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 28, 1996
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: (847) 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 28, 1996:
Class Number of Shares
Common Stock; $3 Par Value 592,895,581
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 28, 1996 and September 30, 1995 3
Condensed Consolidated Balance Sheets at
September 28, 1996 and December 31, 1995 4
Statements of Condensed Consolidated Cash Flows
Nine-Month Periods ended
September 28, 1996 and September 30, 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II
OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Changes in Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
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. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
Net sales $ 6,498 $ 6,851 $20,288 $19,739
Costs and expenses
Manufacturing and other
costs of sales 4,489 4,388 13,792 12,660
Selling, general and
administrative expenses 1,041 1,131 3,239 3,430
Depreciation expense 609 496 1,708 1,405
Interest expense, net 42 48 140 103
Total costs and expenses 6,181 6,063 18,879 17,598
Earnings before income taxes 317 788 1,409 2,141
Income taxes provided on earnings 111 292 493 792
Net earnings $ 206 $ 496 $ 916 $1,349
Net earnings per common and common equivalent share (1)
Fully diluted:
Net earnings per common and
common equivalent share $ .34 $ .81 $ 1.51 $ 2.21
Average common and common
equivalent shares outstanding,
fully diluted (in millions) 609.1 611.1 609.1 611.1
Dividends paid per share $ .12 $ .10 $ .32 $ .30
(1) Average primary common and common equivalent shares outstanding for
the three months and nine months ended September 28, 1996 and
September 30, 1995 were 609.0 million and 609.6 million,
respectively. Primary earnings per common and common equivalent
share were $1.51 and $2.22 for the nine months ended September 28,
1996 and September 30, 1995, respectively, and $.34 and $.81 for the
third quarters ended September 28, 1996 and September 30, 1995,
respectively.
See accompanying notes to condensed consolidated financial statements.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
Sept. 28, December 31,
1996 1995
ASSETS
Cash and cash equivalents $ 1,182 $ 725
Short-term investments 325 350
Accounts receivable, less allowance for
doubtful accounts (1996, $129; 1995, $123) 4,036 4,081
Inventories 3,422 3,528
Other current assets 1,850 1,826
Total current assets 10,815 10,510
Property, plant and equipment, less
accumulated depreciation
(1996, $9,389; 1995, $8,110) 9,746 9,356
Other assets (1) 3,331 2,935
Total Assets $23,892 $22,801
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current portion of
long-term debt $ 1,830 $ 1,605
Accounts payable 1,822 2,018
Accrued liabilities 4,208 4,170
Total current liabilities 7,860 7,793
Long-term debt 1,926 1,949
Other liabilities (1) 2,233 2,011
Stockholders' equity (1) 11,873 11,048
Total liabilities and stockholders' equity $23,892 $22,801
(1) SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" requires the carrying value of certain investments to be
adjusted to their fair value which resulted in the Company recording
an increase to stockholders' equity, other assets and deferred taxes
of $439 million, $727 million and $288 million as of September 28,
1996; and $328 million, $543 million, and $215 million as of December
31, 1995.
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. 28, Sept. 30,
1996 1995
NET CASH PROVIDED BY OPERATIONS $ 2,541 $ 1,988
INVESTING
Payments for property, plant and equipment (2,138) (3,172)
(Increase) decrease in short-term investments 25 (10)
(Increase) in other investing
activities (203) (304)
Net cash used for investing activities (2,316) (3,486)
FINANCING
Net increase in commercial paper
and short-term borrowings 213 807
Proceeds from issuance of debt 23 794
Repayment of debt (33) (19)
Payment of dividends to stockholders (190) (177)
Other financing activities 219 18
Net cash provided by financing activities 232 1,423
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 457 $ (75)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 725 $ 741
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,182 $ 666
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 28, 1996, the
Statements of Consolidated Earnings for the three-month and nine-month
periods ended September 28, 1996 and September 30, 1995, and the Statements
of Condensed Consolidated Cash Flows for the nine-month periods ended
September 28, 1996 and September 30, 1995 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 28, 1996 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 appendix of
the Company's proxy statement for the 1996 Annual Meeting of Shareholders
of the Corporation. The results of operations for the three and nine-month
periods ended September 28, 1996, are not necessarily indicative of the
operating results for the full year.
