Notes to
Condensed
Consolidated Financial Statements
(Dollars in millions, except as noted)
(Unaudited)
The condensed consolidated financial statements as of
April 1, 2017
and for the
three months ended
April 1, 2017
and
April 2, 2016
include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the condensed consolidated balance sheets, statements of operations, statements of comprehensive income, statement of stockholders' equity, and statements of cash flows of Motorola Solutions, Inc. (“Motorola Solutions” or the “Company”) for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended
December 31, 2016
. The results of operations for the
three months ended
April 1, 2017
are not necessarily indicative of the operating results to be expected for the full year.
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers." This new standard will replace the existing revenue recognition guidance in U.S. GAAP. The core principle of the ASU is the recognition of revenue for the transfer of goods and services equal to the amount an entity expects to receive for those goods and services. This ASU requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers: Deferral of the Effective Date" that delayed the effective date of ASU 2014-09 by one year to January 1, 2018, as the Company’s annual reporting period begins after December 15, 2017.
The Company has continued to analyze the impact of the new standard on its financial results based on an inventory of the Company's current contracts with customers. The Company has obtained an understanding of the new standard and currently believes that it will retain much of the same accounting treatment as used to recognize revenue under current standards. Revenue on a significant portion of its contracts is currently recognized under percentage of completion accounting, applying a cost-to-cost method. Under the new standard, the Company will continue to recognize revenue on these contracts using a cost-to-cost method based on the continuous transfer of control to the customer over time. Transfer of control in the Company's contracts is demonstrated by creating a customized asset for customers, in conjunction with contract terms which provide the right to receive payment for goods and services.
In addition, the standard may generally cause issuers to accelerate revenue recognition in contracts which were previously limited by software revenue recognition rules. While the Company may have contracts which fall under these rules in the current standard, it has not historically deferred significant amounts of revenue under these rules as many arrangements are single-element software arrangements or sales of software with a tangible product which falls out of the scope of the current software rules. Based on the contracts currently in place, the Company does not anticipate a significant acceleration of revenue upon applying the new standard to its current contracts under these fact patterns.
The Company continues to evaluate the impact of ASU No. 2014-09 on our financial results and prepare for the adoption of the standard on January 1, 2018, including readying its internal processes and control environment for new requirements, particularly around enhanced disclosures, under the new standard. The standard allows for both retrospective and modified retrospective methods of adoption. The Company is in the process of determining the method of adoption it will elect and the impact on our consolidated financial statements and footnote disclosures, and will provide enhanced disclosures as we continue our assessment.
In February 2016, the FASB issued ASU No. 2016-02, "Leases," which amends existing guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The ASU is effective for the Company January 1, 2019 and interim periods within that reporting period. The ASU requires a modified retrospective method upon adoption. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements and footnote disclosures.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,” which clarifies eight specific cash flow issues in an effort to reduce diversity in practice in how certain transactions are classified within the statement of cash flows. This ASU is effective for the Company January 1, 2018 with early adoption permitted. Upon adoption, the ASU requires a retrospective application unless it is determined that it is impractical to do so, in which case it must be retrospectively applied at the earliest date practical. Upon adoption, the Company does not anticipate significant changes to the Company's existing accounting policies or presentation of the Statement of Cash Flows.
In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory,” as part of the Board’s simplification initiative aimed at reducing complexity in accounting standards. This ASU eliminates the current application of deferring the income tax effect of intra-entity asset transfers, other than inventory, until the transferred asset is sold to a third party or otherwise recovered through use and will require entities to recognize tax expense when the transfer occurs. The guidance will be effective for the Company on January 1, 2018 and interim periods within that reporting period; early adoption permitted. The ASU requires a modified retrospective application with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. The Company is currently assessing the impact of this ASU on its consolidated financial statements and footnote disclosures.
In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The amendments in this update require that an employer disaggregate the service cost component from the other components of net periodic cost (benefit) and report that component in the same line item as other compensation costs arising from services rendered by employees during the period. The other components of net periodic cost (benefit) are required to be presented in the statement of operations separately from the service cost component and outside of operating earnings. The amendment also allows for the service cost component of net periodic cost (benefit) to be eligible for capitalization when applicable. The guidance will be effective for the Company on January 1, 2018 and interim periods within that reporting period; early adoption permitted. The guidance on the income statement presentation of the components of net periodic cost (benefit) must be applied retrospectively, while the guidance limiting the capitalization of net periodic cost (benefit) in assets to the service cost component must be applied prospectively. Upon adoption, the Company plans to update the presentation of net periodic cost (benefit) accordingly, noting all components of the Company's net periodic cost (benefit), as reflected in Note 6 of the Company's Condensed Consolidated Financial Statements and as disclosed in Note 7 of the Company's Form 10-K for the year ended December 31, 2016, with the exception of the service cost component, will be presented outside of operating earnings.
