Adobe PDF Q1 2003 Earnings Release Presentation

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Adobe PDF Q1 2003 Earnings Release Presentation

  1. 1. Motorola Q1 2003 Earnings Release Conference Call Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 1
  2. 2. Ed Gams Senior Vice President Director of Investor Relations Motorola Inc. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 2
  3. 3. Safe Harbor Statement A number of forward-looking statements will be made during this conference call. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Motorola’s actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused, such differences can be found in yesterday’s earnings press release, on pages F-33 through F-40 of Motorola’s Proxy Statement for the 2003 annual meeting of stockholders and in Motorola’s other SEC filings. This presentation is being made on the morning of April 16, 2003. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein. 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. 2003 Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 3
  4. 4. Chris Galvin Chief Executive Officer Chairman of the Board of Directors Motorola Inc. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 4
  5. 5. 5-Point Plan for Improving Motorola’s Financial Performance 1. Persistent Enhancement of the Management Team and Work Environment 2. Aggressive Focus on Strengthening the Balance Sheet and Cash 3. Relentless Pursuit of Cost Competitiveness, Quality and Customer Satisfaction 4. Growth through Profitable Innovative Products, Systems, Software and Customer Relationships 5. Continuous Reassessment and Improvement of our Business Strategies and Portfolio Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 5
  6. 6. David Devonshire Chief Financial Officer Executive Vice President, Motorola Inc. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 6
  7. 7. Motorola Inc. Financial Results Favorable Q1 2003 Q1 2002 (Unfavorable) Sales $M $6,043 $6,181 (2%) Earnings Per Share Excluding $0.01 ($0.08) +$0.09 Special Items Earnings Per Share GAAP $0.07 ($0.20) +$0.27 ! EPS Met Expectations, Sales Slightly Below Expectations ! EPS Excluding Special Items Improved $0.09, Despite 2% Sales Decline ! GAAP Results Reflect Gain on Sale of 25 Million Nextel Shares Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 7
  8. 8. Gross Margin (Ongoing Operations Excluding Special Items) % of Sales % of Sales 40% 40% Multi-Year Trend of 1st Quarter Gross Margin 35% 35% 32.7% 30.1% 30% 30% 27.2% 25% 25% Q1'01 Q3'01 Q1'02 Q3'02 Q1'03 Q1'01 Q1'02 Q1'03 ! Gross Margin Improved 2.6% Points vs. Q1 2002 and 5.5% Points vs. Q1 2001 ! Improvement Reflects Continuing Success of Restructuring/Cost Reduction ! Largest Improvement versus Q1 2002 in SPS and GTSS Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 8
  9. 9. Selling, General and Administrative Expenses (Ongoing Operations Excluding Special Items) $ in Millions $ in Millions Multi-Year Trend of $2,000 $2,000 25.0% 1st Quarter SG&A 20.0% 18.1% $1,500 $1,500 15.4% 14.8 % 15.0% $1,000 $1,000 10.0% $500 $500 5.0% $0 $0 0.0% Q1'01 Q3'01 Q1'02 Q3'02 Q1'03 Q1'01 Q1'02 Q1'03 ! Very Tight Budgetary Control on Discretionary First Quarter Spending ! SG&A Improved 3.3% Points from Q1 2002 ! Improvement Reflects Continuing Success of Restructuring/Cost Reduction ! Lower G&A Partially Offset by Higher Selling/Advertising Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 9
  10. 10. Motorola Work Force Trend 160 150 147 136 140 125 121 Work Force (Thousands) 120 111 107102 100 97 94 100 90 80 60 40 20 0 Aug- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Dec- 00 00 01 01 01 01 02 02 02 02 03 03 Est ! New Estimate of Approximately 90,000 By or Before End of 2003 ! Further Decrease Driven By: ! Announced Outsourcing of Portions of IT and HR ! Attrition ! Selective Work Force Reductions Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 10
