Motorola Solutions Reports Second-Quarter 2014 Financial Results

DEFINITIONS

* Amounts attributable to Motorola Solutions, Inc. common shareholders.

** Non-GAAP financial information excludes from GAAP results the effects of share-based compensation expense, intangible assets amortization expense and highlighted items.

***Business outlook excludes share-based compensation, intangible amortization and charges associated with items typically highlighted by the company in its quarterly earnings releases.

ABOUT MOTOROLA SOLUTIONS

Motorola Solutions is a leading provider of mission-critical communication solutions and services for enterprise and government customers. Through leading-edge innovation and communications technology, it is a global leader that enables its customers to be their best in the moments that matter. Motorola Solutions trades on the New York Stock Exchange under the ticker “MSI.” To learn more, visit www.motorolasolutions.com. For ongoing news, please visit our newsroom or subscribe to our news feed.

MOTOROLA, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license. All other trademarks are the property of their respective owners. ©2014 Motorola Solutions, Inc. All rights reserved.


				GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)

	Three Months Ended
	June 28, 2014			June 29, 2013
Net sales from products	$	887		$	986
Net sales from services		506			511
Net sales		1,393			1,497

Costs of products sales		400			435
Costs of services sales		337			312
Costs of sales		737			747

Gross margin		656			750

Selling, general and administrative expenses		308			339
Research and development expenditures		176			195
Other charges		33			13
Intangibles amortization		1			-
Operating earnings		138			203

Other expense:
Interest expense, net:		(29	)		(32	)
Losses on sales of investments and businesses, net		(4	)		-
Other		(7	)		(3	)
Total other expense		(40	)		(35	)
Earnings from continuing operations before income taxes		98			168
Income tax expense (benefit)		20			(59	)
Earnings from continuing operations		78			227

Earnings from discontinued operations, net of tax		746			35
Net earnings		824			262

Less: Earnings attributable to noncontrolling interests		-			4
Net earnings attributable to Motorola Solutions, Inc.	$	824		$	258

Amounts attributable to Motorola Solutions, Inc. common shareholders
Earnings from continuing operations, net of tax	$	78		$	223
Earnings from discontinued operations, net of tax		746			35
Net earnings attributable to Motorola Solutions, Inc.	$	824		$	258

Earnings per common share
Basic:
Continuing operations	$	0.31		$	0.83
Discontinued operations		2.94			0.13
	$	3.25		$	0.96

Diluted:
Continuing operations	$	0.30		$	0.81
Discontinued operations		2.92			0.13
	$	3.22		$	0.94

Weighted average common shares outstanding
Basic		253.7			269.5
Diluted		256.2			274.7


	Percentage of Net Sales*
Net sales from products		63.7	%		65.9	%
Net sales from services		36.3	%		34.1	%
Net sales		100	%		100	%

Costs of products sales		45.1	%		44.1	%
Costs of services sales		66.6	%		61.1	%
Costs of sales		52.9	%		49.9	%

Gross margin		47.1	%		50.1	%

Selling, general and administrative expenses		22.1	%		22.6	%
Research and development expenditures		12.6	%		13.0	%
Other charges		2.4	%		0.9	%
Intangibles amortization		0.1	%		0.0	%
Operating earnings		9.9	%		13.6	%

Other expense:
Interest expense, net:		-2.1	%		-2.1	%
Losses on sales of investments and businesses, net		-0.3	%		0.0	%
Other		-0.5	%		-0.2	%
Total other expense		-2.9	%		-2.3	%
Earnings from continuing operations before income taxes		7.0	%		11.2	%
Income tax expense (benefit)		1.4	%		-3.9	%
Earnings from continuing operations		5.6	%		15.2	%
Earnings from discontinued operations, net of tax		53.6	%		2.3	%
Net earnings		59.2	%		17.5	%

Less: Earnings attributable to noncontrolling interests		0.0	%		0.3	%
Net earnings attributable to Motorola Solutions, Inc.		59.2	%		17.2	%

* Percentages may not add up due to rounding


				GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)

	Six Months Ended
	June 28, 2014			June 29, 2013
Net sales from products	$	1,640		$	1,899
Net sales from services		982			994
Net sales		2,622			2,893

Costs of products sales		751			840
Costs of services sales		638			610
Costs of sales		1,389			1,450

Gross margin		1,233			1,443

Selling, general and administrative expenses		615			665
Research and development expenditures		350			382
Other charges		21			20
Intangibles amortization		2			-
Operating earnings		245			376

