UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ending April 1, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to _________
Commission file number: 1-7221
MOTOROLA, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-1115800
(State of Incorporation) (I.R.S. Employer Identification No.)
1303 E. Algonquin Road, Schaumburg, Illinois 60196
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 576-5000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of
common stock as of the close of business on April 1, 1995:
Class Number of Shares
Common Stock; $3 Par Value 588,573,987
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
INDEX
Part I
FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Statements of Consolidated Earnings
Three-Month Periods ended
April 1, 1995 and April 2, 1994 3
Condensed Consolidated Balance Sheets at
April 1, 1995 and December 31, 1994 4
Statements of Condensed Consolidated Cash Flows
Three-Month Periods ended
April 1, 1995 and April 2, 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II
OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
PART I - FINANCIAL INFORMATION
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
(Unaudited)
(In millions, except per share amounts)
THREE MONTHS ENDED
April 1, April 2,
1995 1994
Net sales $ 6,011 $ 4,693
Costs and expenses
Manufacturing and other costs of sales 3,878 2,908
Selling, general and
administrative expenses 1,090 986
Depreciation expense 431 310
Interest expense, net 21 37
Total costs and expenses 5,420 4,241
Earnings before income taxes 591 452
Income taxes provided on earnings 219 154
Net earnings $ 372 $ 298
Net earnings per common and common equivalent share (1,2)
Fully diluted:
Net earnings per common and common
equivalent share $ .61 $ .51
Average common and common equivalent shares
outstanding, fully diluted (in millions) 608.7 589.3
Dividends paid per share $ .10 $ .055
(1) All 1994 earnings per common and common equivalent share, dividend
and average common and common equivalent shares outstanding have
been restated to reflect the April 18, 1994 two-for-one stock split
effected in the form of a 100 percent stock dividend payable to
stockholders of record on March 15, 1994.
(2) Average primary common and common equivalent shares outstanding for
the three months ended April 1, 1995 and April 2, 1994 were 608.7
million and 589.3 million, respectively. Primary earnings per
common and common equivalent share were the same as fully diluted
for the first quarters ended April 1, 1995 and April 2, 1994.
See accompanying notes to condensed consolidated financial statements.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
April 1, December 31,
1995 1994
ASSETS
Cash and cash equivalents $ 850 $ 741
Short-term investments 334 318
Accounts receivable, less allowance for
doubtful accounts (1995, $122; 1994, $118) 3,630 3,421
Inventories 3,024 2,670
Other current assets 1,818 1,775
Total current assets 9,656 8,925
Property, plant and equipment, less
accumulated depreciation
(1995, $7,121; 1994, $6,657) 7,735 7,073
Other assets 1,553 1,538
Total Assets $18,944 $17,536
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $ 1,530 $ 916
Accounts payable 1,743 1,678
Accrued liabilities 3,600 3,323
Total current liabilities 6,873 5,917
Long-term debt 1,126 1,127
Other liabilities 1,480 1,396
Stockholders' equity 9,465 9,096
Total liabilities and stockholders' equity $18,944 $17,536
See accompanying notes to condensed consolidated financial statements.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
(In millions)
Three Months Ended
April 1, April 2,
1995 1994
NET CASH PROVIDED BY OPERATIONS $ 639 $ 82
INVESTING
Payments for property, plant and equipment (969) (613)
(Increase) decrease in short-term investments (16) 28
(Increase) decrease in other investing
activities (132) 94
Net cash used for investing activities (1,117) (491)
FINANCING
Net increase in commercial paper
and short-term borrowings 620 254
Proceeds from issuance of debt 1 17
Repayment of debt (9) (3)
Payment of dividends to stockholders (59) (31)
Other financing activities 34 14
Net cash provided by financing activities 587 251
Net increase (decrease) in cash and
cash equivalents $ 109 $ (158)
Cash and cash equivalents, beginning of year $ 741 $ 886
Cash and cash equivalents, end of period $ 850 $ 728
See accompanying notes to condensed consolidated financial statements.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The Condensed Consolidated Balance Sheet as of April 1, 1995, the
Statements of Consolidated Earnings for the three-month periods ended
April 1, 1995 and April 2, 1994, and the Statements of Condensed
Consolidated Cash Flows for the three-month periods ended April 1, 1995
and April 2, 1994 have been prepared by the Company. In the opinion of
management, all adjustments (which include reclassifications and normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at April 1, 1995 and for
all periods presented, have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's December 31, 1994 annual report to stockholders. The
results of operations for the three-month period ended April 1, 1995 are
not necessarily indicative of the operating results for the full year.
2. INVENTORIES
Inventories consist of the following (in millions):
April 1, Dec. 31,
1995 1994
Finished goods $ 905 $ 699
Work in process and productions materials 2,119 1,971
$ 3,024 $ 2,670
3. INCOME TAXES
The Internal Revenue Service (IRS) has examined the federal income tax
returns for Motorola, Inc. through 1985 and the returns have been
settled through that year. The settlement did not result in a material
adverse effect on the consolidated financial position, liquidity or
results of operations of the Company. The IRS has completed its field
audit of the years 1986 and 1987. In connection with these audits, the
IRS has proposed adjustments to the Company's income and tax credits for
those years which would result in additional tax. The Company disagrees
with most of the proposed adjustments and is contesting them. In the
opinion of the Company's management the final disposition of these
matters, and proposed adjustments from other tax authorities, will not
have a material adverse effect on the consolidated financial position,
liquidity or results of operations of the Company.
