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Motorola Reports First-Quarter 2004
Financial Results
• First-quarter 2004 sales of $8.6
billion, up 42 percent versus first-quarter 2003 sales of $6.0
billion.
• First-quarter 2004 GAAP earnings
of $609 million, or $.25 per share, versus first-quarter 2003 GAAP earnings of
$169 million, or $.07 per share, an increase of 257 percent in earnings per
share.
• First-quarter 2004 sales and GAAP
earnings also increased sequentially versus fourth-quarter
2003.
• First-quarter 2004 GAAP earnings
include: (1) income of $171 million pre-tax, or $.04 per share after-tax,
relating to gains on the sales of investments, (2) income of $52 million
pre-tax, or $.02 per share after-tax, for the reversal of reserves for
previously received incentives, and (3) income of $15 million pre-tax, or
one-half of one cent per share after-tax, relating to the reversal of
reorganization of business accruals no longer needed. As previously reported in
Motorola’s 2003 first-quarter earnings release, first-quarter 2003 GAAP
earnings included special-item income of $225 million pre-tax, or $.06 per share
after-tax, as detailed in that earnings release.
• First-quarter 2004 positive
operating cash flow of $858 million, combined with cash proceeds on the sales of
investments, enabled the company to complete the quarter with net cash of $902
million, compared with net debt of $41 million at the end of 2003.
[1]
• Second-quarter 2004
guidance:
|
– Sales: $8.2 to $8.6
billion
– GAAP earnings per share: $.14 to
$.18 per share, excluding the potential deferred tax asset valuation impact of
the semiconductor business initial public offering explained
below
|
Click here
to view the financial tables which are an integral part of this
release.
SCHAUMBURG, Ill. – 20 April 2004
– Motorola, Inc. (NYSE: MOT) today reported sales of $8.6 billion in
first-quarter 2004. This represents a 42 percent increase from sales of $6.0
billion in first-quarter 2003.
Motorola also
reported net earnings of $609 million, or $.25 per share, in first-quarter 2004,
presented in accordance with generally accepted accounting principles (GAAP), an
increase of 257 percent in earnings per share versus the year-ago quarter.
First-quarter 2004 earnings include: (1) income of $171 million pre-tax, or $.04
per share after-tax, relating to gains on the sales of investments, (2) income
of $52 million pre-tax, or $.02 per share after-tax, for the reversal of
reserves for previously received incentives related to impaired semiconductor
facilities, and (3) income of $15 million pre-tax, or one-half of one cent per
share after-tax, relating to the reversal of reorganization of business accruals
no longer needed.
Motorola reported GAAP net earnings in
first-quarter 2003 of $169 million, or $.07 per share. As previously reported
in Motorola’s first-quarter 2003 earnings release, first-quarter 2003
earnings included special-item income of $225 million pre-tax, or $.06 per share
after-tax, as detailed in that earnings
release.
Motorola Chairman and Chief Executive
Officer Ed
Zander said, "We are very pleased with the strong
financial performance of the first quarter. Sales and earnings exceeded our
start-of-the-quarter guidance, the result of strengthening customer demand,
improved execution in delivering new products, and growing market share in some
areas. We are making steady progress in boosting our financial performance and
creating value for our stockholders. I also believe these results reflect
increasing momentum for our evolving vision of seamless mobility. Our growing
portfolio of products, seamlessly connected, will bring voice, media, and
data-rich services to people wherever they are: at home, at work, in the auto or
out in the world.”
“We also
continued to strengthen our balance sheet – a key objective for Motorola
for the past several years. We generated positive operating cash flow of $858
million in the first quarter, the thirteenth consecutive quarter of positive
cash flow. Combined with cash proceeds from the sale of investments, this
enabled Motorola to end the quarter with a net cash position of $902 million.
This represents a major milestone for Motorola, as it is the first time in more
than 35 years that we have ended a quarter in an overall net cash position.
During the quarter, in addition to moving from a net debt position of $41
million to a net cash position of $902 million, we reduced gross debt by $544
million.”
