Motorola 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 Motorola annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

MOTOROLA
SOLUTIONS, INC.
2010 ANNUAL REPORT

Table of contents

  • Page 1
    MOTOROLA SOLUTIONS, INC. 2010 ANNUAL REPORT

  • Page 2
    ... produce advanced data capture devices such as barcode scanners and radio-frequency identification (RFID) products for business. We make professional and commercial two-way radios for a variety of markets, and we also bring unlicensed wireless broadband capabilities and wireless local area networks...

  • Page 3
    ... our outstanding relationships with our diverse, blue-chip customers in both government and enterprise markets. Our new focus enables us to recruit and retain employees who have the expertise to meet the needs of our specific business. And, the value of equity-based incentive compensation plans are...

  • Page 4
    ...• As a shareholder, you can be confident that our journey as Motorola Solutions is built from a solid position of market leadership and supported by a strong balance sheet. Our financial results for the fourth-quarter and the full-year 2010 were impressive. Full-year pro forma sales and operating...

  • Page 5
    MOTOROLA SOLUTIONS, INC. 2010 FORM 10-K

  • Page 6

  • Page 7
    ..., Schaumburg, Illinois 60196 (847) 576-5000 (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $.01 Par Value per Share New York Stock Exchange Chicago Stock Exchange Securities...

  • Page 8
    ... of Matters to a Vote of Security Holders ...Executive Officers of the Registrant ...PART II ...Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Item 6. Selected Financial Data ...Item 7. Management's Discussion and Analysis of...

  • Page 9
    ... Holdings, Inc. ("Motorola Mobility") from Motorola Solutions (the "Separation") was completed. Motorola Mobility is now an independent public company trading under the symbol "MMI" on the New York Stock Exchange. On January 4, 2011, the Company's stockholders of record as of the close of business...

  • Page 10
    ... products. Through December 31, 2010, the Company reported financial results for three operating business segments, which comprised of two main business units. Following the Separation of Motorola Mobility on January 4, 2011, only the Enterprise Mobility Solutions segment remains part of the Company...

  • Page 11
    ..., software management, security tools and wireless infrastructure. Our products and services are sold stand-alone or as an integrated solution through the Company's direct sales force and through PartnerEmpower, our independent and authorized distributors, dealers and value-added resellers...

  • Page 12
    ... sales of the Company's products. Our independent software vendor and value-added resale channels offer customized applications that meet specific needs in each market we serve. Our largest customer is the U.S. Government (through its various branches and agencies, including the armed services...

  • Page 13
    ...broadband and IP solution providers; and new low-tier entrants. Numerous companies, including present manufacturers of scanners, lasers, optical instruments, microprocessors, wireless networks, notebook computers, handheld devices and telephonic and other communication devices may have the technical...

  • Page 14
    ... safety. In addition to these specific actions during 2010 regarding public safety systems, in March 2010, the FCC released its overall National Broadband Plan. The plan's focus is to promote and enable the build-out and utilization of high-speed broadband infrastructure to benefit a number of key...

  • Page 15
    ...is required to meet long-term warranty and contractual requirements. In addition, replacement parts are stocked for delivery on customer demand within a short delivery cycle. At the end of 2010, the segment had a higher inventory balance than at the end of 2009, as the Company increased inventory to...

  • Page 16
    ...; product innovation, features, performance and quality; delivery and warranty; the quality and availability of service; and relationships with key customers. Home Segment The Home segment, which was separated with Motorola Mobility on January 4, 2011, is a provider of products and services to cable...

  • Page 17
    ..., mobile data services and providing new experiences that bridge conventional TV and Internet services. In 2010, while there was some economic recovery from the 2009 adverse macroeconomic conditions, demand had not yet returned to pre-2009 levels. Competition The segment's set-top boxes and cable...

  • Page 18
    ... cable operators support a full two-way security interface, which allows consumers with such a retail device to access all programming available on the operator's network without the need for an operator-provided set-top box. As a result, the segment faces competition from several new manufacturers...

  • Page 19
    ... of the Motorola Solutions, Inc. Board of Directors • Motorola Solutions Code of Business Conduct, which is applicable to all Motorola Solutions employees, including the principal executive officers, the principal financial officer and the controller (principal accounting officer) • Audit and...

  • Page 20
    ...order of importance or probability of occurrence. We are at risk that the sale of the majority of our Networks infrastructure assets is further delayed or does not close. We face risks and uncertainties related to the sale of a majority of our Networks infrastructure assets to Nokia Siemens Networks...

  • Page 21
    ... negatively impact our financial results. • Customers' Inability to Obtain Financing to Make Purchases from Motorola Solutions and/or Maintain Their Business: Some of our customers require substantial financing, including public financing or government grants, in order to fund their operations and...

