EXHIBIT 13
FINANCIAL RESULTS
Sales and earnings set records as strong growth continued throughout our
major businesses. Sales increased 28% to approximately $17.0 billion from $13.3
billion in 1992. Earnings were $1.02 billion, or $3.55 per share on a fully
diluted basis, compared with $576 million, or $2.09 per share on the same basis
a year earlier, before the 1992 cumulative effect of a change in accounting
principle involving postretirement benefits other than pensions.
Net margin on sales was 6.0%, compared with 4.3% a year ago. Detailed
operating and financial results of our various businesses in 1993 appear on
pages 18-37.
REVIEW OF OPERATIONS
SEMICONDUCTOR PRODUCTS SECTOR
Segment sales advanced 28% to $5.7 billion, the 20th consecutive quarter of
sales growth. Orders climbed 26%, and segment operating profits were higher.
Amid the convergence of computing, communications and consumer/entertainment
technologies, we developed an array of advanced products to help lead this
evolution and provide innovative, on-chip solutions for customers worldwide.
All major market regions posted double-digit growth, led by Asia-Pacific.
Among market segments, communications set the pace for new orders, followed
by automotive, personal computer/workstation, industrial and consumer.
Distributor channels also posted strong increases. We also achieved
double-digit growth in each of our major product groups. Microcontrollers,
microprocessors, digital signal processors, mixed signal (analog-digital),
logic integrated circuits, MOS gate arrays, memories, analog and communication
devices led the way, with most product categories contributing.
Support for the PowerPC -TM- family of reduced instruction set (RISC)
microprocessors expanded during the year. It is being developed as part of
our technology alliance with IBM and Apple Computer. Volume production of the
PowerPC 601 was begun by IBM in third quarter. Designed for use in
desktop systems, the 601 also supports high-end symmetric multiprocessing
features. Initial production of the PowerPC 603, targeted for notebook computers
and other battery-powered devices, was announced in October. Motorola and IBM
will manufacture the 603 chip.
Development of the other two members of the PowerPC family continued on
schedule, with rollout of these powerful microprocessors slated to occur in
1994. The 604 microprocessor addresses high-performance PCs, workstations,
servers and graphics applications. The 620 is designed for super high
performance uniprocessor and multiprocessor workstations, servers and
supercomputers.
Microsoft Corp. and Motorola announced that a port of the Microsoft -R-
Windows NT -TM- operating system is under way. Windows NT joins IBM's AIX -R-
and OS/2 -R-, Apple's Macintosh System 7 -R-, PowerOpen -TM- Environment,
Taligent's Object-oriented Environment and Sun Microsystems' Solaris -R- as
PowerPC -TM- operating systems.
Along with Apple and IBM, a wide variety of customers announced the use of
PowerPC microprocessors. They include Bull, Ford Motor Co., Harris, Kaleida
Labs/Scientific Atlanta, Tadpole Technology and Thomson-CSF.
The Taiwan New PC (personal computer) Consortium, which encompasses more
than 70% of the world's PC motherboard manufacturing, was launched to develop
and promote PowerPC systems. In addition, six key industry leaders formed the
PowerOpen Association to provide software developers with services to support
development of products based on the PowerPC architecture.
The year was highlighted by new or expanded technology relationships with
key computer customers. Apple Computer chose the 33MHz version of our 68030
microprocessor for its PowerBook -TM- Duos and the 68040 for its new high
performance desktop computers. Low power devices, such as our 3.3-volt 68040V
microprocessor, for portable and other battery powered computing were a big
focus during the year. For example, our patented read-channel device for hard
disk drives operates as low as 2.7 volts.
We became the second largest worldwide supplier of static random access
memories (SRAMs), which are used in many computer systems. In addition, we
introduced low voltage logic products for the computer and communications
markets.
We capitalized on rapid growth in the communications arena by introducing
GaAS (gallium arsenide) RF field effect transistors for cellular phones, with
more than one million units shipped during the year. We also introduced a new
family of integrated processors for the personal communications wireless market,
including the Dragon I -TM- for personal intelligent communicators. For the
emerging digital information superhighway, we introduced the first 32-bit
Quad Integrated Communications Controller.
In automotive markets, we continued to win key designs at Ford, General
Motors and Chrysler for engine, powertrain, safety and electrical systems. Ford
will use our insulated gate bipolar transistors in next-generation ignition
systems. A licensing agreement with Bosch of Germany will provide that customer
with microcomputers, digital signal processor architectures and wafer
manufacturing techniques.
In consumer markets, in partnership with Thomson Consumer Electronics we
released an industry standard closed-captioning device. Our new 1GHz amplifier
family will enable cable TV providers to add hundreds of new channels. In the
multimedia arena, we partnered with Scientific Atlanta and Kaleida Labs to
produce the Malibu -TM- graphic chip set, and introduced the 68341 processor for
CD-I (compact disk-interactive) Systems.
In the industrial arena, in partnership with Allen Bradley we developed a
new motor control drive family using hybrid power module technology. We shipped
more than 600 LonBuilder development systems to customers worldwide, with IBM,
AT&T, Honeywell and Raytheon among companies that have adopted this technology
and our Neuron Chip -R- for intelligent, distributed sense and control networks.
Our leadership in Smart Card technology was underscored by production of the 100
millionth chip in our East Kilbride, Scotland facility.
Many of the products we make are used in a wide spectrum of applications,
and we expanded many popular device lines. For example, as
the world's largest producer of microcontrollers, we added to the 68H05 family
of customer-specified controllers and announced key additions to our HC11 and
HC16 families. We continued expanding our sensor lines, with a new thrust in
chemical sensors.
Expansions in our worldwide production network were announced to address
the increasing demand for semiconductors. We purchased a wafer fabrication
facility in Irvine, Calif., and announced new or expanded facilities in Austin,
Texas; Chandler, Mesa and Phoenix, Ariz.; Carmona, the Philippines; Tai Po, Hong
Kong; East Kilbride, Scotland; Aizu and Sendai, Japan; and Tianjin,
China.
Thomas D. "Tommy" George was elevated to President of the Semiconductor
Products Sector, replacing James A. Norling, who was appointed President of
Motorola Europe, Middle East and Africa. Murray A. Goldman was promoted to
Senior Vice President and Assistant General Manager.
GENERAL SYSTEMS SECTOR
Segment sales advanced 43% to $5.2 billion and orders rose 42%. Segment
operating profits were higher.
Sales of Motorola cellular telephones continued to show strong growth
worldwide.
We introduced the world's lightest GSM digital phone. GSM is a digital
protocol that allows international roaming throughout western Europe. A line
of personal and portable Time Division Multiple Access (TDMA) digital cellular
telephone products was introduced for the North American market.
Motorola acquired an 18% interest in Telular Corp. and formed a strategic
relationship to advance the development of fixed wireless products. Motorola
also acquired a 40% interest in CedeTel, S.A. de C.V., which serves customers
in Monterey, Mexico's second largest market.
The world's first integrated cellular phone and pager underwent field
trials. Called the MicroTAC -R- RSVP -TM-, it incorporates a numeric digital
pager with silent vibrating alert in a single phone.
Our cellular infrastructure business made significant gains. Analog
systems were expanded in Austria, China, Latin America, Spain and the United
Kingdom. Our narrowband technology, which increases capacity and improves voice
quality of existing systems, has been adopted by more than 12 major operators
worldwide.
Motorola was awarded new digital cellular GSM contracts in Austria,
Belgium, Pakistan, Qatar and the United Arab Emirates. We also won expansion
awards and second source supplier contracts in Germany, Portugal, and the U.K.
To meet the increased demand, we expanded our Swindon, U.K., manufacturing
facility.
Several cellular operators in the U.S. and the Philippines awarded us
contracts to supply Code Division Multiple Access (CDMA) cellular
infrastructure systems. In Japan, we were awarded our third digital cellular
contract to provide SC -TM- 9600 base station equipment for Personal Digital
Cellular systems. The SC 9600 offers customers multiple analog and digital
air interfaces in a compact cabinet.
Several U.S. cellular operators began offering our Cellular Digital
Messaging Services (CDMS). It provides customers with paging, voice mail
notification and digital alphanumeric messaging capabilities. We also won three
additional contracts for our PPS -R- 800 Personal Phone Service, which gives
customers a single phone number to use at home, at work and while traveling.
We asked the Telecommunications Industry Association that our proposed
Interface Specification be used as the basis for developing a standard open and
common cellular industry interface between base stations and switches throughout
North and South America. We have achieved full radio frequency and switch
compatibility for all switches in commercial use for the GSM digital standard.
Motorola and Northern Telecom announced that the cellular infrastructure
systems, sales and service activities within the joint venture, Motorola Nortel
Communications Co., would return to the parent companies.
We supplied equipment for eight new CT-2 (telepoint) systems, four of which
went into service during 1993. Motorola systems are now in the Netherlands,
Finland, Singapore, Hong Kong, Malaysia, Thailand and China. CT-2
(second-generation cordless phone) subscriber equipment began shipping into
the digital home cordless telephone market in Germany, the Netherlands,
Singapore and Hong Kong. We are also engaged in tests of various microcell
personal communications systems worldwide.
