Motorola Solutions Reports Fourth-Quarter and Full-Year 2015 Financial Results

Company closes acquisition of Airwave, leading public safety managed services provider

FOURTH-QUARTER HIGHLIGHTS

  • Sales of $1.7 billion, down 8 percent, including $54 million of unfavorable foreign currency impact
  • GAAP earnings per share (EPS) from continuing operations1 of $1.56
  • Non-GAAP EPS from continuing operations* of $1.58, up 26 percent driven by lower operating expenses
  • Generated $414 million in operating cash flow; $1.0 billion for the full year
  • Generated $370 million in free cash flow2; $830 million for the full year
  • Returned $239 million to shareholders in share repurchase and dividends; $3.5 billion for full year

SCHAUMBURG, Ill.--()--Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the fourth quarter and full year of 2015. Click here for a printable news release and financial tables.

SUPPORTING QUOTE

“The fourth quarter capped off a year of disciplined execution from our team with strong earnings growth and cash flow performance," said Greg Brown, chairman and CEO of Motorola Solutions. “We grew in North America and grew in Managed & Support services across all regions while increasing backlog by nearly $700 million. Additionally, we achieved more than $200 million in structural cost savings and returned $3.5 billion of capital to shareholders."

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

   
Fourth Quarter Full Year
    2015   2014   % Change   2015   2014   % Change
Sales   $1,682   $1,823   (8

)%

  $5,695   $5,881   (3 )%
GAAP        
Operating earnings (loss) $389 $(1,459) N/M $994 $(1,006) N/M
% of Sales 23.1 % (80.0 )% 17.5 % (17.1 )%
EPS from continuing operations   $1.56   $(4.02)   N/M   $3.17   $(2.84)   N/M
Non-GAAP
Operating earnings $458 $483 (5 )% $1,166 $1,069 9 %
% of Sales 27.2 % 26.5 % 20.5 % 18.2 %
EPS from continuing operations   $1.58   $1.25   26 %   $3.33   $2.58   29 %
Product Segment
Sales $1,125 $1,246 (10 )% $3,676 $3,807 (3 )%
GAAP Operating earnings (loss) $291 $(944) N/M $704 $(667) N/M
% of Sales 25.9 % (75.8 )% 19.2 % (17.5 )%
Non-GAAP Operating earnings $340 $394 (14 )% $827 $754 10 %
% of Sales   30.2 %   31.6 %       22.5 %   19.8 %    
Services Segment
Sales $557 $577 (3 )% $2,019 $2,074 (3 )%
GAAP Operating earnings (loss) $98 $(515) N/M $290 $(339) N/M
% of Sales 17.6 % (89.3 )% 14.4 % (16.3 )%
Non-GAAP Operating earnings $118 $89 33 % $339 $315 8 %
% of Sales   21.2 %   15.4 %       16.8 %   15.2 %    
 

*Q4 Non-GAAP financial information excludes the after-tax impact of approximately $0.02 per diluted share related to share-based compensation, intangible assets amortization expense and highlighted items for the fourth-quarter. Details on these non-GAAP adjustments and the use of non-GAAP measures are included later in this news release.

OTHER SELECTED FOURTH-QUARTER FINANCIAL RESULTS

  • Revenue - Sales decreased 8 percent, including $54 million of unfavorable foreign currency impact. These results reflect a 1 percent decline in North America, or flat when excluding the impact of currency. Overall company product sales declined 10 percent due primarily to weakness in Latin America and Europe. The Services business declined 3 percent due to currency headwinds, lower iDEN revenue and a decline in systems integration revenues in Norway.
  • Operating margin - GAAP operating margin was 23.1 percent of sales in the fourth quarter of 2015; non-GAAP operating margin was 27.2 percent of sales, compared with 26.5 percent in the fourth quarter of 2014. Improved non-GAAP results reflect $45 million in lower operating expenses compared with the fourth quarter of 2014, due to the company's cost reduction initiatives, lower pension expense and a stronger dollar.
  • Taxes - The fourth quarter of 2015 GAAP effective tax rate was 26 percent. This compares with a tax rate of 38 percent in the fourth quarter of 2014, which was driven by the loss from continuing operations. The fourth quarter of 2015 non-GAAP tax rate was 31 percent compared with a tax rate of 35 percent in the fourth quarter of 2014.
  • Cash flow - The company generated $414 million in operating cash flow from continuing operations during the quarter, reflecting solid execution across all working capital accounts. Free cash flow was $370 million in the quarter. The increase was largely driven by lower pension contributions and improved cost structure.
  • Cash and cash equivalents - The company ended the quarter with cash and cash equivalents of $2.03 billion and a net debt position of approximately $2.4 billion4. The company repurchased approximately $179 million of its common stock in the fourth quarter of 2015 and paid approximately $60 million in cash dividends.

