Record 2019 sales, cash flow and backlog
bolstered by strong fourth-quarter results
- Revenue of $2.4 billion, up 5% from Q4 in the prior year; up 7%
for full year
- Record backlog of $11.3 billion, up $659 million or 6% from a
year ago
- GAAP earnings per share (EPS) of $1.39, inclusive of a $1.53
per share non-cash charge related to US pension de-risking; $4.95
for full year
- Non-GAAP EPS* of $2.94, up 12%; $7.96 for full year, up
11%
- Generated $795 million in operating cash flow in the quarter;
$1.8 billion for full year
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings
results for the fourth quarter and full year of 2019. Click here
for a printable news release and financial tables.
“Our strong Q4 results capped another year of record sales, cash
flow and backlog," said Greg Brown, chairman and CEO of Motorola
Solutions. “Our momentum, particularly in video security and
software & services, positions us well for another strong
year."
KEY FINANCIAL RESULTS (presented in millions, except per
share data and percentages)
Fourth Quarter
Full Year
Q4 2019
Q4 2018
% Change
2019
2018
% Change
Sales
$2,377
$2,254
5
%
$7,887
$7,343
7
%
GAAP
Operating Earnings
$590
$516
14
%
$1,581
$1,255
26
%
% of Sales
24.8%
22.9%
20.0%
17.1%
EPS
$1.39
$2.44
(43
)%
$4.95
$5.62
(12
)%
Non-GAAP*
Operating Earnings
$707
$650
9
%
$1,975
$1,740
14
%
% of Sales
29.7%
28.8%
25.0%
23.7%
EPS
$2.94
$2.63
12
%
$7.96
$7.15
11
%
Products and Systems Integration
Segment
Sales
$1,673
$1,670
—
%
$5,329
$5,100
5
%
GAAP Operating Earnings
$426
$405
5
%
$994
$854
16
%
% of Sales
25.5%
24.3%
18.7%
16.7%
Non-GAAP Operating Earnings*
$484
$483
—
%
$1,173
$1,109
6
%
% of Sales
28.9%
28.9%
22.0%
21.7%
Software and Services Segment
Sales
$704
$584
21
%
$2,558
$2,243
14
%
GAAP Operating Earnings
$164
$111
48
%
$587
$401
46
%
% of Sales
23.3%
19.0%
22.9%
17.9%
Non-GAAP Operating Earnings*
$223
$167
34
%
$802
$631
27
%
% of Sales
31.7%
28.6%
31.4%
28.1%
*Q4 Non-GAAP financial information excludes the after-tax impact
of approximately $1.55 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.
OTHER SELECT FOURTH-QUARTER FINANCIAL RESULTS
- Revenue - Fourth-quarter revenue was $2.4 billion, up
$123 million or 5% primarily on strength in the Americas. Revenue
from acquisitions was $82 million and currency headwinds were $17
million. The Products and Systems Integration segment was flat with
growth in the Americas and AsiaPac offset by declines in EMEA
related to large LMR deployments in the Middle East and Africa in
the prior year. The Software and Services segment grew 21% with
growth in all regions.
- Operating earnings - GAAP operating margin was
24.8% of sales compared with 22.9% in the year-ago quarter driven
by higher sales and gross margin in the current quarter and higher
costs related to the closure of certain supply chain operations in
Europe in the prior year, partially offset by higher operating
expenses related to acquisitions. Non-GAAP operating margin was
29.7% of sales, up from 28.8% in the year-ago quarter due to higher
sales and gross margins, partially offset by higher operating
expenses related to acquisitions.
- Other charges - The company de-risked $1 billion in
pension obligations through a lump-sum window offered to certain
participants of the U.S. Pension Plan. Approximately $836 million
was paid out of pension plan assets to the participants who elected
lump sums as part of this offer. The Company recorded a non-cash
GAAP charge of $359 million in 2019 as a result of this initiative,
representing the write-off of pension losses previously deferred
within equity.
- Taxes- The GAAP effective tax rate was (26.4)%, compared
to 8.8% in the year-ago quarter. The year over year decline in the
GAAP rate was primarily due to lower profit before tax as a result
of the $359 million U.S. pension settlement charge taken in the
current quarter. The Non-GAAP effective tax rate was 22%, compared
to 23.5% in the year-ago quarter.
- Cash flow - The company generated $795 million in
operating cash, compared with $812 million in the year-ago quarter.
Free cash flow was $736 million, compared with $743 million in the
year-ago quarter. The year over year decline in cash flow was
primarily driven by changes in working capital in the current
quarter, partially offset by higher operating earnings in the
current quarter.
