10-QPeriod: Q1 FY2013

Motorola Solutions, Inc. Quarterly Report for Q1 Ended Mar 30, 2013

Filed April 24, 2013For Securities:MSI

Summary

Motorola Solutions, Inc. reported its first quarter 2013 financial results, showing a slight increase in net sales to $1.97 billion, up 1% year-over-year. While overall sales grew modestly, profitability metrics saw some pressure. Operating earnings decreased to $216 million from $232 million in the prior year, and the operating margin compressed to 10.9% from 11.9%. Despite these headwinds, the company delivered strong earnings per diluted share of $0.68, an increase from $0.50 in Q1 2012, driven by a lower effective tax rate and a reduced share count due to ongoing share repurchases. The company's Government segment demonstrated resilience with a 3% increase in net sales, while the Enterprise segment experienced a 4% decline. This performance shift highlights the growing importance of the Government segment in driving top-line growth. Motorola Solutions continued its capital return program, repurchasing $357 million of its stock and paying $72 million in dividends, while also issuing $600 million in senior notes to bolster its balance sheet.

Financial Highlights

55 data points
Beta

Revenue

$1.40B

49.6% Gross Margin

Net Income

$192.00M

13.8% Net Margin

EPS (Diluted)

$0.68

Total Assets

$12.60B

Cash & Equivalents

$1.47B

Free Cash Flow

-$31.00M

Financial Statements
Beta
Revenue$1.40B
Cost of Revenue$703.00M
Gross Profit$693.00M
R&D Expenses$187.00M
SG&A Expenses$325.00M
Operating Income$174.00M
Interest Expense$30.00M
Net Income$192.00M
EPS (Basic)$0.70
EPS (Diluted)$0.68
Shares Outstanding (Basic)274.50M
Shares Outstanding (Diluted)280.70M

Key Highlights

  • 1Net sales increased 1% year-over-year to $1.97 billion.
  • 2Earnings per diluted share rose to $0.68 from $0.50, primarily due to a lower effective tax rate and fewer outstanding shares.
  • 3The Government segment saw a 3% increase in net sales, while the Enterprise segment experienced a 4% decrease.
  • 4Operating earnings decreased by $16 million to $216 million, with operating margin contracting to 10.9%.
  • 5The company utilized $357 million for share repurchases and paid $72 million in dividends, demonstrating a commitment to returning capital to shareholders.
  • 6Motorola Solutions issued $600 million in senior notes, increasing its long-term debt and strengthening its liquidity position.
  • 7Net cash used for operating activities from continuing operations was $31 million, a decrease compared to $69 million provided in the prior year period.

Frequently Asked Questions

The Government segment showed positive momentum with a 3% increase in net sales, reaching $1.35 billion. Conversely, the Enterprise segment experienced a 4% decline in net sales, totaling $627 million. This divergence suggests that the Government segment was the primary driver of overall revenue growth in the quarter.

The increase in earnings per diluted share to $0.68 from $0.50 was primarily influenced by two key factors: a substantially lower effective tax rate (6% in Q1 2013 vs. 35% in Q1 2012), partly due to a tax benefit related to permanently reinvested foreign earnings, and a reduction in the number of outstanding shares due to the company's active share repurchase program.

Motorola Solutions reported a net cash usage of $31 million from operating activities in Q1 2013, a decrease from the positive $69 million in Q1 2012. This was influenced by factors like the timing of contract billings and a foreign tax deposit. However, the company strengthened its liquidity by issuing $600 million in senior notes, while continuing to return capital to shareholders through dividends and share buybacks.

The acquisition of Psion, which closed in Q4 2012, contributed to increased R&D expenditures in Q1 2013. The Psion acquisition also impacted the Enterprise segment's gross margin profile. The company also incurred $11 million in net reorganization charges related to productivity improvement plans and employee separations, aiming for future cost savings.