10-QPeriod: Q3 FY2012

Motorola Solutions, Inc. Quarterly Report for Q3 Ended Sep 29, 2012

Filed October 24, 2012For Securities:MSI

Summary

Motorola Solutions, Inc. (MSI) reported strong revenue growth in its Government segment, which offset a decline in the Enterprise segment for the nine months ended September 29, 2012. Overall net sales increased by 6% year-over-year to $6.3 billion. The company demonstrated improved operating earnings, increasing to $833 million from $582 million in the prior year period, driven by the strong performance of the Government segment and effective cost management. MSI actively returned capital to shareholders, repurchasing approximately $2.1 billion of stock and paying $197 million in dividends during the first nine months of 2012, underscoring a commitment to shareholder value. The company maintained a healthy liquidity position, with $1.8 billion in cash and cash equivalents, and had approximately $1.8 billion of share repurchase authority remaining. While the Enterprise segment experienced headwinds, the robust growth in the Government segment and strategic financial management position the company for continued operational performance.

Financial Highlights

54 data points
Beta

Revenue

$2.15B

50.5% Gross Margin

Net Income

$206.00M

9.6% Net Margin

EPS (Diluted)

$0.72

Total Assets

$12.02B

Cash & Equivalents

$1.78B

Free Cash Flow

$182.00M

Financial Statements
Beta
Revenue$2.15B
Cost of Revenue$1.07B
Gross Profit$1.09B
R&D Expenses$262.00M
SG&A Expenses$485.00M
Operating Income$324.00M
Interest Expense$29.00M
Net Income$206.00M
EPS (Basic)$0.73
EPS (Diluted)$0.72
Shares Outstanding (Basic)283.10M
Shares Outstanding (Diluted)287.40M

Key Highlights

  • 1Overall net sales increased 6% to $6.3 billion for the nine months ended September 29, 2012, compared to $5.9 billion in the prior year period.
  • 2Operating earnings significantly increased to $833 million from $582 million year-over-year, reflecting improved operational efficiency.
  • 3The Government segment showed strong growth with net sales up 12% to $4.3 billion, while the Enterprise segment saw a 6% decline in net sales to $2.0 billion.
  • 4The company returned $2.3 billion to shareholders through share repurchases ($2.1 billion) and dividends ($197 million) in the first nine months of 2012.
  • 5Diluted earnings per share from continuing operations were $1.80 for the nine months ended September 29, 2012, up from $1.66 in the prior year period, despite a significant tax benefit in the prior year.
  • 6Cash from operating activities from continuing operations was $504 million for the nine months ended September 29, 2012, down from $804 million in the prior year, partly due to higher pension contributions and tax payments related to repatriations.
  • 7The company issued $750 million in new debt while also redeeming $400 million of existing debt, indicating active debt management.

Frequently Asked Questions

The primary driver for the revenue increase was the strong performance of the Government segment, which saw a 12% increase in net sales due to growth in mission-critical infrastructure, commercial radio products, and services. This growth partially offset a 6% decrease in the Enterprise segment, which was impacted by anticipated declines in iDEN infrastructure sales and fewer large deals.

Motorola Solutions actively returned capital to shareholders, repurchasing approximately $2.1 billion of its common stock and paying $197 million in dividends during the first nine months of 2012. The company also managed its debt by issuing $750 million in new senior notes and redeeming $400 million of existing notes.

The Enterprise segment experienced a decline in net sales, particularly due to anticipated reductions in iDEN infrastructure sales and fewer large deals. While the segment showed a slight increase in operating earnings year-over-year for the nine-month period, this was largely due to reduced amortization of intangibles and lower legal expenses, rather than top-line growth. The company also completed the acquisition of Psion plc shortly after the period end, which is expected to bolster its mobile computing solutions within the Enterprise segment.

Yes, the company implemented various productivity improvement plans during the first nine months of 2012, resulting in net reorganization charges of $36 million. These charges were primarily for employee separation costs and lease exit costs. The company expects significant annualized cost savings from these plans starting in 2013.