Other Financial Data

Statements of Operations Information

Other Charges (Income)

Other charges (income) included in Operating earnings consist of the following:



	Three Months Ended					Six Months Ended
	July 2, 2016		July 4, 2015			July 2, 2016		July 4, 2015
Other charges:
Intangibles amortization	$	38	$	3		$	52	$	4
Reorganization of business	19		13			25		26
Building impairment	17		—			17		—
Non-U.S. pension curtailment gain	—		(32		)	—		(32		)
Acquisition-related transaction fees	—		—			13		—
	$	74	$	(16	)	$	107	$	(2	)

Other Income (Expense)

Interest expense, net, and Other, both included in Other income (expense), consist of the following:



	Three Months Ended						Six Months Ended
	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Interest income (expense), net:
Interest expense	$	(59	)	$	(42	)	$	(111	)	$	(86	)
Interest income	5			3			8			7
	$	(54	)	$	(39	)	$	(103	)	$	(79	)
Other:
Investment impairments	—			(3		)	—			(3		)
Foreign currency gain (loss)	14			(11		)	$	27		$	7
Gain (loss) on derivative instruments	(18		)	4			(30		)	(12		)
Gains on equity method investments	—			4			2			4
Realized foreign currency loss on acquisition	—			—			(10		)	—
Other	—			2			—			3
	$	(4	)	$	(4	)	$	(11	)	$	(1	)

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
	Earnings from Continuing Operations, net of tax				Net Earnings
Three Months Ended	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Basic earnings per common share:
Earnings	$	107	$	150	$	107	$	142
Weighted average common shares outstanding	171.9		208.0		171.9		208.0
Per share amount	$	0.62	$	0.72	$	0.62	$	0.68
Diluted earnings per common share:
Earnings	$	107	$	150	$	107	$	142
Weighted average common shares outstanding	171.9		208.0		171.9		208.0
Add effect of dilutive securities:
Share-based awards	2.4		1.5		2.4		1.5
Senior Convertible Notes	0.5		—		0.5		—
Diluted weighted average common shares outstanding	174.8		209.5		174.8		209.5
Per share amount	$	0.61	$	0.72	$	0.61	$	0.68



	Amounts attributable to Motorola Solutions, Inc. common stockholders
	Earnings from Continuing Operations, net of tax				Net Earnings
Six Months Ended	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Basic earnings per common share:
Earnings	$	124	$	238	$	124	$	217
Weighted average common shares outstanding	173.0		211.7		173.0		211.7
Per share amount	$	0.72	$	1.12	$	0.72	$	1.03
Diluted earnings per common share:
Earnings	$	124	$	238	$	124	$	217
Weighted average common shares outstanding	173.0		211.7		173.0		211.7
Add effect of dilutive securities:
Share-based awards	2.4		2.1		2.4		2.1
Senior Convertible Notes	0.3		—		0.3		—
Diluted weighted average common shares outstanding	175.7		213.8		175.7		213.8
Per share amount	$	0.71	$	1.11	$	0.71	$	1.01

In the computation of diluted earnings per common share from both continuing operations and on a net earnings basis for the three months ended July 2, 2016, the assumed exercise of 2.3 million options and the assumed vesting of 0.6 million restricted stock units ("RSUs") were excluded because their inclusion would have been antidilutive. For the six months ended July 2, 2016, the assumed exercise of 3.2 million options and the assumed vesting of 0.6 million restricted stock units ("RSUs") were excluded because their inclusion would have been antidilutive.

For the three months ended July 4, 2015, the assumed exercise of 1.7 million stock options and the assumed vesting of 0.7 million RSUs were excluded because their inclusion would have been antidilutive. For the six months ended July 4, 2015, the assumed exercise of 3.9 million options and the assumed vesting of 1.2 million RSUs were excluded because their inclusion would have been antidilutive.

On August 25, 2015, the Company issued $1.0 billion of 2% Senior Convertible Notes which mature in September 2020 (the "Senior Convertible Notes"). The notes are convertible based on a conversion rate of 14.5985 per $1,000 principal amount (which is equal to an initial conversion price of $68.50 per share). In the event of conversion, the Company intends to settle the principal amount of the Senior Convertible Notes in cash.

Because of the Company’s intention to settle the par value of the Senior Convertible Notes in cash upon conversion, Motorola Solutions does 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 exceeds the conversion price. In this case, only the number of shares that would be issuable (under the treasury stock method of accounting for share dilution) will be included, which is based upon the amount by which the average stock price exceeds the conversion price of $68.50. For the three and six months ended July 2, 2016, the dilutive impact of the Senior Convertible Notes was 0.5 million shares and 0.3 million shares, respectively.

