Market Overview

Motorola Solutions Reports Second-Quarter 2018 Financial Results

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Company raises full-year revenue and earnings outlook

  • Sales of $1.8 billion, up 18 percent from a year ago
  • Organic revenue1 growth of 6 percent
  • Backlog of $9.4 billion, up $919 million or 11 percent from a year ago
  • GAAP earnings per share (EPS) of $1.05, up 35 percent
  • Non-GAAP EPS* of $1.46, up 30 percent

Motorola Solutions, Inc. (NYSE:MSI) today reported its earnings results
for the second quarter of 2018. Click
here
for a printable news release and financial tables.

"Our outstanding second-quarter results highlight the continued strength
of our land-mobile radio business and momentum in services and
software," said Greg Brown, chairman and CEO of Motorola
Solutions. "With our strong earnings, cash generation and highest Q2
backlog position ever, we are well positioned for continued growth."

KEY FINANCIAL RESULTS (presented in millions, except per share
data and percentages)

             
    Q2 2018   Q2 2017   % Change
Sales   $1,760   $1,497   18%
GAAP      
Operating Earnings $273 $261 5%
% of Sales 15.5% 17.4%
EPS   $1.05   $0.78   35%
Non-GAAP
Operating Earnings $378 $316 20%
% of Sales 21.5% 21.1%
EPS   $1.46   $1.12   30%
Products and Systems Integration Segment
Sales $1,189 $1,047 14%
GAAP Operating Earnings $175 $190 (8)%
% of Sales 14.7% 18.1%
Non-GAAP Operating Earnings $226 $204 11%
% of Sales   19.0%   19.5%    
Services and Software Segment
Sales $571 $450 27%
GAAP Operating Earnings $98 $71 38%
% of Sales 17.2% 15.8%
Non-GAAP Operating Earnings $152 $112 36%
% of Sales   26.6%   24.9%    
 

*Non-GAAP financial information excludes the after-tax impact of
approximately $0.41 per diluted share related to share-based
compensation, intangible assets amortization expense and highlighted
items. Details on these non-GAAP adjustments and the use of non-GAAP
measures are included later in this news release.

OTHER SELECTED FINANCIAL RESULTS

  • Revenue - Sales increased $263 million, or 18 percent
    from the year-ago quarter, driven by growth in all regions.
    Approximately $154 million of revenue growth was related to
    acquisitions, and $24 million was related to the adoption of
    accounting standard ASC 606. The Products and Systems Integration
    segment grew 14 percent driven by the Americas and EMEA. The Services
    and Software segment grew 27 percent led by the Americas and EMEA.
  • Operating margin - GAAP operating margin was 15.5
    percent of sales, compared with 17.4 percent in the year-ago quarter.
    The decline reflects higher operating expenses related to
    acquisitions, partially offset by higher gross margins in Services,
    the adoption of ASC 606 and favorable mix. Non-GAAP operating margin
    was 21.5 percent of sales, compared with 21.1 percent in the year-ago
    quarter driven by higher gross margin partially offset by higher
    operating expenses related to acquisitions.
  • Cash flow - Operating cash flow was $425 million,
    compared with $173 million of operating cash generated in the year-ago
    quarter. Free cash flow2 was $384 million, compared with
    $120 million of free cash flow generated in the year-ago quarter. Cash
    flow for the quarter was higher on improved working capital and higher
    earnings.
  • Capital allocation - The company paid $84 million in
    cash dividends. From a debt perspective, the company repaid $100
    million on the revolving credit facility ahead of schedule, leaving an
    outstanding balance of $300 million. The company also repaid the
    remaining $40 million revolver balance assumed in the Avigilon
    acquisition and closed this credit facility.
  • Backlog - The company ended the quarter with backlog of
    $9.4 billion, up $919 million from the year-ago quarter. Products and
    Systems Integration segment backlog was up 13 percent or $367 million,
    and Services and Software was up 10 percent or $552 million. Land
    mobile radio demand led by the Americas continues to drive backlog
    growth.

