Date of report (Date of earliest event reported): May 3, 2018 | ||
Motorola Solutions, Inc. | ||
(Exact Name of Registrant as Specified in Charter) | ||
DELAWARE | ||
(State or Other Jurisdiction of Incorporation) | ||
1-7221 | 36-1115800 | |
(Commission File Number) | (IRS Employer Identification No.) | |
500 W. Monroe Street Chicago, Illinois | 60661 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (847) 576-5000 | ||
_____________________________ | ||
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description |
Press Release by Motorola Solutions, Inc. dated May 3, 2018 announcing financial results for the quarter ended March 31, 2018. |
MOTOROLA SOLUTIONS, INC. (Registrant) | ||||
Dated: May 3, 2018 | By: | /s/ John K. Wozniak | ||
Name: | John K. Wozniak | |||
Title: | Corporate Vice President and Chief Accounting Officer |
Exhibit No. | Description |
99.1 | Press Release by Motorola Solutions, Inc. dated May 3, 2018 announcing financial results for the quarter ended March 31, 2018. |
• | Sales of $1.5 billion, up 15 percent from a year ago |
• | Organic revenue1 growth of 10 percent; North America organic growth of 8 percent |
• | Backlog of $9.6 billion, up $1.1 billion or 13 percent from a year ago |
• | GAAP earnings per share (EPS) of $0.69, up 53 percent |
• | Non-GAAP EPS* of $1.10, up 55 percent |
• | Completed $500 million debt-funded U.S. pension contribution |
• | Completed acquisitions of Avigilon and Airbus DS Communications |
Q1 2018 | Q1 2017 | % Change | ||||
Sales | $1,468 | $1,281 | 15 | % | ||
GAAP | ||||||
Operating Earnings | $171 | $173 | (1 | )% | ||
% of Sales | 11.6 | % | 13.5 | % | ||
EPS | $0.69 | $0.45 | 53 | % | ||
Non-GAAP | ||||||
Operating Earnings | $260 | $212 | 23 | % | ||
% of Sales | 17.7 | % | 16.5 | % | ||
EPS | $1.10 | $0.71 | 55 | % | ||
Product Segment | ||||||
Sales | $801 | $703 | 14 | % | ||
GAAP Operating Earnings | $89 | $88 | 1 | % | ||
% of Sales | 11.1 | % | 12.5 | % | ||
Non-GAAP Operating Earnings | $127 | $94 | 35 | % | ||
% of Sales | 15.9 | % | 13.4 | % | ||
Services Segment | ||||||
Sales | $667 | $578 | 15 | % | ||
GAAP Operating Earnings | $82 | $85 | (4 | )% | ||
% of Sales | 12.3 | % | 14.7 | % | ||
Non-GAAP Operating Earnings | $133 | $118 | 13 | % | ||
% of Sales | 19.9 | % | 20.4 | % |
• | Revenue - Sales increased 15 percent from the year-ago quarter driven by growth in all regions. Approximately $49 million of revenue growth was related to acquisitions, including $22 million from the acquisitions of Airbus DS Communications and Avigilon. In addition, $15 million was related to the adoption of accounting standard ASC 606. Products segment sales grew 14 percent with growth in every region. The Services segment grew 15 percent with growth in every region led by Managed & Support Services. |
• | Operating margin - GAAP operating margin was 11.6 percent of sales, compared with 13.5 percent in the year-ago quarter. The decline reflects higher transaction costs related to acquisitions and a $52 million collection of a legal judgment in the prior year, offset by higher sales volume and higher gross margin. Non-GAAP operating margin was 17.7 percent of sales, compared with 16.5 percent in the year-ago quarter driven primarily by higher sales and higher gross margin. |
• | Cash flow - Operating cash flow was negative $500 million, versus $142 million of operating cash generated in the year-ago quarter. Free cash flow2 was negative $541 million, versus $74 million of free cash flow generated in the year-ago quarter. Cash flow for the quarter was down due to a $500 million debt-funded U.S. pension contribution, higher cash tax payments, higher incentive payments and a $52 million collection of a legal judgment in the prior year offset by lower capital expenditures associated with the company's ERP implementation in the prior year. |
