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Motorola Solutions Reports Third-Quarter 2016 Financial Results

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November 3, 2016 4:11 PM EDT

Announces dividend increase of 15 percent to 47 cents per share

  • Sales of $1.5 billion, up 8 percent from a year ago, including $131 million from Airwave
  • Managed and Support Services up 55 percent; up 5 percent excluding Airwave
  • North America up 4 percent on strength in both Products and Services
  • Operating cash flow of $348 million, up 16 percent
  • GAAP earnings per share (EPS) from continuing operations1 of $1.13, up 79 percent
  • Non-GAAP EPS from continuing operations* of $1.37, up 67 percent

CHICAGO--(BUSINESS WIRE)-- Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the third quarter of 2016. Click here for a printable news release and financial tables.

The company also today announced that its board of directors has increased its regular quarterly dividend by 15 percent to 47 cents per share. The next quarterly dividend will be payable in cash on Jan. 13, 2017, to stockholders of record at the close of business on Dec. 15, 2016.

“Q3 was an excellent quarter,” said Greg Brown, chairman and CEO of Motorola Solutions. “I’m pleased with our revenue growth and continued strong performance in earnings and cash flow generation.”

 

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

                   
      Q3 2016     Q3 2015     % Change
Sales     $1,532     $1,422     8 %
GAAP            
Operating Earnings $341 $231 48 %
% of Sales 22.3% 16.2%
EPS from continuing operations     $1.13     $0.63     79 %
Non-GAAP
Operating Earnings $396 $292 36 %
% of Sales 25.8% 20.5%
EPS from continuing operations     $1.37     $0.82     67 %
Products Segment
Sales $920 $925 (1 )%
GAAP Operating Earnings $225 $178 26 %
% of Sales 24.5% 19.2%
Non-GAAP Operating Earnings $243 $221 10 %
% of Sales     26.4%     23.9%      
Services Segment
Sales $612 $497 23 %
GAAP Operating Earnings $116 $53 119 %
% of Sales 19.0% 10.7%
Non-GAAP Operating Earnings $153 $71 115 %
% of Sales     25.0%     14.3%      
   

*Non-GAAP financial information excludes the after-tax impact of approximately $0.24 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 SELECTED FINANCIAL RESULTS

  • Revenue – Sales increased 8 percent, including $131 million in Airwave sales. Products segment sales declined 1 percent due to softness in Africa and China. The Services segment grew 23 percent including Airwave, while Managed and Support Services grew 5 percent excluding Airwave.
  • Operating margin – GAAP operating margin was 22.3 percent of sales, compared with 16.2 percent in the year-ago quarter. The improvement reflects higher sales and gross margin associated with Airwave, as well as lower operating expenses. Non-GAAP operating margin was 25.8 percent of sales, compared with 20.5 percent in the year-ago quarter, driven by higher sales and gross margin as well as $27 million in lower operating expenses compared with the year-ago quarter.
  • Taxes – The GAAP effective tax rate was 34 percent, compared with a tax rate of 36 percent in the year-ago quarter. The non-GAAP tax rate was 33 percent, compared with a non-GAAP tax rate of 35 percent in the year-ago quarter.
  • Cash flow – The company generated $348 million in operating cash from continuing operations, reflecting an increase of $47 million from the year-ago quarter. Free cash flow2 was up $29 million to $280 million, driven by higher earnings.
  • Cash and cash equivalents – The company ended the quarter with cash and cash equivalents of $1.7 billion and a net debt position of approximately $3.4 billion3. The company repurchased approximately $109 million of its common stock and paid approximately $70 million in cash dividends.

