Motorola Mobility Announces Third Quarter Financial Results

27 Oct, 2011, 16:02 ET from Motorola Mobility Holdings, Inc.

LIBERTYVILLE, Ill., Oct. 27, 2011 /PRNewswire/ --

Third Quarter Financial Highlights

  • Net revenues of $3.3 billion, up 11 percent from third quarter 2010
  • Non-GAAP net earnings of $0.12 per share compared to net earnings of $0.13 per share in third quarter 2010; GAAP net loss of $0.11 per share compared to net loss of $0.12 per share in third quarter 2010
  • Mobile Devices revenues of $2.4 billion, up 20 percent from third quarter 2010; Non-GAAP operating loss of $15 million; GAAP operating loss of $41 million
  • Shipped 11.6 million mobile devices, including 4.8 million smartphones
  • Home revenues of $825 million, down 10 percent from third quarter 2010; Non-GAAP operating earnings of $77 million; GAAP operating earnings of $54 million

Click here for printable press release and financial tables.

Motorola Mobility Holdings, Inc. (NYSE: MMI) today reported net revenues of $3.3 billion in the third quarter of 2011, up 11 percent from the third quarter of 2010. The GAAP net loss in the third quarter of 2011 was $32 million, or $0.11 per share, compared to a net loss of $34 million, or $0.12 per share, in the third quarter of 2010. On a non-GAAP basis, the net earnings in the third quarter of 2011 were $35 million, or $0.12 per share, compared to net earnings of $38 million, or $0.13 per share, in the third quarter of 2010.

Total cash at the end of the quarter was $3.3 billion and includes cash, cash equivalents and cash deposits. Operating cash flow was $25 million for the quarter.

Details on non-GAAP adjustments and the use of non-GAAP measures are included later in this press release and in the financial tables.

"Our third quarter revenues in Mobile Devices increased by 20 percent, driven by continued strong growth in international markets. With the recent launch of our iconic Motorola RAZR™, we now have several 4G LTE devices in our portfolio. Our Home business is creating innovative solutions for our customers, taking leadership in the transition to all-IP networks, and delivering solid levels of profitability," said Sanjay Jha, chairman and chief executive officer, Motorola Mobility. "We are also excited about the proposed merger with Google and continue to make progress to close this transaction."

Operating Results

Mobile Devices net revenues in the third quarter were $2.4 billion, up 20 percent compared with the year-ago quarter. The GAAP operating loss was $41 million compared to an operating loss of $43 million in the year-ago quarter. The non-GAAP operating loss was $15 million compared to operating earnings of $3 million in the year-ago quarter. The company shipped a total of 11.6 million mobile devices, including 4.8 million smartphones and approximately 100,000 Motorola XOOM™ tablets. In the third quarter of 2010, the company shipped 9.1 million mobile devices, including 3.8 million smartphones.

Mobile Devices highlights:

  • Announced global launch of the iconic, ultra-thin RAZR smartphone, featuring sculpted glass face, diamond-cut aluminum accents, KEVLAR® fiber and vibrant 4.3-inch super AMOLED Advanced display.
  • Announced award-winning Motorola ATRIX™ 2, offering enhanced entertainment experiences with dual-core processor, full 1080p video capture and free app for music and pictures.
  • Unveiled MOTOACTV™, the new lightweight, wearable fitness performance tracker and smart music player rolled into one. Sync MOTOACTV with your PC so you can check out the music you perform to best, or track your workouts over extended time periods, set goals and even create workout competitions with your friends via the MOTOACTV Web Portal.
  • Shipped DROID BIONIC™, combining dual-core 1 GHz processor, 1 GB of RAM, 4.3-inch qHD display and webtop application with 4G LTE speeds.
  • Rolled out 4G LTE upgrade to existing Motorola XOOM customers to enhance the tablet experience with faster speeds and connections, and announced the Motorola XOOM Family Edition tablet, preloaded with family-friendly software including KidZone by Zoodles and MotoPack by Motorola.

Home segment net revenues in the third quarter were $825 million, down 10 percent compared with the year-ago quarter. GAAP operating earnings were $54 million, compared to $49 million in the year-ago quarter. Non-GAAP operating earnings were $77 million, the same as in the year-ago quarter. Set-top shipments were down 3 percent compared to the year-ago quarter.

Home highlights:

  • 4Home software platform chosen to power Verizon's new Home Monitoring and Control service in North America for the smart, digital home.
  • Introduced family of advanced video processing technologies to drive bandwidth efficiency and video quality in the European market, including the SE-6000 video encoder and the ST-6000 transcoder.
  • Expanded Internet Protocol (IP) growth and leadership in Russia, extending IPTV set-top rollout with leading telecom provider, Vimpelcom Ltd.
  • Selected by Henan Cable to deliver Video On Demand and Network Digital Video Recording services to its 3.6 million subscribers in China, using M3 Media Server family.

