Announces $5 billion increase to share
repurchase program
- Sales of $1.4 billion, down 5 percent
from a year ago
- GAAP earnings per share (EPS) from
continuing operations* of $0.27
- Non-GAAP** EPS from continuing
operations of $0.62
- Returned $728 million to shareholders
through share repurchases and cash dividends, including the
repurchase of $650 million of stock in the third quarter
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings
results for the third quarter of 2014. Click here for a printable
news release and financial tables.
SHARE REPURCHASE AUTHORIZATION
Today, the company also announced that its board of directors
has approved a $5 billion increase to the share repurchase program
following receipt of $3.45 billion from the sale of its Enterprise
business, raising the total authorization since July 2011 to $12
billion. Under the company’s previously authorized $7 billion share
repurchase program, $600 million remained as of the end of the
third quarter of 2014. The company may continue to repurchase
shares from time to time in the open market or in other privately
negotiated transactions, subject to market conditions.
SUPPORTING QUOTE
“We are encouraged by third-quarter revenues and earnings as the
business continues to show signs of improvement,” said Greg Brown,
chairman and CEO, Motorola Solutions. “Additionally, our actions to
simplify our operations and remove costs continue to yield
sustainable operating expense reductions, which will further
position us for long-term success.”
KEY FINANCIAL RESULTS
Third Quarter Change
2014 2013 Motorola Solutions, Inc.
Sales ($M)
$1,436
$1,517 -5% GAAP Operating
earnings ($M)
$207 $246 -16% Percent of sales
14.4% 16.2% EPS from continuing
operations
$0.27 $0.98 -72% Non-GAAP
Operating earnings ($M)
$259
$296 -13% Percent of sales
18.0% 19.5%
EPS from continuing operations
$0.62 $1.08
-43%
Segments
Products
Sales ($M)
$921 $998 -8% GAAP operating
earnings ($M)
$141 $171 -18% Percent of sales
15.3% 17.1% Non-GAAP operating earnings
($M)
$175 $204 -14% Percent of sales
19.0% 20.4%
Services Sales ($M)
$515
$519 -1% GAAP operating earnings ($M)
$66
$75 -12% Percent of sales
12.8% 14.5%
Non-GAAP operating earnings ($M)
$84
$92 -9% Percent of sales
16.3% 17.7%
Non-GAAP financial information excludes after-tax charges of
approximately $0.35 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
- Revenue – Sales declined 5
percent to $1.4 billion primarily reflecting lower sales in North
America and Asia-Pacific. Product sales declined 8 percent driven
primarily by lower devices revenues, while Services declined 1
percent.
- Operating margin – GAAP
operating margin was 14.4 percent of sales; non-GAAP operating
margin was 18.0 percent. These results include $43 million in lower
operating expenses compared with the third quarter of 2013
primarily due to ongoing cost-reduction initiatives.
- Taxes – The 2014 GAAP
effective tax rate was 56 percent driven by a one-time $55 million
adjustment. This compares with a favorable tax rate of -4 percent
in the third quarter of 2013. The 2014 non-GAAP tax rate was 33
percent, compared with a favorable tax rate of -3 percent in the
third quarter of 2013. The GAAP and non-GAAP tax rates in the third
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
used $115 million in operating cash from continuing operations
during the quarter largely driven by a $397 million contribution
related to the U.S. pension plan transactions announced on Sept.
25, 2014.
KEY HIGHLIGHTS
- Reduced funding volatility associated
with U.S. pension plan while preserving benefits for retirees
through actions that cut pension liability by one-half, or $4.2
billion; the company expects no U.S. pension plan cash contribution
requirements for the next five to six years
- Secured significant projects including
a $33 million statewide public safety system expansion with the
state of Maryland, and two command and control solutions that
include multi-year lifecycle services: $16 million with Loudoun
County, Virginia, and $8 million Spartanburg County, South
Carolina
- Extended leadership in two key growth
areas, including:
- Public safety
long-term evolution (LTE): a $21 million services project
for the Los Angeles Regional Interoperable Communications System
Authority (LA-RICS) network, as well as a $10-15 million project
resulting from an agreement that Harris County, Texas, reached with
FirstNet to move forward with the expansion of its public safety
LTE deployment
- Smart public
safety: project with the city of Elgin, Illinois, for a
Real-Time Crime Center solution that enables access to existing
video feeds, computer-aided dispatch records and other systems to
drive proactive policing and improve situational awareness at the
command center
- Demonstrated commitment to U.S.