  • Page 22
    ... on our financial statements. • Returns on Pension and Retirement Plan Assets and Interest Rate Changes Could Affect Our Earnings and Cash Flow in Future Periods: The funding position of our pension plans is affected by the performance of the financial markets, particularly the equity markets, and...

  • Page 23
    ... of various laws, including those related to procurement integrity, export control, U.S. Government security regulations, employment practices, protection of the environment, accuracy of records, proper recording of costs, and foreign corruption. Generally, U.S. Government contracts and grants are...

  • Page 24
    ...-U.S. rules related to trade, environmental, health and safety, technical standards and consumer protection; (iii) longer payment cycles; (iv) tax issues, such as tax law changes, variations in tax laws from country to country and as compared to the U.S., obligations under tax incentive agreements...

  • Page 25
    ... the software used in the product. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. Often these issues are identified prior to the shipment of the products and may cause delays in shipping products to customers, or even the cancellation of orders...

  • Page 26
    ... which might result in greater product returns, service problems and warranty claims and could harm our business, financial condition and results of operations. Failure of our suppliers to use acceptable ethical business practices could negatively impact our business. It is our policy to require our...

  • Page 27
    ... to actions filed against us prior to the Distribution of Motorola Mobility which crossed our respective businesses. Many of these assertions are brought by non-practicing entities whose principle business model is to secure patent licensing-based revenue from product manufacturing companies. The...

  • Page 28
    ... that are highly dilutive to near-term earnings and have, in the past, foregone certain of these acquisitions. Key employees of acquired businesses may receive substantial value in connection with a transaction in the form of change-in-control agreements, acceleration of stock options and...

  • Page 29
    ... successful new products. We may not be as successful as our competitors at recruiting, assimilating, retaining and utilizing these highly-skilled personnel. Our success depends in part upon our ability to attract, retain and prepare succession plans for senior management and key employees. The...

  • Page 30
    ... to be volatile. Our share price has been volatile due, in part, to generally volatile securities markets, the volatility in the telecommunications and technology companies' securities markets in particular and the Distribution of Motorola Mobility. Factors other than our financial results that may...

  • Page 31
    ... to leverage the purchasing spend of our former Mobile Devices and Home businesses. Prior to the Distribution of Motorola Mobility we negotiated favorable pricing terms with many of our suppliers, some of which have volume-based pricing. In the future, as we establish new pricing terms, our reduced...

  • Page 32
    ... terms of the license agreement we could lose our rights to the Motorola Marks. We have a worldwide, perpetual and royalty-free license from Motorola Mobility to use the Motorola Marks as part of our corporate name and in connection with the manufacture, sale, and marketing of our current products...

  • Page 33
    ... Mobile Devices and/or Home business and another of our business units were joint beneficiaries of contracts, and Motorola Mobility or we will need to enter into a new agreement with the third-party to replicate the contract or assign the portion of the contract related to our respective businesses...

  • Page 34
    ... of the Employment Retirement Income Security Act ("ERISA"). The complaint alleged that the defendants had improperly permitted participants in the Motorola 401(k) Plan (the "Plan") to purchase or hold shares of common stock of Motorola because the price of Motorola's stock was artificially...

  • Page 35
    ... Securities Class Action Case and Related Derivative Matter A purported class action lawsuit , St. Lucie County Fire District Firefighters' Pension Fund v. Motorola, Inc., et al., was filed against the Company and certain current and former officers and directors of the Company on January 21, 2010...

  • Page 36
    ... ordered the cases to be consolidated. On July 16, 2010, the plaintiffs filed a consolidated amended complaint. The amended complaint added as defendants additional current and former employees, the Compensation and Leadership Committee of Motorola, and the Motorola Retirement Benefits Committee...

  • Page 37
    ... the patents-in-suit by making, using, offering for sale and selling in the United States certain mobile devices and related software. The complaint seeks unspecified monetary damages and injunctive relief. On November 9, 2010, Motorola Mobility, Inc. filed counterclaims against Apple Inc. to their...

  • Page 38
    ... Chief Marketing Officer, Motorola Solutions, Motorola, Inc. from September 2010 to January 2011; Senior Vice President, Chief Marketing Officer, Enterprise Mobility Solutions and Home & Networks business from March 2009 to September 2010; Corporate Vice President, Marketing and Communications, Home...

  • Page 39
    ... Support, Networks and Enterprise from May 2006 to June 2007; Director of Technical Accounting and External Reporting from October 2005 until May 2006. The above executive officers will serve as executive officers of Motorola Solutions until the regular meeting of the Board of Directors in May 2011...

  • Page 40
    ... reference to the information under the caption "Equity Compensation Plan Information" of Motorola Solutions' Proxy Statement for the 2010 Annual Meeting of Stockholders. The remainder of the response to this Item incorporates by reference Note 16, "Quarterly and Other Financial Data (unaudited)" of...