OTHER SELECTED FULL-YEAR FINANCIAL RESULTS

  • Revenue - Sales decreased 3 percent, including $201 million of unfavorable foreign currency impact. These results reflect 3 percent growth in North America, which delivered improvements in both Products and Services sales in state and local governments. Overall company product sales declined 3 percent due to currency headwinds and weakness in Latin America and Europe. The Services business declined 3 percent primarily due to currency headwinds, lower iDEN revenue and a decline in systems integration revenues in Norway.
  • Operating margin - For the full year, GAAP operating margin was 17.5 percent of sales in 2015, compared with (17.1) percent for the full year of 2014. 2014 results include a $1.9 billion non-recurring charge related to U.S. pension de-risking actions. For the full year, non-GAAP operating margin was 20.5 percent of sales in 2015, compared with 18.2 percent for the full year of 2014 driven primarily by lower operating expenses.
  • Taxes - The 2015 GAAP effective tax rate was 30 percent. This compares with a full-year GAAP effective tax rate of 40 percent in 2014. The full year 2015 non-GAAP tax rate was 33 percent, compared with a tax rate of 32 percent in 2014.
  • Cash flow - The company generated $1.0 billion in operating cash from continuing operations, reflecting an increase of $1.7 billion over the prior year. Free cash flow was $830 million in the year. The increase was largely driven by lower pension contributions and improved earnings performance.

KEY HIGHLIGHTS

Strategic wins

  • $430 million contract for the fourth major public safety long-term evolution (LTE) award as the Lot 2 winner of the United Kingdom's Emergency Network System
  • $170 million covering four separate U.S. statewide networks to provide both network upgrades and Managed & Support services over multiyear periods
  • $21 million Smart Public Safety win with our local partner serving the Royal Malaysia Police enabling the integration of computer-aided dispatch, video management, command & control center dispatch and equipping police cars with video systems to enable dispatch with situational awareness

Innovation and investments in growth

  • Completed our $1 billion acquisition of Airwave Communications. Airwave is the largest private operator of a public safety network in the world, delivering mission-critical voice and data communications to more than 300 public service agencies in Great Britain
  • Released new P25 software upgrade "Software Defined Core" enabling customers to more easily add features, software updates and licensing capabilities
  • Introduced our next-generation digital mobile radio solution for commercial customers that extends our industry leading MOTOTRBO capabilities and complies with the DMR III standard. Also introduced new devices purpose built for commercial customers in hazardous locations in both P25 and TETRA technologies
  • Executed successful public safety LTE trials around the world that span devices, land-mobile radio & LTE interoperability, applications, and deployable networks

BUSINESS OUTLOOK

  • First quarter 2016 - Motorola Solutions expects a revenue decline of 4 to 6 percent compared with the first quarter of 2015. This assumes a $20 million5 unfavorable currency impact and includes approximately $55 million in revenues associated with the Airwave acquisition. The company expects non-GAAP earnings per share from continuing operations in the range of $0.37 to $0.42 per share.
  • Full-year 2016 - The company expects revenue to increase 5 to 7 percent compared to 2015. This assumes a $60 million5 unfavorable currency impact. The company’s outlook assumes growth in North America and contraction in Europe and Latin America, including iDEN revenues. This revenue outlook includes approximately $450 million in revenues associated with the Airwave acquisition. The company expects non-GAAP earnings per share from continuing operations in the range of $4.45 to $4.65 per share.