national public safety broadband LTE network with introduction of
enhanced VML750 LTE Vehicle Modem, which enables roaming between
public and private networks for enhanced interoperability
BUSINESS OUTLOOK***
- Fourth quarter 2014 –
Motorola Solutions expects a revenue decline of 1 to 3 percent
compared with the fourth quarter of 2013, with non-GAAP earnings
per share from continuing operations in the range of $1.13 to $1.19
per share. This is consistent with the company’s prior full-year
outlook of low- to mid-single digit revenue decline, excluding
iDEN.
- Cost reductions – The
company is ahead of schedule with operating cost reductions,
expecting to achieve more than $200 million in savings in 2014 and
on track to achieve 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 Oct. 27, Motorola Solutions closed the sale of its Enterprise
business to Zebra Technologies, and the Enterprise business is
reflected as discontinued operations. Sales from discontinued
operations were $605 million in the third quarter of 2014 compared
with $595 million in the year-ago quarter. The sales increase
reflects strength in both North America and Europe, while supply
chain and IT execution issues that had an unfavorable impact on
second-quarter 2014 sales were addressed during the quarter.
CONFERENCE CALL AND WEBCAST
Motorola Solutions will host its quarterly conference call
beginning at 7 a.m. U.S. Central Standard Time (8 a.m. U.S. Eastern
Standard Time) Tuesday, Nov. 4. The conference call will be webcast
live with audio and slides at
www.motorolasolutions.com/investor.
CONSOLIDATED GAAP RESULTS
A comparison of results from operations is as follows:
Third Quarter
2014
2013
Net sales ($M) $1,436 $1,517 Gross margin ($M) 685
765 Operating earnings ($M) 207 246 Earnings from continuing
operations ($M) 66 261 Diluted
EPS from continuing operations $0.27 $0.98
Weighted average diluted common shares outstanding
248.2 265.3
HIGHLIGHTED ITEMS AND SHARE-BASED COMPENSATION
EXPENSE
The table below includes highlighted items and share-based
compensation expense for the third quarter of 2014.
Third
Quarter
(per diluted common share)
2014
GAAP Earnings from Continuing
Operations $0.27
Highlighted Items: Tax
expense to establish foreign valuation allowance 0.22 Loss from the
extinguishment of long-term debt 0.09 Reorganization of business
charges 0.06 Share-based compensation expense 0.06 Pension-related
transaction fees 0.03 Gain on investment (0.04) Revaluation of
deferred taxes from change in effective state tax rates
(0.07)
Total Highlighted Items 0.35
Non-GAAP Diluted EPS from Continuing Operations
$0.62
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.
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 fourth quarter and full year of 2014,
cost reduction targets and the reduction of U.S. pension plan cash
contributions. 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 June 30, 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; (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; (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; and (22)
the company’s ability to return proceeds of the sale of the
Enterprise business to 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 public safety and
commercial 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.