The Computer Group announced its Series 900 family of UNIX-based systems
and servers. Based on the Motorola 88110 RISC microprocessor, they feature
"snap-together" modularity and expandability. The group also introduced its
highest performance single board computer based on the 88110.
The Series FT -TM- family of fault-tolerant open network system platforms
was announced. They are particularly suited for telecommunications
applications.
COMMUNICATIONS SEGMENT
In this segment, composed of the Land Mobile Products Sector (LMPS) and the
former Paging and Wireless Data Group (PWDG), sales rose 24% to $4.8 billion
and orders rose 27%. Segment operating profits were higher.
In LMPS, higher orders reflected strong worldwide demand for trunking
systems and new portable two-way radios. New orders for digital Motorola
Integrated Radio Systems (MIRS) totaled more than $400 million in 1993,
including an order for more than $100 million from China that represents the
largest international order in the sector's history, and orders from Nextel
Communications, Inc., for MIRS equipment for its Chicago and New York systems.
We received conditional acceptance of the MIRS system installed in Los Angeles
for Nextel.
Motorola signed agreements in principle to sell its 800MHz Specialized
Mobile Radio (SMR) systems, businesses and licenses in the U.S. to Nextel, Dial
Page, Inc., and CenCall Communications, Inc., in exchange for minority ownership
positions in the three SMR operators. Completion is subject to definitive
agreements and regulatory approvals and approvals by stockholders of the three
companies, among other items. Motorola acquired Airwave Communications Corp.
of Los Angeles, an SMR
operator, and acquired, or agreed to acquire, other SMR operators. Some of
these agreements are conditional.
Major orders for systems using our Astro -TM- digital technology were
received in Canada, Australia, Austria and Switzerland. Our first Astro
wide-area trunking system began operating in South Florida. Orders for other
large trunking systems came from Taiwan, China, Hungary, Portugal and Mexico and
several states in the U.S.
We introduced the Visar -TM- , the industry's smallest high-powered
portable two-way radio at eight cubic inches. Two new Radius -R- portables were
introduced for first-time users, and will be sold through distributors and
retailers for both business and leisure time use. A new portable developed
specifically for China offers telephone interconnect capabilities. A new
generation of mobile and portable two-way radios for Europe supports a variety
of signaling formats.
Motorola sold certain assets of its CoveragePLUS -R- U.S. network to
Qualcomm Inc.'s OmniTRACS -R- business. We are working with Qualcomm for a
smooth transition of CoveragePLUS customers to the OmiTRACS satellite
communications network.
By forming joint ventures, we expanded our trunked radio network services
in international markets. Our joint venture with Organizacion Cisneros of
Venezuela began operations in Caracas and five other cities. Other joint
ventures began new shared trunked two-way radio service in Sao Paulo and Port
Allegre, Brazil, and in Prague in the Czech Republic.
In the former Paging and Wireless Data Group, paging orders again set
records. The Asia-Pacific region led the international growth, especially in
China. Strong Latin American growth was fueled by the expansion of the
Brazilian, Colombian and Mexican markets. In the United States, sales through
retail stores were strong. The paging infrastructure business received major
awards in the United States, Latin America, Europe and Asia.
New subscriber products include the Freespirit -TM- and Bravo -R- Encore
pagers, as well as the Memo Express -TM-, the world's first endless line feature
alphanumeric pager. The Kanaco pager was developed for the new
common carriers in Japan. A new manufacturing facility was opened in Fort
Worth, Texas.
The new FLEX -TM- paging protocol underwent successful market trials. The
protocol provides enhanced speed and increased subscriber capacity for pager
carriers.
We introduced the first in a line of NewsCard -TM- credit-card sized
messaging receivers for use with handheld computers. NewsCard began shipping
for both Apple Computer's Newton -TM- , Casio's Z7000 -TM- and Tandy Corp.'s
ZPDA -TM- Zoomer personal digital assistants. The service to Newton is
provided by MobileComm and the service to Zoomer is provided by Motorola's
EMBARC -TM- (Electronic Mail Broadcast to A Roaming Computer) messaging
service.
Wireless data technology moved forward in several areas. United Parcel
Service (UPS) will use Motorola packet radio modems on a new wireless packet
data network in Germany. UPS is a major user of our wireless data products in
the U.S. Pilot systems also were installed in Australia and Malaysia, and a
Hong Kong system was upgraded.
We are developing a family of wireless personal communicators that will use
operating systems from General Magic, Apple Computer and Microsoft. We also
have demonstrated Mobile Networks Integration products, designed for
end-to-end connectivity between the increasing varieties of both mobile
computing devices and wired and wireless networks.
Motorola acquired Lexicus Corp., a developer of handwriting recognition
software for pen-based computers, and invested in RadioMail Corp., a provider
of wireless electronic mail services.
In January 1994, the Paging and Wireless Data Group's businesses were
incorporated into the new Messaging, Information and Media Sector, as
discussed on page 9.
GOVERNMENT AND SYSTEMS TECHNOLOGY GROUP (GSTG)
Segment sales increased 32% to $858 million and orders rose 54%. The group
recorded a larger loss than a year ago. GSTG continued to move
into commercial and international markets while maintaining its traditional
Department of Defense market share.
The group continued development on several Joint Stars Light Ground Station
Modules for the U.S. Army, and produced a modified commercial cellular network
to help communications and tracking of troops and equipment during battlefield
exercises at the National Training Center in Fort Irwin, Calif.
GSTG received orders totaling $335 million as prime contractor for the
Iridium -TM/SM- global personal communications system. The program is
discussed on page 12. The Diversified Technologies Division was formed to
pursue new commercial businesses, including space, positioning systems, personal
alarm and reporting systems, secure telecommunications and test equipment.
Amtech Corp. and GSTG formed an Intellitag Products joint venture to
produce electronic toll and traffic management systems for autos and other
vehicles. Along with Motorola's Automotive, Energy and Controls Group, GSTG
formed the Position and Navigation Systems business to develop equipment using
Global Positioning System technology.
AUTOMOTIVE, ENERGY AND CONTROLS GROUP (AECG)
Sales were up 39% and orders rose 37%. Operating profits were higher.
AECG's results, which are part of the Other Products segment, include the
Automotive and Industrial Electronics Group and Motorola Lighting, Inc., as well
as two former Communications Segment businesses, the Component Products Division
and Energy Products Division. Results include a significant level of internal
sales of crystals, filters and battery products to other business segments.
AECG's performance was led by strong demand for component and energy
products and continued growth in the U.S. automotive market. Major orders
included programs for body electronics modules, ignitions, load control
receivers, quartz and ceramic components, electronic ballasts, batteries and
chargers. The group announced it will manufacture PC multimedia communications
hardware for BT (formerly British Telecom).
AECG is adding new or expanding facilities in Singapore; Tianjin, China;
Albuquerque, N.M., and Vernon Hills, Ill. Motorola acquired Indala Corp., a
manufacturer of radio frequency identification cards, tags and readers used in
access control, vehicle identification and industrial automation systems.
Motorola and Schlumberger Ltd. formed a joint venture to develop wireless
electronics technology for remote and automated reading of utility meters.
The first vehicles equipped with Motorola's in-vehicle route guidance
system were delivered for a field test of Intelligent Vehicle Highway Systems in
the Chicago area. A new manufacturing facility was unveiled by Motif Inc., a
joint venture of Motorola and In Focus Systems, Inc. to develop and manufacture
Active Addressing -TM- liquid-crystal display technology. Motorola
Lighting, Inc., expanded its distribution network and received additional
orders from major fluorescent light fixture manufacturers.
INFORMATION SYSTEMS GROUP
Group sales declined 2% and orders were 1% lower. Operating profits were
lower. The group's results are part of the Other Products segment.
Codex introduced the 6950 SoftCell -TM- ATM Networking Node, a
software-defined communications platform that integrates data, voice, image and
video over existing and emerging worldwide carrier services. Other new products
included the Multimedia Periphery Router -TM- and a digital service unit with
synchronous data compression.
Universal Data Systems (UDS) introduced two portable modems that connect
directly to Motorola cellular telephones. A multiprotocol dial-up networking
router also was introduced. A combination bridge and router, the product
provides dial-up networking so that organizations can link large numbers of
remote users together. UDS expanded its Canadian operation and opened new
offices in the Czech Republic and Dubai.
In early 1994, a reorganization of ISG was announced as part of the
creation of the Messaging, Information and Media Sector. ISG established a
transmission line of business, responsible for all transmission product
engineering, and development, marketing and support worldwide, and a networking
unit, responsible for network management systems.
NEW ENTERPRISES
The New Enterprises organization manages our entry into strategically
relevant, emerging, high-growth and high-technology worldwide business arenas.
One of these companies, INFO Enterprises, Inc., provides services such as the
EnGenius(SM) on-line source of engineering component information, and
litigation support delivered to a desktop computer.
Emtek Health Care Systems is a leader in the provision of clinical
information systems for critical-care intensive care units, while moving to
acute care and enterprise-wide electronic medical systems.