Merger Update

On Aug. 15, 2011, Motorola Mobility Holdings, Inc. and Google Inc. announced a definitive agreement for Google to acquire Motorola Mobility. The transaction was unanimously approved by the boards of directors of both companies and is subject to customary closing conditions, including various regulatory approvals, and the approval of Motorola Mobility's stockholders. Motorola Mobility will hold a special meeting of stockholders on Nov. 17, 2011, to seek stockholder approval of the proposed merger with Google.  The record date for determining the stockholders entitled to vote at the meeting is Oct. 11, 2011.  

Antitrust clearances will be required in the U.S., by the European Commission, and in Canada, China, Israel, Russia, Taiwan and Turkey. Regulatory filings have been submitted to the appropriate regulatory body in each of these jurisdictions. In the U.S., Motorola Mobility and Google have each received a Request for Additional Information and Documentary Material (commonly referred to as a "second request") from the Department of Justice.

Subject to the satisfaction of customary closing conditions, including antitrust clearance, the transaction is expected to close by the end of 2011 or early 2012. The failure to meet the closing conditions or other factors outside of our control could delay the transaction or prevent the companies from completing the merger.

Third quarter 2011 GAAP results include approximately $18 million of expenses attributable to the planned merger. These costs are included in Other Charges on the income statement. Third quarter results presented on a non-GAAP basis exclude these expenses.

For more information on the proposed merger, please visit http://investors.motorola.com.

Conference Call and Webcast

Motorola Mobility will not host a conference call and webcast in conjunction with its third quarter results. To access the third quarter results and other financial information, please visit http://investors.motorola.com.

Consolidated GAAP Results A comparison of results from operations is as follows:

Third Quarter

(In millions, except per share amounts)

2011

2010

Net revenues

$3,259

$2,946

Gross margin

844

791

Operating earnings (loss)

(5)

6

Loss before income taxes

(2)

(7)

Net loss attributable to Motorola Mobility Holdings, Inc.

($32)

($34)

Basic loss per common share*

($0.11)

($0.12)

Diluted loss per common share*

($0.11)

N/A

Weighted average common shares outstanding

Basic

297.7

294.3

Diluted

297.7

N/A

Non-GAAP Adjustments for third quarter of 2011 and 2010

Third Quarter

Earnings Per Share Impact

2011

2010

GAAP Loss per Common Share *

($0.11)

($0.12)

Stock-based compensation expense

0.11

0.14

Intangible assets amortization expense

0.05

0.05

Reorganization of business charges

------

0.06

Merger-related transaction costs

0.06

------

Total Non-GAAP Adjustments **

0.23

0.25

Non-GAAP Earnings per Common Share *

$0.12

$0.13

Definitions

* The computation of basic earnings (loss) per share for all periods prior to separation is calculated using the number of shares of Motorola Mobility Holdings, Inc. common stock outstanding on Jan. 4, 2011, following the distribution of Motorola Mobility Holdings, Inc. common stock. No measure of diluted earnings (loss) per share is presented for periods prior to separation.

** Earnings or loss per share (EPS) impact may not add up due to rounding.

Use of Non-GAAP Financial Information

In addition to the GAAP results included in this presentation, Motorola Mobility also has included non-GAAP measurements of results. Motorola Mobility has provided these non-GAAP measurements to help investors better understand Motorola Mobility's core operating performance, enhance comparisons of Motorola Mobility's core operating performance from period to period, and allow better comparisons of Motorola Mobility's operating performance to that of its competitors. Among other things, the Company's management uses these operating results, excluding the identified items, to evaluate the performance of its 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 its 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 GAAP.

Non-GAAP adjustments are comprised of the following items:

Reorganization of business charges and merger-related transaction costs: The Company has excluded the effects of reorganization of business charges and merger-related transaction costs from its non-GAAP operating expenses and net income measurements because the Company believes that these 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.

Stock-based compensation expense: The Company has excluded stock-based compensation expense from its non-GAAP operating expenses and net income measurements. Although stock-based compensation is a key incentive offered to our 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 stock-based compensation expense primarily because it represents a significant non-cash expense. Stock-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 income measurements, primarily because it represents a significant 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.

Details of the above non-GAAP adjustments and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found in the financial tables.

Business Risks

Motorola Mobility cautions the reader that this communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include, but are not limited to, the expected closing date of the proposed Google transaction. Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements including, but not limited to, the ability of the parties to consummate the proposed transaction and the satisfaction of the conditions precedent to consummation of the proposed transaction, including the ability to secure regulatory and other approvals at all or in a timely manner; and the other risks and uncertainties contained and identified in Motorola Mobility's filings with the Securities and Exchange Commission (the "SEC"), any of which could cause actual results to differ materially from the forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. Motorola Mobility undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

Additional Information and Where To Find It

On Oct. 14, 2011, Motorola Mobility filed with the SEC a definitive proxy statement in connection with the proposed transaction with Google. The definitive proxy statement is being sent or given to the Motorola Mobility stockholders of record. The definitive proxy statement contains important information about the proposed transaction and related matters. SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT CAREFULLY. The definitive proxy statement and other relevant materials, and any other documents filed by Motorola Mobility with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov or by going to Motorola Mobility's Investor Relations page on its corporate website at http://investors.motorola.com. In addition, security holders may obtain free copies of the proxy statement from Motorola Mobility by contacting Investor Relations by mail at Attention: Investor Relations, 600 North U.S. Highway 45, Libertyville, IL 60048.