KEY HIGHLIGHTS

Services and Software wins

  • $50 million for a multi-year services agreement for a county wide P25
    system in North America
  • $41 million for command center software and 10-year services award in
    Asia
  • $16 million multi-year services renewal in Chile

Products and Systems Integration wins

  • $71 million P25 system upgrade in Northern Africa
  • $35 million P25 expansion for New South Wales Telco Authority in
    Australia
  • $15 million P25 system replacement for Flagler County, Florida
  • $495 million five-year IDIQ (indefinite delivery, indefinite quantity)
    P25 radio upgrade for U.S. Army

BUSINESS OUTLOOK

  • Third-quarter 2018 - Motorola Solutions expects revenue growth
    of approximately 13 percent compared with the third quarter of 2017.
    The company expects non-GAAP earnings in the range of $1.67 to $1.72
    per share. This assumes 173 million fully diluted shares.
  • Full-year 2018 - The company now expects revenue growth
    of approximately 14.5 percent, up from the prior outlook of 14 percent
    including $40 million of unfavorable currency impact since our prior
    guidance. The company now expects non-GAAP earnings per share in the
    range of $6.79 to $6.89, up from the prior guidance of $6.70 to $6.85.
    This assumes current foreign exchange rates, approximately 172 million
    fully diluted shares and a 25 percent effective tax rate.

CONFERENCE CALL AND WEBCAST Motorola Solutions will host its
quarterly conference call beginning at 4 p.m. U.S. Central Daylight Time
(5 p.m. U.S. Eastern Daylight Time) on Thursday, Aug. 2. The conference
call will be webcast live at www.motorolasolutions.com/investor.

CONSOLIDATED GAAP RESULTS (presented in millions, except per
share data)

A comparison of results from operations is as follows:

         
    Q2 2018   Q2 2017
Net sales   $1,760   $1,497
Gross margin   822   690
Operating earnings   273   261
Amounts attributable to Motorola Solutions, Inc. common
stockholders
Net earnings 180 131
Diluted EPS $1.05 $0.78
Weighted average diluted common shares outstanding   171.7   169.0
 

HIGHLIGHTED ITEMS AND SHARE-BASED COMPENSATION EXPENSE

The table below includes highlighted items, share-based compensation
expense and intangible amortization for the second quarter of 2018.

       
(per diluted common share)   Q2 2018
 
GAAP Earnings   $1.05  
Highlighted Items:
Share-based compensation expense $0.08
Reorganization of business charges 0.10
Intangibles amortization expense 0.23
Avigilon purchase accounting adjustment 0.04
Sale of investments 0.01
Loss on foreign currency related to Avigilon purchase 0.01
FIN 48 reserve 0.01
State audit settlement (0.07 )
       
Non-GAAP Diluted EPS   $1.46  
 

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the GAAP results included in this presentation, Motorola
Solutions also has included non-GAAP measurements of results. The
company has provided these non-GAAP measurements to help investors
better understand its core operating performance, enhance comparisons of
core operating performance from period to period and allow better
comparisons of operating performance to its competitors. Among other
things, management uses these operating results, excluding the
identified items, to evaluate performance of the businesses and to
evaluate results relative to certain incentive compensation targets.
Management uses operating results excluding these items because it
believes this measurement enables it to make better period-to-period
evaluations of the financial performance of core business operations.
The non-GAAP measurements are intended only as a supplement to the
comparable GAAP measurements and the company compensates for the
limitations inherent in the use of non-GAAP measurements by using GAAP
measures in conjunction with the non-GAAP measurements. As a result,
investors should consider these non-GAAP measurements in addition to,
and not in substitution for or as superior to, measurements of financial
performance prepared in accordance with generally accepted accounting
principles.

Organic revenue: Reflects net sales calculated under GAAP
excluding net sales from acquired business owned for less than four full
quarters, and excludes the affects of ASC 606. Management believes
organic revenue helps it and investors better identify the underlying
trends of established and ongoing operations by excluding the effects of
acquisitions and accounting adjustments which can obscure period to
period comparisons.

Highlighted items: The company has excluded the effects of
highlighted items including, but not limited to, acquisition-related
transaction costs, tangible and intangible asset impairments,
restructuring charges, non-cash pension adjustments, significant
litigation and other contingencies, significant gains and losses on
investments, and the income tax effects of significant tax matters, from
its non-GAAP operating expenses and net income measurements because the
company believes that these historical items do not reflect expected
future operating earnings or expenses and do not contribute to a
meaningful evaluation of the company's current operating performance or
comparisons to the company's past operating performance. For the
purposes of management's internal analysis over operating performance,
the company uses financial statements that exclude highlighted items, as
these charges do not contribute to a meaningful evaluation of the
company's current operating performance or comparisons to the company's
past operating performance.