OTHER SELECT FULL-YEAR FINANCIAL RESULTS
- Revenue - Full-year revenue was $7.9 billion, up $544
million, or 7% driven by growth in the Americas. Revenue from
acquisitions was $312 million and currency headwinds were $113
million. The Products and Systems Integration segment grew 5%
driven by the Americas. The Software and Services segment grew 14%
driven by growth in the Americas and EMEA.
- Operating earnings - For the full year, GAAP
operating margin was 20% of revenue, compared with 17.1% for the
prior year. The increase was primarily driven by higher revenue and
gross margin in the current year as well as an increase to an
existing environmental reserve related to a legacy business booked
in the prior year, partially offset by higher operating expenses
related to acquisitions in the current year. Non-GAAP operating
margin was 25% of revenue, compared with 23.7% for the prior year,
driven by higher revenue and gross margin, partially offset by
higher operating expenses related to acquisitions.
- Taxes- The 2019 GAAP effective tax rate was 13%,
compared to 12% for the prior year. The Non-GAAP effective tax rate
was 22.4% compared with 21.7% in the previous year.
- Cash flow - The company generated $1.8 billion in
operating cash, up $748 million from the prior year. Free cash flow
was $1.6 billion, up $697 million from the prior year. The increase
in cash flow was driven by the impact of the $500 million debt
funded pension contribution made in Q1 2018 and higher revenue and
associated operating earnings in the current year.
- Backlog - The company ended the quarter with record
backlog of $11.3 billion, up $659 million from the year-ago
quarter. Software and Services segment backlog was up 9% or $699
million, primarily driven by growth in the Americas and the
extension of the ESN contract. Products and System Integrations
segment backlog was down 1% or $40 million due to declines in EMEA
and AsiaPac, partially offset by growth in the Americas.
- Capital Allocation - The company invested $709 million
in acquisitions, paid $379 million in dividends, and repurchased
$315 million of its common stock at an average price of $137.35 per
share.
NOTABLE WINS & ACHIEVEMENTS
Software and Services
- $68 million P25 multi-year service contract with State of
Victoria, Australia
- $29 million P25 multi-year service contract with the state of
Connecticut
- $24 million P25 multi-year service contract with the U.S.
Navy
- $8 million for a Command Center Software suite order from
Tulare County, California
- $6 million for a Command Center Software suite order from
Irvine, California
- $6 million for a Computer Aided Dispatch system for city of
Atlanta, Georgia
Products and Systems
Integration
- $64 million P25 order for the State of Arkansas
- $36 million P25 order for Thurston County, Washington
- $24 million P25 order for Luzerne County, Pennsylvania
- $5 million in fixed video security wins for government
customers
- Launched APX Next, our next-generation P25 radio
- Launched Avigilon AI-powered H5 camera line
BUSINESS OUTLOOK
- First-quarter 2020 - The Company expects revenue growth
of approximately 2% compared with the first quarter of 2019. The
company expects non-GAAP earnings per share in the range of $1.30
to $1.35 per share. This assumes current foreign exchange rates,
approximately 176 million fully diluted shares, and a 20% effective
tax rate.
- Full-year 2020 - The company expects revenue growth of
approximately 4% and non-GAAP earnings per share in the range of
$8.65 to $8.80 per share. This assumes current foreign exchange
rates, between 176 and 177 million fully diluted shares and a
non-GAAP effective tax rate of approximately 23%.
CONFERENCE CALL AND WEBCAST Motorola Solutions will host
its quarterly conference call beginning at 4 p.m. U.S. Central
Standard Time (5 p.m. U.S. Eastern Standard Time) Thursday, Feb 6.
The conference call will be webcast live with audio and slides at
www.motorolasolutions.com/investor.
CONSOLIDATED GAAP RESULTS (presented in millions,
except per share data)
A comparison of results from operations is as follows:
Fourth Quarter
Full Year
2019
2018
2019
2018
Net sales
$2,377
$2,254
$7,887
$7,343
Gross margin
1,220
1,088
3,931
3,480
Operating earnings
590
516
1,581
1,255
Amounts attributable to Motorola
Solutions, Inc. common stockholders
Net earnings
244
423
868
966
Diluted EPS from continuing operations
$1.39
$2.44
$4.95
$5.62
Weighted average diluted common shares
outstanding
175.6
173.4
175.6
172.0
HIGHLIGHTED ITEMS
The table below includes specific share-based compensation
expense, intangible amortization, and other highlighted items for
the fourth-quarter of 2019.
