Motorola Announces Second-Quarter 2010 Financial Results

SCHAUMBURG, Ill., July 29 /PRNewswire-FirstCall/ -- Financial Highlights:

  • Second-quarter sales of $5.4 billion
  • Second-quarter GAAP earnings of $0.07 per share, compared to GAAP earnings of $0.01 per share in second quarter 2009; non-GAAP earnings per share* of $0.09 compared to earnings of $0.03 per share in second quarter 2009
  • Total cash** of $8.3 billion; completed $500 million debt tender offer
  • Enterprise Mobility Solutions sales of $1.9 billion; GAAP operating earnings of $181 million; non-GAAP operating earnings of $292 million
  • Mobile Devices sales of $1.7 billion; shipped 8.3 million handsets, including 2.7 million smartphones; GAAP operating earnings of $87 million; non-GAAP operating loss of $109 million
  • Networks sales of $967 million; GAAP operating earnings of $178 million; non-GAAP operating earnings of $191 million
  • Home sales of $886 million; GAAP operating earnings of $29 million; non-GAAP operating earnings of $57 million
  • Announced sale of majority of Networks business to Nokia Siemens Networks

Click here for printable press release and financial tables.

Motorola, Inc. (NYSE: MOT) today reported sales of $5.4 billion in the second quarter of 2010. The GAAP earnings in the second quarter of 2010 were $162 million, or $0.07 per share, which compares to GAAP earnings of $26 million, or $0.01 per share, in the second quarter of 2009. Non-GAAP financial information excludes after-tax costs of approximately $0.02 per share in the second quarter of both 2010 and 2009 related to stock-based compensation expense, intangible assets amortization expense and highlighted items. Details on these non-GAAP adjustments and the use of non-GAAP measures are included later in this press release.

During the quarter, the Company generated positive operating cash flow of $242 million, reduced long-term debt through a $500 million tender offer and ended the quarter with a total cash** position of $8.3 billion. Net cash*** increased to $4.9 billion from $4.6 billion in the first quarter.

Greg Brown, Motorola co-chief executive officer and CEO of Motorola Solutions, said, “In the second quarter, our Enterprise Mobility Solutions and Networks businesses continued to deliver best-in-class market leadership and financial returns, with strong operating earnings and excellent cash generation.”

"In addition, last week, we announced that Nokia Siemens Networks will acquire the majority of our Networks business. We are very proud of the operational and financial performance of our Networks business and are excited to have reached this agreement to combine our Networks team with such an industry leader," Brown continued. "This is great news for our customers, our investors and our people and will allow us to sharpen our strategic focus on providing mission-and business-critical solutions for our government, public safety and enterprise customers.”

"The Droid X launch has been very well received and is seen as one of the best smartphones in the market today with a 4.3 inch high-resolution display, Adobe flash and an 8 megapixel camera.  As we continue to execute on our business strategy, we are in a strong position to continue improving our share in the rapidly growing smartphone market and improving our operating performance," said Sanjay Jha, Motorola co-chief executive officer and CEO of Motorola Mobility. "The Mobile Devices and Home businesses remain focused on developing next-generation products to capitalize on the convergence of mobile experiences and home entertainment.”

Operating Results

Mobile Devices segment sales were $1.7 billion, down 6 percent compared with the year-ago quarter. GAAP operating earnings were $87 million, which included income from a significant legal settlement of $228 million, compared to an operating loss of $287 million in the year-ago quarter. The non-GAAP operating loss was $109 million, compared to an operating loss of $239 million in the year-ago quarter.

Mobile Devices highlights:

  • Introduced DROID X, a pocket-sized home theater with a 4.3 inch high-resolution display and powerful 1 GHz processor, garnering excitement and attention among media and consumers
  • Introduced i1, the world’s first push-to-talk Android-powered smartphone; Motorola FLIPOUT™ with MOTOBLUR™ and  Motorola CHARM™ with MOTOBLUR™, bringing our current smartphone portfolio to 12 devices
  • Broadened choice of Android applications for consumers in Argentina, Brazil and Mexico with the announcement of SHOP4APPS, Motorola's mobile application storefront

Home segment sales were $886 million, down 13 percent compared with the year-ago quarter. GAAP operating earnings were $29 million, compared to $18 million in the year-ago quarter. Non-GAAP operating earnings were $57 million, compared to $49 million in the year-ago quarter.

Home highlights:

  • Launched 3D TV set-top solution in North America and a next-generation HD IP set-top that supports fixed-mobile convergence solutions with KDDI in Japan
  • Introduced Motorola M3 Media Server family, which delivers multimedia content and services across television, PCs and mobile devices
  • Introduced Medios suite of software solutions for content distribution across multi-screen environments and advanced on-demand services
  • Launched DCX700, a next-generation, cost-effective HD set-top solution that supports applications for whole-home content sharing

Enterprise Mobility Solutions segment sales were $1.9 billion, up 10 percent compared with the year-ago quarter. GAAP operating earnings were $181 million, compared to operating earnings of $141 million in the year-ago quarter. Non-GAAP operating earnings were $292 million, compared to $225 million in the year-ago quarter.

