Motorola Announces Second-Quarter 2010 Financial Results

July 29, 2010 by Press Release | Comments

SCHAUMBURG, Ill., July 29, 2010 — Financial Highlights:

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:

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:

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:

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:

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, April 3, July 4,
2010 2010 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, July 4,
2010 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 April July
3, 3, 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, April 3, July 4,
2010 2010 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, July 4,
2010 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 Three Months % Change
Ended Ended from
July 3, 2010 July 4, 2009 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
———
% Change
Six Months Ended Six Months Ended from
July 3, 2010 July 4, 2009 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 Three Months % Change
Ended Ended from
July 3, 2010 July 4, 2009 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)
————————-
% Change
Six Months Ended Six Months Ended from
July 3, 2010 July 4, 2009 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
July 3, 2010
————
Non-GAAP
GAAP Results Adjustments Non-GAAP Results

Net sales $5,414 $- $5,414
Costs of sales 3,412 16 3,396
Gross margin 2,002 (16) 2,018
—– — —–

Selling, general
and administrative
expenses 896 42 854
Research and
development
expenditures 762 26 736
Separation-related
transaction costs 105 105 -
Other income (189) (189) -
Intangibles
amortization 65 65 -
Operating earnings 363 (65) 428
— — —

Other income
(expense):
Interest expense,
net (38) – (38)
Gain on sales of
investments and
businesses, net 53 50 3
Other (33) – (33)
Total other income
(expense) (18) 50 (68)
— — —
Earnings from
continuing
operations before
income taxes 345 (15) 360
Income tax expense
(benefit) 179 34 145
— — —
Earnings from
continuing
operations 166 (49) 215

Earnings from
discontinued
operations, net of
tax – – -
— — —
Net earnings 166 (49) 215

Less: Earnings
(loss)
attributable to
noncontrolling
interests 4 – 4
Net earnings
attributable to
Motorola, Inc. $162 $(49) $211
==== —- —-

Amounts
attributable to
Motorola, Inc.
common
shareholders
Earnings from
continuing
operations, net of
tax $162 $(49) $211
Earnings from
discontinued
operations, net of
tax – – -
— — —
Net earnings $162 $(49) $211
==== ==== ====

Earnings per common
share
——————-
Basic:
Continuing
operations $0.07 $(0.02) $0.09
Discontinued
operations – – -
$0.07 $(0.02) $0.09
===== ====== =====

Diluted:
Continuing
operations $0.07 $(0.02) $0.09
Discontinued
operations – – -
$0.07 $(0.02) $0.09
===== ====== =====

Weighted average
common shares
outstanding
—————-
Basic 2,328.8 2,328.8 2,328.8
Diluted 2,365.0 2,365.0 2,365.0

Dividends paid per
share $- $-
— —

Percentage of Net
Sales*
—————–
Net sales 100% 100%
Costs of sales 63.0% 62.7%
Gross margin 37.0% 37.3%
—- —-

Selling, general
and administrative
expenses 16.5% 15.8%
Research and
development
expenditures 14.1% 13.6%
Separation-related
transaction costs 1.9% 0.0%
Other income -3.5% 0.0%
Intangibles
amortization 1.2% 0.0%
Operating earnings 6.7% 7.9%
— —

Other income
(expense):
Interest expense,
net -0.7% -0.7%
Gain on sales of
investments and
businesses, net 1.0% 0.1%
Other -0.6% -0.6%
Total other income
(expense) -0.3% -1.3%
—- —-
Earnings from
continuing
operations before
income taxes 6.4% 6.6%
Income tax expense
(benefit) 3.3% 2.7%
— —
Earnings from
continuing
operations 3.1% 4.0%

Earnings from
discontinued
operations, net of
tax 0.0% 0.0%
— —
Net earnings 3.1% 4.0%

Less: Earnings
(loss)
attributable to
noncontrolling
interests 0.1% 0.1%
Net earnings
attributable to
Motorola, Inc. 3.0% 3.9%
— —

Three Months Ended
April 3, 2010
————-
Non-GAAP
GAAP Results Adjustments Non-GAAP Results

Net sales $5,044 $- $5,044
Costs of sales 3,258 13 3,245
Gross margin 1,786 (13) 1,799
—– — —–