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 September 27,
2014 September 28, 2013 Net sales from products $ 921 $
998 Net sales from services 515 519 Net
sales 1,436 1,517 Costs of products sales 414 423 Costs of
services sales 337 329 Costs of sales
751 752 Gross margin 685 765
Selling, general and administrative expenses 287 320
Research and development expenditures 166 183 Other charges 24 16
Intangibles amortization 1 - Operating
earnings 207 246 Other income
(expense): Interest expense, net: (31 ) (29 ) Gains on sales of
investments and businesses, net 1 26 Other (26 ) 8
Total other income (expense) (56 ) 5
Earnings from continuing operations before income taxes 151 251
Income tax expense (benefit) 84 (11 ) Earnings
from continuing operations 67 262 Earnings from discontinued
operations, net of tax 81 46 Net
earnings 148 308 Less: Earnings attributable to
noncontrolling interests 1 1 Net
earnings attributable to Motorola Solutions, Inc. $ 147 $
307 Amounts attributable to Motorola Solutions, Inc.
common shareholders Earnings from continuing operations, net of tax
$ 66 $ 261 Earnings from discontinued operations, net of tax
81 46 Net earnings attributable to Motorola
Solutions, Inc. $ 147 $ 307
Earnings per common
share
Basic: Continuing operations $ 0.27 $ 1.00 Discontinued operations
0.33 0.17 $ 0.60 $ 1.17
Diluted: Continuing operations $ 0.27 $ 0.98 Discontinued
operations 0.32 0.18 $ 0.59 $
1.16
Weighted average
common shares outstanding
Basic 246.3 262.2 Diluted 248.2 265.3
Percentage of Net Sales* Net sales from
products 64.1 % 65.8 % Net sales from services 35.9 %
34.2 % Net sales 100 % 100 % Costs of products
sales 45.0 % 42.4 % Costs of services sales 65.4 %
63.4 % Costs of sales 52.3 % 49.6 % Gross margin
47.7 % 50.4 % Selling, general and
administrative expenses 20.0 % 21.1 % Research and development
expenditures 11.6 % 12.1 % Other charges 1.7 % 1.1 % Intangibles
amortization 0.1 % 0.0 % Operating earnings
14.4 % 16.2 % Other income (expense): Interest
expense, net: -2.2 % -1.9 % Gains on sales of investments and
businesses, net 0.1 % 1.7 % Other -1.8 % 0.5 % Total
other income (expense) -3.9 % 0.3 % Earnings from
continuing operations before income taxes 10.5 % 16.5 % Income tax
expense (benefit) 5.8 % -0.7 % Earnings from
continuing operations 4.7 % 17.3 % Earnings from discontinued
operations, net of tax 5.6 % 3.0 % Net earnings 10.3
% 20.3 % Less: Earnings attributable to noncontrolling
interests 0.1 % 0.1 % Net earnings attributable to
Motorola Solutions, Inc. 10.2 % 20.2 % *
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)
Nine Months Ended September 27, 2014
September 28, 2013 Net sales from products $ 2,561 $ 2,897
Net sales from services 1,497 1,513 Net
sales 4,058 4,410 Costs of products sales 1,165 1,262 Costs
of services sales 974 940 Costs of
sales 2,139 2,202 Gross margin 1,919
2,208 Selling, general and administrative
expenses 902 984 Research and development expenditures 516 565
Other charges 46 36 Intangibles amortization 3
1 Operating earnings 452 622
Other income (expense): Interest expense, net: (85 ) (85 )
Gains on sales of investments and businesses, net 4 34 Other
(34 ) 3 Total other expense (115 ) (48
) Earnings from continuing operations before income taxes 337 574
Income tax expense (benefit) 107 (72 )