Enterprise Mobility Solutions highlights:

  • Achieved year-over-year sales growth in all four regional markets
  • Received multi-million dollar contracts in North America, including P25 system wins for counties in Georgia, Maryland, New York and Washington
  • Announced ES400, the smallest and lightest enterprise digital assistant, which provides field workers access to business-critical applications to overcome productivity challenges
  • Awarded the first phase of a private broadband 700MHz LTE network for public safety in the San Francisco Bay area, the first of its kind in the United States

Networks segment sales were $967 million, down 2 percent compared with the year-ago quarter. GAAP operating earnings were $178 million, compared to $92 million in the year-ago quarter. Non-GAAP operating earnings were $191 million, compared to $147 million in the year-ago quarter.

Networks highlights:

  • Announced sale of majority of Networks assets to Nokia Siemens Networks
  • Completed Phase I TD-LTE field trials with China's Ministry of Industry and Information Technology
  • Introduced unique, cost-effective common platform base station solution that can be used for both WiMAX and LTE
  • Introduced software release for KDDI to reuse existing CDMA base stations for LTE

Third-Quarter 2010 Outlook

The Company's outlook for the third quarter of 2010 is for earnings of $0.10 to $0.12 per share. This outlook includes the Networks business and excludes stock-based compensation expense and intangible assets amortization expense of approximately $0.04 per share, as well as charges associated with items of the variety typically highlighted by the Company in its quarterly earnings releases.

Consolidated GAAP Results

A comparison of results from operations is as follows:



Second Quarter

(In millions, except per share amounts)

2010

2009





Net sales

$5,414

$5,497

Gross margin

2,002

1,710

Operating earnings

363

10

Earnings from continuing operations ****

162

26

Net earnings ****

162

26

Diluted earnings per common share: ****




Continuing operations

$0.07

$0.01





Weighted average diluted common shares  




outstanding

2,365.0

2,306.4



Highlighted Items, Stock-Based Compensation Expense and Intangible Assets Amortization Expense

The table below includes highlighted items, stock-based compensation expense and intangible assets amortization expense for the second quarter of 2010.


EPS Impact Exp/(Inc)*****



GAAP Earnings per Common Share

$0.07



Highlighted Items:


Separation-related transaction costs

0.04

Tax-related expense

0.03

Reorganization of business charges

0.01

Royalty settlement

0.01

Gain on sales of investments and businesses

(0.02)

Tax-related benefit

(0.03)

Legal settlement

(0.06)

Total Highlighted Items

(0.02)



Stock-based compensation expense

0.02

Intangible assets amortization expense

0.02

Stock-Based Compensation Expense and Intangible Assets Amortization Expense


0.04



Total Non-GAAP Adjustments

0.02



Non-GAAP Earnings per Common Share

$0.09



Conference Call and Webcast

Motorola will host its quarterly conference call beginning at 8 a.m. (U.S. Eastern Time) on Thursday, July 29. The conference call will be webcast live with audio and slides at www.motorola.com/investor.

Use of Non-GAAP Financial Information

In addition to the GAAP results included in this presentation, Motorola has also included non-GAAP measurements of results. Motorola has provided these non-GAAP measurements to help investors better understand Motorola’s core operating performance, enhance comparisons of Motorola’s core operating performance from period to period and allow better comparisons of Motorola’s operating performance to that of its competitors. Among other things, the Company’s management uses these operating results, excluding the identified items, to evaluate the performance of its businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of its core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the Company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP.

Highlighted items: The Company has excluded the effects of highlighted items (and any reversals of highlighted items recorded in prior periods) from its non-GAAP operating expenses and net income measurements because the Company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the Company’s current operating performance or comparisons to the Company’s past operating performance.

Stock-based compensation expense: The Company has excluded stock-based compensation expense from its non-GAAP operating expenses and net income measurements. Although stock-based compensation is a key incentive offered to our employees and the Company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute

to the generation of future period revenues, the Company continues to evaluate its performance excluding stock-based compensation expense primarily because it represents a significant non-cash expense. Stock-based compensation expense will recur in future periods.

Intangible assets amortization expense: The Company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net income measurements, primarily because it represents a significant non-cash expense and because the Company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the Company’s acquisitions. Investors should note that the use of intangible assets contributed to the Company’s revenues earned during the periods presented and will contribute to the Company’s future period revenues as well. Intangible assets amortization expense will recur in future periods.

Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this press release.