2. INVENTORIES
Inventories consist of the following (in millions):
Sept. 28, Dec. 31,
1996 1995
Finished goods $ 907 $ 1,026
Work in process and production materials 2,515 2,502
Inventories $ 3,422 $ 3,528
3. INCOME TAXES
The Internal Revenue Service (IRS) has examined the federal income tax
returns for Motorola, Inc. through 1987 and has settled the respective
returns through 1985. 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 $355 million during the first nine
months of 1996 and $818 million for the same period a year earlier. Cash
payments for interest expense (net of amount capitalized) were $173 million
and $145 million for the first nine-month periods of 1996 and 1995,
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 1995 Summary
Annual Report to Stockholders, the Letter to Stockholders on page 2; and
from the Proxy Statement for the 1996 Annual Meeting of Stockholders of the
Company, Management's Discussion and Analysis of Financial Condition and
Results of Operations, pages F-1 through F-11, and the Consolidated
Financial Statements and Footnotes to the Consolidated Financial
Statements, pages F-13 through F-28; and from Motorola, Inc.'s Quarterly
Report on Form 10-Q for the period ending September 28, 1996, of which this
commentary is a part, the Condensed Consolidated Financial Statements and
Notes to the Condensed Consolidated Financial Statements, pages 3 through
6.
RESULTS OF OPERATIONS:
Motorola, Inc. reported lower sales and earnings for the third quarter of
1996. Third quarter sales declined 5 percent to $6.5 billion in 1996 from
$6.9 billion in the third quarter of 1995. In the first nine months, sales
reached $20.3 billion, up 3 percent from $19.7 billion a year ago.
Earnings for the third quarter of 1996 were $206 million, compared with
$496 million in the third quarter of 1995. Fully diluted net earnings per
common and common equivalent share for the third quarter of 1996 were 34
cents, down from 81 cents in the year-earlier period. Earnings in the
first nine months were $916 million, compared with $1.35 billion in 1995.
Fully diluted net earnings per common and common equivalent share were
$1.51, compared to $2.21 a year earlier. Motorola's net margin on sales
(net earnings divided by net sales) during the third quarter of 1996 was
3.2 percent compared to 7.2 percent a year ago, while in the first nine
months, net margin was 4.5 percent, compared to 6.8 percent in the year-
earlier period.
During the past several quarters, a variety of factors have continued to
slow the Company's rate of growth in sales and orders. These factors have
also had an adverse effect on net earnings. They include: (1) competition
and a weakening of demand within the semiconductor industry which has
resulted in pricing pressures; (2) increased depreciation associated with
adding new semiconductor manufacturing capacity primarily during 1995 and
early 1996; (3) the continuation of competitive pressures and price
declines in the cellular telephone, paging and modem businesses; (4) a
moderating growth rate of the cellular subscriber base in the U.S.; (5)
continued expenditures associated with the development and introduction of
new technologies; and (6) a slow-down of economic growth within the
European market. Motorola expects these factors, which have affected 1996
earnings, to continue into the fourth quarter of 1996. In addition, the
third-quarter earnings comparison is even less favorable due to a
substantial net gain on the sale of certain assets in the third quarter of
1995, which favorably affected the results in the year-ago quarter.
The Company is expanding its cost-cutting actions already under way,
including manufacturing and work force adjustments. Specific actions are
expected to be finalized during the fourth quarter and will have a material
adverse effect on 1996 fourth-quarter earnings.
General Systems Sector's segment sales declined to $2.6 billion, a decrease
of 2 percent from the third quarter of 1995. Orders increased 13 percent
and operating profits were lower than in the third quarter of 1995.
Cellular Subscriber Group (CSG) orders increased while sales were lower as
the effect of higher unit shipments was offset by declining prices. Sales
and orders were higher in Pan America and Europe but lower in all other
regions. Cellular Infrastructure Group (CIG) sales were higher and orders
increased significantly. Sales were higher in Japan, Europe and other
international markets outside of Asia-Pacific. Sales were lower in the
Asia-Pacific and Pan America regions. Orders were higher in all regions
except Asia-Pacific where they were essentially flat. Computer Group sales
were lower, but orders increased.
