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 March 29, 1997
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 March 29, 1997:
Class Number of Shares
Common Stock; $3 Par Value 594,270,540
MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I
FINANCIAL INFORMATION Page
Item 1 Financial Statements
Statements of Consolidated Earnings
Three-Month Periods ended
March 29, 1997 and March 30, 1996 3
Condensed Consolidated Balance Sheets at
March 29, 1997 and December 31, 1996 4
Statements of Condensed Consolidated Cash Flows
Three-Month Periods ended
March 29, 1997 and March 30, 1996 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 15
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
March 29, March 30,
1997 1996
Net sales $ 6,642 $ 6,955
Costs and expenses
Manufacturing and other costs of sales 4,384 4,718
Selling, general and
administrative expenses 1,162 1,072
Depreciation expense 565 523
Interest expense, net 32 51
Total costs and expenses 6,143 6,364
Earnings before income taxes 499 591
Income taxes provided on earnings 174 207
Net earnings $ 325 $ 384
Net earnings per common and common equivalent share (1)
Fully diluted:
Net earnings per common and common
equivalent share $ .53 $ .63
Average common and common equivalent shares
outstanding, fully diluted (in millions) 610.8 608.6
Dividends paid per share $ .12 $ .10
(1) Average primary common and common equivalent shares outstanding for
the three months ended March 29, 1997 and March 30, 1996 were 610.8 million
and 608.6 million, respectively. Primary earnings per common and common
equivalent share were the same as fully diluted for the first quarters
ended March 29, 1997 and March 30, 1996.
See accompanying notes to condensed consolidated financial statements.
Motorola, Inc. and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
March 29, December 31,
1997 1996
ASSETS
Cash and cash equivalents $ 1,580 $ 1,513
Short-term investments 267 298
Accounts receivable, less allowance for
doubtful accounts (1997, $146; 1996, $137) 4,294 4,035
Inventories 3,472 3,220
Other current assets 2,209 2,253
Total current assets 11,822 11,319
Property, plant and equipment, less
accumulated depreciation
(1997, $10,166; 1996, $9,830) 9,525 9,768
Other assets (1) 3,002 2,989
Total Assets $24,349 $24,076
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current portion of
long-term debt $ 1,469 $ 1,382
Accounts payable 1,865 2,050
Accrued liabilities 4,719 4,563
Total current liabilities 8,053 7,995
Long-term debt 1,908 1,931
Other liabilities (1) 2,377 2,355
Stockholders' equity (1) 12,011 11,795
Total liabilities and stockholders' equity $24,349 $24,076
(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 $262
million, $433 million, and $171 million as of March 29, 1997; and of $242
million, $401 million and $159 million as of December 31, 1996.
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
March 29, March 30,
1997 1996
NET CASH PROVIDED BY OPERATIONS $ 435 $ 951
INVESTING
Payments for property, plant and equipment (521) (822)
Decrease in short-term investments 31 61
(Increase) decrease in other investing 108 (75)
activities
Net cash used for investing activities (382) (836)
FINANCING
Net increase in commercial paper
and short-term borrowings 140 51
Proceeds from issuance of debt 1 24
Repayment of debt (68) (20)
Payment of dividends to stockholders (71) (59)
Other financing activities 12 9
Net cash provided by financing activities 14 5
Net increase in cash and
cash equivalents $ 67 $ 120
Cash and cash equivalents, beginning of year $ 1,513 $ 725
Cash and cash equivalents, end of period $ 1,580 $ 845
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 March 29, 1997, the
Statements of Consolidated Earnings for the three-month periods ended March
29, 1997 and March 30, 1996, and the Statements of Condensed Consolidated
Cash Flows for the three-month periods ended March 29, 1997 and March 30,
1996 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 March 29, 1997 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 1997 Annual Meeting of Stockholders
of the Corporation. The results of operations for the three-month period
ended March 29, 1997 are not necessarily indicative of the operating
results for the full year.
2. INVENTORIES
Inventories consist of the following (in millions):
March 29, Dec. 31,
1997 1996
Finished goods $ 888 $ 830
Work in process and production materials 2,584 2,390
Inventories $ 3,472 $ 3,220
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 the 1986 and 1987 tax years, the Company
settled the return for adjustments agreed to at the field level. Certain
adjustments were referred to the Appeals level of the IRS and are expected
to result in a net refund. The IRS is currently reviewing the 1988 through
1991 periods and has proposed certain adjustments. 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 $195 million during the first quarter
of 1997 compared to a net income tax refund totaling $7 million which was
recognized during the first quarter of 1996. Cash payments for interest
expense (net of amount capitalized) were $59 million and $67 million, for
the first three-month periods ended March 29, 1997 and March 30, 1996,
respectively.