(per diluted common share)
Q4 2019
GAAP Earnings
$1.39
Highlighted Items:
US pension settlement loss
1.53
Intangibles amortization
expense
0.24
Share-based compensation
expense
0.14
Reorganization of business
charges
0.08
Legal settlements
0.04
Operating lease asset
impairment
0.02
Investment impairments
0.01
Sale of investments
(0.01
)
Release of uncertain tax
positions
(0.03
)
Fair value adjustments to equity
investments
(0.03
)
Release of valuation allowance on
deferred tax assets
(0.44
)
Non-GAAP Diluted EPS
$2.94
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 charges, certain non-cash pension
adjustments, legal settlements and other contingencies, gains and
losses on investments and businesses, 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.
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.
Free cash flow: Free cash flow represents operating cash flow
less capital expenditures. We believe that free cash flow is also
useful to investors as the basis for comparing our performance and
coverage ratios with other companies in our industries, although
our measure of free cash flow may not be directly comparable to
similar measures used by other companies.
Organic Revenue: Organic revenue reflects net sales calculated
under GAAP excluding net sales from acquired business owned for
less than four full quarters. The company believes non-GAAP organic
revenue growth provides useful information for evaluating the
periodic growth of the business on a consistent basis and provides
for a meaningful period-to-period comparison and analysis of trends
in the business.
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.
The company has not quantitatively reconciled its guidance for
non-GAAP metrics to their most comparable GAAP measure because the
company does not provide specific guidance for the various
reconciling items as certain items that impact these measures have
not occurred, are out of the company’s control, or cannot be
reasonably predicted. Accordingly, a reconciliation to the most
comparable GAAP financial metric is not available without
unreasonable effort. Please note that the unavailable reconciling
items could significantly impact the company’s results.
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 first quarter and full year of 2020.
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’ 2018 Annual Report on Form 10-K, page 45 in Item 1A of
Motorola Solutions’ 2019 Third Quarter Report on Form 10-Q 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)
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; (6) 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; (7) 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; (8) the outcome of ongoing and future tax
matters; (9) 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; (10) risks related to dependence
on certain key suppliers, subcontractors, third-party distributors
and other representatives; (11) the impact on the company's
performance and financial results from strategic acquisitions or
divestitures; (12) risks related to the company's manufacturing and
business operations in foreign countries; (13) the creditworthiness
of the company's customers and distributors, particularly
purchasers of large infrastructure systems; (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 complete acquisitions or 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; and (22) the
company’s ability to settle the par value of its 1.75% 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.
ABOUT MOTOROLA SOLUTIONS
Motorola Solutions is a global leader in mission-critical
communications and analytics. Our technology platforms in
mission-critical communications, command center software, video
security & analytics, bolstered by managed & support
services, make cities safer and help communities and businesses
thrive. At Motorola Solutions, we are ushering in a new era in
public safety and security. Learn more at
www.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. ©2020 Motorola Solutions, Inc.
All rights reserved.
GAAP-1 Motorola Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations (In millions,
except per share amounts) Three Months Ended
December 31, 2019 December 31, 2018 Net sales from
products
$
1,507
$
1,470
Net sales from services
870
784
Net sales
2,377
2,254
Costs of products sales
621
652
Costs of services sales
536
514
Costs of sales
1,157
1,166
Gross margin
1,220
1,088
Selling, general and administrative expenses
368
337
Research and development expenditures
182
165
Other charges
26
22
Intangibles amortization
54
48
Operating earnings
590
516
Other income (expense): Interest expense, net
(55
)
(59
)
Gains on sales of investments and businesses, net
1
(1
)
Other
(343
)
7
Total other expense
(397
)
52
Net earnings before income taxes
193
464
Income tax expense (benefit)
(51
)
40
Net earnings
244
424
Less: Earnings attributable to noncontrolling interests
-
1
Net earnings attributable to Motorola Solutions, Inc.
$
244
$
423
Earnings per common share:
Basic:
$
1.43
$
2.58
Diluted:
$
1.39
$
2.44
Weighted average common shares
outstanding: Basic
170.9
163.5
Diluted
175.6
173.4
Percentage of Net Sales* Net sales from products
63.4
%
65.2
%
Net sales from services
36.6
%
34.8
%
Net sales
100.0
%
100.0
%
Costs of products sales
41.2
%
44.4
%
Costs of services sales
61.6
%
65.6
%
Costs of sales
48.7
%
51.7
%
Gross margin
51.3
%
48.3
%
Selling, general and administrative expenses
15.5
%
15.0
%
Research and development expenditures
7.7
%
7.3
%
Other charges
1.1
%
1.0
%
Intangibles amortization
2.3
%
2.1
%
Operating earnings
24.8
%
22.9
%
Other income (expense): Interest expense, net
(2.3
)%
(2.6
)%
Gains on sales of investments and businesses, net -
%
-
%
Other
(14.4
)%
0.3
%
Total other expense
(16.7
)%
(2.3
)%
Net earnings before income taxes
8.1
%
20.6
%
Income tax expense (benefit)
(2.1
)%
1.8
%
Net earnings
10.3
%
18.8
%
Less: Earnings attributable to noncontrolling interests -
%
-
%
Net earnings attributable to Motorola Solutions, Inc.
