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Other Financial Data | 9 Months Ended
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Oct. 01, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Other Financial Data | Other Financial Data Statements of Operations Information Other Charges Other charges (income) included in Operating earnings consist of the following:
| Three Months Ended |  | Nine Months Ended
| October 1, 2022 |  | October 2, 2021 |  | October 1, 2022 |  | October 2, 2021
Other charges: |  |  |  |  |  |  |
Intangibles amortization (Note 15) | $ | 63 |  |  | $ | 56 |  |  | $ | 194 |  |  | $ | 172 |
Legal settlements | 12 |  |  | — |  |  | 23 |  |  | 3 |
Operating lease asset impairments | 4 |  |  | — |  |  | 16 |  |  | 7 |
Acquisition-related transaction fees | 2 |  |  | 2 |  |  | 16 |  |  | 6 |
Reorganization of business (Note 14) | 2 |  |  | 2 |  |  | 14 |  |  | 22 |
Fixed asset impairments | 1 |  |  | — |  |  | 12 |  |  | — |
Gain on Hytera legal settlement | — |  |  | — |  |  | (13) |  |  | — |
Other | (1) |  |  | — |  |  | — |  |  | (1) |
| $ | 83 |  |  | $ | 60 |  |  | $ | 262 |  |  | $ | 209 |
In February 2022, the Company recognized a gain of $13 million related to the recovery, through legal proceedings to seize and liquidate assets, of financial receivables owed to the Company by the bankruptcy estate of the two U.S. subsidiaries of Hytera Communications Corporation Limited of Shenzhen, China. Refer also to "Hytera Bankruptcy Proceedings" in Note 12, "Commitments and Contingencies" to our condensed consolidated financial statements included in this Part I, Item 1 of this Form 10-Q for additional information related to these proceedings. Other Income (Expense) Interest expense, net, and Other, net, both included in Other income (expense), consist of the following:
| Three Months Ended |  | Nine Months Ended
| October 1, 2022 |  | October 2, 2021 |  | October 1, 2022 |  | October 2, 2021
Interest income (expense), net: |  |  |  |  |  |  |
Interest expense | $ | (62) |  |  | $ | (58) |  |  | $ | (179) |  |  | $ | (160) |
Interest income | 2 |  |  | 2 |  |  | 8 |  |  | 6 |
| $ | (60) |  |  | $ | (56) |  |  | $ | (171) |  |  | (154) |
Other, net: |  |  |  |  |  |  |
Net periodic pension and postretirement benefit (Note 8) | $ | 28 |  |  | $ | 31 |  |  | $ | 91 |  |  | $ | 91 |
Loss from the extinguishment of long-term debt (Note 5) | — |  |  | — |  |  | (6) |  |  | (18) |
Investment impairments | — |  |  | — |  |  | (1) |  |  | — |
Foreign currency gain | 45 |  |  | 5 |  |  | 95 |  |  | 13 |
Loss on derivative instruments (Note 6) | (54) |  |  | (10) |  |  | (111) |  |  | (19) |
Gain (loss) on equity method investments | — |  |  | 1 |  |  | (2) |  |  | 5 |
Fair value adjustments to equity investments | (5) |  |  | (18) |  |  | (35) |  |  | (5) |
Gain on TETRA Ireland equity method investment | — |  |  | — |  |  | 21 |  |  | — |
Other | 5 |  |  | 1 |  |  | (2) |  |  | 3 |
| $ | 19 |  |  | $ | 10 |  |  | $ | 50 |  |  | $ | 70 |
The Company previously held a minority ownership interest in TETRA Ireland, and, upon acquisition of 100% of the equity of TETRA Ireland on March 23, 2022, recorded a $21 million gain to adjust the Company's initial equity method investment to fair value during the nine months ended October 1, 2022. Refer to Note 15, "Intangible Assets and Goodwill" to the Company's condensed consolidated financial statements included in this Part I, Item 1 of this Form 10-Q for further information related to this acquisition. Earnings Per Common Share The computation of basic and diluted earnings per common share is as follows:
| Amounts attributable to Motorola Solutions, Inc. common stockholders
| Three Months Ended |  | Nine Months Ended
| October 1, 2022 |  | October 2, 2021 |  | October 1, 2022 |  | October 2, 2021
Basic earnings per common share: |  |  |  |  |  |  |