Interests of Participants

Motorola Mobility and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Motorola Mobility stockholders in connection with the proposed transaction. Information about Motorola Mobility's directors and executive officers is set forth in its proxy statement for its 2011 Annual Meeting of Stockholders, which was filed with the SEC on March 15, 2011, and its Annual Report on Form 10-K for the year ended Dec. 31, 2010, filed on Feb. 18, 2011. These documents are available free of charge at the SEC's website at www.sec.gov, and by mail at Attention: Investor Relations, 600 North U.S. Highway 45, Libertyville, IL 60048, or by going to Motorola Mobility's Investor Relations page on its corporate website at http://investors.motorola.com. Additional information regarding the interests of participants in the solicitation of proxies in connection with the transaction is included in the definitive proxy statement that Motorola Mobility has filed with the SEC.

About Motorola Mobility

Motorola Mobility Holdings, Inc. (NYSE: MMI) fuses innovative technology with human insights to create experiences that simplify, connect and enrich people's lives. Our portfolio includes converged mobile devices such as smartphones and tablets; wireless accessories; end-to-end video and data delivery; and management solutions, including set-tops and data-access devices. For more information, visit motorola.com/mobility.

MOTOROLA and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC. DROID is a trademark of Lucasfilm Ltd. and its related companies. Used under license. All other trademarks are the property of their respective owners.  © 2011 Motorola Mobility, Inc.  All rights reserved. 

CONTACTS:

Media: Jennifer Erickson Motorola Mobility Holdings, Inc. +1 (847) 772-1217 jennifer.erickson@motorola.com

Investors: Dean Lindroth Motorola Mobility Holdings, Inc. +1 (847) 523-2858 dean.lindroth@motorola.com

Motorola Mobility Holdings, Inc.

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

Three Months Ended

October 1, 2011

July 2, 2011

October 2, 2010

Net revenues

$               3,259

$        3,337

$               2,946

Costs of sales

2,415

2,473

2,155

Gross margin

844

864

791

Selling, general and administrative expenses

426

456

385

Research and development expenditures

390

395

373

Other charges

18

20

13

Intangibles amortization

15

16

14

Operating earnings (loss)

(5)

(23)

6

Other income (expense):

  Interest income (expense), net *

7

1

(11)

  Gains on sales of investments

2

10

-

  Other, net

(6)

(5)

(2)

Total other income (expense)

3

6

(13)

Loss before income taxes

(2)

(17)

(7)

Income tax expense  **

30

39

28

Net loss

(32)

(56)

(35)

Less: Loss attributable to non-controlling interests

-

-

(1)

Net loss attributable to Motorola Mobility Holdings, Inc.

$                  (32)

$           (56)

$                  (34)

Basic loss per common share ***

$               (0.11)

$        (0.19)

$               (0.12)

Diluted loss per common share ***

$               (0.11)

$        (0.19)

N/A

Weighted average common shares outstanding

Basic

297.7

295.8

294.3

Diluted

297.7

295.8

N/A

Percentage of Net Revenues ****

Net revenues

100.0%

100.0%

100.0%

Costs of sales

74.1%

74.1%

73.2%

Gross margin

25.9%

25.9%

26.8%

Selling, general and administrative expenses

13.1%

13.7%

13.1%

Research and development expenditures

12.0%

11.8%

12.7%

Other charges

0.6%

0.6%

0.4%

Intangibles amortization

0.5%

0.5%

0.5%

Operating earnings (loss)

-0.2%

-0.7%

0.2%

Other income (expense):

  Interest income (expense), net *

0.2%

0.0%

-0.4%

  Gains on sales of investments

0.1%

0.3%

0.0%

  Other, net

-0.2%

-0.1%

-0.1%

Total other income (expense)

0.1%

0.2%

-0.4%

Loss before income taxes

-0.1%

-0.5%

-0.2%

Income tax expense  **

0.9%

1.2%

1.0%

Net loss

-1.0%

-1.7%

-1.2%

Less: Loss attributable to non-controlling interests

0.0%

0.0%

0.0%

Net loss attributable to Motorola Mobility Holdings, Inc.

-1.0%

-1.7%

-1.2%

* For periods prior to separation on January 4, 2011, interest expense, net represents an allocation to Motorola Mobility Holdings, Inc. of the interest income and interest expense recognized by Motorola, Inc.  

** For periods prior to separation on January 4, 2011, income tax expense was computed as if Motorola Mobility Holdings, Inc. had filed tax returns on a stand-alone basis separate from Motorola, Inc.

