-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DLrjMjgNvUcbyOIlSk7fv+h40MI6Xpw9goZAbiozOFuULG0yod70MTpZB2HUHIu6 ORTQKapZMtPkaXdHjbSAVQ== 0000068505-95-000007.txt : 199507190000068505-95-000007.hdr.sgml : 19950719 ACCESSION NUMBER: 0000068505-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950718 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOTOROLA INC CENTRAL INDEX KEY: 0000068505 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 361115800 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07221 FILM NUMBER: 95554615 BUSINESS ADDRESS: STREET 1: 1303 E ALGONQUIN RD CITY: SCHAUMBURG STATE: IL ZIP: 60196 BUSINESS PHONE: 7085765000 FORMER COMPANY: FORMER CONFORMED NAME: MOTOROLA DELAWARE INC DATE OF NAME CHANGE: 19760414 10-Q 1 2ND QUARTER 10-Q 1995 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ending July 1, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number: 1-7221 MOTOROLA, INC. (Exact name of registrant as specified in its charter) Delaware 36-1115800 (State of Incorporation) (I.R.S. Employer Identification No.) 1303 E. Algonquin Road, Schaumburg, Illinois 60196 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (708) 576-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of each of the issuer's classes of common stock as of the close of business on July 1, 1995: Class Number of Shares Common Stock; $3 Par Value 589,788,263 Motorola, Inc. and Consolidated Subsidiaries Index Part I Financial Information Page Item 1 Financial Statements Statements of Consolidated Earnings Three-Month and Six-Month Periods ended July 1, 1995 and July 2, 1994 3 Condensed Consolidated Balance Sheets at July 1, 1995 and December 31, 1994 4 Statements of Condensed Consolidated Cash Flows Six-Month Periods ended July 1, 1995 and July 2, 1994 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II Other Information Item 1 Legal Proceedings 13 Item 2 Changes in Securities 13 Item 3 Defaults Upon Senior Securities 13 Item 4 Submission of Matters to a Vote of Security Holders 13 Item 5 Other Information 13 Item 6 Exhibits and Reports on Form 8-K 13 Part I - Financial Information Motorola, Inc. and Consolidated Subsidiaries Statements of Consolidated Earnings (Unaudited) (In millions, except per share amounts) Three Months Ended Six Months Ended July 1, July 2, July 1, July 2, 1995 1994 1995 1994 Net sales $ 6,877 $ 5,439 $12,888 $10,132 Costs and expenses Manufacturing and other costs of sales 4,394 3,379 8,272 6,287 Selling, general and administrative expenses 1,209 1,074 2,299 2,060 Depreciation expense 478 362 909 672 Interest expense, net 34 38 55 75 Total costs and expenses 6,115 4,853 11,535 9,094 Earnings before income taxes 762 586 1,353 1,038 Income taxes provided on earnings 281 219 500 373 Net earnings $ 481 $ 367 $ 853 $ 665 Net earnings per common and common equivalent share (1) Fully diluted: Net earnings per common and common equivalent share $ .79 $ .63 $ 1.40 $ 1.14 Average common and common equivalent shares outstanding, fully diluted (in millions) 609.2 588.7 609.2 588.7 Dividends paid per share $ .10 $ .07 $ .20 $ .125 (1) Average primary common and common equivalent shares outstanding for the three months and six months ended July 1, 1995 and July 2, 1994 were 608.3 million and 588.7 million, respectively. Primary earnings per common and common equivalent share were one cent higher than fully diluted for the three and six months ended July 1, 1995 and the same for the three and six months ended July 2, 1994. See accompanying notes to condensed consolidated financial statements. Motorola, Inc. and Consolidated Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (In millions) July 1, December 31, 1995 1994 Assets Cash and cash equivalents $ 760 $ 741 Short-term investments 319 318 Accounts receivable, less allowance for doubtful accounts (1995, $119; 1994, $118) 4,018 3,421 Inventories 3,182 2,670 Other current assets 2,019 1,775 Total current assets 10,298 8,925 Property, plant and equipment, less accumulated depreciation (1995, $7,503; 1994, $6,657) 8,495 7,073 Other assets 1,672 1,538 Total Assets $20,465 $17,536 Liabilities and Stockholders' Equity Notes payable and current portion of long-term debt $ 1,870 $ 916 Accounts payable 1,799 1,678 Accrued liabilities 3,695 3,323 Total current liabilities 7,364 5,917 Long-term debt 1,519 1,127 Other liabilities 1,603 1,396 Stockholders' equity 9,979 9,096 Total liabilities and stockholders' equity $20,465 $17,536 See accompanying notes to condensed consolidated financial statements. Motorola, Inc. and Consolidated Subsidiaries Statements of Condensed Consolidated Cash Flows (Unaudited) (In millions) Six Months Ended July 1, July 2, 1995 1994 Net cash provided by operations $ 1,201 $ 342 Investing Payments for property, plant and equipment (2,076) (1,470) (Increase) decrease in short-term investments (1) 57 (Increase) in other investing activities (413) (34) Net cash used for investing activities (2,490) (1,447) Financing Net increase in commercial paper and short-term borrowings 957 1,037 Proceeds from issuance of debt 414 19 Repayment of debt (21) (105) Payment of dividends to stockholders (118) (70) Other financing activities 76 21 Net cash provided by financing activities 1,308 902 Net increase (decrease) in cash and cash equivalents $ 19 $ (203) Cash and cash equivalents, beginning of year $ 741 $ 886 Cash and cash equivalents, end of period $ 760 $ 683 See accompanying notes to condensed consolidated financial statements. Motorola, Inc. and Consolidated Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Basis of Presentation The Condensed Consolidated Balance Sheet as of July 1, 1995, the Statements of Consolidated Earnings for the three-month and six-month periods ended July 1, 1995 and July 2, 1994, and the Statements of Condensed Consolidated Cash Flows for the six-month periods ended July 1, 1995 and July 2, 1994 have been prepared by the Company. In the opinion of management, all adjustments (which include reclassifications and normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at July 1, 1995 and for all periods presented, have been made. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 annual report to stockholders. The results of operations for the three-month and six-month periods ended July 1, 1995 are not necessarily indicative of the operating results for the full year. 2. Inventories Inventories consist of the following (in millions): July 1, Dec. 31, 1995 1994 Finished goods $ 997 $ 699 Work in process and production materials 2,185 1,971 $ 3,182 $ 2,670 3. Income Taxes The Internal Revenue Service (IRS) has examined the federal income tax returns for Motorola, Inc. through 1985 and the returns have been settled through that year. The settlement did not result in a material adverse effect on the consolidated financial position, liquidity or results of operations of the Company. The IRS has completed its field audit of the years 1986 and 1987. In connection with these audits, the IRS has proposed adjustments to the Company's income and tax credits for those years which would result in additional tax. The Company disagrees with certain of the proposed adjustments and is contesting them. In the opinion of the Company's management, the final disposition of these matters, and proposed adjustments from other tax authorities, will not have a material adverse effect on the consolidated financial position, liquidity or results of operations of the Company. 4. Supplemental Cash Flows Information Cash payments for income taxes were $473 million during the first six months of 1995 and $455 million for the same period a year earlier. Cash payments for interest expense (net of amount capitalized) were $88 million and $100 million, for the first six-month periods of 1995 and 1994, respectively. Motorola, Inc. and Consolidated Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations This commentary should be read in conjunction with the referenced sections of the following documents for a full understanding of Motorola's financial condition and results of operations: from Motorola, Inc.'s 1994 Annual Report to Stockholders, the Letter to Stockholders - Financial Results paragraph on page 2, the Review of Operations section on pages 20 through 23, the Financial Review section on pages 24 through 28, and the Consolidated Financial Statements and Footnotes to the Consolidated Financial Statements, pages 30 through 43; and from Motorola, Inc.'s Quarterly Report on Form 10-Q for the period ending July 1, 1995, of which this commentary is a part, the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements, pages 3 through 6. Results of Operations: Motorola, Inc. reported higher sales and earnings for the second quarter and first half of 1995. Sales rose to $6.9 billion in the second quarter of 1995, up 26 percent from $5.4 billion in the second quarter of 1994. In the first half, sales reached $12.9 billion, up 27 percent from $10.1 billion a year ago. Earnings in the second quarter of 1995 were $481 million, compared with $367 million in the same period a year earlier. Fully diluted net earnings per common and common equivalent share for the second quarter of 1995 were 79 cents, compared to 63 cents in the year-earlier period. Earnings in the first six months were $853 million, compared with $665 million a year earlier. Fully diluted net earnings per common and common equivalent share were $1.40, compared to $1.14 a year earlier. The 1994 per-share figures reflect a two-for-one stock split distributed April 18, 1994 to stockholders of record as of March 15, 1994. Motorola's net margin on sales (net earnings divided by net sales) during the second quarter of 1995 was 7.0 percent compared to 6.7 percent a year ago, while in the first half it was 6.6 percent, unchanged from the year-earlier period. General Systems Sector's segment sales rose to $2.9 billion, an