SCHAUMBURG, Ill.--(BUSINESS WIRE)--April 10, 2001--Motorola, Inc. (NYSE:MOT) today reported sales of $7.8 billion in the first quarter of 2001. For ongoing operations, this is a decrease of 11 percent from $8.8 billion a year earlier. Including pro forma adjustments, the company incurred a loss of $206 million, or (9) cents per share, compared with earnings of $481 million, or 21 cents per share a year ago.
Robert L. Growney, president and chief operating officer, said, "Although cash flow from businesses, including net proceeds from investments, was positive in the first quarter, this quarter was a difficult one. Order growth weakened across all of the company's business segments. We believe this change in customer requirements is part of a major global pattern affecting many technology companies. In response to this environment, substantial cost-reduction activities continue. Additionally, important positive progress was made on key aspects of our balance sheet."
In the first quarter of 2001, Motorola reported pro forma adjustments resulting in a net charge of $279 million pre-tax, or 15 cents per share after-tax. Charges were incurred primarily relating to various cost-reduction activities and product portfolio changes, that were partially offset by gains from sales of investments.
In the first quarter of 2000, the company reported pro forma adjustments resulting in a net charge of $39 million pre-tax, or 1 cent per share after-tax, which was largely comprised of $100 million of costs associated with the merger and integration of General Instrument, offset primarily by gains from sales of investments and the sale of a business.
Excluding pro forma adjustments, the first-quarter 2001 loss was $533 million or (24) cents per share compared with earnings of $448 million or 20 cents per share in the first quarter of 2000.
Consolidated Results for Ongoing Operations, Including Pro Forma
Adjustments
Including pro forma adjustments, a comparison of results from
ongoing operations is as follows:
(Dollars in millions, except per-share amounts)
First Quarter
-------------
2001 2000
---- ----
Sales $7,752 $8,752
Net Earnings (Loss) $(206) $481
Earnings (Loss) Per Share $(.09) $.21
Net Margin on Sales -2.7% 5.5%
Total Consolidated Results
Excluding pro forma adjustments, a comparison of results from
operations is as follows:
(Dollars in millions, except per-share amounts)
First Quarter
-------------
2001 2000
---- ----
Sales $7,752 $8,768
Net Earnings (Loss) $(533) $448
Earnings (Loss) Per Share $(.24) $.20
Net Margin on Sales -6.9% 5.1%
The impact of pro forma adjustments (as defined in a footnote to this press release) on segment results is shown in the segment information tables at the end of this press release.
Growney reviewed the following results of major operations for the first quarter of 2001 compared with the first quarter of 2000. This review is based on ongoing operations, including pro forma adjustments.
Personal Communications Segment
Segment sales were $2.3 billion, down 29 percent. Orders were $2.8 billion, down 10 percent. The segment incurred an operating loss of $402 million versus operating earnings of $53 million a year ago. The decline in financial performance is due to lower worldwide demand for wireless telephones by service providers and an increase in manufacturing costs as a percent of sales.
In the Americas, sales and orders for wireless telephones were down. In Europe, sales were down very significantly and orders were down. In Asia, sales were significantly lower, while orders were higher.
During the quarter, Motorola announced major steps in a continuing effort to reduce costs in its wireless telephone business while repositioning the segment for long-term growth and profitability.
Motorola unveiled a variety of new devices, applications and strategic relationships to enhance its position as a leader in the wireless telephone market.
Motorola is the only company to have introduced a complete portfolio of General Packet Radio Service (GPRS) wireless telephones that will offer consumers "always-on" access to the Internet. The company believes that GPRS is the foundation for third-generation (3G) wireless services. Motorola's new wireless telephones incorporate a variety of new features including enhanced screen sizes and the ability to handle data rates up to four times faster than today's most commonly deployed Global System for Mobile Communications (GSM)technology. The new devices are expected to appeal to a wide market of customers, ranging from the business user to the mass consumer market. To enhance the consumer experience of its GPRS devices, Motorola also launched three new popular interactive games for mobile phone users in Europe, Trivial Pursuit(TM), Who Wants to be a Millionaire?(TM), and Zobmondo!!(TM).
In the U.S., Motorola began shipping its new V.series(TM) 60c wireless telephone for the Code Division Multiple Access (CDMA) technology and also introduced the Motorola V.series 120c phone. Motorola also began shipping the first two Java(TM) technology-enabled wireless telephones in North America for iDEN(R) networks. These wireless telephones represent a new generation of wireless devices capable of running a variety of third-party applications.
Motorola and Nortel Networks announced a non-exclusive global agreement to jointly market to wireless operators an integrated 3G solution featuring Motorola wireless telephones.
Global Telecom Solutions Segment
Segment sales were $1.7 billion, down 5 percent. Orders declined 14 percent to $1.5 billion. Operating profits declined to $54 million, compared with $281 million a year ago. Operating profits declined due to the decrease in sales, increased manufacturing costs as a percentage of sales and increased research and development expenses.
In the Americas, orders were higher while sales were significantly higher. In Europe and Asia, sales and orders were down significantly.
Motorola announced a new agreement to supply cdma2000 1X 3G network equipment upgrades in 12 additional U.S. cities served by Sprint PCS including Chicago, Cleveland, Cincinnati and Charlotte. Motorola also announced plans to offer CDMA operators a 1X EV-DO (data only) solution in the second-half of next year and successfully demonstrated its cdma2000 1X EV-DV (data and voice) technology, offering data rate speeds of up to 5 megabits per second while doubling voice capacity on CDMA networks.
Motorola was awarded a contract by Japan's TU-KA to provide high-speed wireless access on its digital network covering the Tokyo, Tokai and Kansai regions. Motorola was also awarded contracts to provide GPRS network and Wireless Application Protocol (WAP) services in the Republic of Georgia and won contacts for GSM communications networks in China, Malaysia and Morocco. Motorola also deployed its Virtual Pet, an end-to-end solution of a suite of games, as part of T-Mobil's launch of a GPRS network in Germany.
Commercial, Government and Industrial Systems Segment
Segment sales rose 5 percent to $1.1 billion and orders increased 6 percent to $1.2 billion. Operating profits decreased to $56 million from $96 million a year ago, due to an unfavorable mix of lower-margin solutions business, including infrastructure products and systems integration services, as well as the cost of developing and delivering new private system technologies.