Business Risks

This press release contains "forward-looking statements" within the meaning of applicable federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes”, “expects”, “intends”, “anticipates”, “estimates” and similar expressions. We can give no assurance that any future results or events discussed in these statements will be achieved.  Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Readers are cautioned that such forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this release.  Such forward-looking statements include, but are not limited to, statements about the timing and financial impact of the launch of new products and Motorola's financial outlook for the third quarter of 2010. Motorola cautions the reader that the risk factors below, as well as those on pages 17 through 29 in Item 1A of Motorola's 2009 Annual Report on Form 10-K and in its other SEC filings available for free on the SEC’s website at www.sec.gov and on Motorola’s website at www.motorola.com, could cause Motorola's actual results to differ materially from those estimated or predicted in the forward-looking statements. Many of these risks and uncertainties cannot be controlled by Motorola and factors that may impact forward-looking statements include, but are not limited to: (1) possible negative effects on the Company's business operations, financial performance or assets as a result of its plan to create two independent, publicly traded companies; (2) the economic outlook for the telecommunications and broadband industries; (3) the Company's ability to improve financial performance in its Mobile Devices business, including the success of its smartphone strategy; (4) Mobile Device's dependency on third-party operating systems and software, including Google's Android operating system; (5) the level of demand for the Company's products, particularly if consumers, businesses and governments defer purchases in response to tighter credit; (6) the Company's ability to introduce new products and technologies in a timely manner; (7) unexpected negative consequences from the Company's restructuring and cost reduction activities, including as a result of significant restructuring at the Mobile Devices business; (8) negative impact on the Company's business from global economic conditions, which may include: (i) the inability of customers to obtain financing for purchases of the Company's products; (ii) the viability of the Company's suppliers that may no longer have access to necessary financing; (iii) changes in the value of investments held by the Company's pension plan and other defined benefit plans; (iv) fair and/or actual value of the Company's debt and equity investments differing significantly from the fair values currently assigned to them; (v) counterparty failures negatively impacting the Company's financial position; (vi) difficulties or increased costs for the Company in obtaining financing; and (vii) the inability of the Company to sell accounts receivable and long-term receivables in volumes and on terms comparable to historical practices; (9) the Company's ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions; (10) risks related to dependence on certain key suppliers; (11) the impact on the Company's performance and financial results from strategic acquisitions or divestitures, including those that may occur in the future; (12) risks related to the Company's high volume of manufacturing in Asia and business operations in foreign countries; (13) the creditworthiness of the Company's customers and distributors, particularly purchasers of large infrastructure systems; (14) variability in income received from licensing the Company's intellectual property to others, as well as expenses incurred when the Company licenses intellectual property from others; (15) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings; (16) the impact of foreign currency fluctuations, including the negative impact of a strengthening U.S. dollar on the Company when competing for business in foreign markets; (17) the impact on the Company from continuing hostilities in countries where the Company does business; (18) the impact on the Company from ongoing consolidation in the telecommunications and broadband industries; (19) the impact of changes in governmental policies, laws or regulations; (20) the outcome of currently ongoing and future tax matters; and (21) negative consequences from the Company's outsourcing of various activities, including certain manufacturing, information technology and administrative functions. Motorola undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.

Definitions

* Non-GAAP earnings per share excludes from GAAP earnings per share the effects of stock-based compensation expense, intangible assets amortization expense and highlighted items

** Total cash = Cash and cash equivalents + Sigma Fund (current and non-current) + Short-term investments

*** Net cash = Total cash - Total debt (Notes payable and current portion of long-term debt + Long-term debt)

**** Amounts attributable to Motorola, Inc. common shareholders

***** Due to rounding, EPS impact may not be equal to the sum of individual items

About Motorola

Motorola is known around the world for innovation in communications and is focused on advancing the way the world connects. From broadband communications infrastructure, enterprise mobility and public safety solutions to mobile and wireline digital communication devices that provide compelling experiences, Motorola is leading the next wave of innovations that enable people, enterprises and governments to be more connected and more mobile. Motorola (NYSE: MOT) had sales of US $22 billion in 2009. For more information, please visit www.motorola.com.

Media contact:

Jennifer Erickson

Motorola

+1 847-435-5320

jennifer.erickson@motorola.com


Investor contact:

Dean Lindroth

Motorola

+1 847-576-6899

dean.lindroth@motorola.com



MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2010. All rights reserved.

Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)








Three Months Ended


July 3, 2010


April 3, 2010


July 4, 2009

Net sales

$        5,414


$         5,044


$        5,497

Costs of sales

3,412


3,258


3,787

Gross margin

2,002


1,786


1,710







Selling, general and administrative expenses

896


876


822

Research and development expenditures

762


757


775

Separation-related transaction costs

105


25


-

Other charges (income)

(189)


(13)


33

Intangibles amortization

65


65


70

Operating earnings

363


76


10







Other income (expense):






  Interest expense, net

(38)


(33)


(30)

  Gain on sales of investments and businesses, net

53


8


30

  Other

(33)


12


23

Total other income (expense)

(18)


(13)


23

Earnings from continuing operations before income taxes

345


63


33

Income tax expense (benefit)

179


(5)


(2)

Earnings from continuing operations

166


68


35







Earnings from discontinued operations, net of tax

-


-


-

Net earnings

166


68


35







Less: Earnings (loss) attributable to noncontrolling interests

4


(1)


9

Net earnings attributable to Motorola, Inc.

$           162


$              69


$             26







Amounts attributable to Motorola, Inc. common shareholders






Earnings from continuing operations, net of tax

$           162


$              69


$             26

Earnings from discontinued operations, net of tax

-


-


-

Net earnings

$           162


$              69


$             26







Earnings per common share






Basic:






Continuing operations

$          0.07


$           0.03


$          0.01

Discontinued operations

-


-


-


$          0.07


$           0.03


$          0.01







Diluted:






Continuing operations

$          0.07


$           0.03


$          0.01

Discontinued operations

-


-


-


$          0.07


$           0.03


$          0.01







Weighted average common shares outstanding






 Basic

2,328.8


2,315.7


2,293.9

 Diluted

2,365.0


2,341.3


2,306.4







Dividends paid per share

$             -


$               -


$             -














Percentage of Net Sales*

Net sales

100%


100%


100%

Costs of sales

63.0%


64.6%


68.9%

Gross margin

37.0%


35.4%


31.1%







Selling, general and administrative expenses

16.5%


17.4%


15.0%

Research and development expenditures

14.1%


15.0%


14.1%

Separation-related transaction costs

1.9%


0.5%


0.0%

Other charges (income)