Operating Results
Improve
Personal Communications Segment sales
were $4.1 billion, up 67 percent compared with the year-ago quarter. Operating
earnings were $398 million, compared with operating earnings of $114 million in
the year-ago quarter. The increases in sales and operating earnings were due to
the success of new products introduced in the second half of 2003. During the
quarter, the segment shipped 25.3 million handsets, up 51 percent from the
year-ago quarter, and improved its market share, particularly in Europe. The
segment also announced 25 new handsets, 24 featuring color displays and 16
featuring integrated
cameras.
Semiconductor
Products Segment sales were $1.4 billion, up 21 percent compared with the
year-ago quarter. The increase in sales is primarily attributed to the
segment's networking and wireless markets. Operating earnings
were $107 million, compared with an operating loss of
$121 million in the year-ago quarter. In late March 2004, an amended
registration statement was filed with the U. S. Securities and Exchange
Commission (SEC) related to the proposed separation of the semiconductor
operations into a publicly traded company.
Global Telecom Solutions Segment sales were
$1.3 billion, up 38 percent compared with the year-ago quarter. The segment
reported operating earnings of $119 million, compared with $29 million in the
year-ago quarter. The segment announced it is supplying a UMTS network in
northern Portugal for Optimus, and that it also received wireless equipment
awards from leading Indian operators BSNL, MTNL and Tata Teleservices.
Commercial, Government and Industrial
Solutions Segment sales were $1.0 billion, up 18 percent compared with the
year-ago quarter, reflecting significant activity in the segment’s
government markets related to homeland security initiatives. The segment
reported operating earnings of $178 million, compared with operating earnings of
$62 million in the year-ago quarter. The segment announced that it was awarded
a $151 million multi-year contract for an Emergency Services Digital Radio
Network for the State of Victoria, Australia. The segment also was awarded a
contract to provide a TETRA System for the South Africa Police in the Province
of Gauteng.
Integrated Electronic Systems Segment
sales were $654 million, up 26 percent compared with the year-ago quarter,
and the segment reported operating earnings of $43 million, compared with $25
million in the year-ago quarter. Increases in sales and operating earnings
occurred in each of the segment’s businesses – automotive, embedded
computing and portable energy systems. For the third consecutive
quarter, the segment’s automotive business received multi-year awards
valued at more than $1 billion. Automotive News honored Motorola with a
2004 PACE (Premier Automotive Supplier’s Contribution to Excellence) Award
in information technology for its VIAMOTO™ suite of location and
services software.
Broadband Communications
Segment sales were $488 million, up 16 percent compared with the year-ago
quarter. Operating earnings increased to $24 million, compared with $13 million
in the year-ago quarter. The segment continued to deploy its broadband services
cable modem termination system products to a number of leading operators around
the world. The segment’s high-definition/digital video recorder (HD/DVR)
set-top is being deployed by six cable service providers and HD set-top
shipments reached the one-million mark. Additionally, the segment introduced
new products for home monitoring/control and wireless home
networking.
Guidance for Second-Quarter
2004
The company's guidance for second-quarter
2004 is sales of between $8.2 and $8.6 billion and GAAP earnings per share in
the range of $.14 to $.18. However, this second-quarter earnings guidance does
not reflect the potentially material impact to the company's financial
performance from the proposed separation of the company's semiconductor
operations into a publicly traded company, as further discussed below.
A registration statement relating to a
proposed initial public offering (IPO) of a minority interest in Freescale
Semiconductor, Inc. (Freescale), a separate entity comprised of the company's
semiconductor operations, is currently being reviewed by the SEC. There is no
certainty as to when, or if, such an IPO might occur. However, as discussed in
the company's recent Form 10-K filing, in connection with the proposed IPO,
Freescale would receive cash proceeds and Motorola would likely realize a gain
upon the sale of the stock, which would be reflected directly in
stockholders’ equity and not impact the company's earnings. In addition,
as discussed in the 10-K, if the occurrence of the IPO becomes more likely than
not, the company may need to take a non-cash charge for a valuation allowance
for deferred-tax assets relating to its semiconductor operations (expected to be
in the range of $925 million to $1.1 billion), which would be reflected in
Freescale’s earnings as included in the company’s consolidated
statements of operations. Also, if the IPO is completed, and the remaining
shares of Freescale are distributed to Motorola stockholders, the related
operating results of Freescale, including the valuation allowance for deferred
tax assets, would be reflected as discontinued operations for all periods
presented.
