UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) | |
ý |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the period ended September 28, 2002 |
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Or |
|
o |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to |
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Commission file number: 1-7221
MOTOROLA, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State of Incorporation) |
36-1115800 (I.R.S. Employer Identification No.) |
|
1303 E. Algonquin Road Schaumburg, Illinois (Address of principal executive offices) |
60196 (Zip Code) |
Registrant's telephone number, including area code: (847) 576-5000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
The number of shares outstanding of each of the issuer's classes of common stock as of the close of business on September 28, 2002:
| Class |
Number of Shares |
|
|---|---|---|
| Common Stock; $3 Par Value | 2,300,968,823 |
Page |
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|---|---|---|---|---|
| Part I Financial Information | ||||
Item 1 |
Financial Statements |
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| Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 28, 2002 and September 29, 2001 | 3 | |||
| Condensed Consolidated Balance Sheets as of September 28, 2002 and December 31, 2001 | 4 | |||
| Condensed Consolidated Statement of Stockholders' Equity for the Nine Months Ended September 28, 2002 | 5 | |||
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 28, 2002 and September 29, 2001 | 6 | |||
| Notes to Condensed Consolidated Financial Statements | 7 | |||
| Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 24 | ||
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 57 | ||
| Item 4 | Controls and Procedures | 59 | ||
Part II Other Information |
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Item 1 |
Legal Proceedings |
61 |
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| Item 2 | Changes in Securities and Use of Proceeds | 62 | ||
| Item 3 | Defaults Upon Senior Securities | 63 | ||
| Item 4 | Submission of Matters to Vote of Security Holders | 63 | ||
| Item 5 | Other Information | 63 | ||
| Item 6 | Exhibits and Reports on Form 8-K | 63 | ||
Certifications |
64 |
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2
Motorola, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(In millions, except per share amounts)
| |
Three Months Ended |
Nine Months Ended |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
September 28, 2002 |
September 29, 2001 |
September 28, 2002 |
September 29, 2001 |
||||||||||
| Net sales | $ | 6,371 | $ | 7,392 | $ | 19,133 | $ | 22,561 | ||||||
| Costs of sales | 4,126 | 5,476 | 12,892 | 17,304 | ||||||||||
| Gross Margin | 2,245 | 1,916 | 6,241 | 5,257 | ||||||||||
| Selling, general and administrative expenses | 1,017 | 1,121 | 3,200 | 3,576 | ||||||||||
| Research & development expenses | 961 | 1,037 | 2,797 | 3,295 | ||||||||||
| Reorganization of businesses | 11 | 133 | 1,677 | 993 | ||||||||||
| Other charges (income) | (85 | ) | 1,408 | 827 | 1,579 | |||||||||
| Operating earnings (loss) | 341 | (1,783 | ) | (2,260 | ) | (4,186 | ) | |||||||
| Other income (expense): | ||||||||||||||
| Interest expense, net | (92 | ) | (140 | ) | (300 | ) | (305 | ) | ||||||
| Gains on sales of investments and businesses | 37 | 542 | 72 | 1,898 | ||||||||||
| Other | (71 | ) | (838 | ) | (1,238 | ) | (1,065 | ) | ||||||
| Total other income (expense) | (126 | ) | (436 | ) | (1,466 | ) | 528 | |||||||
| Earnings (loss) before income taxes | 215 | (2,219 | ) | (3,726 | ) | (3,658 | ) | |||||||
| Income tax expense (benefit) | 104 | (811 | ) | (1,067 | ) | (958 | ) | |||||||
| Net earnings (loss) | $ | 111 | $ | (1,408 | ) | $ | (2,659 | ) | $ | (2,700 | ) | |||
| Earnings (loss) per common share | ||||||||||||||
| Basic | $ | 0.05 | $ | (0.64 | ) | $ | (1.17 | ) | $ | (1.23 | ) | |||
| Diluted | $ | 0.05 | $ | (0.64 | ) | $ | (1.17 | ) | $ | (1.23 | ) | |||
| Weighted average common shares outstanding | ||||||||||||||
| Basic | 2,295.8 | 2,217.1 | 2,274.5 | 2,204.7 | ||||||||||
| Diluted | 2,308.2 | 2,217.1 | 2,274.5 | 2,204.7 | ||||||||||
| Dividends per share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | ||||||
See accompanying notes to condensed consolidated financial statements.
