Motorola Announces Record Third-Quarter Sales and Earnings
Motorola Announces Record Third-Quarter Sales and EarningsThird-Quarter 2005 Financial Highlights
- Sales up 26 percent: Record sales of $9.42 billion, compared to third-
quarter 2004 sales of $7.50 billion
- Earnings from continuing operations of $.69 per share, including
earnings of $.39 per share from significant items discussed below
- Global mobile device market share up 5.5 percentage points: Achieved an
estimated global market share of approximately 19 percent, an increase
of approximately 5.5 percentage points versus the year-ago quarter and
approximately 1 percentage point versus the second quarter of 2005
- Record Mobile Device shipments of 38.7 million units
- Positive operating cash flow of $1.1 billion
SCHAUMBURG, Ill., Oct. 18 -- Motorola, Inc.
(NYSE: MOT - News) today reported record sales and earnings from continuing
operations as shown below.
Third Quarter %
2005 2004 Increase
Sales $9.42B $7.50B 26%
EPS $0.69 $0.18 283%
Third-quarter 2005 earnings from continuing operations include income of $.39 per share from the items shown below.
Third-Quarter 2005 EPS Impact
Gain on Nextel stock and
related hedge adjustments $0.32
Tax benefits related to the
repatriation of cash and the
divestiture of a business 0.13
Debt retirement costs (0.03)
Reorganization of businesses (0.03)
Total EPS Impact $0.39
During the quarter, the company continued to strengthen its balance sheet. The company generated operating cash flow of $1.1 billion, its 19th consecutive quarter of positive operating cash flow. In addition, the company reduced its total debt by $1.0 billion through repurchases of long-term debt in the market. Also, the company purchased $353 million of its outstanding shares pursuant to a previously announced and ongoing share repurchase program. The company ended the quarter with a record net cash(1) position of $8.4 billion.
"We are very excited about our record third-quarter results and overall performance year-to-date," said Ed Zander, chairman and CEO. "Excluding reorganization charges, all four of Motorola's businesses grew profitably during the quarter - a testament to the hard-working and dedicated talent across the global Motorola organization. We are especially pleased with the record results achieved by our Mobile Devices business for unit shipments,
Operating Results
Mobile Devices Segment sales were $5.6 billion, up 41 percent compared with the year-ago quarter and a record for the business. Operating earnings were $597 million, compared with operating earnings of $394 million in the year-ago quarter, also a record for the business. Sales, earnings and market share were up as a result of "must-have" products that combine innovative style, leading technology and quality while enabling "must-do" experiences such as mobile video and mobile music.
- Shipped 38.7 million handsets during the third quarter -- an increase of
66 percent compared to the same period in 2004 and a record for the
business
- Grew market share to an estimated 19%, up approximately 5.5 percentage
points versus the year-ago quarter and approximately 1 percentage point
versus second quarter of 2005
- Awarded the second tender of the GSM Association's program to "Connect
the Unconnected" in the high-growth markets (Middle East, Africa, India
and Southeast Asia)
- Tremendous global demand for the Motorola RAZR -- the world's best-
selling clamshell mobile handset, with more than 6.5 million units sold
during the quarter and more than 12 million units sold to date
- Launched 13 new mobile devices -- four new handsets for CDMA networks,
five for iDEN and four for GSM networks, including the eagerly
anticipated Motorola ROKR E1 mobile handset
- Integrated new R&D teams in Europe and Asia to deliver value-added
services that leverage software platforms such as i-mode(TM)
- Began shipping the Motorola PEBL U6 and the Motorola SLVR L6 after the
quarter ended
Networks Segment sales were $1.6 billion, up 7 percent compared with the year-ago quarter. The segment continued to deliver a comprehensive value proposition in access, core, platforms and services for wireless and wireline carriers. Operating earnings increased to $268 million, compared with $159 million in the year-ago quarter.
