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 June 28, 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 June 28, 1997:
Class Number of Shares
Common Stock; $3 Par Value 595,328,216
Motorola, Inc. and Consolidated Subsidiaries
Index
Part I
Financial Information Page
Item 1 Financial Statements
Statements of Consolidated Earnings
Three-Month and Six-Month Periods ended
June 28, 1997 and June 29, 1996 3
Condensed Consolidated Balance Sheets at
June 28, 1997 and December 31, 1996 4
Statements of Condensed Consolidated Cash Flows
Six-Month Periods ended
June 28, 1997 and June 29, 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 15
Item 6 Exhibits and Reports on Form 8-K 15
Part I - Financial Information
Motorola, Inc. and Consolidated Subsidiaries
Statements of Consolidated Earnings
(Unaudited)
(In millions, except per share amounts)
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Net sales $ 7,521 $ 6,835 $14,163 $13,790
Costs and expenses
Manufacturing and other
costs of sales 5,019 4,585 9,403 9,303
Selling, general and
administrative expenses 1,481 1,126 2,643 2,198
Depreciation expense 572 576 1,137 1,099
Interest expense, net 36 47 68 98
Total costs and expenses 7,108 6,334 13,251 12,698
Earnings before income taxes 413 501 912 1,092
Income taxes provided on earnings 145 175 319 382
Net earnings $ 268 $ 326 $ 593 $ 710
Net earnings per common and common equivalent share (1)
Fully diluted:
Net earnings per common and
common equivalent share $ .44 $ .54 $ .97 $ 1.17
Average common and common
equivalent shares outstanding,
fully diluted (in millions) 614.3 609.6 614.3 609.6
Dividends paid per share $ .12 $ .10 $ .24 $ .20
(1) Average primary common and common equivalent shares outstanding for
the three and six months ended June 28, 1997 and June 29, 1996 were 611.4
million and 609.1 million, respectively. Primary earnings per common and
common equivalent share were the same as fully diluted for the three months
ended June 28, 1997 and June 29, 1996, respectively, and the same as fully
diluted for the six months ended June 28, 1997 and June 29, 1996,
respectively.
See accompanying notes to condensed consolidated financial statements.
Motorola, Inc. and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
June 28, December 31,
1997 1996
Assets
Cash and cash equivalents $ 1,453 $ 1,513
Short-term investments 318 298
Accounts receivable, less allowance for
doubtful accounts (1997, $150; 1996, $137) 4,659 4,035
Inventories 3,663 3,220
Other current assets 2,276 2,253
Total current assets 12,369 11,319
Property, plant and equipment, less
accumulated depreciation
(1997, $10,666; 1996, $9,830) 9,554 9,768
Other assets (1) 3,550 2,989
Total Assets $25,473 $24,076
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $ 1,351 $ 1,382
Accounts payable 2,085 2,050
Accrued liabilities 4,943 4,563
Total current liabilities 8,379 7,995
Long-term debt 1,907 1,931
Other liabilities (1) 2,640 2,355
Stockholders' equity (1) 12,547 11,795
Total liabilities and stockholders' equity $25,473 $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 $277
million, $458 million and $181 million as of June 28, 1997; and a decrease
to stockholders' equity, other assets and deferred taxes of $26 million,
$43 million and $17 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)
Six Months Ended
June 28, June 29,
1997 1996
Net cash provided by operations $ 1,085 $ 1,655
Investing
Payments for property, plant and equipment (1,052) (1,559)
(Increase) decrease in short-term investments (20) 59
(Increase) decrease in other investing
activities 66 (194)
Net cash used for investing activities (1,006) (1,694)
Financing
Net increase in commercial paper
and short-term borrowings 3 145
Proceeds from issuance of debt 1 21
Repayment of debt (52) (10)
Payment of dividends to stockholders (143) (118)
Other financing activities 52 217
Net cash (used for) provided
by financing activities (139) 255
Net (decrease) increase in cash and
cash equivalents $ (60) $ 216
Cash and cash equivalents, beginning of year $ 1,513 $ 725
Cash and cash equivalents, end of period $ 1,453 $ 941
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 June 28, 1997, the
Statements of Consolidated Earnings for the three-month and six-month
periods ended June 28, 1997 and June 29, 1996, and the Statements of
Condensed Consolidated Cash Flows for the six-month periods ended June 28,
1997 and June 29, 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 June 28, 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 restated financial statements and notes thereto included in the
Company's Form 10-K/A for the year ending December 31, 1996. The results of
operations for the three and six-month periods ended June 28, 1997 are not
necessarily indicative of the operating results for the full year.
2. Inventories
Inventories consist of the following (in millions):
June 28, Dec. 31,
1997 1996
Finished goods $ 968 $ 830
Work in process and production materials 2,695 2,390
Inventories $ 3,663 $ 3,220
3. Income Taxes
The Internal Revenue Service (IRS) has examined the federal income tax
returns for Motorola, Inc. through 1991 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 returns 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. With regard to the 1988-1991 tax years, the IRS
has proposed certain adjustments to the Company's income and tax credits
for those years, which would result in substantial 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 $318 million during the first six
months of 1997 and $396 million for the same period a year earlier. Cash
payments for interest expense (net of amount capitalized) were $95 million
and $117 million, for the first six-month periods of 1997 and 1996,
respectively.
5. Recent Accounting Pronouncements
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. The Financial
Accounting Standards Board has recently issued two new accounting
standards, Statement 130, Reporting Comprehensive Income and Statement 131,
Disclosures about Segments of an Enterprise and Related Information. These
statements will affect the disclosure requirements for the 1998 annual
financial statements. Currently, the Company is evaluating the effect of
these new statements.
6. Restatement of Financial Statements
After discussions with the Securities and Exchange Commission regarding the
1995 sale of its U.S. 800 megahertz Specialized Mobile Radio business,
systems and licenses to Nextel Communications, Inc. for shares of Nextel
stock, the Company has restated its 1995 historical financial statements
and has made resulting reclassifications to the December 31, 1996
Consolidated Balance Sheet. As a result, the Company has amended its Form
10-K for the year ending December 31, 1996 originally filed on March 25,
1997, to reflect the restatement and reclassifications. These condensed
consolidated financial statements should be read in conjunction with the
Company's Form 10-K/A for the year ending December 31, 1996.
7. Reorganization of DRAM Business
On July 1, 1997, the Company announced its decision to phase out its
participation in the dynamic random access memory (DRAM) market. The
Company's second quarter financial results were negatively impacted as a
result of this decision and the associated charge against pre-tax earnings
of $170 million or 18 cents per share. The charge relates primarily to the
write down of both technology development costs and manufacturing
equipment. Earnings in the first six months were also affected by the $170
million or 18 cents per share charge noted above. The per share
comparisons are on a fully diluted basis per common and common equivalent
share.
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 Company's Form 10-K/A, Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in Item 7, and the
Consolidated Financial Statements and Footnotes to the Consolidated
Financial Statements, contained in Item 8; and from Motorola, Inc.'s
Quarterly Report on Form 10-Q for the period ending June 28, 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:
Sales were $7.5 billion in the second quarter of 1997, up 10.0 percent from
$6.8 billion a year earlier. In the first half, sales rose 2.7 percent to
$14.2 billion from $13.8 billion in the first half of 1996.
As a result of the decision to phase out its participation in the dynamic
random access memory (DRAM) market and the associated charge against
pre-tax earnings of $170 million or 18 cents per share, second quarter
earnings were $268 million or 44 cents per share, compared with $326
million or 54 cents per share a year earlier. Earnings in the first six
months were $593 million or 97 cents per share, compared with $710 million
or $1.17 per share in last year's first half, with the comparison again
affected by the $170 million or 18 cents per share charge noted above. The
per share comparisons are on a fully diluted basis per common and common
equivalent share.
Net margin on sales was 3.6 percent in the second quarter, compared with
4.8 percent a year ago, while the first half net margin was 4.2 percent
against 5.1 percent in the year-earlier period.
Gross margin increased to 33.3 percent of sales in the second quarter of
1997 from 32.9 percent of sales during the year-earlier period. Lower
manufacturing costs, as a percent of sales, in the Semiconductor, Paging
and Cellular Subscriber businesses were the primary areas of improvement.