  • Page 41
    ... outstanding (in millions) Dividends paid per share Balance Sheet Total assets Long-term debt Total debt Total stockholders' equity Other Data Capital expenditures % of sales Research and development expenditures % of sales Year-end employment (in thousands) $ 2010 Years Ended December 31 2009 2008...

  • Page 42
    ... 8: Financial Statements and Supplementary Data." Executive Overview What businesses are we in? Through December 31, 2010, the Company reported financial results for three operating business segments, which were comprised of two main business units. Following the Separation of Motorola Mobility on...

  • Page 43
    ... to meet specific market requirements, primarily in emerging markets. However, the segment continued to face challenges as it transitioned its product portfolio. From a financial perspective, the Mobile Devices' sales grew in 2010 compared to 2009, the first year of annual sales growth since 2006...

  • Page 44
    ... that gives consumers more control and access to content. In infrastructure, sales grew in 2010 as operators upgraded networks to expand capacity and provide capabilities for advanced services. From a financial perspective, while Home sales declined in 2010 compared to 2009, the segment improved its...

  • Page 45
    ...Motorola Solutions, Inc. common shareholders. Presentation gives effect to the Reverse Stock Split, which occurred on January 4, 2011. Geographic market sales measured by the locale of the end customer as a percent of total net sales for 2010, 2009 and 2008 are as follows: Geographic Market Sales...

  • Page 46
    ... net sales to the commercial enterprise market and a 5% increase in net sales to the government and public safety market. The 9% increase in net revenues in the Mobile Devices segment was primarily driven by a 61% increase in average selling price ("ASP"), partially offset by a 32% decrease in unit...

  • Page 47
    ... the Separation of Motorola Mobility, (ii) a non-cash tax charge related to the Medicare Part D subsidy tax law change, and (iii) certain separation-related transaction costs incurred for which the Company recorded no tax benefit, partially offset by reductions in unrecognized tax benefits for facts...

  • Page 48
    ... sales by our Mobile Devices business was smaller than in previous years. Since Mobile Devices has the lowest gross margin percentage of the Company's businesses, this positively impacted overall gross margin percentage in 2009. Selling, General and Administrative Expenses SG&A expenses decreased...

  • Page 49
    ...rate of (56) % in 2008. The Company's effective tax rate for 2009 was lower than the U.S. statutory tax rate of 35% primarily due to a reduction in valuation allowances relating to refundable general business credits and a reduction in unrecognized tax benefits for facts that now indicate the extent...

  • Page 50
    ... Costs of sales. Beyond 2010, the Company expects the reorganization plans initiated during 2010 to provide annualized cost savings of approximately $250 million. During 2009, the Company recorded net reorganization of business charges of $298 million, including $320 million for employee separation...

  • Page 51
    ... Solutions Mobile Devices Home Corporate 2010 2009 2008 $ 68 $ 66 $ 21 34 184 25 29 18 216 131 7 268 30 262 38 $138 $298 $300 Cash payments for exit costs and employee separations in connection with these reorganization plans were $153 million in 2010, as compared to $393 million in 2009. The $100...

  • Page 52
    ... Postretirement Health Care Benefits Plan in either 2010 or 2009, and expects to make no contributions to this plan in 2011. The Company maintained the entire Postretirement Health Care Benefits Plan liability following the Separation of Motorola Mobility on January 4, 2011. Retirement benefits are...

  • Page 53
    ...The Company primarily relies on valuation pricing models and broker quotes to determine the fair value of investments in the Sigma Fund. The valuation models are developed and maintained by third-party pricing services, and use a number of standard inputs, including benchmark yields, reported trades...

  • Page 54
    ...unrelated special investment vehicle managed by United Kingdom-based Gordian Knot, Limited. Securities with a maturity greater than 12 months and defaulted securities have been classified as non-current in the Company's consolidated balance sheets. At December 31, 2010, $70 million of the Sigma Fund...

  • Page 55
    ... a gain of approximately $67 million related to these open market purchases in Other within Other income (expense) in the consolidated statements of operations. As of January 2011, the three largest U.S. national ratings agencies rated the Company's senior unsecured longterm debt investment grade...

  • Page 56
    ..., totaled $343 million. Rental expense, net of sublease income, was $131 million in 2010, $146 million in 2009 and $171 million in 2008. Tax Obligations: Following the Separation of Motorola Mobility, Motorola Solutions has approximately $209 million of unrecognized income tax benefits relating to...

  • Page 57
    ... the agreements for reasons other than "cause." The Company outsources certain corporate functions, such as benefit administration and information technology-related services. These contracts are expected to expire in 2013. Following the Separation of Motorola Mobility, the Motorola Solutions' total...

