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 SEPTEMBER 30, 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 September 30, 1995:
CLASS NUMBER OF SHARES
Common Stock; $3 Par Value 590,963,485
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I
FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Statements of Consolidated Earnings
Three-Month and Nine-Month Periods ended
September 30, 1995 and October 1, 1994 3
Condensed Consolidated Balance Sheets at
September 30, 1995 and December 31, 1994 4
Statements of Condensed Consolidated Cash Flows
Nine-Month Periods ended
September 30, 1995 and October 1, 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 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 16
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 Nine Months Ended
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
Net sales $ 6,851 $ 5,660 $19,739 $15,792
Costs and expenses:
Manufacturing and other
costs of sales 4,388 3,539 12,660 9,826
Selling, general and
administrative expenses 1,131 1,106 3,430 3,166
Depreciation expense 496 379 1,405 1,051
Interest expense, net 48 41 103 116
Total costs and expenses 6,063 5,065 17,598 14,159
Earnings before income taxes 788 595 2,141 1,633
Income taxes provided on earnings 292 215 792 588
Net earnings $ 496 $ 380 $ 1,349 $1,045
Net earnings per common and common equivalent share (1)
Fully diluted:
Net earnings per common and
common equivalent share $ .81 $ .65 $ 2.21 $ 1.79
Average common and common
equivalent shares outstanding,
fully diluted (in millions) 611.1 589.7 611.1 589.7
Dividends paid per share $ .10 $ .07 $ .30 $ .195
(1) Average primary common and common equivalent shares outstanding for
the three months and nine months ended September 30, 1995 and
October 1, 1994 were 609.6 million and 589.1 million, respectively.
Primary earnings per common and common equivalent share were $2.22
and $1.79 for the nine months ended September 30, 1995 and October
1, 1994, respectively, and $.81 and $.65 for the third quarters
ended September 30, 1995 and October 1, 1994, respectively.
See accompanying notes to condensed consolidated financial
statements.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN MILLIONS)
SEPT. 30, DEC. 31,
1995 1994
ASSETS
Cash and cash equivalents $ 666 $ 741
Short-term investments 328 318
Accounts receivable, less allowance for
doubtful accounts (1995, $121; 1994, $118) 4,012 3,421
Inventories 3,462 2,670
Other current assets 1,582 1,775
Total current assets 10,050 8,925
Property, plant and equipment, less
accumulated depreciation
(1995, $7,747; 1994, $6,657) 8,951 7,073
Other assets 2,981 1,538
Total assets $21,982 $17,536
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current portion of
long-term debt $ 1,731 $ 916
Accounts payable 1,812 1,678
Accrued liabilities 3,841 3,323
Total current liabilities 7,384 5,917
Long-term debt 1,961 1,127
Other liabilities 1,895 1,396
Stockholders' equity 10,742 9,096
Total liabilities and stockholders' equity $21,982 $17,536
See accompanying notes to condensed consolidated financial statements.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(UNAUDITED)
(IN MILLIONS)
NINE MONTHS ENDED
Sept. 30, Oct. 1,
1995 1994
NET CASH PROVIDED BY OPERATIONS $ 1,988 $ 1,022
INVESTING
Acquisitions and advances to affiliated (478) (395)
companies
Dispositions of investments in affiliated 147 14
companies
Payments for property, plant and equipment (3,172) (2,318)
(Increase) decrease in short-term investments (10) 28
Decrease in other investing activities 27 220
Net cash used for investing activities (3,486) (2,451)
Financing
Net increase in commercial paper
and short-term borrowings 807 1,437
Proceeds from issuance of debt 794 17
Repayment of debt (19) (117)
Payment of dividends to stockholders (177) (109)
Other financing activities 18 49
Net cash provided by financing activities 1,423 1,277
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (75) $ (152)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 741 $ 886
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 666 $ 734
SUPPLEMENTAL NON-CASH FLOW INFORMATION
(IN MILLIONS)
NINE MONTHS ENDED
Sept. 30, Oct. 1,
1995 1994
NON-CASH ACTIVITIES:
Conversion of zero coupon notes due 2009 and 2013 $ 21 $ 225
Unrealized net gain on certain investments $ 435 $ 9
Liabilities assumed in conjunction with
acquisitions $ 95 $ --
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 September
30, 1995, the Statements of Consolidated Earnings for the
three-month and nine-month periods ended September 30,
1995 and October 1, 1994, and the Statements of Condensed
Consolidated Cash Flows for the nine-month periods ended
September 30, 1995 and October 1, 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 September 30, 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 and nine-month periods ended
September 30, 1995 are not necessarily indicative of the
operating results for the full year.