KEY HIGHLIGHTS

Strategic wins

  • $37 million to expand a nationwide TETRA network in North Africa
  • $34 million in two P25 contracts with the U.S. federal government
  • $28 million for a P25 network in Latin America
  • $20 million for a P25 network with U.S. utility provider Xcel Energy
  • $12 million for call-taking and computer-aided dispatch (CAD) solutions, including five-year service contract with Los Angeles Police Department

Innovation and investments in growth

  • Announced plans to acquire Spillman Technologies, a provider of comprehensive law enforcement and public safety software solutions for computer-aided dispatch and records management systems. Spillman complements our high tier command center software offerings, which will help us meet the needs of a broader customer base
  • Announced new APXTM 8500 P25 all-band mobile radio, updated P25 network features and IMPRESTM 2 energy management system

BUSINESS OUTLOOK

Motorola Solutions expects fourth quarter revenue growth of 9 to 10 percent compared with the fourth quarter of 2015. This includes approximately $120 million of Airwave revenue. The company expects fourth-quarter non-GAAP earnings per share from continuing operations in the range of $1.82 to $1.87 per share.

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, Nov 3. 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:

             
      Q3 2016     Q3 2015
Net sales     $1,532     $1,422
Gross margin     762     685
Operating earnings     341     231
Amounts attributable to Motorola Solutions, Inc. common stockholders
Earnings from continuing operations, net of tax 192 126
Net earnings 192 115
Diluted EPS from continuing operations $1.13 $0.63
Weighted average diluted common shares outstanding     169.6     201.3
 
HIGHLIGHTED ITEMS AND SHARE-BASED COMPENSATION EXPENSE

The table below includes highlighted items, share-based compensation expense and intangible amortization for the third quarter of 2016.

       
(per diluted common share)     Q3 2016
       
GAAP Earnings from Continuing Operations     $1.13
Highlighted Items:    
Share-based compensation expense 0.07
Reorganization of business charges 0.03
Intangibles amortization expense     0.14
Total Highlighted Items     0.24
       
Non-GAAP Diluted EPS from Continuing Operations     $1.37
 

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the GAAP results included in this presentation, Motorola Solutions also has included non-GAAP measurements of results. The company has provided these non-GAAP measurements to help investors better understand its core operating performance, enhance comparisons of core operating performance from period to period and allow better comparisons of operating performance to its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of the businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with generally accepted accounting principles.

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

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

Intangible assets amortization expense: The company has excluded intangible assets amortization expense from its Non-GAAP operating expenses and net 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 fourth quarter 2016 and incremental revenues of Airwave. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 9 through 22 in Item 1A of Motorola Solutions 2015 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/investor, 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, including the acquisition of Airwave; (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 outsourcing of various activities, including certain manufacturing operations, information technology and administrative functions; (22) the impact of the sale of the company’s legacy information systems, including components of the enterprise resource planning (ERP) system and the implementation of a new ERP 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 Amounts attributable to Motorola Solutions, Inc. common shareholders

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.

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. ©2016 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
October 1, 2016     October 3, 2015
Net sales from products $ 920 $ 925
Net sales from services   612     497  
Net sales 1,532 1,422
 
Costs of products sales 398 395
Costs of services sales   372     342  
Costs of sales 770 737
   
Gross margin   762     685  
 
Selling, general and administrative expenses 247 259
Research and development expenditures 137 153
Other charges 6 40
Intangibles amortization   31     2  
Operating earnings   341     231  
 
Other income (expense):
Interest expense, net (54 ) (43 )
Gains on sales of investments and businesses, net 7 10
Other   (1 )   (1 )
Total other expense   (48 )   (34 )
Earnings from continuing operations before income taxes 293 197
Income tax expense   100     71  
Earnings from continuing operations 193 126
 
Loss from discontinued operations, net of tax   —     (11 )
Net earnings 193 115
 
Less: Earnings attributable to noncontrolling interests   1     —  
Net earnings attributable to Motorola Solutions, Inc. $ 192   $ 115  
 
Amounts attributable to Motorola Solutions, Inc. common stockholders:
Earnings from continuing operations, net of tax $ 192 $ 126
Loss from discontinued operations, net of tax   —     (11 )
Net earnings attributable to Motorola Solutions, Inc. $ 192   $ 115  
 

Earnings (loss) per common share:

Basic:
Continuing operations $ 1.15 $ 0.63
Discontinued operations   —     (0.05 )
$ 1.15   $ 0.58  
 
Diluted:
Continuing operations $ 1.13 $ 0.63
Discontinued operations   —     (0.06 )
$ 1.13   $ 0.57  

Weighted average common shares outstanding:

Basic 166.3 199.2
Diluted   169.6     201.3  
 
Percentage of Net Sales*
Net sales from products 60.1 % 65.0 %
Net sales from services   39.9 %   35.0 %
Net sales 100.0 % 100.0 %
 
Costs of products sales 43.3 % 42.7 %
Costs of services sales   60.8 %   68.8 %
Costs of sales 50.3 % 51.8 %
   
Gross margin   49.7 %   48.2 %
 
Selling, general and administrative expenses 16.1 % 18.2 %
Research and development expenditures 8.9 % 10.8 %
Other charges 0.4 % 2.8 %
Intangibles amortization   2.0 %   0.1 %
Operating earnings   22.3 %   16.2 %
 
Other income (expense):
Interest expense, net (3.5 )% (3.0 )%
Gains on sales of investments and businesses, net 0.5 % 0.7 %
Other   (0.1 )%   (0.1 )%
Total other expense   (3.1 )%   (2.4 )%
Earnings from continuing operations before income taxes 19.1 % 13.9 %
Income tax expense   6.5 %   5.0 %
Earnings from continuing operations 12.6 % 8.9 %
Loss from discontinued operations, net of tax — % (0.8 )%
Net earnings   12.6 %   8.1 %
 
Less: Earnings attributable to noncontrolling interests 0.1 % — %
Net earnings attributable to Motorola Solutions, Inc.   12.5 %   8.1 %
* 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
October 1, 2016     October 3, 2015
Net sales from products $ 2,423 $ 2,550
Net sales from services   1,732     1,463  
Net sales 4,155 4,013
 
Costs of products sales 1,124 1,139
Costs of services sales   1,090     993  
Costs of sales 2,214 2,132
   
Gross margin   1,941     1,881  
 
Selling, general and administrative expenses 722 769
Research and development expenditures 411 468
Other charges 61 33
Intangibles amortization   83     6  
Operating earnings   664     605  
 
Other income (expense):
Interest expense, net (157 ) (122 )
Gains (losses) on sales of investments and businesses, net (13 ) 60
Other   (12 )   (3 )
Total other expense   (182 )   (65 )
Earnings from continuing operations before income taxes 482 540
Income tax expense   164     175  
Earnings from continuing operations 318 365
 
Loss from discontinued operations, net of tax   —     (32 )
Net earnings 318 333
 
Less: Earnings attributable to noncontrolling interests   1     2  
Net earnings attributable to Motorola Solutions, Inc. $ 317   $ 331  
 
Amounts attributable to Motorola Solutions, Inc. common stockholders:
Earnings from continuing operations, net of tax $ 317 $ 363
Loss from discontinued operations, net of tax   —     (32 )
Net earnings attributable to Motorola Solutions, Inc. $ 317   $ 331  
 

Earnings (loss) per common share:

Basic:
Continuing operations $ 1.85 $ 1.75
Discontinued operations   —     (0.15 )
$ 1.85   $ 1.60  
 
Diluted:
Continuing operations $ 1.82 $ 1.74
Discontinued operations   —     (0.16 )
$ 1.82   $ 1.58  

Weighted average common shares outstanding:

Basic 171.0 207.2
Diluted   174.0     209.2  
 
Percentage of Net Sales*
Net sales from products 58.3 % 63.5 %
Net sales from services   41.7 %   36.5 %
Net sales 100.0 % 100.0 %
 
Costs of products sales 46.4 % 44.7 %
Costs of services sales   62.9 %   67.9 %
Costs of sales 53.3 % 53.1 %
   