4. SUPPLEMENTAL CASH FLOWS INFORMATION
Cash payments for income taxes were $204 million during the first three
months of 1995 and $169 million for the same period a year earlier.
Cash payments for interest expense (net of amount capitalized) were $51
million and $38 million, for the first three-month periods of 1995 and
1994, respectively.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This commentary should be read in conjunction with the sections of the
following documents for a full understanding of Motorola's financial
condition and results of operations: from Motorola, Inc.'s 1994 Annual
Report to Stockholders, the Letter to Stockholders - Financial Results
paragraph on page 2, the Review of Operations section on pages 20
through 23, the Financial Review section on pages 24 through 28, and the
Consolidated Financial Statements and Footnotes to the Consolidated
Financial Statements, pages 30 through 43; and from Motorola, Inc.'s
Quarterly Report on Form 10-Q for the period ending April 1, 1995, of
which this commentary is a part, the Condensed Consolidated Financial
Statements and Notes to the Condensed Consolidated Financial Statements,
pages 3 through 7.
RESULTS OF OPERATIONS:
Motorola, Inc. reported higher sales and earnings for the first quarter
of 1995. Sales rose to $6.0 billion in the first quarter of 1995, up 28
percent from $4.7 billion a year earlier. Earnings were $372 million,
compared with $298 million in the same period a year earlier. Primary
and fully diluted net earnings per common and common equivalent share
for the first quarter of 1995 were 61 cents, compared to 51 cents a year
earlier. The 1994 per-share figures reflect a two-for-one stock split
paid April 18, 1994 to stockholders of record as of March 15, 1994.
Motorola's net margin on sales (net earnings divided by net sales)
during the first quarter of 1995 was 6.2 percent compared to 6.4 percent
for the year earlier period.
General Systems Sector's segment sales rose to $2.3 billion, an increase
of 41 percent from the first quarter of 1994. Orders increased 37
percent and operating profits were higher than in the first quarter of
1994. Manufacturing margins declined in the Cellular Subscriber Group
(CSG) and increased in the Cellular Infrastructure Group (CIG). The
decline in CSG's manufacturing margins was a result of Motorola's
strategy of being a price leader in a very price competitive market, a
products mix shift towards digital telephone sales which realizes lower
margins, and reduced capacity utilization from production cut-backs
related to the levels of cellular phones in the U.S. distribution
channels. At CSG, sales and orders were higher than in the year-earlier
period, although sales and orders increased worldwide at a lower rate
than the average of the last several years and were lower in Pan
America, where excess inventory has accumulated in the U.S. distribution
channels in 1994. Good progress has been made in reducing the above
excess inventory, and the Company currently expects that these
inventories should return to more acceptable levels during the second
quarter. Order backlog was up substantially in CIG and flat in CSG and
the Computer Group.
Segment sales in the Semiconductor Products Sector increased 16 percent
from the first quarter of 1994 to $1.9 billion, the 25th consecutive
quarter of growth. Orders increased 24 percent and operating profits
were higher than in the first quarter of 1994. All major market regions
posted order growth, led by Europe and Asia-Pacific. Among market
segments, automotive, industrial and communications showed the greatest
strength. Distribution orders also were higher. Highest order growth
among products included RISC (reduced instruction set computer)
microprocessors, fast static random access memories and digital signal
processors. Manufacturing margins and operating margins declined during
the first quarter of 1995 compared to the first quarter of 1994 and
compared to the fourth quarter of 1994, primarily due to start-up costs,
increased depreciation and inefficiencies related to the new
manufacturing capacity. The Company presently expects that this segment
will continue to incur significant start-up costs and inefficiencies for
a few quarters as a result of its capacity expansion program and its
increased depreciation costs as a percent of its sales. Based on the
recent past and capacity considerations, it also presently expects that
the sales growth rate of this segment will probably lag the order growth
rate and backlog increase through most of these quarters, as was the
case in the first quarter of 1995. Order backlog increased for this
segment in the first quarter of 1995.
Motorola's Semiconductor Product Sector continues to experience limits
on the amount of orders it can accept for certain types of products, due
to capacity constraints. These constraints may also restrict Motorola's
ability to ship cellular telephones and certain other products. If
customer demand for semiconductors and wireless communications products
remains strong, Motorola does not expect that these capacity constraints
will ease until sufficient wafer fabrication capacity becomes available,
which is expected to start for some products during 1995.
In the Messaging, Information and Media Segment businesses, composed of
the Paging Products and Wireless Data Groups (formerly reported as part
of the Communications Segment) and Information Systems Group (formerly
reported as part of the "Other Products" segment), segment sales
increased 24 percent to $788 million and operating profits were higher
from the first quarter of 1994. The operating margin increased. Orders
increased 31 percent from the first quarter of 1994 and backlog
increased. Paging Products Group orders increased significantly.
Growth within the Paging international markets, led by China and Europe,
offset somewhat lower orders in the United States. The Paging Group
dominates the financial performance of this segment. In the Information
Systems Group, orders increased at a double digit rate, while sales
improved modestly and the operating profit was lower than a year ago.