2. INVENTORIES
Inventories consist of the following (in millions):
Sept. 30, Dec. 31,
1995 1994
Finished goods $ 1,039 $ 699
Work in process and production materials 2,423 1,971
$ 3,462 $ 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 certain 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 $818 million during the first nine months
of 1995 and $715 million for the same period a year earlier. Cash payments
for interest expense (net of amount capitalized) were $145 million and $135
million, for the first nine-month periods of 1995 and 1994, respectively.
5. Accounting for Certain Investments in Debt and Equity
Securities
During July 1995, the Company completed its transaction with Nextel
Communications, Inc. under which Motorola received approximately 59 million
shares of Nextel stock in exchange for most of Motorola's 800 MHz specialized
mobile radio service businesses, systems and licenses in the continental
United States. The transaction was accounted for as an exchange of productive
assets with no gain realized in the Statement of Consolidated Earnings.
The cost based investment is accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Investments in
Debt and Equity Securities" which resulted in a significant increase in Other
Assets, Other Liabilities and Stockholders' Equity due to the recognition of
the unrealized net gain, including the tax effect.
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 referenced 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 ended September 30, 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 third quarter and
first nine months of 1995. In the third quarter of 1995, sales rose to $6.9
billion up 21 percent from $5.7 billion in the third quarter of 1994. In the
first nine months, sales reached $19.7 billion, up 25 percent from $15.8
billion a year ago. Earnings in the third quarter of 1995 were $496 million,
compared with $380 million in the same period a year earlier. Fully diluted
net earnings per common and common equivalent share for the third quarter of
1995 were 81 cents, compared to 65 cents in the year-earlier period. Earnings
in the first nine months were $1.35 billion, compared with $1.05 billion a
year earlier. Fully diluted net earnings per common and common equivalent
share for the first nine months were $2.21, compared to $1.79 a year earlier.
Motorola's net margin on sales (net earnings divided by net sales) during the
third quarter of 1995 was 7.2 percent compared to 6.7 percent a year ago,
while in the first nine months it was 6.8 percent compared with 6.6 percent in
the year-earlier period.
Sales growth rates for the first nine months of 1995 were highest in China,
Europe, Asia-Pacific, Japan and Latin America. Manufacturing margin (net
sales less manufacturing and other costs of sales divided by net sales) in the
third quarter of 1995 declined to 36 percent from 37.5 percent a year ago.
Among the Company's major businesses, manufacturing margins declined in the
Cellular Subscriber Group, Messaging, Information and Media Sector,
Semiconductor Products Sector and Cellular Infrastructure Group. Manufacturing
margin increased in the Land Mobile Products Sector.
General Systems Sector's segment sales rose to $2.6 billion, an increase of 21
percent from the third quarter of 1994. Sales showed strong growth in all
regions except Pan America, where there was a significant decline. Orders
increased 14 percent and operating profits were higher than in the third
quarter of 1994. The results of the cellular businesses in this segment are
being affected by a moderating growth rate in the cellular subscriber base in
the U.S. and, to some extent, in Europe as well. These U.S. effects have been
recently reported by the Cellular Telephone Industry Association. In other
regions of the world, the cellular subscriber base continues to expand
rapidly. At the same time, average selling prices for cellular telephones in
the U.S. declined somewhat more quickly in the third quarter than in the past.
The U.S. market could well experience substantially lower growth rates than in
other parts of the world. Inventory levels of cellular phones in distribution
channels in the U.S. specifically remained in a normal range in the third
quarter of 1995 and were about the same or slightly less in weeks of
anticipated supply than at the end of the second quarter of 1995. Cellular
Subscriber Group's order growth was very strong in Japan and Asia-Pacific,
while orders declined in Europe and Pan America. Sales were up significantly
in Japan and Asia-Pacific, higher in Europe but significantly lower in Pan
America.
