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 1, 2017			July 2, 2016		July 1, 2017			July 2, 2016
Other charges:
Intangibles amortization	$	37		$	38	$	73		$	52
Reorganization of business	1			19		16			25
Building impairment	—			17		8			17
Non-U.S. pension settlement loss	16			—		25			—
Legal settlements	(1		)	—		(44		)	—
Acquisition-related transaction fees	—			—		1			13
	$	53		$	74	$	79		$	107

During the six months ended July 1, 2017, the Company recognized a net gain of $44 million related to legal settlements. Of this amount, $42 million relates to the recovery, through legal procedures to seize and liquidate assets, of financial receivables owed to the Company by a former customer of its legacy Networks business. The net gain of $42 million was based on $52 million of proceeds received, net $10 million of fees owed to third parties for their involvement in the recovery.

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 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Interest income (expense), net:
Interest expense	$	(55	)	$	(59	)	$	(109	)	$	(111	)
Interest income	4			5			7			8
	$	(51	)	$	(54	)	$	(102	)	$	(103	)
Other:
Foreign currency gain (loss)	$	(20	)	$	14		$	(22	)	$	27
Gain (loss) on derivative instruments	18			(18		)	11			(30		)
Gains on equity method investments	1			—			—			2
Realized foreign currency loss on acquisition	—			—			—			(10		)
Other	1			—			2			—
	$	—		$	(4	)	$	(9	)	$	(11	)

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				Six Months Ended
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Basic earnings per common share:
Earnings	$	131	$	107	$	208	$	124
Weighted average common shares outstanding	163.1		171.9		163.7		173.0
Per share amount	$	0.80	$	0.62	$	1.27	$	0.72
Diluted earnings per common share:
Earnings	$	131	$	107	$	208	$	124
Weighted average common shares outstanding	163.1		171.9		163.7		173.0
Add effect of dilutive securities:
Share-based awards	3.1		2.4		3.2		2.4
Senior Convertible Notes	2.8		0.5		2.6		0.3
Diluted weighted average common shares outstanding	169.0		174.8		169.5		175.7
Per share amount	$	0.78	$	0.61	$	1.23	$	0.71

In the computation of diluted earnings per common share for the three months ended July 1, 2017, the assumed exercise of 2.1 million options, including 1.8 million subject to market-based contingent stock agreements, were excluded because their inclusion would have been antidilutive. For the six months ended July 1, 2017, the assumed exercise of 2.4 million options, including 2.0 million subject to market-based contingent stock agreements, were excluded because their inclusion would have been antidilutive.

For the three months ended July 2, 2016, the assumed exercise of 2.3 million options, including 2.1 million subject to market-based contingent stock agreements, 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, including 2.1 million subject to market-based contingent stock agreements, and the assumed vesting of 0.6 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, the Company 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 1, 2017, the dilutive impact of the Senior Convertible Notes was 2.8 million shares and 2.6 million shares, respectively.

Balance Sheet Information

Accounts Receivable, Net

Accounts receivable, net, consists of the following:



	July 1, 2017			December 31, 2016
Accounts receivable	$	1,250		$	1,454
Less allowance for doubtful accounts	(39		)	(44		)
	$	1,211		$	1,410

Inventories, Net

Inventories, net, consist of the following:



	July 1, 2017			December 31, 2016
Finished goods	$	197		$	151
Work-in-process and production materials	321			253
	518			404
Less inventory reserves	(127		)	(131		)
	$	391		$	273

Other Current Assets

Other current assets consist of the following:



	July 1, 2017		December 31, 2016
Available-for-sale securities	$	50	$	46
Costs and earnings in excess of billings	529		495
Tax-related refunds receivable	110		90
Other	115		124
	$	804	$	755

Property, Plant and Equipment, Net

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



	July 1, 2017			December 31, 2016
Land	$	10		$	12
Building	267			306
Machinery and equipment	2,078			1,921
	2,355			2,239
Less accumulated depreciation	(1,496		)	(1,450		)
	$	859		$	789

Depreciation expense for the three months ended July 1, 2017 and July 2, 2016 was $49 million and $44 million, respectively. Depreciation expense for the six months ended July 1, 2017 and July 2, 2016 was $93 million and $92 million, respectively.

Investments

Investments consist of the following:



July 1, 2017	Cost Basis		Unrealized Gains		Investments
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	$	56	$	—	$	56
Corporate bonds	5		—		5
Common stock	5		7		12
	66		7		73
Other investments	210		—		210
Equity method investments	15		—		15
	$	291	$	7	$	298
Less: current portion of available-for-sale securities					50
					$	248



December 31, 2016	Cost Basis		Unrealized Gains		Investments
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	$	51	$	—	$	51
Corporate bonds	5		—		5
	56		—		56
Other investments	211		—		211
Equity method investments	17		—		17
	$	284	$	—	$	284
Less: current portion of available-for-sale securities					46
					$	238

Other investments include strategic investments in non-public technology-driven startup companies recorded at cost of $74 million and $76 million, and insurance policies recorded at their cash surrender value of $136 million and $135 million, at July 1, 2017 and December 31, 2016.