In the Land Mobile Products Sector business segment, made up of the
Radio Products, Radio Parts and Services, Network Services and Business
Strategies, and Radio Network Solutions Groups and formerly part of the
Communications Segment, sales increased 5 percent to $785 million and
operating profits were lower from the first quarter of 1994.
Manufacturing and operating margins also declined. Orders increased 17
percent from the first quarter of 1994. Orders were higher in all
regions, led by Asia. In the U.S., the sales growth rate for iDEN
(Trademark symbol inserted here),
Integrated Dispatch Enhanced Network equipment (formerly Motorola
Integrated Radio System, MIRS(Trademark symbol inserted here)) was lower
than the 1994 second-half growth rate
because of the need by Nextel Communications, Inc. and other
customers to conclude merger, business planning and financing
activities, as well as system optimization and build-out issues. This
slow down in sales adversely affected the Segment's manufacturing margin
as capacity utilization declined. This pattern is expected to continue
as the Company and its customers continue with iDEN related issues which
must be resolved before any accelerated nationwide build-out of these
systems can proceed. Gross margins on iDEN products will vary from
quarter to quarter depending on the types of equipment sold under
various contracts. New infrastructure and subscriber equipment software
installed in the first quarter has led to improved system performance.
After the close of the quarter, Craig McCaw and family members agreed to
invest up to $1.1 billion in Nextel through share purchases from both
Nextel and Motorola. This investment is contingent on a variety of
conditions. Nextel emphasized its intent to focus on serving wireless
communications for business work groups on the move. Motorola announced
it will license essential MIRS intellectual property rights and rename
the technology to iDEN. The Company does not expect this agreement to
favorably affect sales of iDEN equipment for a number of months.
In the Automotive, Energy and Controls Group, sales increased 37
percent, orders increased 33 percent and operating profits were higher
from the first quarter of 1994. The group's performance was led by
strong demand for component and energy products for use primarily within
Motorola's wireless communications businesses. The increased
application of electronics in cars enhanced the group's automotive sales
and orders. The results for this group are reported as part of the
"Other Products" segment.
In the Government and Space Technology Group (GSTG), group sales
increased 106 percent due to increased sales by the Satellite
Communications Division to Iridium, Inc. Orders were 8 percent higher,
and the operating loss was lower than a year ago. GSTG is recording
reserves that currently result in a minimal level of profit recognition
for the IRIDIUM (Registered symbol inserted here) project. These reserves
are reevaluated periodically. The results for
this group are reported as part of the "Other Products" segment.
Motorola's manufacturing and other costs of sales during the first
quarter of 1995 and 1994 were $3.9 billion, 65 percent of net sales, and
$2.9 billion, 62 percent of net sales, respectively. The increase as a
percent of net sales was a result of start-up costs and inefficiencies
associated with the process of adding major elements of new
semiconductor manufacturing capacity to support growth in sales and
orders and the continuation of a strategy to remain the price leader in
the cellular telephone industry worldwide in order to influence the
continuing growth of that market.
Motorola's wireless communications businesses have been attracting
significant price competition for some time, which is expected to
continue. Motorola intends to protect and, if possible, improve its
market share in these businesses by utilizing its high volume
manufacturing capabilities. This may also mean tolerating lower gross
margins per unit. It is management's current intention to continue to
manage selling, general and administrative expense in line with this
strategy.
Motorola's selling, general and administrative expenses during the first
quarter of 1995 were $1,090 million, 18 percent of sales, versus $986
million, 21 percent of sales, during the year-earlier period as a result
of management's continued focus on holding the growth of these costs to
a level less than the growth of sales, in anticipation of continuing
pressure on gross margins. Other factors affecting the decline in
selling, general and administrative expenses included the following:
only a minor level of charges versus the year earlier period related to
the Company's ongoing evaluation of its operations, organization
structure and asset valuations; and a slight foreign exchange gain
occurred, compared to a loss a year ago.
The tax rate for the quarter increased to 37 percent compared with 34
percent in the first quarter of 1994 and 36 percent for the full year
ended 1994. Fully diluted average common and common equivalent shares
outstanding increased to 608.7 million from 589.3 million a year ago,
largely as a result of the Company completing a public equity offering
of 17.1 million shares during November 1994.
LIQUIDITY AND CAPITAL RESOURCES:
Inventories at April 1, 1995 increased by 13 percent or $354 million,
compared to inventories at December 31, 1994. A group within Motorola's
General Systems Sector, the Cellular Subscriber Group (CSG), experienced
an increase in domestic inventory levels as a direct result of a slow
down of cellular telephone shipments caused by a build-up of phones in
the U.S. distribution channels (third party) which were in excess of
historically experienced levels, following an extremely strong level of
Motorola shipments in the fourth quarter of 1994. Motorola's internal
consumption of some of its products, generally semiconductors, crystals,
ceramic filters and batteries, also was adversely affected in the first
quarter of 1995.
Property, plant and equipment, less accumulated depreciation, has
increased $662 million since December 31, 1994, due to the semiconductor
business and other capacity expansions. Depreciation expense increased
39 percent for the first quarter of 1995 in comparison to the year
earlier period due to increased fixed asset expenditures, which were
primarily driven by semiconductor business requirements.