5. EARNINGS PER SHARE
The Company has evaluated the proforma effects of the recent accounting
pronouncement, SFAS No. 128 "Earnings Per Share" which will be effective
for fiscal years ending after December 15, 1997. Based on this evaluation,
the proforma effects are not material to the Company's consolidated
financial position, liquidity or results of operations.
6. DISCUSSIONS WITH THE SECURITIES AND EXCHANGE COMMISSION
In July 1995, the Company sold its U.S. 800 megahertz Specialized Mobile
Radio business, systems and licenses to Nextel Communications, Inc. for
shares of Nextel stock. As reflected in the Company's audited financial
statements for 1995, the Nextel transaction was accounted for as an
exchange of productive assets with no gain realized in the Company's 1995
Statement of Consolidated Earnings. The Nextel stock was carried at its
fair market value with an unrealized gain on the stock reported directly to
Stockholders' Equity as part of the Company's holding of marketable
securities. As reported in the Company's 1996 Consolidated Financial
Statements, the Securities and Exchange Commission (SEC) asserted during
1997 that the Company should have recognized a gain at the time of the
transaction by accounting for the transaction at fair value with 1995
income statement recognition. The Company based its original accounting
treatment for the exchange of assets for Nextel stock independently from a
separate transaction in which Craig McCaw's investor group ("McCaw")
entered into agreements with Nextel and Motorola which significantly
altered the governance structure of Nextel and limited Motorola's influence
over Nextel. Among other factors, the McCaw agreement granted control of
Nextel's operations committee to McCaw and the Company agreed to vote in
accordance with the decisions of the operating committee except in certain
limited circumstances.
After discussions with the SEC, the Company has agreed to restate the 1995
financial statements to reflect the accounting treatment proposed by the
SEC and currently is discussing the restatement with the SEC. Other than
minor reclassifications to Stockholders' Equity, the restatement does not
affect the Consolidated Balance Sheet because the impact of unrealized
gains related to the Nextel stock was recorded in Stockholders' Equity
during 1995 and 1996. In the restatement, the Company will record a gain
of approximately $400 million (net of taxes) in the third quarter of 1995.
The Company also will recognize the decline in share price of the Nextel
stock between the time of the transaction and December 31, 1995 as a
realized loss of approximately $133 million (net of taxes) in the fourth
quarter of 1995. As a result, 1995 earnings before income taxes will
increase from $2.782 billion to $3.225 billion and 1995 fully diluted net
earnings per common and common equivalent share have increased from $2.93
to $3.37.
The Company expects to file this restatement in a Form 10-K/A in the very
near future when it concludes its discussions with the SEC.
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 1996 Summary
Annual Report to Stockholders, the Letter to Stockholders on page 2; and
from the Proxy Statement for the 1997 Annual Meeting of Stockholders,
Management's Discussion and Analysis of Financial Condition and Results of
Operations pages F-1 through F-9, and the Consolidated Financial Statements
and Footnotes to the Consolidated Financial Statements, pages F-11 through
F-25; and from Motorola, Inc.'s Quarterly Report on Form 10-Q for the
period ending March 29, 1997, 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.("Motorola" or the "Company") reported sales of $6.6 billion
in the first quarter of 1997, down 5 percent from $7.0 billion a year
earlier. Earnings were $325 million, compared with $384 million in the
same period a year earlier. The Company's net margin on sales (net
earnings divided by net sales) during the first quarter of 1997 was 4.9
percent compared to 5.5 percent for the year-earlier period. Primary and
fully diluted net earnings per common and common equivalent share for the
first quarter of 1997 were 53 cents, compared to 63 cents a year earlier.
Earnings in the first quarter of 1997 benefited from the favorable
settlement of certain patent claims, as well as a gain on the sale of an
investment, although these items accounted for less than 10 percent of the
pre-tax profits.
The decline in sales in the first quarter of 1997 compared to the year
earlier period was largely in the semiconductor business. Orders have
improved from fourth quarter 1996, as the business emerged from last year's
semiconductor recession.
Gross margin increased to 34.0 percent of sales in the first quarter of
1997 from 32.2 percent of sales during the year-earlier period.
Depreciation expense increased as a percent of sales, while interest
expense decreased as a percent of sales.
Cellular Products segment sales increased 4 percent to $2.7 billion.