Two-way radio equipment sales were higher in the Americas and Europe, and lower in Asia. Orders were higher in the Americas, very significantly higher in Asia and lower in Europe.
Motorola received several major two-way radio equipment contracts, including contracts from San Mateo County, Calif., and the Taiwan National Police, as well as a contract from Aeronautical Radio, Inc. for portable radios to be used on a private iDEN(R) network being deployed at large airport hubs around the U.S.
Major TETRA (TErrestrial Trunked Radio) contracts were received in China, India and Poland. Motorola announced the MTH500, its second-generation TETRA digital two-way portable radio, incorporating mobile telephony and advanced messaging.
Broadband Communications Segment
Segment sales increased 21 percent to $818 million and orders rose 3 percent to $905 million. Operating profits increased to $130 million from $99 million a year ago due to the increase in sales.
Digital Network Systems had a significant increase in orders and in sales. Internet Protocol Network Systems had significantly lower orders and lower sales. Transmission Network Systems had very significantly lower orders and significantly lower sales. Satellite Broadcast & Network Systems had increased orders and significantly increased sales.
Motorola announced several new international "triple-play" (voice, video and data) contracts during the period. In Germany, Kabel NRW, a network operator affiliated with Callahan Associates, selected Motorola to supply broadband cable RF technology and optical components for its planned three-year network upgrade. Motorola also received an initial order for 100,000 multimedia terminal adapters for Kabel NRW's planned Voice over IP roll-out, scheduled to begin in the third quarter of this year and reach an expected 4.2 million homes. Motorola also secured agreements to supply optical transmission products to several customers in China.
Semiconductor Products Segment
Segment sales decreased 22 percent to $1.5 billion and orders declined 47 percent to $1.1 billion. The segment had an operating loss of $131 million versus a profit of $128 million a year ago due to the decline in sales, which is part of a significant downturn occurring across the worldwide semiconductor industry.
Orders were down very significantly in the Americas and Europe, down significantly in Asia/Pacific and up slightly in Japan. Among major markets, orders were down very significantly in wireless, standard embedded solutions and networking/computing, down significantly in imaging/entertainment and down in transportation.
Sales were up in Japan, down in Asia/Pacific and the Americas and down significantly in Europe. Sales among major markets were up in imaging/entertainment, down in transportation and networking/computing, and down significantly in standard embedded solutions and wireless.
Motorola began shipping its new MSC8101 digital signal processor (DSP) to wireless infrastructure customers. This high-end DSP is based on the StarCore(R) SC140 core developed with Agere Systems. For optical networks, a strategic investment was announced in Blaze Network Products Inc.'s Coarse Wave Division Multiplexing technology to develop advanced solutions to meet this market's high-bandwidth infrastructure requirements.
The segment announced four new PowerPC(R) chips including the MPC7450 microprocessor that is now being shipped for networking and telecom applications. For the automotive industry, the segment announced a family of PowerPC-based micro-controllers to support the mobileGT(TM) architecture for driver information systems and a new member of the MPC555 family, used for power-train applications.
Integrated Electronic Systems Segment
Segment sales decreased 5 percent to $637 million and orders decreased 28 percent to $513 million. Operating profits decreased to $19 million from $46 million a year ago due largely to the decline in sales and higher research and development expenses.
In the Telematics Communications Group, sales were up significantly, while orders were down. Motorola signed a licensing agreement with IBM for Java(TM) technology and voice-recognition software for the Motorola iRadio(TM) Telematics system.
Motorola Computer Group sales were up significantly, while orders were down reflecting weakness in the overall telecommunications industry.
Energy Systems Group sales and orders were significantly lower due to the decrease in demand for rechargeable batteries and chargers as wireless telephone demand weakened throughout the industry.
The Automotive and Industrial Electronics Group's sales decreased and orders decreased significantly, as the automotive industry works off excessive inventory levels.
Review and Outlook
Christopher B. Galvin, chairman and chief executive officer, said, "We see a continuing downturn in the U.S. economy beginning to spill over to the rest of the world. The high-tech sector, which has been hard hit, is already in a recession. These issues, plus interest rate policy or energy prices, cannot be controlled by Motorola.
"But Motorola can control its selection of large and skilled financial partners, cash and balance sheet management and the innovation it pursues during the recession so we have winning customer solutions and strong profitability when the positive economic cycle returns. We have expanded financing relationships with Goldman Sachs Credit Partners L.P., JP Morgan Chase and Citibank/Salomon Smith Barney Inc. Cash flow from businesses, including net proceeds from investments, was positive in the first quarter and we anticipate it to be positive for the full year as well. A major contributor in the first quarter was a reduction in accounts receivable and inventories of over $1.7 billion. Also, we continued our longstanding history of innovation and investment in the future in order to bring exciting ideas and profitable solutions to our global customers."
"Beginning last year and continuing throughout the first quarter, Motorola has undertaken aggressive cost-cutting measures. These steps are necessary to restore Motorola's balance sheet performance, earnings performance and the confidence of our shareholders and employees.
"Motorola has strengthened its senior management by bringing in new leadership with proven track records from outside and we have identified and promoted next-generation leaders from inside Motorola. Today, our businesses are built around a team of operations-focused executives who are committed to driving down costs and improving profit and cash flow.
"The Office of the Chairman has placed a great priority on improving the financial performance of the Personal Communications Segment. The segment is working to improve efficiency though software and component standardization, and mandating shorter cycle times for new products. It has discontinued older products and has continued the transition to a simplified, but robust, portfolio of platform products to reduce manufacturing costs."