Cellular Products Segment sales rose 6 percent to $2.8 billion and orders
rose 20 percent. Operating profits were flat, but would have declined
except for a small gain from the sale of two investments. 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 Asia-Pacific, China and Europe, while they were
unchanged in Pan America and declined in both Japan and South Korea.
Orders increased significantly led by Asia-Pacific, China, Europe and Pan
America while they declined in Japan and South Korea. Sales and orders for
Global System for Mobile Communications (GSM) based digital products were
very significantly higher.
CIG sales increased slightly, as higher sales in the Pan American and
Asia-Pacific regions were largely offset by lower sales in Europe and
Japan. Sales were lower in Japan due to the migration from existing
technology to CDMA, in which CIG announced a major award for a nationwide
system in the first quarter of 1997. Orders increased, led by the Pan
American region, Japan and the Asia-Pacific region, while they declined in
Europe.
Semiconductor Products Segment sales were up 3 percent to $2.0 billion, and
orders rose 36 percent. The segment reported an operating loss versus a
profit a year ago. Excluding the impact of charges related to phasing out
participation in the DRAM market, operating profits would have increased.
In deciding to phase out of the DRAM market, the sector announced that it
plans to reallocate resources to other technologies, including proprietary
fast static random access memories (FSRAM) and integrated memories such as
flash and electrically erasable programmable read-only memory (EEPROM).
Orders increased significantly in the Asia-Pacific region, Europe and the
Americas, and were higher in Japan. Among market segments, communications
posted the highest order growth as all end markets had higher orders.
Distributor orders also improved. Among key product segments, orders
increased significantly in all categories except memories, which had
significantly lower orders. The sector was reorganized into five specific
market groups -- Networking & Computer Systems, Wireless Subscriber
Systems, Transportation Systems, Consumer Systems, and Semiconductor
Components.
Land Mobile Products Segment sales rose 22 percent to $1.2 billion. Orders
increased 30 percent and operating profits were higher. Orders for
iDEN(TM) equipment for Integrated Digital Enhanced Networks were up
significantly, including more than $300 million from Nextel Communications,
Inc. for the continued rollout of its nationwide network in the U.S. and
more than $50 million from McCaw International for systems in Brazil and
Argentina. Avantel, a Motorola joint venture in Colombia, announced the
commercial launch of an iDEN system in Bogota with expansion plans for five
additional cities.
Messaging, Information and Media Segment sales increased 6 percent to $1.1
billion, orders rose 1 percent, and operating profits were higher. Orders
in the Paging Group were flat, while orders increased in the Information
Systems Group. The Paging Group again experienced significantly lower
sales and orders from North American paging operators. Management believes
that these operators continue to control inventories tightly in order to
improve their financial positions and cash flow. Paging orders were up
significantly in all international markets except Japan, where orders were
lower.
Automotive, Energy and Components Sector sales increased 6 percent, orders
were 13 percent higher, and operating profits were lower. The sector's
results are reported as part of the "Other Products" segment. Orders
increased in each of the sector's business units. The Energy Products
Division had the highest rate of order growth as demand increased for
rechargeable batteries and battery chargers. Orders in the Components
Product Group increased for printed circuit boards from both external and
internal customers.
Space and Systems Technology Group sales increased 94 percent and orders
were up 187 percent compared with the second quarter of 1996, when order
booking was delayed pending completion of a short-term credit facility
being negotiated by Iridium LLC. The group reported a profit compared with
a loss in the year-earlier period. The group's results are reported as
part of the "Other Products" segment.
Several milestones for the IRIDIUM(R) global communications system were
completed during the quarter. Twelve IRIDIUM satellites were successfully
placed in orbit on two separate launches. On July 9, five more satellites
were placed into orbit. Additional launches are scheduled through May
1998, when the entire constellation of 66 satellites is scheduled to be in
orbit. Comprehensive system testing will continue until the start of
commercial service, expected at the end of September 1998.
Motorola Computer Group sales increased 25 percent and orders were 51
percent higher. The group recorded a similar operating loss to the
year-earlier period. The group's results are reported as part of the
"Other Products" segment.
Selling, general and administrative expenses increased to 19.7 percent of
sales in the second quarter versus 16.5 percent in the year-earlier period.
The increased percent of sales was largely attributable to the charges
recorded in the quarter related to the phase out of participation in the
DRAM market.
Depreciation expense in the second quarter declined as a percent of sales
to 7.6 percent from 8.4 percent in the year-earlier period, as a result of
decreased fixed asset expenditures in 1996. The tax rate for the second
quarter was 35 percent, the same as the year-earlier period. The tax rate
for the full year 1996 was also 35 percent.
Liquidity and Capital Resources:
Inventories at June 28, 1997 increased by 14 percent or $443 million,
compared to inventories at December 31, 1996. Property, plant and
equipment, less accumulated depreciation, decreased $214 million since
December 31, 1996.
Motorola's notes payable and current portion of its long-term debt
decreased $31 million, or 2.2 percent, to $1.351 billion at June 28, 1997
from $1.382 billion at December 31, 1996. Long-term debt remained flat at
$1.9 billion from the amount at December 31, 1996. 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 13.0
percent at June 28, 1997 from 13.4 percent at December 31, 1996. The
Company's total domestic and foreign credit facilities aggregated $4.2
billion at June 28, 1997, of which $397 million were used and the remaining
amount was not drawn, but was available to back up outstanding commercial
paper which totaled $992 million at June 28, 1997. The Company has
guaranteed $750 million of Iridium LLC's bank financing and has agreed in
principal to guarantee an additional $350 million of such bank financing.
As of the end of the reporting period, the Company had no outstanding
interest rate swaps, currency swaps, or options relating to either its debt
instruments or investments.
The Company uses financial instruments to hedge, and therefore attempts to
reduce, its overall exposure to the effects of currency fluctuations on
cash flows. The Company's policy is not to 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.
Instruments used as hedges must be effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge
at the inception of the contract. Accordingly, changes in market values of
hedge instruments must be highly correlated with changes in market values
of underlying hedged items both at inception of the hedge and over the life
of the hedge contract.
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. Currently, the Company primarily hedges firm commitments. The Company
expects that there could be hedges of anticipated transactions or
investments in foreign subsidiaries in the future.
Many of the Company's non-functional currency receivables and payables
which are denominated in major currencies that can be traded on open
markets are hedged. The Company uses forward contracts and options to
hedge these currency exposures. A portion 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.
Assets and liabilities which are denominated in non-functional currencies
are translated to the functional currency on a monthly basis and the
resulting gain or loss is recorded within selling, general, and
administrative expenses in the income statement. Gains and losses on
hedges of existing assets or liabilities are marked to market on a monthly
basis and the result is recorded within selling, general, and
administrative expenses in the income statement. Gains and losses on
financial instruments which hedge firm future commitments are deferred
until such time as the underlying transactions are recognized or recorded
immediately when the transaction is no longer expected to occur. The
criteria used to support the election of deferred accounting is in
accordance with FAS 52 and FAS 80. The foreign exchange financial
instruments which hedge various investments in foreign subsidiaries are
marked to market monthly and the results are recorded in the equity
section. Other gains or losses on financial instruments that do not qualify
as hedges and which are terminated are recognized immediately as income or
expense.
As of June 28, 1997 and June 29, 1996, the Company had net outstanding
foreign exchange contracts totaling $1.6 billion and $1.2 billion,
respectively. The following schedule shows the five largest foreign
exchange hedge positions as of June 28, 1997 and the corresponding
positions at June 29, 1996:
Millions of U.S. Dollars
Buy (Sell) June 28, June 29,
1997 1996
Japanese Yen (427) (357)
British Pound Sterling (356) (185)
German Mark (149) 40
Italian Lira (129) (67)
Singapore Dollar 92 84
As of June 28, 1997 and June 29, 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 June 28, 1997.
As of the end of the reporting period, the Company had no derivatives which
hedge the value of its minority-owned equity investments. However, the
Company has entered into arrangements whereby the Company may increase its
percentage interest in certain affiliates at the option of the other
Shareholders or the Company at various dates. The value of these
arrangements were immaterial as of the end of the reporting period.