2. Other Financial Data
Statements of Operations Information
Other Charges (Income)
Other charges (income) included in Operating earnings consist of the following:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
April 1,
2017
|
|
April 2,
2016
|
Other charges:
|
|
|
|
Intangibles amortization
|
$
|
36
|
|
|
$
|
13
|
|
Reorganization of business
|
15
|
|
|
7
|
|
Building impairment
|
8
|
|
|
—
|
|
Non-U.S. pension settlement loss
|
9
|
|
|
—
|
|
Gain on legal settlement
|
(42
|
)
|
|
—
|
|
Acquisition-related transaction fees
|
1
|
|
|
13
|
|
|
$
|
27
|
|
|
$
|
33
|
|
During the three months ended April 1, 2017, the Company recognized a net gain of
$42 million
related to a legal settlement. The legal settlement relates to the recovery, through legal procedures to seize and liquidate assets, of financial receivables owed to the Company by a former customer. 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
|
|
April 1,
2017
|
|
April 2,
2016
|
Interest income (expense), net:
|
|
|
|
Interest expense
|
$
|
(54
|
)
|
|
$
|
(53
|
)
|
Interest income
|
3
|
|
|
4
|
|
|
$
|
(51
|
)
|
|
$
|
(49
|
)
|
Other:
|
|
|
|
Foreign currency gain (loss)
|
(2
|
)
|
|
13
|
|
Loss on derivative instruments
|
(7
|
)
|
|
(12
|
)
|
Gains (losses) on equity method investments
|
(1
|
)
|
|
1
|
|
Realized foreign currency loss on acquisition
|
—
|
|
|
(10
|
)
|
Other
|
2
|
|
|
—
|
|
|
$
|
(8
|
)
|
|
$
|
(8
|
)
|
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
|
April 1,
2017
|
|
April 2,
2016
|
Basic earnings per common share:
|
|
|
|
Earnings
|
$
|
77
|
|
|
$
|
17
|
|
Weighted average common shares outstanding
|
164.2
|
|
|
174.5
|
|
Per share amount
|
$
|
0.47
|
|
|
$
|
0.10
|
|
Diluted earnings per common share:
|
|
|
|
Earnings
|
$
|
77
|
|
|
$
|
17
|
|
Weighted average common shares outstanding
|
164.2
|
|
|
174.5
|
|
Add effect of dilutive securities:
|
|
|
|
Share-based awards
|
3.3
|
|
|
2.5
|
|
Senior Convertible Notes
|
2.4
|
|
|
—
|
|
Diluted weighted average common shares outstanding
|
169.9
|
|
|
177.0
|
|
Per share amount
|
$
|
0.45
|
|
|
$
|
0.10
|
|
In the computation of diluted earnings per common share for the
three months ended
April 1, 2017
, the assumed exercise of
2.7 million
options, including
2.3 million
subject to market-based contingent stock agreements, were excluded because their inclusion would have been antidilutive. For the
three months ended
April 2, 2016
, the assumed exercise of
4.0 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.
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 months ended
April 1, 2017
, the dilutive impact of the Senior Convertible Notes was
2.4 million
shares.
Balance Sheet Information
Accounts Receivable, Net
Accounts receivable, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Accounts receivable
|
$
|
1,109
|
|
|
$
|
1,454
|
|
Less allowance for doubtful accounts
|
(39
|
)
|
|
(44
|
)
|
|
$
|
1,070
|
|
|
$
|
1,410
|
|
Inventories, Net
Inventories, net, consist of the following:
|
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Finished goods
|
$
|
175
|
|
|
$
|
151
|
|
Work-in-process and production materials
|
298
|
|
|
253
|
|
|
473
|
|
|
404
|
|
Less inventory reserves
|
(128
|
)
|
|
(131
|
)
|
|
$
|
345
|
|
|
$
|
273
|
|
Other Current Assets
Other current assets consist of the following:
|
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Available-for-sale securities
|
$
|
45
|
|
|
$
|
46
|
|
Costs and earnings in excess of billings
|
550
|
|
|
495
|
|
Tax-related refunds receivable
|
94
|
|
|
90
|
|
Other
|
140
|
|
|
124
|
|
|
$
|
829
|
|
|
$
|
755
|
|
Property, Plant and Equipment, Net
Property, plant and equipment, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Land
|
$
|
12
|
|
|
$
|
12
|
|
Building
|
391
|
|
|
306
|
|
Machinery and equipment
|
1,924
|
|
|
1,921
|
|
|
2,327
|
|
|
2,239
|
|
Less accumulated depreciation
|
(1,507
|
)
|
|
(1,450
|
)
|
|
$
|
820
|
|
|
$
|
789
|
|
Depreciation expense for the
three months ended
April 1, 2017
and
April 2, 2016
was
$44 million
and
$49 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
three months ended
April 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 Airwave on February 19, 2016 and
$70 million
in the acquisition of Quorum II S.A. and its three subsidiaries - Interexport Telecomunicaciones Y Servicios S.A., Interexport Telecomunicaciones E Integracion De Sistemas S.A. and Mobilink S.A. (collectively "Interexport") on March 13, 2017. See discussion in Note 13.
