** N/M = Percent change is not meaningful due to the prior year net loss related to tax reform
OTHER SELECT FOURTH-QUARTER FINANCIAL RESULTS
- Revenue - Fourth-quarter sales were $2.3 billion, up $297 million, or 15 percent from the year-ago quarter, driven by growth in the Americas and EMEA. Approximately $159 million was related to acquisitions, and $25 million was related to the adoption of ASC 606. The Products and Systems Integration segment grew 16 percent driven by the Americas and EMEA. The Services and Software segment grew 12 percent with growth in all regions.
- Operating margin - GAAP operating margin was 22.9 percent of sales, compared with 25.7 percent in the year-ago quarter. The decline was primarily due to costs related to the closure of certain supply chain operations in Europe and acquisition-related operating expenses. Non-GAAP operating margin was 28.8 percent of sales, compared with 28.9 percent in the year-ago quarter. Higher gross margins were offset by higher operating expenses related to acquisitions.
- Taxes - The GAAP effective tax rate was 8.8 percent, compared with 223.4 percent in the year-ago quarter. The non-GAAP effective tax rate was 23.5 percent compared with 32.8 percent in the year-ago quarter. Both tax rates for the fourth quarter of 2018 were favorably affected by the ongoing rate reduction and by other provisional adjustments as a result of the U.S. Tax Cuts and Jobs Act of 2017.
- Cash flow - Operating cash flow was $812 million, compared with $761 million of operating cash generated in the year-ago quarter driven primarily by higher earnings. Free cash flow was $743 million, compared with $740 million in the year-ago quarter on higher earnings partially offset by higher capital expenditures related primarily to the Airwave extension.
- Capital allocation - The company paid $85 million in cash dividends, repurchased $66 million of common stock and repaid the remaining $100 million on the revolving credit facility.
- Backlog - The company ended the quarter with backlog of $10.6 billion, up $988 million from the year-ago quarter inclusive of a $205 million unfavorable currency change. Services and Software backlog was up 18 percent or $1.1 billion primarily due to growth in the Americas and the Airwave contract extension through the end of 2022. Products and Systems Integration backlog was down $116 million primarily on two large system deployments in the Middle East and Africa. Products and System Integration backlog grew in the Americas and AP.
OTHER SELECT FULL-YEAR FINANCIAL RESULTS
- Revenue - Full-year sales were $7.3 billion, up $963 million, or 15 percent driven by growth in the Americas and EMEA. Approximately $507 million of revenue growth was related to acquisitions, and $83 million was related to the adoption of ASC 606. The Products and Systems Integration segment grew 13 percent driven by the Americas and EMEA. The Services and Software segment grew 20 percent with growth in all regions.
- Operating margin - GAAP operating margin was 17.1 percent of sales, compared with 20.1 percent in the prior year driven primarily by costs related to the closure of certain supply chain operations in Europe, an increase to an existing environmental reserve related to a legacy business and higher expenses related to acquisitions. Non-GAAP operating margin was 23.7 percent of sales, compared with 23.6 percent in the prior year due to higher revenue and gross margin partially offset by higher operating expenses related to acquisitions.
- Taxes - The GAAP effective tax rate was 12.0 percent, compared with 114.1 percent in 2017. The Non-GAAP effective tax rate was 21.7 percent compared with 31.0 percent in the previous year. Both the tax rates for the full year 2018 were favorably affected primarily by the ongoing rate reduction and by other provisional adjustments as a result of the U.S. Tax Cuts and Jobs Act of 2017.
- Cash flow - Operating cash flow was $1.1 billion, compared with $1.3 billion in the prior year. Excluding the voluntary $500 million debt funded U.S. pension contribution in Q1, operating cash flow was $1.575 billion. Free cash flow was $878 million, compared with $1.1 billion in the prior year. Excluding the U.S. pension contribution in Q1, free cash flow was $1.4 billion. The higher cash flow, excluding the U.S. pension contribution, was driven primarily by higher earnings.
- Capital allocation - The company repurchased $132 million of its common stock, paid $337 million in cash dividends and invested $1.2 billion in acquisitions. From a financing perspective, the company issued $500 million in senior unsecured debt to make a $500 million voluntary contribution to the U.S. pension plan in Q1. Additionally, the company entered into a $400 million term loan and borrowed $400 million under the revolving credit facility to complete the Avigilon acquisition in Q1. The revolving credit facility was paid off throughout the year. The company also repurchased 20 percent of the Silver Lake convertible notes for $369 million in Q3, of which $200 million of principal was repaid with new senior unsecured debt in Q4.