"We have the right strategy. We are in the right markets -- wireless, broadband and Internet -- with the right technologies. Each presents extraordinary opportunities for this company. We will continue to pursue opportunities where we can apply technology, products and services where people work, live and play. Going forward, Motorola will be a leader, not a follower. We have never been more optimistic about our long-term future." Note: Pro Forma adjustments include unusual charges, amortization of goodwill, and gains (losses) on sale or impairment of investments. The use of the word "significant" in this press release indicates a change of greater than 25 percent. The use of the words "very significant" indicates a change of greater than 50 percent. Business Risks:
Statements about the impact of the Company's cost-reduction activities, future cost-reduction actions, future growth and profitability of the Personal Communications Segment, the impact of GPRS, the commercial availability of new products, the completion of pending transactions and statements in "Review and Outlook" are forward-looking statements based on current expectations and involve risks and uncertainties. Motorola wishes to caution the reader that the factors below and those on pages F-29 through F-33 of the appendix to Motorola's Proxy Statement for the 2001 annual meeting of stockholders and in its other SEC filings could cause Motorola's actual results to differ materially from those stated in the forward-looking statements. These factors include: (i) the impact of the ongoing slowdown in the overall economy; (ii) the uncertainty of current economic conditions; (iii) the company's ability to successfully complete its ongoing cost-reduction efforts; (iv) the success of the company's ongoing cost-reduction efforts; (v) the company's continuing ability to access the capital markets on favorable terms; (vi) the impact that lower-than-anticipated demand worldwide for wireless telephones will have on the company's performance; (vii) demand for the company's products, including products related to new technologies such as Internet-ready phones; (viii) the company's ability to achieve profitability in its digital wireless telephone business, especially as it competes in the lower-tier wireless telephone market; (ix) the company's success in the emerging 3G market; (x) the demand for vendor financing and the company's ability to provide that financing in order to remain competitive; (xi) the creditworthiness of the company's customers, especially purchasers of large infrastructure systems; (xii) improvement in the worldwide semiconductor industry and the company's participation in that improvement; (xiii) unexpected liabilities or expenses, including unfavorable outcomes to any currently pending or future litigation, including any relating to the Iridium project; (xiv) pricing pressures and demand for the company's products, especially if economic conditions continue to worsen in the company's markets; (xv) the success of alliances and agreements with other companies to develop new products and services; (xvi) product and technology development and commercialization risks, including for newer digital products; (xvii) difficulties in integrating the operations of newly-acquired businesses and achieving strategic objectives, cost savings and other benefits; (xviii) the impact of foreign currency fluctuations; and (xix) the impact of changes in governmental policies, laws or regulations. MOTOROLA, the Stylized M Logo and all other trademarks indicated as such herein are trademarks of Motorola, Inc. Java is a trademark owned by Sun Microsystems, Inc. PowerPC is a registered trademark owned by IBM. Trivial Pursuit(TM) is a registered trademark of Horn Abbot International Ltd. Who Wants to be a Millionaire(TM) is a registered trademark of Celador Productions. Zobmondo!!(TM) is a registered trademark of Zobmondo!! Entertainment (R)Reg. U.S. Pat. & Tm. Off.
Motorola, Inc. and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
For the Quarter Ended March 31, 2001
--------------------------------------------------
Total Excl
Pro Forma Pro Forma Impact of Pro Forma
Total Adjustments Total Exited Ongoing
Motorola Inc/(Exp) Motorola Businesses Operations
---------- ---------- ---------- ---------- ----------
Net sales $ 7,752 $ - $ 7,752 $ - $ 7,752
Costs and
expenses
Manufacturing
and other
costs of
sales 5,478 (524) 4,954 - 4,954
Selling,
general and
administrative
expenses 1,252 (27) 1,225 - 1,225
Research and
development
expenditures 1,172 - 1,172 - 1,172
Depreciation
expense 627 - 627 - 627
Reorganization
of businesses 241 (241) - - -
Other charges 101 (101) - - -
Interest
expense, net 86 - 86 - 86
Gains on sales
of
investments
and
businesses (614) 614 - - -
---------- ---------- ---------- ---------- ----------
Total costs and
expenses 8,343 (279) 8,064 - 8,064
---------- ---------- ---------- ---------- ----------
Earnings (loss)
before income
taxes (591) 279 (312) - (312)
Income tax
provision
(benefit) (58) (48) (106) - (106)
---------- ---------- ---------- ---------- ----------
Net earnings
(loss) $ (533)$ 327 $ (206)$ - $ (206)
========== ========== ========== ========== ==========
Net earnings (loss) per common share
------------------------------------
Basic $ (0.24)$ 0.15 $ (0.09)$ - $ (0.09)
Diluted $ (0.24)$ 0.15 $ (0.09)$ - $ (0.09)
Weighted average common shares outstanding
------------------------------------------
Basic 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0
Diluted 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0
Dividends Paid
per share $ 0.04 $ 0.04 $ 0.04
Net Margin on
sales -6.9% -2.7% -2.7%
Return on
average
invested
capital(1) 1.5%
For the Quarter Ended April 1, 2000
--------------------------------------------------
Total Excl
Pro Forma Pro Forma Impact of Pro Forma
Total Adjustments Total Exited Ongoing
Motorola Inc/(Exp) Motorola Businesses Operations
---------- ---------- ---------- ---------- ----------
Net sales $ 8,768 $ - $ 8,768 $ (16)$ 8,752
Costs and
expenses
Manufacturing
and other
costs of
sales 5,200 - 5,200 (15) 5,185
Selling,
general and
administrative
expenses 1,299 (30) 1,269 - 1,269
Research and
development
expenditures 1,015 - 1,015 - 1,015
Depreciation
expense 558 - 558 - 558
Reorganization
of businesses - - - - -
Other charges 110 (110) - - -
Interest
expense, net 47 - 47 - 47
Gains on sales
of
investments
and
businesses (101) 101 - - -
---------- ---------- ---------- ---------- ----------
Total costs and
expenses 8,128 (39) 8,089 (15) 8,074
---------- ---------- ---------- ---------- ----------
Earnings (loss)
before income
taxes 640 39 679 (1) 678
Income tax
provision
(benefit) 192 5 197 - 197
---------- ---------- ---------- ---------- ----------
Net earnings
(loss) $ 448 $ 34 $ 482 $ (1)$ 481
========== ========== ========== ========== ==========
Net earnings (loss) per common share
------------------------------------
Basic $ 0.21 $ 0.02 $ 0.23 $ - $ 0.23
Diluted $ 0.20 $ 0.01 $ 0.21 $ - $ 0.21
Weighted average common shares outstanding
------------------------------------------
Basic 2,146.2 2,146.2 2,146.2 2,146.2 2,146.2
Diluted 2,267.7 2,267.7 2,267.7 2,267.7 2,267.7
Dividends Paid
per share $ 0.04 $ 0.04 $ 0.04
Net Margin on
sales 5.1% 5.5% 5.5%
Return on
average
invested
capital(1) 6.6%
(1) Based on the performance of the four preceding quarters ending
March 31, 2001 and April 1, 2000.