The Cellular Infrastructure Group's sales and orders were up substantially and
increased at greater rates than the General Systems Sector as a whole. Order
growth was strongest in Japan, Europe and Asia-Pacific, while there was
a significant decline in orders in Pan America.
Segment sales in the Semiconductor Products Sector increased 28 percent from
the third quarter of 1994 to $2.3 billion. Orders increased 23 percent and
operating profits were higher than in the third quarter of 1994. All major
market regions posted double-digit order growth, led by Asia-Pacific. Among
the market segments, order growth was highest in Personal Computer/Work
Station, followed by Computer (mainframe and other), Consumer, Industrial and
Communications while Automotive was lower. Distribution orders also were
higher. Order growth was broad-based, with the strongest increase in demand
for RISC (reduced instruction set computer) microprocessors, fast static
random access memories, customer-specified microcontrollers, digital signal
processors, CMOS (complementary metal oxide semiconductor) gate arrays and
embedded processors.
The Company presently expects that this segment will continue to incur
significant start-up costs and inefficiencies and experience increased
depreciation expenses (as a percent of sales) for at least several
quarters as a result of its capacity expansion program.
Motorola's Semiconductor Products Sector continues to experience limits on the
amount of orders it can accept for certain types of products, due to capacity
constraints. If customer demand for semiconductors remains strong, Motorola
does not expect that these capacity constraints will ease until sufficient
wafer fabrication capacity becomes available, which is currently expected to
start for some products during 1996. These constraints may also restrict
Motorola's ability to ship cellular phones, paging products and certain other
products.
In the Messaging, Information and Media segment businesses, comprised 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 22 percent from
the third quarter of 1994 to $944 million and operating profits, as a result
of a substantial net gain from the sale of an investment in the third quarter
of 1995, were higher than the year-earlier period. The Messaging,
Information and Media segment operating margin would have been lower except
for a substantial gain on the sale of an investment. Orders increased 35
percent from the third quarter of 1994.
Paging Products Group orders increased substantially in the third quarter of
1995 compared to the year-earlier period, driven by growth in the United
States. International orders were higher led by Europe and China, while in
Japan orders were lower. The backlog for paging products, at the end of the
third quarter 1995, is much higher than average in the recent past as a result
of semiconductor shortages and selective factory capacity constraints brought
about by unexpected strong demand for new products.
In the Land Mobile Products Sector business segment, comprised of the Radio
Products, Radio Parts and Services, Network Services and Business Strategies,
Radio Network Solutions and iDEN(Trademark symbol inserted here) (Integrated
Dispatch Enhanced Network) Groups (formerly reported as part of the
Communications Segment), sales increased 10 percent to $912 million and
operating profits were higher from the third quarter of 1994. Orders
increased 4 percent from the third quarter of 1994. Lower results in the iDEN
business were more than offset by the stronger performance of the sector's
other businesses.
The Sector completed the sale of its 800 megahertz (MHz) Specialized Mobile
Radio businesses, systems and licenses in the continental United States to
Nextel Communications, Inc. for approximately 59 million shares of Nextel
stock.
In the Automotive, Energy and Controls Group, sales increased 17 percent and
orders increased 15 percent from the third quarter of 1994. Operating profits
were lower compared to the third quarter of 1994. 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
from the third quarter of 1994 by 33 percent, and orders were 62 percent lower
than a year ago due to the timing of the IRIDIUM (Registered trademark symbol
inserted here) program financing. The group recorded a smaller operating loss
compared to a year ago. Development of the IRIDIUM global communications
system continued on schedule, as Motorola met all contractual milestones
during the quarter. GSTG is recording reserves in connection with the IRIDIUM
project so that, to date, no profit has been recognized under this contract.
These reserves are reevaluated periodically. As previously indicated,
Iridium, Inc. will require additional financing to continue to make payments
to Motorola under a contract to construct the global communications system.
The additional financing is required beginning in early 1996. To date, no
additional financing commitments have been received by Iridium, Inc. Motorola
is the largest investor in Iridium, Inc. and a failure of Iridium, Inc. to
obtain additional funding would materially adversely affect Motorola's
investment in Iridium, Inc. and in ancillary products. In addition, the
Company will generally remain obligated to perform significant subcontracts
even if Iridium, Inc. is unable to obtain additional funding. The results for
this group are reported as part of the "Other Products" segment.