*** The computation of basic earnings (loss) per common share for all periods through December 31, 2010, is calculated using the number of shares of Motorola Mobility Holdings, Inc. common stock outstanding on January 4, 2011, following the distribution of Motorola Mobility Holdings, Inc. common stock.  No measure of diluted earnings (loss) per share is presented for periods prior to separation.

**** Percentages may not add up due to rounding.

Motorola Mobility Holdings, Inc.

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

Nine Months Ended

October 1, 2011

October 2, 2010

Net revenues

$               9,628

$               8,035

Costs of sales

7,165

5,985

Gross margin

2,463

2,050

Selling, general and administrative expenses

1,299

1,141

Research and development expenditures

1,142

1,112

Other charges (income)

39

(194)

Intangibles amortization

47

41

Operating loss

(64)

(50)

Other income (expense):

  Interest income (expense), net *

10

(40)

  Gains on sales of investments

12

-

  Other, net

(28)

(24)

Total other income (expense)

(6)

(64)

Loss before income taxes

(70)

(114)

Income tax expense  **

99

55

Net loss

(169)

(169)

Less: Loss attributable to non-controlling interests

-

(3)

Net loss attributable to Motorola Mobility Holdings, Inc.

$                (169)

$                (166)

Basic loss per common share ***

$               (0.57)

$               (0.56)

Diluted loss per common share ***

$               (0.57)

N/A

Weighted average common shares outstanding

Basic

296.1

294.3

Diluted

296.1

N/A

Percentage of Net Revenues ****

Net revenues

100.0%

100.0%

Costs of sales

74.4%

74.5%

Gross margin

25.6%

25.5%

Selling, general and administrative expenses

13.5%

14.2%

Research and development expenditures

11.9%

13.8%

Other charges (income)

0.4%

-2.4%

Intangibles amortization

0.5%

0.5%

Operating loss

-0.6%

-0.6%

Other income (expense):

  Interest income (expense), net *

0.1%

-0.5%

  Gains on sales of investments

0.1%

0.0%

  Other, net

-0.3%

-0.3%

Total other income (expense)

-0.1%

-0.8%

Loss before income taxes

-0.7%

-1.4%

Income tax expense  **

1.0%

0.7%

Net loss

-1.8%

-2.1%

Less: Loss attributable to non-controlling interests

0.0%

0.0%

Net loss attributable to Motorola Mobility Holdings, Inc.

-1.8%

-2.1%

* For periods prior to separation on January 4, 2011, interest expense, net represents an allocation to Motorola Mobility Holdings, Inc. of the interest income and interest expense recognized by Motorola, Inc.  

** For periods prior to separation on January 4, 2011, income tax expense was computed as if Motorola Mobility Holdings, Inc. had filed tax returns on a stand-alone basis separate from Motorola, Inc.

*** The computation of basic earnings (loss) per common share for all periods through December 31, 2010, is calculated using the number of shares of Motorola Mobility Holdings, Inc. common stock outstanding on January 4, 2011, following the distribution of Motorola Mobility Holdings, Inc. common stock.  No measure of diluted earnings (loss) per share is presented for periods prior to separation.

**** Percentages may not add up due to rounding.

Motorola Mobility Holdings, Inc.

Condensed Consolidated Balance Sheets

(In millions)

October 1,

July 2,

October 2,

2011

2011

2010

Assets

  Cash and cash equivalents *

$      3,078

$ 3,026

$              -

  Accounts receivable, net

1,774

1,843

1,568

  Inventories, net

746

744

854

  Deferred income taxes **

147

80

111

  Other current assets

605

620

692

Total current assets

6,350

6,313

3,225

  Cash deposits

160

180

-

  Property, plant and equipment, net

803

806

737

  Investments

125

122

123

  Deferred income taxes **

50

98

49

  Goodwill

1,431

1,423

1,323

  Other assets

558

614

701

Total assets

$      9,477

$ 9,556

$      6,158

Liabilities and Stockholders' Equity

  Accounts payable

1,708

1,728

1,734

  Accrued liabilities

2,234

2,276

2,076

Total current liabilities

3,942

4,004

3,810

  Other liabilities

587

648

586

Stockholders' Equity:

Common stock

3

3

-

Additional paid-in capital

5,217

5,051

-

Accumulated other comprehensive loss

(103)

(13)

(398)

Retained earnings (accumulated deficit)

(169)

(137)

-

Owner's net investment, prior to Separation

-

-

2,136

Total Motorola Mobility Holdings, Inc. stockholders' equity

4,948

4,904

1,738

Non-controlling interests

-

-

24

Total stockholders' equity

4,948

4,904

1,762

Total liabilities and stockholders' equity

$      9,477

$ 9,556

$      6,158

* Until separation, the Company participated in Motorola, Inc.'s centralized cash management program.  Accordingly, no cash and cash equivalents are presented on the Motorola Mobility Holdings, Inc. Condensed Consolidated Balance Sheet as of any reporting period prior to separation.  On January 3, 2011, the Company received a cash contribution of $3.2 billion from Motorola, Inc., which included approximately $168 million of cash deposits.