increase of 39 percent from the second quarter of 1994. Orders increased 25 percent and operating profits were higher than in the second quarter of 1994. The Cellular Infrastructure Group's (CIG) sales and orders were up substantially in the second quarter of 1995 compared to the year-earlier period. Order growth was strongest in Greater China, Europe and Japan, while there was a small decline in orders in Pan America. Sales showed very good growth in all regions, including Pan America. The Cellular Subscriber Group (CSG) recorded higher orders and a substantial increase in sales. Order growth was strongest in Greater China and Asia-Pacific, while orders declined slightly in Japan, Europe and Pan America. In the U.S. specifically, inventories of cellular phones in the distribution channels returned to a normal range late in the second quarter and order patterns were improved from the first quarter of 1995. Backlog in the second quarter of 1995 decreased in CSG and increased substantially in CIG compared to the second quarter of 1994. Segment sales in the Semiconductor Products Sector increased 22 percent from the second quarter of 1994 to $2.1 billion. Orders increased 36 percent and operating profits were higher than in the second quarter of 1994. All major market regions showed double-digit order growth, led by Europe and Asia-Pacific. Personal computer/work station, communication and automotive led market segment order growth. Distribution orders also were higher. Highest order growth among product lines included RISC (reduced instruction set computers) microprocessors, analog and logic devices, fast static random access memories and microcontrollers. Operating margins in the Semiconductor Product Segment declined during the second quarter of 1995 compared to the second quarter of 1994, primarily due to start-up costs, increased depreciation (as a percent to sales) and inefficiencies related to the new manufacturing capacity. The Company presently expects that this segment will continue to incur significant start-up costs and inefficiencies and experience increased depreciation expenses (as a percent of sales) for several quarters as a result of its capacity expansion program. Based on the recent past and other considerations, the Company also expects that the sales growth rate of this segment will probably lag the order growth rate, resulting in an increase in backlog, as was experienced in the first and second quarters of 1995 versus the respective year-earlier periods. Motorola's Semiconductor Products Sector continues to experience limits on the amount of orders it can accept for certain types of products, due to capacity constraints. These constraints may also restrict Motorola's ability to ship cellular telephones and certain other products. If customer demand for semiconductors and wireless communications products remains strong, Motorola does not expect that these capacity constraints will ease until sufficient wafer fabrication capacity becomes available, which is currently expected to start for some products during the second half of 1995. In the Messaging, Information and Media Segment businesses, comprised of the Paging Products and Wireless Data Groups (formerly reported as part of the Communications Segment) and Information Systems Group (formerly reported as part of the "Other Products" segment), segment sales increased 24 percent from the second quarter of 1994 to $895 million and operating profits, including a net gain from unusual items in the second quarter of 1995, were higher than the year- earlier period. Orders increased 42 percent from the second quarter of 1994. Paging Products Group orders increased substantially compared to the year-earlier period, driven by international market growth, particularly in China and Europe, while in Japan orders were lower. In the U.S., orders increased slightly in the second quarter of 1995 compared to the year-earlier period. In the Land Mobile Products Sector business segment, comprised of the Radio Products, Radio Parts and Services, Network Services and Business Strategies, and Radio Network Solutions Groups (formerly reported as part of the Communications Segment), sales increased 4 percent to $872 million and operating profits were lower from the second quarter of 1994. Orders declined 18 percent from the second quarter of 1994. The results were affected by factors related to iDEN (trademark symbol inserted here) (Integrated Dispatch Enhanced Network) technology, which offset improved results in the sector's non-iDEN business. This slow-down in sales adversely affected the Segment's manufacturing margin as capacity utilization declined. This pattern is expected to continue as the Company and its customers continue with iDEN-related issues which must be resolved before any accelerated nationwide build-out of these systems can proceed. Gross margins on iDEN products will vary from quarter to quarter depending on the