Other Financial Data

Statements of Operations Information

Other Charges (Income)

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



	Three Months Ended				Nine Months Ended
	September 30, 2017		October 1, 2016		September 30, 2017			October 1, 2016
Other charges:
Intangibles amortization (Note 13)	$	39	$	31	$	112		$	83
Reorganization of business (Note 12)	6		6		22			28
Building impairment	—		—		8			17
Non-U.S. pension settlement loss (Note 6)	21		—		46			—
Asset impairment	1		—		1			—
Gain on legal settlements	—		—		(44		)	—
Impairment of corporate aircraft	—		—		—			3
Acquisition-related transaction fees	—		—		1			13
	$	67	$	37	$	146		$	144

During the nine months ended September 30, 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.

During the nine months ended September 30, 2017 and October 1, 2016, the Company recognized $8 million and $17 million, respectively, of building impairments related to the sale of its Basingstoke building and Schaumburg campus, respectively.

During the nine months ended October 1, 2016, the Company expensed $13 million of transaction fees related to the acquisition of Airwave.

Other Income (Expense)

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



	Three Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Interest income (expense), net:
Interest expense	$	(55	)	$	(58	)	$	(164	)	$	(169	)
Interest income	3			4			10			12
	$	(52	)	$	(54	)	$	(154	)	$	(157	)
Other:
Investment impairments	—			(2		)	—			(2		)
Foreign currency gain (loss)	$	(7	)	$	7		$	(29	)	$	34
Gain (loss) on derivative instruments	3			(11		)	14			(41		)
Gains on equity method investments	1			—			1			2
Realized foreign currency loss on acquisition	—			—			—			(10		)
Other	3			5			5			5
	$	—		$	(1	)	$	(9	)	$	(12	)

During the three and nine months ended September 30, 2017, the Company recognized foreign currency losses of $7 million and $29 million, respectively, primarily driven by the British pound, partially offset by gains of $3 million and $14 million, respectively, on derivative instruments put in place to minimize the foreign exchange risk related to currency fluctuations.

During the three and nine months ended October 1, 2016, the Company recognized foreign currency gains of $7 million and $34 million, respectively, primarily driven by the British pound, partially offset by losses of $11 million and $41 million, respectively, on derivative instruments put in place to minimize the foreign exchange risk related to currency fluctuations.

During the nine months ended October 1, 2016, the Company realized a $10 million foreign currency loss on currency purchased and held in anticipation of the acquisition of Airwave.

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
	September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016
Basic earnings per common share:
Earnings	$	212	$	192	$	420	$	317
Weighted average common shares outstanding	162.3		166.3		163.2		171.0
Per share amount	$	1.30	$	1.15	$	2.57	$	1.85
Diluted earnings per common share:
Earnings	$	212	$	192	$	420	$	317
Weighted average common shares outstanding	162.3		166.3		163.2		171.0
Add effect of dilutive securities:
Share-based awards	3.4		2.4		3.3		2.5
Senior Convertible Notes	3.3		0.9		2.8		0.5
Diluted weighted average common shares outstanding	169.0		169.6		169.3		174.0
Per share amount	$	1.25	$	1.13	$	2.48	$	1.82

In the computation of diluted earnings per common share for the three months ended September 30, 2017, the assumed exercise of 2.0 million options, including 1.7 million subject to market-based contingent stock agreements, were excluded because their inclusion would have been antidilutive. For the nine months ended September 30, 2017, the assumed exercise of 2.3 million options, including 1.9 million subject to market-based contingent stock agreements, were excluded because their inclusion would have been antidilutive.

For the three months ended October 1, 2016, the assumed exercise of 2.5 million options, including 1.8 million subject to market-based contingent stock agreements, were excluded because their inclusion would have been antidilutive. For the nine months ended October 1, 2016, the assumed exercise of 2.9 million options and 0.4 million RSUs, including 2.0 million subject to market-based contingent stock agreements, 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 became fully convertible as of August 25, 2017. 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, only the number of shares that would be issuable (under the treasury stock method of accounting for share dilution) are included in our computation of diluted earnings per share. The conversion price is adjusted for dividends declared through the date of settlement. Diluted earnings per share has been calculated based upon the amount by which the average stock price exceeds the conversion price.

For the three and nine months ended September 30, 2017, the dilutive impact of the Senior Convertible Notes was 3.3 million shares and 2.8 million shares, respectively. For the three and nine months ended October 1, 2016, the dilutive impact of the Senior Convertible Notes was 0.9 million shares and 0.5 million shares, respectively.

Balance Sheet Information

Accounts Receivable, Net

Accounts receivable, net, consists of the following:



	September 30, 2017			December 31, 2016
Accounts receivable	$	1,420		$	1,454
Less allowance for doubtful accounts	(38		)	(44		)
	$	1,382		$	1,410

Inventories, Net

Inventories, net, consist of the following:



	September 30, 2017			December 31, 2016
Finished goods	$	178		$	151
Work-in-process and production materials	315			253
	493			404
Less inventory reserves	(129		)	(131		)
	$	364		$	273

As a result of our Enterprise Resource Planning ("ERP") system implementation in the second quarter of 2017, the Company maintained higher inventory levels to ensure it continued to meet customer demand over the implementation period.