Motorola, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
ASSETS March 31, Dec. 31,
2001 2000
-------------- -------------
Cash and cash equivalents $ 4,047 $ 3,301
Short-term investments 350 354
Accounts receivable, net 5,644 7,092
Inventories, net 4,533 5,242
Other current assets 4,095 3,896
-------------- -------------
Total current assets 18,669 19,885
-------------- -------------
Property, plant and equipment, net 11,236 11,157
Investments 4,133 5,926
Other assets 5,483 5,375
-------------- -------------
Total assets $ 39,521 $ 42,343
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current portion of
long-term debt $ 4,937 $ 6,391
Accounts payable 2,966 3,492
Accrued liabilities 5,719 6,374
--------------- -------------
Total current liabilities 13,622 16,257
--------------- -------------
Long-term debt 6,673 4,293
Other liabilities 2,097 2,696
Company-obligated mandatorily redeemable
preferred securities of subsidiary
trust holding solely company-
guaranteed debentures 485 485
Stockholders' equity 16,644 18,612
--------------- -------------
Total liabilities and
stockholders' equity $ 39,521 $ 42,343
=============== =============
Motorola, Inc. and Subsidiaries
Segment Information
(In millions)
Summarized below are the Company's segment sales as defined by
reportable segment for the three months ended March 31, 2001 and April
1, 2000.
For the Quarter Ended March 31, 2001
----------------------------------------------
Segment Sales
----------------------------------------------
Excl Impact of % Change
Total Exited Ongoing from
Motorola Businesses Operations 2000
----------------------------------------------
Personal Communications Segment $ 2,284 $ - $ 2,284 -29%
Global Telecom Solutions Segment 1,722 - 1,722 -5%
Commercial, Govt, and Industrial
Systems Segment 1,050 - 1,050 5%
Broadband Communications Segment 818 - 818 21%
Semiconductor Products Segment 1,483 - 1,483 -22%
Integrated Electronic Systems
Segment 637 - 637 -5%
Other Products Segment 245 - 245 -5%
Adjustments & Eliminations (487) - (487) 39%
------------------------------------
Segment Totals $ 7,752 $ - $ 7,752 -11%
=============================================
For the Quarter Ended April 1, 2000
---------------------------------------------
Segment Sales
---------------------------------------------
Excl Impact of
Total Exited Ongoing
Motorola Businesses Operations
---------------------------------------------
Personal Communications Segment $ 3,236 $ - $ 3,236
Global Telecom Solutions Segment 1,809 - 1,809
Commercial, Govt, and Industrial
Systems Segment 998 - 998
Broadband Communications Segment 678 - 678
Semiconductor Products Segment 1,900 - 1,900
Integrated Electronic
Systems Segment 690 (16) 674
Other Products Segment 259 - 259
Adjustments & Eliminations (802) - (802)
---------------------------------------------
Segment Totals $ 8,768 $ (16) $ 8,752
=============================================
Motorola, Inc. and Subsidiaries
Segment Information
(In millions)
Summarized below are the Company's segment operating earnings (loss)
before taxes as defined by reportable segment for the three months
ended March 31, 2001 and April 1, 2000.
For the Quarter Ended March 31, 2001
--------------------------------------------------
Segment Operating Earnings (Loss) before Taxes
--------------------------------------------------
Total
Pro Excl
Forma Impact Pro
Adjust- Pro of Forma
ments Forma Exited Ongoing
Total (Inc)/ Total Busin- Opera-
Motorola Exp Motorola esses tions % Sales
-------- ---------------- -------------------------
Personal
Communications
Segment $ (912)$ 510 $ (402)$ - $ (402) -18%
Global Telecom
Solutions Segment 39 15 54 - 54 3%
Commercial, Govt,
and Industrial
Systems Segment 38 18 56 - 56 5%
Broadband
Communications
Segment 98 32 130 - 130 16%
Semiconductor
Products Segment (287) 156 (131) - (131) -9%
Integrated
Electronic Systems
Segment 4 15 19 - 19 3%
Other Products
Segment 460 (490) (30) - (30) -12%
Adjustments &
Eliminations 30 - 30 - 30 -6%
-------- ---------------- -------------------------
Segment Totals (530) 256 (274) - (274) -4%
General Corporate (61) 23 (38) - (38)
-------- ---------------- -------------------------
Earnings (Loss)
Before Income
Taxes $ (591)$ 279 $ (312)$ - $ (312) -4%
======== ================ =========================
For the Quarter Ended April 1, 2000
--------------------------------------------------
Segment Operating Earnings (Loss) before Taxes
--------------------------------------------------
Total
Pro Excl
Forma Impact Pro
Adjust- Pro of Forma
ments Forma Exited Ongoing
Total (Inc)/ Total Busin- Opera-
Motorola Exp Motorola esses tions % Sales
-------- ---------------- -------------------------
Personal
Communications
Segment $ 112 $ (59)$ 53 $ - $ 53 2%
Global Telecom
Solutions Segment 280 1 281 - 281 16%
Commercial, Govt,
and Industrial
Systems Segment 90 6 96 - 96 10%
Broadband
Communications
Segment 91 8 99 - 99 15%
Semiconductor
Products Segment 123 5 128 - 128 7%
Integrated
Electronic Systems
Segment 79 (32) 47 (1) 46 7%
Other Products
Segment (38) 10 (28) - (28) -11%
Adjustments &
Eliminations (2) - (2) - (2) 0%
-------- ---------------- -------------------------
Segment Totals 735 (61) 674 (1) 673 8%
General Corporate (95) 100 5 - 5
-------- ---------------- -------------------------
Earnings (Loss)
Before Income
Taxes $ 640 $ 39 $ 679 $ (1)$ 678 8%
======== ================ =========================
CONTACT: Motorola, Inc. Schaumburg
Scott Wyman, 847/576-2346
Robert L. Growney, president and chief operating officer, said, "Although cash flow from businesses, including net proceeds from investments, was positive in the first quarter, this quarter was a difficult one. Order growth weakened across all of the company's business segments. We believe this change in customer requirements is part of a major global pattern affecting many technology companies. In response to this environment, substantial cost-reduction activities continue. Additionally, important positive progress was made on key aspects of our balance sheet."