types of equipment sold under various contracts. Results in the iDEN business declined due to continued investments in systems optimization and iDEN technology development, provisions for an anticipated contract revision with a customer, and the need for major U.S. customers to complete merger and financing transactions. New orders for iDEN equipment were received from Nextel Communications, Inc. for its U.S. network and from Clearnet for its systems in Canada. In the sector's non-iDEN business, sales, orders and operating profits were higher. Demand was strong for portable and mobile two-way radios sold through dealers and for large private trunking systems, especially in the U.S. and Asia. Motorola and Nextel have extended the agreement by which Motorola will receive up to 59.5 million shares of Nextel stock in exchange for most of Motorola's 800 megahertz (MHz) specialized mobile radio service (SMRS) businesses, systems and licenses in the continental United States. Motorola currently expects the transaction to occur in the third quarter of 1995. Nextel's shareholders and public debt holders have approved the transaction. In the Automotive, Energy and Controls Group, sales increased 16 percent and orders increased 10 percent from the second quarter of 1994. Operating profits were higher compared to the second quarter of 1994. Order growth came from component and energy products used in wireless communications products as well as electronic ballasts from Motorola Lighting. Automotive electronics orders were slightly lower than a year ago because of softness in U.S. and European markets. The results for this group are reported as part of the "Other Products" segment. In the Government and Space Technology Group (GSTG), group sales increased from the second quarter of 1994 by 106 percent due to increased sales by the Satellite Communications Division to Iridium, Inc. Orders were 33 percent higher, and the group recorded an operating profit compared with a loss a year ago. Development of the IRIDIUM (registered mark inserted here) global communications system continued on schedule, as Motorola met all contractual milestones during the quarter. As previously indicated, Iridium, Inc. will require additional financing to continue to make payments to Motorola under a contract to construct the global communications system. The additional financing is expected to be required beginning in early 1996. GSTG is recording reserves that currently result in a minimal level of profit recognition for the IRIDIUM project. These reserves are reevaluated periodically. The results for this group are reported as part of the "Other Products" segment. Motorola's manufacturing and other costs of sales during the second quarter of 1995 and 1994 were $4.4 billion, 64 percent of net sales, and $3.4 billion, 62 percent of net sales, respectively. The increase during the second quarter of 1995 as a percent of net sales was a result of start-up costs and inefficiencies associated with adding major elements of new semiconductor manufacturing capacity to support growth in sales and orders, as well as the continuation of a strategy to remain the price leader in the cellular telephone and paging industries worldwide, to influence the continuing growth of these markets. Motorola's wireless communications businesses have been attracting significant price competition for some time, which is expected to continue. Motorola intends to protect and, if possible, improve its market share in these businesses by utilizing its high volume manufacturing capabilities. This may also mean tolerating lower gross margins. It is management's current intention to continue to manage selling, general and administrative expenses in line with this strategy. Motorola's selling, general and administrative expenses during the second quarter of 1995 were $1.2 billion, 18 percent of sales, versus $1.1 billion, 20 percent of sales, during the year-earlier period. The tax rate for the quarter was 37 percent compared with 38 percent in the second quarter of 1994 and 36 percent for the full year 1994. Fully diluted average common and common equivalent shares outstanding increased to 609.2 million from 588.7 million a year ago, largely as a result of the Company completing a public equity offering of 17.1 million shares during November 1994. Liquidity and Capital Resources: Inventories at July 1, 1995 increased by 19 percent or $512 million, compared to inventories at December 31, 1994. Inventories increased in all segments led by the General Systems Sector and Semiconductor Products Sector. Property, plant and equipment, less accumulated depreciation at July 1, 1995, has increased $1.4 billion since December 31, 1994, largely due to the semiconductor business capacity expansions. Depreciation expense increased 32 percent for the second quarter of 1995 in comparison to the year-earlier period. The Company is currently anticipating that depreciation