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31
subsidy tax law change, partially offset by reductions in unrecognized tax benefits for facts that now indicate the extent to
which certain tax positions are more-likely-than-not of being sustained.
Earnings from Continuing Operations
After taxes, and excluding earnings attributable to noncontrolling interests, we had net earnings from continuing operations
of $747 million, or $2.20 per diluted share, in 2011, compared to $244 million, or $0.72 per diluted share, in 2010. The
improvement in the earnings from continuing operations in 2011 compared to 2010 was primarily attributable to a $334 million
increase in gross margin and a $406 million decrease in tax expense. These improvements were partially offset by a $191
million increase in other charges, and a $38 million increase in SG&A expenses.
Earnings from Discontinued Operations
After taxes, we had earnings from discontinued operations of $411 million, or $1.21 per diluted share, in 2011, compared
to earnings from discontinued operations of $389 million, or $1.15 per diluted share, in 2010. The earnings from discontinued
operations in 2011 was primarily from the operations and gain from the sale of the Networks business. The earnings from
discontinued operations in 2010 were primarily from the Networks business, partially offset by losses from Motorola Mobility.
Segment Information
The following commentary should be read in conjunction with the financial results of each operating business segment as
detailed in Note 12, “Information by Segment and Geographic Region,” to our consolidated financial statements. Net sales and
operating results for our two reporting segments for 2012, 2011, and 2010 are presented below.
Government Segment
In 2012, the Government segment’s net sales represented 69% of our consolidated net sales, compared to 65% in 2011, and
66% in 2010.
Years Ended December 31 Percent Change
(Dollars in millions) 2012 2011 2010 2012—2011 2011—2010
Segment net sales $ 5,989 $ 5,358 $ 5,049 12% 6%
Operating earnings 965 616 534 57% 15%
Segment Results—2012 Compared to 2011
In 2012, the segment’s net sales were $6.0 billion, a 12% increase compared to net sales of $5.4 billion in 2011. The 12%
increase in net sales in the Government segment reflects broad based growth across the portfolio and in all regions. Net sales in
North America continued to comprise a significant portion of the segment’s business, accounting for approximately 63% of the
segment’s net sales in both 2012 and 2011. The segment’s backlog was $4.9 billion at December 31, 2012 and $4.4 billion at
December 31, 2011.
The segment had operating earnings of $965 million in 2012, compared to operating earnings of $616 million in 2011.
The increase in operating earnings was primarily due to: (i) an increase in gross margin, driven by the 12% increase in net
sales, and (ii) a decline in Other charges, driven by net legal matters that occurred in 2011, partially offset by an increase in
SG&A expenses and R&D expenditures. The increase in SG&A expenses was due to increases in pension and employee benefit
related expenses, and the increase in R&D expenditures was driven by higher employee benefit related expenses and increased
investment in next-generation technologies. As a percentage of net sales in 2012 as compared to 2011, gross margin increased
slightly due to favorable mix, and operating leverage increased primarily due to the 12% increase in net sales while improving
the segment's fixed cost structure.
Segment Results—2011 Compared to 2010
In 2011, the segment’s net sales were $5.4 billion, a 6% increase compared to net sales of $5.0 billion in 2010. The 6%
increase in net sales in the Government segment reflects an increase in sales of mission critical and professional commercial
radio products and services. The increase in net sales for the segment reflects higher net sales in North America, Latin America,
and Asia, while EMEA was down slightly due to continued macro-economic challenges in Western Europe. Net sales in North
America continued to comprise a significant portion of the segment’s business, accounting for approximately 63% of the
segment’s net sales in both 2011 and 2010. The segment’s backlog was $4.4 billion at December 31, 2011 and $3.9 billion at
December 31, 2010.
The segment had operating earnings of $616 million in 2011, compared to operating earnings of $534 million in 2010. As
a percentage of net sales in 2011 as compared to 2010, gross margin increased, and SG&A expenses and R&D expenditures
decreased. The increase in operating earnings was primarily due to an increase in gross margin, driven by the 6% increase in
net sales and a favorable product mix, partially offset by: (i) increased SG&A expenses primarily due to an increase in sales
incentives related to the increase in net sales and increased employee benefit-related expenses, and (ii) an increase in Other