Selling, general
and administrative
expenses 876 42 834
Research and
development
expenditures 757 22 735
Separation-related
transaction costs 25 25 -
Other income (13) (13) -
Intangibles
amortization 65 65 -
Operating earnings 76 (154) 230
— —- —

Other income
(expense):
Interest expense,
net (33) – (33)
Gain on sales of
investments and
businesses, net 8 – 8
Other 12 – 12
Total other income
(expense) (13) – (13)
— — —
Earnings from
continuing
operations before
income taxes 63 (154) 217
Income tax expense
(benefit) (5) (81) 76
— — —
Earnings from
continuing
operations 68 (73) 141

Earnings from
discontinued
operations, net of
tax – – -
— — —
Net earnings 68 (73) 141

Less: Earnings
(loss)
attributable to
noncontrolling
interests (1) – (1)
Net earnings
attributable to
Motorola, Inc. $69 $(73) $142
=== —- —-

Amounts
attributable to
Motorola, Inc.
common
shareholders
Earnings from
continuing
operations, net of
tax $69 $(73) $142
Earnings from
discontinued
operations, net of
tax – – -
— — —
Net earnings $69 $(73) $142
=== ==== ====

Earnings per common
share
——————-
Basic:
Continuing
operations $0.03 $(0.03) $0.06
Discontinued
operations – – -
$0.03 $(0.03) $0.06
===== ====== =====

Diluted:
Continuing
operations $0.03 $(0.03) $0.06
Discontinued
operations – – -
$0.03 $(0.03) $0.06
===== ====== =====

Weighted average
common shares
outstanding
—————-
Basic 2,315.7 2,315.7 2,315.7
Diluted 2,341.3 2,341.3 2,341.3

Dividends paid per
share $- $-
— —

Percentage of Net
Sales*
—————–
Net sales 100% 100%
Costs of sales 64.6% 64.3%
Gross margin 35.4% 35.7%
—- —-

Selling, general
and administrative
expenses 17.4% 16.5%
Research and
development
expenditures 15.0% 14.6%
Separation-related
transaction costs 0.5% 0.0%
Other income -0.3% 0.0%
Intangibles
amortization 1.3% 0.0%
Operating earnings 1.5% 4.6%
— —

Other income
(expense):
Interest expense,
net -0.7% -0.7%
Gain on sales of
investments and
businesses, net 0.2% 0.2%
Other 0.2% 0.2%
Total other income
(expense) -0.3% -0.3%
—- —-
Earnings from
continuing
operations before
income taxes 1.2% 4.3%
Income tax expense
(benefit) -0.1% 1.5%
—- —
Earnings from
continuing
operations 1.3% 2.8%

Earnings from
discontinued
operations, net of
tax 0.0% 0.0%
— —
Net earnings 1.3% 2.8%

Less: Earnings
(loss)
attributable to
noncontrolling
interests 0.0% 0.0%
Net earnings
attributable to
Motorola, Inc. 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
July 3, 2010
————
GAAP Non-GAAP
Results Non-GAAP Results
Adjustments

Net sales $5,414 $- $5,414
Costs of sales 3,412 16 3,396
Gross margin 2,002 (16) 2,018
—– — —–

Selling, general and
administrative expenses 896 42 854
Research and development
expenditures 762 26 736
Separation-related
transaction costs 105 105 -
Other charges (income) (189) (189) -
Intangibles amortization 65 65 -
Operating earnings 363 (65) 428
— — —

Other income (expense):
Interest expense, net (38) – (38)
Gain on sales of
investments and
businesses, net 53 50 3
Other (33) – (33)
Total other income
(expense) (18) 50 (68)
— — —
Earnings from continuing
operations before income
taxes 345 (15) 360
Income tax expense
(benefit) 179 34 145
— — —
Earnings from continuing
operations 166 (49) 215

Earnings from discontinued
operations, net of tax – – -
— — —
Net earnings 166 (49) 215

Less: Earnings
attributable to
noncontrolling interests 4 – 4
Net earnings attributable
to Motorola, Inc. $162 $(49) $211
==== —- —-

Amounts attributable to
Motorola, Inc. common
shareholders
Earnings from continuing
operations, net of tax $162 $(49) $211
Earnings from discontinued
operations, net of tax – – -
— — —
Net earnings $162 $(49) $211
==== ==== ====