10.3
%
18.8
%
* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries Consolidated
Statements of Operations (In millions, except per share
amounts) Years Ended December 31, 2019
December 31, 2018 December 31, 2017 Net sales from
products
$
4,746
$
4,463
$
3,772
Net sales from services
3,141
2,880
2,608
Net sales
7,887
7,343
6,380
Costs of products sales
2,049
2,035
1,686
Costs of services sales
1,907
1,828
1,670
Costs of sales
3,956
3,863
3,356
Gross margin
3,931
3,480
3,024
Selling, general and administrative expenses
1,403
1,254
1,025
Research and development expenditures
687
637
568
Other charges (income)
52
146
(4
)
Intangibles amortization
208
188
151
Operating earnings
1,581
1,255
1,284
Other income (expense): Interest expense, net
(220
)
(222
)
(201
)
Gains on sales of investments and businesses, net
5
16
3
Other
(365
)
53
(10
)
Total other expense
(580
)
(153
)
(208
)
Net earnings before income taxes
1,001
1,102
1,076
Income tax expense
130
133
1,227
Net earnings (loss)
871
969
(151
)
Less: Earnings attributable to noncontrolling interests
3
3
4
Net earnings (loss) attributable to Motorola Solutions, Inc.
$
868
$
966
$
(155
)
Earnings (loss) per common
share: Basic:
$
5.21
$
5.95
$
(0.95
)
Diluted:
$
4.95
$
5.62
$
(0.95
)
Weighted average common shares
outstanding: Basic
166.6
162.4
162.9
Diluted
175.6
172.0
162.9
Percentage of Net Sales* Net sales from products
60.2
%
60.8
%
59.1
%
Net sales from services
39.8
%
39.2
%
40.9
%
Net sales
100.0
%
100.0
%
100.0
%
Costs of products sales
43.2
%
45.6
%
44.7
%
Costs of services sales
60.7
%
63.5
%
64.0
%
Costs of sales
50.2
%
52.6
%
52.6
%
Gross margin
49.8
%
47.4
%
47.4
%
Selling, general and administrative expenses
17.8
%
17.1
%
16.1
%
Research and development expenditures
8.7
%
8.7
%
8.9
%
Other charges
0.7
%
2.0
%
(0.1
)%
Intangibles amortization
2.6
%
2.6
%
2.4
%
Operating earnings
20.0
%
17.1
%
20.1
%
Other income (expense): Interest expense, net
(2.8
)%
(3.0
)%
(3.2
)%
Gains on sales of investments and businesses, net
0.1
%
0.2
%
-
%
Other
(4.6
)%
0.7
%
(0.2
)%
Total other expense
(7.4
)%
(2.1
)%
(3.3
)%
Net earnings before income taxes
12.7
%
15.0
%
16.9
%
Income tax expense
1.6
%
1.8
%
19.2
%
Net earnings (loss)
11.0
%
13.2
%
(2.4
)%
Less: Earnings attributable to noncontrolling interests
-
%
-
%
0.1
%
Net earnings (loss) attributable to Motorola Solutions, Inc.
11.0
%
13.2
%
(2.4
)%
* Percentages may not add up due to rounding
GAAP-3
Motorola Solutions, Inc. and Subsidiaries Consolidated
Balance Sheets (In millions) December 31,
2019 December 31, 2018 Assets Cash and cash equivalents
$
1,001
$
1,257
Accounts receivable, net
1,412
1,293
Contract assets
1,046
1,012
Inventories, net
447
356
Other current assets
272
354
Total current assets
4,178
4,272
Property, plant and equipment, net
992
895
Operating lease assets
554
-
Investments
159
169
Deferred income taxes
943
985
Goodwill
2,067
1,514
Intangible assets
1,327
1,230
Other assets
422
344
Total assets
$
10,642
$
9,409
Liabilities and Stockholders' Equity Current portion of
long-term debt
$
16
$
31
Accounts payable
618
592
Contract liabilities
1,449
1,263
Accrued liabilities
1,356
1,210
Total current liabilities
3,439
3,096
Long-term debt
5,113
5,289
Operating lease liabilities
497
-
Other liabilities
2,276
2,300
Total Motorola Solutions, Inc. stockholders’ equity
(deficit)
(700
)
(1,293
)
Noncontrolling interests
17
17
Total liabilities and stockholders’ equity
$
10,642
$
9,409
GAAP-4
Motorola Solutions, Inc. and
Subsidiaries
Consolidated Statements of
Cash Flows
(In millions)
Three Months Ended December 31, 2019
December 31, 2018 Operating Net earnings attributable
to Motorola Solutions, Inc.