  • Page 58
    ... the value of accounts receivable sold is supported by credit insurance purchased from third-party insurance companies, less deductibles or self-insurance requirements under the insurance policies. Under these arrangements, the Company's total credit exposure, less insurance coverage, to outstanding...

  • Page 59
    ... exchanged, the Company recorded a pre-tax gain of $228 million during the year ended December 31, 2010, related to the settlement of the outstanding litigation between the parties. The rights to these future royalties transferred to Motorola Mobility as part of the Separation on January 4, 2011...

  • Page 60
    ... margin, driven by the 10% increase in net sales and a favorable product mix, partially offset by: (i) increased selling, general and administrative ("SG&A") expenses primarily due to increased selling and marketing expenses related to the increase in net sales, and (ii) an increase in research and...

  • Page 61
    ... 2009. The 9% increase in net sales was primarily driven by a 61% increase in average selling price ("ASP"), partially offset by a 32% decrease in unit shipments. The segment's unit shipments reflected a decreased focus on the feature phone and voice-centric device segments of the market, partially...

  • Page 62
    ..., including product mix, geographic mix, market conditions and competitive product offerings, and ASP trends often vary over time. Home Segment In 2010, the segment's net sales represented 19% of the Company's consolidated net sales, compared to 21% in 2009 and 19% in 2008. (Dollars in millions...

  • Page 63
    ...valuation -Income taxes -Valuation of Sigma Fund and investment portfolios -Restructuring activities -Retirement-related benefits -Valuation and recoverability of goodwill and long-lived assets Revenue Recognition In October 2009, the Financial Accounting Standards Board ("FASB") issued new guidance...

  • Page 64
    ... purchase support on a time and materials basis. Additionally, advanced services such as general consulting, network management or advisory projects are often sold in stand-alone engagements. Technical support services are also often sold separately through renewals of annual contracts. The Company...

  • Page 65
    ... revenue related to smart phones shipped under arrangements executed during the year ended December 31, 2010 using ESP for the device, the service and the unspecified software upgrade rights, resulting in a lower deferral of revenue than under prior accounting guidance. Both the as reported revenue...

  • Page 66
    ... 31, 2010, compared to 38% of the gross inventory balance at December 31, 2009. The Company has inventory reserves for excess inventory, pending cancellations of product lines due to technology changes, long-life cycle products, lifetime buys at the end of supplier production runs, business exits...

  • Page 67
    ... at this time. However, the Separation of Motorola Mobility Holdings in the first quarter of 2011, which includes the Mobile Devices and Home businesses, from Motorola Solutions will significantly impact the facts and circumstances related to the Company's deferred tax assets and the assessment of...

  • Page 68
    ... inputs related to perceived market movements and sector news may be considered in addition to the standard inputs. Level 3 fixed income securities are debt securities that do not have actively traded quotes on the date the Company presents its consolidated balance sheets and require the use of...

  • Page 69
    ... medical costs to the retired participant. As of January 1, 2005, the Postretirement Health Care Benefits Plan has been closed to new participants. Accounting methodologies use an attribution approach that generally spreads individual events over the service lives of the employees in the plan...

  • Page 70
    ...Benefits Plan in 2011. The Company maintained the entire Postretirement Health Care Benefits Plan liability following the Separation of Motorola Mobility on January 4, 2011. The Company maintains a number of endorsement split-dollar life insurance policies that were taken out on now-retired officers...

  • Page 71
    ...cost for these split-dollar life insurance arrangements was $5 million and $6 million for both the years ended December 31, 2010 and 2009, respectively. The Company has recorded a liability representing the actuarial present value of the future death benefits as of the employees' expected retirement...

  • Page 72
    ... and Public Safety, Enterprise Mobility, Mobile Devices, and Broadband Home reporting units had fair values that substantially exceeded its carrying values. For the Access Networks reporting unit, the Company calculated a fair value that was within 11% of the carrying value, using a discount rate of...

  • Page 73
    ... deferred tax assets should be discounted to reflect their economic lives, that a significant portion of the corporate assets are required to pay off debt, fund the Company's retirement obligations, meet the near term cash requirements of the Mobile Devices reporting unit, and market participants...

  • Page 74
    ...programs and employee separation costs, (f) the Company's ability and cost to repatriate funds, (g) the impact of the timing and level of sales and the geographic location of such sales, (h) the impact of maintaining inventory, (i) future cash contributions to pension plans or retiree health benefit...

  • Page 75
    ... equivalents, Sigma Fund investments and short-term investments, as well as accounts payable and receivable. Accounts payable and receivable are reflected at fair value in the financial statements. Assuming the amounts of the outstanding foreign exchange contracts represent the Company's underlying...