Share-based compensation expense: The company has excluded
share-based compensation expense from its non-GAAP operating expenses
and net income measurements. Although share-based compensation is a key
incentive offered to the company's employees and the company believes
such compensation contributed to the revenue earned during the periods
presented and also believes it will contribute to the generation of
future period revenues, the company continues to evaluate its
performance excluding share-based compensation expense primarily because
it represents a significant non-cash expense. Share-based compensation
expense will recur in future periods.

Intangible assets amortization expense: The company has excluded
intangible assets amortization expense from its non-GAAP operating
expenses and net earnings measurements, primarily because it represents
a non-cash expense and because the company evaluates its performance
excluding intangible assets amortization expense. Amortization of
intangible assets is consistent in amount and frequency but is
significantly affected by the timing and size of the company's
acquisitions. Investors should note that the use of intangible assets
contributed to the company's revenues earned during the periods
presented and will contribute to the company's future period revenues as
well. Intangible assets amortization expense will recur in future
periods.

Details of the above items and reconciliations of the non-GAAP
measurements to the corresponding GAAP measurements can be found at the
end of this press release.

BUSINESS RISKS

This news release contains "forward-looking statements" within the
meaning of applicable federal securities law. These statements are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and generally include words such as
"believes," "expects," "intends," "anticipates," "estimates" and similar
expressions. The company can give no assurance that any actual or future
results or events discussed in these statements will be achieved. Any
forward-looking statements represent the company's views only as of
today and should not be relied upon as representing the company's views
as of any subsequent date. Readers are cautioned that such
forward-looking statements are subject to a variety of risks and
uncertainties that could cause the company's actual results to differ
materially from the statements contained in this release. Such
forward-looking statements include, but are not limited to, Motorola
Solutions' financial outlook for the third quarter and full year of
2018. Motorola Solutions cautions the reader that the risk factors
below, as well as those on pages 8 through 20 in Item 1A of Motorola
Solutions' 2017 Annual Report on Form 10-K and in its other SEC filings
available for free on the SEC's website at www.sec.gov
and on Motorola Solutions' website at www.motorolasolutions.com,
could cause Motorola Solutions' actual results to differ materially from
those estimated or predicted in the forward-looking statements. Many of
these risks and uncertainties cannot be controlled by Motorola
Solutions, and factors that may impact forward-looking statements
include, but are not limited to: (1) the economic outlook for the
government communications industry; (2) the impact of foreign currency
fluctuations on the company; (3) the level of demand for the company's
products; (4) the company's ability to refresh existing and introduce
new products and technologies in a timely manner; (5) exposure under
large systems and managed services contracts, including risks related to
the fact that certain customers require that the company build, own and
operate their systems, often over a multi-year period; (6) negative
impact on the company's business from global economic and political
conditions, which may include: (i) continued deferment or cancellation
of purchase orders by customers; (ii) the inability of customers to
obtain financing for purchases of the company's products; (iii)
increased demand to provide vendor financing to customers; (iv)
increased financial pressures on third-party dealers, distributors and
retailers; (v) the viability of the company's suppliers that may no
longer have access to necessary financing; (vi) counterparty failures
negatively impacting the company's financial position; (vii) changes in
the value of investments held by the company's pension plan and other
defined benefit plans, which could impact future required or voluntary
pension contributions; and (viii) the company's ability to access the
capital markets on acceptable terms and conditions; (7) the impact of a
security breach or other significant disruption in the company's IT
systems, those of its partners or suppliers or those it sells to or
operates or maintains for its customers; (8) the outcome of ongoing and
future tax matters; (9) the company's ability to purchase sufficient
materials, parts and components to meet customer demand, particularly in
light of global economic conditions and reductions in the company's
purchasing power; (10) risks related to dependence on certain key
suppliers, subcontractors, third-party distributors and other
representatives; (11) the impact on the company's performance and
financial results from strategic acquisitions or divestitures; (12)
risks related to the company's manufacturing and business operations in
foreign countries; (13) the creditworthiness of the company's customers
and distributors, particularly purchasers of large infrastructure
systems; (14) the ownership of certain logos, trademarks, trade names
and service marks including "MOTOROLA" by Motorola Mobility Holdings,
Inc.; (15) variability in income received from licensing the company's
intellectual property to others, as well as expenses incurred when the
company licenses intellectual property from others; (16) unexpected
liabilities or expenses, including unfavorable outcomes to any pending
or future litigation or regulatory or similar proceedings; (17) the
impact of the percentage of cash and cash equivalents held outside of
the United States; (18) the ability of the company to pay future
dividends due to possible adverse market conditions or adverse impacts
on the company's cash flow; (19) the ability of the company to complete
acquisitions or repurchase shares under its repurchase program due to
possible adverse market conditions or adverse impacts on the company's
cash flow; (20) the impact of changes in governmental policies, laws or
regulations; (21) negative consequences from the company's use of third
party vendors for various activities, including certain manufacturing
operations, information technology and administrative functions; and
(22) the company's ability to settle the par value of its Senior
Convertible Notes in cash. Motorola Solutions undertakes no obligation
to publicly update any forward-looking statement or risk factor, whether
as a result of new information, future events or otherwise