The Company's research and development expense was $678 million in the
second quarter of 1997, compared with $625 million in the second 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 June
28, 1997, the Company's fixed asset expenditures for the second quarter
totaled $611 million, compared with $736 million in the second quarter of
1996. The Company is currently anticipating that fixed asset expenditures
for 1997 will be flat with the $3.0 billion spent 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
7.4 percent based on the performance of the four preceding fiscal quarters
ending June 28, 1997, compared with 14.0 percent based on the performance
of the four preceding fiscal quarters ending June 29, 1996. Motorola's
current ratio (the ratio of current assets to current liabilities) was 1.48
at June 28, 1997, compared to 1.42 at December 31, 1996.
Outlook:
The Company continues to build for the future by redirecting resources to
development programs with the greatest potential and focusing on core
technology platforms. As previously stated, the review of development
programs and businesses which have not met expectations is continuing. The
potential for further actions could result in additional charges against
earnings in the second half of the year.
The Company continues to be affected by a competitive pricing environment
and continued pricing declines in several of its businesses, including the
cellular telephone, cellular infrastructure and paging businesses. This
competitive environment is expected to continue pressuring manufacturing
margins.
Business Risks:
Statements that are not historical facts, including statements about (i)
reallocating resources to other technologies in connection with the
decision to phase out of the DRAM market, (ii) deployment and
commercialization of IRIDIUM(R) Services, (iii) fixed asset expenditures
are forward-looking statements that involve risks and uncertainties, and
(iv) in "Outlook". Motorola wishes to caution the reader that the factors
below, along with the factors set forth in Motorola's Form 10-K/A in Item 7
on pages 14 and 15 and in its other SEC filings, 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: (i) the success of strategic decisions to improve
performance and compete more effectively, (ii) the ability of Motorola to
contain costs and the extent of unusual charges incurred in connection with
cost-cutting measures, (iii) unforeseen costs in connection with the
decision to phase out of the DRAM market, (iv) pricing of DRAM products
during the market exit period, (v) continued weak demand for paging
products in North America, (vi) acceptance of new digital technology
and the transition from analog to digital technology, (vii) product
deficiencies in the cellular telephone business,(viii) continued steady
growth in emerging markets, (ix) product development risks, including
technological difficulties and commercialization risks related to Iridium
products and services, (x) unexpected fixed asset expenditures, and (xi)
demand and market acceptance risks for new and existing products,
technologies and services.
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.
Information by Industry Segment (Unaudited)
Summarized below are the Company's segment sales as defined by industry
segment for the three-months and six-months ended June 28, 1997 and June
29, 1996:
Segment Sales
for the three months ended
June 28, June 29,
(In millions) 1997 1996(1) % Change
- -------------------------------------------------------------------
Cellular Products $2,824 $2,653 6
Semiconductor Products 2,032 1,980 3
Land Mobile Products 1,160 949 22
Messaging, Information and
Media Products 1,135 1,071 6
Other Products 1,166 876 33
Adjustments and eliminations (796) (694) (15)
Industry segment totals $7,521 $6,835 10
Segment Sales
for the six months ended
June 28, June 29,
(In millions) 1997 1996(1) % Change
- --------------------------------------------------------------------
Cellular Products $5,537 $5,252 5
Semiconductor Products 3,840 4,126 (7)
Land Mobile Products 2,137 1,775 20
Messaging, Information and
Media Products 2,059 2,061 0
Other Products 2,042 1,904 7
Adjustments and eliminations (1,452) (1,328) (9)
Industry segment totals $14,163 $13,790 3
(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.
Motorola is a defendant in several cases arising out of Motorola's
manufacture and sale of portable cellular telephones. Schiffner v.
Motorola, Inc. is a purported economic loss class action by purchasers of
cellular telephones against Motorola. On June 16, 1997, this case was
dismissed, with prejudice, by the Cook County, Illinois Circuit Court and a
Notice of Appeal of this dismissal was filed on June 20, 1997.
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.
Not applicable.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
10 Motorola Share Option Plan of 1996, as amended
11 Motorola, Inc. and Consolidated Subsidiaries Primary
and Fully Diluted Earnings Per Common and Common Equivalent
Share for the three months ended
June 28, 1997 and June 29, 1996.
11.1 Motorola, Inc. and Consolidated Subsidiaries Primary and
Fully Diluted Earnings Per Common and Common Equivalent
Share for the six months ended
June 28, 1997 and June 29, 1996.
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 second 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: July 16, 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
10 Motorola Share Option Plan of 1996, as amended
11 Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share for the three
months ended June 28, 1997 and June 29, 1996.
11.1 Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share for the six
months ended June 28, 1997 and June 29, 1996.
27 Financial Data Schedule (filed only
electronically with the SEC)
Exhibit 10
MOTOROLA SHARE OPTION PLAN OF 1996, as amended 5/7/97
1. NAME AND PURPOSE
----------------
1.1 Name. The name of this plan is the Motorola Share Option Plan of
1996 (the "Plan").
1.2 Purpose. Motorola has established the Plan to promote the
interests of Motorola and its stockholders by providing full and part-time
employees of Motorola or its Subsidiaries and members of Motorola's Board
who are not employees of Motorola or any of its Subsidiaries (each a
"Non-Employee Director") with additional incentive to increase their
efforts on Motorola's behalf and to remain in the employ or service of
Motorola or its Subsidiaries and with the opportunity, through stock
ownership, to increase their proprietary interest in Motorola and their
personal interest in its continued success and progress.
2. DEFINITIONS
-----------
2.1 General Definitions. The following words and phrases, when used
herein, unless otherwise specifically defined or unless the context clearly
indicates otherwise, shall have the following meanings:
(a) Affiliate. Any corporation, partnership, joint venture or
other business entity in which Motorola or a Subsidiary holds an ownership
interest.
(b) Board. The Board of Directors of Motorola.
(c) Change in Control. The events described in Section 11.2.
(d) Code. The Internal Revenue Code of 1986, as amended, and
the regulations promulgated pursuant thereto.
(e) Committee. The Compensation Committee of the Board.
(f) Common Stock. Motorola's common stock, $3 par value per
Share.
(g) Directors. Members of the Board of Motorola.
(h) Disinterested Person. A person described in Rule
16b-3(c)(2) or any successor definition adopted by the SEC.
(i) Effective Date. The date that the Plan is approved by both
the directors of Motorola and the stockholders of Motorola, and if not
approved by both on the same day, the date of the last approval.
(j) Employee. Any person employed by Motorola or a Subsidiary
on a full or part-time basis.
(k) Employee Stock Options. Stock Options granted to an
Employee under Article 4 of the Plan, including both NSOs and ISOs.
(l) Exchange Act. The Securities Exchange Act of 1934, as
amended.
(m) Fair Market Value. The average of the high and low sale
prices of Shares as reported for the New York Stock Exchange - Composite
Transactions on a given date, or, in the absence of sales on a given date,
the average of the high and low sale prices (as so reported) for the New
York Stock Exchange - Composite Transactions on the last previous day on
which a sale occurred prior to such date. With respect to an ISO, as
defined below, if such method of determining Fair Market Value shall not be
consistent with the then current regulations of the U.S. Secretary of the
Treasury, Fair Market Value shall be determined in accordance with those
regulations.
(n) ISO. An incentive stock option that meets the requirements
of Section 422 (or any successor section) of the Code.
(o) Motorola. Motorola, Inc. or any successor.
(p) NSO. A Stock Option that does not qualify as an ISO.
(q) Non-Employee Director. Is defined in Section 1.2.
(r) Non-Employee Stock Option Period. Is defined in Section
5.3.
(s) Non-Employee Stock Option. Is defined in Section 5.1.
(t) Non-Exercise Period. The period, for each Employee Stock
Option, ending twelve (12) months from the date of its grant, or any longer
period or periods determined by the Committee and set forth in, or
incorporated by reference into, the Employee Stock Option.
(u) Optionee. An Employee who has been granted an Employee
Stock Option under the Plan.
(v) Participant. An individual who is granted a Stock Option
under in the Plan.
