01—Abstract
Summary
Summary of the 10-K filed March 22, 1996. Cited figures are marked; the original filing is the authoritative source.
Motorola, Inc.'s 10-K for fiscal 1995 describes a diversified electronics company with five operating units: General Systems, Semiconductor Products, Messaging/Information/Media, Land Mobile Products, and Government and Space Technology, plus Automotive, Energy and Controls.
Its aggregate backlog rose to $8.024 billiona at December 31, 1995, up from $7.594 billion a year earlier, and management expects about 98% of it to ship in 1996. Semiconductor backlog grew to $3.25 billion from $2.68 billion, while the Land Mobile backlog declined to $1.18 billion from $1.30 billion. Research and development spending reached about $2.197 billion in 1995, up from $1.860 billion in 1994, and the company employed roughly 142,000 people at year-end.
The filing incorporates its core financial statements, MD&A, and five-year summary by reference from the proxy statement attachment, so this document does not itself include revenue, earnings, or balance sheet figures. Investors will need that attachment for profitability and cash flow analysis. The filing does disclose a market value of non-affiliate shares of about $30.8 billionb at $53.75 per share as of January 31, 1996, on roughly 591.7 million shares outstanding.
The main risks flagged are cyclical semiconductor capacity and pricing, dependence on the U.S. government for part of the Government and Space business, large exposure to the Iridium satellite program (including possible Motorola support obligations for Iridium, Inc.), pending environmental and personal-injury suits in Arizona, shareholder class actions, and cellular-phone health litigation. Management states that none of the pending legal matters is expected to have a material adverse effect on the company's financial position, liquidity, or results of operations.
02—Key points
Key Highlights
- Total backlog of $8.024 billion at year-end 1995, up about 5.7% from $7.594 billion, with roughly 98% expected to ship in 1996
- Semiconductor Products backlog rose to $3.25 billion from $2.68 billion, while Land Mobile Products backlog fell to $1.18 billion from $1.30 billion
- R&D spending on new product development and improvements was about $2.197 billion in 1995, up from $1.860 billion in 1994 and $1.521 billion in 1993
- Domestic export sales to third parties were $3.59 billion in 1995, and sales to affiliates were $6.64 billion
- Market value of non-affiliate common stock was about $30.8 billion at $53.75 per share as of January 31, 1996, on about 591.7 million shares outstanding
- Iridium satellite program is a major contributor to the Government and Space Technology Group, with Motorola acting as prime contractor and possibly required to provide financial support to Iridium, Inc.
- Multiple litigation exposures include Arizona groundwater contamination suits, securities class actions (Kaufman and Nextel), and cellular phone health-related cases, though management does not expect material adverse effects
03—Questions
Frequently Asked Questions
How large is Motorola's backlog and is it likely to convert to revenue?
Aggregate backlog was $8.024 billion at December 31, 1995, versus $7.594 billion a year earlier. Management believes about 98% of orders on hand will ship during 1996, though it cautions that this is a forward-looking estimate. The Semiconductor Products Sector has historically experienced abrupt rescheduling of firm and even expedited orders, which adds some uncertainty to conversion.
Does this filing show Motorola's revenue, profit, or cash flow?
Not directly. Item 8 (financial statements), Item 6 (selected financial data), and Item 7 (MD&A) are incorporated by reference from the attachment to the 1996 proxy statement. Investors should review that attachment for income statement, balance sheet, and cash flow details.
How heavily does Motorola depend on Iridium and the U.S. government?
The Iridium contract has become a significant part of the Government and Space Technology Group's business and is expected to remain a major contributor for several years. Motorola may remain obligated on subcontracts even if Iridium, Inc. cannot meet its funding obligations, and it could need to provide additional financial support. U.S. government business represented about 2.7% of total 1995 sales and revenues, and all government contracts can be cancelled for the government's convenience.
What are the most significant legal risks disclosed?
Motorola faces eight Arizona lawsuits alleging groundwater, soil, and air contamination in Phoenix and Scottsdale, including a class action with medical monitoring claims. It is also a defendant in a securities class action (Kaufman) alleging inflated stock prices during November 1994 to February 1995, a Nextel-related securities class action, and multiple cases alleging cellular phones cause or aggravate brain cancer. Management states none of these is expected to have a material adverse effect.
What does R&D spending and patent position suggest about competitiveness?
Motorola spent about $2.197 billion on R&D in 1995 and employed about 11,600 professionals in research activities, including customer-sponsored work. It owns 7,254 U.S. patents and 6,411 foreign patents, and was granted 1,016 U.S. patents in 1995. Patent protection is described as very important to the cellular business, indicating a strong technology base, though the industries are highly competitive and rapidly changing.
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