Earnings per common share
————————-
Basic:
Continuing operations $0.07 $(0.02) $0.09
Discontinued operations – – -
$0.07 $(0.02) $0.09
===== ====== =====

Diluted:
Continuing operations $0.07 $(0.02) $0.09
Discontinued operations – – -
$0.07 $(0.02) $0.09
===== ====== =====

Weighted average common
shares outstanding
———————–
Basic 2,328.8 2,328.8 2,328.8
Diluted 2,365.0 2,365.0 2,365.0

Dividends paid per share $- $-
— —

Percentage of Net Sales*
————————
Net sales 100% 100%
Costs of sales 63.0% 62.7%
Gross margin 37.0% 37.3%
—- —-

Selling, general and
administrative expenses 16.5% 15.8%
Research and development
expenditures 14.1% 13.6%
Separation-related
transaction costs 1.9% 0.0%
Other charges (income) -3.5% 0.0%
Intangibles amortization 1.2% 0.0%
Operating earnings 6.7% 7.9%
— —

Other income (expense):
Interest expense, net -0.7% -0.7%
Gain on sales of
investments and
businesses, net 1.0% 0.1%
Other -0.6% -0.6%
Total other income
(expense) -0.3% -1.3%
—- —-
Earnings from continuing
operations before income
taxes 6.4% 6.6%
Income tax expense
(benefit) 3.3% 2.7%
— —
Earnings from continuing
operations 3.1% 4.0%

Earnings from discontinued
operations, net of tax 0.0% 0.0%
— —
Net earnings 3.1% 4.0%

Less: Earnings
attributable to
noncontrolling interests 0.1% 0.1%
Net earnings attributable
to Motorola, Inc. 3.0% 3.9%
— —

Three Months Ended
July 4, 2009
————
GAAP Non-GAAP
Results Non-GAAP Results
Adjustments

Net sales $5,497 $- $5,497
Costs of sales 3,787 (1) 3,788
Gross margin 1,710 1 1,709
—– — —–

Selling, general and
administrative expenses 822 44 778
Research and development
expenditures 775 23 752
Separation-related
transaction costs – – -
Other charges (income) 33 33 -
Intangibles amortization 70 70 -
Operating earnings 10 (169) 179
— —- —

Other income (expense):
Interest expense, net (30) – (30)
Gain on sales of
investments and
businesses, net 30 – 30
Other 23 69 (46)
Total other income
(expense) 23 69 (46)
— — —
Earnings from continuing
operations before income
taxes 33 (100) 133
Income tax expense
(benefit) (2) (47) 45
— — —
Earnings from continuing
operations 35 (53) 88

Earnings from discontinued
operations, net of tax – – -
— — —
Net earnings 35 (53) 88

Less: Earnings attributable
to noncontrolling
interests 9 – 9
Net earnings attributable
to Motorola, Inc. $26 $(53) $79
=== —- —

Amounts attributable to
Motorola, Inc. common
shareholders
Earnings from continuing
operations, net of tax $26 $(53) $79
Earnings from discontinued
operations, net of tax – – -
— — —
Net earnings $26 $(53) $79
=== ==== ===

Earnings per common share
————————-
Basic:
Continuing operations $0.01 $(0.02) $0.03
Discontinued operations – – -
$0.01 $(0.02) $0.03
===== ====== =====

Diluted:
Continuing operations $0.01 $(0.02) $0.03
Discontinued operations – – -
$0.01 $(0.02) $0.03
===== ====== =====

Weighted average common
shares outstanding
———————–
Basic 2,293.9 2,293.9 2,293.9
Diluted 2,306.4 2,306.4 2,306.4

Dividends paid per share $- $-
— —

Percentage of Net Sales*
————————
Net sales 100% 100%
Costs of sales 68.9% 68.9%
Gross margin 31.1% 31.1%
—- —-

Selling, general and
administrative expenses 15.0% 14.2%
Research and development
expenditures 14.1% 13.7%
Separation-related
transaction costs 0.0% 0.0%
Other charges (income) 0.6% 0.0%
Intangibles amortization 1.3% 0.0%
Operating earnings 0.2% 3.3%
— —