  • Page 76
    ... ACCOUNTING FIRM The Board of Directors and Stockholders Motorola Solutions, Inc.: We have audited the accompanying consolidated balance sheets of Motorola Solutions, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity...

  • Page 77
    ... per share amounts) Net sales Costs of sales Gross margin Selling, general and administrative expenses Research and development expenditures Other charges Operating earnings (loss) Other income (expense): Interest income (expense), net Gains on sales of investments and businesses, net Other Total...

  • Page 78
    ...Motorola Solutions, Inc. and Subsidiaries Consolidated Balance Sheets (In millions, except per share amounts) ASSETS Cash and cash equivalents Sigma Fund and short-term investments Accounts receivable, net Inventories, net Deferred income taxes Other current assets Current assets held for sale Total...

  • Page 79
    ...Motorola Solutions, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity Motorola Solutions, Inc. Shareholders Accumulated Other Comprehensive Income (Loss) Fair Value Adjustment Common To Foreign Stock and Available Currency Retirement Other Additional For Sale Translation Benefits...

  • Page 80
    ... from sales (purchases) of short-term investments, net Net cash provided by (used for) investing activities Financing Repayment of short-term borrowings, net Repayment of debt Issuance of common stock Repurchase of common stock Proceeds from settlement of financial instruments Payment of dividends...

  • Page 81
    ...Solutions (the "Separation") was completed. Motorola Mobility is now an independent public company trading under the symbol "MMI" on the New York Stock Exchange. On January 4, 2011, the stockholders of record as of the close of business on December 21, 2010 (the "Record Date") received one (1) share...

  • Page 82
    ... the Company's iDEN infrastructure business and certain licensing activity generally related to the Networks business are also now being reported as part of the Enterprise Mobility Solutions segment. The Corporate and general costs which have historically been allocated to the Networks business are...

  • Page 83
    ... purchase support on a time and materials basis. Additionally, advanced services such as general consulting, network management or advisory projects are often sold in stand-alone engagements. Technical support services are also often sold separately through renewals of annual contracts. The Company...

  • Page 84
    ... revenue related to smart phones shipped under arrangements executed during the year ended December 31, 2010 using ESP for the device, the service and the unspecified software upgrade rights, resulting in a lower deferral of revenue than under prior accounting guidance. Both the as reported revenue...

  • Page 85
    ..., including sales, use, value added and excise taxes, on a net basis with such taxes excluded from revenue. Cash Equivalents: The Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2010, and 2009...

  • Page 86
    ... reporting unit's goodwill. Fair value is determined using a combination of present value techniques and market prices of comparable businesses. Intangible assets are generally amortized on a straight line basis over their respective estimated useful lives ranging from one to 13 years. The Company...

  • Page 87
    .... Retirement Benefits: The Company records annual expenses relating to its pension benefit and postretirement plans based on calculations which include various actuarial assumptions, including discount rates, assumed asset rates of return, compensation increases, turnover rates and health care cost...

  • Page 88
    ...' financial statements and related notes have been reclassified to conform to the 2010 presentation. 2. Discontinued Operations During the three months ended October 2, 2010, the Company announced an agreement to sell certain assets and liabilities of its Networks business to Nokia Siemens Networks...

  • Page 89
    ... exchanged, the Company recorded a pre-tax gain of $228 million during the year ended December 31, 2010, related to the settlement of the outstanding litigation between the parties. The rights to these future royalties transferred to Motorola Mobility as part of the Separation on January 4, 2011...

  • Page 90
    ... weighted averages outstanding because their inclusion would have been antidilutive. Pursuant to the completion of the Separation on January 4, 2011, 8.0 million stock options and 3.8 million unvested restricted stock units held by the employees of Motorola Mobility were subject to cancellation.

  • Page 91
    ...66 49 $5,092 - 63 - 3 $66 Fair Value Cash Securities: U.S. government and agency obligations Corporate bonds Asset-backed securities Mortgage-backed securities During the years ended December 31, 2010 and 2009, the Company recorded gains related to the Sigma Fund investments of $11 million and $80...

  • Page 92
    ...301 December 31, 2009 Available-for-sale securities: U.S. government, agency and government-sponsored enterprise obligations Corporate bonds Mortgage-backed securities Common stock and equivalents Other securities, at cost Equity method investments Recorded Value Short-term Investments Investments...

  • Page 93
    ... Other current assets consists of the following: December 31 Contract-related deferred costs Costs and earnings in excess of billings Contractor receivables Value-added tax refunds receivable Other 2010 2009 $ 323 $ 287 293 258 271 329 100 94 355 421 $1,342 $1,389 Property, Plant and Equipment, Net...