Gross margin   46.7 %   46.9 %
 
Selling, general and administrative expenses 17.4 % 19.2 %
Research and development expenditures 9.9 % 11.7 %
Other charges 1.5 % 0.8 %
Intangibles amortization   2.0 %   0.1 %
Operating earnings   16.0 %   15.1 %
 
Other income (expense):
Interest expense, net (3.8 )% (3.0 )%
Gains (losses) on sales of investments and businesses, net (0.3 )% 1.5 %
Other   (0.3 )%   (0.1 )%
Total other expense   (4.4 )%   (1.6 )%
Earnings from continuing operations before income taxes 11.6 % 13.5 %
Income tax expense   3.9 %   4.4 %
Earnings from continuing operations 7.7 % 9.1 %
Loss from discontinued operations, net of tax — % (0.8 )%
Net earnings   7.7 %   8.3 %
 
Less: Earnings attributable to noncontrolling interests — % — %
Net earnings attributable to Motorola Solutions, Inc.   7.6 %   8.2 %
* Percentages may not add up due to rounding
 
GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
           
October 1, 2016 December 31, 2015
Assets
Cash and cash equivalents $ 1,687 $ 1,980
Accounts receivable, net 1,164 1,362
Inventories, net 283 296
Other current assets 670 954
Current assets held for disposition   —     27  
Total current assets   3,804     4,619  
 
Property, plant and equipment, net 780 487
Investments 238 231
Deferred income taxes 2,187 2,278
Goodwill 597 420
Other assets 1,013 271
Non-current assets held for disposition   —     40  
Total assets $ 8,619   $ 8,346  
 
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 5 $ 4
Accounts payable 406 518
Accrued liabilities   1,750     1,671  
Total current liabilities   2,161     2,193  
 
Long-term debt 5,044 4,345
Other liabilities 2,062 1,904
 
Total Motorola Solutions, Inc. stockholders’ equity (deficit) (659 ) (106 )
 
Noncontrolling interests   11     10  
   
Total liabilities and stockholders’ equity $ 8,619   $ 8,346  
 
Financial Ratios:
Net cash (debt)* $ (3,362 ) $ (2,369 )
 
*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
October 1, 2016     October 3, 2015
Operating
Net earnings attributable to Motorola Solutions, Inc. $ 192 $ 115
Earnings attributable to noncontrolling interests   1     —  
Net earnings 193 115
Loss from discontinued operations, net of tax   —     (11 )
Earnings from continuing operations, net of tax 193 126
Adjustments to reconcile Earnings from continuing operations to Net cash provided by operating activities:
Depreciation and amortization 76 32
Non-cash other charges 8 38
Share-based compensation expense 16 18
Gains on sales of investments and businesses, net (7 ) (10 )
Deferred income taxes 72 72
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable (82 ) (88 )
Inventories 2 4
Other current assets (37 ) 10
Accounts payable and accrued liabilities 138 96
Other assets and liabilities   (31 )   3  
Net cash provided by operating activities   348     301  
Investing
Acquisitions and investments, net (95 ) (57 )
Proceeds from sales of investments and businesses, net 84 39

Capital expenditures

(68 ) (50 )
Proceeds from sales of property, plant and equipment   22     1  
Net cash used for investing activities   (57 )   (67 )
Financing
Repayment of debt (1 ) (1 )
Net proceeds from issuance of debt — 976
Issuance of common stock 41 33
Purchase of common stock (109 ) (2,058 )
Payment of dividends   (70 )   (70 )
Net cash used for financing activities   (139 )   (1,120 )
   
Effect of exchange rate changes on cash and cash equivalents   (10 )   (26 )
Net increase (decrease) in cash and cash equivalents 142 (912 )
Cash and cash equivalents, beginning of period   1,545     3,112  
Cash and cash equivalents, end of period $ 1,687   $ 2,200  
 