Conference Call and
Webcast
Motorola’s quarterly earnings
conference call is scheduled to begin at 4:00 p.m. Central Time (USA), on
Tuesday, 20 April. Motorola plans a live webcast of the conference call over
the Internet, featuring both audio and slides. Investors can view the webcast
at www.motorola.com/investor.
Consolidated
GAAP Results
A comparison of results from
operations is as follows:
|
First
Quarter
|
(In millions, except per share
amounts)
|
2004
|
2003
|
|
|
|
Net sales
|
$8,561
|
$6,043
|
Gross margin
|
2,868
|
1,976
|
Operating earnings
|
822
|
130
|
Net earnings
|
609
|
169
|
Diluted earnings per common share
|
0.25
|
0.07
|
|
|
|
Weighted average common shares
|
|
|
|
outstanding
|
2,487.4
|
2,325.1
|
|
|
|
|
Definition of Net
Cash/Debt
Net Cash/Debt = Cash and Cash
Equivalents + Short-term Investments - Notes Payable and Current Portion of
Long-term Debt - Long-term Debt - Trust Originated Preferred Securities
(“TOPrS”).
Business
Risks
Statements in this press release that are
not historical facts are forward-looking statements based on current
expectations that involve risks and uncertainties. Such forward-looking
statements include, but are not limited to, the company's guidance for
second-quarter 2004 sales and earnings and expected charges relating to the
proposed separation of the company’s semiconductor operations, including
the valuation allowance for the deferred tax assets. Motorola cautions the
reader that the factors below and those on pages 76 through 85 of Motorola's
2003 Annual Report on Form 10-K 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: (1) the uncertainty of
current economic and political conditions, as well as the economic outlook for
the telecommunications, semiconductor, broadband and automotive industries; (2)
the company's ability to purchase sufficient materials, parts and components to
meet customer demand; (3) the company's ability to increase profitability and
market share in its wireless handset business, particularly in light of
increased competition in the China handset market; (4) the company's ability to
effectively carry out planned cost-reduction actions and realize savings from
those actions; (5) demand for the company's products, including products related
to new technologies; (6) the company's ability to introduce new products and
technologies in a timely manner; (7) the impact of ongoing consolidations in the
telecommunications and cable industries; (8) the creditworthiness of the
company's customers, particularly purchasers of large infrastructure systems;
(9) unexpected liabilities or expenses, including unfavorable outcomes to any
pending or future litigation, including any relating to the Iridium project;
(10) the levels at which design wins become actual orders and sales; (11) risks
related to the company's high volume of manufacturing and sales in Asia; (12)
the impact of foreign currency fluctuations; and (13) the company's ability to
successfully complete the separation of its semiconductor activities in a timely
and cost-effective manner.
About
Motorola
Motorola, Inc. (NYSE: MOT) is a global
leader in wireless, broadband and automotive communications technologies that
help make life smarter, safer, simpler, synchronized and fun. Sales in 2003
were $27.1 billion. Motorola creates innovative technological solutions that
benefit people at home, at work and on the move. The company also is a
progressive corporate citizen dedicated to operating ethically, protecting the
environment and supporting the communities in which it does business. For more
information: www.motorola.com.
# #
#
Media
Contact:
Bill
Parke
+1-847-576-4525
William.Parke@motorola.com
MOTOROLA
and the stylized M Logo are registered in the U.S. Patent & Trademark
Office. All other product or service names are the property of their respective
owners.
© Motorola, Inc.
2004
[1] A
definition of net cash/debt is provided at the end of this
release.
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