Orders rose 3 percent and operating profits were higher. The segment
includes results of the Cellular Subscriber Sector (CSS), the Cellular
Infrastructure Group (CIG) and the Network Management Group. CSS sales
increased, led by Europe, the Pan America region, China and the
Asia-Pacific region, while they declined in Japan and Korea. Orders for
Global System for Mobile Communications (GSM) phones were up significantly,
as demand for an entirely new GSM product line has been very strong.
Orders in total declined slightly, as higher orders in Europe, the
Asia-Pacific region, the Pan America region and China were offset by lower
orders in Japan and Korea.
CIG sales declined in comparison with a very strong first quarter a year
ago, when results benefited from the replacement of a competitor's entire
system in the Philippines. Higher sales in the Pan America region were
offset by lower sales in the Asia-Pacific region, Japan, China and Europe.
Orders increased, led by Japan and the Asia-Pacific region, while they
declined in China, Europe and the Pan America region. The cellular
infrastructure business has been historically characterized by large orders
and irregular purchasing patterns, which can cause volatility in quarterly
growth rates. Management believes that this characteristic has caused
certain regional markets to perform differently than others in the quarter
and believes that the long-term outlook for this business continues to be
very positive. Two leading cellular operators in Japan selected CIG to
provide Code Division Multiple Access (CDMA) cellular infrastructure
equipment nationwide. CIG also was selected by a leading cellular operator
in the Philippines to deploy CDMA. CIG received orders to provide CDMA
Personal Communications Services (PCS) systems in South Korea and the
United States.
Semiconductor Products segment sales were down 16 percent to $1.8 billion,
and orders declined 5 percent. The segment returned to profitability from
an operating loss in the fourth quarter of 1996, although profits were
lower than a year ago. Orders increased in the Asia-Pacific region and
Europe, but declined in the Americas and Japan. The automotive market
segment posted the highest order growth. Distributor orders also improved,
while all other end markets had lower orders. Among key product
categories, orders increased for analog circuits, discrete and
optoelectronic devices, and microcontrollers, while they decreased for
microprocessors and memory devices. Motorola acquired Pilkington
Microelectronics Ltd., a designer of field programmable gate arrays and
opened the Programmable Technology Center in the United Kingdom.
Land Mobile Products segment sales increased 18 percent to $977 million.
Orders rose 36 percent and operating profits were higher. Orders for
iDEN(TM) Integrated Digital Enhanced Network equipment were up
significantly, including more than $200 million from Nextel Communications,
Inc. in the U.S. In addition, orders were received for new iDEN systems in
Brazil and Korea. Key product orders were received from United Parcel
Service for DIAD II (Delivery Information Acquisition Devices) units and
from the Polish National Guard and South African Airways for two-way
radios. LMPS announced an agreement to acquire the private mobile radio
business of Robert Bosch GmbH, Germany, and established the Smartcard
Systems Business to serve the global smartcard market as a total solutions
provider.
Messaging, Information and Media segment sales declined 7 percent to $924
million, orders rose 1 percent, and operating profits were lower. Orders
increased in the Paging and Wireless Data groups, while they declined in
the Information Systems and Multimedia groups. The declines in sales and
profits were largely attributable to the Paging group, which experienced a
significant decline in sales to North American paging operators for the
second consecutive quarter. Management believes that these operators
continued to reduce inventories in order to improve their financial
positions and cash flow. Management also believes that sales by operators
to consumers in North America continued to grow. The first commercial
deployment of advanced voice paging took place in the Dallas-Fort Worth
area over PageNet's VoiceNow(R) network. The system uses Motorola's voice
pagers and InFlexion(TM) protocol - based infrastructure. Carriers in
Singapore and the Philippines launched services using FLEX(TM) technology,
Motorola's high-capacity one-way messaging protocol. India and Korea
adopted the FLEX protocol.
Automotive, Energy and Components Sector sales rose 5 percent, orders were
3 percent higher, and operating profits were higher. The Sector's results
are reported as part of the "Other Products" segment. The Sector was
awarded telematics business by two major automotive manufacturers, one from
Europe and one from the U.S. Telematics is the emerging industry
encompassing transportation, location and communication technologies to
develop such services as vehicle location, route guidance and vehicle
emergency messaging. The Sector's flat panel display development team
demonstrated monochrome and color displays using Motorola's Field Emission
Display technology.