3
Motorola, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
| |
September 28, 2002 |
December 31, 2001 |
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|---|---|---|---|---|---|---|---|---|
| |
(Unaudited) |
|
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| Assets | ||||||||
| Cash and cash equivalents | $ | 6,284 | $ | 6,082 | ||||
| Short-term investments | 86 | 80 | ||||||
| Accounts receivable, net | 4,123 | 4,583 | ||||||
| Inventories, net | 2,869 | 2,756 | ||||||
| Deferred income taxes | 2,274 | 2,633 | ||||||
| Other current assets | 941 | 1,015 | ||||||
| Total current assets | 16,577 | 17,149 | ||||||
| Property, plant and equipment, net | 6,391 | 8,913 | ||||||
| Investments | 1,545 | 2,954 | ||||||
| Deferred income taxes | 2,794 | 1,152 | ||||||
| Other assets | 2,914 | 3,230 | ||||||
| Total assets | $ | 30,221 | $ | 33,398 | ||||
Liabilities and Stockholders' Equity |
||||||||
| Notes payable and current portion of long-term debt | $ | 1,457 | $ | 870 | ||||
| Accounts payable | 2,364 | 2,434 | ||||||
| Accrued liabilities | 5,696 | 6,394 | ||||||
| Total current liabilities | 9,517 | 9,698 | ||||||
| Long-term debt | 7,450 | 8,372 | ||||||
| Other liabilities | 1,457 | 1,152 | ||||||
| Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely company-guaranteed debentures | 485 | 485 | ||||||
Stockholders' Equity |
||||||||
| Preferred stock, $100 par value | — | — | ||||||
| Common stock, $3 par value | 6,905 | 6,764 | ||||||
| Additional paid-in capital | 2,140 | 1,707 | ||||||
| Retained earnings | 2,501 | 5,434 | ||||||
| Non-owner changes to equity | (234 | ) | (214 | ) | ||||
| Total stockholders' equity | 11,312 | 13,691 | ||||||
| Total liabilities and stockholders' equity | $ | 30,221 | $ | 33,398 | ||||
See accompanying notes to condensed consolidated financial statements.
4
Motorola, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)
(In millions)
| |
|
Non-Owner Changes To Equity |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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Common Stock and Additional Paid-In Capital |
Fair Value Adjustment to Available for Sale Securities, Net of Tax |
Foreign Currency Translation Adjustments, Net of Tax |
Other Items, Net of Tax |
Retained Earnings |
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| BALANCES AT DECEMBER 31, 2001 | $ | 8,471 | $ | 343 | $ | (512 | ) | $ | (45 | ) | $ | 5,434 | ||||
| Net loss | (2,659 | ) | ||||||||||||||
| Unrealized losses on securities, net | (78 | ) | ||||||||||||||
| Foreign currency translation adjustments, net | 59 | |||||||||||||||
| Issuance of common stock and stock options exercised | 574 | |||||||||||||||
| Loss on derivative instruments, net | (1 | ) | ||||||||||||||
| Dividends declared | (274 | ) | ||||||||||||||
| BALANCES AT SEPTEMBER 28, 2002 | $ | 9,045 | $ | 265 | $ | (453 | ) | $ | (46 | ) | $ | 2,501 | ||||
See accompanying notes to condensed consolidated financial statements.
5
Motorola, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
| |
Nine Months Ended |
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|---|---|---|---|---|---|---|---|---|---|---|
| |
September 28, 2002 |
September 29, 2001 |
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| Operating | ||||||||||
| Net loss | $ | (2,659 | ) | $ | (2,700 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 1,602 | 1,919 | ||||||||
| Charges for reorganization of businesses and other charges | 2,551 | 3,252 | ||||||||
| Gains on sales of investments and businesses | (72 | ) | (1,898 | ) | ||||||
| Deferred income taxes | (1,258 | ) | (1,640 | ) | ||||||
| Investment impairments and other | 1,269 | 1,096 | ||||||||
| Changes in assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||||
| Accounts receivable | 469 | 1,971 | ||||||||
| Inventories | (102 | ) | 1,340 | |||||||
| Other current assets | (12 | ) | 20 | |||||||
| Accounts payable and accrued liabilities | (1,070 | ) | (2,183 | ) | ||||||
| Other assets and liabilities | 107 | 91 | ||||||||
| Net cash provided by operating activities | 825 | 1,268 | ||||||||
| Investing | ||||||||||
| Acquisitions and investments, net | (67 | ) | (494 | ) | ||||||
| Proceeds from dispositions of investments and businesses | 57 | 3,803 | ||||||||
| Capital expenditures | (388 | ) | (1,040 | ) | ||||||
| Proceeds from dispositions of property, plant and equipment | 82 | 13 | ||||||||
| Sales (purchases) of short-term investments | (6 | ) | 82 | |||||||
| Net cash provided by (used for) investing activities | (322 | ) | 2,364 | |||||||
| Financing | ||||||||||
| Repayment of commercial paper and short-term borrowings | (246 | ) | (3,832 | ) | ||||||
| Net proceeds from issuance of debt | 65 | 2,390 | ||||||||
| Repayment of debt | (155 | ) | (239 | ) | ||||||
| Issuance of common stock | 282 | 256 | ||||||||
| Payment of dividends | (272 | ) | (265 | ) | ||||||
| Net cash used for financing activities | (326 | ) | (1,690 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 25 | 128 | ||||||||
| Net increase in cash and cash equivalents | 202 | 2,070 | ||||||||
| Cash and cash equivalents, beginning of period | $ | 6,082 | 3,301 | |||||||
| Cash and cash equivalents, end of period | $ | 6,284 | $ | 5,371 | ||||||
| Cash paid during the period for: | ||||||||||
| Interest | $ | 420 | $ | 566 | ||||||
| Income taxes | $ | 187 | $ | 632 | ||||||
See accompanying notes to condensed consolidated financial statements.
