Motorola Solutions (MSI)

Q2 2011 Earnings Call

July 28, 2011 8:00 am ET


Gregory Brown - Chairman of the Board, Chief Executive Officer, President and Chairman of Executive Committee

Shep Dunlap -

Edward Fitzpatrick - Chief Financial Officer and Senior Vice President

Mark Moon - Senior Vice President of Sales & Field Operations


Matthew Thornton - Avian Securities, LLC

Peter Misek - Jefferies & Company, Inc.

Deepak Sitaraman - Crédit Suisse AG

Jim Suva - Citigroup Inc

Jeffrey Fidacaro - Susquehanna Financial Group, LLLP

Tavis McCourt - Morgan Keegan & Company, Inc.

Richard Kramer - Arete Research Services LLP

Lawrence Harris - CL King & Associates, Inc.

Ehud Gelblum - Morgan Stanley

Craig Hettenbach - Goldman Sachs Group Inc.



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Good morning, and thank you for holding. Welcome to the Motorola Solutions' Second Quarter 2011 Earnings Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. The presentation material and additional financial tables are currently posted on the Motorola Solutions' Investor Relations website. In addition, a replay of this call will be available approximately 3 hours after the conclusion of this call over the Internet. The website address is [Operator Instructions] I would now like to introduce Mr. Shep Dunlap, Vice President of Investor Relations. Mr. Dunlap, you may begin your conference.

Shep Dunlap

Thank you. Good morning. Welcome to our conference call to present Motorola Solutions' second quarter results. With me this morning are Greg Brown, Chairman and Chief Executive Officer, Motorola Solutions; Ed Fitzpatrick, Executive Vice President and Chief Financial Officer; and Mark Moon, Executive Vice President, Sales and Field Operations. Greg and Ed will review our second quarter results along with commentary, and Mark will join us for Q&A. We have posted an accompanying earnings presentation and press release in, and I encourage you to review these materials.

A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on current expectations of Motorola Solutions, and we can give no assurance that any future results or events discussed in these statements will be achieved.

Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this presentation.

I would now like to turn the call over to Greg.

Gregory Brown

Thanks, Shep, and good morning, and thank you for joining us today. I'm very pleased with our second quarter results as we delivered strong revenue growth with increased profitability. Highlights for the quarter included better-than-expected Enterprise growth across major product lines, solid performance in our Government business, continued operating leverage and numerous examples that illustrate our ability to deliver solutions to our customers to help them be their best in the moments that matter.

This morning, Motorola Solutions reported sales in the second quarter of $2.1 billion, an increase of 6% from Q2 of last year. On a GAAP basis, net earnings were $0.17 per share from continuing operations compared to $0.01 in the year-ago quarter. Non-GAAP net earnings from continuing operations were $0.57 per share compared to $0.37 per share in Q2, a 54% increase. Our Government segment posted sales growth of 4% as our public safety customers continue to choose our solutions to help them achieve their mission critical needs. We also saw improved operating earnings, excluding highlighted items in this segment versus the year-ago quarter.

In our Enterprise segment, operating earnings also improved and sales increased 11% from the year-ago quarter, marking another quarter of excellent growth across enterprise mobile computing, advanced data capture and our wireless LAN businesses.

Last quarter, we indicated that we would provide greater clarity on capital allocation within 90 days. This morning, we made 2 very important announcement along these lines. First, I'm pleased to share with you that the Board of Directors has approved a quarterly cash dividend of $0.22 a share, with the first dividend payable October 14 to shareholders of record on September 15. Second, our board has approved the share repurchase program of $2 billion through the end of 2012. These announcements reflect the confidence we have in both our strategy and growth opportunities, while providing a meaningful return of capital to our shareholders.

As announced yesterday, I'm also delighted to welcome Ken Dahlberg to our Board of Directors. Ken was formerly Chairman and CEO of SAIC, a $10 billion engineering and technology applications company. He has leadership experience working with government and enterprise customers while at SAIC, as well as number of other senior executive roles in a few other Fortune 200 companies. We look forward to the addition of Ken and the wealth of knowledge and business expertise that he brings to the table.

I'll now turn it over to Ed Fitzpatrick to discuss our financial results, as well as additional perspective on capital allocation. I'll then return to discuss the operational highlights and provide additional perspective on our business.

Edward Fitzpatrick

Thanks, Greg. Sales for the quarter grew 6% year-over-year, driven by strong demand in Enterprise, continued growth in Government and better-than-expected growth in EMEA and Asia Pacific. Revenue growth continued in our Government business with second quarter sales of $1.3 billion, an increase of 4% from the prior year. The Enterprise business delivered another excellent quarter, as its sales grew 11% to $747 million driven by very positive demand in EMEA, as well as strength in our Asia region. On a GAAP basis, earnings from continuing operations, net of taxes, were $58 million and EPS was $0.17 per share. These GAAP results include the impact of a net charge for legal matters for $48 million or $0.08 per share and costs associated with the retirement of $540 million of debt and a quarter-end expense of $81 million or $0.14 per share. Non-GAAP earnings were $0.57 per share compared to $0.37 per share a year ago. For the rest of this call, we refer to non-GAAP financial measures.

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