CONFERENCE CALL AND WEBCAST

Motorola Solutions will host its quarterly conference call beginning at 4:00 p.m. U.S. Central Standard Time (5:00 p.m. U.S. Eastern Standard Time) Monday, February 22. 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
    2015   2014   2015   2014
Net sales   $1,682     $1,823     $5,695     $5,881  
Gross margin 838   912 2,719   2,831
Operating earnings (loss)   389     (1,459 )   994     (1,006 )
Amounts attributable to Motorola Solutions, Inc. common stockholders
Earnings (loss) from continuing operations, net of tax 277 (926 ) 640 (697 )
Net earnings 279 201 610 1,299
Diluted EPS from continuing operations   $1.56

$(4.02

)

  $3.17

$(2.84

)

Weighted average diluted common shares outstanding   177.5     230.5     201.8     245.6  
 

HIGHLIGHTED ITEMS AND SHARE-BASED COMPENSATION EXPENSE

The table below includes highlighted items, share-based compensation expense and intangible amortization for the fourth quarter of 2015.

(per diluted common share)   Q4 2015
 
GAAP Earnings from Continuing Operations   $1.56
Highlighted Items:
Share-based compensation expense $0.08
Reorganization of business charges $0.16
Intangibles amortization expense
Gain on sale of equity investment $(0.14)
Impairment of corporate aircraft $0.02
Decrease in net deferred tax liability for undistributed earnings $(0.07)
Tax benefit for foreign tax credit   $(0.03)
Total Highlighted Items   $0.02
     
Non-GAAP Diluted EPS from Continuing Operations   $1.58
 

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.

Constant Currency: We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our current period local currency results using prior-period exchange rates, and then comparing these adjusted values to prior period reported results.

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 2015, including the impact of currency rates and incremental revenues of Airwave. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 9 through 20 in Item 1A of Motorola Solutions 2014 Annual Report on Form 10-K, on page 39 in Part 2 of Item 1A of Motorola Solutions quarterly report on Form 10-Q for the quarter ended September 30, 2015 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 our partners or suppliers or those we sell to or operate or maintain for our 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 the 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 capex

3 Ending cash excludes $400 million of UK treasury securities purchased in association with the Airwave transaction

4 Net debt represents cash and cash equivalents less long-term debt, including current portion

5 Based on currency rates as of Feb. 19, 2016

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
Consolidated Statements of Operations
(In millions, except per share amounts)
     
Three Months Ended
December 31, 2015 December 31, 2014
Net sales from products $ 1,125 $ 1,246
Net sales from services   557   577
Net sales 1,682 1,823
 
Costs of products sales 485 513
Costs of services sales   359   398
Costs of sales 844 911
   
Gross margin   838   912
 
Selling, general and administrative expenses 252 283
Research and development expenditures 152 165
Other charges 43 1,922
Intangibles amortization   2   1
Operating earnings (loss)   389   (1,459)
 
Other income (expense):
Interest expense, net (51) (41)
Gains on sales of investments 47 2
Other   (8)  
Total other expense   (12)   (39)
Earnings (loss) from continuing operations before income taxes 377 (1,498)
Income tax expense (benefit)   99   (572)
Earnings (loss) from continuing operations 278 (926)
 
Earnings from discontinued operations, net of tax   2   1,127
Net earnings 280 201
 
Less: Earnings attributable to noncontrolling interests   1  
Net earnings attributable to Motorola Solutions, Inc. $ 279 $ 201
 
Amounts attributable to Motorola Solutions, Inc. common stockholders:
Earnings (loss) from continuing operations, net of tax $ 277 $ (926)
Earnings from discontinued operations, net of tax   2   1,127
Net earnings attributable to Motorola Solutions, Inc. $ 279 $ 201
 

Earnings (loss) per common share:

Basic:
Continuing operations $ 1.58 $ (4.02)
Discontinued operations   0.02   4.89
$ 1.60 $ 0.87
 
Diluted:
Continuing operations $ 1.56 $ (4.02)
Discontinued operations   0.01   4.89
$ 1.57 $ 0.87

Weighted average common shares outstanding:

Basic 174.9 230.5
Diluted   177.5   230.5
     
Percentage of Net Sales*
Net sales from products 66.9 % 68.3 %
Net sales from services   33.1 %   31.7 %
Net sales 100.0 % 100.0 %
 
Costs of products sales 43.1 % 41.2 %
Costs of services sales   64.5 %   69.0 %
Costs of sales 50.2 % 50.0 %
   