In the first quarter of 2001, Motorola reported pro forma adjustments resulting in a net charge of $279 million pre-tax, or 15 cents per share after-tax. Charges were incurred primarily relating to various cost-reduction activities and product portfolio changes, that were partially offset by gains from sales of investments.
In the first quarter of 2000, the company reported pro forma adjustments resulting in a net charge of $39 million pre-tax, or 1 cent per share after-tax, which was largely comprised of $100 million of costs associated with the merger and integration of General Instrument, offset primarily by gains from sales of investments and the sale of a business.
Excluding pro forma adjustments, the first-quarter 2001 loss was $533 million or (24) cents per share compared with earnings of $448 million or 20 cents per share in the first quarter of 2000.
Consolidated Results for Ongoing Operations, Including Pro Forma
Adjustments
Including pro forma adjustments, a comparison of results from
ongoing operations is as follows:
(Dollars in millions, except per-share amounts)
First Quarter
-------------
2001 2000
---- ----
Sales $7,752 $8,752
Net Earnings (Loss) $(206) $481
Earnings (Loss) Per Share $(.09) $.21
Net Margin on Sales -2.7% 5.5%
Total Consolidated Results
Excluding pro forma adjustments, a comparison of results from
operations is as follows:
(Dollars in millions, except per-share amounts)
First Quarter
-------------
2001 2000
---- ----
Sales $7,752 $8,768
Net Earnings (Loss) $(533) $448
Earnings (Loss) Per Share $(.24) $.20
Net Margin on Sales -6.9% 5.1%
The impact of pro forma adjustments (as defined in a footnote to this press release) on segment results is shown in the segment information tables at the end of this press release.
Growney reviewed the following results of major operations for the first quarter of 2001 compared with the first quarter of 2000. This review is based on ongoing operations, including pro forma adjustments.
Personal Communications Segment
Segment sales were $2.3 billion, down 29 percent. Orders were $2.8 billion, down 10 percent. The segment incurred an operating loss of $402 million versus operating earnings of $53 million a year ago. The decline in financial performance is due to lower worldwide demand for wireless telephones by service providers and an increase in manufacturing costs as a percent of sales.
In the Americas, sales and orders for wireless telephones were down. In Europe, sales were down very significantly and orders were down. In Asia, sales were significantly lower, while orders were higher.
During the quarter, Motorola announced major steps in a continuing effort to reduce costs in its wireless telephone business while repositioning the segment for long-term growth and profitability.
Motorola unveiled a variety of new devices, applications and strategic relationships to enhance its position as a leader in the wireless telephone market.
Motorola is the only company to have introduced a complete portfolio of General Packet Radio Service (GPRS) wireless telephones that will offer consumers "always-on" access to the Internet. The company believes that GPRS is the foundation for third-generation (3G) wireless services. Motorola's new wireless telephones incorporate a variety of new features including enhanced screen sizes and the ability to handle data rates up to four times faster than today's most commonly deployed Global System for Mobile Communications (GSM)technology. The new devices are expected to appeal to a wide market of customers, ranging from the business user to the mass consumer market. To enhance the consumer experience of its GPRS devices, Motorola also launched three new popular interactive games for mobile phone users in Europe, Trivial Pursuit(TM), Who Wants to be a Millionaire?(TM), and Zobmondo!!(TM).
In the U.S., Motorola began shipping its new V.series(TM) 60c wireless telephone for the Code Division Multiple Access (CDMA) technology and also introduced the Motorola V.series 120c phone. Motorola also began shipping the first two Java(TM) technology-enabled wireless telephones in North America for iDEN(R) networks. These wireless telephones represent a new generation of wireless devices capable of running a variety of third-party applications.
Motorola and Nortel Networks announced a non-exclusive global agreement to jointly market to wireless operators an integrated 3G solution featuring Motorola wireless telephones.
Global Telecom Solutions Segment
Segment sales were $1.7 billion, down 5 percent. Orders declined 14 percent to $1.5 billion. Operating profits declined to $54 million, compared with $281 million a year ago. Operating profits declined due to the decrease in sales, increased manufacturing costs as a percentage of sales and increased research and development expenses.
In the Americas, orders were higher while sales were significantly higher. In Europe and Asia, sales and orders were down significantly.
Motorola announced a new agreement to supply cdma2000 1X 3G network equipment upgrades in 12 additional U.S. cities served by Sprint PCS including Chicago, Cleveland, Cincinnati and Charlotte. Motorola also announced plans to offer CDMA operators a 1X EV-DO (data only) solution in the second-half of next year and successfully demonstrated its cdma2000 1X EV-DV (data and voice) technology, offering data rate speeds of up to 5 megabits per second while doubling voice capacity on CDMA networks.
Motorola was awarded a contract by Japan's TU-KA to provide high-speed wireless access on its digital network covering the Tokyo, Tokai and Kansai regions. Motorola was also awarded contracts to provide GPRS network and Wireless Application Protocol (WAP) services in the Republic of Georgia and won contacts for GSM communications networks in China, Malaysia and Morocco. Motorola also deployed its Virtual Pet, an end-to-end solution of a suite of games, as part of T-Mobil's launch of a GPRS network in Germany.
Commercial, Government and Industrial Systems Segment
Segment sales rose 5 percent to $1.1 billion and orders increased 6 percent to $1.2 billion. Operating profits decreased to $56 million from $96 million a year ago, due to an unfavorable mix of lower-margin solutions business, including infrastructure products and systems integration services, as well as the cost of developing and delivering new private system technologies.
Two-way radio equipment sales were higher in the Americas and Europe, and lower in Asia. Orders were higher in the Americas, very significantly higher in Asia and lower in Europe.
