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Motorola Reports Second-Quarter 2004
Financial Results
•
Second-quarter 2004 sales of $8.7 billion, up 41 percent compared to
second-quarter 2003 sales of $6.2
billion.
•
Second-quarter 2004 GAAP pre-tax earnings of $800 million, up 614 percent
compared to second-quarter 2003 GAAP pre-tax earnings of $112
million.
•
Second-quarter 2004 GAAP loss of $203 million, or ($.09) per
share[1], compared to second-quarter
2003 GAAP earnings of $119 million, or $.05 per share. Second-quarter 2004 GAAP
results include: (1) a non-cash tax expense of $898 million, or ($.38) per
share, related to the establishment of a deferred tax asset valuation reserve
associated with the initial public offering of Freescale Semiconductor, Inc., an
entity comprised of the company’s semiconductor operations, (2) a tax
benefit of $197 million, or $.08 per share, resulting from the reversal of tax
reserves due to the settlement of certain tax audit items, and (3) other items
described in this
release.
•
Second-quarter 2004 positive operating cash flow of $994 million, allowing the
company to complete the quarter with net cash of $1.8 billion, compared to net
debt of $41 million at the end of 2003.
[2]
Click here to view the
financial tables which are an integral part of this
release.
SCHAUMBURG, Ill. – 20 July 2004
– Motorola, Inc. (NYSE: MOT) today reported sales of $8.7 billion in the
second quarter of 2004. This is a 41 percent increase from sales of $6.2 billion
in the second quarter of 2003.
Motorola
reported pre-tax earnings of $800 million, presented in accordance with
generally accepted accounting principles (GAAP), up 614 percent compared to
second quarter 2003 pre-tax earnings of $112 million. Motorola reported a GAAP
net loss of $203 million, or ($.09) per share, in the second quarter of 2004 as
second-quarter 2004 results include: (1) a non-cash tax expense of $898 million,
or ($.38) per share, related to the establishment of a deferred tax asset
valuation reserve associated with the initial public offering of Freescale
Semiconductor, Inc., (2) a tax benefit of $197 million, or $.08 per share,
resulting from the reversal of tax reserves due to the settlement of certain tax
audit items, (3) income of $22 million pre-tax resulting from the reversal of
reserves relating to exit and severance costs, income of $21 million pre-tax
resulting from the reversal of loan reserves relating to uncollected
receivables, and income of $20 million pre-tax resulting from the reversal of
reserves relating to the previous sale of a business, totaling $63 million
pre-tax, or $.02 cents per share, (4) expense of $41 million pre-tax, or ($.02)
per share, for separation costs relating to the company’s semiconductor
operations, (5) income of $20 million pre-tax, or $.01 per share, relating to
the partial recovery of a previously impaired investment, and (6) expense of $15
million pre-tax, or ($.01) per share, relating to in-process research and
development costs from an acquisition.
Motorola reported GAAP net earnings of $119
million, or $.05 per share, in the second quarter of 2003. As reported in
Motorola’s second-quarter 2003 earnings release, second-quarter 2003
earnings included income of $100 million after-tax, or $.04 per share, relating
to special items.
Motorola Chairman and Chief
Executive Officer Ed
Zander said, "We are very happy to report that the strong
sales and pre-tax earnings growth with which we started 2004 has continued in
the second quarter. Our improving product portfolio has begun to generate higher
gross margins. Market share improvement continued in a number of areas, and we
brought many new products to market. Our earnings would also have reflected very
strong growth except for the requirement, which we previously discussed in our
first quarter earnings release, that in accordance with GAAP, a non-cash charge
was taken to establish a deferred tax asset valuation reserve stemming from the
initial public offering of stock in our semiconductor segment, now known as
Freescale Semiconductor, Inc.
“Our
balance sheet performance continues to be excellent,” added Zander.
“We generated positive operating cash flow of $994 million in the second
quarter, the 14th consecutive quarter of positive operating cash flow. Motorola
ended the quarter with a net cash position of $1.8 billion. I believe we are
continuing to make 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.”
Operating Results
Improve
Personal Communications Segment sales
were $3.9 billion, up 67 percent compared with the year-ago quarter. Operating
earnings were $394 million, compared with operating earnings of $91 million in
the year-ago quarter. The increases in sales and operating earnings were due to
the success of new products. The segment shipped 24.1 million handsets, up 52
percent from the year-ago quarter, and improved its global market share compared
to the year-ago quarter, particularly in Latin America and Europe.
The segment began shipping 17
new handsets, with 15 featuring color displays and seven featuring integrated
cameras.
Semiconductor Products Segment sales
were $1.5 billion, up 31 percent compared with the year-ago quarter. The
increase in sales is primarily attributed to the segment's wireless and
networking markets. Operating earnings were $55 million, compared with an
operating loss of $125 million in the year-ago quarter. On July 16, 2004, in
connection with the initial public offering of a minority interest of
approximately 30%
of Freescale Semiconductor, Inc., shares of Freescale
began trading on the New York Stock Exchange as a separate public company under
the ticker symbol FSL. It is Motorola’s current intent to distribute the
remaining shares of Freescale to Motorola stockholders before the end of 2004.
Subsequent to such a distribution, the related operating results of Freescale,
including the charge relating to the previously-described valuation allowance
for deferred tax assets, would be reflected as discontinued operations for all
periods presented.