Other income (expense):
Interest expense, net -0.5% -0.5%
Gain on sales of
investments and
businesses, net 0.5% 0.5%
Other 0.4% -0.8%
Total other income
(expense) 0.4% -0.8%
— —-
Earnings from continuing
operations before income
taxes 0.6% 2.4%
Income tax expense
(benefit) 0.0% 0.8%
— —
Earnings from continuing
operations 0.6% 1.6%

Earnings from discontinued
operations, net of tax 0.0% 0.0%
— —
Net earnings 0.6% 1.6%

Less: Earnings attributable
to noncontrolling
interests 0.2% 0.2%
Net earnings attributable
to Motorola, Inc. 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
—– — —-
Net sales $5,044 $1,641 $838
Operating earnings
(loss) $76 $(192) $20
—————— — —– —

Above-OE non-GAAP
adjustments by P&L Statement
Statement line: Line
———-
Reorganization of Cost of
business charges sales 5 3 1
Stock-based Cost of
compensation expense sales 8 2 1
Stock-based
compensation expense SG&A and R&D 64 27 8
Other
Reorganization of charges
business charges (income) 16 12 4
Other
Separation-related charges
transaction costs (income) 25 – -
Other
charges
Legal settlement (income) (29) – -
Intangibles Intangibles
amortization expense amortization 65 – 13
— — —
Less: Total above-OE
non-GAAP adjustments 154 44 27

Operating earnings
(loss) after non-
GAAP adjustments $230 $(148) $47
—————— —- —– —

Operating earnings
(loss) as a
percentage of net
sales -GAAP 1.5% -11.7% 2.4%
Operating earnings
(loss) as a
percentage of net
sales – after non-
GAAP adjustments 4.6% -9.0% 5.6%
— —- —

Other/
EMS Networks Elims
— ——– ——
Net sales $1,694 $896 $(25)
Operating earnings
(loss) $141 $112 $(5)
—————— —- —- —

Above-OE non-GAAP
adjustments by P&L Statement
Statement line: Line
———-
Reorganization of Cost of
business charges sales 1 – -
Stock-based Cost of
compensation expense sales 3 2 -
Stock-based
compensation expense SG&A and R&D 20 9 -
Other
Reorganization of charges
business charges (income) 1 1 (2)
Other
Separation-related charges
transaction costs (income) – – 25
Other
charges
Legal settlement (income) – – (29)
Intangibles Intangibles
amortization expense amortization 51 1 -
Less: Total above-OE
non-GAAP adjustments 76 13 (6)

Operating earnings
(loss) after non-
GAAP adjustments $217 $125 $(11)
—————— —- —- —-

Operating earnings
(loss) as a
percentage of net
sales -GAAP 8.3% 12.5% 20.0%
Operating earnings
(loss) as a
percentage of net
sales – after non-
GAAP adjustments 12.8% 14.0% 44.0%
—- —- —-

Q2 2010
——-

TOTAL MDB Home
—– — —-
Net sales $5,414 $1,724 $886
Operating earnings
(loss) $363 $87 $29
—————— —- — —

Above-OE non-GAAP
adjustments by P&L Statement
Statement line: Line
———-
Reorganization of Cost of
business charges sales 7 (2) 4
Stock-based Cost of
compensation expense sales 9 3 1
Stock-based
compensation expense SG&A and R&D 68 27 9
Other
Reorganization of charges
business charges (income) 18 4 1
Other
Separation-related charges
transaction costs (income) 105 – -
Other
charges
Royalty settlement (income) 21 – -
Other
charges
Legal settlement (income) (228) (228) -
Intangibles Intangibles
amortization expense amortization 65 – 13
— — —
Less: Total above-OE
non-GAAP adjustments 65 (196) 28

Operating earnings
(loss) after non-
GAAP adjustments $428 $(109) $57
—————— —- —– —

Operating earnings
(loss) as a
percentage of net
sales -GAAP 6.7% 5.0% 3.3%
Operating earnings
(loss) as a
percentage of net
sales – after non-
GAAP adjustments 7.9% -6.3% 6.4%
— —- —

Other/
EMS Networks Elims
— ——– ——
Net sales $1,850 $967 $(13)
Operating earnings
(loss) $181 $178 $(112)
—————— —- —- —–