- Motorola's CDMA2000 1X EV-DO wireless broadband solution was selected by
Alltel (USA) as it continues rollout of its Axcess Broadband service
- Signed a multi-million dollar contract with the Philippines' SMART
Communications for purchase of Motorola's Canopy wireless broadband
products
- Continued to strengthen global leadership position in the Push-to-Talk
over Cellular (PoC) market with commercial deployments for Optimus
(Portugal) and Wataniya Telecom (Maldives). To date, Motorola has
delivered its IMS-based solution to 44 wireless carriers in 33 countries
and territories
- Continued MOTOWi4 product portfolio momentum with the addition of three
new carrier-grade Canopy products including a WiMAX-compatible point-to-
point 300 Megabit solution
Government and Enterprise Mobility Solutions Segment sales were $1.6 billion, up 4 percent compared with the year-ago quarter. Automotive market sales were lower, while sales to the other markets served by the segment increased by 7 percent. Operating earnings decreased to $180 million, compared with $197 million in the year-ago quarter.
In the Government/Public Safety Market:
- Announced approximately $100 million in new awards to provide a national
fallback system and ambulance program for O2 Airwave in the United
Kingdom
- Announced new contracts for mission-critical solutions that deliver true
interoperability, critical networks and mission-critical data in several
U.S. counties
- Announced new mesh-enabled technology products, including shipment of
the new MOTOMESH multi-radio broadband solution, and introduced
MESHTRACK, a highly portable wireless broadband indoor/outdoor
location system for first responders
In the Automotive Market:
- Announced more than $1 billion in new lifetime sales awards across the
automotive business, including a multi-year award to provide the next-
generation telematics unit for General Motors OnStar solution
In the Enterprise Market:
- Introduced the HC700-L, Motorola's entry into the commercial, off-the-
shelf rugged handheld mobile computing market, first in a series of
mobile computing devices designed to meet the rigorous demands of mobile
workforces in the utilities, transportation, logistics, public works and
manufacturing industries
Connected Home Solutions Segment sales were $710 million, up 28 percent compared with the year-ago quarter. Operating earnings were $59 million, compared with $40 million in the year-ago quarter. During the quarter, Motorola extended its global footprint in digital video and voice and expanded its reach to the consumer through retail distribution channels.
- Motorola surpassed a significant milestone during the quarter -
40 million digital set-tops shipped to date
- Verizon launched its FiOS TV video service in Keller, Texas during the
quarter, deploying an end-to-end video network designed, built and
installed by Motorola, which includes state-of-the-art video set-top
products
- Named supplier of next-generation Internet Protocol TV (IPTV) set-tops
for SBC's U-Verse TV deployments
- Entered the Italian digital TV market with the launch of a new
interactive Terrestrial Receiver, providing access to interactive
entertainment services
Fourth-Quarter 2005 Outlook
The company's outlook for the fourth quarter of 2005 is for sales of between $10.3 billion and $10.5 billion. The outlook for earnings per share from continuing operations in the fourth quarter of 2005 is in the range of $.32 to $.34.
Conference Call and Webcast
Motorola's quarterly earnings conference call is scheduled to begin at 4:00 p.m. Central Time (USA), on Tuesday, October 18, 2005. Motorola plans a live web-cast 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:
(In millions, except Third Quarter Nine Months
per share amounts) 2005 2004 2005 2004
Net sales $9,424 $7,499 $26,410 $22,481
Gross margin 3,028 2,573 8,575 7,542
Operating earnings 1,100 644 2,947 2,114
Earnings from
continuing operations 1,750 426 3,389 1,512
Net earnings 1,751 479 3,376 886
Diluted earnings per
common share:
Continuing operations 0.69 0.18 1.35 0.63
Net Earnings 0.69 0.20 1.34 0.37
Weighted average diluted
common shares 2547.0 2466.0 2514.7 2463.3
outstanding
Definition of Net Cash
Net Cash = Cash, Cash Equivalents, Sigma Funds and Short-Term Investments minus Notes Payable minus Current Portion of Long-Term Debt minus Long-Term Debt.