  11. 11. Research & Development Expenses (Ongoing Operations Excluding Special Items) $ in Millions $ in Millions $2,000 25.0% $2,000 Multi-Year Trend of 1st Quarter R&D 20.0% $1,500 $1,500 15.1% 15.7% 14.7% 15.0% $1,000 $1,000 10.0% $500 $500 5.0% $0 $0 0.0% Q1'01 Q3'01 Q1'02 Q3'02 Q1'03 Q1'01 Q1'02 Q1'03 R&D Spending Remains Relatively Stable Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 11
  12. 12. Operating Margin % (Ongoing Operations, Excluding Special Items) % of Sales % of Sales Multi-Year Trend of 8% 8% 1st Quarter 6% Operating Margin 6% 4% 4% 2.2% 2% 2% Q1’01 Q1’02 0% 0% Q1’03 -2% Q1'01 Q3'01 Q1'02 Q3'02 Q1'03 -2% -4% -2.7% -4% -3.4% ! Considering Seasonality of Q1, Operating Margin Continues to Trend Upward ! Operating Margin Improved 4.9% Points Vs. Q1 2002, & 5.6% Points Vs. Q1 2001 ! Operating Earnings Excl. Special Items Increased $300M from Q1 2002 ! Largest Improvement from Q1 2002 in SPS and GTSS Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 12
  13. 13. Net Special Items in Q1 2003 $ millions Pretax Impact Gains on Sales of Investments ($279) Iridium – Reduction of Reserves No Longer Necessary ($59) Restructuring Reserves No Longer Necessary ($39) Restructuring / Employee Separation / Exit Cost $43 Fixed Asset Impairments $62 Investment Impairments $47 NET SPECIAL ITEM – PRETAX ($225) = $0.06 EPS ! Net Special Items for 2003 Are Expected to be Approximately $0. The Company Expects to Have Special Item Charges During 2003 Related to: quot; Acquisition Related Charges Associated with Winphoria/Next Level quot; The Initiation of Additional Actions to Improve Cost Competitiveness . ! Reductions to Reserves Previously Established Through Special Item Charges Have Been Consistently Reflected as a Special Item. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 13
  14. 14. Cash Flow ($ in Billions) Fcst Q1 Annual Annual 2003 2003 2002 Operating Cash Flow without $0.7 $2.4 $2.4 Restructuring/Other Cash for Restructuring/Other ($0.2) ($0.8) ($1.1) Operating Cash Flow $0.5 $1.6 $1.3 Capital Expenditures ($0.1) ($1.0) ($0.6) Free Cash Flow $0.4 $0.6 $0.7 ! Ninth Consecutive Quarter of Positive Operating Cash Flow ! Expect Annual Depreciation of Approximately $1.6B ! Expect Cash Contribution to Pension Fund of Approximately $200M ! Expect Neutral/Slightly Positive Working Capital Impact to Cash Flow Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 14
  15. 15. Average Working Capital / Sales Ratio Accounts Receivable + Inventory - Accounts Payable % to Sales 25.0% 21.6% 22.7% 22.3% 21.9% 19.9% 18.4% 20.0% 17.4% 17.0% 17.0% 17.1% 15.0% Long Term Target of 12% 4 Quarter Rolling Average 10.0% Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4'02 Q1'03 Accounts Receivable Performance Remains Good # Inventory Performance Continues to Need Improvement # Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 15
  16. 16. Cash and Debt $ in Billions Mar. 2003 Dec. 2002 Dec 2001 Short Term/Current Debt $0.8 $1.6 $0.9 Long Term Debt $6.0 $6.0 $7.2 Long Term Debt Linked to $1.2 $1.2 $1.2 Equity Units TOTAL DEBT $8.0 $8.8 $9.2 Cash & Cash Equivalents ($6.4) ($6.6) ($6.2) NET DEBT $1.6 $2.3 $3.1 NET DEBT/ NET 12.3% 16.7% 18.4% DEBT+EQUITY ! Total Debt Down $800M in Q1 2003, Net Debt Down $700M ! PURS ($825M) Retired February 2003 ! Net Debt Ratio Improved by Over 4 Percentage Points Compared To Dec. 2002 Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 16
  17. 17. Low Level of Debt Maturities (Excludes Commercial Paper) 2003/2004/2005 $ in Billions $1.5 $1.0 ~$0.5 ~$0.4 $0.5 ~$0.2 $0.0 Q2/Q3/Q4 2003 2004 2005 Strong Position to Meet Debt Maturities With $6.4B in Cash Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 17