Investments
Investments consist of the following:
|
|
|
|
|
April 1, 2017
|
|
Available-for-sale securities:
|
|
Government, agency, and government-sponsored enterprise obligations
|
$
|
50
|
|
Corporate bonds
|
5
|
|
|
55
|
|
Other investments
|
213
|
|
Equity method investments
|
14
|
|
|
$
|
282
|
|
Less: current portion of available-for-sale securities
|
45
|
|
|
$
|
237
|
|
|
|
|
|
|
December 31, 2016
|
|
Available-for-sale securities:
|
|
Government, agency, and government-sponsored enterprise obligations
|
$
|
51
|
|
Corporate bonds
|
5
|
|
|
56
|
|
Other investments
|
211
|
|
Equity method investments
|
17
|
|
|
$
|
284
|
|
Less: current portion of available-for-sale securities
|
46
|
|
|
$
|
238
|
|
Cost basis was equal to fair value for available-for-sale securities at April 1, 2017 and December 31, 2016. Other investments include strategic investments in technology-driven startup companies recorded at cost of
$77 million
and
$76 million
, and insurance policies recorded at their cash surrender value of
$136 million
and
$135 million
, at April 1, 2017 and December 31, 2016.
The Company recognized gains on the sale of investments and businesses of
$3 million
in the
first
quarter of
2017
. The Company recognized losses on the sale of investments and businesses of
$21 million
in the
first
quarter of
2016
, primarily driven by a realized loss of
$19 million
associated with the sale of United Kingdom treasury securities.
Other Assets
Other assets consist of the following:
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Non-current long-term receivables
|
30
|
|
|
49
|
|
Defined benefit plan assets
|
118
|
|
|
102
|
|
Other
|
49
|
|
|
49
|
|
|
$
|
197
|
|
|
200
|
|
Accrued Liabilities
Accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Deferred revenue
|
$
|
473
|
|
|
$
|
439
|
|
Compensation
|
176
|
|
|
250
|
|
Billings in excess of costs and earnings
|
391
|
|
|
434
|
|
Tax liabilities
|
93
|
|
|
111
|
|
Dividend payable
|
77
|
|
|
77
|
|
Trade liabilities
|
154
|
|
|
180
|
|
Other
|
544
|
|
|
620
|
|
|
$
|
1,908
|
|
|
$
|
2,111
|
|
Other Liabilities
Other liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Defined benefit plans
|
$
|
1,795
|
|
|
$
|
1,799
|
|
Deferred revenue
|
115
|
|
|
115
|
|
Unrecognized tax benefits
|
39
|
|
|
39
|
|
Deferred income taxes
|
140
|
|
|
121
|
|
Deferred consideration (Note 13)
|
74
|
|
|
72
|
|
Other
|
215
|
|
|
209
|
|
|
$
|
2,378
|
|
|
$
|
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
three months ended
April 1, 2017
, the Company paid an aggregate of
$178 million
, including transaction costs, to repurchase approximately
2.2 million
shares at an average price of
$80.82
per share. As of
April 1, 2017
, the Company had used approximately
$12.0 billion
of the share repurchase authority, including transaction costs, to repurchase shares, leaving
$2.0 billion
of authority available for future repurchases.
Payment of Dividends:
During the
three months ended
April 1, 2017
and
April 2, 2016
, the Company paid
$77 million
and
$71 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 months ended
April 1, 2017
and
April 2, 2016
:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
April 1,
2017
|
|
April 2,
2016
|
Foreign Currency Translation Adjustments:
|
|
|
|
Balance at beginning of period
|
$
|
(494
|
)
|
|
$
|
(266
|
)
|
Other comprehensive income before reclassification adjustment
|
37
|
|
|
14
|
|
Tax expense
|
(3
|
)
|
|
(1
|
)
|
Other comprehensive income, net of tax
|
34
|
|
|
13
|
|
Balance at end of period
|
$
|
(460
|
)
|
|
$
|
(253
|
)
|
Available-for-Sale Securities:
|
|
|
|
Balance at beginning of period
|
$
|
—
|
|
|
$
|
(3
|
)
|
Reclassification adjustment into Gains (losses) on sales of investments and businesses, net
|
—
|
|
|
6
|
|
Tax benefit
|
—
|
|
|
(2
|
)
|
Other comprehensive income, net of tax
|
—
|
|
|
4
|
|
Balance at end of period
|
$
|
—
|
|
|
$
|
1
|
|
Defined Benefit Plans:
|
|
|
|
Balance at beginning of period
|
(1,823
|
)
|
|
(1,597
|
)
|
Reclassification adjustment - Actuarial net losses into Selling, general, and administrative expenses
|
16
|
|
|
10
|
|
Reclassification adjustment - Prior service benefits into Selling, general, and administrative expenses
|
(4
|
)
|
|
(5
|
)
|
Reclassification adjustment - Non-U.S. pension settlement loss into Other charges
|
9
|
|
|
—
|
|
Tax benefit
|
(2
|
)
|
|
(1
|
)
|
Other comprehensive income, net of tax
|
19
|
|
|
4
|
|
Balance at end of period
|
$
|
(1,804
|
)
|
|
$
|
(1,593
|
)
|
|
|
|
|
Total Accumulated other comprehensive loss
|
$
|
(2,264
|
)
|
|
$
|
(1,845
|
)
|
3. Debt and Credit Facilities
As of
April 1, 2017
, the Company had a
$2.1 billion
unsecured syndicated revolving credit facility, which includes a
$500 million
letter of credit sub-limit with
$450 million
of fronting commitments, (the “2014 Motorola Solutions Credit Agreement”) scheduled to mature on May 29, 2019. The Company must comply with certain customary covenants, including a maximum leverage ratio as defined in the 2014 Motorola Solutions Credit Agreement. The Company was in compliance with its financial covenants as of
April 1, 2017
. The Company did
no
t borrow or issue any letters of credit under the 2014 Motorola Solutions Credit Agreement during the
three
months ended
April 1, 2017
.