(w) Plan. The Motorola Share Option Plan of 1996 and all
amendments and supplements thereto.
(x) Plan Year. The calendar year.
(y) Rule 16b-3. Rule 16b-3 promulgated by the SEC, as amended,
or any successor rule in effect from time to time.
(z) SEC. The Securities and Exchange Commission.
(aa) Share. A share of Common Stock.
(bb) Stock Options. Employee Stock Options and Non-Employee
Stock Options.
(cc) Subsidiary; Subsidiaries. Any corporation or other entity
in which a fifty percent (50%) or greater interest is, at the time,
directly or indirectly owned by Motorola or by one or more Subsidiaries or
by Motorola and one or more Subsidiaries, except that: (i) with respect to
ISOs, "Subsidiary" shall mean "subsidiary corporation" as defined in
Section 424(f) of the Code, and (ii) with respect to Directors and any
elected officer of Motorola or a Subsidiary subject to Section 16 of the
Exchange Act, the terms "Subsidiary" or "Subsidiaries" mean and include any
corporation or other entity at least a majority of the outstanding voting
shares of which (other than directors' qualifying shares) is, at the time,
directly or indirectly owned by Motorola or by one or more Subsidiaries or
by Motorola and one or more Subsidiaries.
(dd) Successor-in-Interest. Is defined in Section 4.5(a)(ii).
(ee) Total and Permanent Disability. Is defined in Section
4.5(a)(i).
2.2 Other Definitions. In addition to the above definitions, certain
words and phrases used in the Plan and any Stock Option certificate may be
defined elsewhere in the Plan or in such Stock Option certificate.
3. SHARES SUBJECT TO PLAN
----------------------
3.1 Number of Shares. The number of Shares for which Stock Options
may be granted under the Plan shall be (i) 29,000,000 Shares, plus (ii) the
total number of Shares with respect to which no options have been granted
under Motorola's Share Option Plan of 1991 on the Effective Date, plus
(iii) the number of Shares as to which options granted under Motorola's
Share Option Plan of 1991 terminate or expire without being fully
exercised, subject, in each case, to Sections 3.2 and 3.3. Shares issued
under the Plan may be either authorized and unissued Shares or issued
Shares reacquired by Motorola. No Employee may receive Stock Options
relating to more than 300,000 Shares in any Plan Year (as adjusted
pursuant to Section 3.3).
3.2 Reusage. If a Stock Option expires or is terminated, surrendered
or canceled without having been fully exercised, the Shares covered by such
Option shall again be available for use under the Plan.
3.3 Adjustments. If there is any change in the Common Stock by
reason of any stock split, stock dividend, spin-off, split-up, spin-out,
recapitalization, merger, consolidation, reorganization, combination or
exchange of shares, the number and class of Shares available for Stock
Options the number of Shares to be automatically granted under Section 5.1
hereof and the number of Shares subject to outstanding Stock Options and
the price of each of the foregoing, as applicable, shall be appropriately
adjusted by the Committee to provide Participants with the same relative
rights before and after such adjustment.
4. EMPLOYEE STOCK OPTIONS
----------------------
4.1 Grant of Employee Stock Options. The Committee shall have
authority to grant Stock Options (ISOs or NSOs) to Employees. The
Committee shall determine the number of Shares subject to each Employee
Stock Option, the purchase price per Share, the term of the Employee Stock
Option, the time or times at which the Employee Stock Option may be
exercised, and all other terms and conditions of the Employee Stock Option.
The Option exercise price per Share of an Employee Stock Option may not be
less than the Fair Market Value of a Share on the date of grant. The
Committee may accelerate the exercisability of any Employee Stock Option,
including the waiver or modification of any installment exercise
provisions. The Committee may in its discretion, delegate to members of
the Committee and/or one or more elected officers of Motorola the authority
to grant Stock Options to Employees who are not subject to Section 16 of
the Exchange Act.
4.2 NSOs and ISOs.
(a) The Stock Option exercise price of any Stock Option may not
be less than the Fair Market Value on the date of grant of the Shares of
the Common Stock subject to the Stock Option.
(b) ISOs. The following additional terms and conditions shall
apply to ISOs:
(i) No ISO shall be granted to any Participant who, at the
time the Employee Stock Option is granted, would own (within the meaning of
Section 422(b) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of Motorola.
(ii) The aggregate Fair Market Value (determined as of the
time the Employee Stock Option is granted) of the Shares of Common Stock
with respect to which one or more ISO's are exercisable for the first time
by any individual Optionee during any calendar year (under all plans of
Motorola and its Subsidiaries) shall not exceed $100,000.00.
(iii) Each ISO, by its terms, shall (1) not be exercisable
after the expiration often (10) years after the date it is granted and (2)
not be transferrable by the Optionee otherwise than by will or the
applicable laws of descent and distribution or by operation of a death
beneficiary designation made by the Optionee in accordance with rules
established by the Committee and shall be exercisable during the Optionee's
lifetime only by the Optionee or the Optionee's guardian or legal
representative if the Optionee is legally incompetent.
4.3 Exercise of Employee Stock Options; Payment.
(a) An Employee Stock Option may be exercised by the Optionee
submitting to Motorola such form(s) as are prescribed for such purpose.
Motorola may require the surrender of the Employee Stock Option certificate
if one has been issued. No Employee Stock Option shall be exercisable for
less than a minimum of fifty (50) Shares except in cases where the number
of Shares represented by the Employee Stock Option being exercised is less
than fifty (50), in which case, the Employee Stock Option shall not be
exercisable for less than all shares represented by such Option.
(b) Payment for Shares purchased upon exercise of an Employee
Stock Option shall be paid in full as permitted by Section 13 for all
Shares purchased at the time of purchase. No fractional Shares may be
purchased.
4.4 Non-Exercise Period. Except as provided herein for Optionees who
die while in the employ of Motorola or any Subsidiary or for a Change in
Control, no Employee Stock Option granted under the Plan may be exercised
prior to the expiration of the Non-Exercise Period. No Employee Stock
Option may be exercised after expiration of its stated term.
4.5 Effect of Termination of Employment on Employee Stock Options:
(a) Termination of Employment During the Non-Exercise Period.
(i) Except for a Change in Control and except for a
disability leave of absence as provided in Section 4.5(a)(iii) hereof, if,
during the NonExercise Period, the Optionee's employment with Motorola and
its Subsidiaries shall terminate for any reason (including retirement)
other than death, transfer to an Affiliate and other than Total and
Permanent Disability (as that term is defined in the Motorola Profit
Sharing and Investment Plan) of the Optionee, as determined by the
Committee or its designee, the Optionee's right to exercise the Employee
Stock Option shall terminate and all rights thereunder shall cease;
provided, however, if the Optionee's employment terminates by reason of the
transfer of such Optionee to an Affiliate, the Committee shall have the
power and authority, in its discretion, to determine whether or not any or
all of the Employee Stock Options held by the Optionee shall terminate or
shall continue in effect (in which case such Options shall be subject to
all of the conditions of the Plan, including this Section 4.5, and such
other conditions as the Committee may impose, with "termination of
employment," "employment is terminated" or "employment shall have been
terminated" or words of like import or intent meaning termination of
employment with the Affiliate.)
(ii) If, during the Non-Exercise Period, an Optionee dies
while in the employ of Motorola or any Subsidiary, the deceased Optionee's
Successor-in-Interest shall have the right to exercise, in whole or in
part, at any time during the remainder of the term of such Employee Stock
Option, the entire amount of the Shares subject to such Employee Stock
Option (without regard to any installment limitation on the exercise of the
Employee Stock Option). For purposes of the Plan, the term
"Successor-in-Interest" shall mean the deceased Optionee's death
beneficiary, personal representative, or any person who acquired the right
to exercise such Employee Stock Option by bequest or inheritance or by
reason of the laws of descent and distribution.