  • Page 94
    ... 31 Defined benefit plans, including split dollar life insurance policies Deferred revenue Postretirement health care benefits plan Unrecognized tax benefits Other 2010 2009 $2,183 $2,450 496 601 277 287 76 196 510 453 $3,542 $3,987 Stockholders' Equity Information Share Repurchase Program: During...

  • Page 95
    ...-in capital. Motorola Mobility Separation: On January 4, 2011, the separation of Motorola Mobility from Motorola Solutions was completed. On January 4, 2011, the stockholders of record as of the close of business on December 21, 2010 received one (1) share of Motorola Mobility common stock for each...

  • Page 96
    ... interest coverage ratios as defined in the 2011 Motorola Solutions Credit Agreement. The Company has no outstanding borrowings under the 2011 Motorola Solutions Credit Agreement. 5. Risk Management Derivative Financial Instruments Foreign Currency Risk The Company uses financial instruments to...

  • Page 97
    ... net asset positions, product pricing and component sourcing. At December 31, 2010, the Company had outstanding foreign exchange contracts totaling $1.5 billion, compared to $1.7 billion outstanding at December 31, 2009. Management believes that these financial instruments should not subject the...

  • Page 98
    ... balance sheets of all derivative financial instruments held by the Company, including immaterial amounts related to held for sale businesses, at December 31, 2010 and 2009: Fair Values of Derivative Instruments Assets Liabilities Balance Balance Fair Sheet Fair Sheet Value Location Value Location...

  • Page 99
    ...$ (7) 2010 2009 Financial Statement Location $(9) (6) $ - Accumulated other comprehensive loss (18) Cost of sales/Sales 1 - Other income (expense) Balance at January 1 Increase (decrease) in fair value Reclassifications to earnings, net of tax Balance at December 31 6. Income Taxes Components...

  • Page 100
    ... quarter of 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law, which eliminated the favorable income tax treatment of Medicare Part D Subsidy receipts effective for tax years starting in 2013. As a result of the tax...

  • Page 101
    ... a decrease in the valuation allowance for refundable general business credits. During 2010, the U.S. valuation allowance was reduced by $39 million, primarily related to certain of the Company's state tax carryforwards that the Company expects to utilize. At December 31, 2010 and 2009, the Company...

  • Page 102
    ... of prior years Reductions for tax positions of prior years Settlements Lapse of statute of limitations Balance at December 31 During 2010, the Company recorded $150 million of tax benefits related to reductions in unrecognized tax benefits relating to facts that indicate the extent to which...

  • Page 103
    ... stock units. Effective December 31, 1999, newly elected officers are not eligible to participate in the Officers' Plan. Effective June 30, 2005, salaries were frozen for this plan. The Company has an additional noncontributory supplemental retirement benefit plan, the Motorola Supplemental Pension...

  • Page 104
    ...Officers' Plan and MSPP and Non-U.S. plans was as follows: Regular Pension Plan Years Ended December 31 Service cost Interest cost Expected return on plan assets Amortization of: Unrecognized net loss Unrecognized prior service cost Curtailment gain Net periodic pension cost (benefit) 2010 2009 2008...

  • Page 105
    ...Return on plan assets Company contributions Employee contributions Foreign exchange valuation adjustment Tax payments from plan assets Benefit payments from plan assets Fair value at December 31 Funded status of the plan Unrecognized net loss Unrecognized prior service cost Prepaid (accrued) pension...

  • Page 106
    ... rate and the long-term rate of return on plan assets have a significant effect on the amounts reported for net periodic cost and benefit obligation. The assumed discount rates reflect the prevailing market rates of a universe of high-quality, non-callable, corporate bonds currently available that...

  • Page 107
    ... meeting certain age and service requirements upon termination of employment (the "Postretirement Health Care Benefits Plan"). For eligible employees hired prior to January 1, 2002, the Company offsets a portion of the postretirement medical costs to the retired participant. As of January 1, 2005...

  • Page 108
    ...31 Change in plan assets: Fair value at January 1 Return on plan assets Company contributions Benefit payments made with plan assets Fair value at December 31 Funded status of the plan Unrecognized net loss Unrecognized prior service cost Accrued postretirement health care cost Components of accrued...

  • Page 109
    ... liability and related expense. The Company has no significant Postretirement Health Care Benefit Plans outside the United States. Other Benefit Plans The Company maintains a number of endorsement split-dollar life insurance policies that were taken out on now-retired officers under a plan that was...

  • Page 110
    ... compensation on an after-tax basis. Plan participants cannot purchase more than $25,000 of stock in any calendar year. The price an employee pays per share is 85% of the lower of the fair market value of the Company's stock on the close of the first trading day or last trading day of the purchase...

  • Page 111
    ... outstanding at December 31 Options exercisable at December 31 Approx. number of employees granted options At December 31, 2010, the Company had $100 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans and the employee stock purchase plan...

