10-QPeriod: Q1 FY2014

Motorola Solutions, Inc. Quarterly Report for Q1 Ended Mar 29, 2014

Filed May 1, 2014For Securities:MSI

Summary

Motorola Solutions, Inc. (MSI) reported a decline in net sales and net earnings for the first quarter of 2014 compared to the same period in 2013. Net sales decreased by 9% to $1.8 billion, primarily driven by lower sales in both the Government and Enterprise segments. Consequently, net earnings fell to $127 million, or $0.49 per diluted share, down from $192 million, or $0.68 per diluted share, in the prior year. Despite the top-line and bottom-line decrease, the company demonstrated improved operational cash flow, generating $46 million compared to using $31 million in the prior year. Motorola Solutions also continued to return capital to shareholders through dividends and share repurchases, totaling $136 million in the quarter. A significant event subsequent to the quarter was the announcement of the sale of the Enterprise business to Zebra Technologies for $3.45 billion, which is expected to close by year-end 2014 and signals a strategic shift for the company.

Financial Highlights

55 data points
Beta

Revenue

$1.23B

47.0% Gross Margin

Net Income

$127.00M

10.3% Net Margin

EPS (Diluted)

$0.49

Total Assets

$11.62B

Cash & Equivalents

$3.14B

Free Cash Flow

$12.00M

Financial Statements
Beta
Revenue$1.23B
Cost of Revenue$651.00M
Gross Profit$577.00M
R&D Expenses$174.00M
SG&A Expenses$307.00M
Operating Income$107.00M
Interest Expense$30.00M
Net Income$127.00M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)254.10M
Shares Outstanding (Diluted)258.30M

Key Highlights

  • 1Net sales decreased 9% year-over-year to $1.8 billion in Q1 2014, driven by declines in both the Government (-11%) and Enterprise (-4%) segments.
  • 2Net earnings decreased to $127 million ($0.49/share) from $192 million ($0.68/share) in Q1 2013.
  • 3Gross margin declined to 46.9% from 48.4% year-over-year, impacted by lower demand in ASTRO and iDEN.
  • 4Operating cash flow improved significantly, turning positive at $46 million in Q1 2014 compared to negative $31 million in Q1 2013.
  • 5The company returned $136 million to shareholders via dividends ($79 million) and share repurchases ($57 million) in Q1 2014.
  • 6A major subsequent event was the April 14, 2014 announcement of the sale of the Enterprise business to Zebra Technologies for $3.45 billion cash.
  • 7The company's balance sheet shows a strong cash position of $3.1 billion as of March 29, 2014.

Frequently Asked Questions

The primary reasons for the decline in net sales and earnings were decreased sales in both the Government and Enterprise segments. The Government segment saw an 11% decrease, partly due to slower subscriber demand in North America for ASTRO products. The Enterprise segment experienced a 4% decrease, attributed to lower sales in iDEN and Mobile Computing.

Motorola Solutions showed a significant improvement in its operating cash flow. Net cash provided by operating activities was $46 million in the first quarter of 2014, a substantial increase from the $31 million of net cash used for operating activities in the same period of 2013. This improvement was driven by factors like the timing of contract billings and the return of previously seized funds by Indian tax authorities.

The announcement on April 14, 2014, of the sale of the Enterprise business to Zebra Technologies for $3.45 billion in cash is a significant strategic development. It indicates a move to streamline operations and focus on the core Government segment. The transaction is expected to close by the end of 2014, and management intends to return the proceeds to shareholders.

Motorola Solutions maintained a strong cash position, with $3.1 billion in cash and cash equivalents at the end of the quarter. In the first quarter of 2014, the company returned $136 million to shareholders through dividend payments ($79 million) and share repurchases ($57 million), demonstrating a commitment to capital return.