-3.5%


-0.3%


0.6%

Intangibles amortization

1.2%


1.3%


1.3%

Operating earnings

6.7%


1.5%


0.2%







Other income (expense):






  Interest expense, net

-0.7%


-0.7%


-0.5%

  Gain on sales of investments and businesses, net

1.0%


0.2%


0.5%

  Other

-0.6%


0.2%


0.4%

Total other income (expense)

-0.3%


-0.3%


0.4%

Earnings from continuing operations before income taxes

6.4%


1.2%


0.6%

Income tax expense (benefit)

3.3%


-0.1%


0.0%

Earnings from continuing operations

3.1%


1.3%


0.6%







Earnings from discontinued operations, net of tax

0.0%


0.0%


0.0%

Net earnings

3.1%


1.3%


0.6%







Less: Earnings (loss) attributable to noncontrolling interests

0.1%


0.0%


0.2%

Net earnings attributable to Motorola, Inc.

3.0%


1.4%


0.5%













* Percentages may not add up due to rounding



Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)






Six Months Ended


July 3, 2010


July 4, 2009

Net sales

$      10,458


$      10,868

Costs of sales

6,670


7,662

Gross margin

3,788


3,206





Selling, general and administrative expenses

1,772


1,691

Research and development expenditures

1,519


1,622

Separation-related transaction costs

105


-

Other charges (income)

(177)


191

Intangibles amortization

130


141

Operating earnings (loss)

439


(439)





Other income (expense):




  Interest expense, net

(71)


(65)

  Gain on sales of investments and businesses, net

61


10

  Other

(21)


93

Total other income (expense)

(31)


38

Earnings (loss) from continuing operations before income taxes

408


(401)

Income tax expense (benefit)

174


(148)

Earnings (loss) from continuing operations

234


(253)





Earnings from discontinued operations, net of tax

-


60

Net earnings (loss)

234


(193)





Less: Earnings attributable to noncontrolling interests

3


12

Net earnings (loss) attributable to Motorola, Inc.

$           231


$         (205)





Amounts attributable to Motorola, Inc. common shareholders




Earnings (loss) from continuing operations, net of tax

$           231


$         (265)

Earnings from discontinued operations, net of tax

-


60

Net earnings (loss)

$           231


$         (205)





Earnings (loss) per common share




Basic:




Continuing operations

$          0.10


$        (0.12)

Discontinued operations

-


0.03


$          0.10


$        (0.09)





Diluted:




Continuing operations

$          0.10


$        (0.12)

Discontinued operations

-


0.03


$          0.10


$        (0.09)





Weighted average common shares outstanding




 Basic

2,322.0


2,286.5

 Diluted

2,352.9


2,286.5





Dividends paid per share

$             -


$          0.05










Percentage of Net Sales*

Net sales

100%


100%

Costs of sales

63.8%


70.5%

Gross margin

36.2%


29.5%





Selling, general and administrative expenses

16.9%


15.6%

Research and development expenditures

14.5%


14.9%

Separation-related transaction costs

1.0%


0.0%

Other charges (income)

-1.7%


1.8%

Intangibles amortization

1.2%


1.3%

Operating earnings (loss)

4.2%


-4.0%





Other income (expense):




  Interest expense, net

-0.7%


-0.6%

  Gain on sales of investments and businesses, net

0.6%


0.1%

  Other

-0.2%


0.9%

Total other income (expense)

-0.3%


0.3%

Earnings (loss) from continuing operations before income taxes

3.9%


-3.7%

Income tax expense (benefit)

1.7%


-1.4%

Earnings (loss) from continuing operations

2.2%


-2.3%





Earnings from discontinued operations, net of tax

0.0%


0.6%

Net earnings (loss)

2.2%


-1.8%





Less: Earnings attributable to noncontrolling interests

0.0%


0.1%

Net earnings (loss) attributable to Motorola, Inc.

2.2%


-1.9%









* Percentages may not add up due to rounding



Motorola, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In millions)








July 3,


April 3,


July 4,


2010


2010


2009

Assets






  Cash and cash equivalents

$   2,893


$   3,188


$   2,881

  Sigma Fund

5,313


5,174


3,489

  Short-term investments

25


6


45

  Accounts receivable, net

3,465


3,086


3,689

  Inventories, net

1,299


1,251


1,660

  Deferred income taxes

1,212


1,125


1,320

  Other current assets

1,807


2,066


2,630

Total current assets

16,014


15,896


15,714







  Property, plant and equipment, net

1,968


2,088


2,280

  Sigma Fund

105


116


72

  Investments

322


408


446

  Deferred income taxes

1,882


2,253


2,094

  Goodwill

2,828


2,830


2,822

  Other assets

1,693


1,669


1,676

Total assets

$ 24,812


$ 25,260


$ 25,104







Liabilities and Stockholders' Equity






  Notes payable and current portion of long-term debt

$      531


$      532


$        40

  Accounts payable

2,336


2,147


2,188

  Accrued liabilities

5,020


5,194


5,956

Total current liabilities

7,887


7,873


8,184







  Long-term debt

2,907


3,372


3,899

  Other liabilities

3,798


3,970


3,398







Total Motorola, Inc. stockholders' equity

10,116


9,944


9,523







Noncontrolling interests

104


101


100







Total liabilities and stockholders' equity

$ 24,812


$ 25,260


$ 25,104







Financial Ratios:






   Total cash*

$   8,336


$   8,484


$   6,487

   Total debt**

$   3,438


$   3,904


$   3,939

   Net cash***

$   4,898


$   4,580


$   2,548







*Total cash = Cash and cash equivalents + Sigma Fund (current and non-current) + Short-term investments

**Total debt = Notes payable and current portion of long-term debt + Long-term debt

***Net cash = Total cash - Total debt



Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In millions)








Three Months Ended


July 3, 2010


April 3, 2010


July 4, 2009

Operating






Net earnings attributable to Motorola, Inc.

