     Three Months Ended        
     July 1, 2017     July 2, 2016        

Products

     19.8     16.1  

Services

     13.7     15.1  

Total Motorola Solutions

     17.2     15.7  
  

 

 

   

 

 

   
     Six Months Ended        
     July 1, 2017     July 2, 2016        

Products

     16.6     11.9  

Services

     14.4     12.9  

Total Motorola Solutions

     15.6     12.3  
  

 

 

   

 

 

   


Non-GAAP-1

Motorola Solutions, Inc. and Subsidiaries

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

 

Q1 2017

 

Non-GAAP Adjustments

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

Share-based compensation expense

     Cost of sales, SG&A and R&D     $ 17     $ 6     $ 11     $ 0.06  

Reorganization of business charges

     Cost of sales and Other charges       19       4       15       0.09  

Intangibles amortization expense

     Intangibles amortization       36       9       27       0.16  

Gain on legal settlement

     Other charges       (42     (16     (26     (0.15

Building impairment

     Other charges       8       —         8       0.05  

Non-US pension settlement loss

     Other charges       9       —         9       0.05  

Sale of investments

    
Sale of Investment or Business
(Gain) or Loss
 
 
    (3     (1     (2     (0.01

Acquisition-related transaction fees

     Other charges       1       —         1       0.01  
    

 

 

   

 

 

   

 

 

   

 

 

 

Total impact on Net earnings

     $ 45     $ 2     $ 43     $ 0.26  

Q2 2017

 

Non-GAAP Adjustments

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

Share-based compensation expense

     Cost of sales, SG&A and R&D     $ 16     $ 5     $ 11     $ 0.07  

Reorganization of business charges

     Cost of sales and Other charges       3       —         3       0.02  

Intangibles amortization expense

     Intangibles amortization       37       9       28       0.17  

Non-US pension settlement loss

     Other charges       16       —         16       0.08  

Legal settlement

     Other charges       (1     —         (1     (0.01

Sale of business

    
Sale of Investment or Business
(Gain) or Loss
 
 
    1       —         1       0.01  
    

 

 

   

 

 

   

 

 

   

 

 

 

Total impact on Net earnings

     $ 72     $ 14     $ 58     $ 0.34  


Non-GAAP-2

Motorola Solutions, Inc. and Subsidiaries

Non-GAAP Segment Information

(In millions)

 

Net Sales

 
     Three Months Ended        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 848     $ 801       6

Services

     649       629       3
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 1,497     $ 1,430       5
  

 

 

   

 

 

   
     Six Months Ended        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 1,551     $ 1,503       3

Services

     1,226       1,120       9
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 2,777     $ 2,623       6
  

 

 

   

 

 

   

Non-GAAP Operating Earnings

 
     Three Months Ended        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 193     $ 176       10

Services

     135       148       (9 )% 
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 328     $ 324       1
  

 

 

   

 

 

   
     Six Months Ended        
     July 1, 2017     July 2, 2016     % Change  

Products

   $ 294     $ 260       13

Services

     258       230       12
  

 

 

   

 

 

   

Total Motorola Solutions

   $ 552     $ 490       13
  

 

 

   

 

 

   

Non-GAAP Operating Earnings %

 
     Three Months Ended        
     July 1, 2017     July 2, 2016        

Products

     22.8     22.0  

Services

     20.8     23.5  

Total Motorola Solutions

     21.9     22.7  
  

 

 

   

 

 

   
     Six Months Ended        
     July 1, 2017     July 2, 2016        

Products

     19.0     17.3  

Services

     21.0     20.5  

Total Motorola Solutions

     19.9     18.7  
  

 

 

   

 

 

   


Non-GAAP-3

Motorola Solutions, Inc. and Subsidiaries

Operating Earnings after Non-GAAP Adjustments

 

Q1 2017

 
     TOTAL     Products     Services  

Net sales

   $ 1,281     $ 703     $ 578  

Operating earnings (“OE”)

   $ 176     $ 89     $ 87  
  

 

 

   

 

 

   

 

 

 

Above-OE non-GAAP adjustments:

      

Share-based compensation expense

     17       11       6  

Reorganization of business charges

     19       13       6  

Intangibles amortization expense

     36       6       30  

Acquisition-related transaction fees

     1       —         1  

Gain on legal settlement

     (42     (30     (12

Building impairment

     8       6       2  

Non-US pension settlement loss

     9       6       3  
  

 

 

   

 

 

   

 

 

 

Total above-OE non-GAAP adjustments

     48       12       36  
  

 

 

   

 

 

   

 

 

 

Operating earnings after non-GAAP adjustments

   $ 224     $ 101     $ 123  
  

 

 

   

 

 

   

 

 

 

Operating earnings as a percentage of net sales - GAAP

     13.7     12.7     15.1

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

     17.5     14.4     21.3

Q2 2017

 
     TOTAL     Products     Services  

Net sales

   $ 1,497     $ 848     $ 649  

Operating earnings (“OE”)

   $ 257     $ 168     $ 89  
  

 

 

   

 

 

   

 

 

 

Above-OE non-GAAP adjustments:

      

Share-based compensation expense

     16       11       5  

Reorganization of business charges

     3       3       —    

Intangibles amortization expense

     37       1       36  

Legal Settlement

     (1     (1     —    

Non-US pension settlement loss

     16       11       5  
  

 

 

   

 

 

   

 

 

 

Total above-OE non-GAAP adjustments

     71       25       46  
  

 

 

   

 

 

   

 

 

 

Operating earnings after non-GAAP adjustments

   $ 328     $ 193     $ 135  
  

 

 

   

 

 

   

 

 

 

Operating earnings as a percentage of net sales - GAAP

     17.2     19.8     13.7

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

     21.9     22.8     20.8