In addition to the GAAP results included in this presentation, Motorola Solutions also has included non-GAAP measurements of results. The company has provided these non-GAAP measurements to help investors better understand its core operating performance, enhance comparisons of core operating performance from period-to-period and allow better comparisons of operating performance to its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of the businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with generally accepted accounting principles.
Highlighted items: The company has excluded the effects of highlighted items including, but not limited to, acquisition-related transaction costs, asset impairments, reorganization of business charges, non-cash pension adjustments, significant litigation and other contingencies, significant gains and losses on investments, and the income tax effects of significant tax matters, from its non-GAAP operating expenses and net income measurements because the company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance. For the purposes of management's internal analysis over operating performance, the company uses financial statements that exclude highlighted items, as these charges do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance.
Share-based compensation expense: The company has excluded share-based compensation expense from its non-GAAP operating expenses and net income measurements. Although share-based compensation is a key incentive offered to the company’s employees and the company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues, the company continues to evaluate its performance excluding share-based compensation expense primarily because it represents a significant non-cash expense. Share-based compensation expense will recur in future periods.
Intangible assets amortization expense: The company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net earnings measurements, primarily because it represents a non-cash expense and because the company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the company’s acquisitions. Investors should note that the use of intangible assets contributed to the company’s revenues earned during the periods presented and will contribute to the company’s future period revenues as well. Intangible assets amortization expense will recur in future periods.
Adjusted operating cash flow: Adjusted operating cash flow information reflects operating cash flow under GAAP excluding a $500 million voluntary, debt-funded U.S. pension contribution in the first quarter 2018. The Company has excluded the impact of this contribution because the company believes that this item does not reflect expected future operating cash flows and does not contribute to a meaningful evaluation of the company's current operating cash flow performance or comparisons to the company's past operating cash flow performance.
Free cash flow: Free cash flow represents operating cash flow less capital expenditures. We believe that free cash flow is also useful to investors as the basis for comparing our performance and coverage ratios with other companies in our industries, although our measure of free cash flow may not be directly comparable to similar measures used by other companies
Organic Revenue: Organic revenue reflects net sales calculated under GAAP excluding net sales from acquired business owned for less than four full quarters and excluding the effects of ASC 606. The Company believes non-GAAP organic revenue growth provides useful information for evaluating the periodic growth of the business on a consistent basis and provides for a meaningful period-to-period comparison and analysis of trends in the business.
Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this press release.
BUSINESS RISKS
This news release contains "forward-looking statements" within the
meaning of applicable federal securities law. These statements are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and generally include words such as
“believes,” “expects,” “intends,” “anticipates,” “estimates” and similar
expressions. The company can give no assurance that any actual or future
results or events discussed in these statements will be achieved. Any
forward-looking statements represent the company’s views only as of
today and should not be relied upon as representing the company’s views
as of any subsequent date. Readers are cautioned that such
forward-looking statements are subject to a variety of risks and
uncertainties that could cause the company’s actual results to differ
materially from the statements contained in this release. Such
forward-looking statements include, but are not limited to, Motorola
Solutions’ financial outlook for the first quarter and full year of
2019. Motorola Solutions cautions the reader that the risk factors
below, as well as those on pages 8 through 20 in Item 1A of Motorola
Solutions’ 2017 Annual Report on Form 10-K and in its other SEC filings
available for free on the SEC’s website at
www.sec.gov
and on Motorola Solutions’ website at
www.motorolasolutions.com ,
could cause Motorola Solutions’ actual results to differ materially from
those estimated or predicted in the forward-looking statements. Many of
these risks and uncertainties cannot be controlled by Motorola
Solutions, and factors that may impact forward-looking statements
include, but are not limited to: (1) the economic outlook for the
government communications industry; (2) the impact of foreign currency
fluctuations on the company; (3) the level of demand for the company's
products; (4) the company's ability to refresh existing and introduce
new products and technologies in a timely manner; (5) exposure under
large systems and managed services contracts, including risks related to
the fact that certain customers require that the company build, own and
operate their systems, often over a multi-year period; (6) negative
impact on the company's business from global economic and political
conditions, which may include: (i) continued deferment or cancellation
of purchase orders by customers; (ii) the inability of customers to
obtain financing for purchases of the company's products; (iii)
increased demand to provide vendor financing to customers; (iv)
increased financial pressures on third-party dealers, distributors and
retailers; (v) the viability of the company's suppliers that may no
longer have access to necessary financing; (vi) counterparty failures
negatively impacting the company’s financial position; (vii) changes in
the value of investments held by the company's pension plan and other
defined benefit plans, which could impact future required or voluntary
pension contributions; and (viii) the company’s ability to access the
capital markets on acceptable terms and conditions; (7) the impact of a
security breach or other significant disruption in the company’s IT
systems, those of its partners or suppliers or those it sells to or
operates or maintains for its customers; (8) the outcome of ongoing and
future tax matters; (9) the company's ability to purchase sufficient
materials, parts and components to meet customer demand, particularly in
light of global economic conditions and reductions in the company’s
purchasing power; (10) risks related to dependence on certain key
suppliers, subcontractors, third-party distributors and other
representatives; (11) the impact on the company's performance and
financial results from strategic acquisitions or divestitures; (12)
risks related to the company's manufacturing and business operations in
foreign countries; (13) the creditworthiness of the company's customers
and distributors, particularly purchasers of large infrastructure
systems; (14) the ownership of certain logos, trademarks, trade names
and service marks including “MOTOROLA” by Motorola Mobility Holdings,
Inc.; (15) variability in income received from licensing the company's
intellectual property to others, as well as expenses incurred when the
company licenses intellectual property from others; (16) unexpected
liabilities or expenses, including unfavorable outcomes to any pending
or future litigation or regulatory or similar proceedings; (17) the
impact of the percentage of cash and cash equivalents held outside of
the United States; (18) the ability of the company to pay future
dividends due to possible adverse market conditions or adverse impacts
on the company’s cash flow; (19) the ability of the company to complete
acquisitions or repurchase shares under its repurchase program due to
possible adverse market conditions or adverse impacts on the company’s
cash flow; (20) the impact of changes in governmental policies, laws or
regulations; (21) negative consequences from the company's use of third
party vendors for various activities, including certain manufacturing
operations, information technology and administrative functions; and
(22) the company’s ability to settle the par value of its Senior
Convertible Notes in cash. Motorola Solutions undertakes no obligation
to publicly update any forward-looking statement or risk factor, whether
as a result of new information, future events or otherwise
