Motorola Solutions Reports Second-Quarter 2019 Financial Results

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

	Three Months Ended
	June 29, 2019			June 30, 2018
Net sales from products	$	1,118		$	1,042
Net sales from services		742			718
Net sales		1,860			1,760
Costs of products sales		490			485
Costs of services sales		439			453
Costs of sales		929			938
Gross margin		931			822
Selling, general and administrative expenses		351			316
Research and development expenditures		170			162
Other charges		9			18
Intangibles amortization		52			53
Operating earnings		349			273
Other income (expense):
Interest expense, net		(56	)		(58	)
Gains (losses) on sales of investments and businesses, net		3			(1	)
Other		(21	)		13
Total other expense		(74	)		(46	)
Net earnings before income taxes		275			227
Income tax expense		67			46
Net earnings		208			181
Less: Earnings attributable to non-controlling interests		1			1
Net earnings attributable to Motorola Solutions, Inc.	$	207		$	180
Earnings per common share:
Basic	$	1.25		$	1.11
Diluted	$	1.18		$	1.05
Weighted average common shares outstanding:
Basic		164.9			162.2
Diluted		176.1			171.7

	Percentage of Net Sales*
Net sales from products		60.1	%		59.2	%
Net sales from services		39.9	%		40.8	%
Net sales		100.0	%		100.0	%
Costs of products sales		43.8	%		46.5	%
Costs of services sales		59.2	%		63.1	%
Costs of sales		49.9	%		53.3	%
Gross margin		50.1	%		46.7	%
Selling, general and administrative expenses		18.9	%		18.0	%
Research and development expenditures		9.1	%		9.2	%
Other charges		0.5	%		1.0	%
Intangibles amortization		2.8	%		3.0	%
Operating earnings		18.8	%		15.5	%
Other income (expense):
Interest expense, net		(3.0	)%		(3.3	)%
Gains (losses) on sales of investments and businesses, net		0.2	%		(0.1	)%
Other		(1.1	)%		0.7	%
Total other expense		(4.0	)%		(2.6	)%
Net earnings before income taxes		14.8	%		12.9	%
Income tax expense		3.6	%		2.6	%
Net earnings		11.2	%		10.3	%
Less: Earnings attributable to non-controlling interests		0.1	%		0.1	%
Net earnings attributable to Motorola Solutions, Inc.		11.1	%		10.2	%
* 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 29, 2019			June 30, 2018
Net sales from products	$	2,063		$	1,842
Net sales from services		1,454			1,385
Net sales		3,517			3,227
Costs of products sales		934			867
Costs of services sales		879			869
Costs of sales		1,813			1,736
Gross margin		1,704			1,491
Selling, general and administrative expenses		676			594
Research and development expenditures		333			314
Other charges		14			44
Intangibles amortization		102			94
Operating earnings		579			445
Other income (expense):
Interest expense, net		(111	)		(104	)
Gains on sales of investments and businesses, net		4			10
Other		(12	)		16
Total other expense		(119	)		(78	)
Net earnings before income taxes		460			367
Income tax expense		100			69
Net earnings		360			298
Less: Earnings attributable to non-controlling interests		2			1
Net earnings attributable to Motorola Solutions, Inc.	$	358		$	297
Earnings per common share:
Basic	$	2.18		$	1.83
Diluted	$	2.04		$	1.73
Weighted average common shares outstanding:
Basic		164.4			161.7
Diluted		175.3			171.1