Gross margin   49.8 %   50.0 %
 
Selling, general and administrative expenses 15.0 % 15.5 %
Research and development expenditures 9.0 % 9.1 %
Other charges 2.6 % 105.4 %
Intangibles amortization   0.1 %   0.1 %
Operating earnings (loss)   23.1 %   (80.0)%
 
Other income (expense):
Interest expense, net (3.0)% (2.2)%
Gains on sales of investments 2.8 % 0.1 %
Other   (0.5)%   —%
Total other expense   (0.7)%   (2.1)%
Earnings (loss) from continuing operations before income taxes 22.4 % (82.2)%
Income tax expense (benefit)   5.9 %   (31.4)%
Earnings (loss) from continuing operations 16.5 % (50.8)%
Earnings from discontinued operations, net of tax 0.1 % 61.8 %
Net earnings   16.6 %   11.0 %
 
Less: Earnings attributable to noncontrolling interests 0.1 % —%
Net earnings attributable to Motorola Solutions, Inc.   16.6 %   11.0 %
* 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, 2015 December 31, 2014 December 31, 2013
Net sales from products $ 3,676 $ 3,807 $ 4,109
Net sales from services   2,019   2,074   2,118
Net sales 5,695 5,881 6,227
 
Costs of products sales 1,625 1,678 1,808
Costs of services sales   1,351   1,372   1,310
Costs of sales 2,976 3,050 3,118
     
Gross margin   2,719   2,831   3,109
 
Selling, general and administrative expenses 1,021 1,184 1,330
Research and development expenditures 620 681 761
Other charges 76 1,968 70
Intangibles amortization   8   4   1
Operating earnings (loss)   994   (1,006)   947
 
Other income (expense):
Interest expense, net (173) (126) (113)
Gains on sales of investments 107 5 37
Other   (11)   (34)   9
Total other expense   (77)   (155)   (67)
Earnings (loss) from continuing operations before income taxes 917 (1,161) 880
Income tax expense (benefit)   274   (465)   (59)
Earnings (loss) from continuing operations 643 (696) 939
 
Earnings (loss) from discontinued operations, net of tax   (30)   1,996   166
Net earnings 613 1,300 1,105
 
Less: Earnings attributable to noncontrolling interests   3   1   6
Net earnings attributable to Motorola Solutions, Inc. $ 610 $ 1,299 $ 1,099
 
Amounts attributable to Motorola Solutions, Inc. common stockholders:
Earnings (loss) from continuing operations, net of tax $ 640 $ (697) $ 933
Earnings (loss) from discontinued operations, net of tax   (30)   1,996   166
Net earnings attributable to Motorola Solutions, Inc. $ 610 $ 1,299 $ 1,099
 

Earnings (loss) per common share:

Basic:
Continuing operations $ 3.21 $ (2.84) $ 3.51
Discontinued operations   (0.15)   8.13   0.62
$ 3.06 $ 5.29 $ 4.13
 
Diluted:
Continuing operations $ 3.17 $ (2.84) $ 3.45
Discontinued operations   (0.15)   8.13   0.61
$ 3.02 $ 5.29 $ 4.06

Weighted average common shares outstanding:

Basic 199.6 245.6 266.0
Diluted   201.8   245.6   270.5
         
Percentage of Net Sales*
Net sales from products 64.5 % 64.7 % 66.0 %
Net sales from services   35.5 %   35.3 %   34.0 %
Net sales 100.0 % 100.0 % 100.0 %
 
Costs of products sales 44.2 % 44.1 % 44.0 %
Costs of services sales   66.9 %   66.2 %   61.9 %
Costs of sales 52.3 % 51.9 % 50.1 %
     
Gross margin   47.7 %   48.1 %   49.9 %
 
Selling, general and administrative expenses 17.9 % 20.1 % 21.4 %
Research and development expenditures 10.9 % 11.6 % 12.2 %
Other charges 1.3 % 33.5 % 1.1 %
Intangibles amortization   0.1 %   0.1 %   —%
Operating earnings (loss)   17.5 %   (17.1)%   15.2 %
 