Balance Sheet Information

Cash and Cash Equivalents

The Company’s cash and cash equivalents were $1.5 billion at July 2, 2016 and $2.0 billion at December 31, 2015. Of these amounts, $64 million was restricted at July 2, 2016 and $63 million was restricted at December 31, 2015.

Accounts Receivable, Net

Accounts receivable, net, consists of the following:



	July 2, 2016			December 31, 2015
Accounts receivable	$	1,122		$	1,390
Less allowance for doubtful accounts	(39		)	(28		)
	$	1,083		$	1,362

Inventories, Net

Inventories, net, consist of the following:



	July 2, 2016			December 31, 2015
Finished goods	$	160		$	151
Work-in-process and production materials	261			287
	421			438
Less inventory reserves	(137		)	(142		)
	$	284		$	296

Other Current Assets

Other current assets consist of the following:



	July 2, 2016		December 31, 2015
Available-for-sale securities	$	47	$	438
Costs and earnings in excess of billings	350		374
Tax-related refunds receivable	107		44
Other	131		98
	$	635	$	954

Property, Plant and Equipment, Net

Property, plant and equipment, net, consists of the following:



	July 2, 2016			December 31, 2015
Land	$	16		$	17
Building	543			523
Machinery and equipment	1,897			1,585
	2,456			2,125
Less accumulated depreciation	(1,678		)	(1,638		)
	$	778		$	487

Depreciation expense for the three months ended July 2, 2016 and July 4, 2015 was $44 million and $38 million, respectively. Depreciation expense for the six months ended July 2, 2016 and July 4, 2015 was $92 million and $77 million, respectively.

On February 1, 2016, the Company completed the sale of its Penang, Malaysia manufacturing operations, including the land, building, equipment, and inventory, as well as the transfer of employees to a contract manufacturer. During the six months ended July 2, 2016, the Company incurred a loss of $7 million on the sale of its Penang, Malaysia facility and manufacturing operations, which is included within Gains (losses) on sales of investments and businesses, net.

The Company acquired property, plant and equipment, including network-related assets, with a fair value of $245 million in the acquisition of GDCL on February 19, 2016. The valuation of acquired property, plant and equipment has been finalized during the three months ended July 2, 2016. See discussion in Note 14.

During the three months ended July 2, 2016, the Company sold parcels of its Schaumburg, IL headquarters campus and entered into an agreement to sell the remaining buildings and parcels. A building impairment loss of $17 million has been recognized in Other charges during the three months ended July 2, 2016 related to the excess carrying value of the long-lived assets in relation to the selling price. All of the buildings on the Schaumburg campus are classified as assets held and used as of July 2, 2016.

Investments

Investments consist of the following:



July 2, 2016	Cost Basis		Unrealized Gains		Unrealized Losses		Investments
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	$	52	$	—	$	—	$	52
Corporate bonds	8		—		—		8
Common stock	—		—		—		—
	60		—		—		60
Other investments, at cost	200		—		—		200
Equity method investments	10		—		—		10
	$	270	$	—	$	—	$	270
Less: current portion of available-for-sale securities							47
							$	223



December 31, 2015	Cost Basis		Unrealized Gains		Unrealized Losses			Investments
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	$	455	$	—	$	(11	)	$	444
Corporate bonds	7		—		—			7
Common stock	—		6		—			6
	462		6		(11		)	457
Other investments, at cost	203		—		—			203
Equity method investments	9		—		—			9
	674		6		(11		)	669
Less: current portion of available-for-sale securities								438
								$	231

In December 2015, the Company invested $401 million in United Kingdom treasury securities in order to partially offset the risk associated with fluctuations in the British Pound Sterling in the period before the closing of the purchase of GDCL. The investments were recorded within Other current assets in the Company's consolidated balance sheets. The Company liquidated these investments in February 2016 to partially fund the acquisition of GDCL. During the six months ended July 2, 2016, the Company realized a loss of $19 million associated with the sale of the treasury securities, of which, $11 million was unrealized as of December 31, 2015.