DEFINITIONS

1 Organic revenue reflects net sales calculated under GAAP
excluding net sales from acquired business owned for less than four full
quarters and excluding the effects of ASC 606.

2 Free cash flow represents operating cash flow less capital
expenditures.

ABOUT MOTOROLA SOLUTIONS

Motorola Solutions (NYSE:MSI) creates mission-critical communications
solutions, including devices, networks, services, software and video,
that help public safety and commercial customers build safer cities and
thriving communities. For ongoing news, visit www.motorolasolutions.com/newsroom
or subscribe to a news
feed
.

MOTOROLA, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or
registered trademarks of Motorola Trademark Holdings, LLC and are used
under license. All other trademarks are the property of their respective
owners. ©2018 Motorola Solutions, Inc. All rights reserved.

GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
       
Three Months Ended
June 30, 2018   July 1, 2017
Net sales from products $ 1,042 $ 848
Net sales from services   718     649  
Net sales 1,760 1,497
 
Costs of products sales 485 392
Costs of services sales   453     415  
Costs of sales 938 807
   
Gross margin   822     690  
 
Selling, general and administrative expenses 316 254
Research and development expenditures 162 138
Other charges 18
Intangibles amortization   53     37  
Operating earnings   273     261  
 
Other income (expense):
Interest expense, net (58 ) (51 )
Losses on sales of investments and businesses, net (1 ) (1 )
Other   13     (4 )
Total other expense   (46 )   (56 )
Net earnings before income taxes 227 205
Income tax expense   46     73  
Net earnings 181 132
 
Less: Earnings attributable to noncontrolling interests   1     1  
Net earnings attributable to Motorola Solutions, Inc. $ 180   $ 131  
 

Earnings per common share:

Basic $ 1.11 $ 0.80
Diluted $ 1.05 $ 0.78

Weighted average common shares
outstanding:

Basic 162.2 163.1
Diluted   171.7     169.0  
     
Percentage of Net Sales*
Net sales from products 59.2 % 56.6 %
Net sales from services   40.8 %   43.4 %
Net sales 100.0 % 100.0 %
 
Costs of products sales 46.5 % 46.2 %
Costs of services sales   63.1 %   63.9 %
Costs of sales 53.3 % 53.9 %
   
Gross margin   46.7 %   46.1 %
 
Selling, general and administrative expenses 18.0 % 17.0 %
Research and development expenditures 9.2 % 9.2 %
Other charges 1.0 % %
Intangibles amortization   3.0 %   2.5 %
Operating earnings   15.5 %   17.4 %
 
Other income (expense):
Interest expense, net (3.3 )% (3.4 )%
Losses on sales of investments and businesses, net (0.1 )% (0.1 )%
Other   0.7 %   (0.3 )%
Total other expense   (2.6 )%   (3.7 )%
Net earnings before income taxes 12.9 % 13.7 %
Income tax expense   2.6 %   4.9 %
Net earnings   10.3 %   8.8 %
 
Less: Earnings attributable to noncontrolling interests 0.1 % 0.1 %
Net earnings attributable to Motorola Solutions, Inc.   10.2 %   8.8 %
* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
       