Other income (expense):
Interest expense, net (3.0)% (2.1)% (1.8)%
Gains on sales of investments 1.9 % 0.1 % 0.6 %
Other   (0.2)%   (0.6)%   0.1 %
Total other expense   (1.4)%   (2.6)%   (1.1)%
Earnings (loss) from continuing operations before income taxes 16.1 % (19.7)% 14.1 %
Income tax expense (benefit)   4.8 %   (7.9)%   (0.9)%
Earnings (loss) from continuing operations 11.3 % (11.8)% 15.1 %
Earnings (loss) from discontinued operations, net of tax (0.5)% 33.9 % 2.7 %
Net earnings   10.8 %   22.1 %   17.7 %
 
Less: Earnings attributable to noncontrolling interests 0.1 % —% 0.1 %
Net earnings attributable to Motorola Solutions, Inc.   10.7 %   22.1 %   17.6 %
* Percentages may not add up due to rounding
   
GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions)
   
December 31, 2015 December 31, 2014
Assets
Cash and cash equivalents $ 1,980 $ 3,954
Accounts receivable, net 1,362 1,409
Inventories, net 296 345
Deferred income taxes 431
Other current assets 917 740
Current assets held for disposition   27    
Total current assets   4,582     6,879
 
Property, plant and equipment, net 487 549
Investments 268 316
Deferred income taxes 2,278 2,151
Goodwill 420 383
Other assets 312 145
Non-current assets held for disposition   40    
Total assets $ 8,387   $ 10,423
 
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 4 $ 4
Accounts payable 518 540
Accrued liabilities   1,671     1,706
Total current liabilities   2,193     2,250
 
Long-term debt 4,386 3,396
Other liabilities 1,904 2,011
 
Total Motorola Solutions, Inc. stockholders’ equity (deficit) (106 ) 2,735
 
Noncontrolling interests 10 31
   
Total liabilities and stockholders’ equity $ 8,387   $ 10,423
 
Financial Ratios:
Net cash (debt)* $ (2,410 ) $ 554
 
*Net cash (debt) = Total cash - Current portion of long-term debt - Long-term debt
   
GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
     
Three Months Ended
December 31, 2015 December 31, 2014
Operating
Net earnings attributable to Motorola Solutions, Inc. $ 279 $ 201
Earnings attributable to noncontrolling interests   1      
Net earnings 280 201
Earnings from discontinued operations, net of tax   2     1,127  
Earnings (loss) from continuing operations, net of tax 278 (926 )

Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by (used
for) operating activities:

Depreciation and amortization 37 42
Non-cash other charges 9 2
Loss on pension plan settlement 1,883
Share-based compensation expense 20 20
Gains on sales of investments and businesses, net (47 ) (2 )
Deferred income taxes 33 (626 )

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

Accounts receivable (146 ) (264 )
Inventories 37 (17 )
Other current assets 54 (38 )
Accounts payable and accrued liabilities 178 50
Other assets and liabilities   (39 )   (824 )
Net cash provided by (used for) operating activities from continuing operations   414     (700 )
Investing
Acquisitions and investments, net (436 ) (26 )
Proceeds from sales of investments and businesses, net 80 3,380
Capital expenditures (44 ) (51 )
Proceeds from sales of property, plant and equipment   1     3  
Net cash provided by (used for) investing activities from continuing operations   (399 )   3,306  
Financing
Repayment of debt (1 ) (4 )
Net proceeds from issuance of debt (5 )
Issuance of common stock 15 41
Purchase of common stock (179 ) (1,423 )
Excess tax benefit from share-based compensation 4
Payment of dividends (60 ) (82 )
Distributions from discontinued operations       27  
Net cash used for financing activities from continuing operations   (226 )   (1,441 )
Discontinued Operations
Net cash provided by operating activities from discontinued operations 32
Net cash used for investing activities from discontinued operations (1 )
Net cash used for financing activities from discontinued operations (27 )
Effect of exchange rate changes on cash and cash equivalents from discontinued operations       (4 )
Net cash provided by discontinued operations

 

   
Effect of exchange rate changes on cash and cash equivalents from continuing operations   (9 )   (56 )
Net increase (decrease) in cash and cash equivalents (220 ) 1,109
Cash and cash equivalents, beginning of period   2,200     2,845  
Cash and cash equivalents, end of period $ 1,980   $ 3,954  
 
Financial Ratios:
Free cash flow* $ 370 $ (751 )
 