Motorola New Enterprises continually seeks to identify paradigm
shifting technologies, discontinuous business opportunities and individual
entrepreneurs with vision and a passion for their enterprise.
FINANCIAL REVIEW
Motorola Management's Discussion and Analysis of Financial Condition and Results
of Operations includes the Financial Results section of the Letter to
Stockholders on pages 2-3 and the Review of Operations on pages 18-21, in
addition to the following commentary. This commentary should be read in
conjunction with the consolidated financial statements and notes, presented on
pages 26-37, for a full understanding of Motorola's financial position and
results of operations.
RESULTS OF OPERATIONS
Sales increased 28% to $17.0 billion from $13.3 billion in 1992. Sales in 1991
were $11.3 billion. The Semiconductor Products segment continues to be the
largest business segment, reporting 31% of total sales in 1993, compared to 32%
in 1992. The General Systems Products segment also continued its growth,
representing 28% of total sales in 1993 compared with 26% a year ago.
International market sales, as measured by the locale of the end customer,
represent 54% of total sales in 1993, compared with 52% a year ago. The growth
was primarily due to stronger markets in the People's Republic of China/Hong
Kong, and the rest of the Asia-Pacific region.
Operating profits were $1.94 billion. The Semiconductor Products Segment
again showed the most profit improvement in 1993, and the General Systems
Products segment maintained its position as one of the Company's most profitable
segments in 1993. The Company's profitability was primarily affected by
significant volume increases driven by demand for its products. The Company
continued investing in new technologies across business segments.
Net earnings in 1993 were $1.0 billion, or $3.56 and $3.55 per primary and
fully diluted common and common equivalent share, respectively, compared with
$576 million before the cumulative effect of change in accounting principle, or
$2.10 and $2.09 per primary and fully diluted common and common equivalent
share, respectively, a year earlier. In 1991, earnings were $454 million, or
$1.70 and $1.69 per primary and fully diluted common and common equivalent
share, respectively. Net margin on sales was 6.0%, compared with 4.3% a year
ago, before the cumulative effect of change in accounting principle.
Sales in the fourth quarter were $4.99 billion, up 35% from $3.71 billion
in the fourth quarter of 1992. Earnings in the fourth quarter were $340 million,
or $1.15 per primary and fully diluted common and common equivalent share,
compared with $181 million, or 65 cents and 64 cents per primary and fully
diluted common and common equivalent share, respectively, a year ago. Motorola
routinely reviews its business strategies, organizational structure, and asset
valuations, and implements changes deemed appropriate by management. Charges
associated with these decisions are included in selling, general, and
administrative expenses; amounts provided in the fourth quarter of 1993,
principally relating to the Communications Products, General Systems Products,
and Other Products segments, were larger than amounts recorded in prior periods.
The effective tax rate for 1993 of 33% is up from the 1992 rate of 28% and
the 1991 rate of 26%, principally due to continued growth in countries with high
tax rates.
The Company will adopt SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities," effective January 1, 1994. The statement
establishes a new accounting and reporting standard to be
applied to investments in equity and debt securities. The statement requires the
Company, based on its intent to hold or dispose of the securities, to categorize
them into one of three separate groups, each receiving different accounting
treatment. The impact of this change on the Company's financial position and
results of operations is not expected to be material.
In recent years, a large and increasing portion of the Company's net sales,
operating profits and growth have come from its international operations. As a
result, the Company's business activities and its results could be significantly
affected by the policies of local governments and prevailing social and economic
conditions, such as unstable governments, inflation rates, monetary
fluctuations, balance of payments, foreign exchange rates and trade restrictions
or prohibitions.
During 1993, a significant portion of the Company's growth was in the
People's Republic of China/Hong Kong. Total sales in these two countries, as
measured by the locale of the end customer, were $1.56 billion in 1993. Any
possible restrictions on U. S. trade imposed by the People's Republic of China
or by the United States on the People's Republic of China, for example, through
its loss of Most Favored Nation trade status, could have a significant effect on
the Company's growth in this region of the world.
While the Company operates using many currencies, the U. S. dollar is the
primary functional currency for financial reporting purposes. On January 1,
1993, the Company's operations in Japan began to use the Japanese yen as its
functional currency. Beginning on January 1, 1994, the Company's European
operations will begin to use an appropriate local functional currency for
financial reporting purposes. The Company monitors all foreign currency
exposures and generally implements strategies to reduce the impact of currency
fluctuations on its financial position and results, including hedging
activities.
STRATEGIC INVESTMENT: The Company further advanced its strategic investment in
the IRIDIUM-TM-(SM) global communications system. The system is being developed
by Iridium, Inc., a private, international consortium of telecommunications and
industrial companies. The Company has reduced its ownership in Iridium, Inc.
from 100% to approximately 29% and intends to further reduce its ownership to
not less than 15% over time. At December 31, 1993, the Company's equity
investment in and commitments to make equity investments in Iridium, Inc.
totaled $231.3 million; additionally, it has committed, subject to action by the
Iridium, Inc. Board, to additional equity investments totaling approximately $60
million. Iridium, Inc. will require additional funding from various sources in
order to complete the global communications system, which is expected to take
place over the next five years.
The Company has executed two contracts with Iridum, Inc., for the
construction and operation of portions of the global communications system,
providing for approximately $6.3 billion in payments by the consortium over a
ten year period. The Company has in turn entered into significant subcontracts
for portions of the system, for which it will generally remain obligated even if
Iridium, Inc. is unable to satsify the terms of the contracts with the Company,
including funding. Separately, the Company is making significant investments to
produce ancillary products for the system, such as subscriber units.
TRANSFER OF SPECIALIZED MOBILE RADIO BUSINESSES, SYSTEMS, AND LICENSES: The
Company has signed agreements in principle with Dial Page, Inc., CenCall
Communications Corp., and NEXTEL Communications Inc., under which the Company
agreed to transfer substantially all of its 800 MHz specialized mobile radio
businesses, systems and licenses in the United States, along with cash, in
exchange for
stock and warrants in these companies. Binding agreements to complete these
transactions are subject to various conditions, including agreement on
definitive documents, and approvals by the Federal Communications Commission and
other governmental agencies, and the shareholders of each of the three
companies. The Company may receive approximately 11.74 million shares of Dial
Page, Inc. stock and a warrant to purchase an additional 1 million shares at
specified, increasing prices; 11.5 million shares of CenCall Communications
Corp. common stock and a warrant to purchase an additional 4 million shares at
specified, increasind prices; and 35.5 million shares of NEXTEL Communications
Inc. common stock, subject to certain adjustments. In connection with these
agreements, those companies have agreed to enter into purchase agreements to use
Motorola Integrated Radio System technology on those systems. These agreements
in principle provide that the Company will lend or guarantee approximately $440
million in connection with these transactions, which may result in some
concentrations of credit risk. The agreements in principle further provide that
the Company will acquire certain managed licenses (or substitutes) within
specified periods.
ENVIRONMENTAL MATTERS: Regulating agencies are proposing regulations and
interpreting legislation in a manner that allows retroactive imposition of
remedial requirements. The Company is engaged in a number of remedial efforts,
some of which have been identified as Superfund sites under the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, or
similar state laws. The Company accrues costs associated with environmental
matters when they become probable and reasonably estimable. At the end of 1993,
the Company has accrued liabilities for the remedial efforts of approximately
$42 million. However, due to their uncertain nature, the amounts accrued could
differ, perhaps significantly, from the actual costs incurred. These amounts
assume no substantial recovery of costs from any insurer. The remedial efforts
include environmental cleanup costs, and communication programs. These
liabilities represent only the Company's share of any possible costs incurred in
environmental cleanup sites, since in most cases, potentially responsible
parties other than the Company may exist.
STOCK SPLIT: On February 1, 1994, the Board of Directors declared a two-for-one
stock split, effected in the form of a 100% stock dividend, to stockholders of
record on March 15, 1994, payable on April 18, 1994. On the same day, the Board
of Directors approved an increase of 27% in the quarterly dividend.
RESEARCH AND DEVELOPMENT: Expenditures increased to $1.52 billion in 1993, up
from $1.31 billion in 1992 and $1.13 billion in 1991. The Company continues to
invest approximately 9% of every sales dollar in product development and
technological advances, and continues to believe that a strong commitment to
research and development will drive long-term growth.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations reached a record $2.31 billion in 1993 compared
with $1.96 billion in 1992 and $1.36 billion in 1991.
Accounts receivable levels grew at a significantly slower pace than sales.
The number of weeks that accounts receivable were outstanding was reduced to 6.1
for 1993 from 7.1 for 1992. While the Company's inventory levels also grew, the
inventory turns improved to 5.8 in 1993 from 5.2 in 1992.
The Company's ratio of net debt to net debt plus equity was 11.9% for 1993
compared with 15.2% in 1992.
As of December 31, 1993, the zero coupon notes referred to as Liquid Yield
Option-TM- Notes ("LYONs"-TM-), due 2009, have a face value of $744 million.
During 1993, various holders of the 2009 LYONs exercised conversion rights for
approximately 568,000 notes ($216 million carrying value).