Subsequent to
April 1, 2017
, the Company entered into a
$2.2 billion
syndicated, unsecured revolving credit facility expiring April 2022, which can be used for borrowing and letters of credit (the "2017 Revolving Credit Facility"). The 2017 Revolving Credit Facility has a
$500 million
letter of credit sub-limit. Borrowings under the facility bear interest at the prime rate plus the applicable margin, or at a spread above the London Interbank Offered Rate, at our option. An annual facility fee is payable on the undrawn amount of the credit line. The interest rate and facility fee are subject to adjustment if the Company's credit rating changes. Under the 2017 Revolving Credit Facility, the Company must comply with certain customary covenants including a maximum leverage ratio, as defined in the 2017 Revolving Credit Facility.
4. Risk Management
Foreign Currency Risk
As of
April 1, 2017
, the Company had outstanding foreign exchange contracts with notional amounts totaling
$692 million
, compared to
$717 million
outstanding at
December 31, 2016
. The Company does not believe these financial instruments should subject it to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset gains and losses on the underlying assets, liabilities and transactions.
The following table shows the
five
largest net notional amounts of the positions to buy or sell foreign currency as of
April 1, 2017
, and the corresponding positions as of
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
Net Buy (Sell) by Currency
|
April 1,
2017
|
|
December 31,
2016
|
British Pound
|
$
|
172
|
|
|
$
|
246
|
|
Euro
|
158
|
|
|
122
|
|
Chinese Renminbi
|
(120
|
)
|
|
(108
|
)
|
Brazilian Real
|
(54
|
)
|
|
(56
|
)
|
Australian Dollar
|
(42
|
)
|
|
(51
|
)
|
During the three months ended April 1, 2017, the Company entered into forward contracts to sell
£50 million
, expiring in December 2017. The forward contracts have been designated as a net investment hedge which is in place to partially hedge the Company's British Pound foreign currency exposure on its net investment in Airwave Solutions Limited for the purpose of future cash repatriations. The gains and losses on the Company's net investment in pound-denominated foreign operations, driven by changes in foreign exchange rates, are economically offset by movements in the fair values of the forward contracts designated as net investment hedges. Any changes in fair value of the net investment hedges are reflected as a component of Accumulated other comprehensive loss. As of April 1, 2017, the fair value of the derivative contract was de minimus.
Interest Rate Risk
One of the Company’s European subsidiaries has Euro-denominated loans. The interest on the Euro-denominated loans is variable. The Company has interest rate swap agreements in place which change the characteristics of interest rate payments from variable to maximum fixed-rate payments. The interest rate swaps are not designated as a hedge. As such, changes in the fair value of the interest rate swaps are included in Other income (expense) in the Company’s condensed consolidated statements of operations. The fair value of the interest rate swaps liability was de minimus at both
April 1, 2017
and
December 31, 2016
.
Counterparty Risk
The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of non-performance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. As of
April 1, 2017
, all of the counterparties have investment grade credit ratings. As of
April 1, 2017
, the Company had
$2 million
of exposure to aggregate net credit risk with all counterparties.
The following tables summarize the fair values and locations in the condensed consolidated balance sheets of all derivative financial instruments held by the Company as of
April 1, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values of Derivative Instruments
|
|
Assets
|
|
Liabilities
|
April 1, 2017
|
Fair
Value
|
|
Balance
Sheet
Location
|
|
Fair
Value
|
|
Balance
Sheet
Location
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
2
|
|
|
Other current assets
|
|
$
|
3
|
|
|
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values of Derivative Instruments
|
|
Assets
|
|
Liabilities
|
December 31, 2016
|
Fair
Value
|
|
Balance
Sheet
Location
|
|
Fair
Value
|
|
Balance
Sheet
Location
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
9
|
|
|
Other current assets
|
|
$
|
32
|
|
|
Accrued liabilities
|
The fair value of derivatives designated as hedging instruments at April 1, 2017 was de minimus.
The following table summarizes the effect of derivatives not designated as hedging instruments on the Company's condensed consolidated statements of operations for the
three months ended
April 1, 2017
and
April 2, 2016
:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Statements of
Operations Location
|
Loss on Derivative Instruments
|
April 1,
2017
|
|
April 2,
2016
|
|
Foreign exchange contracts
|
(7
|
)
|
|
(12
|
)
|
|
Other income (expense)
|
5. Income Taxes
At the end of each interim reporting period, the Company makes an estimate of its annual effective income tax rate. Tax expense in interim periods is calculated at the estimated annual effective tax rate plus or minus the tax effects of items of income and expense that are discrete to the period. The estimate used in providing for income taxes on a year-to-date basis may change in subsequent interim periods.