Earnings | $ | 279 |  |  | $ | 307 |  |  | $ | 774 |  |  | $ | 844 |
Weighted average common shares outstanding | 167.2 |  |  | 169.2 |  |  | 167.5 |  |  | 169.3 |
Per share amount | $ | 1.67 |  |  | $ | 1.81 |  |  | $ | 4.62 |  |  | $ | 4.98 |
Diluted earnings per common share: |  |  |  |  |  |  |
Earnings | $ | 279 |  |  | $ | 307 |  |  | $ | 774 |  |  | $ | 844 |
Weighted average common shares outstanding | 167.2 |  |  | 169.2 |  |  | 167.5 |  |  | 169.3 |
Add effect of dilutive securities: |  |  |  |  |  |  |
Share-based awards | 3.6 |  |  | 4.3 |  |  | 3.8 |  |  | 3.9 |
1.75% senior convertible notes | 0.7 |  |  | 0.6 |  |  | 0.6 |  |  | 0.2 |
Diluted weighted average common shares outstanding | 171.5 |  |  | 174.1 |  |  | 171.9 |  |  | 173.4 |
Per share amount | $ | 1.63 |  |  | $ | 1.76 |  |  | $ | 4.50 |  |  | $ | 4.87 |
In the computation of diluted earnings per common share for the three months ended October 1, 2022, the assumed exercise of 0.4 million options, including 0.2 million subject to market based contingent option agreements, were excluded from the computation of diluted earnings per common share because their inclusion would have been antidilutive. In the computation of diluted earnings per common share for the nine months ended October 1, 2022, the assumed exercise of 0.2 million options, including 0.1 million subject to market based contingent option agreements, were excluded because their inclusion would have been antidilutive. In the computation of diluted earnings per common share for the three months ended October 2, 2021, no shares were considered anti-dilutive. In the computation of diluted earnings per common share for the nine months ended October 2, 2021, the assumed exercise of 0.2 million options, including 0.1 million subject to market based contingent option agreements, were excluded because their inclusion would have been antidilutive. As of October 1, 2022, the Company had $1.0 billion of the Senior Convertible Notes outstanding, which mature on September 15, 2024. The notes are convertible based on a conversion rate of 4.9140 per $1,000 principal amount (which is equal to an initial conversion price of $203.50 per share), adjusted for dividends declared through the date of settlement. The notes became fully convertible as of September 5, 2021, when the average stock price exceeded the contractual conversion price, providing the holders the option to convert all or any portion of their Senior Convertible Notes. In November 2021, the Company's Board of Directors approved an irrevocable determination requiring the future settlement of the principal amount of the Senior Convertible Notes to be settled in cash. Because the Company has irrevocably decided to settle the principal amount of the Senior Convertible Notes in cash, the Company did not reflect any shares underlying the Senior Convertible Notes in its diluted weighted average shares outstanding until the average stock price per share for the period exceeded the conversion price, which first occurred for the quarter ended October 2, 2021. Upon conversion of the Senior Convertible Notes, the Company has the option to settle the conversion spread in cash or shares. The Company included the number of shares that would be issuable upon conversion in the Company’s computation of diluted earnings per share, based on the amount by which the average stock price exceeded the conversion price for the period ended October 1, 2022. The value by which the Senior Convertible Notes exceeded their principal amount if converted as of October 1, 2022 was $189 million. Balance Sheet Information Accounts Receivable, Net Accounts receivable, net, consists of the following:
| October 1, 2022 |  | December 31, 2021
Accounts receivable | $ | 1,433 |  |  | $ | 1,456 |
Less allowance for credit losses | (65) |  |  | (70) |
| $ | 1,368 |  |  | $ | 1,386 |
Inventories, Net Inventories, net, consist of the following:
| October 1, 2022 |  | December 31, 2021
Finished goods | $ | 352 |  |  | $ | 268 |
Work-in-process and production materials | 924 |  |  | 643 |
| 1,276 |  |  | 911 |
Less inventory reserves | (119) |  |  | (123) |
| $ | 1,157 |  |  | $ | 788 |
Other Current Assets Other current assets consist of the following:
| October 1, 2022 |  | December 31, 2021
Current contract cost assets (Note 2) | $ | 52 |  |  | $ | 30 |
Tax-related deposits | 35 |  |  | 41 |
Other | 240 |  |  | 188 |
| $ | 327 |  |  | $ | 259 |
Property, Plant and Equipment, Net Property, plant and equipment, net, consist of the following:
| October 1, 2022 |  | December 31, 2021
Land | $ | 5 |  |  | $ | 5 |
Leasehold improvements | 445 |  |  | 474 |
Machinery and equipment | 2,232 |  |  | 2,439 |
| 2,682 |  |  | 2,918 |
Less accumulated depreciation | (1,816) |  |  | (1,876) |
| $ | 866 |  |  | $ | 1,042 |
During the third quarter of 2022, the Company began negotiations with the Home Office of the United Kingdom (the "Home Office") regarding an early exit by the Company from the Emergency Services Network ("ESN") communications systems contract, inclusive of twelve months of transition services. As a result of the negotiations, the Company determined that the future service potential of the asset is limited, based on the Company's intention to terminate the contract in advance of the contracted service term. During the three months ended October 1, 2022, the Company recorded a fixed asset impairment loss of $147 million related to assets constructed and used in the deployment of the ESN service contract with the Home Office based on its current expectation that, more likely than not, the ESN long-lived asset group will be disposed of significantly before the end of its previously estimated useful life. The recognized impairment loss represents the amount by which the carrying amount of the asset group exceeded the fair value as of October 1, 2022, under a measurement of discounted cash flows. The impairment loss was recorded in the Software and Services segment within cost of sales in the Condensed Consolidated Statements of Operations. Depreciation expense for the three months ended October 1, 2022 and October 2, 2021 was $45 million and $49 million, respectively. Depreciation expense for the nine months ended October 1, 2022 and October 2, 2021 was $137 million and $153 million, respectively. Investments Investments consist of the following:
| October 1, 2022 |  | December 31, 2021 |  |  |  |
Common stock | $ | 23 |  |  | $ | 69 |  |  |  |  |
Strategic investments | 43 |  |  | 35 |  |  |  |  |
Company-owned life insurance policies | 67 |  |  | 81 |  |  |  |  |
Equity method investments | 13 |  |  | 24 |  |  |  |  |
| $ | 146 |  |  | $ | 209 |  |  |  |  |
On July 16, 2021, the Company paid $50 million for equity securities of NewHold Investment Corp. ("NHIC"), a special purpose acquisition company (SPAC) that completed a business combination with Evolv Technologies, Inc. After the business combination, NHIC was renamed “Evolv Technologies Holdings, Inc.” (together with its subsidiaries, “Evolv”). During the nine months ended October 1, 2022, the Company recognized a loss of $14 million in Other income (expense) within the Condensed Consolidated Statements of Operations related to a decrease in the fair value of the investment. During the nine months ended October 1, 2022, the Company sold $12 million of equity securities and recognized a loss of $10 million in Other income (expense) within the Condensed Consolidated Statements of Operations, related to a decrease in the fair value related to an investment in a business operating in the critical infrastructure market. Other Assets Other assets consist of the following:
| October 1, 2022 |  | December 31, 2021
Defined benefit plan assets | $ | 370 |  |  | $ | 365 |
Non-current contract cost assets (Note 2) | 120 |  |  | 124 |