Other Current Assets

Other current assets consist of the following:



	September 30, 2017		December 31, 2016
Available-for-sale securities	$	—	$	46
Costs and earnings in excess of billings	595		495
Tax-related refunds receivable	144		90
Other	134		124
	$	873	$	755

Property, Plant and Equipment, Net

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



	September 30, 2017			December 31, 2016
Land	$	11		$	12
Building	282			306
Machinery and equipment	2,153			1,921
	2,446			2,239
Less accumulated depreciation	(1,557		)	(1,450		)
	$	889		$	789

Depreciation expense for the three months ended September 30, 2017 and October 1, 2016 was $49 million and $45 million, respectively. Depreciation expense for the nine months ended September 30, 2017 and October 1, 2016 was $142 million and $137 million, respectively.

Investments

Investments consist of the following:



September 30, 2017	Cost Basis		Unrealized Gains		Investments
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	$	5	$	—	$	5
Corporate bonds	2		—		2
Common stock	5		8		13
	12		8		20
Other investments	215		—		215
Equity method investments	14		—		14
	$	241	$	8	$	249



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 $141 million and $135 million, at September 30, 2017 and December 31, 2016, respectively.

During the three months ended September 30, 2017, Gains on the sale of investments and businesses was de minimus, compared to gains of $7 million during the three months ended October 1, 2016. During the nine months ended September 30, 2017, the Company recognized Gains on the sale of investments and businesses of $3 million, compared to losses of $13 million during the nine months ended October 1, 2016, of which, $19 million was associated with the sale of United Kingdom treasury securities, partially offset by gains of $6 million.

Other Assets

Other assets consist of the following:



	September 30, 2017		December 31, 2016
Long-term receivables	24		49
Defined benefit plan assets	138		102
Other	39		49
	$	201	200

Accrued Liabilities

Accrued liabilities consist of the following:



	September 30, 2017		December 31, 2016
Deferred revenue	$	469	$	439
Compensation	232		250
Billings in excess of costs and earnings	408		434
Tax liabilities	168		111
Dividend payable	76		77
Trade liabilities	154		180
Other	536		620
	$	2,043	$	2,111

Other Liabilities

Other liabilities consist of the following:



	September 30, 2017		December 31, 2016
Defined benefit plans	$	1,797	$	1,799
Deferred revenue	158		115
Unrecognized tax benefits	40		39
Deferred income taxes	142		121
Deferred consideration (Note 13)	82		72
Other	231		209
	$	2,450	$	2,355

Stockholders’ Equity

Share Repurchase Program: Through a series of actions, 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 nine months ended September 30, 2017, the Company paid an aggregate of $358 million, including transaction costs, to repurchase approximately 4.3 million shares at an average price of $83.22 per share. As of September 30, 2017, the Company had used approximately $12.2 billion of the share repurchase authority, including transaction costs, to repurchase shares, leaving $1.8 billion of authority available for future repurchases.

Payment of Dividends: During the three months ended September 30, 2017 and October 1, 2016, the Company paid $76 million and $70 million, respectively, in cash dividends to holders of its common stock. During the nine months ended September 30, 2017 and October 1, 2016, the Company paid $230 million and $213 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 nine months ended September 30, 2017 and October 1, 2016:



	Three Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Foreign Currency Translation Adjustments:
Balance at beginning of period	$	(413	)	$	(351	)	$	(494	)	$	(266	)
Other comprehensive income (loss) before reclassification adjustment	49			(47		)	133			(131		)
Tax expense	(3		)	(2		)	(6		)	(3		)
Other comprehensive income (loss), net of tax	46			(49		)	127			(134		)
Balance at end of period	$	(367	)	$	(400	)	$	(367	)	$	(400	)
Available-for-Sale Securities:
Balance at beginning of period	$	4		$	—		$	—		$	(3	)
Other comprehensive income (loss) before reclassification adjustment	1			1			8			(1		)
Tax (expense) benefit	—			—			(3		)	1
Other comprehensive income before reclassification adjustment, net of tax	1			1			5			—
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, net of tax	1			1			5			4
Balance at end of period	$	5		$	1		$	5		$	1
Defined Benefit Plans:
Balance at beginning of period	(1,790		)	(1,537		)	$	(1,823	)	$	(1,597	)
Other comprehensive income (loss) before reclassification adjustment	(4		)	—			(15		)	53
Tax expense	—			—			—			(16		)
Other comprehensive income (loss) before reclassification adjustment, net of tax	(4		)	—			(15		)	37
Reclassification adjustment - Actuarial net losses into Selling, general, and administrative expenses	17			13			49			40
Reclassification adjustment - Prior service benefits into Selling, general, and administrative expenses	(4		)	(7		)	(12		)	(20		)
Reclassification adjustment - Non-U.S. pension settlement loss into Other charges	21			—			46			—
Tax expense (benefit)	(4		)	(1		)	(9		)	8
Reclassification adjustment into Operating earnings, net of tax	30			5			74			28
Other comprehensive income, net of tax	26			5			59			65
Balance at end of period	$	(1,764	)	$	(1,532	)	$	(1,764	)	$	(1,532	)

Total Accumulated other comprehensive loss	$	(2,126	)	$	(1,931	)	$	(2,126	)	$	(1,931	)