The following table provides details of income taxes:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
April 1,
2017
|
|
April 2,
2016
|
Net earnings before income taxes
|
$
|
120
|
|
|
$
|
22
|
|
Income tax expense
|
42
|
|
|
5
|
|
Effective tax rate
|
35
|
%
|
|
23
|
%
|
The Company recorded
$42 million
of net tax expense in the
first
quarter of
2017
resulting in an effective tax rate of
35%
, compared to
$5 million
of net tax expense in the
first
quarter of
2016
resulting in an effective tax rate of
23%
. The effective tax rate in the
first
quarter of
2017
was equal to the U.S. statutory tax rate of
35%
. The effective tax rate in the
first
quarter of
2016
was lower than the U.S. statutory tax rate of
35%
primarily due to the recognition of excess tax benefits on share-based compensation in income tax expense. The effective tax rate in the
first
quarter of
2016
was also positively impacted by the release of unrecognized tax benefit reserves, offset by increases in state valuation allowances and other adjustments to certain deferred tax assets.
6. Retirement and Other Employee Benefits
Pension and Postretirement Health Care Benefits Plans
The net periodic costs (benefits) for Pension and Postretirement Health Care Benefits Plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefit Plans
|
|
Non U.S. Pension Benefit Plans
|
|
Postretirement Health Care Benefits Plan
|
Three Months Ended
|
April 1, 2017
|
|
April 2, 2016
|
|
April 1, 2017
|
|
April 2, 2016
|
|
April 1, 2017
|
|
April 2, 2016
|
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
46
|
|
|
46
|
|
|
10
|
|
|
14
|
|
|
1
|
|
|
1
|
|
Expected return on plan assets
|
(58
|
)
|
|
(55
|
)
|
|
(23
|
)
|
|
(24
|
)
|
|
(3
|
)
|
|
(2
|
)
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net loss
|
11
|
|
|
9
|
|
|
4
|
|
|
3
|
|
|
1
|
|
|
1
|
|
Unrecognized prior service benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(5
|
)
|
Settlement loss
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net periodic pension cost (benefit)
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
During the
three months ended
April 1, 2017
, the Company offered lump-sum settlements to certain participants in the Non-US defined benefit plan within the United Kingdom. The lump-sum settlements were targeted to certain participants who had accrued a pension benefit, but had not yet started receiving pension benefit payments. As a result of the actions taken, the Company recorded a settlement loss of
$9
million as of
April 1, 2017
, which is recorded within Other Charges within the condensed consolidated statement of operations.
7. Share-Based Compensation Plans
Compensation expense for the Company’s share-based compensation plans was as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
April 1,
2017
|
|
April 2,
2016
|
Share-based compensation expense included in:
|
|
|
|
Costs of sales
|
$
|
2
|
|
|
$
|
2
|
|
Selling, general and administrative expenses
|
11
|
|
|
12
|
|
Research and development expenditures
|
4
|
|
|
3
|
|
Share-based compensation expense included in Operating earnings
|
17
|
|
|
17
|
|
Tax benefit
|
6
|
|
|
5
|
|
Share-based compensation expense, net of tax
|
$
|
11
|
|
|
$
|
12
|
|
Decrease in basic earnings per share
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
Decrease in diluted earnings per share
|
$
|
(0.06
|
)
|
|
$
|
(0.07
|
)
|
During the
three months ended
April 1, 2017
, the Company granted
0.5 million
RSUs and market stock units ("MSUs") with an aggregate grant-date fair value of
$42 million
and
0.9 million
stock options and performance options ("POs") with an aggregate grant-date fair value of
$13 million
. Share-based compensation expense will generally be recognized over the vesting period of
three years
.
8. Fair Value Measurements
The Company holds certain fixed income securities, equity securities and derivatives, which are recognized and disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Fair value is measured using the fair value hierarchy and related valuation methodologies as defined in the authoritative literature. This guidance specifies a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions about current market conditions.
The fair value hierarchy and related valuation methodologies are as follows:
Level 1—Quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
Level 3—Valuations derived from valuation techniques, in which one or more significant inputs are unobservable.
The fair values of the Company’s financial assets and liabilities by level in the fair value hierarchy as of
April 1, 2017
and
December 31, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
April 1, 2017
|
|
Level 2
|
|
Total
|
Assets:
|
|
|
|
|
Foreign exchange derivative contracts
|
|
$
|
2
|
|
|
$
|
2
|
|
Available-for-sale securities:
|
|
|
|
|
Government, agency, and government-sponsored enterprise obligations
|
|
$
|
50
|
|
|
$
|
50
|
|
Corporate bonds
|
|
5
|
|
|
5
|
|
Liabilities:
|
|
|
|
|
Foreign exchange derivative contracts
|
|
$
|
3
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Level 2
|
|
Total
|
Assets:
|
|
|
|
|
Foreign exchange derivative contracts
|
|
$
|
9
|
|
|
$
|
9
|
|
Available-for-sale securities:
|
|
|
|
|
Government, agency, and government-sponsored enterprise obligations
|
|
51
|
|
|
51
|
|
Corporate bonds
|
|
5
|
|
|
5
|
|
Liabilities:
|
|
|
|
|
Foreign exchange derivative contracts
|
|
$
|
32
|
|
|
$
|
32
|
|
The Company had no Level 3 holdings as of
April 1, 2017
or
December 31, 2016
.
At
April 1, 2017
and
December 31, 2016
, the Company had
$299 million
and
$309 million
, respectively, of investments in money market prime and government funds (Level 1) classified as Cash and cash equivalents in its condensed consolidated balance sheets. The money market funds had quoted market prices that are equivalent to par.