Segment sales in the Semiconductor Products Sector decreased 19 percent
from the third quarter of 1995 to $1.8 billion. Orders decreased 33
percent, and operating profits were significantly lower, essentially at
break-even, in comparison to the third quarter of 1995. Orders were lower
in all geographic regions. Among major market segments, only automotive
orders were higher. Distributor orders declined. Orders were lower in all
of the sector's technology groups. All product categories experienced
weaker orders except sensor products, where orders were higher.
A broad weakening of demand for semiconductor products and resulting
pricing pressures have had the greatest negative effects on operating
profits. The sector has progressively implemented and is expanding a range
of cost-cutting actions which commenced in early 1996 and include, in part,
reducing operating expenses and fixed asset expenditures, halting various
building expansion and new construction projects, reducing the labor
workforce, and re-evaluating manufacturing run rates. In September, the
sector began phasing down pilot production at the COM 1 start-up facility
in Phoenix, Arizona and on one of the wafer production lines in East Kilbride,
Scotland.
It is anticipated that year-to-year semiconductor sales and order growth
comparisons are likely to remain negative for a few more quarters, although
the rates of decline are expected to lessen. This will continue to place
significant pressures on semiconductor profitability, as order backlog has
decreased significantly compared to 1995.
In the Messaging, Information and Media segment, sales increased 8 percent
to $1.0 billion and orders decreased 2 percent compared with the third
quarter of 1995. Operating profits were lower compared with the third
quarter of 1995 largely because of the substantial net gain recorded in the
year-ago quarter from the sale of an investment. Sales were higher in all
business units. Paging orders were flat compared with a year ago, as lower
orders in Asia, particularly China, offset increased orders in Pan America
and Europe. While the growth of the paging subscriber business in China
continues, distribution channels have reduced their inventory levels as the
sector has made considerable improvements in delivery time. The overall
paging backlog is higher than a year ago. Orders were lower in the
Information Systems Group, reflecting a continuation of a very competitive
pricing environment for modems.
In the Land Mobile Products Sector business segment, sales increased 2
percent to $929 million and orders advanced 18 percent compared with the
third quarter of 1995. Operating profits were higher. Equipment sales for
iDEN (Trademark symbol inserted here) products were higher and orders were
up significantly. Nextel Communications, Inc. placed orders for more than
$200 million in iDEN infrastructure and subscriber equipment as part of the
continued roll-out of its nationwide network in the U.S.
In the Automotive, Energy and Controls Group (AECG), sales decreased 13
percent, orders decreased 12 percent and operating profits were lower from
the third quarter of 1995. Pricing pressures and reduced demand for
components and rechargeable batteries were the primary factors in the
group's performance versus a year ago. The Automotive and Industrial
Electronics portion of the group's business reported increased sales,
orders and profits. AECG has implemented a series of cost-cutting measures
and, in September 1996, announced a voluntary severance program for its
component businesses and headquarters employees. The results for this
group are reported as part of the "Other Products" segment.
In the Space and Systems Technology Group (SSTG), group sales increased 3
percent and orders were 437 percent higher. The group recorded an
operating profit compared with a loss a year ago. The significant increase
in orders reflects recognition of order bookings that had been delayed
pending completion by Iridium L.L.C. of a $750 million short-term credit
facility that enabled it to continue to make contractual payments to
Motorola. Development of the IRIDIUM(R) global telecommunications system
continued on schedule, as Motorola met all contractual milestones during
the quarter.
The short-term credit facility is expected to provide Iridium L.L.C. with
funding until February 1997. At that time, Iridium L.L.C. will require
further funding to continue to make contractual payments to Motorola. As
previously reported, Iridium L.L.C. is continuing to negotiate a permanent
credit facility. There can be no assurances as to the outcome of these
negotiations. Motorola has guaranteed Iridium L.L.C.'s short-term facility
and may agree to extend that guarantee during the time period of the
initial technology deployment and regulatory approval phases of the IRIDIUM
program. As planned, the start of the satellite deployment phase of the
IRIDIUM program will result in much higher expenses being reported by
Iridium L.L.C., of which Motorola will record in its financial results its
pro-rata share (approximately 25 percent equity ownership interest of Iridium
L.L.C.). These increased expenses are largely due to satellite depreciation
expense before the system enters commercial service in late 1998. Depreciation
expense will commence upon the first launch (which is currently expected in
late 1996 or early 1997) and will increase as additional satellites of the
66 satellite constellation are placed into orbit.