On September 27, 1993, the Company issued $480 million principal amount at
maturity of LYONs due 2013, for net cash proceeds of $301 million. The 2013
LYONS are subordinated to all existing and future senior indebtedness of the
Company, rank on a parity with the 2009 LYONs, and may be redeemed by the
holders prior to the stated maturity. The 2013 LYONs are convertible into the
Company's common stock at a conversion rate of 5.589 shares per LYON.
In March 1993, the Company issued $200 million in aggregate principal
amount of 6.5% 15-year notes, which fully depleted its shelf registration
statement. In 1993, the Company redeemed all of its 8% sinking fund debentures
due 2007 which were then outstanding. In 1994, the Company intends to call the
11.5% Eurodollar notes due 1997.
As of December 31, 1993, the Company had domestic and international credit
facilities totaling $1.88 billion, of which $1.48 billion remain unused. Cash
generated from operations and available credit facilities provides support for
short-term funding requirements.
Capital expenditures required to support current and long-term growth
increased to $2.13 billion from $1.39 billion in 1992. The expenditures for 1994
are expected to be higher than the 1993 level. The 1991 expenditures totaled
$1.32 billion. The Semiconductor Products segment continues to comprise the
largest portion of fixed asset expenditures, with 53% of all such investments.
LYON-TM- is a trademark of Merrill Lynch & Co., Inc.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation, integrity, and objectivity of the
consolidated financial statements and other financial information presented in
this report. The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles, applying certain
estimates and judgments as required.
Motorola's internal controls are designed to provide reasonable assurance
as to the integrity and reliability of the financial statements and to
adequately safeguard, verify, and maintain accountability of assets. Such
controls are based on established written policies and procedures, are
implemented by trained, skilled personnel with an appropriate segregation of
duties, and are monitored through a comprehensive internal audit program. These
policies and procedures prescribe that the Company and all its employees are to
maintain the highest ethical standards and that its business practices
throughout the world are to be conducted in a manner which is above reproach.
KPMG Peat Marwick, independent auditors, are retained to audit Motorola's
financial statements. Their accompanying report is based on audits conducted in
accordance with generally accepted auditing standards, which includes the
consideration of the Company's internal controls to establish a basis for
reliance thereon in determining the nature, timing, and extent of audit tests to
be applied.
The Board of Directors exercises its responsibility for these financial
statements through its Audit Committee, which consists entirely of independent
non-management Board members. The Audit Committee meets periodically with the
independent auditors and with the Company's internal auditors, both privately
and with management present, to review accounting, auditing, internal controls,
and financial reporting matters.
/s/ GARY L. TOOKER /s/ CARL F. KOENEMANN
Gary L. Tooker Carl F. Koenemann
Vice Chairman and Executive Vice President
Chief Executive Officer and Chief Financial
Officer
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Motorola, Inc.:
We have audited the accompanying consolidated balance sheets of Motorola, Inc.
and consolidated subsidiaries as of December 31, 1993 and 1992, and the related
statements of consolidated earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1993. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Motorola,
Inc. and consolidated subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in notes 1, 2, and 5 to the consolidated financial statements,
the Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes," in 1992.
/s/ KPMG PEAT MARWICK
KPMG Peat Marwick
Chicago, Illinois
January 13, 1994
STATEMENTS OF CONSOLIDATED EARNINGS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991
- --------------------------------------------------------------------------------------------
Net Sales $16,963 $13,303 $11,341
----------------------------------------------------------------------------------------
COSTS AND EXPENSES
Manufacturing and other costs of sales 10,351 8,395 7,134
Selling, general and administrative expenses 3,776 2,951 2,579
Depreciation expense 1,170 1,000 886
Interest expense, net 141 157 129
----------------------------------------------------------------------------------------
Total costs and expenses 15,438 12,503 10,728
----------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,525 800 613
----------------------------------------------------------------------------------------
INCOME TAXES PROVIDED ON EARNINGS 503 224 159
----------------------------------------------------------------------------------------
NET EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE $1,022 $576 $454
----------------------------------------------------------------------------------------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX -- (123) --
----------------------------------------------------------------------------------------
NET EARNINGS $1,022 $453 $454
----------------------------------------------------------------------------------------
FULLY DILUTED NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE (1),(2)
----------------------------------------------------------------------------------------
Net earnings before cumulative effect of
change in accounting principle $3.55 $2.09 $1.69
----------------------------------------------------------------------------------------
Cumulative effect of change in accounting
principle -- (0.43) --
----------------------------------------------------------------------------------------
NET EARNINGS $3.55 $1.66 $1.69
----------------------------------------------------------------------------------------
FULLY DILUTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 291.9 283.6 279.3
- ---------------------------------------------------------------------------------------------
<FN>
(1) PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE ONE CENT HIGHER
THAN FULLY DILUTED FOR ALL YEARS SHOWN. AVERAGE PRIMARY COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING FOR 1993, 1992, AND 1991 WERE 291.3, 282.8 AND
277.8, RESPECTIVELY.
(2) INCLUDES ADJUSTMENT FOR THE 1992 TWO-FOR-ONE STOCK SPLIT (SEE ALSO NOTE 9).
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Common Stock and
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Additional Paid-In Capital (2) Retained Earnings
- ----------------------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
Balances at January 1 $1,510 $1,343 $1,324 $3,634 $3,287 $2,933
Net earnings -- -- -- 1,022 453 454
Stock options and other (1) 365 167 19 -- -- --
Dividends declared ($.440 per share
in 1993, $.395 in 1992, and
$.380 in 1991) -- -- -- (122) (106) (100)
------------------------------------------------------------------------------------------------------
Balances at December 31 $1,875 $1,510 $1,343 $4,534 $3,634 $3,287
- ----------------------------------------------------------------------------------------------------------
<FN>
(1) CONVERSIONS OF THE ZERO COUPON NOTES DUE 2009, WITH CARRYING VALUES OF
APPROXIMATELY $216 MILLION AND $11 MILLION, ARE REFLECTED WITHIN 1993 AND 1992
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL AMOUNTS, RESPECTIVELY.
(2) 1992 STOCK SPLIT: AN AMOUNT EQUAL TO THE PAR VALUE OF THE ADDITIONAL SHARES
ISSUED WAS TRANSFERRED FROM ADDITIONAL PAID-IN CAPITAL TO COMMON STOCK DUE TO
THE TWO-FOR-ONE STOCK SPLIT EFFECTED IN THE FORM OF A 100 PERCENT STOCK
DIVIDEND. ALL REFERENCES TO SHARES OUTSTANDING AND PER SHARE AMOUNTS HAVE BEEN
ADJUSTED ON A RETROACTIVE BASIS (SEE ALSO NOTE 9).
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
TWENTY-SIX
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------
December 31 1993 1992
- ----------------------------------------------------------------------------------------------------
ASSETS CURRENT ASSETS
Cash and cash equivalents $886 $677
Short-term investments (at lower of cost or market) 358 253
Accounts receivable, less allowance for doubtful accounts
(1993, $91; 1992, $86) 2,476 2,036
Inventories 1,864 1,321
Future income tax benefits 675 522
Other current assets 454 409
---------------------------------------------------------------------------------
Total current assets 6,713 5,218
---------------------------------------------------------------------------------
Property, plant and equipment, net 5,547 4,576
Other assets 1,238 835
---------------------------------------------------------------------------------
Total assets $13,498 $10,629
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND CURRENT LIABILITIES
STOCKHOLDERS' Notes payable and current portion of long-term debt $555 $437
EQUITY Accounts payable 1,338 1,127
Accrued liabilities 2,496 1,771
---------------------------------------------------------------------------------
Total current liabilities 4,389 3,335
---------------------------------------------------------------------------------
Long-term debt 1,360 1,258
Deferred income taxes 433 230
Other liabilities 907 662
---------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $3 par value
Authorized shares: 1993, 700.0; 1992, 300.0
Issued and outstanding shares: 1993, 278.6; 1992, 269.7 836 809
Preferred stock, $100 par value issuable in series
Authorized shares: 0.5 (none issued) -- --
Additional paid-in capital 1,039 701
Retained earnings 4,534 3,634
---------------------------------------------------------------------------------
Total stockholders' equity 6,409 5,144
---------------------------------------------------------------------------------
Total liabilities and stockholders' equity $13,498 $10,629
- ----------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
TWENTY-SEVEN
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN MILLIONS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
OPERATING Net earnings $1,022 $453 $454
Add (deduct) non-cash items
Cumulative effect of change in accounting principle -- 123 --
Depreciation 1,170 1,000 886
Net change in deferred income taxes 50 (23) (5)
Amortization of debt discount and issue costs 26 29 27
Change in assets and liabilities, net of effects
of acquisition and dispositions
Gain on disposition of investments in affiliated companies (9) (12) (22)
Accounts receivable, net (439) (82) (96)
Inventories (539) (77) 3
Other current assets (44) (67) 12
Accounts payable and accrued liabilities 927 675 154
Other assets (95) (16) (145)
Other liabilities 245 (42) 90
------------------------------------------------------------------------------------------
Net cash provided by operations 2,314 1,961 1,358
- ---------------------------------------------------------------------------------------------------------------
INVESTING Acquisitions and advances to affiliated companies (408) (117) (52)
Dispositions of investments in affiliated companies 67 28 40
Payments for property, plant and equipment (2,187) (1,442) (1,387)
Other changes to property, plant, and equipment, net 126 59 86
(Increase) decrease in short-term investments (105) (22) 81
------------------------------------------------------------------------------------------
Net cash used for investing activities (2,507) (1,494) (1,232)
- ---------------------------------------------------------------------------------------------------------------
FINANCING Increase (decrease) in notes payable and current portion
of long-term debt 117 (415) (143)
Increase in long-term debt 292 286 135
Issuance of common stock 113 137 19
Payment of dividends to stockholders (120) (100) (100)
------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 402 (92) (89)
- ---------------------------------------------------------------------------------------------------------------
INCREASE IN
CASH AND CASH
EQUIVALENTS $209 $375 $37
- ---------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
SUPPLEMENTAL CASH FLOW INFORMATION
(IN MILLIONS) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
NON-CASH Conversion of zero coupon notes due 2009 $216 $11 --
ACTIVITIES Issuance of common stock for investment acquisition $ 36 $19 --
- ----------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
TWENTY-EIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION: The consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. All significant intercompany
accounts and transactions are eliminated in consolidation.
