10-QPeriod: Q3 FY2013

Motorola Solutions, Inc. Quarterly Report for Q3 Ended Sep 28, 2013

Filed October 23, 2013For Securities:MSI

Summary

Motorola Solutions, Inc. reported its third-quarter and year-to-date results for the period ending September 27, 2013. For the third quarter, the company saw a slight decrease in net sales of 2% year-over-year, totaling $2.1 billion, while diluted earnings per share increased significantly to $1.16 from $0.72 in the prior year quarter. This earnings improvement was largely driven by a lower effective tax rate and reduced pension expenses, despite a $44 million decrease in gross margin. For the nine-month period, net sales saw a 1% decrease to $6.2 billion. Diluted earnings per share from continuing operations increased to $2.77 from $1.80 in the comparable prior year period. The company continued its strong focus on returning capital to shareholders, repurchasing $1.3 billion in shares and paying $212 million in dividends during the first nine months of the year. The company also highlighted ongoing reorganization efforts aimed at improving operating margins and cost efficiencies, with an expectation of annualized cost savings.

Financial Highlights

54 data points
Beta

Revenue

$1.52B

50.4% Gross Margin

Net Income

$307.00M

20.2% Net Margin

EPS (Diluted)

$1.16

Total Assets

$12.06B

Cash & Equivalents

$1.72B

Free Cash Flow

$75.00M

Financial Statements
Beta
Revenue$1.52B
Cost of Revenue$752.00M
Gross Profit$765.00M
R&D Expenses$183.00M
SG&A Expenses$319.00M
Operating Income$246.00M
Interest Expense$33.00M
Net Income$307.00M
EPS (Basic)$1.17
EPS (Diluted)$1.16
Shares Outstanding (Basic)262.20M
Shares Outstanding (Diluted)265.30M

Key Highlights

  • 1Net sales decreased by 2% to $2.1 billion in Q3 2013 compared to Q3 2012.
  • 2Diluted earnings per share increased significantly to $1.16 in Q3 2013 from $0.72 in Q3 2012.
  • 3The effective tax rate was significantly lower in Q3 2013 (5%) compared to Q3 2012 (36%), partly due to tax benefits from foreign earnings.
  • 4The Government segment's net sales decreased by 4% year-over-year, while the Enterprise segment saw a 2% increase.
  • 5Motorola Solutions returned $1.5 billion to shareholders through share repurchases and dividends in the first nine months of 2013.
  • 6The company continued its reorganization efforts, incurring $32 million in charges in Q3 2013 and expecting significant annualized cost savings from these initiatives.

Frequently Asked Questions

The significant increase in net earnings and diluted earnings per share was primarily driven by a substantially lower effective tax rate in Q3 2013, which benefited from tax credits related to undistributed foreign earnings. Reduced pension expenses also contributed to the improved profitability.

The Government segment experienced a 4% decrease in net sales in the third quarter of 2013 compared to the prior year, primarily due to declines in North America and Asia Pacific, Middle East. In contrast, the Enterprise segment saw a 2% increase in net sales, boosted by growth in Europe, Africa, and Asia Pacific, Middle East, partly due to the Psion acquisition.

Motorola Solutions is actively pursuing reorganization efforts and productivity improvement plans aimed at driving efficiencies and reducing operating costs. In Q3 2013, the company recorded $32 million in reorganization charges and anticipates annualized cost savings of approximately $82 million from these initiatives.

The company is actively returning capital to shareholders through share repurchases and dividends. In the first nine months of 2013, Motorola Solutions returned $1.5 billion to shareholders, including $1.3 billion in share repurchases and $212 million in dividends. The company also announced an increase in its quarterly cash dividend to $0.31 per share.