Financial Ratios:
Free cash flow* $ 280 $ 251
 
*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
October 1, 2016     October 3, 2015
Operating
Net earnings attributable to Motorola Solutions, Inc. $ 317 $ 331
Earnings attributable to noncontrolling interests   1     2  
Net earnings 318 333
Loss from discontinued operations, net of tax   —     (32 )
Earnings from continuing operations, net of tax 318 365
Adjustments to reconcile Earnings from continuing operations to Net cash provided by operating activities:
Depreciation and amortization 220 113
Non-cash other charges 43 43
Non-U.S. pension curtailment gain — (32 )
Share-based compensation expense 52 58
Losses (gains) on sales of investments and businesses, net 13 (60 )
Deferred income taxes 143 127
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable 245 167
Inventories — (21 )
Other current assets (102 ) 38
Accounts payable and accrued liabilities (224 ) (152 )
Other assets and liabilities   (56 )   (39 )
Net cash provided by operating activities   652     607  
Investing
Acquisitions and investments, net (1,215 ) (150 )
Proceeds from sales of investments and businesses, net 637 150
Capital expenditures (211 ) (131 )
Proceeds from sales of property, plant and equipment   68     2  
Net cash used for investing activities   (721 )   (129 )
Financing
Repayment of debt (3 ) (3 )
Net proceeds from issuance of debt 673 976
Issuance of common stock 80 69
Purchase of common stock (728 ) (2,996 )
Excess tax benefit from share-based compensation — 1
Payment of dividends   (213 )   (218 )
Net cash used for financing activities   (191 )   (2,171 )
   
Effect of exchange rate changes on cash and cash equivalents   (33 )   (61 )
Net decrease in cash and cash equivalents (293 ) (1,754 )
Cash and cash equivalents, beginning of period   1,980     3,954  
Cash and cash equivalents, end of period $ 1,687   $ 2,200  
 
Financial Ratios:
Free cash flow* $ 441 $ 476
 
*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
         
October 1, 2016 October 3, 2015 % Change
Products $ 920 $ 925 (1 )%
Services   612     497   23 %
Total Motorola Solutions $ 1,532   $ 1,422   8 %
 
Nine Months Ended
     
October 1, 2016 October 3, 2015 % Change
Products $ 2,423 $ 2,550 (5 )%
Services   1,732     1,463   18 %
Total Motorola Solutions $ 4,155   $ 4,013   4 %
 
 
Operating Earnings
 
Three Months Ended
     
October 1, 2016 October 3, 2015 % Change
Products $ 225 $ 178 26 %
Services   116     53   119 %
Total Motorola Solutions $ 341   $ 231   48 %
 
Nine Months Ended
     
October 1, 2016 October 3, 2015 % Change
Products $ 404 $ 413 (2 )%
Services   260     192   35 %
Total Motorola Solutions $ 664   $ 605   10 %
 
 
Operating Earnings %
 
Three Months Ended
   
October 1, 2016 October 3, 2015
Products 24.5 % 19.2 %
Services   19.0 %   10.7 %
Total Motorola Solutions   22.3 %   16.2 %
 
Nine Months Ended
   
October 1, 2016 October 3, 2015
Products 16.7 % 16.2 %
Services   15.0 %   13.1 %
Total Motorola Solutions   16.0 %   15.1 %
 
Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)
 
Q1 2016
                   
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 23 8 15 0.08
Intangibles amortization expense Intangibles amortization 13 3 10 0.06
Acquisition related transaction fees Other charges 13 — 13 0.07
Loss on investment in United Kingdom treasuries Other expense (income) 19 7 12 0.07
Realized foreign currency loss on acquisition Other expense (income) 10 3 7 0.04
Loss on sale of Malaysia facility and operations Other expense (income) 7 — 7 0.04
       
Total impact on Net earnings $ 102 $ 27 $ 75 $ 0.42
 
Q2 2016
 
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 $ 18 $ 6 $ 12 $ 0.07
Reorganization of business charges Cost of sales and Other charges 27 7 20 0.12
Intangibles amortization expense Intangibles amortization 38 8 30 0.17
Building impairment Other charges 17 6 11 0.06
       