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 fourth-quarter 2005 sales and earnings. Motorola cautions the reader that the factors below and those on pages 70 through 80 of Motorola's 2004 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, broadband and automotive industries; (2) the company's ability to continue to increase profitability and market share in its wireless handset business; (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) risks related to dependence on certain key manufacturing suppliers; (6) risks related to the company's high volume of manufacturing and sales in Asia; (7) the company's ability to purchase sufficient materials, parts and components to meet customer demand; (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 without limitation any relating to the Iridium project; (10) the timing and levels at which design wins become actual orders and sales; (11) the impact of foreign currency fluctuations; (12) the company's ability to use its deferred tax assets; (13) the impact on the company from continuing hostilities in Iraq and conflict in other countries; (14) the impact of changes in governmental policies, laws or regulations; and (15) the outcome of currently ongoing and future tax matters with the IRS.
About Motorola
Motorola is a Fortune 100 global communications leader that provides seamless mobility products and solutions across broadband, embedded systems and wireless networks. In your home, auto, workplace and all spaces in between, seamless mobility means you can reach the people, things and information you need, anywhere, anytime. Seamless mobility harnesses the power of technology convergence and enables smarter, faster, cost-effective and flexible communication. Motorola had sales of US $31.3 billion in 2004. For more information: www.motorola.com.
(1) A definition of net cash is provided at the end of this release
sales and profits. Motorola continues to deliver compelling products
and solutions to our customers who embrace our vision of seamless
mobility."
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. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
Quarter Ended Quarter Ended
October 1, 2005 October 2, 2004
--------------- ---------------
Net sales $9,424 $7,499
Costs of sales 6,396 4,926
--------------- ---------------
Gross margin 3,028 2,573
--------------- ---------------
Selling, general and administrative
expenses 1,021 1,042
Research and development expenditures 857 771
Other charges 50 116
--------------- ---------------
Operating earnings 1,100 644
--------------- ---------------
Other income (expense):
Interest income (expense), net 20 (48)
Gains on sales of investments and
businesses 1,266 195
Other (105) (98)
--------------- ---------------
Total other income (expense) 1,181 49
--------------- ---------------
Earnings from continuing operations
before income taxes 2,281 693
Income tax expense 531 267
--------------- ---------------
Earnings from continuing operations 1,750 426
--------------- ---------------
Earnings from discontinued operations,
net of tax 1 53
--------------- ---------------
Net earnings $1,751 $479
=============== ===============
Earnings per common share
-------------------------
Basic:
Continuing operations $0.71 $0.18
Discontinued operations - 0.02
--------------- ---------------
$0.71 $0.20
=============== ===============
Diluted:
Continuing operations $0.69 $0.18
Discontinued operations - 0.02
--------------- ---------------
$0.69 $0.20
=============== ===============
Weighted average common shares outstanding
------------------------------------------
Basic 2,480.6 2,359.6
Diluted 2,547.0 2,466.0
Dividends paid per share $0.04 $0.04
Nine Months Ended Nine Months Ended
October 1, 2005 October 2, 2004
--------------- ---------------
Net sales $26,410 $22,481
Costs of sales 17,835 14,939
--------------- ---------------
Gross margin 8,575 7,542
--------------- ---------------
Selling, general and administrative
expenses 3,048 3,108
Research and development expenditures 2,519 2,244
Other charges 61 76
--------------- ---------------
Operating earnings 2,947 2,114
--------------- ---------------
Other income (expense):
Interest expense, net 16 (175)
Gains on sales of investments and
businesses 1,930 348
Other (93) (118)
--------------- ---------------
Total other income 1,853 55
--------------- ---------------
Earnings from continuing operations
before income taxes 4,800 2,169