Motorola's notes payable and current portion of its long-term debt
increased to $1,530 million at April 1, 1995, an increase of
approximately 67 percent from the amount at December 31, 1994, primarily
due to increased capital expenditures and material requirements. Net
debt (notes payable and current portion of long-term debt plus long-term
debt less short-term investments and cash equivalents) to net debt plus
equity rose to 15.2 percent at April 1, 1995 from 12.1 percent at
December 31, 1994. The Company's total domestic and foreign credit
facilities aggregated $2.8 billion at April 1, 1995, of which $241
million were used and the remaining amount was not drawn, but was
available to back up outstanding commercial paper which totaled $1.3
billion at April 1, 1995.
The Company uses financial instruments to hedge, and therefore help
reduce, its overall exposure to the effects of currency fluctuations on
cash flows of foreign operations and investments in foreign countries.
The Company's strategy is to offset the gains or losses of the financial
instruments against losses or gains on the underlying operational cash
flows or investments. Motorola does not speculate in these financial
instruments for profit on the exchange rate price fluctuations alone.
Motorola does not trade in currencies for which there are no underlying
exposures, and the Company does not enter into trades for any currency
to intentionally increase the underlying exposure.
Essentially all the Company's non-functional currency receivables and
payables denominated in major currencies which can be traded on open
markets are hedged. Some of the Company's exposure is to currencies
which are not traded on open markets, such as those in Latin America and
China, and these are addressed, to the extent reasonably possible,
through managing net asset positions, product pricing, and other means,
such as component sourcing. Currently, the Company primarily hedges
firm commitments. The Company expects that there could be hedges of
anticipated transactions in the future. The foreign exchange financial
instruments which hedge various investments in foreign subsidiaries are
marked to market monthly as are the underlying investments and the
results are recorded in the financial statements.
As of April 1, 1995 and April 2, 1994, the Company had net outstanding
foreign exchange contracts totaling $1.3 billion and $882 million,
respectively. The following schedule shows the five largest foreign
exchange hedge positions as of April 1, 1995, and the corresponding
positions at April 2, 1994:
Millions of U.S. Dollars
Buy (Sell) April 1, April 2,
1995 1994
German Deutsche Mark (333) (49)
Japanese Yen (279) (383)
Spanish Peseta (146) (37)
British Pound Sterling (130) (220)
Italian Lira (67) (82)
As of April 1, 1995 and April 2, 1994, outstanding foreign exchange
contracts primarily consisted of short-term forward contracts. Net
deferred losses on these forward contracts which hedge designated firm
commitments totaled $4.7 million at April 1, 1995.
Motorola's research and development expense was $501 million in the
first quarter of 1995, compared to $410 million in the first quarter of
1994. The Company continues to believe that a strong commitment to
research and development drives long-term growth. At April 1, 1995, the
Company's fixed asset expenditures for the first quarter totaled $969
million, compared to $613 million in the first quarter of 1994. Total
fixed asset and research and development expenditures for the year ended
December 31, 1994 were $3.3 billion and $1.9 billion, respectively.
Return on average invested capital (net earnings divided by the sum of
stockholders' equity, long-term debt, and notes payable and the current
portion of long-term debt, less short-term investments and cash
equivalents) was 16.8 percent based on the performance of the four
preceding fiscal quarters ending April 1, 1995, compared with 15.8
percent based on the performance of the four preceding fiscal quarters
ending April 2, 1994. Motorola's current ratio (the ratio of current
assets to current liabilities) was 1.4 at April 1, 1995, compared to 1.5
at December 31, 1994.
(Registered symbol inserted here) Iridium is a registered trademark and
service mark of Iridium, Inc.
Information by Industry Segment (Unaudited)
Summarized below are the Company's segment sales as defined by industry
segment for the quarters ended April 1, 1995 and April 2, 1994:
April 1, April 2,
(In millions) 1995 1994 (1) % Change
General Systems Products $2,346 $1,667 41
Semiconductor Products 1,881 1,615 16
Messaging, Information and
Media Products 788 633 24
Land Mobile Products 785 748 5
Other Products 823 539 53
Adjustments and eliminations (612) (509) 20
Industry segment totals $6,011 $4,693 28
(1) Information for 1994 has been reclassified to reflect the
realignment of various business units. Messaging, Information and Media
Products segment includes the Paging Products and Wireless Data groups
(formerly reported in the Communications segment) and the Information
Systems Group (formerly reported as part of the Other Products segment).
The Government and Space Technology Group is reported as part of the
Other Products segment.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
There are currently six cases pending in Phoenix, Arizona arising out of
alleged groundwater, soil and air pollution in Phoenix and Scottsdale,
Arizona. The plaintiffs in McIntire et al. v. Motorola et al. filed a
Fifth Amended Complaint on April 17, 1995 in the U.S. District Court for
the District of Arizona which dropped the claims of 77 personal injury
plaintiffs and two property damage plaintiffs. McIntire now involves
approximately 900 plaintiffs (450 personal injury, 125 property damage,
and 325 personal injury and property damage). The plaintiffs in
Lofgren/Betancourt/Ford et al. v. Motorola et al. filed a Third Amended
Complaint on April 24, 1995 which added 12 plaintiffs, dropped the
claims of 23 plaintiffs and added 13 new defendants. The consolidated
Lofgren/Betancourt/Ford cases involve claims for personal injury by
approximately 190 individuals against Motorola and 30 other defendants.
(See Item 3 of the Company's Annual Report on Form 10-K for the year
ended 1994 for additional disclosures regarding cases arising out of
alleged groundwater, soil and air pollution in Phoenix and Scottsdale,
Arizona.) In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the
consolidated financial condition, liquidity or results of operations of
Motorola.