Other income (expense):
Interest expense, net:		(54	)		(57	)
Gains on sales of investments and businesses, net		4			7
Other		(9	)		(3	)
Total other expense		(59	)		(53	)
Earnings from continuing operations before income taxes		186			323
Income tax expense (benefit)		23			(61	)
Earnings from continuing operations		163			384

Earnings from discontinued operations, net of tax		788			70
Net earnings		951			454

Less: Earnings attributable to noncontrolling interests		-			4
Net earnings attributable to Motorola Solutions, Inc.	$	951		$	450

Amounts attributable to Motorola Solutions, Inc. common shareholders
Earnings from continuing operations, net of tax	$	163		$	380
Earnings from discontinued operations, net of tax		788			70
Net earnings attributable to Motorola Solutions, Inc.	$	951		$	450

Earnings per common share
Basic:
Continuing operations	$	0.64		$	1.40
Discontinued operations		3.11			0.26
	$	3.75		$	1.66

Diluted:
Continuing operations	$	0.63		$	1.37
Discontinued operations		3.07			0.25
	$	3.70		$	1.62

Weighted average common shares outstanding
Basic		253.8			271.9
Diluted		257.2			277.7


	Percentage of Net Sales*
Net sales from products		62.5	%		65.6	%
Net sales from services		37.5	%		34.4	%
Net sales		100	%		100	%

Costs of products sales		45.8	%		44.2	%
Costs of services sales		65.0	%		61.4	%
Costs of sales		53.0	%		50.1	%

Gross margin		47.0	%		49.9	%

Selling, general and administrative expenses		23.5	%		23.0	%
Research and development expenditures		13.3	%		13.2	%
Other charges		0.8	%		0.7	%
Intangibles amortization		0.1	%		0.0	%
Operating earnings		9.3	%		13.0	%

Other income (expense):
Interest expense, net:		-2.1	%		-2.0	%
Gains on sales of investments and businesses, net		0.2	%		0.2	%
Other		-0.3	%		-0.1	%
Total other expense		-2.3	%		-1.8	%
Earnings from continuing operations before income taxes		7.1	%		11.2	%
Income tax expense (benefit)		0.9	%		-2.1	%
Earnings from continuing operations		6.2	%		13.3	%

Earnings from discontinued operations, net of tax		30.1	%		2.4	%
Net earnings		36.3	%		15.7	%

Less: Earnings attributable to noncontrolling interests		0.0	%		0.1	%
Net earnings attributable to Motorola Solutions, Inc.		36.3	%		15.6	%

* Percentages may not add up due to rounding


			GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)

	June 28,		December 31,
	2014		2013
Assets
Cash and cash equivalents	$	2,876	$	3,225
Accounts receivable, net		1,185		1,369
Inventories, net		330		347
Deferred income taxes		1,205		451
Other current assets		527		635
Current assets held for sale		943		993
Total current assets		7,066		7,020

Property, plant and equipment, net		682		695
Investments		236		232
Deferred income taxes		1,909		1,990
Goodwill		383		361
Other assets		128		89
Noncurrent assets held for sale		1,464		1,464
Total assets	$	11,868	$	11,851

Liabilities and Stockholders' Equity
Current portion of long-term debt	$	4	$	4
Accounts payable		453		583
Accrued liabilities		1,615		1,763
Current liabilities held for sale		852		870
Total current liabilities		2,924		3,220

Long-term debt		2,446		2,457
Other liabilities		2,151		2,314
Noncurrent liabilities held for sale		178		171

Total Motorola Solutions, Inc. stockholders' equity		4,139		3,659

Noncontrolling interests		30		30

Total liabilities and stockholders' equity	$	11,868	$	11,851

Financial Ratios:
Net cash*	$	426	$	764

*Net cash = Total cash - Current portion of long-term debt - Long-term debt


				GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)