The group changed its name from the Government and Space Technology Group
to reflect its emphasis on becoming a premier systems developer and
integrator. Results are reported as part of the "Other Products" segment.
Motorola's manufacturing and other costs of sales during the third quarter
of 1996 and 1995 were $4.5 billion, 69.1 percent of net sales, and $4.4
billion, 64.0 percent of net sales, respectively. The increase as a
percent of net sales was a result of a continuation of a more competitive
pricing environment for: semiconductors, especially memory products as
industry growth has slowed; cellular telephones; pagers and modems. While
all major operations are continuing to invest in key programs for the
future, the Company intends to focus on controlling budgeted costs in
response to slowing demand and competitive pricing. Manufacturing run
rates continue to be adjusted in response to changing demands.
Motorola's selling, general and administrative expenses during the third
quarter of 1996 were $1.0 billion, 16.0 percent of sales, versus $1.1
billion, 16.5 percent of sales, during the year-earlier period.
Major transitions to new technologies continue in Motorola's equipment
businesses. These are very important to the Company's long-term growth and
are already beginning to result in significant new businesses. These
technologies include two-way and voice paging, CDMA (code divisional
multiple access) for cellular and PCS (personal communications systems),
wireless local loop, telephony and high speed data modems for cable
systems, integrated dispatch radios, and flat-panel display products. 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.
The tax rate for the quarter was 35 percent compared with 37 percent in the
third quarter of 1995 and 36 percent for the full year ended 1995.
LIQUIDITY AND CAPITAL RESOURCES:
Inventories at September 28, 1996 decreased by 3 percent or $106 million,
compared to inventories at December 31, 1995. Property, plant and
equipment, less accumulated depreciation, increased $390 million since
December 31, 1995, largely due to adding new capacity within the
Semiconductor Products Sector and the General Systems Sector during the
first half of 1996. Currently the Company is selectively deferring
capacity expansion programs. Depreciation expense increased 22.8
percent to $609 million for the third quarter of 1996 in comparison with
$496 million for the year-earlier period.
Motorola's notes payable and current portion of its long-term debt
increased $225 million, or 14.0 percent from the amount at December 31,
1995. Long-term debt decreased slightly from $1.95 billion at December
31, 1995 to $1.93 billion at September 28, 1996, or 1.2 percent. 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
decreased to 18.1 percent at September 28, 1996 from 19.8 percent at
December 31, 1995. The Company's total domestic and foreign credit
facilities aggregated $4.0 billion at September 28, 1996, of which $341
million were used and the remaining amount was not drawn, but was available
to back up outstanding commercial paper which totaled $1.5 billion at
September 28, 1996.
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 28, 1996, and September 30, 1995, the Company had net
outstanding foreign exchange contracts totaling $1.3 billion for each year
respectively. The following schedule shows the five largest foreign
exchange hedge positions as of September 28, 1996, and the corresponding
positions at September 30, 1995:
Millions of U.S. Dollars
Buy (Sell) Sept. 28, Sept. 30,
1996 1995
Japanese Yen (344) (424)
British Pound Sterling (299) (302)
Spanish Peseta (103) (52)
Italian Lire (98) (59)
Singapore Dollar 73 90
As of September 28, 1996 and September 30, 1995, 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 28, 1996. 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.
Motorola's research and development expense was $617 million in the third
quarter of 1996, compared with $562 million in the third quarter of 1995.
Research and development expenditures for the year ended December 31, 1995
were $2.2 billion. The Company continues to believe that a strong
commitment to research and development drives long-term growth. At
September 28, 1996, the Company's fixed asset expenditures for the third
quarter totaled $579 million, compared with $1.1 billion in the third
quarter of 1995. The Company is currently anticipating that fixed asset
expenditures incurred during 1996 could total approximately $3.1 billion,
significantly lower than fixed asset expenditures incurred during 1995
which aggregated $4.2 billion. The decrease in expected fixed asset
expenditures for 1996 reflects management's commitment to adjusting
investment levels to better match current industry conditions, particularly
with respect to the semiconductor industry.
Return on average invested capital (net earnings divided by the sum of
stockholders' equity, long-term debt, notes payable and the current portion
of long-term debt, less short-term investments and cash equivalents) was
9.8 percent based on the performance of the four preceding fiscal quarters
ending September 28, 1996, compared with 16.3 percent based on the
performance of the four preceding fiscal quarters ending September 30,
1995. Motorola's current ratio (the ratio of current assets to current
liabilities) was 1.38 at September 28, 1996, compared to 1.35 at December
31, 1995.