$
244
$
423
Earnings attributable to noncontrolling interests
-
1
Net earnings
244
424
Adjustments to reconcile Net earnings (loss) to Net cash provided
by operating activities: Depreciation and amortization
104
93
Non-cash other charges
8
-
U.S. pension settlement loss
359
-
Share-based compensation expense
31
20
Gains on sales of investments and businesses, net
(1
)
-
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
(109
)
(124
)
Inventories
14
10
Other current assets and contract assets
(55
)
(114
)
Accounts payable, accrued liabilities, and contract liabilities
341
441
Other assets and liabilities
(16
)
72
Deferred income taxes
(125
)
(10
)
Net cash provided by operating activities
795
812
Investing Acquisitions and investments, net
(86
)
(6
)
Proceeds from sales of investments
6
5
Capital expenditures
(59
)
(69
)
Proceeds from sales of property, plant and equipment
7
-
Net cash used for investing activities
(132
)
(70
)
Financing Repayment of debt
(604
)
(311
)
Net proceeds from issuance of debt
-
195
Issuances of common stock
32
29
Purchases of common stock
(145
)
(66
)
Payment of dividends
(98
)
(85
)
Deferred acquisition costs
-
(76
)
Net cash used for financing activities
(815
)
(314
)
Effect of exchange rate changes on cash and cash equivalents
13
(22
)
Net increase (decrease) in cash and cash equivalents
(139
)
406
Cash and cash equivalents, beginning of period
1140
851
Cash and cash equivalents, end of period
$
1,001
$
1,257
Financial Ratios: Free cash flow*
$
736
$
743
*Free cash flow = Net cash provided by operating activities
- Capital Expenditures
GAAP-5 Motorola Solutions, Inc.
and Subsidiaries Consolidated Statements of Cash Flows
(In millions) Years Ended December 31,
2019 December 31, 2018 December 31, 2017
Operating Net earnings (loss) attributable to Motorola
Solutions, Inc.
$
868
$
966
$
(155
)
Earnings attributable to noncontrolling interests
3
3
4
Net earnings (loss)
871
969
(151
)
Adjustments to reconcile Net earnings (loss) to Net cash provided
by operating activities: Depreciation and amortization
394
360
343
Non-cash other charges
35
56
32
Pension settlement losses
359
-
48
Gain from the extinguishment of 2.00% senior convertible notes
(4
)
(6
)
-
Share-based compensation expense
118
73
66
Gains on sales of investments and businesses, net
(5
)
(16
)
(3
)
Losses from the extinguishment of long-term debt
50
-
-
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
(79
)
62
(60
)
Inventories
(74
)
71
(46
)
Other current assets and contract assets
49
(251
)
(99
)
Accounts payable, accrued liabilities, and contract liabilities
198
271
160
Other assets and liabilities
(5
)
(523
)
(44
)
Deferred income taxes
(84
)
9
1,100
Net cash provided by operating activities
1,823
1,075
1,346
Investing Acquisitions and investments, net
(709
)
(1164
)
(404
)
Proceeds from sales of investments
16
95
183
Capital expenditures
(248
)
(197
)
(227
)
Proceeds from sales of property, plant and equipment
7
-
-
Net cash used for investing activities
(934
)
(1,266
)
(448
)
Financing Repayment of debt
(2,039
)
(723
)
(21
)
Net proceeds from issuance of debt
1,804
1490
10
Issuances of common stock
114
168
82
Purchases of common stock
(315
)
(132
)
(483
)
Settlement of conversion premium on 2.00% senior convertible notes
(326
)
(169
)
-
Payment of dividends
(379
)
(337
)
(307
)
Payment of dividends to noncontrolling interest
(3
)
(1
)
(1
)
Deferred acquisition costs
-
(76
)
(2
)
Net cash provided by (used for) financing activities
(1,144
)
220
(722
)
Effect of exchange rate changes on cash and cash equivalents
(1
)
(40
)
62
Net increase (decrease) in cash and cash equivalents
(256
)
(11
)
238
Cash and cash equivalents, beginning of period
1,257
1,268
1,030
Cash and cash equivalents, end of period
1,001
1,257
1,268