• | Capital allocation - The company paid $1.1 billion for acquisitions, repurchased $66 million of its common stock and paid $84 million in cash dividends. |
• | Backlog - The company ended the quarter with backlog of $9.6 billion, up $1.1 billion from the year-ago quarter. Products segment backlog was up 11 percent or $166 million, and Services was up 14 percent or $973 million. Land mobile radio demand led by the Americas continues to drive backlog growth. |
• | Selected by the state of Florida to build and manage a new statewide public safety network |
• | $40 million for a four-year Managed & Support Services contract for the state of Maryland |
• | $20 million for additional Managed & Support Services for the state of Indiana |
• | $15 million for a P25 system in Miami-Dade County, Florida |
• | $6 million for a two-year Managed & Support Services contract for Petrobras, a large petroleum company in Latin America |
• | Announced the LEX L11 Mission Critical LTE handheld device for global broadband networks, including FirstNet in the U.S. |
• | Announced the Capture mobile camera app, which allows first responders to capture image, video and audio evidence on any Android or iOS-based smartphone |
• | Completed the acquisitions of Avigilon, a leader in advanced video surveillance and analytics, and Airbus DS Communications (Plant Holdings, Inc.), a leading provider in North America of command center software for emergency call-handling |
• | Second-quarter 2018 - Motorola Solutions expects revenue growth of approximately 15 percent, with organic growth of approximately 4 percent, compared with the second quarter of 2017. The company expects non-GAAP earnings in the range of $1.34 to $1.39 per share. |
• | Full-year 2018 - The company now expects revenue growth of approximately 14 percent, up from the prior outlook of 10 to 11 percent provided at the Financial Analyst Meeting on Feb. 27. The company now expects non-GAAP earnings per share in the range of $6.70 to $6.85, up from the prior outlook of $6.50 to $6.65. This assumes current foreign exchange rates, approximately 172 million fully diluted shares and a 25 percent effective tax rate. |
Q1 2018 | Q1 2017 | |||
Net sales | $1,468 | $1,281 | ||
Gross margin | 669 | 570 | ||
Operating earnings | 171 | 173 | ||
Amounts attributable to Motorola Solutions, Inc. common stockholders | ||||
Net earnings | 117 | 77 | ||
Diluted EPS | $0.69 | $0.45 | ||
Weighted average diluted common shares outstanding | 170.6 | 169.9 |
(per diluted common share) | Q1 2018 | |
GAAP Earnings | $0.69 | |
Highlighted Items: | ||
Share-based compensation expense | 0.08 | |
Reorganization of business charges | 0.06 | |
Intangibles amortization expense | 0.19 | |
Loss on legal settlements | 0.01 | |
Loss on Avigilon derivative instruments | 0.06 | |
Release of FIN 48 reserve | (0.01 | ) |
Sale of investments | (0.05 | ) |
Acquisition-related transaction fees | 0.07 | |
Non-GAAP Diluted EPS | $1.10 |
Three Months Ended | |||||||
March 31, 2018 | April 1, 2017 | ||||||
Net sales from products | $ | 801 | $ | 703 | |||
Net sales from services | 667 | 578 | |||||
Net sales | 1,468 | 1,281 | |||||
Costs of products sales | 383 | 347 | |||||
Costs of services sales | 416 | 364 | |||||
Costs of sales | 799 | 711 | |||||
Gross margin | 669 | 570 | |||||
Selling, general and administrative expenses | 279 | 244 | |||||