	Percentage of Net Sales*
Net sales from products		58.7	%		57.1	%
Net sales from services		41.3	%		42.9	%
Net sales		100.0	%		100.0	%
Costs of products sales		45.3	%		47.1	%
Costs of services sales		60.5	%		62.7	%
Costs of sales		51.5	%		53.8	%
Gross margin		48.5	%		46.2	%
Selling, general and administrative expenses		19.2	%		18.4	%
Research and development expenditures		9.5	%		9.7	%
Other charges		0.4	%		1.4	%
Intangibles amortization		2.9	%		2.9	%
Operating earnings		16.5	%		13.8	%
Other income (expense):
Interest expense, net		(3.2	)%		(3.2	)%
Gains on sales of investments and businesses, net		0.1	%		(0.3	)%
Other		(0.3	)%		0.5	%
Total other expense		(3.4	)%		(2.4	)%
Net earnings before income taxes		13.1	%		11.4	%
Income tax expense		2.8	%		2.1	%
Net earnings		10.2	%		9.2	%
Less: Earnings attributable to non-controlling interests		0.1	%	-		%
Net earnings attributable to Motorola Solutions, Inc.		10.2	%		9.2	%
* Percentages may not add up due to rounding

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

	June 29, 2019			December 31, 2018
Assets
Cash and cash equivalents	$	953		$	1,246
Restricted cash		11			11
Total cash and cash equivalents		964			1,257
Accounts receivable, net		1,206			1,293
Contract assets		913			1,012
Inventories, net		424			356
Other current assets		324			354
Total current assets		3,831			4,272
Property, plant and equipment, net		940			895
Operating lease assets		567			-
Investments		175			169
Deferred income taxes		913			985
Goodwill		1,852			1,514
Intangible Assets		1,332			1,230
Other assets		364			344
Total assets	$	9,974		$	9,409
Liabilities and Stockholders' Equity
Current portion of long-term debt	$	28		$	31
Accounts payable		544			592
Contract liabilities		1,187			1,263
Accrued liabilities		1,117			1,210
Total current liabilities		2,876			3,096
Long-term debt		5,315			5,289
Operating lease liabilities		504			-
Other liabilities		2,233			2,300
Total Motorola Solutions, Inc. stockholders’ equity (deficit)		(970	)		(1,293	)
Non-controlling interests		16			17
Total liabilities and stockholders’ equity	$	9,974		$	9,409

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

	Three Months Ended
	June 29, 2019			June 30, 2018
Operating
Net earnings attributable to Motorola Solutions, Inc.	$	207		$	180
Earnings attributable to non-controlling interests		1			1
Net earnings		208			181
Adjustments to reconcile Net earnings to Net cash provided by (used for) operating activities:
Depreciation and amortization		96			96
Non-cash other (income) charges		(6	)		3
Share-based compensation expense		30			17
Losses (gains) on sales of investments and businesses, net		(3	)		1
Loss from the extinguishment of long term debt		43			-
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable		(58	)		11
Inventories		2			46
Other current assets and contract assets		(8	)		41
Accounts payable, accrued liabilities, and contract liabilities		(84	)		10
Other assets and liabilities		8			(5	)
Deferred income taxes		23			24
Net cash provided by operating activities		251			425
Investing
Acquisitions and investments, net		(3	)		(28	)
Proceeds from sales of investments and businesses, net		8			2
Capital expenditures		(63	)		(41	)
Net cash used for investing activities		(58	)		(67	)
Financing
Repayment of debt		(658	)		(147	)
Net proceeds from issuance of debt		645			(1	)
Issuance of common stock		25			6
Purchases of common stock		(25	)		-
Payments of dividends		(94	)		(84	)
Payments of dividends to non-controlling interests		(3	)		(1	)
Net cash used for financing activities		(110	)		(227	)

Effect of exchange rate changes on total cash and cash equivalents		(16	)		(48	)
Net increase in total cash and cash equivalents		67			83
Total cash and cash equivalents, beginning of period		897			858
Total cash and cash equivalents, end of period	$	964		$	941

Financial Ratios:
Free cash flow*	$	188		$	384

*Free cash flow = Net cash provided by (used for) operating activities - Capital expenditures