"Safe Harbor" statement under the Private Securities Litigation Reform Act
of 1995: Statements that are not historical facts, including statements
about (i) the factors affecting the Company's growth rate in the beginning
of "Results of Operations"; (ii) the Company's anticipated cost-cutting
actions and the impact thereof; (iii) Semiconductor Products Sector's
anticipated cost-cutting actions and the impact thereof; (iv) semiconductor
industry anticipated sales and order growth; (v) Iridium L.L.C. financing
negotiations; (vi) the effect of transitions to new technologies and
research and development activities; and (vii) fixed asset expenditures,
are forward looking statements based on current expectations and involve
risks and uncertainties. Motorola wishes to caution the reader that the
factors below, along with the factors set forth in the Company's 1996 proxy
statement in Management's Discussion and Analysis on pages F-10 and F-11
and in the Company's other documents filed with the SEC, in some cases have
affected and could affect Motorola's actual results causing results to
differ materially from those in any forward looking statement. These
factors include: continued or increased competition and/or pricing
pressure on the Company's businesses including the cellular telephone,
paging and modem businesses; continued or increased weakening demand for
semiconductors, industry wide or Company specific and the resulting pricing
pressures on semiconductors; the effects of underutilization of plants and
facilities, including Semiconductor Product Sector's wholly owned and joint
venture facilities (some of which are not controlled by Motorola), General
System Sector's and Automotive, Energy and Controls Group's facilities; the
outcome of Iridium L.L.C.'s financing negotiations and the Company's
guarantee negotiations for such financing; product development risks,
including technological difficulties, and commercialization and regulatory
factors; demand and market acceptance risks for new and existing products,
technologies and services, including new cellular phones, PCS systems, CDMA
systems, digital technology, paging products including two-way and voice
paging, computer products, automotive products, telephony and high speed
data modems for cable systems, and the flat-panel display products; risks
related to the IRIDIUM (Registered trademark symbol inserted here) project,
including regulatory approvals, software technological or market acceptance
issues and performance failures; unexpected expenditures, including fixed
asset expenditures; continued or increased moderating growth rate in the
cellular subscriber base in the U.S.; cellular subscriber growth rates in
other regions; and the impact of world-wide economic conditions,
particularly Europe, on growth and demand for wireless communications.
IRIDIUM (Registered trademark symbol inserted here) is a registered
trademark and service mark of Iridium L.L.C.
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
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 28, 1996 and
September 30, 1995:
Segment Sales
for the Three Months Ended
Sept. 28, Sept. 30,
(Dollars In millions) 1996 1995 % Change
General Systems Products $2,584 $2,648 (2)
Semiconductor Products 1,849 2,275 (19)
Messaging, Information and
Media Products 1,021 944 8
Land Mobile Products 929 912 2
Other Products 765 807 (5)
Adjustments and eliminations (650) (735) (12)
Industry segment totals $6,498 $6,851 (5)
Segment Sales
for the Nine Months Ended
Sept. 28, Sept. 30,
1996 1995 % Change
General Systems Products $8,066 $7,877 2
Semiconductor Products 5,975 6,241 (4)
Messaging, Information and
Media Products 3,082 2,627 17
Land Mobile Products 2,693 2,574 5
Other Products 2,450 2,526 (3)
Adjustments and eliminations (1,978) (2,106) (6)
Industry segment totals $20,288 $19,739 3
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
There are currently eight cases pending in Phoenix, Arizona arising out of
alleged groundwater, soil and air pollution in Phoenix and Scottsdale,
Arizona. Two plaintiffs in the McIntire lawsuit, pending in United States
District Court for the District of Arizona stipulated to dismissal of their
claims with prejudice. There remain approximately 920 plaintiffs in
McIntire. In the consolidated Lofgren/Betancourt/Ford/Wilkins v. Motorola
lawsuits pending in the Arizona Superior Court, Maricopa County, plaintiffs
filed a Fifth Amended Complaint on June 27, 1996. These consolidated cases
involve claims by approximately 225 plaintiffs alleging that Motorola and
approximately 30 other defendants contaminated the soil, air and
groundwater in the Phoenix/Scottsdale area, causing health problems. In
the Camelhead case, Motorola had won a motion for summary judgment
dismissing it from the suit in November 1995. The plaintiff filed a motion
for re-consideration, but the decision was re-confirmed by the trial court
in August 1996. The plaintiff has filed an appeal in the Ninth Circuit.