Using quoted market prices and market interest rates, the Company determined that the fair value of long-term debt at
April 1, 2017
and
December 31, 2016
was
$4.5 billion
(Level 2).
All other financial instruments are carried at cost, which is not materially different from the instruments’ fair values.
9. Long-term Financing and Sales of Receivables
Long-term Financing
Long-term receivables consist of receivables with payment terms greater than twelve months, long-term loans and lease receivables under sales-type leases. Long-term receivables consist of the following:
|
|
|
|
|
|
|
|
|
|
April 1,
2017
|
|
December 31,
2016
|
Long-term receivables
|
46
|
|
|
63
|
|
Less current portion
|
(16
|
)
|
|
(14
|
)
|
Non-current long-term receivables
|
$
|
30
|
|
|
$
|
49
|
|
The current portion of long-term receivables is included in Accounts receivable, net and the non-current portion of long-term receivables is included in Other assets in the Company’s condensed consolidated balance sheets. The Company had outstanding commitments to provide long-term financing to third parties totaling
$186 million
at
April 1, 2017
, compared to
$125 million
at
December 31, 2016
.
Sales of Receivables
The following table summarizes the proceeds received from sales of accounts receivable and long-term receivables for the
three months ended
April 1, 2017
and
April 2, 2016
:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
April 1,
2017
|
|
April 2,
2016
|
Accounts receivable sales proceeds
|
$
|
19
|
|
|
$
|
2
|
|
Long-term receivables sales proceeds
|
46
|
|
|
64
|
|
Total proceeds from receivable sales
|
$
|
65
|
|
|
$
|
66
|
|
At
April 1, 2017
, the Company had retained servicing obligations for
$768 million
of long-term receivables, compared to
$774 million
of long-term receivables at
December 31, 2016
. Servicing obligations are limited to collection activities related to the sales of accounts receivables and long-term receivables.
Credit Quality of Financing Receivables and Allowance for Credit Losses
An aging analysis of financing receivables at
April 1, 2017
and
December 31, 2016
is as follows:
|
|
|
|
|
|
|
|
|
April 1, 2017
|
Total
Long-term
Receivable
|
|
Past Due Under 90 Days
|
Municipal leases secured tax exempt
|
$
|
14
|
|
|
$
|
1
|
|
Commercial loans and leases secured
|
32
|
|
|
—
|
|
Long-term receivables, including current portion
|
$
|
46
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
Total
Long-term
Receivable
|
|
Past Due Over 90 Days
|
Municipal leases secured tax exempt
|
$
|
20
|
|
|
$
|
—
|
|
Commercial loans and leases secured
|
43
|
|
|
2
|
|
Long-term receivables, including current portion
|
$
|
63
|
|
|
$
|
2
|
|
10. Commitments and Contingencies
Legal Matters
The Company is a defendant in various lawsuits, claims, and actions, which arise in the normal course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's condensed consolidated financial position, liquidity, or results of operations. However, an unfavorable resolution could have a material adverse effect on the Company's consolidated financial position, liquidity, or results of operations in the periods in which the matters are ultimately resolved, or in the periods in which more information is obtained that changes management's opinion of the ultimate disposition.
Other Indemnifications
The Company is a party to a variety of agreements pursuant to which it is obligated to indemnify the other party with respect to certain matters. In indemnification cases, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party's claims. In some instances, the Company may have recourse against third parties for certain payments made by the Company.
Some of these obligations arise as a result of divestitures of the Company's assets or businesses and require the Company to indemnify the other party against losses arising from breaches of representations and warranties and covenants and, in some cases, the settlement of pending obligations. The Company's obligations under divestiture agreements for indemnification based on breaches of representations and warranties are generally limited in terms of duration and to amounts not in excess of a percentage of the contract value. The Company had
no
accruals for any such obligations at
April 1, 2017
.
In addition, the Company may provide indemnifications for losses that result from the breach of general warranties contained in certain commercial and intellectual property agreements. Historically, the Company has not made significant payments under these agreements.
11. Segment Information
The Company conducts its business globally and manages it through the following
two
segments:
Products:
The Products segment is comprised of Devices and Systems. Devices includes two-way portable and vehicle-mounted radios, accessories, software features, and upgrades. Systems includes the radio network core and central processing software, base stations, consoles, repeaters, and software applications and features. The primary customers of the Products segment are government, public safety and first-responder agencies, municipalities, and commercial and industrial customers who operate private communications networks and manage a mobile workforce.
Services:
The Services segment provides a full set of offerings for government, public safety and commercial communication networks including: (i) Integration services, (ii) Managed & Support services, and (iii) iDEN services. Integration services includes implementation, optimization, and integration of networks, devices, software, and applications. Managed & Support services includes a continuum of service offerings beginning with repair, technical support and hardware maintenance. More advanced offerings include network monitoring, software maintenance and cyber security services. Managed service offerings range from partial or full operation of customer owned networks to operation of Motorola Solutions owned networks. Services are provided across all radio network technologies, Command Center Consoles and Smart Public Safety Solutions. iDEN services consists primarily of hardware and software maintenance services for our legacy iDEN customers.