Earnings from continuing operations 230 646 Earnings from
discontinued operations, net of tax 869 116
Net earnings 1,099 762 Less: Earnings attributable to
noncontrolling interests 1 5 Net
earnings attributable to Motorola Solutions, Inc. $ 1,098 $
757 Amounts attributable to Motorola Solutions, Inc.
common shareholders Earnings from continuing operations, net of tax
$ 229 $ 641 Earnings from discontinued operations, net of tax
869 116 Net earnings attributable to
Motorola Solutions, Inc. $ 1,098 $ 757
Earnings per common
share
Basic: Continuing operations $ 0.91 $ 2.39 Discontinued operations
3.46 0.43 $ 4.37 $ 2.82
Diluted: Continuing operations $ 0.90 $ 2.34 Discontinued
operations 3.42 0.43 $ 4.32 $
2.77
Weighted average
common shares outstanding
Basic 251.1 268.7 Diluted 254.0 273.5
Percentage of Net Sales*
Net sales from products 63.1 % 65.7 % Net sales from services
36.9 % 34.3 % Net sales 100 % 100 %
Costs of products sales 45.5 % 43.6 % Costs of services
sales 65.1 % 62.1 % Costs of sales 52.7 % 49.9 %
Gross margin 47.3 % 50.1 %
Selling, general and administrative expenses 22.2 % 22.3 % Research
and development expenditures 12.7 % 12.8 % Other charges 1.1 % 0.8
% Intangibles amortization 0.1 % 0.0 % Operating
earnings 11.1 % 14.1 % Other income (expense):
Interest expense, net: -2.1 % -1.9 % Gains on sales of investments
and businesses, net 0.1 % 0.8 % Other -0.8 % 0.1 %
Total other expense -2.8 % -1.1 % Earnings from
continuing operations before income taxes 8.3 % 13.0 % Income tax
expense (benefit) 2.6 % -1.6 % Earnings from
continuing operations 5.7 % 14.6 % Earnings from
discontinued operations, net of tax 21.4 % 2.6 % Net
earnings 27.1 % 17.3 % Less: Earnings attributable to
noncontrolling interests 0.0 % 0.1 % Net earnings
attributable to Motorola Solutions, Inc. 27.1 % 17.2
% * Percentages may not add up due to rounding
GAAP-3 Motorola
Solutions, Inc. and Subsidiaries Condensed Consolidated
Balance Sheets (In millions) September
27, December 31, 2014 2013 Assets Cash and
cash equivalents $ 2,845 $ 3,225 Accounts receivable, net 1,162
1,369 Inventories, net 331 347 Deferred income taxes 1,192 451
Other current assets 604 635 Current assets held for sale
1,034 993 Total current assets 7,168
7,020 Property, plant and equipment, net 664 695
Investments 240 232 Deferred income taxes 2,141 1,990 Goodwill 383
361 Other assets 138 89 Noncurrent assets held for sale
1,461 1,464
Total assets $
12,195 $ 11,851 Liabilities and
Stockholders' Equity Current portion of long-term debt $ 4 $ 4
Accounts payable 501 583 Accrued liabilities 1,673 1,763 Current
liabilities held for sale 846 870 Total
current liabilities 3,024 3,220
Long-term debt 3,401 2,457 Other liabilities 2,364 2,314 Noncurrent
liabilities held for sale 164 171 Total Motorola Solutions,
Inc. stockholders' equity 3,211 3,659 Noncontrolling
interests 31 30
Total
liabilities and stockholders' equity $ 12,195
$ 11,851 Financial Ratios: Net
cash* $ (560 ) $ 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
September 27, 2014 September 28, 2013
Operating Net earnings attributable to Motorola Solutions,
Inc. $ 147 $ 307 Earnings attributable to noncontrolling interests
1 1 Net earnings 148 308 Earnings from
discontinued operations, net of tax 81 46
Earnings from continuing operations, net of tax 67 262
Adjustments to reconcile Earnings from continuing operations to Net
cash provided by operating activities: Depreciation and
amortization 45 40 Loss on extinguishment of debt 37 - Non-cash
other charges (income) 2 (4 ) Share-based compensation expense 20
29 Gains on sales of investments and businesses, net (1 ) (28 )
Deferred income taxes 63 (115 ) Changes in assets and liabilities,
net of effects of acquisitions and dispositions: Accounts
receivable 12 (59 ) Inventories (5 ) (23 ) Other current assets (85
) 35 Accounts payable and accrued liabilities 128 (22 ) Other
assets and liabilities (398 ) (39 ) Net cash provided
by (used for) operating activities from continuing operations
(115 ) 76
Investing Acquisitions and
investments, net (11 ) (12 ) Proceeds from sales of investments and