Six Months Ended
June 30, 2018   July 1, 2017
Net sales from products $ 1,842 $ 1,551
Net sales from services   1,385     1,226  
Net sales 3,227 2,777
   
Costs of products sales 867 739
Costs of services sales   869     778  
Costs of sales 1,736 1,517
   
Gross margin   1,491     1,260  
 
Selling, general and administrative expenses 594 500
Research and development expenditures 314 273
Other charges 44 (19 )
Intangibles amortization   94     73  
Operating earnings   445     433  
 
Other income (expense):
Interest expense, net (104 ) (102 )
Gains on sales of investments and businesses, net 10 2
Other   16     (9 )
Total other expense   (78 )   (109 )
Net earnings before income taxes 367 324
Income tax expense   69     114  
Net earnings 298 210
 
Less: Earnings attributable to noncontrolling interests   1     2  
Net earnings attributable to Motorola Solutions, Inc. $ 297   $ 208  
 

Earnings per common share:

Basic $ 1.83 $ 1.27
Diluted $ 1.73 $ 1.23

Weighted average common shares
outstanding:

Basic 161.7 163.7
Diluted   171.1     169.5  
     
Percentage of Net Sales*
Net sales from products 57.1 % 55.9 %
Net sales from services   42.9 %   44.1 %
Net sales 100.0 % 100.0 %
 
Costs of products sales 47.1 % 47.6 %
Costs of services sales   62.7 %   63.5 %
Costs of sales 53.8 % 54.6 %
   
Gross margin   46.2 %   45.4 %
 
Selling, general and administrative expenses 18.4 % 18.0 %
Research and development expenditures 9.7 % 9.8 %
Other charges 1.4 % (0.7 )%
Intangibles amortization   2.9 %   2.6 %
Operating earnings   13.8 %   15.6 %
 
Other income (expense):
Interest expense, net (3.2 )% (3.7 )%
Gains on sales of investments and businesses, net 0.3 % 0.1 %
Other   0.5 %   (0.3 )%
Total other expense   (2.4 )%   (3.9 )%
Net earnings before income taxes 11.4 % 11.7 %
Income tax expense   2.1 %   4.1 %
Net earnings   9.2 %   7.6 %
 
Less: Earnings attributable to noncontrolling interests % 0.1 %
Net earnings attributable to Motorola Solutions, Inc.   9.2 %   7.5 %
* Percentages may not add up due to rounding
GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
       
June 30, 2018 December 31, 2017
Assets
Cash and cash equivalents $ 878 $ 1,205
Restricted cash   63     63  
Total cash and cash equivalents   941     1,268  
Accounts receivable, net 1,159 1,523
Contract assets 760
Inventories, net 391 327
Other current assets   330     832  
Total current assets   3,581     3,950  
 
Property, plant and equipment, net 895 856
Investments 172 247
Deferred income taxes 945 1,023
Goodwill 1,528 938
Intangible Assets 1,340 861
Other assets   420     333  
Total assets $ 8,881   $ 8,208  
 
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 347 $ 52
Accounts payable 430 593
Contract liabilities 1,049
Accrued liabilities   1,096     2,286  
Total current liabilities   2,922     2,931  
 
Long-term debt 5,298 4,419
Other liabilities 2,153 2,585
 
Total Motorola Solutions, Inc. stockholders' equity (deficit) (1,507 ) (1,742 )
 
Noncontrolling interests   15     15  
 
Total liabilities and stockholders' equity $ 8,881   $ 8,208  
GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
       
Three Months Ended
June 30, 2018   July 1, 2017
Operating
Net earnings attributable to Motorola Solutions, Inc. $ 180 $ 131
Earnings attributable to noncontrolling interests   1     1  
Net earnings 181 132
Adjustments to reconcile Net earnings to Net cash provided by (used
for) operating activities:
Depreciation and amortization 96 86
Non-cash other charges 3 6
Non-U.S. pension settlement loss 16
Share-based compensation expense 17 16
Losses on sales of investments and businesses, net 1 1
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable, contract assets and contract liabilities 11 (117 )
Inventories 46 (43 )
Other current assets 41 38
Accounts payable and accrued liabilities 10 (33 )
Other assets and liabilities (5 ) 31
Deferred income taxes   24     40  
Net cash (used for) provided by operating activities   425     173  
Investing
Acquisitions and investments, net (28 ) (34 )
Proceeds from sales of investments and businesses, net 2 19
Capital expenditures   (41 )   (53 )
Net cash used for investing activities   (67 )   (68 )
Financing
Repayment of debt (147 ) (5 )
Net proceeds from issuance of debt (1 )
Proceeds from financing through capital leases 7
Issuance of common stock 6 6
Purchases of common stock (80 )
Payments of dividends (84 ) (77 )
Payment of dividend to non-controlling interest   (1 )   (2 )
Net cash used for financing activities   (227 )   (151 )
   
