Motorola Solutions (MSI) Q2 2012 Earnings Call July 25, 2012 8:00 am ET Executives Shep Dunlap - Vice President of Investor Relations Gregory Q. Brown - Chairman, Chief Executive Officer, President and Chairman of Executive Committee Edward J. Fitzpatrick - Chief Financial Officer and Executive Vice President Mark F. Moon - Executive Vice President of Sales and Field Operations Analysts Peter Misek - Jefferies & Company, Inc., Research Division Jeffrey T. Kvaal - Barclays Capital, Research Division Tavis C. McCourt - Raymond James & Associates, Inc., Research Division Jasmeet Chadha Craig Hettenbach - Goldman Sachs Group Inc., Research Division Ehud Gelblum - Morgan Stanley, Research Division Jim Suva - Citigroup Inc, Research Division Keith M. Housum - Northcoast Research Timothy Long - BMO Capital Markets U.S. Kulbinder Garcha - Crédit Suisse AG, Research Division Matthew Hoffman - Cowen and Company, LLC, Research Division Presentation Operator
We have posted an earnings presentation and press release at www.motorolasolutions.com/investor. These materials also include GAAP to non-GAAP reconciliations for your reference. As always, it's important for 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 the 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. And with that, I would like to turn the call over to Greg. Gregory Q. Brown Thanks, Shep. Good morning, and thank you for joining us today. Q2 highlighted another strong quarter for Motorola Solutions as we delivered strong sales growth and operating leverage, resulting in excellent earnings growth. In addition, we continue to place a high priority on the return of capital to shareholders through our quarterly dividend and share repurchase program. This morning, we reported record second quarter sales of $2.1 billion, which represents an increase of 8% from Q2 of last year. On a GAAP basis, net earnings were $0.60 per share from continuing operations compared to $0.14 in the year-ago quarter. Non-GAAP net earnings from continuing operations were $0.70 per share compared to $0.54 per share in Q2 of last year, which represents a 30% increase. For the remainder of this call, we'll reference non-GAAP financial results unless otherwise noted. Our Government business revenues increased 14%, a record second quarter. This reflects broad-based growth across all of our regions driven by a combination of factors, including core market growth, new product introductions and narrow banding in the United States. Operating margins in the Government business improved 330 basis points year-over-year to 16.4% due to the sizable growth in sales across our portfolio coupled with our continued focus on cost management.
In our Enterprise business, sales declined 2% from the year-ago quarter, including an anticipated iDEN decline. We've seen this business impacted by a number of factors, including most notably a tougher macroeconomic environment, especially within Europe, coupled with foreign currency headwinds.Let me spend a moment on capital allocation. During Q2, we paid $64 million in dividends and repurchased 439 million in stock, bringing the total repurchase amount to $2.9 billion since the program was announced approximately 12 months ago. One year ago, we initiated a dividend, authorized a repurchase program and introduced a capital allocation framework. Today, I'm pleased to announce that the Board of Directors has approved an increase in our quarterly cash dividend to $0.26 per share, an increase of 18%. In addition, our board has increased our share repurchase authorization by $2 billion, bringing the total to $5 billion. These announcements reflect the continued confidence we have in our business, as well as our earnings growth and cash flow generation opportunities. Ed will speak more on this topic later in the call. I'll now turn it over to Ed Fitzpatrick to discuss our financial results in more detail. I'll then return to discuss operational highlights and provide additional commentary and perspective on our overall business performance. Edward J. Fitzpatrick Thanks, Greg. Q2 was another strong quarter of earnings growth and cash flow generation for MSI. Along with revenue growth of 8%, our focus on operating leverage yielded an increase in operating earnings of 15% compared to last year despite an $11 million increase in U.S. regular pension expense and $20 million of unfavorable FX impact to operating margins. The unfavorable FX impact was driven primarily by the weakening euro. Read the rest of this transcript for free on seekingalpha.com