$           162


$              69


$             26

Earnings (loss) attributable to the noncontrolling interests

4


(1)


9

Net earnings

166


68


35

Earnings from discontinued operations, net of tax

-


-


-

Earnings from continuing operations

166


68


35

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:






Depreciation and amortization

168


173


192

Non-cash other charges (income)

3


(21)


(9)

Share-based compensation expense

77


72


74

Gain on sales of investments and businesses, net

(53)


(8)


(30)

Loss from the extinguishment of long-term debt

12


-


-

Deferred income taxes, including change in valuation allowance

283


(22)


162

Changes in assets and liabilities, net of effects of acquisitions and dispositions:






Accounts receivable

(428)


411


1

Inventories

(58)


58


408

Other current assets

254


114


290

Accounts payable and accrued liabilities

32


(388)


(848)

Other assets and liabilities

(214)


28


(125)

 Net cash provided by operating activities

242


485


150

Investing






Acquisitions and investments, net

(3)


(23)


(6)

Proceeds from sales of investments and businesses, net

221


22


89

Capital expenditures

(76)


(70)


(66)

Proceeds from sales of property, plant and equipment

-


28


3

Purchases of Sigma Fund investments, net

(132)


(116)


(649)

Purchases of short-term investments, net

(19)


(4)


(26)

Net cash used for investing activities

(9)


(163)


(655)

Financing






Repayment of short-term borrowings, net

(1)


(4)


(23)

Repayment of debt

(479)


(2)


-

Issuance of common stock

5


63


-

Other, net

1


(8)


6

Net cash provided by (used for) financing activities

(474)


49


(17)

Effect of exchange rate changes on cash and cash equivalents

(54)


(52)


138

Net increase (decrease) in cash and cash equivalents

(295)


319


(384)

Cash and cash equivalents, beginning of period

3,188


2,869


3,265

Cash and cash equivalents, end of period

$        2,893


$         3,188


$        2,881



Motorola, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In millions)






Six Months Ended


July 3, 2010


July 4, 2009

Operating




Net earnings (loss) attributable to Motorola, Inc.

$           231


$         (205)

Less: Earnings attributable to the noncontrolling interests

3


12

Net earnings (loss)

234


(193)

Earnings from discontinued operations, net of tax

-


60

Earnings (loss) from continuing operations

234


(253)

Adjustments to reconcile loss from continuing operations to net cash provided by (used for) operating activities:




Depreciation and amortization

341


382

Non-cash other income

(18)


(5)

Share-based compensation expense

149


150

Gain on sales of investments and businesses, net

(61)


(10)

Loss (gain) from the extinguishment of long-term debt

12


(67)

Deferred income taxes, including change in valuation allowance

261


(35)

Changes in assets and liabilities, net of effects of acquisitions and dispositions:




Accounts receivable

(17)


(203)

Inventories

-


990

Other current assets

368


507

Accounts payable and accrued liabilities

(356)


(2,203)

Other assets and liabilities

(186)


(117)

 Net cash cash provided by (used for) operating activities

727


(864)

Investing




Acquisitions and investments, net

(26)


(21)

Proceeds from sales of investments and businesses, net

243


226

Capital expenditures

(146)


(137)

Proceeds from sales of property, plant and equipment

28


6

Proceeds from sales (purchases) of Sigma Fund investments, net

(248)


670

Proceeds from sales (purchases) of short-term investments, net

(23)


180

Net cash provided by (used for) investing activities

(172)


924

Financing




Repayment of short-term borrowings, net

(5)


(54)

Repayment of debt

(481)


(129)

Issuance of common stock

68


56

Payment of dividends

-


(114)

Other, net

(7)


6

Net cash used for financing activities

(425)


(235)

Effect of exchange rate changes on cash and cash equivalents

(106)


(8)

Net increase (decrease) in cash and cash equivalents

24


(183)

Cash and cash equivalents, beginning of period

2,869


3,064

Cash and cash equivalents, end of period

$        2,893


$        2,881



Motorola, Inc. and Subsidiaries

Segment Information

(In millions)







Summarized below are the Company's Net sales by reportable segment for the three months and six months ended July 3, 2010 and July 4, 2009.














Net Sales


Three Months Ended
July 3, 2010


Three Months Ended
July 4, 2009


% Change from
2009







Mobile Devices

$                          1,724


$                          1,829


-6%

Home

886


1,013


-13%

Enterprise Mobility Solutions

1,850


1,685


10%

Networks

967


988


-2%

  Segment Totals

5,427


5,515


-2%

Other and Eliminations

(13)


(18)


-28%

  Company Totals

$                          5,414


$                          5,497


-2%














Net Sales


Six Months Ended
July 3, 2010


Six Months Ended
July 4, 2009


% Change from
2009







Mobile Devices

$                          3,365


$                          3,630


-7%

Home

1,724


2,038


-15%

Enterprise Mobility Solutions

3,544


3,284


8%

Networks

1,863


1,954


-5%

  Segment Totals

10,496


10,906


-4%

Other and Eliminations

(38)


(38)


0%

  Company Totals

$                        10,458


$                        10,868


-4%



Motorola, Inc. and Subsidiaries

Segment Information

(In millions)







Summarized below are the Company's Operating earnings (loss) by reportable segment for the three months and six months ended July 3, 2010 and July 4, 2009.