businesses, net 2 27 Capital expenditures (47 ) (31 ) Proceeds from
sales of property, plant and equipment 6 - Proceeds from sales of
Sigma Fund and short-term investments, net -
590 Net cash provided by (used for) investing activities
from continuing operations (50 ) 574
Financing Repayment of debt (458 ) (1 ) Net proceeds from
issuance of debt 1,370 - Issuance of common stock 9 9 Repurchase of
common stock (650 ) (425 ) Excess tax benefit from share-based
compensation 5 2 Payments of dividends (78 ) (69 ) Distributions
from (to) discontinued operations (32 ) 76 Net
cash provided by (used for) financing activities from continuing
operations 166 (408 )
Discontinued
Operations Net cash provided by (used for) operating activities
from discontinued operations (25 ) 76 Net cash provided by (used
for) investing activities from discontinued operations (5 ) 1 Net
cash provided by (used for) financing activities from discontinued
operations 32 (76 ) Effect of exchange rate changes on cash and
cash equivalents from discontinued operations (2 ) (1
) Net cash provided by discontinued operations -
- Effect of exchange rate changes on cash and
cash equivalents from continuing operations (32 ) 22
Net increase (decrease) in cash and cash equivalents (31 )
264 Cash and cash equivalents, beginning of period 2,876
1,457 Cash and cash equivalents, end of period
$ 2,845 $ 1,721
Financial Ratios: Free
cash flow* $ (162 ) $ 45 *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) Nine Months Ended
September 27, 2014 September 28, 2013
Operating Net earnings attributable to Motorola Solutions,
Inc. $ 1,098 $ 757 Earnings attributable to noncontrolling
interests 1 5 Net earnings 1,099 762
Earnings from discontinued operations, net of tax 869
116 Earnings from continuing operations, net of tax
230 646 Adjustments to reconcile Earnings from continuing
operations to Net cash provided by operating activities:
Depreciation and amortization 131 116 Gain on sale of building and
land (21 ) - Loss on extinguishment of debt 37 - Non-cash other
income (2 ) (11 ) Share-based compensation expense 74 91 Gains on
sales of investments and businesses, net (4 ) (34 ) Deferred income
taxes 69 (309 ) Changes in assets and liabilities, net of effects
of acquisitions and dispositions: Accounts receivable 202 19
Inventories 12 (9 ) Other current assets (9 ) 11 Accounts payable
and accrued liabilities (170 ) (501 ) Other assets and liabilities
(534 ) (44 ) Net cash provided by (used for)
operating activities from continuing operations 15
(25 )
Investing Acquisitions and investments, net (21
) (20 ) Proceeds from sales of investments and businesses, net 23
48 Capital expenditures (130 ) (110 ) Proceeds from sales of
property, plant and equipment 30 15 Proceeds from sales of Sigma
Fund and short-term investments, net - 966
Net cash provided by (used for) investing activities from
continuing operations (98 ) 899
Financing Repayment of debt (461 ) (3 ) Net proceeds from
issuance of debt 1,375 593 Issuance of common stock 94 108
Repurchase of common stock (1,123 ) (1,332 ) Excess tax benefit
from share-based compensation 11 20 Payments of dividends (236 )
(212 ) Distributions from discontinued operations 66
214 Net cash used for financing activities from
continuing operations (274 ) (612 )
Discontinued
Operations Net cash provided by operating activities from
discontinued operations 63 228 Net cash provided by (used for)
investing activities from discontinued operations 5 (16 ) Net cash
used for financing activities from discontinued operations (66 )
(214 ) Effect of exchange rate changes on cash and cash equivalents
from discontinued operations (2 ) 2 Net cash
provided by discontinued operations - -
Effect of exchange rate changes on cash and cash equivalents
from continuing operations (23 ) (9 ) Net increase
(decrease) in cash and cash equivalents (380 ) 253 Cash and cash
equivalents, beginning of period 3,225 1,468
Cash and cash equivalents, end of period $ 2,845 $
1,721
Financial Ratios: Free cash flow* $ (115
) $ (135 ) *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 September 27, September 28,
2014 2013 % Change Products $ 921 $ 998