Space and Systems Technology Group sales declined 43 percent and orders
were flat. The Group reported a loss compared with a profit in the
year-earlier period. The Group's results are reported as part of the
"Other Products" segment. Two milestones in the space system contract for
the IRIDIUM(R) global communications system were not completed in the
quarter. The initial launch of IRIDIUM satellites on a Delta II rocket,
originally scheduled for late January 1997, was delayed as a result of a
failed Delta II rocket launch unrelated to the IRIDIUM program. The
successful first launch of IRIDIUM satellites occurred on May 5, 1997. As
previously reported, Iridium LLC will require additional funding, possibly
before the end of the second quarter, to continue to make contractual
payments to the Company. An agreement in principle has been reached with
Iridium LLC to increase the Company's guarantee of Iridium LLC bank
financing by an additional $350 million to a new total of $1.1 billion, and
Iridium LLC also is pursuing other funding options. There can be no
assurances as to the availability to Iridium LLC of these funding options.
Motorola Computer Group sales declined 7 percent and orders were 19 percent
lower. The Group's results are reported as part of the "Other Products"
segment. The Group recorded a larger operating loss than the year-earlier
period. Higher sales and orders in the embedded businesses were offset by
the effect of price competition and higher than anticipated distributor
inventory levels in the commercial business.
The Company's manufacturing and other costs of sales during the first
quarter of 1997 and 1996 were $4.4 billion, 66 percent of net sales, and
$4.7 billion, 68 percent of net sales, respectively. This resulted from
improved manufacturing performance in the Cellular Subscriber, Land Mobile
Products and Automotive, Energy and Components Sectors, and the Cellular
Infrastructure Group.
Selling, general and administrative expenses during the first quarter of
1997 were $1.162 billion, or 17 percent of sales from $1.072 billion, or 15
percent of sales a year ago. This increase is partly attributable to the
fact that sales declined by 5 percent versus a year ago. The first
quarter's result, however, is comparable to the percent of sales for the
full year 1996.
To improve financial performance, the Company will continue to pursue its
program of implementing cost reductions in businesses which are not
achieving adequate profitability, reviewing development programs which have
not achieved their objectives, and concentrating resources in technologies
and geographic regions where it can establish or continue leadership. This
program may result in decisions requiring unusual charges later in 1997.
LIQUIDITY AND CAPITAL RESOURCES:
Inventories at March 29, 1997 increased by 8 percent or $252 million,
compared with inventories at December 31, 1996. Inventory turns as of
March 29, 1997 were 5.1, compared to 5.3 as of December 31, 1996. This
slight decline in inventory turns resulted from inventory increases at the
Space and Systems Technology Group and Motorola Computer Group.
Property, plant and equipment, less accumulated depreciation, decreased
$243 million since December 31, 1996, and depreciation expense during the
first quarter of 1997 increased 8 percent totaling $565 million compared to
$523 million for the year-earlier period.
The Company's notes payable and current portion of long-term debt increased
to $1.469 billion at March 29, 1997, from $1.382 billion at December 31,
1996, an increase of approximately 6 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 increased
slightly to 13.6 percent at March 29, 1997 from 13.4 percent at December
31, 1996. The Company's total domestic and foreign credit facilities
aggregated $4.2 billion at March 29, 1997, of which $511 million were used
and the remaining amount was not drawn, but was available to back up
outstanding commercial paper which totaled $1.0 billion at March 29, 1997.
In April 1997, the Company and Nextel Communications, Inc. ("Nextel")
reached agreement on various terms and conditions relating to global
purchases of iDEN(TM) equipment to be used in the Nextel National Network
in the U.S. and in digital wireless communications networks expected to be
constructed and operated by entities affiliated with Nextel's wholly owned
subsidiary, McCaw International, Ltd., in Brazil, Argentina, Mexico and the
Philippines. In addition, the Company has agreed to provide up to $450
million in additional equipment financing in the U.S.
The Company uses financial instruments to hedge, and therefore attempt to
reduce, its overall exposure to the effects of currency fluctuations on
cash flows. The Company does not speculate in financial instruments for
profit on the exchange rate price fluctuation, trade in currencies for
which there are no underlying exposures, or enter into trades for any
currency to intentionally increase the underlying exposure.
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. Gains and losses on hedges of existing assets or liabilities are
marked to market on a monthly basis. Other gains or losses on financial
instruments that do not qualify as hedges are recognized immediately as
income or expense.
Currently, the Company primarily hedges firm commitments. Gains and losses
on financial instruments which hedge firm future commitments are deferred
until such time as the underlying transactions are recognized or
immediately when the transaction is no longer expected to occur. The
Company expects that there could be hedges of anticipated transactions in
the future.