Operating Earnings (Loss)


Three Months Ended
July 3, 2010


Three Months Ended
July 4, 2009


% Change from
2009







Mobile Devices

$                               87


$                            (287)


*

Home

29


18


61%

Enterprise Mobility Solutions

181


141


28%

Networks

178


92


93%

  Segment Totals

475


(36)


*

Other and Eliminations

(112)


46


*

  Company Totals

$                             363


$                               10


3530%














Operating Earnings (Loss)


Six Months Ended
July 3, 2010


Six Months Ended
July 4, 2009


% Change from
2009







Mobile Devices

$                            (105)


$                            (832)


-87%

Home

                                 49


                                 21


133%

Enterprise Mobility Solutions

                               322


                               207


56%

Networks

                               290


                               154


88%

  Segment Totals

                               556


                              (450)


*

Other and Eliminations

                              (117)


                                 11


*

  Company Totals

$                             439


$                            (439)


*







* Percentage change is not meaningful.



Motorola, Inc. and Subsidiaries

Non-GAAP Adjustments Bridge

(In millions, except per share amounts)














Three Months Ended


Three Months Ended


July 3, 2010


April 3, 2010


GAAP Results


Non-GAAP
Adjustments


Non-GAAP Results


GAAP Results


Non-GAAP
Adjustments


Non-GAAP Results













Net sales

$             5,414


$                                     -


$                     5,414


$             5,044


$                                     -


$                     5,044

Costs of sales

3,412


16


3,396


3,258


13


3,245

Gross margin

2,002


(16)


2,018


1,786


(13)


1,799













Selling, general and administrative expenses

896


42


854


876


42


834

Research and development expenditures

762


26


736


757


22


735

Separation-related transaction costs

105


105


-


25


25


-

Other income

(189)


(189)


-


(13)


(13)


-

Intangibles amortization

65


65


-


65


65


-

Operating earnings

363


(65)


428


76


(154)


230













Other income (expense):












  Interest expense, net

(38)


-


(38)


(33)


-


(33)

  Gain on sales of investments and businesses, net

53


50


3


8


-


8

  Other

(33)


-


(33)


12


-


12

Total other income (expense)

(18)


50


(68)


(13)


-


(13)

Earnings from continuing operations before income taxes

345


(15)


360


63


(154)


217

Income tax expense (benefit)

179


34


145


(5)


(81)


76

Earnings from continuing operations

166


(49)


215


68


(73)


141













Earnings from discontinued operations, net of tax

-


-


-


-


-


-

Net earnings

166


(49)


215


68


(73)


141













Less: Earnings (loss) attributable to noncontrolling interests

4


-


4


(1)


-


(1)

Net earnings attributable to Motorola, Inc.

$                162


$                                   (49)


$                        211


$                  69


$                                   (73)


$                        142

























Amounts attributable to Motorola, Inc. common shareholders












Earnings from continuing operations, net of tax

$                162


$                                   (49)


$                        211


$                  69


$                                   (73)


$                        142

Earnings from discontinued operations, net of tax

-


-


-


-


-


-

Net earnings

$                162


$                                   (49)


$                        211


$                  69


$                                   (73)


$                        142













Earnings per common share












Basic:












Continuing operations

$               0.07


$                                (0.02)


$                       0.09


$               0.03


$                                (0.03)


$                       0.06

Discontinued operations

-


-


-


-


-


-


$               0.07


$                                (0.02)


$                       0.09


$               0.03


$                                (0.03)


$                       0.06













Diluted:












Continuing operations

$               0.07


$                                (0.02)


$                       0.09


$               0.03


$                                (0.03)


$                       0.06

Discontinued operations

-


-


-


-


-


-


$               0.07


$                                (0.02)


$                       0.09


$               0.03


$                                (0.03)


$                       0.06













Weighted average common shares outstanding












 Basic

2,328.8


2,328.8


2,328.8


2,315.7


2,315.7


2,315.7

 Diluted

2,365.0


2,365.0


2,365.0


2,341.3


2,341.3


2,341.3













Dividends paid per share

$                  -




$                           -


$                  -




$                           -

























Percentage of Net Sales*












Net sales

100%




100%


100%




100%

Costs of sales

63.0%




62.7%


64.6%




64.3%

Gross margin

37.0%




37.3%


35.4%




35.7%













Selling, general and administrative expenses

16.5%




15.8%


17.4%




16.5%

Research and development expenditures

14.1%




13.6%


15.0%




14.6%

Separation-related transaction costs

1.9%




0.0%


0.5%




0.0%

Other income

-3.5%




0.0%


-0.3%




0.0%

Intangibles amortization

1.2%




0.0%


1.3%




0.0%

Operating earnings

6.7%




7.9%


1.5%




4.6%













Other income (expense):












  Interest expense, net

-0.7%




-0.7%


-0.7%




-0.7%

  Gain on sales of investments and businesses, net

1.0%




0.1%


0.2%




0.2%

  Other

-0.6%




-0.6%


0.2%




0.2%

Total other income (expense)

-0.3%




-1.3%


-0.3%




-0.3%

Earnings from continuing operations before income taxes

6.4%




6.6%


1.2%




4.3%

Income tax expense (benefit)

3.3%




2.7%


-0.1%




1.5%

Earnings from continuing operations

3.1%




4.0%


1.3%




2.8%













Earnings from discontinued operations, net of tax

0.0%




0.0%


0.0%




0.0%

Net earnings

3.1%




4.0%


1.3%




2.8%













Less: Earnings (loss) attributable to noncontrolling interests

0.1%




0.1%


0.0%




0.0%

Net earnings attributable to Motorola, Inc.