Income tax expense 1,411 657
--------------- ---------------
Earnings from continuing operations 3,389 1,512
--------------- ---------------
Loss from discontinued operations,
net of tax (13) (626)
--------------- ---------------
Net earnings $3,376 $886
=============== ===============
Earnings (loss) per common share
--------------------------------
Basic:
Continuing operations $1.38 $0.64
Discontinued operations (0.01) (0.26)
--------------- ---------------
$1.37 $0.38
=============== ===============
Diluted:
Continuing operations $1.35 $0.63
Discontinued operations (0.01) (0.26)
--------------- ---------------
$1.34 $0.37
=============== ===============
Weighted average common shares outstanding
------------------------------------------
Basic 2463.4 2,349.6
Diluted 2514.7 2,463.3
Dividends paid per share $0.12 $0.12
Motorola, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
ASSETS October 1, December 31,
2005 2004
--------------- ---------------
Cash & cash equivalents $2,856 $2,846
Sigma funds 9,732 7,710
Short-term investments 143 152
Accounts receivable, net 5,660 4,525
Inventories, net 2,302 2,546
Deferred income taxes 966 1,541
Other current assets 2,163 1,795
--------------- ---------------
Total current assets 23,822 21,115
--------------- ---------------
Property, plant and equipment, net 2,303 2,332
Investments 2,477 3,241
Deferred income taxes 2,930 2,353
Other assets 1,930 1,881
--------------- ---------------
Total assets $33,462 $30,922
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current portion of
long-term debt $344 $717
Accounts payable 3,597 3,330
Accrued liabilities 7,417 6,559
--------------- ---------------
Total current liabilities 11,358 10,606
--------------- ---------------
Long-term debt 3,975 4,578
Other liabilities 2,363 2,407
Stockholders' equity 15,766 13,331
--------------- ---------------
Total liabilities and stockholders'
equity $33,462 $30,922
=============== ===============
Motorola, Inc. and Subsidiaries
Segment Information
(In millions)
Summarized below are the Company's net sales by reportable segment for
the quarters and nine months ended October 1, 2005 and October 2, 2004.
Segment Net Sales
--------------------------------------
Quarter Ended Quarter Ended
October 1, October 2, % Change
2005 2004 from 2004
--------------------------------------
Mobile Devices $5,603 $3,987 41%
Networks 1,565 1,462 7%
Government & Enterprise Mobility
Solutions 1,620 1,565 4%
Connected Home Solutions 710 556 28%
Other/Eliminations (74) (71) 4%
---------------------------
Segment Totals $9,424 $7,499 26%
======================================
Segment Net Sales
--------------------------------------
Nine Months Nine Months
Ended Ended % Change
October 1, October 2, from 2004
2005 2004
--------------------------------------
Mobile Devices $14,918 $12,091 23%
Networks 4,838 4,477 8%
Government & Enterprise Mobility
Solutions 4,781 4,552 5%
Connected Home Solutions 2,090 1,545 35%
Other/Eliminations (217) (184) 18%
---------------------------
Segment Totals $26,410 $22,481 17%
======================================
Motorola, Inc. and Subsidiaries
Segment Information
(In millions)
Summarized below are the Company's operating earnings (loss) by reportable
segment for the quarters and nine months ended October 1, 2005 and
October 2, 2004.
Segment Operating Earnings (Loss)
--------------------------------------
GAAP Results
--------------------------------------
Quarter Ended Quarter Ended
October 1, 2005 October 2, 2004
-------------------- ----------------
Mobile Devices $597 $394
Networks 268 159
Government & Enterprise Mobility
Solutions 180 197
Connected Home Solutions 59 40
Other & Eliminations (4) (146)
--------------- ---------------
Segment Totals $1,100 $644
=============== ===============
Segment Operating Earnings (Loss)
--------------------------------------
GAAP Results
--------------------------------------
Nine Months Ended Nine Months Ended
October 1, 2005 October 2, 2004
-------------------- -----------------
Mobile Devices $1,535 $1,196
Networks 765 443
Government & Enterprise Mobility
Solutions 568 620
Connected Home Solutions 125 103
Other & Eliminations (46) (248)
--------------- ---------------
Segment Totals $2,947 $2,114
=============== ===============
--------------------------------------------------------------------------------
Source: Motorola, Inc.
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