(iii) If, during the Non-Exercise Period, an Optionee's
employment with Motorola and its Subsidiaries shall terminate because of
the Total and Permanent Disability of the Optionee or if the Optionee shall
be put on disability leave of absence status because of the Total and
Permanent Disability of the Optionee, each Employee Stock Option held by
such an Optionee which has a Non-Exercise Period in effect at the time of
termination of employment or commencement of the disability leave of
absence shall become exercisable at the time the applicable Non-Exercise
Period elapses or terminates, and the Optionee shall then have the right to
exercise, in whole or in part, each such Employee Stock Option for the
entire amount of Shares subject to each such Employee Stock Option (without
regard to any installment limitation on exercise of the Employee Stock
Option) at any time during the remainder of the term of the Employee Stock
Option. The unexercised portion of each Employee Stock Option shall
terminate upon expiration of the term of such Stock Option, and any
unexercised portion shall terminate immediately if and when the Optionee is
employed by a competitor of Motorola or any Subsidiary without written
consent of the Committee.
(b) Termination of Employment After the Non-Exercise Period.
(i) By Termination of Employment Without Cause. If the
Non-Exercise Period shall have elapsed or terminated and the Optionee's
employment with Motorola and its Subsidiaries shall have been terminated
thereafter by Motorola or any Subsidiary without cause, the Optionee shall
have the right to exercise the then presently exercisable unexercised
portion of the Employee Stock Option at any time during a period of twelve
(12) months after the date of termination of employment. The unexercised
portion of the Employee Stock Option may be exercised, in whole or in part,
for the number of Shares which were or would have become exercisable to the
extent the Optionee could have exercised such Employee Stock Option had the
Optionee remained in the employ of Motorola or any Subsidiary during the
twelve (12) month period immediately following the date of termination of
employment. Except as otherwise provided in Section 4.5(b)(vii) hereof, the
unexercised and/or unexercisable portion of each Employee Stock Option
shall terminate twelve (12) months after an Optionee's employment with
Motorola and its Subsidiaries shall have been so terminated, and any
unexercised and/or unexercisable portion shall terminate immediately if and
when the Optionee is employed by a competitor of Motorola or any Subsidiary
without the written consent of the Committee.
(ii) By Termination of Employment for Cause. If the
Non-Exercise Period shall have elapsed or terminated and the Optionee's
employment is terminated by Motorola or any Subsidiary for cause, any
unexercised portion of any Employee Stock Option granted to the Optionee
shall terminate with the Optionee's termination of employment. As used
herein, the term "cause" means (a) the failure of the Optionee to carry out
the duties assigned to the Optionee as a result of incompetence or willful
neglect, as determined by the Committee, or (b) such other reasons,
including the existence of a conflict of interest, as the Committee may
determine.
(iii) By Voluntary Termination of Employment. If the
Non-Exercise Period shall have elapsed or terminated and the Optionee
voluntarily terminates employment with Motorola or any Subsidiary for
reasons other than the retirement of the Optionee, any unexercised portion
of the Optionee's Employee Stock Option shall terminate with the Optionee's
termination of employment.
(iv) By Retirement. If the Non-Exercise Period shall have
elapsed or terminated and the Optionee's employment with Motorola or any
Subsidiary shall have been terminated because of the retirement of the
Optionee from Motorola or any Subsidiary at age 55 or older, the Optionee
shall have the right to exercise, in whole or in part, the unexercised
portion of any Employee Stock Option held by such Optionee for the entire
amount of Shares subject to such Stock Option (without regard to any
installment limitation on exercise of the Employee Stock Option) at any
time during the remainder of the term of such Stock Option. The
unexercised portion of each Employee Stock Option shall terminate upon
expiration of the term applicable to each such Employee Stock Option, and
any unexercised portion shall terminate immediately if and when the
Optionee is employed by a competitor of Motorola or any Subsidiary without
the written consent of the Committee.
For purposes of this Section 4.5, if the Optionee is a
participant in Motorola's pension plan or the pension plan of any
Subsidiary, the term "retirement" shall mean the Optionee's retirement as
provided for in the applicable pension plan. If the Optionee is not a
participant in Motorola's pension plan or the pension plan of any
Subsidiary, "retirement" of an Optionee shall be determined by the
Committee. In no event can retirement take place prior to age 55 even if
permitted under the applicable pension plan.
(v) By Total and Permanent Disability. If the Non-Exercise
Period shall have elapsed or terminated, and the Optionee's employment with
Motorola and its Subsidiaries shall have been terminated because of the
Total and Permanent Disability of the Optionee or if the Optionee shall be
put on disability leave of absence status because of the Total and
Permanent Disability of the Optionee, the Optionee shall have the right to
exercise, in whole or in part, the unexercised portion of any Employee
Stock Option held by such Optionee for the entire amount of Shares subject
to such Employee Stock Option (without regard to any installment limitation
on exercise of the Employee Stock Option) at any time during the remainder
of the term of the Employee Stock Option. The unexercised portion of each
Employee Stock Option shall terminate upon expiration of the term of each
such Employee Stock Option, and any unexercised portion shall terminate
immediately if and when the Optionee is employed by a competitor of
Motorola or any Subsidiary without the written consent of the Committee.
(vi) By Death. If the Non-Exercise Period shall have elapsed
or terminated and the Optionee dies while in the employ of Motorola or any
Subsidiary, the unexercised portion of the Employee Stock Option may be
exercised, in whole or in part, at any time during the remainder of the
term of the Employee Stock Option by the Optionee's Successor-in-Interest,
for the entire number of Shares subject to the Employee Stock Option
(without regard to any installment limitation on exercise of the Employee
Stock Option).
(vii) Effect of Death After Termination of Employment
Without Cause or Retirement. If the Non-Exercise Period shall have elapsed
or terminated and the Optionee dies during the twelve (12) month period
immediately following the Optionee's termination of employment by Motorola
or any Subsidiary without cause and at the time of death such Optionee is
not employed by a competitor of Motorola or any Subsidiary (or while
employed by a competitor of Motorola or any Subsidiary with the written
consent of the Committee), the unexercised portion of the Employee Stock
Option may be exercised by the Optionee's Successor-in-Interest at any time
during the remainder of the term of the Employee Stock Option, in whole or
in part, for the number of Shares which were or would have become
exercisable had the Optionee survived for the remainder of the term of the
Employee Stock Option, without regard to the requirement of exercise within
twelve (12) months after termination of employment without cause.
If the Non-Exercise Period shall have elapsed or
terminated and the Optionee dies after retirement prior to the expiration
of the term of the Employee Stock Option, and, if at the time of death such
Optionee is not employed by a competitor of Motorola or any Subsidiary (or
while employed by a competitor of Motorola or any Subsidiary with the
written consent of the Committee), the unexercised portion of the Employee
Stock Option may be exercised for the entire number of Shares subject to
such Employee Stock Option (without regard to any installment limitation on
exercise of the Employee Stock Option), by the Optionee's
Successor-in-Interest at any time during the remainder of the term of the
Employee Stock Option.
(viii) By Transfer of Optionee to an Affiliate. If the
Non-Exercise Period shall have elapsed or terminated and the Optionee's
employment with Motorola and its Subsidiaries shall terminate by reason of
the transfer of such Optionee to an Affiliate, the Committee shall have the
power and authority, in its discretion, to determine whether or not any or
all of the Employee Stock Options held by the Optionee shall continue in
effect for the remainder of the term of such Employee Stock Option or for
the period otherwise applicable under the provisions of the Plan. Any
Employee Stock Option which the Committee permits to continue in effect
beyond the period otherwise applicable under the Plan shall be subject to
all of the terms and conditions of the Plan, including this Section 4.5 and
such other conditions as the Committee may impose (with "termination of
employment", "employment shall terminate", "terminates employment",
"employment is terminated" or "employment shall have been terminated" or
words of like import or intent meaning termination of employment with the
Affiliate).
(c) Procedure on Death.
No transfer of an Employee Stock Option pursuant to Section 4.5
(a)(ii), (b)(vi) and (b)(vii) above, by will or by the laws of descent and
distribution, shall be effective unless Motorola shall have been furnished
with written notice thereof and a copy of the will, if any, and/or such
other evidence as the Committee may deem necessary to establish the
validity of the transfer and the acceptance by the Successor-in-interest or
Successors-in-interest of the terms and conditions of the Employee Stock
Option, and under no circumstances shall the right of any such
Successor-in-Interest to exercise any such Employee Stock Option extend
beyond the applicable period specified in sub-paragraph (a)(ii), (b)(vi) or
(b)(vii) above, or beyond the expiration of the term of such Employee Stock
Option.