Research and development expenditures | 152 | 135 | |||||
Other charges | 26 | (18 | ) | ||||
Intangibles amortization | 41 | 36 | |||||
Operating earnings | 171 | 173 | |||||
Other income (expense): | |||||||
Interest expense, net | (46 | ) | (51 | ) | |||
Gains on sales of investments and businesses, net | 11 | 3 | |||||
Other | 4 | (5 | ) | ||||
Total other expense | (31 | ) | (53 | ) | |||
Net earnings before income taxes | 140 | 120 | |||||
Income tax expense | 23 | 42 | |||||
Net earnings | 117 | 78 | |||||
Less: Earnings attributable to noncontrolling interests | — | 1 | |||||
Net earnings attributable to Motorola Solutions, Inc. | $ | 117 | $ | 77 | |||
Earnings per common share: | |||||||
Basic | $ | 0.73 | $ | 0.47 | |||
Diluted | $ | 0.69 | $ | 0.45 | |||
Weighted average common shares outstanding: | |||||||
Basic | 161.4 | 164.2 | |||||
Diluted | 170.6 | 169.9 |
Percentage of Net Sales* | |||||
Net sales from products | 54.6 | % | 54.9 | % | |
Net sales from services | 45.4 | % | 45.1 | % | |
Net sales | 100.0 | % | 100.0 | % | |
Costs of products sales | 47.8 | % | 49.4 | % | |
Costs of services sales | 62.4 | % | 63.0 | % | |
Costs of sales | 54.4 | % | 55.5 | % | |
Gross margin | 45.6 | % | 44.5 | % | |
Selling, general and administrative expenses | 19.0 | % | 19.0 | % | |
Research and development expenditures | 10.4 | % | 10.5 | % | |
Other charges | 1.8 | % | (1.4 | )% | |
Intangibles amortization | 2.8 | % | 2.8 | % | |
Operating earnings | 11.6 | % | 13.5 | % | |
Other income (expense): | |||||
Interest expense, net | (3.1 | )% | (4.0 | )% | |
Gains on sales of investments and businesses, net | 0.7 | % | 0.2 | % | |
Other | 0.3 | % | (0.4 | )% | |
Total other expense | (2.1 | )% | (4.1 | )% | |
Net earnings before income taxes | 9.5 | % | 9.4 | % | |
Income tax expense | 1.6 | % | 3.3 | % | |
Net earnings | 8.0 | % | 6.1 | % | |
Less: Earnings attributable to noncontrolling interests | — | % | 0.1 | % | |
Net earnings attributable to Motorola Solutions, Inc. | 8.0 | % | 6.0 | % | |
* Percentages may not add up due to rounding |
March 31, 2018 | December 31, 2017 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 795 | $ | 1,205 | ||||
Restricted cash | 63 | 63 | ||||||
Total cash and cash equivalents | 858 | 1,268 | ||||||
Accounts receivable, net | 1,179 | 1,523 | ||||||
Contract assets | 800 | — | ||||||
Inventories, net | 441 | 327 | ||||||
Other current assets | 343 | 832 | ||||||
Total current assets | 3,621 | 3,950 | ||||||
Property, plant and equipment, net | 900 | 856 | ||||||
Investments | 174 | 247 | ||||||
Deferred income taxes | 973 | 1,023 | ||||||
Goodwill | 1,535 | 938 | ||||||
Intangible assets | 1,436 | 861 | ||||||
Other assets | 412 | 333 | ||||||
Total assets | $ | 9,051 | $ | 8,208 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current portion of long-term debt | $ | 492 | $ | 52 | ||||
Accounts payable | 463 | 593 | ||||||
Contract liabilities | 1,069 | — | ||||||
Accrued liabilities | 1,072 | 2,286 | ||||||
Total current liabilities | 3,096 | 2,931 | ||||||
Long-term debt | 5,304 | 4,419 | ||||||
Other liabilities | 2,190 | 2,585 | ||||||
Total Motorola Solutions, Inc. stockholders’ equity (deficit) | (1,554 | ) | (1,742 | ) | ||||
Noncontrolling interests | 15 | 15 | ||||||
Total liabilities and stockholders’ equity | $ | 9,051 | $ | 8,208 | ||||
Financial Ratios: | ||||||||
Net cash (debt)* | $ | (4,938 | ) | $ | (3,203 | ) | ||
*Net cash (debt) = Total cash - Current portion of long-term debt - Long-term debt |
Three Months Ended | |||||||
March 31, 2018 | April 1, 2017 | ||||||
Operating | |||||||