Other | 62 |  |  | 69 |
| $ | 552 |  |  | $ | 558 |
Accrued Liabilities Accrued liabilities consist of the following:
| October 1, 2022 |  | December 31, 2021
Compensation | $ | 257 |  |  | $ | 360 |
Tax liabilities | 176 |  |  | 183 |
Dividend payable | 132 |  |  | 134 |
Trade liabilities | 162 |  |  | 235 |
Operating lease liabilities (Note 3) | 77 |  |  | 124 |
Other | 529 |  |  | 521 |
| $ | 1,333 |  |  | $ | 1,557 |
Other Liabilities Other liabilities consist of the following:
| October 1, 2022 |  | December 31, 2021
Defined benefit plans | $ | 1,219 |  |  | $ | 1,390 |
Non-current contract liabilities (Note 2) | 327 |  |  | 306 |
Unrecognized tax benefits (Note 7) | 35 |  |  | 36 |
Deferred income taxes (Note 7) | 129 |  |  | 183 |
Environmental reserve | 108 |  |  | 108 |
Other | 119 |  |  | 125 |
| $ | 1,937 |  |  | $ | 2,148 |
Stockholders’ Equity (Deficit) Share Repurchase Program: During the three and nine months ended October 1, 2022, the Company paid an aggregate of $94 million, and $749 million, including transaction costs, to repurchase approximately 0.4 million and 3.3 million shares at an average price of $236.46 and $224.35 per share, respectively. As of October 1, 2022, the Company had $1.4 billion of authority available for future repurchases. Payment of Dividends: During the three months ended October 1, 2022 and October 2, 2021, the Company paid $132 million and $120 million, respectively, in cash dividends to holders of its common stock. During the nine months ended October 1, 2022 and October 2, 2021, the Company paid $398 and $362 million, respectively, in cash dividends to holders of its common stock. Subsequent to the quarter, the Company paid an additional $132 million in cash dividends to holders of its common stock. Accumulated Other Comprehensive Loss The following table displays the changes in Accumulated other comprehensive loss, including amounts reclassified into income, and the affected line items in the Condensed Consolidated Statements of Operations during the three and nine months ended October 1, 2022 and October 2, 2021:
| Three Months Ended |  | Nine Months Ended
| October 1, 2022 |  | October 2, 2021 |  | October 1, 2022 |  | October 2, 2021
Foreign Currency Translation Adjustments: |  |  |  |  |  |  |
Balance at beginning of period | $ | (539) |  |  | $ | (335) |  |  | $ | (384) |  |  | $ | (360) |
Other comprehensive income (loss) before reclassification adjustment | (153) |  |  | (47) |  |  | (304) |  |  | (24) |
Tax benefit (expense) | (9) |  |  | 3 |  |  | (13) |  |  | 5 |
Other comprehensive income (loss), net of tax | (162) |  |  | (44) |  |  | (317) |  |  | (19) |
Balance at end of period | $ | (701) |  |  | $ | (379) |  |  | $ | (701) |  |  | $ | (379) |
Defined Benefit Plans: |  |  |  |  |  |  |
Balance at beginning of period | $ | (1,952) |  |  | $ | (2,053) |  |  | $ | (1,995) |  |  | $ | (2,086) |
Other comprehensive income before reclassification adjustment | — |  |  | — |  |  | 17 |  |  | — |
Tax expense | — |  |  | — |  |  | (3) |  |  | — |
Other comprehensive income before reclassification adjustment, net of tax | — |  |  | — |  |  | 14 |  |  | — |
Reclassification adjustment - Actuarial net losses into Other income (Note 8) | 20 |  |  | 22 |  |  | 60 |  |  | 65 |
Reclassification adjustment - Prior service benefits into Other income (Note 8) | (1) |  |  | (2) |  |  | (3) |  |  | (6) |
Tax expense | (4) |  |  | (4) |  |  | (13) |  |  | (10) |
Reclassification adjustment into Net earnings, net of tax | 15 |  |  | 16 |  |  | 44 |  |  | 49 |
Other comprehensive income, net of tax | 15 |  |  | 16 |  |  | 58 |  |  | 49 |
Balance at end of period | $ | (1,937) |  |  | $ | (2,037) |  |  | $ | (1,937) |  |  | $ | (2,037) |
Total Accumulated other comprehensive loss | $ | (2,638) |  |  | $ | (2,416) |  |  | $ | (2,638) |  |  | $ | (2,416) |

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