Effect of exchange rate changes on cash and cash equivalents   (48 )   22  
Net increase (decrease) in cash and cash equivalents 83 (24 )
Cash and cash equivalents, beginning of period   858     829  
Cash and cash equivalents, end of period $ 941   $ 805  
 
Financial Ratios:
Free cash flow* $ 384 $ 120
 
*Free cash flow = Net cash provided by operating activities -
Capital Expenditures
GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
       
Six Months Ended
June 30, 2018   July 1, 2017
Operating
Net earnings attributable to Motorola Solutions, Inc. $ 297 $ 208
Earnings attributable to noncontrolling interests   1     2  
Net earnings 298 210
Adjustments to reconcile Net earnings to Net cash provided by (used
for) operating activities:
Depreciation and amortization 178 166
Non-cash other charges 6 21
Non-U.S. pension settlement loss 25
Share-based compensation expense 34 33
Gains on sales of investments and businesses, net (10 ) (2 )
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable, contract assets and contract liabilities 206 251
Inventories 37 (112 )
Other current assets 43 (21 )
Accounts payable and accrued liabilities (340 ) (340 )
Other assets and liabilities (558 ) 21
Deferred income taxes   31     63  
Net cash provided by (used for) operating activities   (75 )   315  
Investing
Acquisitions and investments, net (1,153 ) (140 )
Proceeds from sales of investments and businesses, net 79 72
Capital expenditures   (82 )   (121 )
Net cash used for investing activities   (1,156 )   (189 )
Financing
Repayment of debt (197 ) (6 )
Net proceeds from issuance of debt 1,295
Proceeds from financing through capital leases 7
Issuance of common stock 59 28
Purchases of common stock (66 ) (258 )
Payments of dividends (168 ) (154 )
Payment of dividend to non-controlling interest   (1 )   (2 )
Net cash provided by (used for) financing activities   922     (385 )
   
Effect of exchange rate changes on cash and cash equivalents   (18 )   34  
Net decrease in cash and cash equivalents (327 ) (225 )
Cash and cash equivalents, beginning of period   1,268     1,030  
Cash and cash equivalents, end of period $ 941   $ 805  
 
Financial Ratios:
Free cash flow* $ (157 ) $ 194
 
*Free cash flow = Net cash provided by operating activities -
Capital Expenditures
GAAP-6
Motorola Solutions, Inc. and Subsidiaries
Segment Information
(In millions)
               
Net Sales
         
Three Months Ended
       
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 1,189 $ 1,047 14 %
Services and software   571     450   27 %
Total Motorola Solutions $ 1,760   $ 1,497   18 %
     
Six Months Ended
     
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 2,141 $ 1,901 13 %
Services and software   1,086     876   24 %
Total Motorola Solutions $ 3,227   $ 2,777   16 %
 
               
Operating Earnings
     
Three Months Ended
     
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 175 $ 190 (8 )%
Services and software   98     71   38 %
Total Motorola Solutions $ 273   $ 261   5 %
     
Six Months Ended
     
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 265 $ 287 (8 )%
Services and software   180     146   23 %
Total Motorola Solutions $ 445   $ 433   3 %
 
           
Operating Earnings %
     
Three Months Ended
   
June 30, 2018 July 1, 2017
Products and systems integration 14.7 % 18.1 %
Services and software 17.2 % 15.8 %
Total Motorola Solutions   15.5 %   17.4 %
     
Six Months Ended
   
June 30, 2018 July 1, 2017
Products and systems integration 12.4 % 15.1 %
Services and software 16.6 % 16.7 %
Total Motorola Solutions   13.8 %   15.6 %

Non-GAAP-1

Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense,
Share-Based Compensation Expense and Highlighted Items)
                     