CASH EQUIVALENTS: The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.
CONTRACT ACCOUNTING: The Company uses the percentage-of-completion method to
recognize revenues and costs associated with most long-term contracts. For
contracts involving certain technologies, profits and revenues are deferred
until technological feasibility is established or customer acceptance is
obtained.
INVENTORIES: Inventories are valued at the lower of average cost (which
approximates computation on a first-in, first-out basis) or market (i.e., net
realizable value or replacement cost), less progress payments on long-term
contracts.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment are stated at
cost less accumulated depreciation. Depreciation is recorded principally using
the declining-balance method, based on the estmated useful lives of the assets
(buildings and building equipment, 5-50 years; machinery and equipment, 2-12
years).
FOREIGN CURRENCY TRANSLATION: The Company principally uses the U.S. dollar as
the functional currency for financial reporting. Gains and losses from
remeasurement to U.S. dollars are included in net earnings. The Company enters
into foreign exchange contracts to hedge its investments in foreign
subsidiaries. Gains and losses on these hedges are also included in net
earnings.
The Company periodically enters into foreign exchange contracts to hedge
identifiable transactions. Gains and losses from these contracts are classified
in earnings in the same category and accounting period as the underlying
transactions.
EARNINGS PER SHARE: The Company has considered the dilutive effects of the
convertible zero coupon notes due 2009 and 2013 and the outstanding stock
options in determining primary and fully diluted earnings per share.
INCOME TAXES: Effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires a change from the deferred method of accounting for income
taxes of Accounting Principles Board (APB) Opinion 11 to the asset and
liability method of accounting for income taxes.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: Effective January 1, 1992, the
Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." SFAS No. 106 requires that the cost of
postretirement benefits be accrued during the years that employees render
service. The Company implemented SFAS No. 106 by recognizing the transition
obligation in the year of adoption.
RECLASSIFICATIONS: Certain amounts in prior years' financial statements and
related notes have been reclassified to conform to the 1993 presentation.
- --------------------------------------------------------------------------------
2. INCOME TAXES
The company adopted, in 1992, SFAS No. 109, "Accounting for Income Taxes."
The impact of this accounting change was not material. Prior years' financial
statements have not been restated to apply the provisions of SFAS No. 109.
COMPONENTS OF EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
1993 1992 1991
- ------------------------------------------------------
United States $ 360 $146 $166
Other nations 1,165 654 447
----------------------
Total $1,525 $800 $613
- ------------------------------------------------------
Income tax payments were $286 million in 1993, $132 million in 1992, and $150
million in 1991.
Income taxes are generally not provided on cumulative undistributed earnings
of certain non-U.S. subsidiaries. Such undistributed earnings aggregated $2.2
billion and $1.7 billion at December 31, 1993 and 1992, respectively.
It is intended that these earnings will be permanently reinvested in operations
outside the U.S. Should these earnings be distributed, foreign tax credits would
reduce the additional U.S. income tax which would be payable. In cases where
taxes are provided on such undistributed earnings, those taxes are included in
U.S. income taxes.
COMPONENTS OF INCOME TAXES PROVIDED ON EARNINGS
1993 1992 1991
- --------------------------------------------------------
Current
United States $133 $ 75 $ 54
Other nations 298 147 104
State income taxes (U.S.) 22 7 6
------------------------
453 229 164
Deferred 50 (5) (5)
-----------------------
Income taxes before
cumulative effect of
change in accounting
principle $503 $224 $159
- --------------------------------------------------------
TWENTY-NINE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
At December 31, 1993, certain non-U.S. subsidiaries had loss carryforwards
for income tax reporting purposes of $59.1 million, with expiration dates
starting in 1994.
DIFFERENCES BETWEEN INCOME TAX EXPENSE COMPUTED AT THE U.S. FEDERAL STATUTORY
TAX RATE OF 35% FOR 1993 AND 34% FOR 1992 AND 1991 AND INCOME TAXES PROVIDED ON
EARNINGS
1993 1992 1991
- -----------------------------------------------------------------
Income tax expense at statutory rate $534 $272 $208
Taxes on non-U.S. earnings (21) (31) (24)
State income taxes 14 7 5
Foreign Sales Corporation (29) (18) (22)
Tax Credits (4) (2) (7)
Other 9 (4) (1)
------------------------
Income taxes before cumulative
effect of change in accounting
principle $503 $224 $159
- ------------------------------------------------------------------
SIGNIFICANT DEFERRED TAX ASSETS (LIABILITIES)
December 31 1993 1992
- -----------------------------------------------------------------
Depreciation $(166) $(139)
Inventory reserves 196 164
Employee benefits 114 102
Capitalized items 97 72
Other deterred income (3) 93
----- -----
Net deferred tax asset $ 242 $ 292
- -----------------------------------------------------------------
The deferred tax assets are considered realizable considering past income and
evidence of future income. These include, but are not limited to, carrybacks,
earnings trends, and tax planning strategies.
The Internal Revenue Service (IRS) has examined the federal income tax
returns for Motorola, Inc. through 1985 and the returns have been settled
through 1983. In connection with the audits for the years 1984 through 1987,
the IRS has proposed 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 business or financial position of the
Company.
- --------------------------------------------------------------------------------
3. DEBT AND CREDIT FACILITIES
LONG-TERM DEBT
December 31 1993 1992
- -------------------------------------------------------
12% Eurodollar notes due 1994 $ 68 $ 68
11.5% Eurodollar notes due 1997 93 93
7.6% notes due 2007 300 300
8% sinking fund debentures 0 58
6.5% debentures due 2008 199 0
Zero coupon notes due 2009 294 489
Zero coupon notes due 2013 309 0
6.75% industrial revenue bonds
due 2014 20 20
8.4% debentures due 2031
(redeemable at the holders'
option in 2001) 200 200
Other long-term debt 42 39
---------------
1,525 1,267
Less current maturities 165 9
---------------
Long-term debt $1,360 $ 1,258
- -------------------------------------------------------
SHORT-TERM DEBT
December 31 1993 1992
- -------------------------------------------------------
Notes to banks $ 83 $ 89
Commercial paper 293 325
Other short-term debt 14 14
--------------
390 428
Add current maturities 165 9
--------------
Notes payable and current
portion of long-term debt $555 $437
The Company intends to call, in 1994, at a rate of 101%, the 11.5% Eurodollar
notes due 1997. The $93 million carrying value of the notes is included in
current maturities of long-term debt.
As of December 31, 1993, the zero coupon notes due 2009, referred to as
Liquid Yield Option -TM- Notes ("LYONs"-TM-), have a face value at maturity of
$744 million. The 2009 LYONs were priced at a 6% yield to maturity and are
convertible into 9.134 shares of Motorola common stock for each $1,000 note.
During 1993, various holders of the 2009 LYONs exercised conversion rights for
approximately 568,000 notes ($568 million face value; $216 million carrying
value). On September 27, 1993, the Company issued additional LYONs due 2013,
having a face value of $480 million at maturity, for net cash proceeds of $301
million. The 2013 LYONs were priced to yield 2.25% to maturity and are
convertible into 5.589 shares of Motorola
THIRTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
common stock for each $1,000 note. Both LYONs issues are subordinated to all
existing and future senior indebtedness of the Company, rank on a parity with
each other, and may be redeemed by the holders prior to the stated maturity.
During March 1993, the Company issued $200 million in aggregate principal
amount of 6.5% fifteen year debentures. The Company also retired the 8% sinking
fund debentures during 1993.
Aggregate maturities and sinking fund requirements for long-term debt, in
millions, during the next five years are as follows: 1994, $165; 1995, $9; 1996,
$7; 1997, $6; 1998, $5.
The Company has domestic and international credit facilities for short-term
borrowings with banks and other external sources. It pays commitment fees of
approximately 1/10% on its domestic credit facilities and generally no fees on
its foreign credit facilities. Short-term credit facilities totaled $1.88
billion at December 31, 1993, of which $1.48 billion remain unused. Domestic
credit facilities primarily support the issuance of commercial paper, while
foreign credit facilities generally support working capital requirements.