3.0%




3.9%


1.4%




2.8%













* Percentages may not add up due to rounding



Motorola, Inc. and Subsidiaries

Non-GAAP Adjustments Bridge

(In millions, except per share amounts)














Three Months Ended


Three Months Ended


July 3, 2010


July 4, 2009


GAAP Results


Non-GAAP
Adjustments


Non-GAAP Results


GAAP Results


Non-GAAP
Adjustments


Non-GAAP Results













Net sales

$             5,414


$                                     -


$                     5,414


$             5,497


$                                     -


$                     5,497

Costs of sales

3,412


16


3,396


3,787


(1)


3,788

Gross margin

2,002


(16)


2,018


1,710


1


1,709













Selling, general and administrative expenses

896


42


854


822


44


778

Research and development expenditures

762


26


736


775


23


752

Separation-related transaction costs

105


105


-


-


-


-

Other charges (income)

(189)


(189)


-


33


33


-

Intangibles amortization

65


65


-


70


70


-

Operating earnings

363


(65)


428


10


(169)


179













Other income (expense):












  Interest expense, net

(38)


-


(38)


(30)


-


(30)

  Gain on sales of investments and businesses, net

53


50


3


30


-


30

  Other

(33)


-


(33)


23


69


(46)

Total other income (expense)

(18)


50


(68)


23


69


(46)

Earnings from continuing operations before income taxes

345


(15)


360


33


(100)


133

Income tax expense (benefit)

179


34


145


(2)


(47)


45

Earnings from continuing operations

166


(49)


215


35


(53)


88













Earnings from discontinued operations, net of tax

-


-


-


-


-


-

Net earnings

166


(49)


215


35


(53)


88













Less: Earnings attributable to noncontrolling interests

4


-


4


9


-


9

Net earnings attributable to Motorola, Inc.

$                162


$                                   (49)


$                        211


$                  26


$                                   (53)


$                          79

























Amounts attributable to Motorola, Inc. common shareholders












Earnings from continuing operations, net of tax

$                162


$                                   (49)


$                        211


$                  26


$                                   (53)


$                          79

Earnings from discontinued operations, net of tax

-


-


-


-


-


-

Net earnings

$                162


$                                   (49)


$                        211


$                  26


$                                   (53)


$                          79













Earnings per common share












Basic:












Continuing operations

$               0.07


$                                (0.02)


$                       0.09


$               0.01


$                                (0.02)


$                       0.03

Discontinued operations

-


-


-


-


-


-


$               0.07


$                                (0.02)


$                       0.09


$               0.01


$                                (0.02)


$                       0.03













Diluted:












Continuing operations

$               0.07


$                                (0.02)


$                       0.09


$               0.01


$                                (0.02)


$                       0.03

Discontinued operations

-


-


-


-


-


-


$               0.07


$                                (0.02)


$                       0.09


$               0.01


$                                (0.02)


$                       0.03













Weighted average common shares outstanding












 Basic

2,328.8


2,328.8


2,328.8


2,293.9


2,293.9


2,293.9

 Diluted

2,365.0


2,365.0


2,365.0


2,306.4


2,306.4


2,306.4













Dividends paid per share

$                  -




$                           -


$                  -




$                           -

























Percentage of Net Sales*












Net sales

100%




100%


100%




100%

Costs of sales

63.0%




62.7%


68.9%




68.9%

Gross margin

37.0%




37.3%


31.1%




31.1%













Selling, general and administrative expenses

16.5%




15.8%


15.0%




14.2%

Research and development expenditures

14.1%




13.6%


14.1%




13.7%

Separation-related transaction costs

1.9%




0.0%


0.0%




0.0%

Other charges (income)

-3.5%




0.0%


0.6%




0.0%

Intangibles amortization

1.2%




0.0%


1.3%




0.0%

Operating earnings

6.7%




7.9%


0.2%




3.3%













Other income (expense):












  Interest expense, net

-0.7%




-0.7%


-0.5%




-0.5%

  Gain on sales of investments and businesses, net

1.0%




0.1%


0.5%




0.5%

  Other

-0.6%




-0.6%


0.4%




-0.8%

Total other income (expense)

-0.3%




-1.3%


0.4%




-0.8%

Earnings from continuing operations before income taxes

6.4%




6.6%


0.6%




2.4%

Income tax expense (benefit)

3.3%




2.7%


0.0%




0.8%

Earnings from continuing operations

3.1%




4.0%


0.6%




1.6%













Earnings from discontinued operations, net of tax

0.0%




0.0%


0.0%




0.0%

Net earnings

3.1%




4.0%


0.6%




1.6%













Less: Earnings attributable to noncontrolling interests

0.1%




0.1%


0.2%




0.2%

Net earnings attributable to Motorola, Inc.