Motorola's declaratory judgment filed on October 6, 1993 against
Interdigital Communications Corporation ("IDC") was tried in March 1995,
by jury in the United States District Court for the District of
Delaware, gave a verdict in favor of Motorola in this case. IDC had
contended that Motorola's digital cellular technology (used in some of
Motorola's cellular phones and other communications products as well as
in related infrastructure) infringed four of IDC's patents. The jury
held that Motorola had not infringed the patents and that the patents
were invalid in any event. Motorola thus has no liability whatsoever to
IDC. IDC may appeal this verdict. Motorola believes that is has a
strong chance of preserving the verdict on appeal.
ITEM 2 - CHANGES IN SECURITIES.
Not applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) and (c). The Company held its annual meeting of stockholders on May
2, 1995, and the following matters were voted on at that meeting:
1. The election of the following directors who will serve until their
successors are elected and qualified, or their earlier death or
resignation:
BROKER
DIRECTOR FOR WITHHELD NON-VOTES
David R. Clare 502,755,986 917,324 0
H. Laurance Fuller 502,777,443 895,867 0
Christopher B. Galvin 502,964,262 909,048 0
Robert W. Galvin 502,743,859 929,451 0
John T. Hickey 502,749,343 923,967 0
Anne P. Jones 502,751,403 921,907 0
Donald R. Jones 502,775,961 897,349 0
Judy C. Lewent 502,658,268 1,015,042 0
Walter E. Massey 502,756,792 916,518 0
John F. Mitchell 502,748,285 925,025 0
Thomas J. Murrin 502,774,351 898,959 0
John E. Pepper, Jr. 502,721,946 951,364 0
Samuel C. Scott III 502,778,386 894,924 0
Gary L. Tooker 502,780,690 892,620 0
Gardiner L. Tucker 502,763,911 909,399 0
William J. Weisz 502,781,315 891,995 0
B. Kenneth West 502,794,167 879,143 0
Dr. John A. White 502,773,798 899,512 0
2. The adoption of the Motorola Non-Employee Directors' Stock Plan was
approved by the following vote: For, 484,970,938; Against, 15,358,761;
Abstain, 3,343,811; and Broker Non-Votes, 0 .
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
11 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully
Diluted Earnings Per Common and Common Equivalent Share.
99(a) Amendment to the Nextel Agreement and Plan of Contribution and
Merger.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of
1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOTOROLA, INC.
(Registrant)
Date: May 9, 1995 By: /s/ Kenneth J. Johnson
Kenneth J. Johnson
Corporate Vice President and Controller
(Chief Accounting Officer and Duly
Authorized Officer of the Registrant)
EXHIBIT INDEX
Number Description of Exhibits Page No.
11 Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share. 19
99(a) Amendment to the Nextel Agreement and Plan of 20
Contribution and Merger.
Exhibit 11
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
PRIMARY AND FULLY DILUTED EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
(In millions, except per share amounts)
Three Months Ended
April 1, April 2,
1995 1994 (1)
Net Income $ 372 $ 298
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 2 4
Adjusted net income $ 374 $ 302
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - PRIMARY:
Weighted average common shares outstanding 588.3 557.8
Common equivalent shares:
Stock options 12.7 12.9
Zero coupon notes due 2009 and 2013 7.7 18.6
Common and common equivalent
shares - primary (in millions) 608.7 589.3
Net earnings per share - primary $ .61 $ .51
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - FULLY DILUTED:
Weighted average common shares outstanding 588.3 557.8
Common equivalent shares:
Stock options 12.7 12.9
Zero coupon notes due 2009 and 2013 7.7 18.6
Common and common equivalent
shares - fully diluted (in millions) 608.7 589.3
Net earnings per share - fully diluted $ .61 $ .51
(1) All 1994 earnings per common and common equivalent share and weighted
average common and common equivalent shares outstanding have been restated to
reflect the April 18, 1994 two-for-one stock split effected in the form of a
100 percent stock dividend payable to stockholders of record on March 15,
1994.
Exhibit 99(a)
AMENDMENT TO AGREEMENT AND PLAN
OF CONTRIBUTION AND MERGER
THIS AMENDMENT TO AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
(hereinafter called this "Amendment"), is entered into as of April 4, 1995,
among Nextel Communications, Inc., a Delaware corporation (the "Company")
Motorola, Inc. a Delaware corporation, ("Motorola"), ESMR, Inc., a Delaware
corporation and a Wholly-Owned Subsidiary of Motorola ("New Sub"), ESMR Sub,
Inc., a Delaware corporation and a Wholly-Owned Subsidiary of New Sub ("ESMR
Sub"), the other Subsidiaries of Motorola listed as signatories hereto (the
"Motorola SMR Subsidiaries"), and is made with reference to that certain
Agreement and Plan of Contribution and Merger dated August 4, 1994, as amended
(the "Contribution and Merger Agreement") among the Company, Motorola, New
Sub, ESMR Sub and the Motorola SMR Subsidiaries (collectively, the "Parties").
Capitalized terms used herein shall have the meanings assigned in the
Contribution and Merger Agreement unless otherwise defined herein.