expense will rise as a percent of sales for the full year, as was experienced in the first half of 1995 when depreciation increased to 7.1 percent of sales versus 6.6 percent for the year-earlier period. Motorola's notes payable and current portion of long-term debt increased $954 million, or 104 percent from the amount at December 31, 1994. The increase is primarily due to a significant increase in fixed asset expenditures, sales growth which is driving increases in receivables and inventory, and the Company's inability to achieve improved rates of inventory turnover and receivable collections. Long-term debt increased $392 million or 35 percent from the amount at December 31, 1994, as a result of the Company issuing, during the second quarter of 1995, 7 1/2 percent debentures due May 15, 2025 in an aggregate principal amount of $400 million under the universal shelf registration statement filed during 1994. The Company anticipates that through the second half of the year, cash will be required to fund additional fixed asset purchases and to complete other investment activities. Net debt (notes payable and current portion of long-term debt plus long-term debt less short-term investments and cash equivalents) to net debt plus equity rose to 20.3 percent at July 1, 1995 from 12.1 percent at December 31, 1994. The Company's total domestic and foreign credit facilities aggregated $2.9 billion at July 1, 1995, of which $349 million were used and the remaining amount was not drawn, but was available to back up outstanding commercial paper which totaled $1.5 billion at July 1, 1995. The Company uses financial instruments to hedge, and therefore help reduce, its overall exposure to the effects of currency fluctuations on cash flows of foreign operations and investments in foreign countries. The Company's strategy is to offset the gains or losses of the financial instruments against losses or gains on the underlying operational cash flows or investments based on the operating business units assessment of risk. Motorola does not speculate in these financial instruments for profit on the exchange rate price fluctuations alone. Motorola does not trade in currencies for which there are no underlying exposures, and the Company does not enter into trades for any currency to intentionally increase the underlying exposure. Essentially all the Company's non-functional currency receivables and payables denominated in major currencies which can be traded on open markets are hedged. Some of the Company's exposure is to currencies which are not traded on open markets, such as those in Latin America and China, and these are addressed, to the extent reasonably possible, through managing net asset positions, product pricing, and other means, such as component sourcing. Currently, the Company primarily hedges firm commitments. The Company expects that there could be hedges of anticipated transactions in the future. The foreign exchange financial instruments which hedge various investments in foreign subsidiaries are marked to market monthly as are the underlying investments and the results are recorded in the financial statements. As of July 1, 1995 and July 2, 1994, the Company had net outstanding foreign exchange contracts totaling $1.2 billion and $1 billion, respectively. The following schedule shows the five largest foreign exchange hedge positions as of July 1, 1995, and the corresponding positions at July 2, 1994: Millions of U.S. Dollars Buy (Sell) July 1, July 2, 1995 1994 Japanese Yen (387) (480) German Deutsche Mark (221) (126) British Pound Sterling (182) (117) Spanish Peseta (75) (52) Singapore Dollar 70 -- As of July 1, 1995 and July 2, 1994, outstanding foreign exchange contracts primarily consisted of short-term forward contracts. Net deferred losses on these forward contracts which hedge designated firm commitments were immaterial at July 1, 1995. Motorola's research and development expense was $551 million in the second quarter of 1995, compared to $455 million in the second quarter of 1994. In the first half of 1995, research and development expense was $1,052 million, compared to $865 million a year ago. The Company continues to believe that a strong commitment to research and development drives long-term growth. Return on average invested capital (net earnings divided by the sum of stockholders' equity, long-term debt, notes payable and current portion of long-term debt, less short- term investments and cash equivalents) was 16.5 percent based on the performance of the four preceding fiscal quarters ending July 1, 1995, unchanged from the year- earlier period. Motorola's current ratio (the ratio of current assets to current liabilities) was 1.4 at July 1, 1995, compared to 1.5 at December 31, 1994. IRIDIUM (registered mark inserted here) is a registered trademark and service mark of Iridium, Inc. Information by Industry Segment (Unaudited) Summarized below are the Company's segment