Motorola's manufacturing and other costs of sales during the third quarter of
1995 and 1994 were $4.4 billion, 64.0 percent of net sales, and $3.5 billion,
62.5 percent of net sales, respectively. The increase during the third
quarter of 1995 as a percent of net sales was a result of continuing
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, as well as increasing price competition in several
of the Company's equipment businesses.
Motorola's wireless communications businesses, particularly cellular
subscriber, 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 has and may continue to cause the
Company to tolerate lower gross margins.
Motorola's selling, general and administrative expenses during the third
quarter of 1995 were $1,131 million, 16.5 percent of sales, versus $1,106
million, 19.5 percent of sales, during the year-earlier period. Additionally,
a net gain was realized in the third quarter of 1995 from the sale
of an investment within the Messaging, Information and Media segment.
Management continues its focus on holding the growth of the budgeted portion
of these costs excluding the impact of unusual items, for the Company overall,
to a level less than the growth of sales in anticipation of continuing
pressure on gross margins.
Motorola's total backlog at September 30, 1995 is approximately 15 percent
higher than a year ago. This represents the lowest increase in quarter-end
backlog in several years. The Cellular Subscriber Group's backlog is
significantly lower than a year ago and is the primary factor in the lower
overall growth rate. Backlogs are also lower in the Land Mobile Products
Sector, as well as the Government and Space Technology Group. Backlogs are up
significantly versus a year ago in the Computer Group, Semiconductor Products
Sector, Cellular Infrastructure Group, and Messaging, Information and Media
Sector. Backlog in the Automotive, Energy and Controls Group also
rose versus a year ago.
Motorola's research and development expense was $562 million in the third
quarter of 1995, compared to $485 million in the third quarter of 1994. In
the first nine months of 1995, research and development expense was $1,614
million, compared to $1,350 million a year ago. The Company continues to
believe that a strong commitment to research and development drives long-term
growth.
Return on average invested capital (net earnings divided by the sum of
stockholders' equity, long-term debt, notes payable and current portion of
long-term debt, less short-term investments and cash equivalents) was 16.3
percent based on the performance of the four preceding fiscal quarters ending
September 30, 1995, compared to 16.7 percent from the year earlier period.
Motorola's current ratio (the ratio of current assets to current liabilities)
was 1.4 at September 30, 1995, compared to 1.5 at December 31, 1994.
The tax rate for the third quarter of 1995 was 37 percent compared with 36
percent in the third quarter of 1994 and for the full year 1994. Fully
diluted average common and common equivalent shares outstanding increased to
611.1 million from 589.7 million a year ago, largely as a result
of the Company completing a public equity offering of 17.1 million shares
during November 1994.
In the United States, the Company expects to continue to experience the
effects of slower economic expansion in selected businesses over the near
term. In addition, the Company expects its results in the next several
quarters to be affected by other factors. First, the Company does not
anticipate a fourth quarter of 1995 repetition of the buildup of cellular
phone inventories in the U.S. distribution channels that occurred in the
fourth quarter of 1994. Accordingly, this anticipated lack of buildup and
continued pressure on average selling prices will adversely affect the
comparison of the fourth quarter of 1995 sales and profits to last year.
Second, an unprecedented number of major transitions to new technologies are
concurrently underway in the Company's equipment businesses. These are
very important to the Company's long-term growth potential and awards for many
were received in the third quarter. They include: two-way and voice paging,
CDMA for cellular and PCS systems, wireless local loop, telephony and high
speed data for cable systems, and integrated dispatch radio. As new
technologies enter the Company's revenue base, their early life cycle levels
of profitability are low until markets mature and manufacturing economies of
scale develop to reduce unit costs. It will continue to be the Company's
strategy to remain a market leader in these equipment businesses worldwide and
to influence the continuing growth of these markets. Motorola also continues
to invest heavily in manufacturing capacity, as well as the development of new
products, new technologies and new markets in order to serve the Company's
global customers.