*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, 2015 December 31, 2014 December 31, 2013
Operating
Net earnings attributable to Motorola Solutions, Inc. $ 610 $ 1,299 $ 1,099
Earnings attributable to noncontrolling interests   3     1     6  
Net earnings 613 1,300 1,105
Earnings (loss) from discontinued operations, net of tax   (30 )   1,996     166  
Earnings (loss) from continuing operations, net of tax 643 (696 ) 939

Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by (used
for) operating activities:

Depreciation and amortization 150 173 158
Non-cash other charges (income) 52 (14 )
Non-U.S. pension curtailment gain (32 )
Gain on sale of building and land (21 )
Loss on pension plan settlement 1,883
Share-based compensation expense 78 94 120
Gains on sales of investments and businesses, net (107 ) (5 ) (37 )
Loss from the extinguishment of long-term debt 37
Deferred income taxes 160 (557 ) (334 )

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

Accounts receivable 21 (62 ) (36 )
Inventories 16 (5 ) (8 )
Other current assets 92 (47 ) 50
Accounts payable and accrued liabilities 10 (120 ) (232 )
Other assets and liabilities   (78 )   (1,359 )   (51 )
Net cash provided by (used for) operating activities from continuing operations   1,005     (685 )   555  
Investing
Acquisitions and investments, net (586 ) (47 ) (57 )
Proceeds from sales of investments and businesses, net 230 3,403 61
Capital expenditures (175 ) (181 ) (169 )
Proceeds from sales of property, plant and equipment 3 33 66
Proceeds from sales of Sigma Fund investments and short-term investments, net           2,133  
Net cash provided by (used for) investing activities from continuing operations   (528 )   3,208     2,034  
Financing
Repayment of debt (4 ) (465 ) (4 )
Net proceeds from issuance of debt 971 1,375 593
Issuance of common stock 100 135 165
Purchase of common stock (3,177 ) (2,546 ) (1,694 )
Excess tax benefit from share-based compensation 5 11 25
Payment of dividends (277 ) (318 ) (292 )
Distributions from discontinued operations       93     365  
Net cash used for financing activities from continuing operations   (2,382 )   (1,715 )   (842 )
Discontinued Operations
Net cash provided by operating activities from discontinued operations 95 389
Net cash provided by (used for) investing activities from discontinued operations 4 (24 )
Net cash used for financing activities from discontinued operations (93 ) (365 )
Effect of exchange rate changes on cash and cash equivalents from discontinued operations       (6 )    
Net cash provided by discontinued operations
     
Effect of exchange rate changes on cash and cash equivalents from continuing operations   (69 )   (79 )   10  
Net increase (decrease) in cash and cash equivalents (1,974 ) 729 1,757
Cash and cash equivalents, beginning of period   3,954     3,225     1,468  
Cash and cash equivalents, end of period $ 1,980   $ 3,954   $ 3,225  
 
Financial Ratios:
Free cash flow* $ 830 $ (866 ) $ 386
 
*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, 2015 December 31, 2014 % Change  
Products $ 1,125 $ 1,246 (10 )%
Services   557     577   (3 )%
Total Motorola Solutions $ 1,682   $ 1,823   (8 )%
     
Years Ended
     
December 31, 2015 December 31, 2014 % Change  
Products $ 3,676 $ 3,807 (3 )%
Services   2,019     2,074   (3 )%
Total Motorola Solutions $ 5,695   $ 5,881   (3 )%
             
Operating Earnings (loss)
     
Three Months Ended
     
December 31, 2015 December 31, 2014 % Change  
Products $ 291 $ (944 ) N/M
Services   98     (515 ) N/M
Total Motorola Solutions $ 389   $ (1,459 ) N/M  
     
Years Ended
     
December 31, 2015 December 31, 2014 % Change  
Products $ 704 $ (667 ) N/M
Services   290     (339 ) N/M
Total Motorola Solutions $ 994   $ (1,006 ) N/M  
 
*N/M = % Change is not meaningful due to the comparison using prior year operating losses as a basis for the calculation.
             