sales as defined by industry segment for the three-months and six-months ended July 1, 1995 and July 2, 1994: Segment Sales for the three months ended July 1, July 2, (In millions) 1995 1994 (1) % Change General Systems Products $2,883 $2,072 39 Semiconductor Products 2,085 1,713 22 Messaging, Information and Media Products 895 720 24 Land Mobile Products 872 840 4 Other Products 901 644 40 Adjustments and eliminations (759) (550) 38 Industry segment totals $6,877 $5,439 26 Segment Sales for the six months ended July 1, July 2, (In millions) 1995 1994 (1) % Change General Systems Products $5,229 $3,739 40 Semiconductor Products 3,966 3,328 19 Messaging, Information and Media Products 1,683 1,353 24 Land Mobile Products 1,662 1,590 5 Other Products 1,719 1,182 45 Adjustments and eliminations (1,371) (1,060) 29 Industry segment totals $12,888 $10,132 27 (1) Information for 1994 has been reclassified to reflect the realignment of various business units. Messaging, Information and Media Products segment includes the Paging Products and Wireless Data Groups (formerly reported as part of the Communications segment) and the Information Systems Group (formerly reported as part of the Other Products segment). The Government and Space Technology Group is reported as part of the Other Products segment. Part II - Other Information Item 1 - Legal Proceedings. Motorola and several of its directors and officers are named defendants in three alleged class actions for alleged violations of section 10(b) and 20 (a) of the Securities Exchange Act and SEC Rule 10b-5, Kaufman, et al. v. Motorola, Inc., et al.; Hoffman Ira Rollover Account et al. v. Motorola, Inc., et al.; and Miller v. Motorola, Inc., et al. On June 1, 1995, these three cases were consolidated into one lawsuit which is pending in the U.S. District Court for the Northern District of Illinois. A class action, In Re Nextel Communications Securities Litigation, against Nextel Communications, Inc., certain of its officers and directors and Motorola for alleged violations of Sections 10(b) and 20 of the Securities Exchange Act of 1934 and SEC Rule 10b-5, is pending in the United States District Court for the District of New Jersey. The pending complaint, a consolidation of cases previously filed against Nextel, maintains that the defendants artificially inflated the price of Nextel common stock through a series of alleged misrepresentations and omissions. Plaintiffs propose a class period of July 22, 1993 through January 10, 1995 and seek an unspecified amount of monetary damages. There are currently six cases pending in Phoenix, Arizona arising out of alleged groundwater, soil and air pollution in Phoenix and Scottsdale, Arizona. The plaintiffs in Baker et al. v. Motorola et al. filed a Third Amended Complaint on June 30, 1995 which added seven new defendants (See Item 3 of the Company's Annual Report on Form 10-K for the year ended 1994, and the Company's first quarter report on Form 10-Q for additional disclosures regarding cases arising out of alleged groundwater, soil and air pollution in Phoenix and Scottsdale, Arizona). In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the consolidated financial condition, liquidity or results of operations of Motorola. Item 2 - Changes in Securities. Not applicable. Item 3 - Defaults Upon Senior Securities. Not applicable. Item 4 - Submission of Matters to a Vote of Security Holders. Not applicable. Item 5 - Other Information. Not applicable. Item 6 - Exhibits and Reports on Form 8-K. (a) Exhibits 10 Consulting Agreement between Motorola Inc. and John F. Mitchell. 11 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted Earnings Per Common and Common Equivalent Share for the three months ended July 1, 1995 and July 2, 1994. 11.1 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted Earnings Per Common and Common Equivalent Share for the six months ended July 1, 1995 and July 2, 1994. (b) Reports on Form 8-K During the second quarter of 1995, the Company filed one current report on Form 8-K, dated May 15, 1995, containing no financial statements but describing, under Item 5, the filing of a prospectus supplement and including copies of exhibits under Item 7. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MOTOROLA, INC. (Registrant) Date: July 17, 1995 By: /s/ Kenneth J. Johnson Kenneth J. Johnson Corporate Vice President and Controller (Chief Accounting Officer and Duly Authorized Officer of the Registrant) EXHIBIT INDEX Number Description of Exhibits Page No. 10 Consulting Agreement between Motorola, Inc. and John F. Mitchell. 17 11 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted Earnings Per Common and Common Equivalent Share for the three months ended July 1, 1995 and July 2, 1994. 22 11.1 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted Earnings Per Common and Common Equivalent Share for the six months ended July 1, 1995 and July 2, 1994. 