Above-OE non-GAAP
adjustments by P&L Statement
Statement line: Line
———-
Reorganization of Cost of
business charges sales 5 – -
Stock-based Cost of
compensation expense sales 3 2 -
Stock-based
compensation expense SG&A and R&D 22 10 -
Other
Reorganization of charges
business charges (income) 9 – 4
Other
Separation-related charges
transaction costs (income) – – 105
Other
charges
Royalty settlement (income) 21 – -
Other
charges
Legal settlement (income) – – -
Intangibles Intangibles
amortization expense amortization 51 1 -
Less: Total above-OE
non-GAAP adjustments 111 13 109

Operating earnings
(loss) after non-
GAAP adjustments $292 $191 $(3)
—————— —- —- —

Operating earnings
(loss) as a
percentage of net
sales -GAAP 9.8% 18.4% 861.5%
Operating earnings
(loss) as a
percentage of net
sales – after non-
GAAP adjustments 15.8% 19.8% 23.1%
—- —- —-

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

Q1 2010
——-

Q1 2010 Q1 2010
Highlighted Items Statement Line PBT Tax
Inc/
—————– ————– (Inc)/Exp (Exp)
——— —-

Stock-based
compensation Cost of sales,
expense SG&A and R&D $72 $23
Intangibles
amortization Intangibles
expense amortization 65 24
Separation-related Other charges
transaction costs (income) 25 5
Cost of sales
and Other
Reorganization of charges
business charges (income) 21 6
Other charges
Legal settlement (income) (29) (12)
Income tax
(expense)
Tax-related benefit benefit – 53
Impact of Medicare Income tax
Part D Subsidy tax (expense)
law change benefit – (18)
Total Continuing
Operations Impact $154 $81

Q1 2010 EPS
Highlighted Items Statement Line PAT impact*
—————– ————– (Inc)/Exp ——-
———

Stock-based
compensation Cost of sales,
expense SG&A and R&D $49 $0.02
Intangibles
amortization Intangibles
expense amortization 41 0.02
Separation-related Other charges
transaction costs (income) 20 0.01
Cost of sales
and Other
Reorganization of charges
business charges (income) 15 0.01
Other charges
Legal settlement (income) (17) (0.01)
Income tax
(expense)
Tax-related benefit benefit (53) (0.02)
Impact of Medicare Income tax
Part D Subsidy tax (expense)
law change benefit 18 0.01
Total Continuing
Operations Impact $73 $0.03

Q2 2010

Q2 2010 Q2 2010
Highlighted Items Statement Line PBT Tax
Inc/
—————– ————– (Inc)/Exp (Exp)
——— —-

Separation-related Other charges
transaction costs (income) $105 $15
Stock-based
compensation Cost of sales,
expense SG&A and R&D 77 25
Intangibles
amortization Intangibles
expense amortization 65 24
Cost of sales
and Other
Reorganization of charges
business charges (income) 25 7
Royalty settlement SG&A 21 6
Gain on sale of Other income
business (expense) (20) -
Gain on sale of Other income
investment (expense) (30) (11)
Other charges
Legal settlement (income) (228) (84)
Income tax
(expense)
Tax-related expense benefit – (82)
Income tax
(expense)
Tax-related benefit benefit – 66
Total Continuing
Operations Impact $15 $(34)

Q2 2010 EPS
Highlighted Items Statement Line PAT impact*
—————– ————– (Inc)/Exp ——-
———

Separation-related Other charges
transaction costs (income) $90 $0.04
Stock-based
compensation Cost of sales,
expense SG&A and R&D 52 0.02
Intangibles
amortization Intangibles
expense amortization 41 0.02
Cost of sales
and Other
Reorganization of charges
business charges (income) 18 0.01
Royalty settlement SG&A 15 0.01
Gain on sale of Other income
business (expense) (20) (0.01)
Gain on sale of Other income
investment (expense) (19) (0.01)
Other charges
Legal settlement (income) (144) (0.06)
Income tax
(expense)
Tax-related expense benefit 82 0.03
Income tax
(expense)
Tax-related benefit benefit (66) (0.03)
Total Continuing
Operations Impact $49 $0.02