6
Motorola, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in millions, except as noted)
1. Basis of Presentation
The condensed consolidated financial statements as of September 28, 2002 and for the three months and nine months ended September 28, 2002 and September 29, 2001, include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the financial position, results of operations and cash flows as of September 28, 2002 and for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in the Company's Form 10-K for the year ended December 31, 2001. The results of operations for the three months and nine months ended September 28, 2002 are not necessarily indicative of the operating results to be expected for the full year. Certain amounts in prior periods' financial statements and related notes have been reclassified to conform to the 2002 presentation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. Other Financial Data
Statements of Operations Information
Other Charges
Other charges (income) consist of the following:
| |
Three Months Ended |
Nine Months Ended |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
September 28, 2002 |
September 29, 2001 |
September 28, 2002 |
September 29, 2001 |
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| Other charges (income): | |||||||||||||
| Goodwill and intangible asset impairments | $ | — | $ | — | $ | 326 | $ | 72 | |||||
| Potentially uncollectible finance receivables | — | 1,354 | 526 | 1,454 | |||||||||
| Iridium settlements | (60 | ) | — | (60 | ) | — | |||||||
| Other | (25 | ) | 54 | 35 | 53 | ||||||||
| $ | (85 | ) | $ | 1,408 | $ | 827 | $ | 1,579 | |||||
7
Other Income (Expense)
The following table displays the amounts comprising Interest Expense, net, and Other included in Other Income (Expense) in the Company's condensed consolidated statements of operations:
| |
Three Months Ended |
Nine Months Ended |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
September 28, 2002 |
September 29, 2001 |
September 28, 2002 |
September 29, 2001 |
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| Interest expense, net: | ||||||||||||||
| Interest expense | $ | 173 | $ | 192 | $ | 512 | $ | 599 | ||||||
| Interest income | (81 | ) | (52 | ) | (212 | ) | (294 | ) | ||||||
| $ | 92 | $ | 140 | $ | 300 | $ | 305 | |||||||
Other charges (income): |
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| Investment impairments | $ | 77 | $ | 830 | $ | 1,220 | $ | 1,053 | ||||||
| Foreign currency (gains) losses | (1 | ) | 7 | 24 | (17 | ) | ||||||||
| Other | (5 | ) | 1 | (6 | ) | 29 | ||||||||
| $ | 71 | $ | 838 | $ | 1,238 | $ | 1,065 | |||||||
Earnings (Loss) Per Common Share
The following table presents a reconciliation of the numerators and denominators of basic and diluted loss per common share:
| |
Three Months Ended |
Nine Months Ended |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
September 28, 2002 |
September 29, 2001 |
September 28, 2002 |
September 29, 2001 |
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| Basic earnings (loss) per common share: | |||||||||||||||
| Net earnings (loss) | $ | 111 | $ | (1,408 | ) | $ | (2,659 | ) | $ | (2,700 | ) | ||||
| Weighted average common shares outstanding | 2,295.8 | 2,217.1 | 2,274.5 | 2,204.7 | |||||||||||
| Per share amount | $ | 0.05 | $ | (0.64 | ) | $ | (1.17 | ) | $ | (1.23 | ) | ||||
| Diluted earnings (loss) per common share: | |||||||||||||||
| Net earnings (loss) | $ | 111 | $ | (1,408 | ) | $ | (2,659 | ) | $ | (2,700 | ) | ||||
| Add: Interest on zero coupon notes | — | — | — | — | |||||||||||
| Net earnings (loss) as adjusted | $ | 111 | $ | (1,408 | ) | $ | (2,659 | ) | $ | (2,700 | ) | ||||
| Weighted average common shares outstanding | 2,295.8 | 2,217.1 | 2,274.5 | 2,204.7 | |||||||||||
| Add effect of dilutive securities: | |||||||||||||||
| Stock options/restricted stock | 10.9 | — | — | — | |||||||||||
| Zero coupon notes due 2009 | 1.5 | — | — | — | |||||||||||
| Diluted weighted average common shares outstanding | 2,308.2 | 2,217.1 | 2,274.5 | 2,204.7 | |||||||||||
| Per share amount | $ | 0.05 | $ | (0.64 | ) | $ | (1.17 | ) | $ | (1.23 | ) | ||||
In the computation of diluted earnings (loss) per common share for the nine months ended September 28, 2002 and the three months and nine months ended September 29, 2001, the assumed conversions of the zero coupon notes due 2009 and 2013, all stock options, restricted stock and the equity security units were excluded because their inclusion would have been antidilutive. For the three months ended September 28, 2002, the assumed conversions of the zero coupon notes due 2013, the
8
equity security units and out-of-the-money stock options were excluded because their inclusion would have been antidilutive.
Balance Sheet Information
Accounts Receivable
Accounts receivable, net, consist of the following:
| |
September 28, 2002 |
December 31, 2001 |
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