** For periods prior to separation on January 4, 2011, income taxes were computed as if Motorola Mobility Holdings, Inc. had filed tax returns on a stand-alone basis separate from Motorola, Inc.

Motorola Mobility Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

Three Months Ended

October 1, 2011

July 2, 2011

October 2, 2010

Operating

Net loss attributable to Motorola Mobility Holdings, Inc.

$                  (32)

$           (56)

$                  (34)

Less: Loss attributable to non-controlling interests

-

-

(1)

Net loss

(32)

(56)

(35)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

57

56

58

Share-based compensation expense

34

46

42

Non-cash other charges

-

18

-

Gains on sales of investments

(2)

(10)

-

Deferred income taxes

(31)

(4)

17

Changes in assets and liabilities, net of effects of acquisitions:

Accounts receivable, net

17

(284)

(276)

Inventories

(19)

115

(226)

Other current assets

(45)

23

(86)

Accounts payable and accrued liabilities

30

94

775

Other assets and liabilities

16

2

55

Net cash provided by operating activities

25

-

324

Investing

Acquisitions and investments

(21)

(33)

(46)

Proceeds from sales of investments

12

17

12

Capital expenditures

(40)

(46)

(26)

Cash deposits

(1)

(23)

-

Other, net

4

1

(5)

Net cash used for investing activities

(46)

(84)

(65)

Financing

Share-based compensation activity

46

(14)

-

Capital contribution from Former Parent

75

-

-

Other, net

(1)

-

-

Net transfers to Former Parent

-

-

(265)

Net cash provided by (used for) financing activities

120

(14)

(265)

Effect of exchange rate changes on cash and cash equivalents

(47)

8

6

Net increase (decrease) in cash and cash equivalents

52

(90)

-

Cash and cash equivalents, beginning of period

3,026

3,116

-

Cash and cash equivalents, end of period

$               3,078

$        3,026

$                     -

Until separation, the Company participated in Motorola, Inc.'s (Former Parent) centralized cash management program.  Accordingly, no cash and cash equivalents are presented on the Motorola Mobility Holdings, Inc. Condensed Consolidated Balance Sheet as of any reporting period prior to separation.  On January 3, 2011, the Company received a cash contribution of $3.2 billion from Motorola, Inc., which included approximately $168 million of cash deposits. On July 22, 2011, the Company received $75 million of the deferred contribution due from the Former Parent.

Motorola Mobility Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

Nine Months Ended

October 1, 2011

October 2, 2010

Operating

Net loss attributable to Motorola Mobility Holdings, Inc.

$                (169)

$                (166)

Less: Loss attributable to non-controlling interests

-

(3)

Net loss

(169)

(169)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

167

169

Share-based compensation expense

120

120

Non-cash other charges

17

1

Gains on sales of investments

(12)

-

Deferred income taxes

(46)

14

Changes in assets and liabilities, net of effects of acquisitions:

Accounts receivable, net

(246)

(225)

Inventories

80

(166)

Other current assets

-

(7)

Accounts payable and accrued liabilities

125

686

Other assets and liabilities

96

(42)

Net cash provided by operating activities

132

381

Investing

Acquisitions and investments

(65)

(66)

Proceeds from sales of investments

29

12

Capital expenditures

(136)

(68)

Cash deposits

(24)

-

Other, net

5

1

Net cash used for investing activities

(191)

(121)

Financing

Share-based compensation activity

48

-

Capital contributions from Former Parent

3,107

-

Other, net

14

-

Net transfers to Former Parent

-

(293)

Net cash provided by (used for) financing activities

3,169

(293)

Effect of exchange rate changes on cash and cash equivalents

(32)

33

Net increase in cash and cash equivalents

3,078

-

Cash and cash equivalents, beginning of period

-

-

Cash and cash equivalents, end of period

$               3,078

$                     -

Until separation, the Company participated in Motorola, Inc.'s (Former Parent) centralized cash management program.  Accordingly, no cash and cash equivalents are presented on the Motorola Mobility Holdings, Inc. Condensed Consolidated Balance Sheet as of any reporting period prior to separation.  On January 3, 2011, the Company received a cash contribution of $3.2 billion from Motorola, Inc., which included approximately $168 million of cash deposits. On July 22, 2011, the Company received $75 million of the deferred contribution due from the Former Parent.

Motorola Mobility Holdings, Inc.

Segment Information

(In millions)

Summarized below are the Company's Net revenues and Operating earnings (loss) by reportable segment for the three months and nine months ended October 1, 2011 and October 2, 2010.