Motorola received several major two-way radio equipment contracts, including contracts from San Mateo County, Calif., and the Taiwan National Police, as well as a contract from Aeronautical Radio, Inc. for portable radios to be used on a private iDEN(R) network being deployed at large airport hubs around the U.S.
Major TETRA (TErrestrial Trunked Radio) contracts were received in China, India and Poland. Motorola announced the MTH500, its second-generation TETRA digital two-way portable radio, incorporating mobile telephony and advanced messaging.
Broadband Communications Segment
Segment sales increased 21 percent to $818 million and orders rose 3 percent to $905 million. Operating profits increased to $130 million from $99 million a year ago due to the increase in sales.
Digital Network Systems had a significant increase in orders and in sales. Internet Protocol Network Systems had significantly lower orders and lower sales. Transmission Network Systems had very significantly lower orders and significantly lower sales. Satellite Broadcast & Network Systems had increased orders and significantly increased sales.
Motorola announced several new international "triple-play" (voice, video and data) contracts during the period. In Germany, Kabel NRW, a network operator affiliated with Callahan Associates, selected Motorola to supply broadband cable RF technology and optical components for its planned three-year network upgrade. Motorola also received an initial order for 100,000 multimedia terminal adapters for Kabel NRW's planned Voice over IP roll-out, scheduled to begin in the third quarter of this year and reach an expected 4.2 million homes. Motorola also secured agreements to supply optical transmission products to several customers in China.
Semiconductor Products Segment
Segment sales decreased 22 percent to $1.5 billion and orders declined 47 percent to $1.1 billion. The segment had an operating loss of $131 million versus a profit of $128 million a year ago due to the decline in sales, which is part of a significant downturn occurring across the worldwide semiconductor industry.
Orders were down very significantly in the Americas and Europe, down significantly in Asia/Pacific and up slightly in Japan. Among major markets, orders were down very significantly in wireless, standard embedded solutions and networking/computing, down significantly in imaging/entertainment and down in transportation.
Sales were up in Japan, down in Asia/Pacific and the Americas and down significantly in Europe. Sales among major markets were up in imaging/entertainment, down in transportation and networking/computing, and down significantly in standard embedded solutions and wireless.
Motorola began shipping its new MSC8101 digital signal processor (DSP) to wireless infrastructure customers. This high-end DSP is based on the StarCore(R) SC140 core developed with Agere Systems. For optical networks, a strategic investment was announced in Blaze Network Products Inc.'s Coarse Wave Division Multiplexing technology to develop advanced solutions to meet this market's high-bandwidth infrastructure requirements.
The segment announced four new PowerPC(R) chips including the MPC7450 microprocessor that is now being shipped for networking and telecom applications. For the automotive industry, the segment announced a family of PowerPC-based micro-controllers to support the mobileGT(TM) architecture for driver information systems and a new member of the MPC555 family, used for power-train applications.
Integrated Electronic Systems Segment
Segment sales decreased 5 percent to $637 million and orders decreased 28 percent to $513 million. Operating profits decreased to $19 million from $46 million a year ago due largely to the decline in sales and higher research and development expenses.
In the Telematics Communications Group, sales were up significantly, while orders were down. Motorola signed a licensing agreement with IBM for Java(TM) technology and voice-recognition software for the Motorola iRadio(TM) Telematics system.
Motorola Computer Group sales were up significantly, while orders were down reflecting weakness in the overall telecommunications industry.
Energy Systems Group sales and orders were significantly lower due to the decrease in demand for rechargeable batteries and chargers as wireless telephone demand weakened throughout the industry.
The Automotive and Industrial Electronics Group's sales decreased and orders decreased significantly, as the automotive industry works off excessive inventory levels.
Review and Outlook
Christopher B. Galvin, chairman and chief executive officer, said, "We see a continuing downturn in the U.S. economy beginning to spill over to the rest of the world. The high-tech sector, which has been hard hit, is already in a recession. These issues, plus interest rate policy or energy prices, cannot be controlled by Motorola.
"But Motorola can control its selection of large and skilled financial partners, cash and balance sheet management and the innovation it pursues during the recession so we have winning customer solutions and strong profitability when the positive economic cycle returns. We have expanded financing relationships with Goldman Sachs Credit Partners L.P., JP Morgan Chase and Citibank/Salomon Smith Barney Inc. Cash flow from businesses, including net proceeds from investments, was positive in the first quarter and we anticipate it to be positive for the full year as well. A major contributor in the first quarter was a reduction in accounts receivable and inventories of over $1.7 billion. Also, we continued our longstanding history of innovation and investment in the future in order to bring exciting ideas and profitable solutions to our global customers."
"Beginning last year and continuing throughout the first quarter, Motorola has undertaken aggressive cost-cutting measures. These steps are necessary to restore Motorola's balance sheet performance, earnings performance and the confidence of our shareholders and employees.
"Motorola has strengthened its senior management by bringing in new leadership with proven track records from outside and we have identified and promoted next-generation leaders from inside Motorola. Today, our businesses are built around a team of operations-focused executives who are committed to driving down costs and improving profit and cash flow.
"The Office of the Chairman has placed a great priority on improving the financial performance of the Personal Communications Segment. The segment is working to improve efficiency though software and component standardization, and mandating shorter cycle times for new products. It has discontinued older products and has continued the transition to a simplified, but robust, portfolio of platform products to reduce manufacturing costs."