The Company's finance subsidiary has outstanding floating to fixed interest
rate commercial paper swaps totaling $75 million as of December 31, 1993. These
instruments mature at a rate of $25 million per year from 1994 to 1996.
Outstanding letters of credit aggregated approximately $189 million and
$172 million at December 31, 1993 and 1992, respectively.
- --------------------------------------------------------------------------------
4. OTHER FINANCIAL DATA
INCOME STATEMENT INFORMATION
1993 1992 1991
- ----------------------------------------------------------------------
Research and development $1,521 $1,306 $1,133
--------------------------
Maintenance and repairs 267 236 204
--------------------------
Foreign currency gains (losses) (18) (34) 16
--------------------------
Interest expense, net
Interest expense 182 196 176
Interest income (41) (39) (47)
--------------------------
Interest expense, net $ 141 $ 157 $ 129
- ----------------------------------------------------------------------
The Company's cash payments for interest expense were $126 million in 1993, $121
million in 1992 and $122 million in 1991.
BALANCE SHEET INFORMATION
December 31 1993 1992
- ----------------------------------------------------------------------
Inventories:
Finished goods $ 584 $ 413
W.I.P. and production materials 1,280 908
----------------
Total $1,864 $1,321
----------------
Property, plant, and equipment:
Land $ 151 $ 115
Buildings 2,475 2,185
Machinery 6,690 5,476
Equipment leased to others 391 403
----------------
9,707 8,179
Less accumulated depreciation 4,160 3,603
----------------
Total $5,547 $4,576
----------------
Accrued liabilities:
Compensation $ 491 $ 326
Deferred revenue 223 128
Taxes other than income 137 149
Income taxes payable 158 62
Contribution to employees'
profit sharing funds 107 59
Dividends payable 31 30
Other 1,349 1,017
----------------
Total $2,496 $1,771
- ----------------------------------------------------------------------
FINANCIAL DATA OF CONSOLIDATED FINANCE SUBSIDIARY
1993 1992 1991
- ----------------------------------------------------------------------
Total revenue $ 37 $ 29 $ 20
-------------------------
Net earnings 16 12 8
-------------------------
Total assets 361 295 238
Total liabilities (298) (248) (203)
-------------------------
Stockholder's investments
and advances $ 63 $ 47 $ 35
- ----------------------------------------------------------------------
The Company's finance subsidiary purchases customer obligations under long-
term contracts from the Company at net carrying value.
The finance subsidiary interest revenue is included in the Company's
consolidated net sales. Interest expense of $12 million in 1993, $11 million in
1992, and $8 million in 1991 is included in manufacturing and other costs of
sales. In addition, long-term finance receivables of $282 million in 1993 and
$228 million in 1992 are included in other assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include short-term investments, long-term
receivables, notes payable, long-term debt, foreign currency contracts, and
other financing commitments. The fair values of such financial instruments have
been determined based on quoted market prices and market interest rates, as of
December 31, 1993.
At December 31, 1993, the fair value of the convertible zero coupon notes
due 2009 was $624 million compared to the carrying value of $294 million. Such
notes, however, are callable by the Company at the carrying value at any time.
The fair values of all other financial instruments were not materially
different than their carrying (or contract) values.
THIRTY-ONE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
LEASES
The Company owns most of its major facilities, but does lease certain office,
factory and warehouse space, land, and data processing and other equipment under
principally noncancellable operating leases. Rental expense, net of sublease
income, was $152 million in 1993, $149 million in 1992, and $142 million in
1991. At December 31, 1993, future minimum lease obligations, net of minimum
sublease rentals, for the next five years and beyond are as follows: 1994, $113;
1995, $85; 1996, $65; 1997, $48; 1998, $31; beyond, $120.
- --------------------------------------------------------------------------------
5. EMPLOYEE BENEFIT AND INCENTIVE PLANS
PENSION BENEFITS
The Company's noncontributory pension plan covers most U.S. employees after one
year of service. The benefit formula is dependent upon employee earnings and
years of service. The Company's policy is to fund the accrued pension cost or
the amount allowable based on the full funding limitations of the Internal
Revenue Code, if less.
The Company has a noncontributory supplemental retirement benefit plan for
its elected officers. The plan contains provisions for funding the participants'
expected retirement benefits when the participants meet the minimum age and
years of service requirements.
Certain non-U.S. subsidiaries have varying types of retirement plans
providing benefits for substantially all of their employees. Amounts charged to
earnings for all non-U.S. plans were $41 million in 1993, $33 million in 1992,
and $32 million in 1991.
The Company uses a three-year, market-related asset value method of
amortizing asset-related gains and losses.
Net transition amounts and prior service costs are being amortized over
periods ranging from 10 to 15 years.
Benefits under all U.S. pension plans are valued based upon the projected
unit credit cost method. The assumptions used to develop the projected benefit
obligations for the plans for 1993 and 1992 were as follows:
1993 1992
- ----------------------------------------------------------------------
Discount rate for obligations 7.25% 8.5%
Future compensation increase rate 5.0% 5.5%
Investment return assumption (regular) 9.25% 9.25%
Investment return assumption (elected officers) 8.0% 8.0%
- ----------------------------------------------------------------------
Accounting literature requires discount rates to be established based on
prevailing market rates for high-quality fixed-income instruments that, if the
pension benefit obligation was settled at the measurement date, would provide
the necessary future cash flows to pay the benefit obligation when due. The
Company has reduced the discount rate in determining the pension obligation from
8.5% to 7.25% to comply with these guidelines. As of December 31, 1993, the
investment portfolio was predominantly long-term bonds and equity investments,
which have historically realized annual returns at or significantly above the
assumed investment return rate. The Company believes that discount rate
fluctuations are short term in nature and should not adversely affect the
Company's long-term obligation. If the pension assumptions were not changed from
the previous year, the market value of the plan asset would have exceeded the
projected benefit obligation by $55 million at December 31, 1993.
COMPONENTS OF NET U.S. PENSION EXPENSE FOR THE REGULAR PENSION PLAN.
1993 1992 1991
- ----------------------------------------------------------------------
Service costs $ 92 $ 84 $ 69
Interest cost on projected obligation 67 55 43
Actual return on plan assets (80) (53) (154)
Net amortization and deferral (11) (25) 89
-------------------------
Net pension expense $ 68 $ 61 $ 47
- ----------------------------------------------------------------------
The net U.S. pension expense for the elected officers' supplemental
retirement benefit plan was $19 million in 1993 and $17 million in 1992 and
1991.
U.S. FUNDED PENSION PLANS
December 31 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
Elected Elected
Regular Officers Regular Officers
- ----------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $(754) $ (42) $(511) $ (34)
----------------------------------------------------
Accumulated benefit obligation (821) (73) (558) (57)
----------------------------------------------------
Projected benefit obligation for service rendered to date (1,117) (82) (774) (67)
Plan assets at fair value, primarily bonds, stocks,
and cash equivalents 991 45 849 44
----------------------------------------------------
Plan assets in excess of (less than) projected benefit obligation (126) (37) 75 (23)
Unrecognized net (gain) loss 106 36 (97) 17
Unrecognized prior service cost 1 21 1 25
Unrecognized net transition (asset) liability (57) 8 (68) 9
Adjustment required to recognize minimum liability -- (56) -- (41)
----------------------------------------------------
Pension liability recognized in balance sheet $ (76) $ (28) $ (89) $ (13)
- ----------------------------------------------------------------------------------------------------------------------------------
THIRTY-TWO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
POSTRETIREMENT HEALTH CARE BENEFITS
In addition to providing pension benefits, the Company provides certain health
care benefits to its retired employees. The majority of its domestic employees
may become eligible for these benefits if they reach normal retirement age while
working for the Company. During 1992, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS
No. 106 requires that the cost of postretirement benefits be accrued during the
years that the employees render service. Prior to 1992, costs of retiree health
care were recognized as expenses when claims were paid. The Company chose to
implement SFAS No. 106 by recognizing as expense in 1992 the entire accumulated
postretirement benefit obligation as of January 1, 1992. The Company's policy is
to fund the maximum amount allowable based on funding limitations of the
Internal Revenue Code.
The assumptions used to develop the accumulated postretirement benefit
obligation for the retiree health care plan for 1993 and 1992 were as follows:
1993 1992
- ---------------------------------------------------------------------------
Discount rate for obligations 7.25% 8.5%
Investment return assumption 9.25% 9.25%
- ---------------------------------------------------------------------------
Components of the expense recognized in 1993 and 1992 for the retiree
health care plan were as follows:
1993 1992
- ---------------------------------------------------------------------------
Service costs $ 7 $ 7
Interest cost on projected obligation 16 14
---------------
Net retiree health care expense $23 $21
- ---------------------------------------------------------------------------
U.S. FUNDED RETIREE HEALTH CARE PLAN
December 31 1993 1992
- ---------------------------------------------------------------------------
Actuarial present value of accumulated
postretirement benefit obligation $(263) $(183)
Plan assets at fair value, primarily listed stocks,
bonds, and cash equivalents 33 4
Unrecognized net loss 55 --
----------------
Retiree health care liability recognized in
balance sheet $(175) $(179)
- ---------------------------------------------------------------------------
The health care trend rate used to determine the pre-age 65 accumulated
postretirement benefit obligation was 9.89% for 1993, decreasing to 6% by the
year 2000 and beyond. A flat 5% rate per year is used for the post-age 65
obligation. Increasing the health care trend rate by one percentage point would
increase the accumulated postretirement benefit obligation by $30 million and
would increase the 1993 net retiree health care expense by $5 million. There are
no significant postretirement health care benefit plans outside of the United
States.