Financial Ratios: Free cash flow*
$
1575
$
878
$
1,119
*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 December 31, 2019
December 31, 2018 % Change Products and Systems
Integration
$
1,673
$
1,670
-
%
Software and Services
704
584
21
%
Total Motorola Solutions
$
2,377
$
2,254
5
%
Years Ended December 31, 2019
December 31, 2018 % Change Products and Systems
Integration
$
5,329
$
5,100
5
%
Software and Services
2,558
2,243
14
%
Total Motorola Solutions
$
7,887
$
7,343
7
%
Operating Earnings Three Months Ended
December 31, 2019 December 31, 2018 %
Change Products and Systems Integration
$
426
$
405
5
%
Software and Services
164
111
48
%
Total Motorola Solutions
$
590
$
516
14
%
Years Ended December 31, 2019
December 31, 2018 % Change Products and Systems
Integration
$
994
$
854
16
%
Software and Services
587
401
46
%
Total Motorola Solutions
$
1,581
$
1,255
26
%
Operating Earnings % Three Months
Ended December 31, 2019 December 31, 2018
Products and Systems Integration
25.5
%
24.3
%
Software and Services
23.3
%
19.0
%
Total Motorola Solutions
24.8
%
22.9
%
Years Ended December 31, 2019
December 31, 2018 Products and Systems Integration
18.7
%
16.7
%
Software and Services
22.9
%
17.9
%
Total Motorola Solutions
20.0
%
17.1
%
Non-GAAP-1 Motorola Solutions, Inc. and
Subsidiaries Non-GAAP Adjustments (Intangibles Amortization
Expense, Share-Based Compensation Expense, and Highlighted
Items) Q1 2019
Non-GAAP Adjustments
Statement Line
PBT (Inc)/Exp
Tax Inc/(Exp)
PAT (Inc)/Exp
EPS impact
Intangibles amortization expense Intangibles amortization
$
50
$
11
$
39
$
0.23
Share-based compensation expense Cost of sales, SG&A and
R&D
27
6
21
0.12
Reorganization of business charges Cost of sales and Other charges
8
2
6
0.04
Investment impairments Investment impairments
8
2
6
0.04
Acquisition-related transaction fees Other charges
2
-
2
0.01
Fair value adjustments to equity investments Other expense
1
-
1
0.01
Release of uncertain tax positions Income tax expense
-
1
(1
)
(0.01
)
Legal settlement Other charges
(1
)
-
(1
)
(0.01
)
Sale of investments (Gain) or loss on sales of investments and
businesses, net
(1
)
0
(1
)
(0.01
)
Total impact on Net earnings
$
94
$
22
$
72
$
0.42
Q2 2019
Non-GAAP Adjustments
Statement Line
PBT (Inc)/Exp
Tax Inc/(Exp)
PAT (Inc)/Exp
EPS impact
Intangibles amortization expense Intangibles amortization
$
52
$
11
$
41
$
0.23
Loss from the extinguishment of long-term debt Other expense
43
11
32
0.18
Share-based compensation expense Cost of sales, SG&A and
R&D
30
7
23
0.13
Reorganization of business charges Cost of sales and Other charges
12
3
9
0.05
Investment impairments Investment impairments
3
1
2
0.01
Legal settlements Other charges
1
-
1
0.01
Sale of a business (Gain) or loss on sales of investments and
businesses, net
(3
)
(1
)
(2
)
(0.01
)
Release of uncertain tax positions Other income, Income tax expense
(4
)
(1
)
(3
)
(0.02
)
Fair value adjustments to equity investments Other income
(16
)
(4
)
(12
)
(0.07
)
Total impact on Net earnings
$
118
$
27
$
91
$
0.51
Q3 2019
Non-GAAP Adjustments
Statement Line
PBT (Inc)/Exp
Tax Inc/(Exp)
PAT (Inc)/Exp
EPS impact
Intangibles amortization expense Intangibles amortization
$
52
$
12
$
40
$
0.22
Share-based compensation expense Cost of sales, SG&A and
R&D
30
7
23
0.13
Reorganization of business charges Cost of sales and Other charges
18
4
14
0.08
Fair value adjustments to equity investments Other income
18
4
14
0.08
Loss from the extinguishment of long-term debt Other expense
7
2
5
0.03
Investment impairments Other expense
5
1
4
0.02
Acquisition-related transaction fees Other charges
1
-
1
0.01
Gain from the extinguishment of 2.00% senior convertible notes
Other income
(4
)
(1
)
(3
)
(0.02
)
Gain on legal settlement Other charges
(5
)
(1
)
(4
)
(0.02
)
Total impact on Net earnings