LIQUIDITY AND CAPITAL RESOURCES:
Inventories at September 30, 1995 increased by 30 percent or $792 million,
compared to inventories at December 31, 1994. Inventories increased in all
segments led by the General Systems Sector and Semiconductor Products Sector.
Property, plant and equipment, less accumulated depreciation at September 30,
1995, has increased 27 percent or $1,878 million since December 31, 1994,
largely due to the semiconductor business capacity expansions. Depreciation
expense increased 31 percent for the third quarter of 1995 in comparison to
the year-earlier period. The Company is currently anticipating that
depreciation expense will rise as a percent of sales for the full year, as was
experienced in the first nine months of 1995 when depreciation increased
to 7.1 percent of sales versus 6.7 percent for the year-earlier period. Fixed
asset expenditures for 1995 may total as much as $4.6 billion, although the
actual amount may vary from this estimate.
Motorola's notes payable and current portion of long-term debt increased $815
million, or 89 percent from the amount at December 31, 1994. The increase is
primarily due to a significant increase in fixed asset expenditures, sales
growth which is driving increases in receivables and inventories, and the
Company's inability to achieve improved rates of inventory turnover and
receivable collections. Long-term debt increased $834 million or 74 percent
during the first nine months of 1995. During the third quarter of
1995, the Company issued 6 1/2 percent debentures due September 1, 2025 in an
aggregate principal amount of $400 million under the universal shelf
registration statement which was previously filed during 1994. Furthermore,
during the third quarter of 1995, the Company filed a $1 billion
universal shelf registration statement with the Securities and Exchange
Commission, which has not yet been made effective; and, the Company and its
finance subsidiary increased its one - and five-year revolving domestic credit
agreements with a group of banks from $1.5 billion to $2.0 billion. These
revolving domestic credit agreements contain various conditions, covenants and
representations. The Company anticipates that through 1996, a substantial
amount of funds, possibly involving financing activities, will be required to
fund additional fixed asset purchases and to complete other investment
activities.
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 21.6 percent at September 30, 1995 from 12.1 percent at December
31, 1994. The Company's total domestic and foreign credit facilities
aggregated $3.3 billion at September 30, 1995, of which $392 million were used
and the remaining amount was not drawn, but was available, in part, to back up
outstanding commercial paper which totaled $1.4 billion at September 30, 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 based
on the operating business units' assessment of risk. 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.
As of September 30, 1995 and October 1, 1994, the Company had net outstanding
foreign exchange contracts totaling $1.3 billion and $1.0 billion,
respectively. The following schedule shows the five largest foreign exchange
hedge positions as of September 30, 1995, and the corresponding
positions at October 1, 1994:
Millions of U.S. Dollars Sept. 30, Oct. 1,
Buy (Sell) 1995 1994
Japanese Yen (424) (484)
British Pound Sterling (302) (59)
German Deutsche Mark (101) (221)
Singapore Dollar 90 --
Italian Lira (59) (54)
As of September 30, 1995 and October 1, 1994, outstanding foreign exchange
contracts primarily consisted of short-term forward contracts. Net deferred
losses on these forward contracts which hedge designated firm commitments were
immaterial at September 30, 1995. 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.
IRIDIUM (Registered trademark symbol inserted here) 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 three-months and nine-months ended September 30, 1995 and
October 1, 1994:
Segment Sales
for the three months ended
Sept. 30, Oct. 1,
(In millions) 1995 1994 (1) % Change
General Systems Products $2,648 $2,197 21
Semiconductor Products 2,275 1,772 28
Messaging, Information and
Media Products 944 774 22
Land Mobile Products 912 832 10
Other Products 807 677 19
Adjustments and eliminations (735) (592) 24
Industry segment totals $6,851 $5,660 21
Segment Sales
for the nine months ended
Sept. 30, Oct. 1,
(In millions) 1995 1994 (1) % Change
General Systems Products $7,877 $5,936 33
Semiconductor Products 6,241 5,100 22
Messaging, Information and
Media Products 2,627 2,127 24
Land Mobile Products 2,574 2,422 6
Other Products 2,526 1,859 36
Adjustments and eliminations (2,106) (1,652) 27
Industry segment totals $19,739 $15,792 25
(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 as
part of 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 Wilkins et al. v. Motorola, Inc. et al. CV 95-
05322 filed a First Amended Complaint on July 18, 1995 in Arizona Superior
Court, Maricopa County and served the lawsuit on Motorola on July 26, 1995.