(d) Leaves of Absence and Lay-offs.
If an Optionee is placed on leave of absence status (except as
provided in Section 4.5 (a)(iii) or (b)(v) above) by Motorola or any
Subsidiary, each Employee Stock Option then held by the optionee, whether
exercisable or nonexercisable, shall be suspended at such time, but the
period of time during which the Optionee is on leave of absence shall be
counted in determining when the Non-Exercise Period elapses. If an Optionee
is placed on lay-off status by Motorola or any Subsidiary, any then
non-exercisable Employee Stock Option shall terminate and any then
exercisable Employee Stock Option may be exercised during the period of
twelve (12) months from the date the Optionee is placed on lay-off status
and shall be suspended thereafter to the extent not exercised. In any
case, the unexercised portion of each suspended Employe Stock Option shall
either (i) terminate upon the Optionee's termination of employment with
Motorola and its Subsidiaries or (ii) be reinstated upon such Optionee
returning from leave of absence or lay-off status to active employment
status with Motorola or any Subsidiary.
(e) Meaning of Termination of Employment.
Wherever in this Article or elsewhere in the Plan the words
"termination of employment, employment is terminated, employment shall
terminate or employment shall have been terminated" or words of like import
or intent are used, they shall mean the last day worked by the Participant
rather than the last day the Participant is on the payroll of Motorola or
any Subsidiary.
5. NON-EMPLOYEE STOCK OPTIONS
--------------------------
5.1 Automatic Grant of Non-Employee Stock Options. On June 1, 1996
and on June 1 of each Plan Year after 1996 in which the Plan is in effect,
each individual elected, re-elected or continuing as a Non-Employee
Director shall automatically receive a NSO covering 2,500 Shares (a
"Non-Employee Stock Option"). Notwithstanding the foregoing, if, on that
day, the General Counsel of Motorola determines, in his or her sole
discretion, that Motorola is in possession of material, undisclosed
information about Motorola, then the annual grant of NSO's to Non-Employee
Directors shall be suspended until the second day after public
dissemination of such information and the price, exercisability date and
Non-Employee Stock Option Period shall then be determined by reference to
such later date. If Common Stock is not reported as traded on the New York
Stock Exchange - Composite Transactions on any date a grant would otherwise
be awarded, then the grant shall be made the next day thereafter on which
Common Stock is so traded.
5.2 Price. The Stock Option exercise price of a Non-Employee Stock
Option shall be the Fair Market Value of the Shares subject to such Stock
Option on the date of grant.
5.3 Exercisability. A Non-Employee Stock Option granted under the
Plan shall become exercisable twelve months after the date of grant (except
as otherwise provided in Section 5.6 for retirement and Section 5.7 for
death which occurs during such period and in Article 11 if a Change in
Control occurs during such period) and shall expire, except as otherwise
provided herein, 10 years after the date of grant ("Non-Employee Stock
Option Period").
5.4 Payment. The Non-Employee Stock Option exercise price shall be
paid in full as permitted by Section 13 for all Shares purchased at the
time the Non-Employee Stock Option is exercised. No fractional Shares may
be purchased. Motorola may require the surrender of the Non-Employee Stock
Option certificate if one has been issued, and no Non-Employee Stock Option
may be exercised for less than fifty (50) Shares, except in cases where the
number of shares represented by the Non-Employee Stock Option being
exercised is less than fifty (50), in which case the Non-Employee Stock
Option shall not be exercisable for less than all Shares represented by
such Stock Option.
5.5 Termination. Upon cessation of services as a Non-Employee
Director (for reasons other than retirement as defined in Section 5.6
hereof or death) only those Non-Employee Stock Options immediately
exercisable at the date of cessation of service shall be exercisable by the
Non-Employee Director. Such Non-Employee Stock Options must be exercised
within 30 days after cessation of service (but in no event after the
expiration of the Non-Employee Stock Option Period) or they shall be
forfeited. If, however, the Non-Employee Director during or after his or
her service on the Board, engages, directly or indirectly, in any activity
which is in competition with any activity of Motorola or any Subsidiary or
in any action or conduct which is in any manner adverse or in any way
contrary to the interests of Motorola, or any Subsidiary, any unexercised
portion of such Non-Employee Stock Options shall immediately terminate,
unless otherwise determined by the Chief Executive Officer of Motorola. The
determination of whether a Director is or has engaged in any competitive
activity or in any action or conduct which is adverse or contrary to the
interests of Motorola or any of its Subsidiaries shall be made by the Chief
Executive Officer of Motorola, and such determination shall be conclusive
and binding upon all parties.
5.6 Retirement. As used in this Article 5, the term "retirement"
shall mean, for Non-Employee Directors, resignation at or after age 65,
failure to stand for re-election at or after age 65 or failure to be
re-elected at or after age 65. Upon retirement, all Non-Employee Stock
Options previously granted to a Non-Employee Director shall become or
continue to be exercisable, except as otherwise provided herein. Such
Non-Employee Stock Options must be exercised prior to the expiration of the
Non-Employee Stock Option Period or they shall be forfeited.
5.7 Death. Upon the death of a Non-Employee Director, all
Non-Employee Stock Options previously granted to the Non-Employee Director
shall become exercisable by his or her Successor-in-Interest, except as
otherwise provided herein. Such Non-Employee Stock Options can be exercised
during the remainder of the Non-Employee Stock Option Period.
5.8 Amendments. An amendment of this Article 5 amending provisions of
the kind described in Rule 16b-3(c)(2)(ii)(A) under the Exchange Act shall
not be made more frequently than once every six months unless necessary to
comply with the Code. No amendment may revoke or alter in a manner
unfavorable to a Non-Employee Director holding Non-Employee Stock Options
any Non-Employee Stock Options then outstanding, without such Non-Employee
Director's approval.
5.9 Interpretation. The Chief Executive Officer of Motorola shall
administer, construe and interpret this Article 5, whose decisions shall be
conclusive and binding on all parties. The Chief Executive Officer of
Motorola is authorized, subject to the provisions of this Article 5, from
time to time to establish such rules and regulations as he or she may deem
appropriate for the proper administration or operation of this Article 5.
Non-Employee Stock Options may be evidenced by certificates at the option
of the Chief Executive Officer of Motorola.
6. ELIGIBILITY
-----------
The Participants shall be determined by the Committee, except for
Non-Employee Stock Options which shall be automatically granted to
Non-Employee Directors under Article 5 and except to the extent authority
has been delegated under Section 7.1 hereof. In making its determinations,
the Committee shall consider past, present and expected future
contributions of Employees to Motorola and its Subsidiaries.
7. ADMINISTRATION
--------------
7.1 Committee. The Plan (except for Article 5 and the Non-Employee
Stock Options automatically granted thereunder) shall be administered by
the Committee; provided, however, if at any time Rule 16b-3 and Section
162(m) of the Code, and any implementing regulations (and any successor
provisions thereof), so permit without adversely affecting the ability of
the Plan to comply with the conditions for exemption from Section 16 of the
Exchange Act (or any successor provision) provided by Rule 16b-3 and the
exemption from the limitations on the deductibility of certain executive
compensation provided by Section 162(m), the Committee may delegate the
administration of the Plan in whole or in part, on such terms and
conditions, to such other person or persons as it may determine in its
discretion. References to the Committee hereunder shall include the Board
where appropriate. The membership of the Committee or such successor
committee shall be constituted so as to comply at all times with the
applicable requirements of Rule 16b-3 and Section 162(m). No member of the
Committee shall have within one year prior to his appointment received
awards under the Plan or under any other plan, program or arrangement of
Motorola or any of its affiliates if such receipt would cause such member
to cease to be a "disinterested person" under Rule 16b-3; provided that if
at any time Rule 16b-3 so permits without adversely affecting the ability
of the Plan to comply with the conditions for exemption from Section 16 of
the Exchange Act (or any successor provision) provided by Rule 16b-3, one
or more members of the Committee may cease to be a "disinterested person."