Total impact on Net earnings $ 100 $ 27 $ 73 $ 0.42
 
Q3 2016
 
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 $ 5 $ 12 $ 0.07
Reorganization of business charges Cost of sales and Other charges 7 2 5 0.03
Intangibles amortization expense Intangibles amortization 31 7 24 0.14
       
Total impact on Net earnings $ 55 $ 14 $ 41 $ 0.24
 
Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)
 
Net Sales
         
Three Months Ended
       
October 1, 2016 October 3, 2015 % Change
Products $ 920 $ 925 (1 )%
Services   612     497   23 %
Total Motorola Solutions $ 1,532   $ 1,422   8 %
 
Nine Months Ended
     
October 1, 2016 October 3, 2015 % Change
Products $ 2,423 $ 2,550 (5 )%
Services   1,732     1,463   18 %
Total Motorola Solutions $ 4,155   $ 4,013   4 %
 
 
Non-GAAP Operating Earnings
 
Three Months Ended
     
October 1, 2016 October 3, 2015 % Change
Products $ 243 $ 221 10 %
Services   153     71   115 %
Total Motorola Solutions $ 396   $ 292   36 %
 
Nine Months Ended
     
October 1, 2016 October 3, 2015 % Change
Products $ 503 $ 487 3 %
Services   383     221   73 %
Total Motorola Solutions $ 886   $ 708   25 %
 
 
Non-GAAP Operating Earnings %
 
Three Months Ended
   
October 1, 2016 October 3, 2015
Products 26.4 % 23.9 %
Services   25.0 %   14.3 %
Total Motorola Solutions   25.8 %   20.5 %
     
Nine Months Ended
   
October 1, 2016 October 3, 2015
Products 20.8 % 19.1 %
Services   22.1 %   15.1 %
Total Motorola Solutions   21.3 %   17.6 %
 
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
 
Q1 2016
           
    TOTAL Products Services
Net sales $ 1,193 $ 702 $ 491
Operating earnings ("OE")   $ 100   $ 51   $ 49  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 17 11 6
Reorganization of business charges 23 21 2
Intangibles amortization expense 13 1 12
Acquisition related transaction fees   13     —     13  
Total above-OE non-GAAP adjustments 66 33 33
         
Operating earnings after non-GAAP adjustments   $ 166   $ 84   $ 82  
     
Operating earnings as a percentage of net sales - GAAP 8.4 % 7.3 % 10.0 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   13.9 %   12.0 %   16.7 %
 
Q2 2016
     
    TOTAL Products Services
Net sales $ 1,430 $ 801 $ 629
Operating earnings ("OE")   $ 224   $ 129   $ 95  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 18 12 6
Reorganization of business charges 27 21 6
Intangibles amortization expense 38 2 36
Building impairment   17     12     5  
Total above-OE non-GAAP adjustments 100 47 53
         
Operating earnings after non-GAAP adjustments   $ 324   $ 176   $ 148  
     
Operating earnings as a percentage of net sales - GAAP 15.7 % 16.1 % 15.1 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   22.7 %   22.0 %   23.5 %
 
Q3 2016
     
    TOTAL Products Services
Net sales $ 1,532 $ 920 $ 612
Operating earnings ("OE")   $ 341   $ 225   $ 116  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 17 11 6
Reorganization of business charges 7 5 2
Intangibles amortization expense   31     2     29  
Total above-OE non-GAAP adjustments 55 18 37
         
Operating earnings after non-GAAP adjustments   $ 396   $ 243   $ 153  
     
Operating earnings as a percentage of net sales - GAAP 22.3 % 24.5 % 19.0 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   25.8 %   26.4 %   25.0 %
 

MEDIA CONTACT
Tama McWhinney
Motorola Solutions
+1 847-538-1865
[email protected]
or
INVESTOR CONTACT
Chris Kutsor
Motorola Solutions
+1 847-576-4995
[email protected]

Source: Motorola Solutions, Inc.


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