3.0%




3.9%


0.5%




1.4%













* Percentages may not add up due to rounding



Motorola, Inc.

Operating Earnings (Loss) after Non-GAAP Adjustments















Q1 2010


















TOTAL


MDB


Home


EMS


Networks


Other/Elims

Net sales



$ 5,044


$ 1,641


$ 838


$ 1,694


$        896


$            (25)

Operating earnings (loss)



$      76


$  (192)


$   20


$    141


$        112


$              (5)















Above-OE non-GAAP adjustments by P&L Statement line:

Statement Line













Reorganization of business charges

Cost of sales


5


3


1


1


-


-

Stock-based compensation expense

Cost of sales


8


2


1


3


2


-

Stock-based compensation expense

SG&A and R&D


64


27


8


20


9


-

Reorganization of business charges

Other charges (income)


16


12


4


1


1


(2)

Separation-related transaction costs

Other charges (income)


25


-


-


-


-


25

Legal settlement

Other charges (income)


(29)


-


-


-


-


(29)

Intangibles amortization expense

Intangibles amortization


65


-


13


51


1


-

Less:  Total above-OE non-GAAP adjustments



154


44


27


76


13


(6)















Operating earnings (loss) after non-GAAP adjustments



$    230


$  (148)


$   47


$    217


$        125


$            (11)















 Operating earnings (loss) as a percentage of net sales - GAAP



1.5%


-11.7%


2.4%


8.3%


12.5%


20.0%

 Operating earnings (loss) as a percentage of net sales - after non-GAAP adjustments



4.6%


-9.0%


5.6%


12.8%


14.0%


44.0%

















Q2 2010


















TOTAL


MDB


Home


EMS


Networks


Other/Elims

Net sales



$ 5,414


$ 1,724


$ 886


$ 1,850


$        967


$            (13)

Operating earnings (loss)



$    363


$      87


$   29


$    181


$        178


$          (112)















Above-OE non-GAAP adjustments by P&L Statement line:

Statement Line













Reorganization of business charges

Cost of sales


7


(2)


4


5


-


-

Stock-based compensation expense

Cost of sales


9


3


1


3


2


-

Stock-based compensation expense

SG&A and R&D


68


27


9


22


10


-

Reorganization of business charges

Other charges (income)


18


4


1


9


-


4

Separation-related transaction costs

Other charges (income)


105


-


-


-


-


105

Royalty settlement

Other charges (income)


21


-


-


21


-


-

Legal settlement

Other charges (income)


(228)


(228)


-


-


-


-

Intangibles amortization expense

Intangibles amortization


65


-


13


51


1


-

Less:  Total above-OE non-GAAP adjustments



65


(196)


28


111


13


109















Operating earnings (loss) after non-GAAP adjustments



$    428


$  (109)


$   57


$    292


$        191


$              (3)















 Operating earnings (loss) as a percentage of net sales - GAAP



6.7%


5.0%


3.3%


9.8%


18.4%


861.5%

 Operating earnings (loss) as a percentage of net sales - after non-GAAP adjustments



7.9%


-6.3%


6.4%


15.8%


19.8%


23.1%



Motorola, Inc.

Non-GAAP Adjustments (Highlighted Items, Stock-Based Compensation Expense and Intangibles Amortization Expense)












Q1 2010












Highlighted Items


Statement Line


Q1 2010 PBT
(Inc)/Exp


Q1 2010 Tax
Inc/(Exp)


Q1 2010 PAT
(Inc)/Exp


EPS impact*












Stock-based compensation expense


Cost of sales, SG&A and R&D


$              72


$             23


$              49


$           0.02

Intangibles amortization expense


Intangibles amortization


65


24


41


0.02

Separation-related transaction costs


Other charges (income)


25


5


20


0.01

Reorganization of business charges


Cost of sales and Other charges (income)


21


6


15


0.01

Legal settlement


Other charges (income)


(29)


(12)


(17)


(0.01)

Tax-related benefit


Income tax (expense) benefit


-


53


(53)


(0.02)

Impact of Medicare Part D Subsidy tax law change


Income tax (expense) benefit


-


(18)


18


0.01

 Total Continuing Operations Impact




$            154


$             81


$              73


$           0.03














Q2 2010












Highlighted Items


Statement Line


Q2 2010 PBT
(Inc)/Exp


Q2 2010 Tax
Inc/(Exp)


Q2 2010 PAT
(Inc)/Exp


EPS impact*












Separation-related transaction costs


Other charges (income)


$            105


$             15


$              90


$           0.04

Stock-based compensation expense


Cost of sales, SG&A and R&D


77


25


52


0.02

Intangibles amortization expense


Intangibles amortization


65


24


41


0.02

Reorganization of business charges


Cost of sales and Other charges (income)


25


7


18


0.01

Royalty settlement


SG&A


21


6


15


0.01

Gain on sale of business


Other income (expense)


(20)


-


(20)


(0.01)

Gain on sale of investment


Other income (expense)


(30)


(11)


(19)


(0.01)

Legal settlement


Other charges (income)


(228)


(84)


(144)


(0.06)

Tax-related expense


Income tax (expense) benefit


-


(82)


82


0.03

Tax-related benefit


Income tax (expense) benefit


-


66


(66)


(0.03)

 Total Continuing Operations Impact




$              15


$            (34)


$              49


$           0.02












* EPS impact may not add up due to rounding



SOURCE Motorola, Inc.



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http://www.motorola.com

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