  • Page 112
    ... 14, 2009, the Company initiated a tender offer for certain eligible employees (excluding executive officers and directors) to exchange certain out-of-the-money options for new options with an exercise price equal to the fair market value of the Company's stock as of the grant date. In order to be...

  • Page 113
    ... 4, 2011, approximately 3.8 million unvested restricted stock units held by the employees of Motorola Mobility were subject to cancellation. Total Share-Based Compensation Expense Compensation expense for the Company's employee stock options, stock appreciation rights, employee stock purchase plans...

  • Page 114
    ... fair values of the Company's financial assets and liabilities by level in the fair value hierarchy as of December 31, 2010 and 2009 were as follows: December 31, 2010 Assets: Sigma Fund securities: U.S. government, agency and government-sponsored enterprise obligations Corporate bonds Asset-backed...

  • Page 115
    ... Payments received and securities sold Permanent impairments Mark-to-market gain (loss) on Sigma Fund investments included in Other income (expense) Balance at December 31 Pension and Postretirement Health Care Benefits Plan Assets The fair value of the various pension and postretirement health care...

  • Page 116
    108 Non-U.S. Plans December 31, 2010 Common stock and equivalents Commingled equity funds Corporate bonds Government and agency obligations Commingled bond funds Short-term investment funds Insurance contracts Total investment securities Cash Accrued income receivable Fair value plan assets Level 1 ...

  • Page 117
    ... in its consolidated balance sheet. The money market funds have quoted market prices that are generally equivalent to par. 10. Long-term Customer Financing and Sales of Receivables Long-term Customer Financing Long-term receivables consist of trade receivables with payment terms greater than twelve...

  • Page 118
    ...-insurance requirements under the insurance policies. Under these arrangements, the Company's total credit exposure, less insurance coverage, to outstanding accounts receivable that have been sold was $9 million and $27 million at December 31, 2010 and 2009, respectively. Credit Quality of Customer...

  • Page 119
    ...$ 154 December 31, 2009 Municipal leases secured tax exempt Commercial loans and leases secured Commercial loans unsecured Total long-term receivables Current Billed Due $- $- $- $- Past Due Under 90 Days $- $ 5 $- $ 5 Past Due Over 90 Days $- $- $ 2 $ 2 The Company uses an internally developed...

  • Page 120
    ... related to the settlement of a purchase commitment. 12. Information by Segment and Geographic Region Through December 31, 2010, the Company reported financial results for the following business segments, which comprised of two main business units. Following the Separation of Motorola Mobility...

  • Page 121
    ...segment-specific items and corporate allocations. Intersegment and intergeographic sales are accounted for on an arm's-length pricing basis. Intersegment sales included in other and eliminations were: Years Ended December 31 Enterprise Mobility Solutions Mobile Devices 2010 2009 2008 $31 $38 $ 87 17...

  • Page 122
    ... cash equivalents, Sigma Fund, deferred income taxes, short-term investments, property, plant and equipment, investments, and the administrative headquarters of the Company. Geographic area information Property, Plant, and Net Sales Assets Equipment, net 2009 2008 2010 2009 2008 2010 2009 2008 $10...

  • Page 123
    ...are impacted by these plans, with the majority of the impact in the Mobile Devices segment. The employees affected are located in all geographic regions. $171 Adjustments $(11) (29) $(40) Amount Accruals at Used December 31, 2010 $ (32) $ 35 (121) 65 $(153) $100 Exit costs Employee separation costs

  • Page 124
    ... employees, were separated from the Company. The $347 million used in 2009 reflects cash payments to these separated employees. The remaining accrual of $65 million, which is included in Accrued liabilities in the Company's consolidated balance sheets at December 31, 2009. 2008 Charges During 2008...

  • Page 125
    ... used in 2008 reflected cash payments to these separated employees. The remaining accrual of $153 million was included in Accrued liabilities in the Company's consolidated balance sheets at December 31, 2008. 14. Intangible Assets and Goodwill The Company accounts for acquisitions using purchase...

  • Page 126
    ... to be $241 million in 2011, $80 million in 2012, $45 million in 2013 and $24 million in 2014 and $17 million in 2015. Amortized intangible assets, excluding goodwill, by business segment: 2010 December 31 Enterprise Mobility Solutions Mobile Devices Home Gross Carrying Amount $1,193 153 666...

  • Page 127
    ... reporting units, the Broadband Home Solutions reporting unit and the Access Networks reporting unit. The Company performs extensive valuation analyses, utilizing both income and market-based approaches, in its goodwill assessment process. The determination of the fair value of the reporting units...

  • Page 128
    ... impairment of goodwill. Based on the results of step one of the 2008 annual assessment of the recoverability of goodwill, the fair values of the Broadband Home Solutions and the Access Networks reporting units exceeded their book values, indicating that there was no impairment of goodwill at these...