The following table summarizes Net sales by segment:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
April 1,
2017
|
|
April 2,
2016
|
Products
|
$
|
703
|
|
|
$
|
702
|
|
Services
|
578
|
|
|
491
|
|
|
$
|
1,281
|
|
|
$
|
1,193
|
|
The following table summarizes the Operating earnings by segment:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
April 1,
2017
|
|
April 2,
2016
|
Products
|
$
|
89
|
|
|
$
|
51
|
|
Services
|
87
|
|
|
49
|
|
Operating earnings
|
176
|
|
|
100
|
|
Total other expense
|
(56
|
)
|
|
(78
|
)
|
Earnings before income taxes
|
$
|
120
|
|
|
$
|
22
|
|
12. Reorganization of Business
2017
Charges
During the
three months ended
April 1, 2017
, the Company recorded net reorganization of business charges of
$19 million
including
$15 million
of charges in Other charges and
$4 million
of charges in Cost of sales in the Company's condensed consolidated statements of operations. Included in the
$19 million
were charges of
$15 million
related to employee separation costs and
$4 million
for exit costs.
The following table displays the net charges incurred by segment:
|
|
|
|
|
April 1, 2017
|
Three Months Ended
|
Products
|
$
|
13
|
|
Services
|
6
|
|
|
$
|
19
|
|
The following table displays a rollforward of the reorganization of business accruals established for lease exit costs and employee separation costs from
January 1, 2017
to
April 1, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2017
|
|
Additional
Charges
|
|
Amount
Used
|
|
April 1, 2017
|
Exit costs
|
$
|
7
|
|
|
$
|
4
|
|
|
$
|
(1
|
)
|
|
$
|
10
|
|
Employee separation costs
|
94
|
|
|
15
|
|
|
(29
|
)
|
|
80
|
|
|
$
|
101
|
|
|
$
|
19
|
|
|
$
|
(30
|
)
|
|
$
|
90
|
|
Exit Costs
At
January 1, 2017
, the Company had
$7 million
of accruals for exit costs. During the
three months ended
April 1, 2017
, there were
$4 million
of additional charges and
$1 million
of cash payments related to the exit of leased facilities. The remaining accrual of
$10 million
, which is included in Accrued liabilities in the Company’s condensed consolidated balance sheets at
April 1, 2017
, primarily represents future cash payments for lease obligations that are expected to be paid over a number of years.
Employee Separation Costs
At
January 1, 2017
, the Company had an accrual of
$94 million
for employee separation costs. The
2017
additional charges of
$15 million
represent severance costs for approximately
200
employees. The
$29 million
used reflects cash payments to severed employees. The remaining accrual of
$80 million
, which is included in Accrued liabilities in the Company’s condensed consolidated balance sheets at
April 1, 2017
, is expected to be paid, primarily within one year, to approximately
700
employees, who have either been severed or have been notified of their severance and have begun or will begin receiving payments.
2016
Charges
During the
three months ended
April 2, 2016
, the Company recorded net reorganization of business charges of
$23 million
including
$7 million
of charges in Other charges and
$16 million
of charges in Cost of sales in the Company's condensed consolidated statements of operations. Included in the
$23 million
were charges of: (i)
$24 million
related to employee separation costs, (ii)
$3 million
for the impairment of the corporate aircraft, partially offset by
$4 million
of reversals for accruals no longer needed.
The following table displays the net charges incurred by segment:
|
|
|
|
|
April 2, 2016
|
Three Months Ended
|
Products
|
$
|
21
|
|
Services
|
2
|
|
|
$
|
23
|
|
13. Intangible Assets and Goodwill
The Company accounts for acquisitions using purchase accounting with the results of operations for each acquiree included in the Company's consolidated financial statements for the period subsequent to the date of acquisition.
Guardian Digital Communications Limited
On February 19, 2016, the Company completed the acquisition of Guardian Digital Communications Limited ("GDCL"), a holding company of Airwave Solutions Limited (collectively referred to as "Airwave"), the largest private operator of a public safety network in the world. All of the outstanding equity of Airwave was acquired for the sum of
£1
, after which the Company invested into Airwave
£698 million
, net of cash acquired, or approximately
$1.0 billion
, to settle all third party debt. The Company will make a deferred cash payment of
£64 million
on November 15, 2018.
The acquisition of Airwave enables the Company to geographically diversify its global Managed & Support services offerings, while offering a proven service delivery platform to build on for providing innovative, leading, mission-critical communications solutions and services to customers.
The acquisition of Airwave has been accounted for at fair value as of the acquisition date, based on the fair value of the total consideration transferred which has been attributed to all identifiable assets acquired and liabilities assumed and measured at fair value.
The total consideration for the acquisition of Airwave was approximately
$1.1 billion
, consisting of cash payments of
$1.0 billion
, net of cash acquired, and deferred consideration valued at fair value on the date of the acquisition of
$82 million
. The fair value of deferred consideration has been determined based on its net present value, calculated using a discount rate of
4.2%
, which is reflective of the credit standing of the combined entity. The following table summarizes fair values of assets acquired and liabilities assumed as of the February 19, 2016 acquisition date:
|
|
|
|
|
|
Cash
|
|
$
|
86
|
|
Accounts receivable, net
|
|
55
|
|
Other current assets
|
|
36
|
|
Property, plant and equipment, net
|
|
245
|
|
Deferred income taxes
|
|
82
|
|
Accounts payable
|
|
(18
|
)
|
Accrued liabilities
|
|
(181
|
)
|
Other liabilities
|
|
(289
|
)
|
Goodwill
|
|
191
|
|
Intangible assets
|
|
875
|
|
Total consideration
|
|
$
|
1,082
|
|
Net present value of deferred consideration payment to former owners
|
|
(82
|
)
|
Net cash consideration at purchase
|
|
$
|
1,000
|
|
Acquired intangible assets consist of
$846 million
of customer relationships and
$29 million
of trade names. All intangibles have a useful life of
seven years
, over which amortization expense will be recognized on a straight line basis. Acquired goodwill of
$191 million
is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. Goodwill is not deductible for tax purposes.