Net earnings attributable to Motorola Solutions, Inc. | $ | 117 | $ | 77 | |||
Earnings attributable to noncontrolling interests | — | 1 | |||||
Net earnings | 117 | 78 | |||||
Adjustments to reconcile Net earnings to Net cash provided by (used for) operating activities: | |||||||
Depreciation and amortization | 82 | 80 | |||||
Non-cash other charges | 3 | 15 | |||||
Non-U.S. pension settlement loss | — | 9 | |||||
Share-based compensation expense | 17 | 17 | |||||
Gains on sales of investments and businesses, net | (11 | ) | (3 | ) | |||
Deferred income taxes | 7 | 23 | |||||
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments: | |||||||
Accounts receivable, contract assets and contract liabilities | 195 | 368 | |||||
Inventories | (9 | ) | (69 | ) | |||
Other current assets | 2 | (59 | ) | ||||
Accounts payable and accrued liabilities | (350 | ) | (307 | ) | |||
Other assets and liabilities | (553 | ) | (10 | ) | |||
Net cash (used for) provided by operating activities | (500 | ) | 142 | ||||
Investing | |||||||
Acquisitions and investments, net | (1,125 | ) | (106 | ) | |||
Proceeds from sales of investments and businesses, net | 77 | 53 | |||||
Capital expenditures | (41 | ) | (68 | ) | |||
Net cash used for investing activities | (1,089 | ) | (121 | ) | |||
Financing | |||||||
Repayment of debt | (50 | ) | (1 | ) | |||
Net proceeds from issuance of debt | 1,296 | — | |||||
Issuance of common stock | 53 | 22 | |||||
Purchase of common stock | (66 | ) | (178 | ) | |||
Payment of dividends | (84 | ) | (77 | ) | |||
Net cash provided by (used for) financing activities | 1,149 | (234 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 30 | 12 | |||||
Net decrease in cash and cash equivalents | (410 | ) | (201 | ) | |||
Cash and cash equivalents, beginning of period | 1,268 | 1,030 | |||||
Cash and cash equivalents, end of period | $ | 858 | $ | 829 | |||
Financial Ratios: | |||||||
Free cash flow* | $ | (541 | ) | $ | 74 | ||
*Free cash flow = Net cash provided by operating activities - Capital Expenditures |
Net Sales | ||||||||||
Three Months Ended | ||||||||||
March 31, 2018 | April 1, 2017 | % Change | ||||||||
Products | $ | 801 | $ | 703 | 14 | % | ||||
Services | 667 | 578 | 15 | % | ||||||
Total Motorola Solutions | $ | 1,468 | $ | 1,281 | 15 | % | ||||
Operating Earnings | ||||||||||
Three Months Ended | ||||||||||
March 31, 2018 | April 1, 2017 | % Change | ||||||||
Products | $ | 89 | $ | 88 | 1 | % | ||||
Services | 82 | 85 | (4 | )% | ||||||
Total Motorola Solutions | $ | 171 | $ | 173 | (1 | )% | ||||
Operating Earnings % | |||||||
Three Months Ended | |||||||
March 31, 2018 | April 1, 2017 | ||||||
Products | 11.1 | % | 12.5 | % | |||
Services | 12.3 | % | 14.7 | % | |||
Total Motorola Solutions | 11.6 | % | 13.5 | % | |||
Q1 2018 | ||||||||||||||||||
Non-GAAP Adjustments | Statement Line | PBT (Inc)/Exp | Tax Inc/(Exp) | PAT (Inc)/Exp | EPS impact | |||||||||||||
Share-based compensation expense | Cost of sales, SG&A and R&D | $ | 17 | $ | 4 | $ | 13 | $ | 0.08 | |||||||||
Reorganization of business charges | Cost of sales and Other charges | 13 | 3 | 10 | 0.06 | |||||||||||||
Intangibles amortization expense | Intangibles amortization | 41 | 8 | 33 | 0.19 | |||||||||||||
Loss on legal settlements | Other charges | 1 | — | 1 | 0.01 | |||||||||||||
Loss on derivative instruments related to Avigilon | Other expense | 14 | 4 | 10 | 0.06 | |||||||||||||
Release of FIN 48 reserve | Income tax benefit | — | 1 | (1 | ) | (0.01 | ) | |||||||||||
Sale of investments | Sale of Investment or Business (Gain) or Loss | (11 | ) | (3 | ) | (8 | ) | (0.05 | ) | |||||||||