During the three months ended July 1, 2017, the Company recognized a loss on the sale of investments and businesses of $1 million, compared to a gain of $1 million during the three months ended July 2, 2016. During the six months ended July 1, 2017, the Company recognized a gain on the sale of investments and businesses of $2 million, compared to a loss of $20 million during the six months ended July 2, 2016, of which, $19 million was associated with the sale of United Kingdom treasury securities.

Other Assets

Other assets consist of the following:



	July 1, 2017		December 31, 2016
Long-term receivables	35		49
Defined benefit plan assets	125		102
Other	40		49
	$	200	200

Accrued Liabilities

Accrued liabilities consist of the following:



	July 1, 2017		December 31, 2016
Deferred revenue	$	427	$	439
Compensation	171		250
Billings in excess of costs and earnings	387		434
Tax liabilities	134		111
Dividend payable	76		77
Trade liabilities	174		180
Other	555		620
	$	1,924	$	2,111

Other Liabilities

Other liabilities consist of the following:



	July 1, 2017		December 31, 2016
Defined benefit plans	$	1,800	$	1,799
Deferred revenue	164		115
Unrecognized tax benefits	39		39
Deferred income taxes	139		121
Deferred consideration (Note 13)	78		72
Other	220		209
	$	2,440	$	2,355

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 1, 2017, the Company paid an aggregate of $258 million, including transaction costs, to repurchase approximately 3.2 million shares at an average price of $81.66 per share. As of July 1, 2017, the Company had used approximately $12.1 billion of the share repurchase authority, including transaction costs, to repurchase shares, leaving $1.9 billion of authority available for future repurchases.

Payment of Dividends: During the three months ended July 1, 2017 and July 2, 2016, the Company paid $77 million and $72 million, respectively, in cash dividends to holders of its common stock. During the six months ended July 1, 2017 and July 2, 2016, the Company paid $154 million and $143 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 1, 2017 and July 2, 2016:



	Three Months Ended						Six Months Ended
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Foreign Currency Translation Adjustments:
Balance at beginning of period	$	(460	)	$	(253	)	$	(494	)	$	(266	)
Other comprehensive income (loss) before reclassification adjustment	47			(98		)	84			(84		)
Tax expense	—			—			(3		)	(1		)
Other comprehensive income (loss), net of tax	47			(98		)	81			(85		)
Balance at end of period	$	(413	)	$	(351	)	$	(413	)	$	(351	)
Available-for-Sale Securities:
Balance at beginning of period	$	—		$	1		$	—		$	(3	)
Other comprehensive income (loss) before reclassification adjustment	7			(2		)	7			(2		)
Tax (expense) benefit	(3		)	1			(3		)	1
Other comprehensive income (loss) before reclassification adjustment, net of tax	4			(1		)	4			(1		)
Reclassification adjustment into Gains (losses) on sales of investments and businesses, net	—			—			—			6
Tax benefit	—			—			—			(2		)
Reclassification adjustment into Gains (losses) on sales of investments and businesses, net of tax	—			—			—			4
Other comprehensive income (loss), net of tax	4			(1		)	4			3
Balance at end of period	$	4		$	—		$	4		$	—
Defined Benefit Plans:
Balance at beginning of period	(1,804		)	(1,593		)	$	(1,823	)	$	(1,597	)
Other comprehensive income (loss) before reclassification adjustment	(11		)	53			(11		)	53
Tax expense	—			(16		)	—			(16		)
Other comprehensive income (loss) before reclassification adjustment, net of tax	(11		)	37			(11		)	37
Reclassification adjustment - Actuarial net losses into Selling, general, and administrative expenses	16			18			32			28
Reclassification adjustment - Prior service benefits into Selling, general, and administrative expenses	(4		)	(7		)	(8		)	(13		)
Reclassification adjustment - Non-U.S. pension settlement loss into Other charges	16			—			25			—
Tax expense (benefit)	(3		)	8			(5		)	8
Reclassification adjustment into Operating earnings, net of tax	25			19			44			23
Other comprehensive income, net of tax	14			56			33			60
Balance at end of period	$	(1,790	)	$	(1,537	)	$	(1,790	)	$	(1,537	)

Total Accumulated other comprehensive loss	$	(2,199	)	$	(1,888	)	$	(2,199	)	$	(1,888	)