-8 % Services 515 519 -1 % Total
Motorola Solutions $ 1,436 $ 1,517 -5 %
Nine Months Ended September 27,
September 28, 2014 2013 % Change
Products $ 2,561 $ 2,897 -12 % Services 1,497
1,513 -1 % Total Motorola Solutions $ 4,058 $ 4,410
-8 %
Operating Earnings Three
Months Ended September 27, September
28, 2014 2013 % Change Products $
141 $ 171 -18 % Services 66 75 -12 %
Total Motorola Solutions $ 207 $ 246 -16 %
Nine Months Ended September 27,
September 28, 2014 2013 % Change
Products $ 276 $ 402 -31 % Services 176 220
-20 % Total Motorola Solutions $ 452 $ 622 -27
%
Operating Earnings % Three Months
Ended September 27, September 28,
2014 2013 Products 15.3 % 17.1 % Services 12.8 % 14.5
% Total Motorola Solutions 14.4 % 16.2 %
Nine Months Ended September 27,
September 28, 2014 2013 Products 10.8 % 13.9 %
Services 11.8 % 14.5 % Total Motorola Solutions 11.1 %
14.1 %
Non-GAAP-1 Motorola Solutions, Inc. and
Subsidiaries Non-GAAP Adjustments (Intangibles Amortization
Expense, Share-Based Compensation Expense and Highlighted
Items) Q1 2014 PBT Tax
PAT Highlighted Items Statement Line
(Inc)/Exp Inc/(Exp) (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 PBT Tax PAT Highlighted
Items Statement Line (Inc)/Exp Inc/(Exp)
(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
Q3 2014 PBT Tax
PAT Highlighted Items Statement Line
(Inc)/Exp Inc/(Exp) (Inc)/Exp EPS
impact Intangibles amortization expense Intangibles
amortization $ 1 $ - $ 1 $ - Share-based compensation expense Cost
of sales, SG&A and R&D 20 6 14 0.06 Reorganization of
business charges Cost of sales and Other charges 20 6 14 0.06
Pension-related transaction fees Other charges 11 4 7 0.03 Loss
from the extinguishment of long-term debt Other expense (income) 37
14 23 0.09 Gain on investment Other expense (income) (10 ) - (10 )
(0.04 ) Tax expense to establish foreign valuation allowance Income
tax expense - (55 ) 55 0.22 Revaluation of deferred taxes for
change in effective state tax rates Income tax expense - 16 (16 )
(0.07 ) Total impact on Net earnings $
79 $ (9 ) $ 88 $ 0.35
Non-GAAP-2 Motorola
Solutions, Inc. and Subsidiaries Non-GAAP Segment
Information (In millions) Net Sales
Three Months Ended September 27,
September 28, 2014 2013 % Change
Products $ 921 $ 998 -8 % Services 515 519
-1 % Total Motorola Solutions $ 1,436 $ 1,517
-5 %
Nine Months Ended September
27, September 28, 2014 2013 %
Change Products $ 2,561 $ 2,897 -12 % Services 1,497
1,513 -1 % Total Motorola Solutions $ 4,058
$ 4,410 -8 %
Non-GAAP Operating
Earnings Three Months Ended
September 27, September 28, 2014
2013 % Change Products $ 175 $ 204 -14 % Services
84 92 -9 % Total Motorola Solutions $
259 $ 296 -13 %
Nine Months Ended
September 27, September 28,
2014 2013 % Change Products $ 359 $ 492 -27 %
Services 226 268 -16 % Total Motorola
Solutions $ 585 $ 760 -23 %
Non-GAAP
Operating Earnings % Three Months Ended
September 27, September 28, 2014
2013 Products 19.0 % 20.4 % Services 16.3 % 17.7 % Total
Motorola Solutions 18.0 % 19.5 %
Nine
Months Ended September 27, September
28, 2014 2013 Products 14.0 % 17.0 %
Services 15.1 % 17.7 % Total Motorola Solutions 14.4 %
17.2 %
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 %
Q3 2014
TOTAL Products Services Net sales $ 1,436 $
921 $ 515 Operating earnings ("OE") $ 207 $ 141
$ 66 Above-OE non-GAAP adjustments:
Share-based compensation expense 20 11 9 Reorganization of business
charges 20 14 6 Intangibles amortization expense 1 1 -
Pension-related transaction fees 11 8
3 Total above-OE non-GAAP adjustments 52 34 18
Operating earnings after non-GAAP
adjustments $ 259 $ 175 $ 84
Operating earnings as a percentage of net sales -
GAAP 14.4 % 15.3 % 12.8 % Operating earnings as a percentage of net
sales - after non-GAAP adjustments 18.8 % 19.4 %
17.7 %
MEDIA CONTACTKurt EbenhochMotorola Solutions+1
847-576-1341kurt.ebenhoch@motorolasolutions.comorINVESTOR
CONTACTSShep DunlapMotorola Solutions+1
847-576-6899shep.dunlap@motorolasolutions.comorChris KutsorMotorola
Solutions+1 847-576-4995chris.kutsor@motorolasolutions.com
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