Net Revenues

Three Months Ended

October 1, 2011

Three Months Ended

October 2, 2010

% Change from

2010

Mobile Devices

$                          2,434

$                          2,034

19.7 %

Home

825

912

(9.5)%

  Company Totals

$                          3,259

$                          2,946

10.6 %

Nine Months Ended

October 1, 2011

Nine Months Ended

October 2, 2010

% Change from

2010

Mobile Devices

$                          6,992

$                          5,399

30 %

Home

2,636

2,636

-

  Company Totals

$                          9,628

$                          8,035

20 %

Operating Earnings (Loss)

Three Months Ended

October 1, 2011

Three Months Ended

October 2, 2010

% Change from

2010

Mobile Devices

$                              (41)

$                              (43)

(5)%

Home

54

49

10 %

Merger-related transaction costs *

(18)

-

-

  Company Totals

$                                (5)

$                                 6

(183)%

Nine Months Ended

October 1, 2011

Nine Months Ended

October 2, 2010

% Change from

2010

Mobile Devices

$                            (215)

$                            (148)

45 %

Home

169

98

72 %

Merger-related transaction costs *

(18)

-

-

  Company Totals

$                              (64)

$                              (50)

28 %

* Represents costs incurred at the corporate level related to the Company's proposed merger with Google Inc.

Motorola Mobility Holdings, Inc.

GAAP to Non-GAAP Bridge

(In millions, except per share amounts)

Three Months Ended

Three Months Ended

October 1, 2011

July 2, 2011

GAAP

Results

Non-GAAP

Adjustments

Non-GAAP

Results

GAAP

Results

Non-GAAP

Adjustments

Non-GAAP

Results

Net revenues

$              3,259

$                      -

$              3,259

$              3,337

$                      -

$              3,337

Costs of sales

2,415

3

2,412

2,473

4

2,469

Gross margin

844

(3)

847

864

(4)

868

Selling, general and administrative expenses

426

19

407

456

28

428

Research and development expenditures

390

12

378

395

14

381

Other charges

18

18

-

20

20

-

Intangibles amortization

15

15

-

16

16

-

Operating earnings (loss)

(5)

(67)

62

(23)

(82)

59

Other income (expense):

  Interest income, net

7

-

7

1

-

1

  Gains on sales of investments

2

-

2

10

-

10

  Other, net

(6)

-

(6)

(5)

-

(5)

Total other income (expense)

3

-

3

6

-

6

Earnings (loss) before income taxes

(2)

(67)

65

(17)

(82)

65

Income tax expense

30

-

30

39

-

39

Net earnings (loss)

(32)

(67)

35

(56)

(82)

26

Less: Earnings attributable to non-controlling interests

-

-

-

-

-

-

Net earnings (loss) attributable to Motorola Mobility Holdings, Inc.

$                  (32)

$                    (67)

$                   35

$                  (56)

$                    (82)

$                   26

Basic earnings (loss) per common share

$               (0.11)

$                 (0.23)

$                0.12

$               (0.19)

$                 (0.28)

$                0.09

Diluted earnings (loss) per common share

$               (0.11)

$                 (0.23)

$                0.12

$               (0.19)

$                 (0.28)

$                0.09

Weighted average common shares outstanding

Basic

297.7

297.7

297.7

295.8

295.8

295.8

Diluted

297.7

297.7

297.7

295.8

295.8

295.8

Percentage of Net Revenues *

Net revenues

100.0%

100.0%

100.0%

100.0%

Costs of sales

74.1%

74.0%

74.1%

74.0%

Gross margin

25.9%

26.0%

25.9%

26.0%

Selling, general and administrative expenses

13.1%

12.5%

13.7%

12.8%

Research and development expenditures

12.0%

11.6%

11.8%

11.4%

Other charges

0.6%

0.0%

0.6%

0.0%

Intangibles amortization

0.5%

0.0%

0.5%

0.0%

Operating earnings (loss)

-0.2%

1.9%

-0.7%

1.8%

Other income (expense):

  Interest income, net

0.2%

0.2%

0.0%

0.0%

  Gains on sales of investments

0.1%

0.1%

0.3%

0.3%

  Other, net

-0.2%

-0.2%

-0.1%

-0.1%

Total other income (expense)

0.1%

0.1%

0.2%

0.2%

Earnings (loss) before income taxes

-0.1%

2.0%

-0.5%

1.9%

Income tax expense

0.9%

0.9%

1.2%

1.2%

Net earnings (loss)

-1.0%

1.1%

-1.7%

0.8%

Less: Earnings attributable to non-controlling interests

0.0%

0.0%

0.0%

0.0%

Net earnings (loss) attributable to Motorola Mobility Holdings, Inc.

-1.0%

1.1%

-1.7%

0.8%

* Percentages may not add up due to rounding.

Motorola Mobility Holdings, Inc.