23 EX-11 2 EXHIBIT 11 TO 10-Q Exhibit 11 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted Earnings Per Common and Common Equivalent Share Three Months Ended July 1, 1995 and July 2, 1994 (In millions, except per share amounts) Three Months Ended July 1, July 2, 1995 1994 (1) Net Income $ 481 $ 367 Add: Interest on Zero coupon notes due 2009 and 2013, net of tax and effect of executive incentive and employee profit sharing plans 1 4 Adjusted net income $ 482 $ 371 Earnings per common and common equivalent share - Primary: Weighted average common shares outstanding 588.7 559.1 Common equivalent shares: Stock options 12.3 12.0 Zero coupon notes due 2009 and 2013 7.3 17.6 Common and common equivalent shares - primary (in millions) 608.3 588.7 Net earnings per share - primary $ .80 $ .63 Earnings per common and common equivalent share - Fully Diluted: Weighted average common shares outstanding 588.7 559.1 Common equivalent shares: Stock options 13.2 12.0 Zero coupon notes due 2009 and 2013 7.3 17.6 Common and common equivalent shares - fully diluted (in millions) 609.2 588.7 Net earnings per share - fully diluted $ .79 $ .63 (1) All 1994 earnings per common and common equivalent share and weighted average common and common equivalent shares outstanding have been restated to reflect the April 18, 1994 two-for-one stock split effected in the form of a 100 percent stock dividend payable to stockholders of record on March 15, 1994. EX-27 3 FINANCIAL DATA SCHEDULE TO 10-Q
5 Financial Data Schedule to 10-Q 1,000,000 6-MOS DEC-31-1995 JAN-01-1995 JUL-01-1995 760 319 4137 119 3182 10298 15998 7503 20465 7364 1519 1769 0 0 8210 20465 12888 0 8272 10566 909 0 55 1353 500 0 0 0 0 853 1.41 1.40 Total cost includes cost of goods sold and selling, general and administrative expenses. Other expense includes depreciation expense.
EX-11.1 4 EXHIBIT 11.1 TO 10-Q Exhibit 11.1 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted Earnings Per Common and Common Equivalent Share Six Months Ended July 1, 1995 and July 2, 1994 (In millions, except per share amounts) Six Months Ended July 1, July 2, 1995 1994 (1) Net Income $ 853 $ 665 Add: Interest on Zero coupon notes due 2009 and 2013, net of tax and effect of executive incentive and employee profit sharing plans 3 8 Adjusted net income $ 856 $ 673 Earnings per common and common equivalent share - Primary: Weighted average common shares outstanding 588.7 559.1 Common equivalent shares: Stock options 12.3 12.0 Zero coupon notes due 2009 and 2013 7.3 17.6 Common and common equivalent shares - primary (in millions) 608.3 588.7 Net earnings per share - primary $ 1.41 $ 1.14 Earnings per common and common equivalent share - Fully Diluted: Weighted average common shares outstanding 588.7 559.1 Common equivalent shares Stock options 13.2 12.0 Zero coupon notes due 2009 and 2013 7.3 17.6 Common and common equivalent shares - fully diluted (in millions) 609.2 588.7 Net earnings per share - fully diluted $ 1.40 $ 1.14 (1) All 1994 earnings per common and common equivalent share and weighted average common and common equivalent shares outstanding have been restated to reflect the April 18, 1994 two-for-one stock split effected in the form of a 100 percent stock dividend payable to stockholders of record on March 15, 1994. EX-10 5 EXHIBIT 10 TO 10-Q CONSULTANT AGREEMENT This Agreement is entered into as of this 1st day of May, 1995, between Motorola, Inc., a Delaware corporation, with an office at 1303 E. Algonquin Road, Schaumburg, Illinois, 60196 ("Motorola") and John F. Mitchell ("Consultant"). In consideration of the mutual promises contained herein and other valuable consideration, the parties mutually agree as follows: 1. TERM. This Agreement shall begin on May 1, 1995, and continue through April 30, 1996, and may thereafter be renewed on an annual basis upon written agreement of the parties, provided, however, that either Motorola or Consultant may terminate this Agreement or any renewal thereof upon thirty (30) days' notice to the other party. 2. STATEMENT OF SERVICES. Consultant agrees to make available to Motorola consulting services in the areas described in Appendix A and other areas as shall from time to time be agreed upon by Consultant and Motorola. 3. PAYMENT. For services performed pursuant to this Agreement, Consultant will be compensated at an amount and under such terms as are contained in a separate memo between Consultant and Gary Tooker; said memo being incorporated herein as Appendix B. Consultant shall be reimbursed for all expenses which are necessary for and incident to the performance of service hereunder upon approval of Motorola. 4. RECORDS, REPORTS AND INFORMATION. Consultant agrees to furnish Motorola with reports and information regarding the services covered by this Agreement at such times and as often as Motorola may request. 