"We have the right strategy. We are in the right markets -- wireless, broadband and Internet -- with the right technologies. Each presents extraordinary opportunities for this company. We will continue to pursue opportunities where we can apply technology, products and services where people work, live and play. Going forward, Motorola will be a leader, not a follower. We have never been more optimistic about our long-term future." Note: Pro Forma adjustments include unusual charges, amortization of goodwill, and gains (losses) on sale or impairment of investments. The use of the word "significant" in this press release indicates a change of greater than 25 percent. The use of the words "very significant" indicates a change of greater than 50 percent. Business Risks:
Statements about the impact of the Company's cost-reduction activities, future cost-reduction actions, future growth and profitability of the Personal Communications Segment, the impact of GPRS, the commercial availability of new products, the completion of pending transactions and statements in "Review and Outlook" are forward-looking statements based on current expectations and involve risks and uncertainties. Motorola wishes to caution the reader that the factors below and those on pages F-29 through F-33 of the appendix to Motorola's Proxy Statement for the 2001 annual meeting of stockholders and in its other SEC filings could cause Motorola's actual results to differ materially from those stated in the forward-looking statements. These factors include: (i) the impact of the ongoing slowdown in the overall economy; (ii) the uncertainty of current economic conditions; (iii) the company's ability to successfully complete its ongoing cost-reduction efforts; (iv) the success of the company's ongoing cost-reduction efforts; (v) the company's continuing ability to access the capital markets on favorable terms; (vi) the impact that lower-than-anticipated demand worldwide for wireless telephones will have on the company's performance; (vii) demand for the company's products, including products related to new technologies such as Internet-ready phones; (viii) the company's ability to achieve profitability in its digital wireless telephone business, especially as it competes in the lower-tier wireless telephone market; (ix) the company's success in the emerging 3G market; (x) the demand for vendor financing and the company's ability to provide that financing in order to remain competitive; (xi) the creditworthiness of the company's customers, especially purchasers of large infrastructure systems; (xii) improvement in the worldwide semiconductor industry and the company's participation in that improvement; (xiii) unexpected liabilities or expenses, including unfavorable outcomes to any currently pending or future litigation, including any relating to the Iridium project; (xiv) pricing pressures and demand for the company's products, especially if economic conditions continue to worsen in the company's markets; (xv) the success of alliances and agreements with other companies to develop new products and services; (xvi) product and technology development and commercialization risks, including for newer digital products; (xvii) difficulties in integrating the operations of newly-acquired businesses and achieving strategic objectives, cost savings and other benefits; (xviii) the impact of foreign currency fluctuations; and (xix) the impact of changes in governmental policies, laws or regulations. MOTOROLA, the Stylized M Logo and all other trademarks indicated as such herein are trademarks of Motorola, Inc. Java is a trademark owned by Sun Microsystems, Inc. PowerPC is a registered trademark owned by IBM. Trivial Pursuit(TM) is a registered trademark of Horn Abbot International Ltd. Who Wants to be a Millionaire(TM) is a registered trademark of Celador Productions. Zobmondo!!(TM) is a registered trademark of Zobmondo!! Entertainment (R)Reg. U.S. Pat. & Tm. Off.
Motorola, Inc. and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
For the Quarter Ended March 31, 2001
--------------------------------------------------
Total Excl
Pro Forma Pro Forma Impact of Pro Forma
Total Adjustments Total Exited Ongoing
Motorola Inc/(Exp) Motorola Businesses Operations
---------- ---------- ---------- ---------- ----------
Net sales $ 7,752 $ - $ 7,752 $ - $ 7,752
Costs and
expenses
Manufacturing
and other
costs of
sales 5,478 (524) 4,954 - 4,954
Selling,
general and
administrative
expenses 1,252 (27) 1,225 - 1,225
Research and
development
expenditures 1,172 - 1,172 - 1,172
Depreciation
expense 627 - 627 - 627
Reorganization
of businesses 241 (241) - - -
Other charges 101 (101) - - -
Interest
expense, net 86 - 86 - 86
Gains on sales
of
investments
and
businesses (614) 614 - - -
---------- ---------- ---------- ---------- ----------
Total costs and
expenses 8,343 (279) 8,064 - 8,064
---------- ---------- ---------- ---------- ----------
Earnings (loss)
before income
taxes (591) 279 (312) - (312)
Income tax
provision
(benefit) (58) (48) (106) - (106)
---------- ---------- ---------- ---------- ----------
Net earnings
(loss) $ (533)$ 327 $ (206)$ - $ (206)
========== ========== ========== ========== ==========
Net earnings (loss) per common share
------------------------------------
Basic $ (0.24)$ 0.15 $ (0.09)$ - $ (0.09)
Diluted $ (0.24)$ 0.15 $ (0.09)$ - $ (0.09)
Weighted average common shares outstanding
------------------------------------------
Basic 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0
Diluted 2,194.0 2,194.0 2,194.0 2,194.0 2,194.0
Dividends Paid
per share $ 0.04 $ 0.04 $ 0.04
Net Margin on
sales -6.9% -2.7% -2.7%
Return on
average
invested
capital(1) 1.5%
For the Quarter Ended April 1, 2000
--------------------------------------------------
Total Excl
Pro Forma Pro Forma Impact of Pro Forma
Total Adjustments Total Exited Ongoing
Motorola Inc/(Exp) Motorola Businesses Operations
---------- ---------- ---------- ---------- ----------
Net sales $ 8,768 $ - $ 8,768 $ (16)$ 8,752
Costs and
expenses
Manufacturing
and other
costs of
sales 5,200 - 5,200 (15) 5,185
Selling,
general and
administrative
expenses 1,299 (30) 1,269 - 1,269
Research and
development
expenditures 1,015 - 1,015 - 1,015
Depreciation
expense 558 - 558 - 558
Reorganization
of businesses - - - - -
Other charges 110 (110) - - -
Interest
expense, net 47 - 47 - 47
Gains on sales
of
investments
and
businesses (101) 101 - - -
---------- ---------- ---------- ---------- ----------
Total costs and
expenses 8,128 (39) 8,089 (15) 8,074
---------- ---------- ---------- ---------- ----------
Earnings (loss)
before income
taxes 640 39 679 (1) 678
Income tax
provision
(benefit) 192 5 197 - 197
---------- ---------- ---------- ---------- ----------
Net earnings
(loss) $ 448 $ 34 $ 482 $ (1)$ 481
========== ========== ========== ========== ==========
Net earnings (loss) per common share
------------------------------------
Basic $ 0.21 $ 0.02 $ 0.23 $ - $ 0.23
Diluted $ 0.20 $ 0.01 $ 0.21 $ - $ 0.21
Weighted average common shares outstanding
------------------------------------------
Basic 2,146.2 2,146.2 2,146.2 2,146.2 2,146.2
Diluted 2,267.7 2,267.7 2,267.7 2,267.7 2,267.7
Dividends Paid
per share $ 0.04 $ 0.04 $ 0.04
Net Margin on
sales 5.1% 5.5% 5.5%
Return on
average
invested
capital(1) 6.6%
(1) Based on the performance of the four preceding quarters ending
March 31, 2001 and April 1, 2000.