Operating Earnings %
     
Three Months Ended
   
December 31, 2015 December 31, 2014
Products 25.9 % (75.8 )%
Services   17.6 %   (89.3 )%
Total Motorola Solutions   23.1 %   (80.0 )%
     
Years Ended
   
December 31, 2015   December 31, 2014
Products 19.2 % (17.5 )%
Services   14.4 %   (16.3 )%
Total Motorola Solutions   17.5 %   (17.1 )%
       

 

Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense, and Highlighted Items)
                     
Q1 2015
 
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 $ 21 7 $ 14 0.06
Reorganization of business charges Cost of sales and Other charges 14 4 10 0.05
Intangibles amortization expense Intangibles amortization 2 1 1
Gain on sale of equity investment Gains on sales of investments and businesses, net (46 ) (17 ) (29 ) (0.13 )
       
Total impact on Net earnings $ (9 ) $ (5 ) $ (4 ) $ (0.02 )
                     
Q2 2015
 
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 $ 19 6 $ 13 0.06
Reorganization of business charges Cost of sales and Other charges 16 6 $ 10 0.05
Intangibles amortization expense Intangibles amortization 3 1 $ 2
Non-U.S. pension curtailment gain Other charges (32 ) $ (32 ) (0.15 )
       
Total impact on Net earnings $ 6 $ 13 $ (7 ) $ (0.04 )
                     
Q3 2015
 
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 0.06
Reorganization of business charges Cost of sales and Other charges 15 4 11 0.05
Intangibles amortization expense Intangibles amortization 2 1 1
Impairment of corporate aircraft Other charges 26 10 16 0.08
       
Total impact on Net earnings $ 61 $ 21 $ 40 $ 0.19
                     
Q4 2015
 
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 20 6 14 0.08
Reorganization of business charges Cost of sales and Other charges 42 13 29 0.16
Intangibles amortization expense Intangibles amortization 2 1 1
Gain on sale of equity investment Gains on sales of investments and businesses, net (39 ) (14 ) (25 ) (0.14 )
Impairment of corporate aircraft Other charges 5 2 3 0.02
Decrease in net deferred tax liability for undistributed earnings Income tax expense 13 (13 ) (0.07 )
Tax benefit for foreign tax credit Income tax expense 6 (6 ) (0.03 )
       
Total impact on Net earnings $ 30 $ 27 $ 3 0.02
                     
FY 2015
 
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 78 25 53 0.26
Reorganization of business charges Cost of sales and Other charges 87 27 60 0.30
Intangibles amortization expense Intangibles amortization 8 3 5 0.02
Gain on sale of equity investment Gains on sales of investments and businesses, net (85 ) (32 ) (53 ) (0.27 )
Non-U.S. pension curtailment gain Other charges (32 ) (32 ) (0.16 )
Impairment of corporate aircraft Other charges 31 12 19 0.10
Decrease in net deferred tax liability for undistributed earnings Income tax expense 13 (13 ) (0.06 )
Tax benefit for foreign tax credit Income tax expense 6 (6 ) (0.03 )
       
Total impact on Net earnings $ 87 $ 54 $ 33 $ 0.16
 
      Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)
     
Net Sales
     
Three Months Ended
     
December 31, 2015 December 31, 2014 % Change  
Products $ 1,125 $ 1,246 (10 )%
Services   557     577   (3 )%
Total Motorola Solutions $ 1,682   $ 1,823   (8 )%
     
Years Ended
     
December 31, 2015 December 31, 2014 % Change  
Products $ 3,676 $ 3,807 (3 )%
Services   2,019     2,074   (3 )%
Total Motorola Solutions $ 5,695   $ 5,881   (3 )%
 
   
Non-GAAP Operating Earnings
     
Three Months Ended
     
December 31, 2015 December 31, 2014 % Change  
Products $ 340 $ 394 (14 )%
Services   118     89   33 %
Total Motorola Solutions $ 458   $ 483   (5 )%
     
Years Ended
     
December 31, 2015 December 31, 2014 % Change  
Products $ 827 $ 754 10 %
Services   339     315   8 %
Total Motorola Solutions $ 1,166   $ 1,069   9 %
 
   
Non-GAAP Operating Earnings %
     
Three Months Ended
   
December 31, 2015 December 31, 2014
Products 30.2 % 31.6 %
Services   21.2 %   15.4 %
Total Motorola Solutions   27.2 %   26.5 %
     