Acquisition-related transaction fees | Other charges | 17 | 5 | 12 | 0.07 | |||||||||||||
Total impact on Net earnings | $ | 92 | $ | 22 | $ | 70 | $ | 0.41 | ||||||||||
Net Sales | ||||||||||
Three Months Ended | ||||||||||
March 31, 2018 | April 1, 2017 | % Change | ||||||||
Products | $ | 801 | $ | 703 | 14 | % | ||||
Services | 667 | 578 | 15 | % | ||||||
Total Motorola Solutions | $ | 1,468 | $ | 1,281 | 15 | % | ||||
Non-GAAP Operating Earnings | ||||||||||
Three Months Ended | ||||||||||
March 31, 2018 | April 1, 2017 | % Change | ||||||||
Products | $ | 127 | $ | 94 | 35 | % | ||||
Services | 133 | 118 | 13 | % | ||||||
Total Motorola Solutions | $ | 260 | $ | 212 | 23 | % | ||||
Non-GAAP Operating Earnings % | |||||||
Three Months Ended | |||||||
March 31, 2018 | April 1, 2017 | ||||||
Products | 15.9 | % | 13.4 | % | |||
Services | 19.9 | % | 20.4 | % | |||
Total Motorola Solutions | 17.7 | % | 16.5 | % | |||
Q1 2018 | ||||||||||||
TOTAL | Products | Services | ||||||||||
Net sales | $ | 1,468 | $ | 801 | $ | 667 | ||||||
Operating earnings ("OE") | $ | 171 | $ | 89 | $ | 82 | ||||||
Above-OE non-GAAP adjustments: | ||||||||||||
Share-based compensation expense | 17 | 12 | 5 | |||||||||
Reorganization of business charges | 13 | 10 | 3 | |||||||||
Intangibles amortization expense | 41 | 4 | 37 | |||||||||
Acquisition-related transaction fees | 17 | 11 | 6 | |||||||||
Loss on legal settlements | 1 | 1 | — | |||||||||
Total above-OE non-GAAP adjustments | 89 | 38 | 51 | |||||||||
Operating earnings after non-GAAP adjustments | $ | 260 | $ | 127 | $ | 133 |
Operating earnings as a percentage of net sales - GAAP | 11.6 | % | 11.1 | % | 12.3 | % | |||
Operating earnings as a percentage of net sales - after non-GAAP adjustments | 17.7 | % | 15.9 | % | 19.9 | % |
Total Motorola Solutions | |||||||||||
Three Months Ended | |||||||||||
March 31, 2018 | April 1, 2017 | % Change | |||||||||
Net sales | $ | 1,468 | $ | 1,281 | 15 | % | |||||
Non-GAAP adjustments: | |||||||||||
Acquisitions | (54 | ) | (5 | ) | |||||||
ASC 606 impact | (15 | ) | — | ||||||||
Organic revenue | 1,399 | 1,276 | 10 | % | |||||||
Less foreign exchange impact | (39 | ) | — | ||||||||
Organic revenue in constant currency | $ | 1,360 | $ | 1,276 | 7 | % |
North America | |||||||||||
Three Months Ended | |||||||||||
March 31, 2018 | April 1, 2017 | % Change | |||||||||
Americas net sales | $ | 995 | $ | 865 | 15 | % | |||||
Adjustments: | |||||||||||
Latin America | (93 | ) | (65 | ) | 43 | % | |||||
North America acquisitions | (25 | ) | — | ||||||||
ASC 606 impact | (15 | ) | — | ||||||||
North America organic revenue | 862 | 800 | 8 | % | |||||||
Less foreign exchange impact | (5 | ) | — | ||||||||
North America organic revenue in constant currency | $ | 857 | $ | 800 | 7 | % |
Total Motorola Solutions | ||||||||||||||||||||
April 1, 2017 | July 1, 2017 | September 30, 2017 | December 31, 2017 | 2017 | ||||||||||||||||
Net sales, as reported | $ | 1,281 | $ | 1,497 | $ | 1,645 | $ | 1,957 | $ | 6,380 | ||||||||||
Third-party sales commissions adjustment * | 13 | 15 | 18 | 22 | 68 | |||||||||||||||
Pro Forma net sales | 1,294 | 1,512 | 1,663 | 1,979 | 6,448 | |||||||||||||||
Non-GAAP operating expenses, as reported** | 364 | 378 | 386 | 407 | 1,535 | |||||||||||||||
Third-party sales commissions adjustment * | 13 | 15 | 18 | 22 | 68 | |||||||||||||||
Pro forma non-GAAP operating expenses | 377 | 393 | 404 | 429 | 1,603 | |||||||||||||||
Non-GAAP earnings, as reported | 120 | 189 | 259 | 355 | 923 | |||||||||||||||
Pro forma earnings | $ | 120 | $ | 189 | $ | 259 | $ | 355 | $ | 923 |