WHEREAS, the Company, Craig O. McCaw and Digital Radio L.L.C., a
Washington limited liability company ("Investor"), (i) have entered into a
Securities Purchase Agreement dated as of April 4, 1995 (as in effect as of
the date hereof, the "Securities Purchase Agreement"), and (ii) have agreed to
enter into those certain Option Agreements attached as exhibits to the
Securities Purchase Agreement, each of which shall be dated as of the date of
the Closing of the Securities Purchase Agreement (as defined therein) (the
"Option Agreements").
WHEREAS, it is the mutual understanding of the Parties that upon the
closing of the Securities Purchase Agreement the Investor will be a Strategic
Investor under the Contribution and Merger Agreement.
WHEREAS, the Parties desire to supplement and amend the Contribution and
Merger Agreement to reflect the transaction contemplated by the Securities
Purchase Agreement and provide for certain other agreements among the Parties.
NOW, THEREFORE in consideration of the premises and of the agreements
herein contained and for other good and valuable consideration, the parties
hereto agree as follows:
1. LIQUIDITY EVENT. Motorola agrees to waive its right to a
Liquidity Event under Section 7.16 (a) (B) of the Contribution and Merger
Agreement solely with respect to the Securities Purchase Agreement and only to
the extent the transactions thereby are consummated in accordance with the
terms thereof as of the date hereof (or as otherwise agreed by Motorola);
provided, however, that (a) Motorola shall retain its rights set forth in
Section 7.9 of the Contribution and Merger Agreement (except that, subject to
ratification by the Company's Board of Directors, effective upon the Closing
of the Securities Purchase Agreement (as defined therein), (i) Section 7.9 (a)
of the Contribution and Merger Agreement is amended to provide that the New
Sub Board of Directors shall include two members who are designated by
Motorola so long as Motorola owns 5% of the outstanding New Sub Shares, (ii)
all references to "Motorola Nominee" in the Contribution and Merger Agreement
and this Amendment shall be deemed to mean and include such two designees of
Motorola and (iii) Section 7.9 (b) of the Contribution and Merger Agreement is
amended to provide that, upon the election of a designee of the Motorola
Transferee to the New Sub Board of Directors pursuant to Section 7.9 (b) of
the Contribution and Merger Agreement, Motorola shall cause on of its two
designees on the New Sub Board of Directors to resign and the term "Motorola
Nominee" in the Contribution and Merger Agreement and this Amendment shall
thereafter refer to one designee of Motorola), and (b) upon the Closing of the
Securities Purchase Agreement, Motorola's rights under Section 7.13 and the
restrictions on Motorola set forth in Sections 7.12 and 7.14 of the
Contribution and Merger Agreement shall terminate. The provisions of Section
7.16 of the Contribution and Merger Agreement shall remain in full force and
effect with respect to any other Strategic Investor (other than AT&T
Corporation and its Affiliates) and with respect to Investor insofar as the
terms of its investment are amended or modified in any respect from those set
forth in the Securities Purchase Agreement as of the date hereof or as
otherwise agreed by Motorola.
2. OPERATIONS COMMITTEE. Until the earlier of the occurrence of any
event described in Section 3.5 of the Securities Purchase Agreement or such
time as the Operations Committee (as defined in the Securities Purchase
Agreement), for whatever reason, no longer exists, Motorola will support the
decisions and recommendations of the Operations Committee and will vote its
New Sub Shares accordingly, it being understood, however that (a) the Motorola
Nominee shall be free to vote as a director in a manner consistent and such
director's fiduciary duties, and (b) that after due consultation with the
Operations Committee, Motorola shall be free to vote all New Sub Shares held
by it, or otherwise act as a stockholder of the Company (or, following the
Merger, New Sub), as Motorola reasonably determines to be necessary with
respect to the following:
- issues that conflict with Motorola's corporate ethics;
- issues relating to a conflict of interest between any of Motorola,
Nextel, Investor, New Sub and/or their respective Affiliates and
any other third party; or
- where there are circumstances that make it necessary for Motorola
to vote in order to protect the value or marketablilty of the New
Sub Shares held by it.
3. PUBLIC ANNOUNCEMENTS CONCERNING THE TRANSFER OF MOTOROLA SUB
SHARES. Neither Motorola nor any Motorola Subsidiary will, except as required
by law, make any public statements concerning the Transfer of Motorola New Sub
Shares of the type contemplated by Section 7.14 (a) (iv) of the Contribution
and Merger Agreement (whether or not Section 7.14 is then in effect).
4. SECURITIES PURCHASE AGREEMENT.
Motorola will vote its shares of Nextel which it holds as of the
applicable record date in favor of the transactions contemplated by the
Securities Purchase Agreement.
5. PURCHASE ORDER.
On March 31, 1995, Nextel placed purchase orders with Motorola for
the purchase of certain infrastructure equipment and contemporaneous herewith
Nextel has delivered to Motorola a Letter outlining Nextel's commitments to
purchase infrastructure equipment prior to December 31, 1995 (in accordance
with the terms of such letter, the applicable purchase order (s) and that
certain letter agreement dated March 20, 1995 between Motorola and Nextel
concerning payment terms).