Many of the Company's non-functional currency receivables and payables are
denominated in major currencies which can be traded on open markets that
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.
As of March 29, 1997, and March 30, 1996, the Company had net outstanding
foreign exchange contracts totaling $1.5 billion and $1.2 billion,
respectively. The following schedule shows the five largest foreign
exchange hedge positions as of March 29, 1997, and the corresponding
positions at March 29, 1997:
Millions of U.S. Dollars
Buy (Sell) March 29, March 30,
1997 1996
British Pound Sterling (529) (180)
Japanese Yen (375) (361)
Italian Lira (94) (40)
Singapore Dollar 88 94
Spanish Peseta (72) (125)
As of March 29, 1997 and March 30, 1996, 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 March 29, 1997. The foreign exchange
financial instruments which hedge various investments in foreign
subsidiaries are marked to market monthly and the results are recorded in
the financial statements.
Motorola's research and development expense was $614 million in the first
quarter of 1997, compared with $556 million in the first quarter of 1996.
Research and development expenditures for the year ended December 31, 1996
were $2.4 billion. The Company continues to believe that a strong
commitment to research and development drives long-term growth. At March
29, 1997, the Company's fixed asset expenditures for the first quarter
totaled $521 million, compared with $822 million in the first quarter of
1996. Almost the entire decline is attributable to the semiconductor
business. For the full year of 1997, fixed asset expenditures are expected
to be flat with the $3.0 billion spent in 1996, although the portion
attributable to the semiconductor business may fall to $800 million from
$1.4 billion in 1996.
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 8
percent based on the performance of the four preceding fiscal quarters
ending March 29, 1997, compared with 14 percent based on the performance of
the four preceding fiscal quarters ending March 30, 1996. Motorola's
current ratio (the ratio of current assets to current liabilities) was 1.47
at March 29, 1997, slightly higher than 1.42 at December 31, 1996.
Business Risks: Statements that are not historical facts, including
statements about (i) the long-term outlook for the cellular infrastructure
business; (ii) Iridium LLC's. financing negotiations; (iii) future
cost-cutting measures; and (iv) fixed asset expenditures, are
forward-looking statements that involve risks and uncertainties. Motorola
wishes to caution the reader that the factors below, along with the factors
set forth in the Company's 1997 proxy statement in Management's Discussion
and Analysis pages F-8 and F-9, 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: the acceptance of CDMA
technology; the impact of new contracts such as for the sale of CDMA
cellular infrastructure equipment in Japan; the success of strategic
decisions to improve financial performance; the ability of Motorola to
contain costs and the extent of unusual charges incurred in connection with
cost-cutting measures; the outcome of the Iridium LLC financing
negotiations; the deployment and commercialization of the Iridium system;
product development risks, including technological difficulties and
commercialization; demand and market acceptance risks for
new and existing products, technologies and services, including new
cellular phones, paging products, computer products and automobile
products, PCS systems, and digital technology; and unexpected fixed asset
expenditures.
IRIDIUM(R) is a registered trademark and service mark of Iridium LLC. All
other brand names mentioned are registered trademarks of their respective
holders, and are herein acknowledged.
VoiceNow(R) is a registered trademark of Paging Network Inc.
INFORMATION BY INDUSTRY SEGMENT (UNAUDITED)
Summarized below are the Company's segment sales as defined by industry
segment for the three months ended March 29, 1997 and March 30, 1996:
Segment Sales
(In millions) for the three months ended
March 29, March 30,
1997 1996(1) % Change
Cellular Products $2,713 $2,599 4
Semiconductor Products 1,808 2,146 (16)
Land Mobile Products 977 826 18
Messaging, Information
and Media Products 924 990 (7)
Other Products 876 1,028 (15)
Adjustments & eliminations (656) (634) 3
Industry segment totals $6,642 $6,955 (5)
(1) Information for 1996 has been reclassified to reflect the realignment
of various business units. Cellular Products segment includes the Cellular
Subscriber Sector, the Cellular Infrastructure Group and the Network
Management Group (formerly included in the General Systems segment).
Results of the Motorola Computer Group (formerly included in the General
Systems segment) are now included in the Other Products segment. The
results of Indala Corp., formerly in the Other Products segment, have been
moved to the Land Mobile Products segment.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.