Years Ended
   
December 31, 2015 December 31, 2014
Products 22.5 % 19.8 %
Services   16.8 %   15.2 %
Total Motorola Solutions   20.5 %   18.2 %
     
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
             
Q1 2015
     
    TOTAL Products Services
Net sales $ 1,223 $ 758 $ 465
Operating earnings ("OE")   $ 119   $ 64   $ 55  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 21 14 7
Reorganization of business charges 14 10 4
Intangibles amortization expense   2     2      
Total above-OE non-GAAP adjustments 37 26 11
         
Operating earnings after non-GAAP adjustments   $ 156   $ 90   $ 66  
     
Operating earnings as a percentage of net sales - GAAP 9.7 % 8.4 % 11.8 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   12.8 %   11.9 %   14.2 %
             
Q2 2015
     
    TOTAL Products Services
Net sales $ 1,368 $ 867 $ 501
Operating earnings ("OE")   $ 254   $ 171   $ 83  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 19 12 7
Reorganization of business charges 16 12 4
Intangibles amortization expense 3 3
Non-U.S. pension curtailment gain   (32 )   (22 )   (10 )
Total above-OE non-GAAP adjustments 6 5 1
         
Operating earnings after non-GAAP adjustments   $ 260   $ 176   $ 84  
     
Operating earnings as a percentage of net sales - GAAP 18.6 % 19.7 % 16.6 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   19.0 %   20.3 %   16.8 %
             
Q3 2015
     
    TOTAL Products Services
Net sales $ 1,422 $ 925 $ 497
Operating earnings ("OE")   $ 231   $ 178   $ 53  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 18 12 6
Reorganization of business charges 15 11 4
Intangibles amortization expense 2 2
Impairment of corporate aircraft   26     18     8  
Total above-OE non-GAAP adjustments 61 43 18
         
Operating earnings after non-GAAP adjustments   $ 292   $ 221   $ 71  
     
Operating earnings as a percentage of net sales - GAAP 16.2 % 19.2 % 10.7 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   20.5 %   23.9 %   14.3 %
             
Q4 2015
     
    TOTAL Products   Services
Net sales $ 1,682 $ 1,125 $ 557
Operating earnings ("OE")   $ 389   $ 291   $ 98  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 20 13 7
Reorganization of business charges 42 31 11
Intangibles amortization expense 2 2
Impairment of corporate aircraft   5     3     2  
Total above-OE non-GAAP adjustments 69 49 20
         
Operating earnings after non-GAAP adjustments   $ 458   $ 340   $ 118  
     
Operating earnings as a percentage of net sales - GAAP 23.1 % 25.9 % 17.6 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   27.2 %   30.2 %   21.2 %
             
FY 2015
     
    TOTAL Products   Services
Net sales $ 5,695 $ 3,676 $ 2,019
Operating earnings ("OE")   $ 994   $ 704   $ 290  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 78 51 27
Reorganization of business charges 87 65 22
Intangibles amortization expense 8 8
Non-U.S. pension curtailment gain (32 ) (22 ) (10 )
Impairment of corporate aircraft   31     21     10  
Total above-OE non-GAAP adjustments 172 123 49
         
Operating earnings after non-GAAP adjustments   $ 1,166   $ 827   $ 339  
     
Operating earnings as a percentage of net sales - GAAP 17.5 % 19.2 % 14.4 %
Operating earnings as a percentage of net sales - after non-GAAP adjustments   20.5 %   22.5 %   16.8 %
 

Contacts

MEDIA CONTACT
Tama McWhinney
Motorola Solutions
+1 847-538-1865
tama.mcwhinney@motorolasolutions.com
or
INVESTOR CONTACTS
Shep Dunlap
Motorola Solutions
+1 847-576-6899
shep.dunlap@motorolasolutions.com
or
Chris Kutsor
Motorola Solutions
+1 847-576-4995
chris.kutsor@motorolasolutions.com

Contacts

MEDIA CONTACT
Tama McWhinney
Motorola Solutions
+1 847-538-1865
tama.mcwhinney@motorolasolutions.com
or
INVESTOR CONTACTS
Shep Dunlap
Motorola Solutions
+1 847-576-6899
shep.dunlap@motorolasolutions.com
or
Chris Kutsor
Motorola Solutions
+1 847-576-4995
chris.kutsor@motorolasolutions.com