GAAP to Non-GAAP Bridge

(In millions, except per share amounts)

Three Months Ended

Three Months Ended

October 1, 2011

October 2, 2010

GAAP

Results

Non-GAAP

Adjustments

Non-GAAP

Results

GAAP

Results

Non-GAAP

Adjustments

Non-GAAP

Results

Net revenues

$              3,259

$                      -

$              3,259

$              2,946

$                      -

$              2,946

Costs of sales

2,415

3

2,412

2,155

9

2,146

Gross margin

844

(3)

847

791

(9)

800

Selling, general and administrative expenses

426

19

407

385

23

362

Research and development expenditures

390

12

378

373

15

358

Other charges

18

18

-

13

13

-

Intangibles amortization

15

15

-

14

14

-

Operating earnings (loss)

(5)

(67)

62

6

(74)

80

Other income (expense):

  Interest income (expense), net *

7

-

7

(11)

-

(11)

  Gains on sales of investments

2

-

2

-

-

-

  Other, net

(6)

-

(6)

(2)

-

(2)

Total other income (expense)

3

-

3

(13)

-

(13)

Earnings (loss) before income taxes

(2)

(67)

65

(7)

(74)

67

Income tax expense **

30

-

30

28

(2)

30

Net earnings (loss)

(32)

(67)

35

(35)

(72)

37

Less: Loss attributable to non-controlling interests

-

-

-

(1)

-

(1)

Net earnings (loss) attributable to Motorola Mobility Holdings, Inc.

$                  (32)

$                    (67)

$                   35

$                  (34)

$                    (72)

$                   38

Basic earnings (loss) per common share ***

$               (0.11)

$                 (0.23)

$                0.12

$               (0.12)

$                 (0.25)

$                0.13

Diluted earnings (loss) per common share ***

$               (0.11)

$                 (0.23)

$                0.12

N/A

N/A

N/A

Weighted average common shares outstanding***

Basic

297.7

297.7

297.7

294.3

294.3

294.3

Diluted

297.7

297.7

297.7

N/A

N/A

N/A

Percentage of Net Revenues ****

Net revenues

100.0%

100.0%

100.0%

100.0%

Costs of sales

74.1%

74.0%

73.2%

72.8%

Gross margin

25.9%

26.0%

26.8%

27.2%

Selling, general and administrative expenses

13.1%

12.5%

13.1%

12.3%

Research and development expenditures

12.0%

11.6%

12.7%

12.2%

Other charges

0.6%

0.0%

0.4%

0.0%

Intangibles amortization

0.5%

0.0%

0.5%

0.0%

Operating earnings (loss)

-0.2%

1.9%

0.2%

2.7%

Other income (expense):

  Interest income (expense), net *

0.2%

0.2%

-0.4%

-0.4%

  Gains on sales of investments

0.1%

0.1%

0.0%

0.0%

  Other, net

-0.2%

-0.2%

-0.1%

-0.1%

Total other income (expense)

0.1%

0.1%

-0.4%

-0.4%

Earnings (loss) before income taxes

-0.1%

2.0%

-0.2%

2.3%

Income tax expense **

0.9%

0.9%

1.0%

1.0%

Net earnings (loss)

-1.0%

1.1%

-1.2%

1.3%

Less: Loss attributable to non-controlling interests

0.0%

0.0%

0.0%

0.0%

Net earnings (loss) attributable to Motorola Mobility Holdings, Inc.

-1.0%

1.1%

-1.2%

1.3%

* For periods prior to separation on January 4, 2011, interest expense, net represents an allocation to Motorola Mobility Holdings, Inc. of the interest income and interest expense recognized by Motorola, Inc.

** For periods prior to separation on January 4, 2011, income tax expense was computed as if Motorola Mobility Holdings, Inc. had filed tax returns on a stand-alone basis separate from Motorola, Inc.  

*** The computation of basic earnings (loss) per common share for all periods through December 31, 2010, is calculated using the number of shares of Motorola Mobility Holdings, Inc. common stock outstanding on January 4, 2011, following the distribution of Motorola Mobility Holdings, Inc. common stock.  No measure of diluted earnings (loss) per share is presented for periods prior to separation.

**** Percentages may not add up due to rounding.

Motorola Mobility Holdings, Inc.

Operating Earnings (Loss) after Non-GAAP Adjustments

(In millions)

Q1 2011

TOTAL

Mobile Devices

Home

Other

Net revenues                                                                                          

$                         3,032

$                         2,128

$                            904

$                                 -

Operating earnings (loss)

$                            (36)

$                            (89)

$                              53

$                                 -

Non-GAAP adjustments by P&L statement line:

Statement Line

Stock-based compensation expense

Cost of sales

4

2

2

-

Stock-based compensation expense

SG&A and R&D

36

23

13

-

Intangible assets amortization expense

Intangibles amortization

16

3

13

-

Less:  Total non-GAAP adjustments

56

28

28

-

Operating earnings (loss) after non-GAAP adjustments

$                              20

$                            (61)

$                              81

$                                 -

 Operating earnings (loss) as a percentage of net revenues - GAAP

-1.2%

-4.2%

5.9%

0.0%

 Operating earnings (loss) as a percentage of net revenues - after non-GAAP adjustments