OTHER BENEFITS
PROFIT SHARING PLANS: The Company and certain subsidiaries have profit sharing
plans, principally contributory, in which all eligible employees participate.
The Company makes contributions to profit sharing funds in the United States and
other nations, which are generally based upon percentages of pretax earnings, as
defined, from those operations. Company contributions to all profit sharing
plans totaled $107 million, $59 million, and $45 million in 1993, 1992, and
1991, respectively.
MANAGEMENT INCENTIVE: The Company may provide up to 7% of its annual
consolidated pretax earnings, as defined in the Motorola Executive Incentive
Plan, for the payment of cash incentive awards to key employees. During 1993,
$78 million was provided for incentive awards, as compared to $29 million and
$16 million in 1992 and 1991, respectively.
STOCK OPTIONS: Under the Company's employee stock option plans, shares of common
stock have been made available for grant to key employees. The exercise price of
each option granted is 100% of market value on the date of the grant.
Options exercised during 1993 were at per share prices ranging from
$15.91 to $52.07. Options outstanding at December 31, 1993 were at per share
prices ranging from $15.57 to $106.44.
SHARES SUBJECT TO OPTIONS
(In thousands of shares) 1993 1992
- ---------------------------------------------------------------------------
Options outstanding at January 1 13,009 14,990
Additional options granted 1,765 3,348
Options exercised (3,163) (5,250)
Options terminated, cancelled, or expired (158) (79)
-----------------
Options outstanding at December 31 11,453 13,009
Shares reserved for future option grants 8,727 10,334
-----------------
Total shares reserved 20,180 23,343
-----------------
Total options exercisable 9,688 9,672
- ---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES
FINANCIAL: The Company had $1.78 billion of forward foreign exchange contracts
outstanding as of December 31, 1993. Management believes that these forward
contracts should not subject the Company to undue risk due to foreign exchange
movements because gains and losses on these contracts should offset losses and
gains on the assets, liabilities, and transactions being hedged.
As of December 31, 1993, off balance sheet commitments aggregated $586
million, which includes commitments to extend or guarantee financing for non-
consolidated affiliates and for customer financing as well as capital funding
commitments. Customer financing commitments require the customer to meet certain
conditions established in the financing arrangements. Capital funding
commitments are primarily related to the Company's strategic investment in the
IRIDIUM(TM/SM) space system. Commitments represent the
THIRTY-THREE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
maximum amounts available under these arrangements and may not be completely
utilized.
The Company has entered into agreements in principle with NEXTEL
Communications, Inc., CenCall Communications Corp., and Dial Page, Inc., to
effect tax-deferred exchanges of substantially all of the 800 MHz Specialized
Mobile Radio businesses, systems, and licenses owned or managed by the Company
in the United States in exchange for equity interests in these companies.
Binding commitments to complete these transactions are subject to a number of
significant conditions including, among other items, agreement on definitive
documents, all regulatory approvals, and shareholder approval of the acquiring
companies. The transactions further commit the Company to acquire certain
managed licenses (or substitutes) within a specified period before or after the
closing. The agreements in principle provide that the Company will lend or
guarantee approximately $440 million. During 1994, the outcome of the agreements
in principle noted above may result in concentrations of credit risk; however,
as of December 31, 1993, the Company had no significant concentrations of credit
risk.
ENVIRONMENTAL AND LEGAL: Under the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended (CERCLA, or Superfund), the
Company has been designated as a potentially responsible party by the United
States Environmental Protection Agency with respect to certain waste sites with
which the Company may have had direct or indirect involvement. Such designations
are made regardless of the extent of the Company's involvement. These claims are
in various stages of administrative or judicial proceedings. They include
demands for recovery of past governmental costs and for future investigations or
remedial actions. In many cases, the dollar amounts of the claims have not been
specified, and have been asserted against a number of other entities for the
same cost recovery or other relief as was asserted against the Company. The
Company accrues costs associated with environmental matters when they become
probable and reasonably estimable. The amount of such charges to earnings, which
did not include potential reimbursements from insurance coverage, was $36
million, $17 million, and $18 million in 1993, 1992, and 1991, respectively.
The Company is a defendant in various suits and is subject to various
claims which arise in the normal course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the consolidated business or financial position of the
Company.
- --------------------------------------------------------------------------------
7. INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC REGION
INDUSTRY SEGMENT INFORMATION
Net Sales Operating Profit
- ----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductor Products $ 5,707 $ 4,475 $ 3,679 $ 801 14.0% $ 464 10.4% $ 356 9.7%
General Systems Products 5,236 3,662 2,882 718 13.7% 420 11.5% 344 11.9%
Communications Products 4,834 3,906 3,491 354 7.3% 192 4.9% 111 3.2%
Government and Systems
Technology Products 858 650 704 (17) (2.0)% (7) (1.1)% 33 4.7%
Other Products 1,762 1,452 1,212 95 5.4% 77 5.3% 42 3.5%
Adjustments and eliminations (1,434) (842) (627) (11) -- (4) -- 4 --
---------------------------- ------ ------ -----
Industry segment totals $16,963 $13,303 $11,341 1,940 11.4% 1,142 8.6% 890 7.8%
----------------------------
General corporate expenses (274) (185) (148)
Interest expense, net (141) (157) (129)
------ ------ -----
Earnings before income taxes
and cumulative effect of change
in accounting principle $1,525 9.0% $ 800 6.0% $ 613 5.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Assets Fixed Asset Expenditures Depreciation Expense
- ----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991 1993 1992 1991 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductor Products $ 4,507 $ 3,618 $3,196 $1,120 $ 666 $ 653 $ 529 $ 429 $362
General Systems Products 3,223 2,108 1,790 453 334 250 227 171 151
Communications Products 3,202 2,925 2,597 363 263 274 238 207 195
Government and Systems
Technology Products 304 312 375 31 24 27 33 33 36
Other Products 957 826 755 120 101 101 89 106 88
Adjustments and eliminations (24) (32) (51) -- -- -- -- -- --
--------------------------- -------------------------- -------------------------
Industry segment totals 12,169 9,757 8,662 2,087 1,388 1,305 1,116 946 832
General corporate 1,329 872 713 100 54 82 54 54 54
--------------------------- -------------------------- -------------------------
Consolidated totals $13,498 $10,629 $9,375 $2,187 $1,442 $1,387 $1,170 $1,000 $886
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
1992 and 1991 have been reclassified to reflect the realignment of various
business units.
THIRTY-FOUR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
GEOGRAPHIC AREA INFORMATION(1)
Net Sales Operating Profit
- ----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
United States $12,924 $10,232 $ 8,802 $ 970 7.5% $ 624 6.1% $ 452 5.1%
Other nations 10,066 8,017 6,340 1,164 11.6% 706 8.8% 501 7.9%
Adjustments and eliminations (6,027) (4,946) (3,801) (193) -- (188) -- (63) --
--------------------------- ------ ------ -----
Geographic totals $16,963 $13,303 $11,341 1,940 11.4% 1,142 8.6% 890 7.8%
---------------------------
General corporate expenses (274) (185) (148)
Interest expense, net (141) (157) (129)
------ ------ -----
Earnings before income taxes
and cumulative effect of change
in accounting principle $1,525 9.0% $ 800 6.0% $ 613 5.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------------------------------------------
December 31 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
United States $ 7,731 $ 6,297 $5,660
Other nations 4,674 3,668 3,164
Adjustments and eliminations (236) (208) (162)
---------------------------------
Geographic totals 12,169 9,757 8,662
General corporate assets 1,329 872 713
---------------------------------
Consolidated totals $13,498 $10,629 $9,375
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) AS MEASURED BY THE LOCALE OF THE REVENUE-PRODUCING OPERATIONS.
1992 AND 1991 HAVE BEEN RECLASSIFIED TO REFLECT THE REALIGNMENT OF VARIOUS
BUSINESS UNITS.
The Company operates predominantly in the wireless communication,
semiconductor technology, and advanced electronic industries. Operations involve
the design, manufacture, and sale of a diversified line of products, which
include, but are not limited to, two-way radios and pagers; cellular telephones
and systems; semiconductors, including integrated circuits and microprocessor
units; data communication and distributive data processing equipment and
systems; and electronic equipment and industrial electronic products.
Previously, Information Systems Products was reported as an industry segment. It
no longer represents a significant industry segment of the Company's operations
and has been combined with Other Products in the presentation. Manufacturing and
distribution operations in any one foreign country do not account for more than
10% of consolidated net sales or total assets.