  18. 18. Mike Zafirovski President and Chief Operating Officer Motorola Inc. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 18
  19. 19. Motorola Objectives for 2003 Commitment to Continued Earnings And Balance # Sheet Improvement Conservatively Managing Cost Structure ― Continued Focus on Positive Cash Flow ― Drive Continuous Improvement ― 90% of Employee Bonuses Based on Achieving Operating Earnings and Cash Flow Goals Return to Growth # Accelerate Addressing Opportunities and Fixing # Strategic Issues Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 19
  20. 20. Performance of Motorola’s 6 Major Sectors Number of Sectors Q1 2003 Q2 2003 2003 Annual Actual Estimate Estimate Operating Earnings Year Over Year Improvement 5 4/5 5 (Excluding Special Items) Positive Operating Earnings 5 5 6 (Excluding Special Items) Positive Operating Cash Flow 6 5 6 Continued Improvement in a Tough Environment Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 20
  21. 21. Segment Updates & Guidance Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 21
  22. 22. Personal Communications Segment ( Excluding Special Items) Favorable Q1 2003 Q1 2002 (Unfavorable) Orders $M $2,495 $2,644 (6%) Sales $M $2,447 $2,406 2% Operating Earnings $M $108 $106 2% Operating Margin 4.4% 4.4% - ! Excluding Discontinued Paging Business from Q1 2002: ! Sales Up 4%, Orders down 2%, Operating Earnings up 11% ! Sales & Orders Near Parity in Q1 Now That New Order Process In Place ! Higher Gross Margin Offset By Investment in R&D, Selling/Advertising ! Internet Software Content Group Integrated Into PCS ! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 22
  23. 23. Personal Communications Segment Units and Market Share Q1 2003 Q1 2002 Growth Unit Shipments 16.7 Million 14.2 Million 18% Market Share ~19% ~16% Up 3 Points Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 23
  24. 24. Personal Communications Segment Q1 2003 Estimated Sell-In Market Share Compared Compared to Q1 2002 to Q4 2002 North America Up Strongly Up Asia Down Down Europe Up Slightly Up Slightly Latin America Up Strongly Down Slightly Worldwide Up Up Slightly ! Became a Clear #1 in Both U.S. and Canada ! Share is Down In China, But We Remain # 1 by More than 5 % Points ! Local Companies in China Continue to Gain Share ! Modest Share Gain in Europe ! Latin America Share More than Double Q102, Modest Decline from Q402 Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 24
  25. 25. China Market Actions !Strong New Product Portfolio quot; Recently Accelerated Launch Dates $ 3 New Products Launched In Q1 $ 2 More In Q2 $ 9 More In Q3 ! Supporting New Product Launches with Digital Content and Personalization Features ! Increasing R&D Resources Focused on China Market ! Strengthening Distribution quot; Aligning Support Around Distributors AND Operators quot; Extending Distribution Coverage of Smaller Cities quot; Initiatives to Work Directly with Large Retailers quot; Closer Collaboration with Operators Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 25
  26. 26. Personal Communications Segment Unit Shipments by Technology Q1 2003 Change from Q1 2002 CDMA Unit Shipments Up 58% GSM Unit Shipments Down 5% TDMA Unit Shipments Up 315% iDEN Unit Shipments Down 7% ! CDMA/TDMA Growth Driven By Americas ! GSM Weakness in Asia Partially Offset by Strength in Americas ! iDEN Decline From Ongoing Shift to Direct Fulfillment Program With Nextel Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 26
  27. 27. NEW COLOR PHONES SHIPPING IN Q1 C350 A388c PDA GSM GSM (Shipping in Asia (Shipping in Asia) and Europe) Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 27
  28. 28. NEW COLOR GSM PHONES SHIPPING IN 3rd QUARTER E365 A760 T725 E390 Integrated Java+Linux EDGE Integrated Camera PDA Camera, 3D Audio V295 E380 V600 Integrated Integrated Camera Camera Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 28