Global Telecom Solutions
Segment sales were $1.4 billion, up 38 percent compared with the year-ago
quarter. The segment reported operating earnings of $208 million, compared with
$19 million in the year-ago quarter. The segment was awarded one of the
world’s largest wireless soft-switch contracts by Pacific Bangladesh
Telecom Limited and seven contracts for Push-To-Talk over Cellular technology.
The segment also established a strategic relationship with France Telecom for
collaboration to demonstrate seamless mobility solutions.
Commercial, Government and Industrial
Solutions Segment sales were $1.1 billion, up 13 percent compared with the
year-ago quarter. The segment reported operating earnings of $183 million,
compared with operating earnings of $114 million in the year-ago quarter. The
segment’s results reflect continued emphasis by government customers
worldwide on border, airport and homeland security, and by enterprise customers
on business-critical communications needs. On July 19, 2004, Motorola announced
a $329 million multi-year contract with the Commonwealth of Virginia for a
statewide multi-agency radio system. This system responds to the
Commonwealth’s recognized need for a shared, statewide, public
safety-grade radio system that includes law enforcement mobile data, and
provides interoperability among state, county and local police communications
systems.
Integrated Electronic Systems Segment
sales were $656 million, up 27 percent compared with the year-ago quarter,
and the segment reported operating earnings of $44 million, compared with $45
million in the year-ago quarter. The increase in sales was primarily
attributable to the segment’s automotive electronics business. During the
quarter, a definitive agreement was signed to acquire Force Computers, an
embedded computing business owned by Solectron Corporation. The agreement is
subject to various closing conditions, including receipt of regulatory
approvals. Upon closing, Force Computers will be integrated with the
segment’s embedded computing
business.
Broadband Communications Segment
sales were $567 million, up 32 percent compared with the year-ago quarter.
Operating earnings increased to $20 million, compared with $5 million in the
year-ago quarter. During the quarter, the segment began shipping a
high-definition dual tuner set-top and completed its acquisition of Quantum
Bridge Communications, a leading provider of fiber-to-the-premises solutions.
Guidance for Third Quarter
2004
The company's guidance for third quarter
2004 is sales of between $8.4 and $8.8 billion, an increase of approximately 25
to 30 percent compared to the third quarter of 2003, and GAAP earnings per share
in the range of $.15 to $.19 compared to $.05 per share in the third quarter of
2003. This
third-quarter earnings guidance excludes a portion of the expected results of
the company’s semiconductor operations due to the initial public offering
of a minority interest of approximately
30% of Freescale
Semiconductor, Inc. The guidance also reflects an expected increase in fully
diluted shares outstanding in the third quarter as the company expects to return
to profitability on a GAAP
basis.
Conference Call and
Web-cast
Motorola’s quarterly earnings
conference call is scheduled to begin at 4:00 p.m. Central Time (USA), on
Tuesday, July 20. Motorola plans a live web-cast of the conference call over
the Internet, featuring both audio and slides. Investors can view the web-cast
at www.motorola.com/investor.
Consolidated
GAAP Results
A comparison of results from
operations is as follows:
|
Second
Quarter
|
|
Six Months
|
(In millions, except per share
amounts)
|
2004
|
2003
|
|
2004
|
2003
|
|
|
|
|
|
|
Net sales
|
$8,700
|
$6,163
|
|
$17,261
|
$12,206
|
Gross margin
|
3,169
|
2,008
|
|
6,037
|
3,984
|
Operating earnings
|
845
|
171
|
|
1,667
|
301
|
Net earnings (loss)
|
(203)
|
119
|
|
406
|
288
|
Diluted earnings (loss) per common
share
|
(0.09)
|
0.05
|
|
0.17
|
0.12
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
|
outstanding
|
2,351.7
|
2,337.0
|
|
2,432.9
|
2,332.5
|
|
|
|
|
|
|
|
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, statements about Motorola's guidance
for third-quarter 2004 sales and earnings, Motorola’s current intentions
regarding its remaining ownership of Freescale Semiconductor, Inc., and the
completion of pending acquisitions. 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
increase profitability and market share in its wireless handset business,
particularly in light of competition in the China handset market; (3) demand for
the company's products, including products related to new technologies; (4) the
company's ability to introduce new products and technologies in a timely manner;
(5) the impact of ongoing consolidations in the telecommunications and cable
industries; (6) risks related to dependence on certain key manufacturing
suppliers; (7) risks related to the company’s high volume of manufacturing
and sales in Asia; (8) the company's ability to purchase sufficient materials,
parts and components to meet customer demand, including without limitation
semiconductor products; (9) the creditworthiness of the company's customers,
particularly purchasers of large infrastructure systems; (10) unexpected
liabilities or expenses, including unfavorable outcomes to any pending or future
litigation, including any relating to the Iridium project; (11) the levels at
which design wins become actual orders and sales; (12) the impact of foreign
currency fluctuations; (13) the company’s ability to use its valuable
deferred tax assets; (14) the impact on the company from continuing hostilities
in Iraq and conflict in other countries; (15) unexpected effects on the company
and Freescale Semiconductor, Inc. as a result of the recent initial public
offering of Freescale, and (16) the company’s ability to successfully
implement the complete separation of its semiconductor operations, which success
is dependent upon a wide variety of factors, many of which are outside of the
company’s control.
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:
Jennifer
Weyrauch
+1-847-435-5320
Jennifer.Weyrauch@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]
All per share amounts in this release are expressed on an after-tax
basis.
[2]
A definition of net cash/debt is provided at the end of this
release.
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