6. FINANCING.
Notwithstanding Part A, Section 5 of the Equipment Finance
Agreement Amendment, Motorola agrees that it will sell it's vendor-debt owed
by Nextel (or by any subsidiary of Nextel) only in circumstances such that it
retains control of votes or determination of actions required of or
discretionary to the creditor group under such vendor financing. Motorola is
not aware of any current default by Nextel (or by any subsidiary of Nextel) in
any of the Financing and Security Agreements (as defined in the Equipment
Finance Agreement Amendment and, for purposes of this Section, including the
$165,000,000 OneComm commitment), and agrees that the transactions
contemplated by the Securities Purchase Agreement will not constitute a
violation of any of the current debt arrangements between Motorola and Nextel.
The strategic business plan of Nextel (Version 3.6) (the "Current Plan") is
approved by Motorola and Motorola acknowledges that it is based on reasonable
assumptions and projections. If Nextel meets the applicable target figures
set forth in the finance agreement business plans of the Operating Companies
which are approved by Motorola, it will loan to Nextel all such funds
available under the Financing and Security Agreements (which, in the
aggregate, will equal $685,000,000 upon the consummation of the merger of
Nextel and OneComm Corporation), from time to time and subject to the terms
and conditions set forth therein. The parties hereby agree to amend the
Financing and Security Agreements to extend the term during which funds are
available for borrowing thereunder to June 30, 1997 (unless terminated earlier
pursuant to the terms thereof).
7. CHANGE IN CAPITALIZATION.
Section 4.4 of the Contribution and Merger Agreement is hereby
amended by deleting in its entirety the existing first proviso appearing
therein and substituting therefor the following new first proviso:
"provided, however, that no adjustment is intended to be made pursuant
to be made pursuant to this Section 4.4 by reason of (i) the
recapitalization of the Company and/or of New Sub contemplated by the
Certificate of Amendment (as such term is defined in the Securities
Purchase Agreement); (ii) the issuance of the number of Company Shares
and/or of the number and type of other securities of the Company or,
following the Merger, New Sub contemplated to be issued as specified in
the Securities Purchase Agreement, and (iii) the issuance of the number
of Company Shares and/or New Sub Shares currently contemplated to be
issued in the Currently Announced Transactions."
8. ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Section 5.11 (a) is
hereby amended by inserting, immediately following existing clause (ii) in the
proviso thereto, the following new clause (iii):
"or (iii) amendments constituting the Certificate of Amendment and
the By-Law Amendment (as such terms are defined in the Securities Purchase
Agreement)"
9. CURRENTLY ANNOUNCED TRANSACTIONS. Section 5.19 (a) is hereby
amended by deleting in its entirety the existing paragraph immediately
following existing clause (viii) thereof, and substituting therefor the
following new paragraph:
"Additionally, between the date hereof and April 4, 1995 the
Company (A) has entered into amendments, revisions or supplements to the
transaction documents described in the foregoing clauses (i), (iv), (v), (vi),
(vii), and (viii), true and correct copies of which amendments, revisions
and/or supplements have been provided to Motorola, (B) has entered into a
certain Agreement of Merger and Plan of Reorganization, dated as of February
17, 1995, by and between the Company and Dial Page, a true and correct copy of
which has been provided to Motorola ("Dial Page Merger Agreement") and (C) has
entered into the Securities Purchase Agreement and certain of the other
Transaction Documents (as defined therein). The transactions listed in
clauses (i) through (viii), in accordance with the terms and conditions of the
related agreements referred to therein, as amended, revised or supplemented
pursuant to the agreements referred to in clause (A) above, and the additional
transactions contemplated by the Dial Page Merger Agreement and the Securities
Purchase Agreement, are herein referred to collectively as the Currently
Announced Transactions."
10. AMENDED CERTIFICATE. Section 8.1(h) of the Contribution and
Merger Agreement is hereby amended by replacing the reference to "Section
3.2(a)" with "Section 3.1(a)".
11. NEXTEL ATTRIBUTABLE SHARES. Section 2.2 (a) is hereby amended by
deleting in its entirety existing clause (i) and substituting in place thereof
the following new clause (i):
"(i) 34,300,000 New Sub Shares (the Nextel Attributable Shares");
plus"
12. CERTAIN DEFINITIONS. (a) The following defined term is hereby
inserted in Article I of the Contribution and Merger Agreement, immediately
prior to the defined term": The Securities Purchase Agreement dated as of
April 4, 1995 by and among the Company, Craig O. McCaw and Digital Radio
L.L.C., a Washington limited liability company, as in effect on April 4,
1995".; and
(b) The defined term "CHANGE OF CONTROL" appearing in Article I
of the Contribution and Merger Agreement is hereby amended by deleting the
existing parenthetical of clause (d) in such definition and substituting
therefor the following parenthetical: "(other than the transactions
contemplated by the Securities Purchase Agreement or a Strategic Investor
which becomes a Strategic Investor in compliance with Section 7.16 and 7.17
hereof)".