7.2 Authority. Subject to the terms of the Plan, and except for the
Non-Employee Stock Options granted under Article 5 (over which the
Committee shall have no discretion), the Committee shall have complete
power and authority to:
(a) determine the individuals to whom Employee Stock Options are
granted, the type and amounts to be granted and the time of all such
grants;
(b) determine the terms, conditions and provisions of, and
restrictions relating to, each Employee Stock Option granted;
(c) administer, interpret and construe the Plan and the Employee
Stock Options;
(d) prescribe, amend and revoke rules and regulations relating to
the Plan;
(e) maintain accounts, records and ledgers relating to the Plan;
(f) maintain records concerning its decisions and proceedings;
(g) employ agents, attorneys, accountants or other persons for
such purposes as the Committee considers necessary or desirable;
(h) take, at any time, any action permitted by Section 11.1
irrespective of whether any Change in Control has occurred or is imminent;
and
(i) do and perform all acts which it may deem necessary or
appropriate for the administration of the Plan and carry out the purposes
of the Plan.
7.3 Determinations. All determinations of the Committee shall be
final, binding and conclusive upon all persons, including Motorola and its
Subsidiaries and Participants and their respective legal representatives,
Successors-in Interest and permitted assigns and upon all other persons
claiming by, through, under or against any of them.
8. AMENDMENT
---------
Except as hereinafter provided, and except as may be required for
compliance with Rule 16b-3 and Section 162(m) of the Code, the Board or the
Committee shall have the right and power to amend the Plan at any time and
from time to time. Only the Board may amend Article 5 of the Plan, subject
to such Article and subject to compliance with Rule 16b-3. Neither the
Board nor the Committee may amend the Plan in a manner which would impair
or adversely affect the rights of the holder of a Stock Option without the
holder's consent. If the Code or any other applicable statute, rule or
regulation, including, but not limited to, those of any securities
exchange, requires stockholder approval with respect to the Plan or any
type of Plan amendment, then to the extent so required, stockholder
approval shall be obtained.
9. TERM AND TERMINATION
--------------------
9.1 Term. The Plan shall commence as of the Effective Date and,
subject to the terms of the Plan, including those in Section 14.7 requiring
stockholder approval for implementation or limiting the period over which
ISOs may be granted, shall continue in full force and effect until five (5)
years from the Effective Date, unless sooner terminated by the Board.
9.2 Termination. The Plan may be terminated at any time by the Board.
Termination shall not in any manner impair or adversely affect any Stock
Option outstanding at the time of termination.
10. MODIFICATION OR TERMINATION
---------------------------
10.1 General. Subject to the provisions of Section 10.2, the
amendment or termination of the Plan shall not impair or adversely affect a
Participant's right to any Stock Option granted prior to such amendment or
termination.
10.2 Committee's Right. Any Stock Option granted may be converted,
modified, forfeited or canceled, in whole or in part, by the Committee if
and to the extent permitted in the Plan or applicable Stock Option
certificate or with the consent of the Participant to whom such Stock
Option was granted. Subject to the limitations in the Plan, the Committee
may grant Stock Options on such terms and conditions, which may be
different than those specified in the Plan, as it may deem desirable in
order to comply with, or make available the benefits of, the laws of any
foreign jurisdiction.
11. CHANGE IN CONTROL
-----------------
11.1 Stock Option Vesting and Payment. Upon the occurrence of a Change
in Control, each Stock Option outstanding on the date on which the Change
in Control occurs shall immediately become exercisable in full for the
remainder of its term and each Participant holding Stock Options shall have
the right, at his or her election made during a period of sixty (60) days
following the date on which the Change in Control occurs, to have Motorola
purchase any or all such Stock Options for an immediate lump-sum cash
payment equal to the product of (1) the excess, if any, of the higher of
(i) the average of the high and low sale prices of the Common Stock as
reported on the New York Stock Exchange -Composite Transactions on the date
immediately prior to the date of payment, or if Shares did not trade on
such date, on the last previous day on which Shares traded prior to such
date, or (ii) the highest per Share price for Common Stock actually paid in
connection with the Change in Control, over the per Share exercise price of
each such Stock Option held, and (2) the number of Shares covered by each
such Stock Option.
11.2 Change in Control. A Change in Control shall mean:
A Change in Control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act whether or not Motorola is then subject to such
reporting requirement; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if (A) any "person" or "group" (as
such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Motorola representing 20% or
more of the combined voting power of Motorola's then outstanding securities
(other than Motorola or any employee benefit plan of Motorola; and, for
purposes of the Plan, no Change in Control shall be deemed to have occurred
as a result of the "beneficial ownership," or changes therein, of
Motorola's securities by either of the foregoing), (B) there shall be
consummated (i) any consolidation or merger of Motorola in which Motorola
is not the surviving or continuing corporation or pursuant to which Shares
of Common Stock would be converted into cash, securities or other property,
other than a merger of Motorola in which the holders of Common Stock
immediately prior to the merger have (directly or indirectly) at least an
80% ownership interest in the outstanding common stock of the surviving
corporation immediately after the merger, or (ii) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions)
of all, or substantially all, of the assets of Motorola, (C) the
stockholders of Motorola approve any plan or proposal for the liquidation
or dissolution of Motorola, or (D) as the result of, or in connection with,
any cash tender offer, exchange offer, merger or other business
combination, sale of assets, proxy or consent solicitation (other than by
the Board), contested election or substantial stock accumulation (a
"Control Transaction"), the members of the Board immediately prior to the
first public announcement relating to such Control Transaction shall
thereafter cease to constitute a majority of the Board.
12. CERTIFICATES AND TRANSFER OF STOCK OPTIONS
------------------------------------------
12.1 Provisions of Stock Option Certificates. ISOs may be evidenced by
Incentive Stock Option certificates and NSOs may be evidenced by
Non-Qualified Stock Option certificates. Each certificate may include, but
shall not be limited to, the following: description of the type of Stock
Option; the Stock Option's duration; its transferability; the exercise
price; the exercise period; the Non-Exercise Period; the person or persons
who may exercise the Stock Option; the effect upon such Stock Option of the
Participant's death or other termination of employment; and the Stock
Option's conditions.
12.2 Transfer of Stock Options. Except as set forth in the next
sentence of this Section 12.2, a Stock Option shall not be transferable by
a Participant other than by operation of a death beneficiary designation
made by the Participant in accordance with rules established by the
Committee, or the Chief Executive Officer of Motorola, as appropriate, by
will or the applicable laws of descent and distribution and shall be
exercisable during the Participant's lifetime only by him or her or his or
her guardian or legal representative if the Participant is legally
incompetent. Notwithstanding the foregoing, except to the extent that it
would cause the Plan to fail to meet the conditions required to be met
under Rule 16b-3, the Committee shall have the power and authority to
provide, as a term of any NSO, including any outstanding NSO held by a
Non-Employee Director or an Optionee, that such NSO may be transferred
without consideration by the Non-Employee Director or the Optionee to a
member or members of his or her immediate family (i.e., a child, children,
grandchild, grandchildren, or spouse) and/or to a trust or trusts for the
benefit of an immediate family member or family members.
13. PAYMENT
-------
Upon the exercise of a Stock Option, the amount due Motorola is to be
paid:
(a) in cash;
(b) by the transfer to Motorola of Shares owned by the
Participant valued at Fair Market Value on the date of transfer;
(c) by any combination of the payment methods specified in (a)
and (b) above; or
(d) such other manner as may be authorized from time to time by
the Committee.
Notwithstanding the foregoing, any method of payment other than (a) and (b)
may be used only with the approval of the Committee or if and to the extent
so provided in the applicable Stock Option certificate.
14. GENERAL
-------
14.1 Tax Withholding. At the time Motorola is required to withhold any
Federal Insurance Contribution Act ("FICA") tax and/or any federal, state
or local tax of any kind with respect to the exercise of any Stock Option,
the Participant shall pay to Motorola the amount of any such FICA, federal,
state or local tax or taxes required to be withheld. The obligations of
Motorola under the Plan shall be conditional on payment of all withholding
taxes, and Motorola shall have the right to deduct any such taxes from any
payment of any kind under the Plan or otherwise due to the Participant.