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
                     
Q2 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 25 6 19 0.10
Intangibles amortization expense Intangibles amortization 53 12 41 0.23
Avigilon purchase accounting adjustment Cost of sales 10 3 7 0.04
Sale of investments Sale of Investment or Business (Gain) or Loss 1 1 0.01

Loss on foreign currency related to Avigilon purchase

Other expense 1 1 0.01
FIN 48 reserve Income tax expense (1 ) 1 0.01
State audit settlement Income tax benefit 12 (12 ) (0.07 )
       
Total impact on Net earnings $ 107 $ 36 $ 71 $ 0.41
Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)
               
Net Sales
         
Three Months Ended
       
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 1,189 $ 1,047 14 %
Services and software   571     450   27 %
Total Motorola Solutions $ 1,760   $ 1,497   18 %
     
Six Months Ended
     
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 2,141 $ 1,901 13 %
Services and software   1,086     876   24 %
Total Motorola Solutions $ 3,227   $ 2,777   16 %
 
               
Non-GAAP Operating Earnings
     
Three Months Ended
     
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 226 $ 204 11 %
Services and software   152     112   36 %
Total Motorola Solutions $ 378   $ 316   20 %
     
Six Months Ended
     
June 30, 2018 July 1, 2017 % Change
Products and systems integration $ 350 $ 306 14 %
Services and software   287     222   29 %
Total Motorola Solutions $ 637   $ 528   21 %
 
               
Non-GAAP Operating Earnings %
     
Three Months Ended
   
June 30, 2018 July 1, 2017
Products and systems integration 19.0 % 19.5 %
Services and software 26.6 % 24.9 %
Total Motorola Solutions   21.5 %   21.1 %
     
Six Months Ended
   
June 30, 2018 July 1, 2017
Products and systems integration 16.3 % 16.1 %
Services and software 26.4 % 25.3 %
Total Motorola Solutions   19.7 %   19.0 %
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
             
Q1 2018
           
    TOTAL

Products and Systems

Integration

Services and Software
Net sales $ 1,468 $ 952 $ 516
Operating earnings ("OE")   $ 171   $ 90   $ 81  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 17 12 5
Reorganization of business charges 13 9 4
Intangibles amortization expense 41 1 40
Acquisition-related transaction fees 17 12 5
Loss on legal settlements   1     1      
Total above-OE non-GAAP adjustments 89 35 54
         
Operating earnings after non-GAAP adjustments   $ 260   $ 125   $ 135  
     
Operating earnings as a percentage of net sales - GAAP 11.6 % 9.5 % 15.7 %
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
  17.7 %   13.1 %   26.2 %
             
Q2 2018
     
    TOTAL

Products and Systems

Integration

Services and Software
Net sales $ 1,760 $ 1,189 $ 571
Operating earnings ("OE")   $ 273   $ 175   $ 98  
 
Above-OE non-GAAP adjustments:
Share-based compensation expense 17 12 5
Reorganization of business charges 25 19 6
Intangibles amortization expense 53 10 43
Avigilon purchase accounting adjustment   10     10      
Total above-OE non-GAAP adjustments 105 51 54
         
Operating earnings after non-GAAP adjustments   $ 378   $ 226   $ 152  
     
Operating earnings as a percentage of net sales - GAAP 15.5 % 14.7 % 17.2 %
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
  21.5 %   19.0 %   26.6 %
Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Organic Revenue
Total Motorola Solutions
         
Three Months Ended
       
    June 30, 2018 July 1, 2017 % Change
Net sales   $ 1,760   $ 1,497   18 %
 
Non-GAAP adjustments:
Acquisitions (154 )
ASC 606 impact   (24 )    
Organic revenue   1,582     1,497   6 %
Less foreign exchange impact     (26 )    
Organic revenue in constant currency   $ 1,556   $ 1,497   4 %
     
Six Months Ended
     
    June 30, 2018 July 1, 2017 % Change
Net sales   $ 3,227   $ 2,777   16 %
 
Non-GAAP adjustments:
Acquisitions (206 ) (5 )
ASC 606 impact   (39 )    
Organic revenue   2,982     2,772   8 %
Less foreign exchange impact     (65 )    
Organic revenue in constant currency   $ 2,917   $ 2,772   5 %

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