  • Page 129
    ... - 65.52 53.69 Certain amounts in prior years' financial statements and related notes have been reclassified to conform to the 2010 presentation. ** Amounts attributable to Motorola Solutions, Inc. common shareholders. Presentation gives effect to the Reverse Stock Split, which occurred on January...

  • Page 130
    ... our Securities and Exchange Commission ("SEC") reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to Motorola Solutions' management, including our chief executive officer and chief financial...

  • Page 131
    ... with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Motorola Solutions, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of...

  • Page 132
    ... Code of Business Conduct (the "Code"), that applies to all employees, including the Company's principal executive officer, principal financial officer and controller (principal accounting officer). The Code is posted on Motorola Solutions' Internet website, www.motorolasolutions.com/investor...

  • Page 133
    ... 15: Exhibits, Financial Statement Schedules (a) 1. Financial Statements See Part II, Item 8 hereof. 2. Financial Statement Schedule and Independent Auditors' Report All schedules omitted are inapplicable or the information required is shown in the consolidated financial statements or notes thereto...

  • Page 134
    ...and 333-36320) of Motorola Solutions, Inc. of our reports dated February 18, 2011, with respect to the consolidated balance sheets of Motorola Solutions, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity and cash flows...

  • Page 135
    ...President and Chief Executive Officer and Director (Principal Executive Officer) Senior Vice President and Chief Financial Officer (Principal Financial Officer) Corporate Vice President and Chief Accounting Officer (Principal Accounting Officer) Chairman of the Board February 18, 2011 February 18...

  • Page 136
    ...Separation and Distribution Agreement among Motorola Mobility Holdings, Inc. (f/k/a Motorola SpinCo Holdings Corporation), Motorola Mobility, Inc. and Motorola, Inc. effective as of July 31, 2010 (incorporated by reference to Exhibit 2.1 to Amendment No. 1 to the Form 10 Registration Statement filed...

  • Page 137
    ...May 5, 2008 (incorporated by reference to Exhibit 10.4 to Motorola Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 1-27221)). Form of Motorola Solutions, Inc. Restricted Stock Unit Agreement relating to the Motorola Solutions Omnibus Incentive Plan of 2006 for...

  • Page 138
    ... 1, 2009 to May 4, 2010 (incorporated by reference to Exhibit 10.2 to Motorola, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2009 (File No. 1-7221)). Form of Motorola, Inc. Restricted Stock Unit Agreement relating to the Motorola Solutions Omnibus Incentive Plan of 2006...

  • Page 139
    ... 2, 2010 (File No. 1-7221)). Form of Motorola, Inc. Restricted Stock Unit Award Agreement for Gregory Q. Brown relating to the Motorola Omnibus Incentive Plan of 2006, for grants from May 7, 2009 to January 3, 2011 (incorporated by reference to Exhibit 10.15 to Motorola, Inc.'s Quarterly Report on...

  • Page 140
    ...Report on Form 10-Q for the fiscal quarter ended April 2, 2005 (File No. 1-7221)). Form of Motorola, Inc. Restricted Stock Unit Agreement (Cliff Vesting), relating to the Motorola Omnibus Incentive Plan of 2003, the Motorola Omnibus Incentive Plan of 2002, the Motorola Omnibus Incentive Plan of 2000...

  • Page 141
    ... under the caption "Director Retirement Plan and Insurance Coverage" of the Motorola Solutions Proxy Statement and to Exhibit 10.57 to Motorola, Inc.'s Report on Form 10-Q for the fiscal quarter ended March 29, 2008 (File No. 1-7221). Employment Agreement dated August 27, 2008 by and between...

  • Page 142
    ... 31, 2010 by Motorola Mobility Holdings, Inc. (formerly Motorola SpinCo Holdings Corporation) (File No. 1-34805)). Aircraft Time Sharing Agreement dated May 4, 2009, by and between Motorola, Inc. and Gregory Q. Brown (incorporated by reference to Exhibit 10.11 to Motorola, Inc.'s Quarterly Report on...

  • Page 143
    ...be directed to: Investor Relations Motorola Solutions, Inc. 1303 E. Algonquin Road Schaumburg, IL 60196 U.S.A. [email protected] +1 847 538 7367 Common Stock Motorola Solutions common stock is listed on the New York and Chicago Stock Exchanges Annual Meeting of Stockholders May 2, 2011...

  • Page 144
    ...LLC and are used under license. All other trademarks are the property of their respective owners. © 2011 Motorola Solutions, Inc. All rights reserved. Motorola Solutions, Inc. trades under the symbol MSI and is proud to meet the listing requirements of the NYSE, the world's leading equities market.