Motorola, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
ASSETS March 31, Dec. 31,
2001 2000
-------------- -------------
Cash and cash equivalents $ 4,047 $ 3,301
Short-term investments 350 354
Accounts receivable, net 5,644 7,092
Inventories, net 4,533 5,242
Other current assets 4,095 3,896
-------------- -------------
Total current assets 18,669 19,885
-------------- -------------
Property, plant and equipment, net 11,236 11,157
Investments 4,133 5,926
Other assets 5,483 5,375
-------------- -------------
Total assets $ 39,521 $ 42,343
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current portion of
long-term debt $ 4,937 $ 6,391
Accounts payable 2,966 3,492
Accrued liabilities 5,719 6,374
--------------- -------------
Total current liabilities 13,622 16,257
--------------- -------------
Long-term debt 6,673 4,293
Other liabilities 2,097 2,696
Company-obligated mandatorily redeemable
preferred securities of subsidiary
trust holding solely company-
guaranteed debentures 485 485
Stockholders' equity 16,644 18,612
--------------- -------------
Total liabilities and
stockholders' equity $ 39,521 $ 42,343
=============== =============
Motorola, Inc. and Subsidiaries
Segment Information
(In millions)
Summarized below are the Company's segment sales as defined by
reportable segment for the three months ended March 31, 2001 and April
1, 2000.
For the Quarter Ended March 31, 2001
----------------------------------------------
Segment Sales
----------------------------------------------
Excl Impact of % Change
Total Exited Ongoing from
Motorola Businesses Operations 2000
----------------------------------------------
Personal Communications Segment $ 2,284 $ - $ 2,284 -29%
Global Telecom Solutions Segment 1,722 - 1,722 -5%
Commercial, Govt, and Industrial
Systems Segment 1,050 - 1,050 5%
Broadband Communications Segment 818 - 818 21%
Semiconductor Products Segment 1,483 - 1,483 -22%
Integrated Electronic Systems
Segment 637 - 637 -5%
Other Products Segment 245 - 245 -5%
Adjustments & Eliminations (487) - (487) 39%
------------------------------------
Segment Totals $ 7,752 $ - $ 7,752 -11%
=============================================
For the Quarter Ended April 1, 2000
---------------------------------------------
Segment Sales
---------------------------------------------
Excl Impact of
Total Exited Ongoing
Motorola Businesses Operations
---------------------------------------------
Personal Communications Segment $ 3,236 $ - $ 3,236
Global Telecom Solutions Segment 1,809 - 1,809
Commercial, Govt, and Industrial
Systems Segment 998 - 998
Broadband Communications Segment 678 - 678
Semiconductor Products Segment 1,900 - 1,900
Integrated Electronic
Systems Segment 690 (16) 674
Other Products Segment 259 - 259
Adjustments & Eliminations (802) - (802)
---------------------------------------------
Segment Totals $ 8,768 $ (16) $ 8,752
=============================================
Motorola, Inc. and Subsidiaries
Segment Information
(In millions)
Summarized below are the Company's segment operating earnings (loss)
before taxes as defined by reportable segment for the three months
ended March 31, 2001 and April 1, 2000.
For the Quarter Ended March 31, 2001
--------------------------------------------------
Segment Operating Earnings (Loss) before Taxes
--------------------------------------------------
Total
Pro Excl
Forma Impact Pro
Adjust- Pro of Forma
ments Forma Exited Ongoing
Total (Inc)/ Total Busin- Opera-
Motorola Exp Motorola esses tions % Sales
-------- ---------------- -------------------------
Personal
Communications
Segment $ (912)$ 510 $ (402)$ - $ (402) -18%
Global Telecom
Solutions Segment 39 15 54 - 54 3%
Commercial, Govt,
and Industrial
Systems Segment 38 18 56 - 56 5%
Broadband
Communications
Segment 98 32 130 - 130 16%
Semiconductor
Products Segment (287) 156 (131) - (131) -9%
Integrated
Electronic Systems
Segment 4 15 19 - 19 3%
Other Products
Segment 460 (490) (30) - (30) -12%
Adjustments &
Eliminations 30 - 30 - 30 -6%
-------- ---------------- -------------------------
Segment Totals (530) 256 (274) - (274) -4%
General Corporate (61) 23 (38) - (38)
-------- ---------------- -------------------------
Earnings (Loss)
Before Income
Taxes $ (591)$ 279 $ (312)$ - $ (312) -4%
======== ================ =========================
For the Quarter Ended April 1, 2000
--------------------------------------------------
Segment Operating Earnings (Loss) before Taxes
--------------------------------------------------
Total
Pro Excl
Forma Impact Pro
Adjust- Pro of Forma
ments Forma Exited Ongoing
Total (Inc)/ Total Busin- Opera-
Motorola Exp Motorola esses tions % Sales
-------- ---------------- -------------------------
Personal
Communications
Segment $ 112 $ (59)$ 53 $ - $ 53 2%
Global Telecom
Solutions Segment 280 1 281 - 281 16%
Commercial, Govt,
and Industrial
Systems Segment 90 6 96 - 96 10%
Broadband
Communications
Segment 91 8 99 - 99 15%
Semiconductor
Products Segment 123 5 128 - 128 7%
Integrated
Electronic Systems
Segment 79 (32) 47 (1) 46 7%
Other Products
Segment (38) 10 (28) - (28) -11%
Adjustments &
Eliminations (2) - (2) - (2) 0%
-------- ---------------- -------------------------
Segment Totals 735 (61) 674 (1) 673 8%
General Corporate (95) 100 5 - 5
-------- ---------------- -------------------------
Earnings (Loss)
Before Income
Taxes $ 640 $ 39 $ 679 $ (1)$ 678 8%
======== ================ =========================
CONTACT: Motorola, Inc. Schaumburg
Scott Wyman, 847/576-2346