Withholding tax obligations may be settled, in whole or in part, with
Common Stock. At any time when a Participant is required to pay to Motorola
an amount required to be withheld under applicable tax laws upon exercise
of a Stock Option, the Participant may satisfy this obligation in whole or
in part by transfer to Motorola of Shares previously owned by the
Participant, by electing (the "Election") to have Motorola withhold from
the distribution Shares of Common Stock having a value equal (as near as
possible) to the amount required to be withheld or by a combination of such
means, provided, however, that the amount of federal, state and local
income taxes that may be paid by transfer or withholding of Shares shall
not exceed the statutory minimum withholding requirements. The amount of
any withholding tax not paid by transfer or withholding of Shares shall be
paid to Motorola in cash. The value of the Shares transferred or to be
withheld shall be based on the Fair Market Value of the Common Stock on the
date that the amount of tax to be withheld shall be determined ("Tax Date")
or if Shares did not trade on the New York Stock Exchange on the Tax Date,
as of the last previous date Shares did so trade. Each Election must be
made on or prior to the Tax Date. The Committee may disapprove of any
Election or may suspend, condition, restrict or terminate the right to make
Elections. An Election is irrevocable, unless revocation is approved by the
Committee.
14.2 Compliance With Legal Requirements. Anything in the Plan to the
contrary notwithstanding: (a) Motorola may, if it shall determine it
necessary or desirable for any reason, at the time of award of any Stock
Option or the issuance of any Shares of Common Stock, require the recipient
of the Stock Option, as a condition to the receipt thereof or to the
receipt of Shares of Common Stock issued pursuant thereto, to deliver to
Motorola a written representation of present intention to acquire the Stock
Option or the Shares of Common Stock issued pursuant thereto for his or her
own account for investment and not for distribution; and (b) if at any time
Motorola further determines that the listing, registration or qualification
(or any updating of any such document) of any Stock Option or the Shares of
Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with the grant of any Stock
Option or the issuance of Shares of Common Stock pursuant thereto, such
Stock Option shall not be granted or such Shares of Common Stock shall not
be issued, as the case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to Motorola. In addition,
Motorola may terminate any Stock Option or terminate, condition, restrict
or limit the issuance or delivery of any Shares of Common Stock if it
determines that such Stock Option or delivery violates any applicable laws,
regulations or rules, including but not limited to, those of any stock
exchange or Rule 16b-3.
14.3 Indemnification and Exculpation. Each person, who is or shall
have been a member of the Board or of the Committee, shall be indemnified
and held harmless by Motorola against and from any and all loss, cost,
liability or expense that may be imposed upon or reasonably incurred by
such person in connection with or resulting from any claim, action, suit or
proceeding to which such person may be a party or in which such person may
be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by such person in settlement
thereof (with Motorola's written approval) or paid by such person in
satisfaction of a judgment in any such action, suit, or proceeding, except
a judgment based upon a finding of such person's bad faith, subject,
however, to the condition that upon the institution of any claim, action,
suit or proceeding against such person, such person shall in writing give
Motorola an opportunity, at its own expense, to participate in, and to the
extent it may wish, to assume the defense thereof before such person
undertakes to handle it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of any other right to which such
person may be entitled as a matter of law, under the Delaware General
Corporation Law, the Restated Certificate of Incorporation or By-Laws of
Motorola or otherwise, or any power that Motorola may have to indemnify
such person or hold such person harmless. Each member of the Board or of
the Committee, and each officer and employee of Motorola shall be fully
justified in relying or acting upon any information furnished on behalf of
Motorola by any person or persons other than himself or herself in
connection with the administration of the Plan. In no event shall any
person who is or shall have been a member of the Board or of the Committee,
or an officer or employee of Motorola, be liable for any determination made
or other action taken or any omission to act in reliance upon any such
information, or for any action taken (including the furnishing of
information) or any failure to act, if in good faith.
14.4 Headings. The headings of the sections and subsections of the
Plan are for convenience of reference only and shall not be used to
construe any provision of the Plan.
14.5 Governing Law. The Plan shall be governed by, and construed and
administered in accordance with, the laws of the State of Illinois except
to the extent that any federal law otherwise controls.
14.6 Employment Rights. Nothing in the Plan or in any grant of any
Employee Stock Option shall restrict the right of Motorola or any
Subsidiary to terminate the employment of any Participant at any time, with
or without cause, or to increase or decrease the compensation of any
Participant.
14.7 Approval by Stockholders. The Plan has been approved by the Board
of Directors and is subject to approval by the affirmative votes of the
holders of a majority of the Shares present, or represented, and entitled
to vote at the meeting of stockholders at which the Plan is submitted.
14.8 Implementation of the Plan and Grant of Employee Stock Options
Under 1991 Plan. If the Plan is implemented pursuant to Section 14.7,
except as herein provided, no further options will be granted under the
Share Option Plan of 1991. If the Board of Directors terminates this Plan
after it has been implemented, stock options may be granted under the Share
Option Plan of 1991, but not as to any Shares issued or subject to Stock
Options under this Plan.
Exhibit 11
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share
Three Months Ended June 28, 1997 and June 29, 1996
(In millions, except per share amounts)
Three Months Ended
June 28, June 29,
1997 1996
Net Income $ 268 $ 326
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 2 1
Adjusted net income $ 270 $ 327
Earnings per common and common equivalent
share - Primary:
==========================================
Weighted average common shares outstanding 594.3 592.0
Common equivalent shares:
Stock options 10.8 10.4
Zero coupon notes due 2009 and 2013 6.3 6.7
Common and common equivalent
shares - primary (in millions) 611.4 609.1
Net earnings per share - primary $ .44 $ .54
Earnings per common and common equivalent
share - Fully Diluted:
=========================================
Weighted average common shares outstanding 594.3 592.0
Common equivalent shares:
Stock options 13.6 10.9
Zero coupon notes due 2009 and 2013 6.4 6.7
Common and common equivalent
shares - fully diluted (in millions) 614.3 609.6
Net earnings per share - fully diluted $ .44 $ .54
Exhibit 11.1
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share
Six Months Ended June 28, 1997 and June 29, 1996
(In millions, except per share amounts)
Six Months Ended
June 28, June 29,
1997 1996
Net Income $ 593 $ 710
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 3 2
Adjusted net income $ 596 $ 712
Earnings per common and common equivalent
share - Primary:
=========================================
Weighted average common shares outstanding 594.3 592.0
Common equivalent shares:
Stock options 10.8 10.4
Zero coupon notes due 2009 and 2013 6.3 6.7
Common and common equivalent
shares - primary (in millions) 611.4 609.1
Net earnings per share - primary $ .97 $ 1.17
Earnings per common and common equivalent
share - Fully Diluted:
=========================================
Weighted average common shares outstanding 594.3 592.0
Common equivalent shares:
Stock options 13.6 10.9
Zero coupon notes due 2009 and 2013 6.4 6.7
Common and common equivalent
shares - fully diluted (in millions) 614.3 609.6
Net earnings per share - fully diluted $ .97 $ 1.17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated Balance Sheet as of 6/28/97 and the Statement of Consolidated
Earninbgs for the quarter ended 6/28/97 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> JUN-28-1997
<CASH> 1,453
<SECURITIES> 318
<RECEIVABLES> 4,809
<ALLOWANCES> (150)
<INVENTORY> 3,663
<CURRENT-ASSETS> 12,369
<PP&E> 20,220
<DEPRECIATION> (10,666)
<TOTAL-ASSETS> 25,473
<CURRENT-LIABILITIES> 8,379
<BONDS> 1,907
0
0
<COMMON> 1,786
<OTHER-SE> 10,761
<TOTAL-LIABILITY-AND-EQUITY> 25,473
<SALES> 14,163
<TOTAL-REVENUES> 0
<CGS> 9,403
<TOTAL-COSTS> 12,046<F1>
<OTHER-EXPENSES> 1,137<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> 912
<INCOME-TAX> 319
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 593
<EPS-PRIMARY> 0.974
<EPS-DILUTED> 0.969
<FN>
<F1>Total cost includes: cost of goods sold, selling and admin expense, total EXCH
(gain)/loss.
<F2>Other expense includes: depreciations expenses.
</FN>
</TABLE>