Operating profit (revenues less operating expenses) excludes general
corporate expenses, net interest, and income taxes. Intersegment and
intergeographic transfers are accounted for on an arm's length pricing basis.
Identifiable assets (excluding intersegment receivables) are the Company's
assets that are identified with classes of similar products or operations in
each geographic area. General corporate assets primarily include cash and cash
equivalents, marketable securities, equity investments, and the administrative
headquarters of the Company.
In 1993, no single customer or group under common control represented 10%
or more of the Company's sales. The equity in net assets of non-U.S.
subsidiaries amounted to $3.28 billion at December 31, 1993 and $2.51 billion at
December 31, 1992.
- --------------------------------------------------------------------------------
8. STOCKHOLDER RIGHTS PLAN
Each outstanding share of the Company's common stock carries with it one-half of
a preferred share purchase right. Each right becomes exercisable for one-
thousandth of a share of the Company's junior participating preferred stock,
series A, at an exercise price of $150 per one-thousandth of a share (subject to
adjustment) if a person or group acquires 20% or more of the Company's common
stock or announces a tender or exchange offer for 30% or more of the Company's
common stock. If a person or group acquires 20% or more of the Company's common
stock and in certain other circumstances, each right (except, in some instances,
those held by an acquiror) becomes exercisable for an amount of the Company's
common stock (or that of an acquiror) having a market value of twice the
exercise price. In some cases, the Board of Directors may exchange one
exercisable right for two shares (subject to adjustment) of the Company's common
stock (or the equivalent) and may suspend the exercisability of the rights. The
rights have no voting power, expire on November 20, 1998, and may be redeemed
for $.05 per right prior to a public announcement that 20% or more of the
Company's shares have been accumulated by a person or group.
THIRTY-FIVE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT AS NOTED) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENTS
On February 1, 1994, the Board of Directors declared a two-for-one stock split
(effected in the form of a 100 percent stock dividend) and an increase in the
quarterly dividend to 14 cents per pre-split share, payable April 18, 1994, to
stockholders of record on March 15, 1994. Pro forma net earnings per fully
diluted common and common equivalent share before cumulative effect of change in
accounting principle, giving retroactive effect to the two-for-one stock split,
are as follows: 1993, $1.78; 1992, $1.05; 1991, $0.85.
Conversion rights outstanding on the zero coupon notes due 2009 and 2013
will increase to 18.268 common shares and 11.178 common shares, respectively,
and each outstanding share of the Company's common stock will carry with it one-
quarter of a preferred share purchase right.
Financial information contained elsewhere in this report has not been
adjusted to reflect the impact of the 1994 common stock split.
QUARTERLY AND OTHER FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS; UNAUDITED) 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
Quarterly 1ST 2ND 3RD 4TH 1st(1) 2nd(1) 3rd(1) 4th
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING Net sales $3,626 $3,936 $4,408 $4,993 $3,055 $3,141 $3,396 $3,711
RESULTS Gross profit 1,391 1,556 1,696 1,969 1,130 1,159 1,240 1,379
Net earnings before
cumulative effect of change
in accounting principle 204 224 254 340 125 143 127 181
Cumulative effect of change
in accounting principle -- -- -- -- (123) -- -- --
Net earnings 204 224 254 340 2 143 127 181
Net earnings before cumulative
effect of change in accounting
principle as a percent of sales 5.6% 5.7% 5.8% 6.8% 4.1% 4.6% 3.7% 4.9%
Net earnings as a percent of sales 5.6% 5.7% 5.8% 6.8% 0.1% 4.6% 3.7% 4.9%
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE Fully diluted net earnings
DATA(2),(3) per common and common
equivalent share
Net earnings before cumulative
effect of change in
accounting principle $ 0.72 $ 0.81 $ 0.87 $ 1.15 $ 0.46 $ 0.53 $ 0.46 $ 0.64
Cumulative effect of change in
accounting principle -- -- -- -- (0.44) -- -- --
Net earnings $ 0.72 $ 0.81 $ 0.87 $ 1.15 $ 0.02 $ 0.53 $ 0.46 $ 0.64
--------------------------------------------------------------------------------------------------------------------
Dividends declared $0.110 $0.110 $ 0.110 $ 0.110 $0.095 $0.095 $0.095 $0.110
Dividends paid $0.110 $0.110 $ 0.110 $ 0.110 $0.095 $0.095 $0.095 $0.095
STOCK PRICES
High $67.13 $88.63 $105.13 $107.50 $40.82 $41.32 $45.22 $52.72
Low $48.63 $63.25 $ 82.50 $ 84.75 $32.44 $37.10 $37.91 $42.57
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
1 THE FIRST, SECOND, AND THIRD QUARTER 1992 NET EARNINGS, NET EARNINGS PER
COMMON AND COMMON EQUIVALENT SHARE, AND NET EARNINGS AS A PERCENT OF SALES HAVE
BEEN RESTATED TO REFLECT THE ADOPTION OF SFAS NO. 106 AS OF JANUARY 1, 1992. THE
ADOPTION OF SFAS NO. 109 DID NOT HAVE A MATERIAL AFFECT ON ANY QUARTER.
2 ALL EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE, DIVIDEND AND STOCK PRICE
DATA HAS BEEN RESTATED TO REFLECT THE 1992 TWO-FOR-ONE STOCK SPLIT.
3 PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE THE SAME AS FULLY
DILUTED FOR ALL PERIODS SHOWN, EXCEPT FOR THE FIRST AND THIRD QUARTERS OF 1993,
AND THE FOURTH QUARTER OF 1992, WHEN THEY WERE ONE CENT HIGHER.
THE NUMBER OF STOCKHOLDERS OF RECORD OF MOTOROLA COMMON STOCK ON JANUARY 31,
1994 WAS 21,453.
THIRTY-SIX
FIVE YEAR FINANCIAL SUMMARY
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA) MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING Net sales $16,963 $13,303 $11,341 $10,885 $ 9,620
RESULTS Manufacturing and other costs of sales 10,351 8,395 7,134 6,787 5,877
Selling, general, and administrative expenses 3,776 2,951 2,579 2,509 2,317
Depreciation expense 1,170 1,000 886 790 650
Interest expense, net 141 157 129 133 130
Total costs and expenses 15,438 12,503 10,728 10,219 8,974
Earnings before income taxes and cumulative effect
of change in accounting principle 1,525 800 613 666 646
Income taxes provided on earnings 503 224 159 167 148
Net earnings before cumulative effect of change
in accounting principle $ 1,022 $ 576 $ 454 $ 499 $ 498
Net earnings $ 1,022 $ 453 $ 454 $ 499 $ 498
Net earnings before cumulative effect of change
in accounting principle as a percent of sales 6.0% 4.3% 4.0% 4.6% 5.2%
Net earnings as a percent of sales 6.0% 3.4% 4.0% 4.6% 5.2%
- ----------------------------------------------------------------------------------------------------------------------------------
SHARE DATA(1,2)Fully diluted net earnings per common and
common equivalent share
Net earnings before cumulative effect of change
in accounting principle $ 3.55 $ 2.09 $ 1.69 $ 1.86 $ 1.88
Cumulative effect of change in accounting principle -- (0.43) -- -- --
Net earnings $ 3.55 $ 1.66 $ 1.69 $ 1.86 $ 1.88
Fully diluted average common and common equivalent
shares outstanding 291.9 283.6 279.3 277.9 267.4
Dividends declared per share $ 0.440 $ 0.395 $ 0.380 $ 0.380 $ 0.380
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE Total assets $13,498 $10,629 $ 9,375 $ 8,742 $ 7,686
SHEET Working capital 2,324 1,883 1,424 1,404 1,261
Long-term debt 1,360 1,258 954 792 755
Total debt 1,915 1,695 1,806 1,787 1,542
Total stockholders' equity $ 6,409 $ 5,144 $ 4,630 $ 4,257 $ 3,803
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER DATA Current ratio 1.53 1.56 1.46 1.46 1.48
Return on average invested capital before cumulative
effect of change in accounting principle 15.3% 9.4% 7.8% 9.4% 10.3%
Return on average invested capital 15.3% 7.5% 7.8% 9.4% 10.3%
Return on average stockholders' equity before cumulative
effect of change in accounting principle 17.8% 11.7% 10.2% 12.3% 13.9%
Return on average stockholders' equity 17.8% 9.4% 10.2% 12.3% 13.9%
Year-end employment (in thousands) 120 107 102 105 104
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) ALL EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE, DIVIDENDS, AND
OUTSTANDING SHARES HAVE BEEN RESTATED TO REFLECT THE 1992 TWO-FOR-ONE STOCK
SPLIT.
(2) PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE ONE CENT HIGHER
THAN FULLY DILUTED FOR ALL YEARS SHOWN, EXCEPT IN 1990, WHEN THEY WERE THE SAME.
AVERAGE PRIMARY COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING FOR 1993, 1992,
1991, 1990 AND 1989 WERE 291.3, 282.8, 277.8, 277.9, AND 266.6, RESPECTIVELY.
THIRTY-SEVEN