Wilkins involves claims for personal injury and wrongful death by eleven
plaintiffs against Motorola and twenty eight other defendants, (See Item 3 of
the Company's Annual Report on Form 10-K for the year ended 1994, and the
Company's first and second quarter reports on Form 10-Q 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.
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.
Not applicable.
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 for the three
months ended September 30, 1995 and October 1, 1994.
11.1 Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share for the nine
months ended September 30, 1995 and October 1, 1994.
(b) REPORTS ON FORM 8-K
During the third quarter of 1995, the Company
filed one current report on Form 8-K dated
August 29, 1995, containing no financial
statements but describing, under Item 5, the
filing of a prospectus supplement and
including an exhibit under Item 7.
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: November 10, 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 N0.
11 Motorola, Inc. and Consolidated Subsidiaries 19
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share for the three
months ended September 30, 1995 and October 1, 1994.
11.1 Motorola, Inc. and Consolidated Subsidiaries 20
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share for the nine
months ended September 30, 1995 and October 1, 1994.
27 Financial Data Schedule (filed only electronically
with the Securities and Exchange Commission)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND THE
STATEMENT OF CONSOLIDATED EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 666
<SECURITIES> 328
<RECEIVABLES> 4,133
<ALLOWANCES> 121
<INVENTORY> 3,462
<CURRENT-ASSETS> 10,050
<PP&E> 16,698
<DEPRECIATION> 7,747
<TOTAL-ASSETS> 21,982
<CURRENT-LIABILITIES> 7,384
<BONDS> 1,961
<COMMON> 1,773
0
0
<OTHER-SE> 8,969
<TOTAL-LIABILITY-AND-EQUITY> 21,982
<SALES> 19,739
<TOTAL-REVENUES> 0
<CGS> 12,660
<TOTAL-COSTS> 16,084<F1>
<OTHER-EXPENSES> 1,405<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103
<INCOME-PRETAX> 2,141
<INCOME-TAX> 792
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,349
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.21
<FN>
<F1>Total cost includes cost of goods sold and selling, general, and
administrative expense.
<F2>Other expense includes depreciation expense.
</FN>
</TABLE>
Exhibit 11
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
PRIMARY AND FULLY DILUTED EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
Sept. 30, Oct. 1,
1995 1994
Net Income $ 496 $ 380
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 1 3
Adjusted net income $ 497 $ 383
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - PRIMARY:
Weighted average common shares outstanding 589.3 561.6
Common equivalent shares:
Stock options 13.1 12.3
Zero coupon notes due 2009 and 2013 7.2 15.2
Common and common equivalent
shares - primary (in millions) 609.6 589.1
Net earnings per share - primary $ .81 $ .65
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - FULLY DILUTED:
Weighted average common shares outstanding 589.3 561.6
Common equivalent shares:
Stock options 14.6 12.9
Zero coupon notes due 2009 and 2013 7.2 15.2
Common and common equivalent
shares - fully diluted (in millions) 611.1 589.7
Net earnings per share - fully diluted $ .81 $ .65
Exhibit 11.1
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share
Nine Months Ended September 30, 1995 and October 1, 1994
(In millions, except per share amounts)
Nine Months Ended
Sept. 30, Oct. 1,
1995 1994
Net Income $ 1,349 $ 1,045
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 4 11
Adjusted net income $ 1,353 $ 1,056
Earnings per common and common equivalent
share - Primary:
Weighted average common shares outstanding 589.3 561.6
Common equivalent shares:
Stock options 13.1 12.3
Zero coupon notes due 2009 and 2013 7.2 15.2
Common and common equivalent
shares - primary (in millions) 609.6 589.1
Net earnings per share - primary $ 2.22 $ 1.79
Earnings per common and common equivalent
share - Fully Diluted:
Weighted average common shares outstanding 589.3 561.6
Common equivalent shares:
Stock options 14.6 12.9
Zero coupon notes due 2009 and 2013 7.2 15.2
Common and common equivalent
shares - fully diluted (in millions) 611.1 589.7
Net earnings per share - fully diluted $ 2.21 $ 1.79
