Motorola 2015 Annual Report Download - page 29

28
iDEN: We have experienced a downward trend in iDEN product and services sales over the last three years due to
decreased demand as a result of the dated nature of the technology. We expect the downward trend to continue as service
contracts expire and new technology replaces iDEN equipment in the marketplace. This trend primarily relates to our Services
segment as the majority of iDEN sales are hardware and software maintenance services. The expected decline in iDEN sales
will impact both revenues and gross margins within the Services segment as iDEN services’ gross margins are generally higher
than the remainder of our services portfolio.
Change in Presentation
During the first quarter of 2015, we restructured our regions operationally separating the Asia Pacific and Middle East
region into two regions which are now reflected as Asia Pacific ("AP") and Middle East ("ME"). As a result of this change, our
sales force is better aligned and focused on the growth opportunities within each geographic region. Accordingly, we now report
net sales in the following five geographic regions: North America, Latin America, Europe and Africa ("EA"), AP, and ME. We
have updated all periods presented to reflect this change in presentation.
What were our 2015 financial results?
• Net sales were $5.7 billion in 2015 compared to $5.9 billion in 2014. Net sales in 2015 included the unfavorable impact
of foreign currency fluctuations primarily within EA, AP, and Latin America, partially offset by growth in North America.
• Operating earnings were $1.0 billion in 2015, compared to an operating loss of $1.0 billion in 2014. Included in the 2014
operating loss was a $1.9 billion pension settlement loss.
• Earnings from continuing operations were $640 million, or $3.17 per diluted common share in 2015, compared to
losses of $697 million, or $(2.84) per diluted common share in 2014.
• Cash provided by operating activities was $1.0 billion in 2015, compared to cash used for operating activities of $685
million in 2014. Pension plan contributions were $13 million in 2015 and $1.3 billion in 2014.
• We repurchased $3.2 billion of our shares and paid $277 million in cash dividends during 2015.
What were the financial results for our two segments in 2015?
• In the Products segment, net sales were $3.7 billion in 2015, a decrease of $131 million, or 3%, compared to $3.8
billion in 2014. On a geographic basis, net sales decreased in EA and Latin America and increased in North America,
AP, and ME, compared to 2014. Operating earnings were $704 million in 2015, compared to an operating loss of $667
million in 2014. Operating margin increased in 2015 to 19.2% from (17.5)% in 2014. Approximately $1.3 billion of
pension settlement losses were allocated to the Products segment in 2014.
• In the Services segment, net sales were $2.0 billion in 2015, a decrease of $55 million, or 3%, compared to $2.1 billion
in 2014. On a geographic basis, net sales decreased in EA, Latin America, and AP and increased in ME and North
America, compared to 2014. Operating earnings were $290 million in 2015, compared to an operating loss of $339
million in 2014. Operating margin increased in 2015 to 14.4% from (16.3)% in 2014. Approximately $584 million of
pension settlement losses were allocated to the Services segment in 2014.
What were our major accomplishments in 2015?
Structural highlights
• On August 4, 2015, the Board of Directors authorized a modified "Dutch auction" tender offer to repurchase up to $2.0 billion
of our outstanding common stock under the previously existing share repurchase authority. The tender offer commenced on
August 7, 2015 and expired on September 3, 2015. We paid $2.0 billion, including transaction costs, to repurchase
approximately 30.1 million shares at a tender price of $66.50 per share;
• On August 25, 2015, we entered into an agreement with Silver Lake Partners to issue $1.0 billion of 2% Senior Convertible
Notes (the "Senior Convertible Notes") which mature in September 2020. The investment provides capital and a financial
partnership to work together on opportunities in software and services growth areas; and
• Reduced operating expenses by more than $200 million as compared to 2014, including reorganizing our R&D and SG&A
functions. This reorganization both reduced costs and enabled efficiencies that shifted more investment into key areas such
as Services and Public Safety LTE solutions.
Business highlights
• Ended 2015 with a record backlog position of $6.5 billion, up 12% compared to 2014;
• Grew revenue 3% in North America, 32% in the Middle East, and 1% in Asia Pacific;
• Grew diluted earnings per share from continuing operations to $3.17;
• In November 2015, we increased our quarterly dividend by 21% to $0.41 per share;
• Grew Managed & Support services by 1%;
• Increased operating cash flows to $1.0 billion;
• Returned $3.5 billion in capital in the form of $3.2 billion in share repurchases and $277 million in dividends; and