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

	Six Months Ended
	June 29, 2019			June 30, 2018
Operating
Net earnings attributable to Motorola Solutions, Inc.	$	358		$	297
Earnings attributable to non-controlling interests		2			1
Net earnings		360			298
Adjustments to reconcile Net earnings to Net cash provided by (used for) operating activities:
Depreciation and amortization		191			178
Non-cash other charges		4			6
Share-based compensation expense		57			34
Gains on sales of investments and businesses, net		(4	)		(10	)
Loss from the extinguishment of long term debt		43			-
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable		110			206
Inventories		(61	)		37
Other current assets and contract assets		128			43
Accounts payable, accrued liabilities, and contract liabilities		(345	)		(340	)
Other assets and liabilities		2			(558	)
Deferred income taxes		17			31
Net cash provided by (used for) operating activities		502			(75	)
Investing
Acquisitions and investments, net		(371	)		(1,153	)
Proceeds from sales of investments and businesses, net		10			79
Capital expenditures		(129	)		(82	)
Net cash used for investing activities		(490	)		(1,156	)
Financing
Repayment of debt		(666	)		(197	)
Net proceeds from issuance of debt		645			1,295
Issuance of common stock		70			59
Purchases of common stock		(170	)		(66	)
Payments of dividends		(187	)		(168	)
Payments of dividends to non-controlling interests		(3	)		(1	)
Net cash provided by (used for) financing activities		(311	)		922

Effect of exchange rate changes on total cash and cash equivalents		6			(18	)
Net decrease in total cash and cash equivalents		(293	)		(327	)
Total cash and cash equivalents, beginning of period		1,257			1,268
Total cash and cash equivalents, end of period	$	964		$	941

Financial Ratios:
Free cash flow*	$	373		$	(157	)

*Free cash flow = Net cash provided by (used for) operating activities - Capital expenditures

									GAAP-6
Motorola Solutions, Inc. and Subsidiaries
Segment Information
(In millions)

Net Sales

	Three Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	1,238		$	1,189		4	%
Services and Software		622			571		9	%
Total Motorola Solutions	$	1,860		$	1,760		6	%

	Six Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	2,307		$	2,141		8	%
Services and Software		1,210			1,086		11	%
Total Motorola Solutions	$	3,517		$	3,227		9	%


Operating Earnings

	Three Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	201		$	175		15	%
Services and Software		148			98		51	%
Total Motorola Solutions	$	349		$	273		28	%

	Six Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	310		$	265		17	%
Services and Software		269			180		49	%
Total Motorola Solutions	$	579		$	445		30	%


Operating Earnings %

	Three Months Ended

	June 29, 2019			June 30, 2018
Products and Systems Integration		16.2	%		14.7	%
Services and Software		23.8	%		17.2	%
Total Motorola Solutions		18.8	%		15.5	%

	Six Months Ended

	June 29, 2019			June 30, 2018
Products and Systems Integration		13.4	%		12.4	%
Services and Software		22.2	%		16.6	%
Total Motorola Solutions		16.5	%		13.8	%

Non-GAAP Adjustments											Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)
(In millions)
Q1 2019

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	$	27		$	6		$	21		$	0.12
Reorganization of business charges	Cost of sales and Other charges		8			2			6			0.04
Intangibles amortization expense	Intangibles amortization		50			11			39			0.23
Legal settlement	Other charges		(1	)		-			(1	)		(0.01	)
Fair value adjustments to equity investments	Other expense		1			-			1			0.01
Investment impairments	Investment impairments		8			2			6			0.04
Sale of investments	(Gain) or loss on sales of investments and businesses, net		(1	)		-			(1	)		(0.01	)
Acquisition-related transaction fees	Other charges		2			-			2			0.01
FIN48 release	Income tax expense		-			1			(1	)		(0.01	)

Total impact on Net earnings		$	94		$	22		$	72		$	0.42

Q2 2019

Non-GAAP Adjustments	Statement Line	PBT (Inc)/Exp			Tax Inc/(Exp)			PAT (Inc)/Exp			EPS impact