13. ANTI-DILUTIVE RIGHT. The Company and Motorola agree that
Motorola's rights pursuant to the Anti-Dilutive Right set forth in Section
7.13 of the Contribution and Merger Agreement shall be suspended with respect
to Proposed Issuances and Interim Proposed Issuances (including without
limitation, those contemplated under the Securities Purchase Agreement and the
Transaction Agreements referred to therein) between the date of this Amendment
and the closing of the Securities Purchase Agreement ("Pre-Closing
Issuances"). Subject to the last sentence of this Section 13, if the closing
of the transactions contemplated by the Securities Purchase Agreement occurs,
Motorola shall have no Anti-Dilutive Right with respect to the Pre-Closing
Issuances. If the Securities Purchase Agreement is terminate, (i) the company
shall, within five days of such termination, send written notice thereof and
of all material terms of any Pre-Closing Issuance (other than Excluded
Issuances) which have occurred or were proposed between the date hereof and
the date of such notice and (ii) Motorola shall have the right to purchase
such number of shares of the Company (or, if the Merger has theretofore
occurred, New Sub) at such prices and on such other terms as would have been
applicable pursuant to Section 7.13 of the Contribution and Merger Agreement
with respect to each such Pre-Closing Issuance. In the event the closing
under the Securities Purchase Agreement shall not have occurred prior to March
31, 1996, Motorola shall thereafter have the right, upon written notice to the
Company, to terminate the suspension of its Anti-Dilutive Right under the
first sentence of this Section 13, whereupon the Company shall within 5 days
thereafter deliver a written notice of all material terms of any Pre-Closing
Issuances (other than Excluded Issuances) which have occurred or were proposed
between the date hereof and the date of such notice and Motorola shall have
the right to purchase such number of shares of the Company (or, if the Merger
has theretofore occurred, New Sub) at such prices and on such other terms as
would have been applicable pursuant to Section 7.13 of the Contribution and
Merger Agreement with respect to each such Pre-Closing Issuance, and
thereafter (unless and until the closing under the Securities Purchase
Agreement) Motorola shall have its rights under Section 7.13 of the
Contribution and Merger Agreement.
14. SWITCH IN TECHNOLOGY. The provisions of Section 7.17 are subject
to Section 1.8.5 of the Equipment Purchase Agreement, as amended by Second
Amendment to Purchase Agreement, as amended by Second Amendment to Purchase
Agreements dated the date hereof.
15. CONTRIBUTION OF STOCK. In certain cases Motorola has acquired or
will acquire stock of a corporation holding Acquired SMR Licenses, as opposed
to a direct acquisition of such Acquired SMR Licenses. Nextel agrees that,
subject to receipt at Closing of the Contribution and Merger Agreement (and
subject to the terms and conditions of the Contribution and Merger Agreement)
of an appropriate indemnity agreement from Motorola indemnifying New Sub from
liabilities associated with such corporation (s) which are not Applicable SMR
Liabilities-Dial Page Territory, Applicable SMR Liabilities-Nextel Territory
or Applicable SMR Liabilities-OneComm Territory, as appropriate, Motorola may
at Closing of the Contribution and Merger Agreement contribute the stock of
such corporations and shall thereby be deemed to have contributed the Acquired
SMR Licenses owned by such corporations.
16. EFFECTIVE DATE. The provisions set forth in Sections 4, 5, 7, 8,
9, 10, 11, 12, 13, 15, 16, 17, 18 and 19 shall become effective as of the date
hereof; provided, that in the event that the Securities Purchase Agreement is
terminated such Sections shall terminate and shall no longer be enforceable.
The provisions set forth in Sections 1, 2, 3, 6 and 14 of this Amendment are
conditioned upon and will not be effective until the Closing of the Securities
Purchase Agreement (as defined therein) in accordance with the terms thereof
as of the date hereof.
17. EFFECT. Except as specifically provided for herein the
Contribution and Merger Agreement shall otherwise remain in full force and
effect.
18. PUBLIC ANNOUNCEMENTS. The Parties will agree upon the timing and
content of the initial press release describing this Amendment and will not
make statements prior to or following such release that are inconsistent
therewith.
19. COUNTER PARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
NEXTEL COMMUNICATIONS, INC.
By: /s/Brian McAuley
MOTOROLA, INC.
By:/s/Christopher B. Galvin
ESMR, INC.
By:/s/Richard D. Severns
ESMR SUB, INC.
By:/s/Richard D. Severns
METRACOM TRUNKED RADIO COMMUNI-
CATIONS SYSTEMS, INC.
By:/s/Richard D. Severns
MIJAC ENTERPRISES, INC.
By:/s/Richard D. Severns
MOTOROLA SF, INC.
By:/s/Richard D. Severns
MOTOROLA SMR, INC.
By:/s/Richard D. Severns
NATIONAL TOWER TRUNKING SYSTEMS,
INC.
By:/s/Richard D. Severns
AIRWAVE COMMUNICATIONS CORP.
By:/s/Richard D. Severns
MOTOROLA CANADA LIMITED
By:/s/Joyce Borden-Reed
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule to 10Q
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> APR-01-1995
<CASH> 850
<SECURITIES> 334
<RECEIVABLES> 3753
<ALLOWANCES> 122
<INVENTORY> 3024
<CURRENT-ASSETS> 9656
<PP&E> 14856
<DEPRECIATION> 7121
<TOTAL-ASSETS> 18944
<CURRENT-LIABILITIES> 6873
<BONDS> 1126
<COMMON> 1766
0
0
<OTHER-SE> 7699
<TOTAL-LIABILITY-AND-EQUITY> 18944
<SALES> 6011
<TOTAL-REVENUES> 0
<CGS> 3878
<TOTAL-COSTS> 4968<F1>
<OTHER-EXPENSES> 431<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 591
<INCOME-TAX> 219
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 372
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
<FN>
<F1>Total cost includes cost of goods sold and selling, general and administrative
expenses.
<F2>Other expense includes depreciation expense.
</FN>
</TABLE>