0.7%

-2.9%

9.0%

0.0%

Q2 2011

TOTAL

Mobile Devices

Home

Other

Net revenues

$                         3,337

$                         2,430

$                            907

$                                 -

Operating earnings (loss)

$                            (23)

$                            (85)

$                              62

$                                 -

Non-GAAP adjustments by P&L statement line:

Statement Line

Stock-based compensation expense

Cost of sales

4

3

1

-

Stock-based compensation expense

SG&A and R&D

42

29

13

-

Intangible assets amortization expense

Intangibles amortization

16

2

14

-

Legal claim provision

Other charges (income)

20

20

-

-

Less:  Total non-GAAP adjustments

82

54

28

-

Operating earnings (loss) after non-GAAP adjustments

$                              59

$                            (31)

$                              90

$                                 -

 Operating earnings (loss) as a percentage of net revenues - GAAP

-0.7%

-3.5%

6.8%

0.0%

 Operating earnings (loss) as a percentage of net revenues - after non-GAAP adjustments

1.8%

-1.3%

9.9%

0.0%

Q3 2011

TOTAL

Mobile Devices

Home

Other

Net revenues

$                         3,259

$                         2,434

$                            825

$                                 -

Operating earnings (loss)

$                              (5)

$                            (41)

$                              54

$                            (18)

Non-GAAP adjustments by P&L statement line:

Statement Line

Merger-related transaction costs *

Other charges (income)

18

-

-

18

Stock-based compensation expense

Cost of sales

3

2

1

-

Stock-based compensation expense

SG&A and R&D

31

21

10

-

Intangible assets amortization expense

Intangibles amortization

15

3

12

-

Less:  Total Non-GAAP adjustments

67

26

23

18

Operating earnings (loss) after non-GAAP adjustments

$                              62

$                            (15)

$                              77

$                               -

 Operating earnings (loss) as a percentage of net revenues - GAAP

-0.2%

-1.7%

6.5%

0.0%

 Operating earnings (loss) as a percentage of net revenues - after non-GAAP adjustments

1.9%

-0.6%

9.3%

0.0%

* Represents costs incurred at the corporate level related to the Company's proposed merger with Google Inc.

Motorola Mobility Holdings, Inc.

Non-GAAP Adjustments

(In millions, except per share amounts)

Q1 2011

Non-GAAP Adjustments

Statement Line

Q1 2011 PBT

(Inc)/Exp

Q1 2011 Tax

Inc/(Exp)

Q1 2011 PAT

(Inc)/Exp

EPS Impact

(Incr)/Decr *

GAAP Results

$                           (51)

$                          30

$                           (81)

$                   (0.27)

Stock-based compensation expense

Cost of sales, SG&A and R&D

40

-

40

(0.14)

Intangible assets amortization expense

Intangibles amortization

16

-

16

(0.05)

 Total Impact

56

-

56

(0.19)

Non-GAAP Results

$                              5

$                          30

$                           (25)

$                   (0.08)

Q2 2011

Non-GAAP Adjustments

Statement Line

Q2 2011 PBT

(Inc)/Exp

Q2 2011 Tax

Inc/(Exp)

Q2 2011 PAT

(Inc)/Exp

EPS Impact

(Incr)/Decr *

GAAP Results

$                           (17)

$                          39

$                           (56)

$                   (0.19)

Stock-based compensation expense

Cost of sales, SG&A and R&D

46

-

46

(0.16)

Intangible assets amortization expense

Intangibles amortization

16

-

16

(0.05)

Legal claim provision

Other charges (income)

20

-

20

(0.07)

 Total Impact

82

-

82

(0.28)

Non-GAAP Results

$                            65

$                          39

$                            26

$                     0.09

Q3 2011

Non-GAAP Adjustments

Statement Line

Q3 2011 PBT

(Inc)/Exp

Q3 2011 Tax

Inc/(Exp)

Q3 2011 PAT

(Inc)/Exp

EPS Impact

(Incr)/Decr *

GAAP Results

$                             (2)

$                          30

$                           (32)

$                   (0.11)

Merger-related transaction costs **

Other charges (income)

18

-

18

(0.06)

Stock-based compensation expense

Cost of sales, SG&A and R&D

34

-

34

(0.11)

Intangible assets amortization expense

Intangibles amortization

15

-

15

(0.05)

 Total Impact

67

-

67

(0.23)

Non-GAAP Results

$                            65

$                          30

$                            35

$                     0.12

* EPS impact may not add up due to rounding.

** Represents costs incurred at the corporate level related to the Company's proposed merger with Google Inc.

Motorola Mobility Holdings, Inc.

Revenue Mix by Region

(In millions)

Q1 2011

TOTAL

Mobile Devices

Home

North America

62%

56%

77%

Latin America

17%

20%

11%

Greater China

11%

15%

2%

EMEA

6%

5%

8%

Rest of Asia

4%

4%

2%

Total

100%

100%

100%

Q2 2011

TOTAL

Mobile Devices

Home

North America