Share-based compensation expense	Cost of sales, SG&A and R&D	$	30		$	7		$	23		$	0.13
Reorganization of business charges	Cost of sales and Other charges		12			3			9			0.05
Intangibles amortization expense	Intangibles amortization		52			11			41			0.23
Loss from the extinguishment of long-term debt	Other expense		43			11			32			0.18
Sale of a business	(Gain) or loss on sales of investments and businesses, net		(3	)		(1	)		(2	)		(0.01	)
Legal settlements	Other charges		1			-			1			0.01
Investment impairments	Investment impairments		3			1			2			0.01
Fair value adjustments to equity investments	Other income		(16	)		(4	)		(12	)		(0.07	)
FIN48 releases	Other income, Income tax expense		(4	)		(1	)		(3	)		(0.02	)

Total impact on Net earnings		$	118		$	27		$	91		$	0.51

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

Net Sales

	Three Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	1,238		$	1,189		4	%
Services and Software		622			571		9	%
Total Motorola Solutions	$	1,860		$	1,760		6	%

	Six Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	2,307		$	2,141		8	%
Services and Software		1,210			1,086		11	%
Total Motorola Solutions	$	3,517		$	3,227		9	%


Non-GAAP Operating Earnings

	Three Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	242		$	226		7	%
Services and Software		202			152		33	%
Total Motorola Solutions	$	444		$	378		17	%

	Six Months Ended

	June 29, 2019			June 30, 2018			% Change
Products and Systems Integration	$	389		$	350		11	%
Services and Software		370			287		29	%
Total Motorola Solutions	$	759		$	637		19	%


Non-GAAP Operating Earnings %

	Three Months Ended

	June 29, 2019			June 30, 2018
Products and Systems Integration		19.5	%		19.0	%
Services and Software		32.5	%		26.6	%
Total Motorola Solutions		23.9	%		21.5	%

	Six Months Ended

	June 29, 2019			June 30, 2018
Products and Systems Integration		16.9	%		16.3	%
Services and Software		30.6	%		26.4	%
Total Motorola Solutions		21.6	%		19.7	%

							Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
(In millions)
Q1 2019

	TOTAL			Products and Systems Integration			Services and Software
Net sales	$	1,657		$	1,069		$	588
Operating earnings ("OE")	$	229		$	108		$	121
Above-OE non-GAAP adjustments:
Share-based compensation expense		27			21			6
Reorganization of business charges		8			7			1
Intangibles amortization expense		50			11			39
Acquisition-related transaction fees		2			1			1
Legal settlement		(1	)		(1	)		-
Total above-OE non-GAAP adjustments		86			39			47

Operating earnings after non-GAAP adjustments	$	315		$	147		$	168

Operating earnings as a percentage of net sales - GAAP		13.8	%		10.1	%		20.6	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments		19.0	%		13.8	%		28.6	%

Q2 2019

	TOTAL			Products and Systems Integration			Services and Software
Net sales	$	1,860		$	1,238		$	622
Operating earnings ("OE")	$	349		$	201		$	148
Above-OE non-GAAP adjustments:
Share-based compensation expense		30			19			11
Reorganization of business charges		12			9			3
Intangibles amortization expense		52			12			40
Legal settlements		1			1			-
Total above-OE non-GAAP adjustments		95			41			54

Operating earnings after non-GAAP adjustments	$	444		$	242		$	202

Operating earnings as a percentage of net sales - GAAP		18.8	%		16.2	%		23.8	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments		23.9	%		19.5	%		32.5	%

							Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Organic Revenue
(In millions)

Total Motorola Solutions

	Three Months Ended

	June 29, 2019			June 30, 2018			% Change
Net sales	$	1,860		$	1,760		6	%

Non-GAAP adjustments:
Acquisitions		(37	)		(4	)
Organic revenue	$	1,823		$	1,756		4	%

	Six Months Ended

	June 29, 2019			June 30, 2018			% Change
Net sales	$	3,517		$	3,227		9	%

Non-GAAP adjustments:
Acquisitions		(196	)		(26	)
Organic revenue	$	3,321		$	3,201		4	%

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