	Three Months Ended
	June 28, 2014			June 29, 2013
Operating
Net earnings attributable to Motorola Solutions, Inc.	$	824		$	258
Earnings attributable to noncontrolling interests		-			4
Net earnings		824			262
Earnings from discontinued operations, net of tax		746			35
Earnings from continuing operations, net of tax		78			227
Adjustments to reconcile Earnings from continuing operations to Net cash provided by operating activities:
Depreciation and amortization		46			40
Non-cash other income		(1	)		(6	)
Share-based compensation expense		25			27
Loss on sales of investments and businesses, net		4			-
Deferred income taxes		(16	)		(167	)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable		30			(108	)
Inventories		29			8
Other current assets		60			61
Accounts payable and accrued liabilities		(124	)		(113	)
Other assets and liabilities		(13	)		9
Net cash provided by (used for) operating activities from continuing operations		118			(22	)
Investing
Acquisitions and investments, net		(6	)		(5	)
Proceeds from sales of investments and businesses, net		10			2
Capital expenditures		(42	)		(37	)
Proceeds from sales of property, plant and equipment		-			15
Proceeds from sales of Sigma Fund and short-term investments, net		-			489
Net cash provided by (used for) investing activities from continuing operations		(38	)		464
Financing
Repayment of debt		(1	)		(1	)
Issuance of common stock		71			60
Repurchase of common stock		(416	)		(550	)
Excess tax benefit from share-based compensation		1			9
Payments of dividends		(79	)		(71	)
Distributions from discontinued operations		74			95
Net cash used for financing activities from continuing operations		(350	)		(458	)
Discontinued Operations
Net cash provided by operating activities from discontinued operations		55			105
Net cash provided by (used for) investing activities from discontinued operations		19			(12	)
Net cash used for financing activities from discontinued operations		(74	)		(95	)
Effect of exchange rate changes on cash and cash equivalents from discontinued operations		-			2
Net cash provided by discontinued operations		-			-

Effect of exchange rate changes on cash and cash equivalents from continuing operations		5			3
Net decrease in cash and cash equivalents		(265	)		(13	)
Cash and cash equivalents, beginning of period		3,141			1,470
Cash and cash equivalents, end of period	$	2,876		$	1,457

Financial Ratios:
Free cash flow*	$	76		$	(59	)

*Free cash flow = Net cash provided by operating activities - Capital expenditures


				GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)

	Six Months Ended
	June 28, 2014			June 29, 2013
Operating
Net earnings attributable to Motorola Solutions, Inc.	$	951		$	450
Earnings attributable to noncontrolling interests		-			4
Net earnings		951			454
Earnings from discontinued operations, net of tax		788			70
Earnings from continuing operations, net of tax		163			384
Adjustments to reconcile Earnings from continuing operations to Net cash provided by operating activities:
Depreciation and amortization		86			76
Gain on sale of building and land		(21	)		-
Non-cash other income		(5	)		(7	)
Share-based compensation expense		54			62
Gains on sales of investments and businesses, net		(4	)		(7	)
Deferred income taxes		6			(193	)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable		190			78
Inventories		17			14
Other current assets		76			(23	)
Accounts payable and accrued liabilities		(299	)		(479	)
Other assets and liabilities		(133	)		(5	)
Net cash provided by (used for) operating activities from continuing operations		130			(100	)
Investing
Acquisitions and investments, net		(11	)		(8	)
Proceeds from sales of investments and businesses, net		21			21
Capital expenditures		(82	)		(79	)
Proceeds from sales of property, plant and equipment		24			15
Proceeds from sales of Sigma Fund and short-term investments, net		-			376
Net cash provided by (used for) investing activities from continuing operations		(48	)		325
Financing
Repayment of debt		(2	)		(2	)
Net proceeds from issuance of debt		4			593
Issuance of common stock		85			99
Repurchase of common stock		(473	)		(907	)
Excess tax benefit from share-based compensation		6			18
Payments of dividends		(158	)		(143	)
Distributions from discontinued operations		100			137
Net cash used for financing activities from continuing operations		(438	)		(205	)
Discontinued Operations
Net cash provided by operating activities from discontinued operations		89			152
Net cash provided by (used for) investing activities from discontinued operations		11			(17	)
Net cash used for financing activities from discontinued operations		(100	)		(137	)
Effect of exchange rate changes on cash and cash equivalents from discontinued operations		-			2
Net cash provided by discontinued operations		-			-

Effect of exchange rate changes on cash and cash equivalents from continuing operations		7			(31	)
Net decrease in cash and cash equivalents		(349	)		(11	)
Cash and cash equivalents, beginning of period		3,225			1,468
Cash and cash equivalents, end of period	$	2,876		$	1,457

Financial Ratios:
Free cash flow*	$	48		$	(179	)

*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

	June 28,			June 29,			% Change
	2014			2013
Products	$	887		$	986		-10	%
Services		506			511		-1	%
Total Motorola Solutions	$	1,393		$	1,497		-7	%

	Six Months Ended

	June 28,			June 29,
	2014			2013			% Change

Products	$	1,640		$	1,899		-14	%
Services		982			994		-1	%
Total Motorola Solutions	$	2,622		$	2,893		-9	%