Other Acquisitions
On May 1, 2017, the Company announced its intention to purchase Kodiak Networks, a provider of broadband push-to-talk (PTT) for commercial customers. The acquisition of Kodiak Networks reflects Motorola Solutions' strategy to build its communications and collaboration software portfolio. The acquisition is expected to be completed later this year.
On March 13, 2017, the Company completed the acquisition of Interexport, a company that provides Managed & Support services for communications systems to public safety and commercial customers in Chile, for a gross purchase price of $
98 billion
Chilean Pesos, or approximately
$147 million
U.S. Dollars based on cash proceeds of
$55 million
, net of cash acquired, and assumed liabilities of
$92 million
, primarily related to capital leases. As a result of the acquisition, the Company recognized
$3 million
of goodwill,
$68 million
of identifiable intangible assets, and
$70 million
of acquired property, plant and equipment and
$6 million
of net other tangible assets. The estimated identifiable intangible assets were classified as
$63 million
of customer-related intangibles and
$5 million
of other intangibles and will be amortized over a period of
seven years
. As of April 1, 2017, the purchase accounting is not yet complete and as such the final allocation between identifiable intangibles and goodwill may be subject to change.
On November 10, 2016, the Company completed the acquisition of Spillman Technologies, Inc., a provider of comprehensive law enforcement and public safety software solutions, for a gross purchase price of
$217 million
. As a result of the acquisition, the Company recognized
$140 million
of goodwill,
$115 million
of identifiable intangible assets, and
$38 million
of acquired liabilities. The identifiable intangible assets were classified as
$49 million
of completed technology,
$59 million
of customer-related intangibles, and
$7 million
of other intangibles and will be amortized over a period of
seven
to
ten years
.
During the year ended December 31, 2016, the Company completed the acquisition of several software and service-based providers for a total of
$30 million
, recognizing
$6 million
of goodwill,
$15 million
of intangible assets, and
$9 million
of tangible net assets related to these acquisitions. Under the preliminary purchase accounting, the
$15 million
of identifiable intangible assets were classified as: (i)
$7 million
of completed technology and (ii)
$8 million
of customer-related intangibles and will be amortized over a period of
five years
. During the first quarter of 2017, the Company completed the purchase accounting and recorded an additional
$11 million
completed technology intangible asset that will be amortized over a period of
eight years
.
Intangible Assets
Amortized intangible assets were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2017
|
|
December 31, 2016
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
Completed technology
|
$
|
128
|
|
|
$
|
42
|
|
|
$
|
116
|
|
|
$
|
38
|
|
Patents
|
8
|
|
|
6
|
|
|
8
|
|
|
6
|
|
Customer-related
|
888
|
|
|
133
|
|
|
810
|
|
|
101
|
|
Other intangibles
|
53
|
|
|
18
|
|
|
49
|
|
|
17
|
|
|
$
|
1,077
|
|
|
$
|
199
|
|
|
$
|
983
|
|
|
$
|
162
|
|
Amortization expense on intangible assets was
$36 million
for the
three months ended
April 1, 2017
and
$13 million
for the
three months ended
April 2, 2016
. The increase in amortization expense is primarily due to the acquisition of Airwave and Spillman Technologies, Inc. As of
April 1, 2017
, annual amortization expense is estimated to be
$134 million
in
2017
,
$143 million
in
2018
,
$142 million
in
2019
,
$139 million
in
2020
,
$138 million
in
2021
, and
$135 million
in
2022
.
Amortized intangible assets, excluding goodwill, were comprised of the following by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2017
|
|
December 31, 2016
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
Products
|
$
|
178
|
|
|
$
|
69
|
|
|
$
|
178
|
|
|
$
|
63
|
|
Services
|
899
|
|
|
130
|
|
|
805
|
|
|
99
|
|
|
$
|
1,077
|
|
|
$
|
199
|
|
|
$
|
983
|
|
|
$
|
162
|
|
Goodwill
The following table displays a rollforward of the carrying amount of goodwill by segment from
January 1, 2017
to
April 1, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
Services
|
|
Total
|
Balance as of January 1, 2017
|
|
|
|
|
|
Goodwill, net of impairment losses
|
$
|
316
|
|
|
$
|
412
|
|
|
$
|
728
|
|
Goodwill acquired
|
—
|
|
|
3
|
|
|
3
|
|
Purchase accounting adjustments
|
1
|
|
|
1
|
|
|
2
|
|
Foreign currency
|
—
|
|
|
4
|
|
|
4
|
|
Balance as of April 1, 2017
|
|
|
|
|
|
Goodwill, net of impairment losses
|
$
|
317
|
|
|
$
|
420
|
|
|
$
|
737
|
|