10-QPeriod: Q1 FY2012

Motorola Solutions, Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 25, 2012For Securities:MSI

Summary

Motorola Solutions, Inc. reported a 7% increase in net sales for the first quarter of 2012, reaching $1.96 billion, primarily driven by an 11% surge in the Government segment. While the Enterprise segment saw a slight 2% decline in sales, largely due to a $31 million drop in iDEN sales, the overall revenue growth was positive. Operating earnings improved significantly to $232 million from $169 million in the prior year period, reflecting a higher operating margin of 11.9%. However, net earnings from continuing operations attributable to common stockholders decreased substantially to $159 million ($0.50 per diluted share) from $367 million ($1.07 per diluted share) in the prior year. This decline was primarily due to the absence of a significant tax benefit realized in the first quarter of 2011 related to the reversal of a valuation allowance on U.S. deferred tax assets. The company actively managed its capital through significant share repurchases, returning $1.4 billion to shareholders in the first quarter of 2012, alongside $70 million in dividends. Liquidity remains strong, with $1.7 billion in cash and cash equivalents, though down from the prior quarter due to these capital returns. Strategic focus remains on the Government segment, with the Enterprise segment facing headwinds from specific product lines.

Financial Highlights

54 data points
Beta

Revenue

$1.96B

49.7% Gross Margin

Net Income

$157.00M

8.0% Net Margin

EPS (Diluted)

$0.49

Total Assets

$12.44B

Cash & Equivalents

$1.72B

Free Cash Flow

$69.00M

Financial Statements
Beta
Revenue$1.96B
Cost of Revenue$983.00M
Gross Profit$973.00M
R&D Expenses$254.00M
SG&A Expenses$472.00M
Operating Income$232.00M
Interest Expense$25.00M
Net Income$157.00M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)311.30M
Shares Outstanding (Diluted)317.70M

Key Highlights

  • 1Net sales increased by 7% to $1.96 billion, driven by strong performance in the Government segment (+11%).
  • 2Operating earnings grew to $232 million, with operating margin expanding to 11.9% from 9.2% year-over-year.
  • 3Net earnings from continuing operations attributable to common stockholders decreased to $159 million ($0.50/share) from $367 million ($1.07/share), largely due to a one-time tax benefit in the prior year.
  • 4The company returned $1.4 billion to shareholders through share repurchases and paid $70 million in dividends during the quarter.
  • 5The Government segment continues to be the primary revenue driver, while the Enterprise segment experienced a 2% decline in net sales.
  • 6Cash from operating activities decreased to $69 million from $233 million, impacted by timing of bonus payments and a legal settlement.
  • 7The company completed the exit of its amateur, marine, and airband radio businesses, now reported as discontinued operations.

Frequently Asked Questions

The primary driver for the decrease in net earnings from continuing operations was the absence of a significant $244 million tax benefit recognized in the first quarter of 2011. This benefit resulted from the reversal of a valuation allowance on U.S. deferred tax assets, which did not recur in the current period. While gross margins improved, the lack of this one-time tax benefit led to the year-over-year decline in net earnings.

Motorola Solutions is actively returning capital to shareholders through a substantial share repurchase program and the payment of dividends. In the first quarter of 2012, the company repurchased approximately $1.4 billion of its common stock and paid $70 million in dividends. This aligns with the announced share repurchase programs totaling $2.0 billion, with an additional $1.0 billion authorized in January 2012.

The Government segment is performing strongly, with net sales increasing by 11% year-over-year, driven by growth across all regions. The Enterprise segment, however, experienced a 2% decrease in net sales, primarily due to a $31 million decline in iDEN sales, although sales increased in North America and Asia. Management appears to be focusing on next-generation technologies and strategic acquisitions to bolster growth in both segments.

The company's liquidity position saw a decrease in cash and cash equivalents to $1.7 billion from $1.9 billion at the end of the previous quarter, largely due to the significant capital returned to shareholders. Despite this decrease, the company maintains a strong liquidity position with substantial investments in its Sigma Fund. A priority is the repatriation of foreign funds to meet domestic cash requirements, with approximately $2.1 billion in foreign earnings potentially available without additional tax charges. The company believes its available cash and investments are adequate for its operating requirements over the next twelve months.