In Kaufman, et al. v. Motorola, Inc. et. al., pending in the U.S. District
Court for the Northern District of Illinois, Motorola and several of its
directors and officers are named defendants in an action for alleged
violations of Section 10(b) and 20(a) of the Securities Exchange Act and
SEC Rule 10b-5. On February 27, 1997, the District Court certified a class
consisting of purchasers of Motorola common stock during the period of
November 4, 1994 through February 17, 1995.
Motorola is a defendant in several cases arising out of Motorola's
manufacture and sale of portable cellular telephones. Verb, et. al. v.
Motorola, Inc., et. al., is a purported economic loss class action by
purchasers of portable cellular phones against Motorola and seven other
corporate defendants. On April 2, 1997, the Illinois Supreme Court denied
plaintiff's petition for leave to appeal the 1996 decision of the Illinois
Appellate Court affirming the Cook County, Illinois Circuit Court's
dismissal of the case.
Ward v. Motorola, Inc. et. al., is a case alleging that brain cancer was
caused by or aggravated by the use of a cellular telephone. On March 7,
1997, the Georgia Supreme Court denied plaintiff's petition for certiorari
of the Georgia Court of Appeals' ruling that summary judgment should be
entered on behalf of Motorola in this case.
See Item 3 of the Company's Form 10-K for the year ended 1996 for
additional disclosures regarding pending cases.
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.
(a) and (c). The Company held its annual meeting of stockholders on May 6,
1997, and the only matter voted on at that meeting was the following:
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
H. Laurance Fuller 514,016,199 2,116,104 0
Christopher B. Galvin 513,899,105 2,233,198 0
Robert W. Galvin 513,897,165 2,235,138 0
Robert L. Growney 514,019,938 2,112,365 0
Anne P. Jones 513,954,428 2,177,875 0
Donald R. Jones 513,953,664 2,178,639 0
Judy C. Lewent 513,969,379 2,162,924 0
Walter E. Massey 514,007,999 2,124,304 0
John F. Mitchell 513,915,724 2,216,579 0
Thomas J. Murrin 513,986,303 2,146,000 0
Nicholas Negroponte 513,458,414 2,673,889 0
John E. Pepper, Jr. 514,013,138 2,119,165 0
Samuel C. Scott III 514,006,121 2,126,182 0
Gary L. Tooker 513,977,597 2,154,706 0
B. Kenneth West 514,015,022 2,117,281 0
Dr. John A. White 514,015,974 2,116,329 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.
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 first quarter of
1997.
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 13, 1997 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 19
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 MARCH 29, 1997 AND MARCH 30, 1996
(In millions, except per share amounts)
Three Months Ended
March 29, March 30,
1997 1996
Net Income $ 325 $ 384
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 $ 326 $ 385
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - PRIMARY:
Weighted average common shares outstanding 593.9 591.7
Common equivalent shares:
Stock options 10.5 10.2
Zero coupon notes due 2009 and 2013 6.4 6.7
Common and common equivalent
shares - primary (in millions) 610.8 608.6
Net earnings per share - primary $ .53 $ .63
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE - FULLY DILUTED:
Weighted average common shares outstanding 593.9 591.7
Common equivalent shares:
Stock options 10.5 10.2
Zero coupon notes due 2009 and 2013 6.4 6.7
Common and common equivalent
shares - fully diluted (in millions) 610.8 608.6
Net earnings per share - fully diluted $ .53 $ .63
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated Balance Sheet as of 3/29/97 and the Statement of Consolidated
Earnings for the quarter ended 3/29/97 and 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<CASH> 1,580
<SECURITIES> 267
<RECEIVABLES> 4,440
<ALLOWANCES> (146)
<INVENTORY> 3,472
<CURRENT-ASSETS> 11,822
<PP&E> 19,691
<DEPRECIATION> (10,166)
<TOTAL-ASSETS> 24,349
<CURRENT-LIABILITIES> 8,053
<BONDS> 1,908
0
0
<COMMON> 1,783
<OTHER-SE> 10,228
<TOTAL-LIABILITY-AND-EQUITY> 24,349
<SALES> 6,642
<TOTAL-REVENUES> 0
<CGS> 4,384
<TOTAL-COSTS> 5,546<F1>
<OTHER-EXPENSES> 565<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32
<INCOME-PRETAX> 499
<INCOME-TAX> 174
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 325
<EPS-PRIMARY> 0.534
<EPS-DILUTED> 0.534
<FN>
<F1>Total cost includes: cost of goods sold, selling and admin. expense,
total exch (gain)/loss.
<F2>Other expense includes: depreciation expenses.
</FN>
</TABLE>