Other Assets

Other assets consist of the following:



	July 2, 2016		December 31, 2015
Intangible assets, net (Note 14)	$	824	$	49
Long-term receivables	42		47
Defined benefit plan assets	143		128
Other	52		47
	$	1,061	$	271

Accrued Liabilities

Accrued liabilities consist of the following:



	July 2, 2016		December 31, 2015
Deferred revenue	$	361	$	390
Compensation	166		241
Billings in excess of costs and earnings	291		337
Tax liabilities	65		48
Dividend payable	70		71
Trade liabilities	137		135
Other	541		449
	$	1,631	$	1,671

Other Liabilities

Other liabilities consist of the following:



	July 2, 2016		December 31, 2015
Defined benefit plans	$	1,493	$	1,512
Postretirement Health Care Benefit Plan	—		49
Deferred revenue	149		113
Unrecognized tax benefits	42		50
Deferred income taxes	120		—
Deferred consideration (Note 14)	78		—
Other	190		180
	$	2,072	$	1,904

Stockholders’ Equity

Share Repurchase Program: Through actions taken on July 28, 2011, January 30, 2012, July 25, 2012, July 22, 2013, November 3, 2014, and August 3, 2016, the Board of Directors has authorized the Company to repurchase in the aggregate up to $14.0 billion of its outstanding shares of common stock (the “share repurchase program”). The share repurchase program does not have an expiration date.

During the six months ended July 2, 2016, the Company paid an aggregate of $619 million, including transaction costs, to repurchase approximately 9.0 million shares at an average price of $68.68 per share. As of July 2, 2016, the Company had used approximately $11.6 billion of the share repurchase authority, including transaction costs, to repurchase shares, leaving $415 million of authority available for future repurchases. Subsequent to quarter end, the Board of Directors approved a $2.0 billion increase to the share repurchase program, raising the remaining authority available for future repurchases to $2.4 billion.

Payment of Dividends: During both the three months ended July 2, 2016 and July 4, 2015, the Company paid $72 million in cash dividends to holders of its common stock. During the six months ended July 2, 2016 and July 4, 2015, the Company paid $143 million and $148 million, respectively, 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 six months ended July 2, 2016 and July 4, 2015:



	Three Months Ended						Six Months Ended
	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Foreign Currency Translation Adjustments:
Balance at beginning of period	$	(253	)	$	(230	)	$	(266	)	$	(204	)
Other comprehensive income (loss) before reclassification adjustment	(98		)	7			(84		)	(18		)
Tax expense	—			—			(1		)	(1		)
Other comprehensive income (loss), net of tax	(98		)	7			(85		)	(19		)
Balance at end of period	$	(351	)	$	(223	)	$	(351	)	$	(223	)
Available-for-Sale Securities:
Balance at beginning of period	$	1		$	11		$	(3	)	$	44
Other comprehensive income (loss) before reclassification adjustment	(2		)	6			(2		)	(1		)
Tax (expense) benefit	1			(2		)	1			1
Other comprehensive income (loss) before reclassification adjustment, net of tax	(1		)	4			(1		)	—
Reclassification adjustment into Gains (losses) on sales of investments and businesses, net	—			—			6			(46		)
Tax expense (benefit)	—			—			(2		)	17
Reclassification adjustment into Gains (losses) on sales of investments and businesses, net of tax	—			—			4			(29		)
Other comprehensive income (loss), net of tax	(1		)	4			3			(29		)
Balance at end of period	$	—		$	15		$	—		$	15
Defined Benefit Plans:
Balance at beginning of period	(1,593		)	(1,694		)	$	(1,597	)	$	(1,695	)
Other comprehensive income (loss) before reclassification adjustment	53			(53		)	53			(53		)
Tax expense	(16		)	—			(16		)	—
Other comprehensive income (loss) before reclassification adjustment, net of tax	37			(53		)	37			(53		)
Reclassification adjustment - Actuarial net losses into Selling, general, and administrative expenses	18			18			28			36
Reclassification adjustment - Prior service benefits into Selling, general, and administrative expenses	(7		)	(16		)	(13		)	(32		)
Reclassification adjustment - Non-U.S. pension curtailment gain into Other charges	—			(32		)	—			(32		)
Tax expense (benefit)	8			—			8			(1		)
Reclassification adjustment into Selling, general, and administrative expenses, net of tax	19			(30		)	23			(29		)
Other comprehensive income (loss), net of tax	56			(83		)	60			(82		)
Balance at end of period	$	(1,537	)	$	(1,777	)	$	(1,537	)	$	(1,777	)

Total Accumulated other comprehensive loss	$	(1,888	)	$	(1,985	)	$	(1,888	)	$	(1,985	)