(See Item 3 of the Company's Annual Report on Form 10-K for the year ended
1995 and Form 10-Q for the second quarter of 1996 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 28, 1996 and
September 30, 1995.
11.1 Motorola, Inc. and Consolidated Subsidiaries Primary and
Fully Diluted Earnings Per Common and Common Equivalent
Share for the Nine Months Ended September 28, 1996 and
September 30, 1995.
27 Financial Data Schedule (filed only electronically with
the SEC)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter
of 1996.
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: Nov. 8, 1996 By: /s/ Kenneth J. Johnson
Kenneth J. Johnson
Senior 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 for the Three
Months Ended September 28, 1996 and September 30, 1995. 17
11.1 Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share for the Nine
Months Ended September 28, 1996 and September 30, 1995. 18
27 Financial Data Schedule (filed only
electronically with the SEC) --
Exhibit 11
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share
Three Months Ended September 28, 1996 and September 30, 1995
(In millions, except per share amounts)
Three Months Ended
Sept. 28, Sept. 30,
1996 1995
Net Income $ 206 $ 496
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 1 1
Adjusted net income $ 207 $ 497
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - PRIMARY:
Weighted average common shares outstanding 592.2 589.3
Common equivalent shares:
Stock options 10.2 13.1
Zero coupon notes due 2009 and 2013 6.6 7.2
Common and common equivalent
shares - primary (in millions) 609.0 609.6
Net earnings per share - primary $ .34 $ .81
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - FULLY DILUTED:
Weighted average common shares outstanding 592.2 589.3
Common equivalent shares:
Stock options 10.3 14.6
Zero coupon notes due 2009 and 2013 6.6 7.2
Common and common equivalent
shares - fully diluted (in millions) 609.1 611.1
Net earnings per share - fully diluted $ .34 $ .81
Exhibit 11.1
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share
Nine months Ended September 28, 1996 and September 30, 1995
(In millions, except per share amounts)
Nine months Ended
Sept. 28, Sept. 30,
1996 1995
Net Income $ 916 $ 1,349
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 3 4
Adjusted net income $ 919 $ 1,353
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - PRIMARY:
Weighted average common shares outstanding 592.2 589.3
Common equivalent shares:
Stock options 10.2 13.1
Zero coupon notes due 2009 and 2013 6.6 7.2
Common and common equivalent
shares - primary (in millions) 609.0 609.6
Net earnings per share - primary $ 1.51 $ 2.22
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - FULLY DILUTED:
Weighted average common shares outstanding 592.2 589.3
Common equivalent shares:
Stock options 10.3 14.6
Zero coupon notes due 2009 and 2013 6.6 7.2
Common and common equivalent
shares - fully diluted (in millions) 609.1 611.1
Net earnings per share - fully diluted $ 1.51 $ 2.21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated Balance Sheet as of 9/28/96 and the Statement of Consolidated
Earnings for the quarter ended 9/28/96 as is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-28-1996
<CASH> 1,182
<SECURITIES> 325
<RECEIVABLES> 4,165
<ALLOWANCES> (129)
<INVENTORY> 3,422
<CURRENT-ASSETS> 10,815
<PP&E> 19,135
<DEPRECIATION> (9,389)
<TOTAL-ASSETS> 23,892
<CURRENT-LIABILITIES> 7,860
<BONDS> 1,926
0
0
<COMMON> 1,779
<OTHER-SE> 10,094
<TOTAL-LIABILITY-AND-EQUITY> 23,892
<SALES> 20,288
<TOTAL-REVENUES> 0
<CGS> 13,792
<TOTAL-COSTS> 17,030<F1>
<OTHER-EXPENSES> 1,708<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 1,409
<INCOME-TAX> 493
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 916
<EPS-PRIMARY> 1.510
<EPS-DILUTED> 1.509
<FN>
<F1>Total cost includes: cost of goods sold, selling and administrative expense,
total exchange (gain)/loss
<F2>Other expense includes: depreciation expenses
</FN>
</TABLE>