$
122
$
28
$
94
$
0.53
Q4 2019
Non-GAAP Adjustments
Statement Line
PBT (Inc)/Exp
Tax Inc/(Exp)
PAT (Inc)/Exp
EPS impact
US pension settlement loss Other expense
$
359
$
90
$
269
$
1.53
Intangibles amortization expense Intangibles amortization
54
12
42
0.24
Share-based compensation expense Cost of sales, SG&A and
R&D
31
7
24
0.14
Reorganization of business charges Cost of sales and Other charges
19
5
14
0.08
Legal settlements Other charges
8
2
6
0.04
Operating lease asset impairment Other charges
5
1
4
0.02
Investment impairments Other expense
2
-
2
0.01
Sale of investments (Gain) or loss on sales of investments and
businesses, net
(1
)
-
(1
)
(0.01
)
Release of uncertain tax positions Other income, Income tax expense
(1
)
4
(5
)
(0.03
)
Fair value adjustments to equity investments Other income
(6
)
(1
)
(5
)
(0.03
)
Release of valuation allowance on deferred tax assets Income tax
expense
-
77
(77
)
(0.44
)
Total impact on Net earnings
$
470
$
197
$
273
$
1.55
FY 2019
Non-GAAP Adjustments
Statement Line
PBT (Inc)/Exp
Tax Inc/(Exp)
PAT (Inc)/Exp
EPS impact
US pension settlement loss Other expense
$
359
$
90
$
269
$
1.53
Intangibles amortization expense Intangibles amortization
208
46
162
0.92
Share-based compensation expense Cost of sales, SG&A and
R&D
118
27
91
0.52
Reorganization of business charges Cost of sales and Other charges
57
14
43
0.24
Loss from the extinguishment of long-term debt Other expense
50
13
37
0.21
Investment impairments Investment impairments
18
4
14
0.08
Operating lease asset impairment Other charges
5
1
4
0.02
Legal settlements Other charges
3
1
2
0.01
Acquisition-related transaction fees Other charges
3
-
3
0.02
Sales of investments (Gain) or loss on sales of investments and
businesses, net
(2
)
-
(2
)
(0.01
)
Sale of a business (Gain) or loss on sales of investments and
businesses, net
(3
)
(1
)
(2
)
(0.01
)
Fair value adjustments to equity investments Other expense
(3
)
(1
)
(2
)
(0.01
)
Gain from the extinguishment of 2.00% senior convertible notes
Other income
(4
)
(1
)
(3
)
(0.02
)
Release of uncertain tax positions Income tax expense
(5
)
4
(9
)
(0.05
)
Release of valuation allowance on deferred tax assets Income tax
expense
-
77
(77
)
(0.44
)
Total impact on Net earnings
$
804
$
274
$
530
$
3.01
Non-GAAP-2 Motorola Solutions, Inc. and
Subsidiaries Non-GAAP Segment Information (In
millions) Net Sales Three Months
Ended December 31, 2019 December 31, 2018
% Change Products and Systems Integration
$
1,673
$
1,670
-
%
Software and Services
704
584
21
%
Total Motorola Solutions
$
2,377
$
2,254
5
%
Years Ended December 31, 2019
December 31, 2018 % Change Products and Systems
Integration
$
5,329
$
5,100
5
%
Software and Services
2,558
2,243
14
%
Total Motorola Solutions
$
7,887
$
7,343
7
%
Non-GAAP Operating Earnings Three
Months Ended December 31, 2019 December 31,
2018 % Change Products and Systems Integration
$
484
$
483
-
%
Software and Services
223
167
34
%
Total Motorola Solutions
$
707
$
650
9
%
Years Ended December 31, 2019
December 31, 2018 % Change Products and Systems
Integration
$
1,173
$
1,109
6
%
Software and Services
802
631
27
%
Total Motorola Solutions
$
1,975
$
1,740
14
%
Non-GAAP Operating Earnings % Three
Months Ended December 31, 2019 December 31,
2018 Products and Systems Integration
28.9
%
28.9
%
Software and Services
31.7
%
28.6
%
Total Motorola Solutions
29.7
%
28.8
%
Years Ended December 31, 2019
December 31, 2018 Products and Systems Integration
22.0
%
21.7
%
Software and Services
31.4
%
28.1
%
Total Motorola Solutions
25.0
%
23.7
%
Non-GAAP-3 Motorola Solutions, Inc. and
Subsidiaries Operating Earnings after Non-GAAP
Adjustments Q1 2019 TOTAL
Products and Systems Integration Software and
Services Net sales
$ 1,657
$ 1069
$ 588
Operating earnings ("OE")
$ 229
