Motorola 2012 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2012 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 120

  • 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

24
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion and analysis of our financial position and results of operations for each of the three years in
the period ended December 31, 2012. This commentary should be read in conjunction with our consolidated financial
statements and the notes thereto appearing under “Item 8: Financial Statements and Supplementary Data.”
Executive Overview
What businesses are we in?
We report financial results for two segments:
Government: Our Government segment includes sales of public safety communications systems, commercial two-
way radio systems, devices, and software. Service revenues included in the Government segment are primarily those
associated with the design, installation, maintenance and optimization of equipment for public safety networks.
Enterprise: Our Enterprise segment includes sales of rugged and enterprise-grade mobile computers and tablets,
laser/imaging/RFID based data capture products, WLAN and iDEN infrastructure and software. Service revenues
included in the Enterprise segment are primarily maintenance contracts associated with the above products.
What were our 2012 financial results?
• We increased net sales by 6% to $8.7 billion in 2012, compared to net sales of $8.2 billion in 2011.
• We generated operating earnings of $1.3 billion in 2012, compared to $858 million in 2011. Operating margin was
14.4% of net sales in 2012, compared to 10.5% of net sales in 2011.
• We had earnings from continuing operations of $878 million, or $2.95 per diluted common share, in 2012, compared
to earnings from continuing operations of $747 million, or $2.20 per diluted common share, in 2011.
• We generated cash from operating activities of $1.1 billion in 2012, compared to $848 million of cash from operating
activities in 2011.
• We returned $2.4 billion in cash to shareholders through share repurchases and $270 million in cash dividends during
2012.
• We issued $750 million of 3.750% senior notes due 2022 and redeemed $400 million of 5.375% senior notes due in
November 2012.
What were the financial results for our two operating segments in 2012?
• In the Government segment: Net sales were $6.0 billion in 2012, an increase of 12% compared to net sales of $5.4
billion in 2011. On a geographic basis, net sales increased in all regions. Operating margin improved in 2012 to
16.1% from 11.5% in 2011, primarily due to the 12% increase in net sales and increased leverage in operating
expenses. Operating earnings were $965 million in 2012, compared to operating earnings of $616 million in 2011.
• In the Enterprise segment: Net sales were $2.7 billion in 2012, a decrease of 5% compared to net sales of $2.8 billion
in 2011. On a geographic basis, net sales increased in Asia and decreased in North America, Latin America and
Europe, Middle East, and Africa ("EMEA"). Operating earnings were $291 million in 2012, compared to operating
earnings of $242 million in 2011. Operating margin increased in 2012 compared to 2011, due to a decrease in Other
charges driven by lower intangible amortization, partially offset by decreased gross margins due to lower sales levels.
What were our major accomplishments in 2012?
• In the Government segment: In 2012, sales, operating earnings, and operating leverage increased compared to 2011.
We saw strong growth across all of our major product lines, including systems infrastructure and subscribers. The
12% increase in net sales was primarily driven by the continued transition from analog to digital, the replacement of
aged public safety infrastructure, and the tiered expansion of our product portfolio. Additionally, in North America we
benefited from U.S. narrowbanding, as many existing public safety, professional and commercial analog systems were
replaced with next generation digital systems, with enhanced features and a more efficient use of spectrum, providing
additional channels and enabling new users to be added.
During 2012, our APCO P-25 based Astro technology continued to extend beyond North America, as we now have
deployments in over 60 countries. Additionally, we shipped our two millionth TETRA terminal, and continued to
expand our digital professional and commercial radio solution MOTOTRBO. Additionally, our services portfolio saw
significant growth with the completion of the agreement with NSN to take over responsibility to implement and
manage Norway´s TETRA public safety network.