Operating Earnings

	Three Months Ended

	June 28,			June 29,			% Change
	2014			2013
Products	$	95		$	125		-24	%
Services		43			78		-45	%
Total Motorola Solutions	$	138		$	203		-32	%

	Six Months Ended

	June 28,			June 29,
	2014			2013			% Change

Products	$	134		$	231		-42	%
Services		111			145		-23	%
Total Motorola Solutions	$	245		$	376		-35	%


Operating Earnings %

	Three Months Ended

	June 28,			June 29,
	2014			2013
Products		10.7	%		12.7	%
Services		8.5	%		15.3	%
Total Motorola Solutions		9.9	%		13.6	%

	Six Months Ended

	June 28,			June 29,
	2014			2013

Products		8.2	%		12.2	%
Services		11.3	%		14.6	%
Total Motorola Solutions		9.3	%		13.0	%


											Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)

Q1 2014

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

Intangibles amortization expense	Intangibles amortization	$	1		$	-		$	1			$	-
Share-based compensation expense	Cost of sales, SG&A and R&D		29			9			20				0.08
Reorganization of business charges	Cost of sales and Other charges		10			2			8				0.03
Gain on sale of building and land	Other charges		(21	)		(8	)		(13	)			(0.05	)
Recognition of previously unrecognized income tax benefits	Income tax expense		-			29			(29	)			(0.11	)

Total impact on Net earnings		$	19		$	32		$	(13	)		$	(0.05	)

Q2 2014

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

Intangibles amortization expense	Intangibles amortization	$	1		$	-		$	1			$	-
Share-based compensation expense	Cost of sales, SG&A and R&D		26			9			17			$	0.07
Reorganization of business charges	Cost of sales and Other charges		28			8			20			$	0.08
Legal settlement	Other charges		8			3			5			$	0.02

Total impact on Net earnings		$	63		$	20		$	43			$	0.17


									Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)

Net Sales

	Three Months Ended

	June 28,			June 29,
	2014			2013			% Change

Products	$	887		$	986		-10	%
Services		506			511		-1	%
Total Motorola Solutions	$	1,393		$	1,497		-7	%

	Six Months Ended

	June 28,			June 29,
	2014			2013			% Change

Products	$	1,640		$	1,899		-14	%
Services		982			994		-1	%
Total Motorola Solutions	$	2,622		$	2,893		-9	%


Non-GAAP Operating Earnings

	Three Months Ended

	June 28,			June 29,			% Change
	2014			2013
Products	$	133		$	154		-14	%
Services		68			94		-28	%
Total Motorola Solutions	$	201		$	248		-19	%

	Six Months Ended

	June 28,			June 29,
	2014			2013			% Change

Products	$	185		$	288		-36	%
Services		142			176		-19	%
Total Motorola Solutions	$	327		$	464		-30	%


Non-GAAP Operating Earnings %

	Three Months Ended

	2014			2013

Products		15.0	%		15.6	%
Services		13.4	%		18.4	%
Total Motorola Solutions		14.4	%		16.6	%

	Six Months Ended

	June 28,			June 29,
	2014			2013

Products		11.3	%		15.2	%
Services		14.5	%		17.7	%
Total Motorola Solutions		12.5	%		16.0	%


							Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments

Q1 2014

	TOTAL			Products			Services
Net sales	$	1,228		$	753		$	475
Operating earnings ("OE")	$	107		$	39		$	68

Above-OE non-GAAP adjustments:
Share-based compensation expense		29			19			10
Reorganization of business charges		10			6			4
Intangibles amortization expense		1			1			-
Gain on sale of building and land		(21	)		(14	)		(7	)
Total above-OE non-GAAP adjustments		19			12			7

Operating earnings after non-GAAP adjustments	$	126		$	51		$	75

Operating earnings as a percentage of net sales - GAAP		8.7	%		5.2	%		14.3	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments		10.3	%		6.8	%		15.8	%

Q2 2014

	TOTAL			Products			Services
Net sales	$	1,393		$	887		$	506
Operating earnings ("OE")	$	138		$	95		$	43

Above-OE non-GAAP adjustments:
Share-based compensation expense		26			14			12
Reorganization of business charges		28			18			10
Intangibles amortization expense		1			1			-
Legal settlement		8			5			3
Total above-OE non-GAAP adjustments		63			38			25

Operating earnings after non-GAAP adjustments	$	201		$	133		$	68

Operating earnings as a percentage of net sales - GAAP		9.9	%		10.7	%		8.5	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments		14.4	%		15.0	%		13.4	%

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