5. INDEPENDENT CONTRACTOR. Consultant shall perform services hereunder only as an independent contractor and shall not be entitled to participate in Motorola's profit sharing, pension, or other plans for the benefit of Motorola employees except as Consultant may otherwise be eligible by virtue of any period of employment with Motorola. 6. CODE OF CONDUCT. Notwithstanding Consultant's status as an independent contractor, Motorola expects that and Consultant hereby agrees to conduct himself on behalf of Motorola in accordance with the relevant sections of the Motorola Code of Conduct, which is attached hereto as Appendix C. Should Consultant require interpretation of any section of said Code of Conduct, such can be obtained by contacting Motorola's Senior Vice President and General Counsel, who is currently Richard H. Weise, 1303 E. Algonquin Road, Schaumburg, Illinois 60196; (708) 576-5009. 7. PROTECTION OF MOTOROLA'S BUSINESS. Except as required to perform services under this Agreement, Consultant will not use, publish or otherwise disclose to others, during the term of this Agreement and for five (5) years after termination thereof, any confidential 17 information of Motorola or its customers or suppliers, and will take all reasonable precautions to prevent disclosure of the confidential information to any unauthorized persons or entities. Consultant further agrees that, during the term of this Agreement and for a period of twelve (12) months after the termination of this Agreement, he will not provide services as a consultant or employee to any independent company or business segment of a company to the extent that it competes with Motorola or a business segment of Motorola. 8. WRITINGS AND OTHER DATA TO BECOME PROPERTY OF MOTOROLA. Consultant agrees that all notes, writings, drawings, designs, analyses, memoranda and other data prepared and/or produced by Consultant in the performance of this Agreement shall be the sole property of Motorola, including all rights, title and interest of whatever kind, and shall not be disclosed to any other person or firm by Consultant. Upon termination of this Agreement, Consultant shall return all of the above, and any other Motorola property or records which relate to the business of Motorola to an appropriate Motorola representative. 8. GENERAL REPRESENTATION OF COMPLIANCE. Consultant agrees to comply with all standards, laws and procedures pertaining to this Agreement which are currently in effect or which are subsequently implemented by any government agency or industry consortium to which Motorola belongs. 9. ENTIRE AGREEMENT. This Agreement constitutes the final expression of the agreement of the parties; it is intended as a complete and exclusive statement of the terms of their agreement; and it supersedes all prior and concurrent promises, representations, negotiations, discussions, and agreements that may have been made in connection with the subject matter hereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the day and year first above written. MOTOROLA, INC. By:/s/ John F. Mitchell BY:/s/Richard H. Weise John F. Mitchell Richard H. Weise Senior Vice President, General Counsel and Secretary APPENDIX A Consultant agrees to make available to Motorola the following services pursuant to the Consultant Agreement to which this Appendix is attached. 1. Acting as Senior Consultant to Motorola on Iridium issues, including: - conclusion of the terrestrial network development contract; agreements with Gateway operators; - Iridium financing, including public debt issuance and establishment of commercial - banking relationships; - global licensing and spectrum issues; - Gateway joint ventures. 2. Participating in Motorola University training courses and other Motorola University activities. 3. Other topics as may from time-to-time be decided upon by Consultant and the CEO. 18 ============================== ______________________________ ============================== Inter-Office Correspondence APPENDIX B DATE: April 12, 1995 TO: John Mitchell FROM: Gary Tooker RE: Consultant Agreement As you know, I am very pleased that you have agreed to continue your relationship with Motorola after your retirement through a consulting arrangement. As we agreed, you will provide consulting services to Motorola as specified in attached agreement, as well as handle other projects which, from time to time, may arise. The payment terms of your consulting arrangement are as follows: 1) you shall be compensated at the rate of $2,400 per day for your services; 2) Motorola shall be responsible for all expenses which you incur in performing the services pursuant to our arrangement; 3) we shall provide you with office facilities and secretarial services in Chicago; and 4) you shall have the corporate aircraft made available to you, dependent upon scheduling, to further your consulting activities for Motorola. Once again, I am delighted that Motorola will continue to benefit from your expertise which has proved so invaluable to the Company. APPENDIX C -----END PRIVACY-ENHANCED MESSAGE-----