10-QPeriod: Q3 FY2015

Motorola Solutions, Inc. Quarterly Report for Q3 Ended Jul 4, 2015

Filed August 5, 2015For Securities:MSI

Summary

Motorola Solutions, Inc. (MSI) reported financial results for the second quarter and first half of fiscal year 2015. For the three months ended July 4, 2015, net sales were $1.37 billion, a slight decrease of 2% compared to the prior year quarter. Operating earnings significantly improved to $254 million from $138 million in Q2 2014, driven by cost savings initiatives, favorable foreign exchange rates on operating costs, and lower pension expense. Earnings from continuing operations attributable to Motorola Solutions, Inc. were $150 million, or $0.72 per diluted share, up from $78 million, or $0.30 per diluted share, in the prior year quarter. For the six months ended July 4, 2015, net sales were $2.59 billion, a modest decrease of 1% year-over-year. The company demonstrated strong operational efficiency, with operating earnings rising to $373 million from $245 million in the first half of 2014. This improvement was largely due to substantial reductions in Selling, General & Administrative (SG&A) and Research & Development (R&D) expenses. Earnings from continuing operations attributable to Motorola Solutions, Inc. were $238 million, or $1.11 per diluted share, compared to $163 million, or $0.63 per diluted share, in the first half of 2014. The company also repurchased a significant amount of its stock and announced plans for a large tender offer and convertible note issuance shortly after the quarter end.

Financial Highlights

55 data points
Beta

Revenue

$1.37B

47.4% Gross Margin

Net Income

$142.00M

10.4% Net Margin

EPS (Diluted)

$0.68

Total Assets

$9.16B

Cash & Equivalents

$3.11B

Free Cash Flow

$150.00M

Financial Statements
Beta
Revenue$1.37B
Cost of Revenue$720.00M
Gross Profit$648.00M
R&D Expenses$156.00M
SG&A Expenses$254.00M
Operating Income$254.00M
Interest Expense$42.00M
Net Income$142.00M
EPS (Basic)$0.68
EPS (Diluted)$0.68
Shares Outstanding (Basic)208.00M
Shares Outstanding (Diluted)209.50M

Key Highlights

  • 1Net sales for Q2 2015 were $1.37 billion, a 2% decrease year-over-year, impacted by foreign currency fluctuations.
  • 2Operating earnings surged to $254 million in Q2 2015 from $138 million in Q2 2014, a significant improvement driven by cost controls and lower expenses.
  • 3Earnings from continuing operations per diluted share increased to $0.72 in Q2 2015 from $0.30 in Q2 2014.
  • 4The company returned $1.1 billion to shareholders through share repurchases and dividends in the first half of 2015.
  • 5Strong operational efficiency was noted with a $105 million reduction in SG&A expenses for the first half of 2015 compared to the prior year.
  • 6Subsequent to the quarter, the company announced a $2 billion Dutch auction tender offer and a $1 billion convertible note issuance, indicating active capital return and financial management strategies.
  • 7The Products segment contributed 63% of net sales, while the Services segment contributed 37% in Q2 2015, with both segments showing slight revenue declines but improved operating earnings.

Frequently Asked Questions

In the second quarter of 2015, Motorola Solutions reported net sales of $1.37 billion, a slight decrease of 2% compared to the prior year quarter. However, operating earnings saw a substantial improvement, rising to $254 million from $138 million in the second quarter of 2014. This increase was driven by effective cost savings initiatives, favorable foreign exchange impacts on operating costs, and reduced pension expenses. Earnings from continuing operations attributable to Motorola Solutions, Inc. were $150 million, or $0.72 per diluted share, a significant increase from $78 million, or $0.30 per diluted share, in the prior year quarter.

Motorola Solutions implemented significant cost-saving initiatives, leading to a notable reduction in operating expenses. Selling, General & Administrative (SG&A) expenses decreased by 18% to $254 million in Q2 2015 compared to $308 million in Q2 2014. Similarly, Research & Development (R&D) expenditures decreased by 11%. These expense reductions, along with a $32 million non-U.S. pension curtailment gain, contributed significantly to the improvement in operating earnings and profitability.

Motorola Solutions has been actively returning capital to shareholders through share repurchases and dividends. In the first half of 2015, the company returned $1.1 billion to shareholders via these methods. Subsequent to the quarter end, the company announced two significant financial actions: a modified Dutch auction tender offer to repurchase up to $2 billion of its outstanding common stock and an agreement to issue $1 billion of 2% convertible notes due in September 2020. These actions demonstrate a proactive approach to capital management and shareholder returns.

In the second quarter of 2015, the Products segment generated $867 million in net sales, representing 63% of total sales, a slight decrease of 2% year-over-year. The Services segment reported $501 million in net sales, accounting for 37% of total sales, a decrease of 1%. Despite slight revenue declines in both segments, operating earnings improved significantly for both. The Products segment's operating earnings rose to $171 million from $95 million, and the Services segment's operating earnings increased to $83 million from $43 million in the prior year quarter, reflecting improved operational efficiency across the business.