$ 108
$ 121
Above-OE non-GAAP adjustments: Share-based compensation
expense
27
21
6
Reorganization of business charges
8
7
1
Intangibles amortization expense
50
11
39
Legal settlement
(1)
(1)
-
Acquisition-related transaction fees
2
1
1
Total above-OE non-GAAP adjustments
86
39
47
Operating earnings after non-GAAP adjustments
$ 315
$ 147
$ 168
Operating earnings as a percentage of net sales - GAAP
13.8 %
10.1 %
20.6 %
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
19.0 %
13.8 %
28.6 %
Q2 2019 TOTAL Products and Systems
Integration Software and Services Net sales
$ 1,860
$ 1,238
$ 622
Operating earnings ("OE")
$ 349
$ 201
$ 148
Above-OE non-GAAP adjustments: Share-based compensation
expense
30
19
11
Reorganization of business charges
12
9
3
Intangibles amortization expense
52
12
40
Legal settlements
1
1
-
Total above-OE non-GAAP adjustments
95
41
54
Operating earnings after non-GAAP adjustments
$ 444
$ 242
$ 202
Operating earnings as a percentage of net sales - GAAP
18.8 %
16.2 %
23.8 %
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
23.9 %
19.5 %
32.5 %
Q3 2019 TOTAL Products and Systems
Integration Software and Services Net sales
$ 1,994
$ 1,349
$ 645
Operating earnings ("OE")
$ 413
$ 258
$ 155
Above-OE non-GAAP adjustments: Share-based compensation
expense
30
20
10
Reorganization of business charges
18
14
4
Intangibles amortization expense
52
12
40
Acquisition-related transaction fees
1
1
-
Gain on legal settlements
(5)
(5)
-
Total above-OE non-GAAP adjustments
96
42
54
Operating earnings after non-GAAP adjustments
$ 509
$ 300
$ 209
Operating earnings as a percentage of net sales - GAAP
20.7 %
19.1 %
24.0 %
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
25.5 %
22.2 %
32.4 %
Q4 2019 TOTAL Products and Systems
Integration Software and Services Net sales
$ 2,377
$ 1,673
$ 704
Operating earnings ("OE")
$ 590
$ 426
$ 164
Above-OE non-GAAP adjustments: Reorganization of business
charges
19
16
3
Share-based compensation expense
31
21
10
Intangibles amortization expense
54
12
42
Operating lease asset impairment
5
3
2
Legal settlements
8
6
2
Total above-OE non-GAAP adjustments
117
58
59
Operating earnings after non-GAAP adjustments
$ 707
$ 484
$ 223
Operating earnings as a percentage of net sales - GAAP
24.8 %
25.5 %
23.3 %
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
29.7 %
28.9 %
31.7 %
FY 2019 TOTAL Products and Systems
Integration Software and Services Net sales
$ 7,887
$ 5,329
$ 2,558
Operating earnings ("OE")
$ 1,581
$ 994
$ 587
Above-OE non-GAAP adjustments: Intangibles amortization
expense
208
47
161
Share-based compensation expense
118
81
37
Reorganization of business charges
57
45
12
Legal settlement
3
1
2
Acquisition-related transaction fees
3
2
1
Operating lease asset impairment
5
3
2
Total above-OE non-GAAP adjustments
394
179
215
Operating earnings after non-GAAP adjustments
$ 1,975
$ 1,173
$ 802
Operating earnings as a percentage of net sales - GAAP
20.0 %
18.7 %
22.9 %
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
25.0 %
22.0 %
31.4 %
Non-GAAP-4 Motorola Solutions, Inc. and
Subsidiaries Non-GAAP Organic Revenue Total Motorola
Solutions Three Months Ended December
31, 2019 December 31, 2018 % Change Net sales
$
2,377
$
2,254
5
%
Non-GAAP adjustments: Acquisitions
(82
)
-
Organic revenue
$
2,295
$
2,254
2
%
Years Ended December 31, 2019
December 31, 2018 % Change Net sales
$
7,887
$
7,343
7
%
Non-GAAP adjustments: Acquisitions
(337
)
(26
)
Organic revenue
$
7,550
$
7,317
3
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200206005947/en/
MEDIA CONTACT Kate Dyer Motorola Solutions +1
224-374-3124 Kate.Dyer@motorolasolutions.com
INVESTOR CONTACT Tim Yocum Motorola Solutions +1
847-576-6899 Tim.Yocum@motorolasolutions.com
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