  29. 29. NEW COLOR CDMA PHONES SHIPPING IN 2ND HALF … and More Than 10 to Come in the Second Half of 2003. Most Will Be Announced During Q2 V810 Integrated Camera E310 (Q4 2003) (Q3 2003) Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 29
  30. 30. Personal Communications Segment Average Selling Price Q1 2003 Down 5% from Q4 2002 Down 12% from Q1 2002 ASP Decline Primarily Due To Higher Mix of Entry Level Products Annual 2003 Estimate Down ~5% ASP’s Expected to Increase Slightly in Second Half of 2003 as a Higher Percentage of Color, Camera and Other Feature Rich Phones Ship Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 30
  31. 31. Handset Industry Perspective Q1 2003 Sell-Through Estimate ~90 to 93 Million Units Global Industry in Channel Inventory ! Industry Inventory Was Reduced by Approximately 4 to 5 Million Units in Q1 ! Industry Inventory in the Channel is Approximately 9 Weeks ! Highest Weeks of Industry Inventory in Asia at 11 to 12 Weeks ! China Higher than Elsewhere in Asia Motorola in Channel Inventory ! Motorola Global Channel Inventory Approximately 7 Weeks ! Within Historical Industry Norm of 6 to 8 Weeks ! Motorola Channel Inventory in Asia is Within Normal Range of 6-8 Weeks Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 31
  32. 32. 2003 Industry Handset Forecast Sell-Through Units Q2 2003 ~98 Million to 103 Million Annual 2003 ~430 Million Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 32
  33. 33. Personal Communications Segment Q2 2003 Forecast Compared to Compared to Q2 2002 Q1 2003 Up Slightly Up Sales Up Slightly Higher Operating Margin % (Excluding Special Items) ! Expect Competitive Environment in China to be Comparable to Q1 2003 ! China Market Channel Inventory, While Down Approx. 1 Million Units Still is Too High • GAAP Operating Margin % is Expected to be Higher in Q2 2003 Compared to Q2 2002 and Higher Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release. • The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 33
  34. 34. Semiconductor Products Segment ( Excluding Special Items) Favorable Q1 2003 Q1 2002 (Unfavorable) Orders $M $1,104 $1,319 (16%) Sales $M $1,151 $1,127 2% Operating Earnings $M ($74) ($227) 67% Operating Margin (6.4%) (20.1%) 13.7 % Points ! Order Decline is Indicative of Ongoing Weakness in Served Markets ! Book to Bill Ratio of 0.96 ! Lower Operating Loss Driven by: ! Higher Gross Margin, Lower Operating Expenses ! Sales Up Substantially in Wireless, Up in Transportation and Down Substantially in Networking/Computing. ! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 34
  35. 35. SPS – Other Developments Announced 11th Merchant Market Chipset Customer # Motorola Wafer Fab. In Scotland Closing by End of # April 2003. Wafer Fabs Will then Total 8 Cost Reduction Activities will Continue To Be # Implemented in 1st Half 2003. Breakeven Sales Expected To Be Reduced to Approximately $5.0 Billion. Capex Expected to be $350M in 2003 # We Now Forecast Our Served Semiconductor # Markets to Grow Approximately 5-10% in 2003 Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 35
  36. 36. Semiconductor Products Segment Q2 2003 Forecast Compared to Compared to Q2 2002 Q1 2003 Down Up Slightly Sales Smaller Loss Smaller Loss Operating Margin % (Excluding Special Items) Compared to Q1 2003 ! Sales Expected to be Up in Transportation, Flat in Wireless & Networking ! Operating Margin Expected to Improve Due to Leverage on Higher Sales • GAAP Operating Margin % is Expected to be a Smaller Loss in Q2 2003 Compared to Q2 2002 and Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release. • The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 36
  37. 37. Global Telecom Solutions Segment ( Excluding Special Items) Favorable Q1 2003 Q1 2002 (Unfavorable) Orders $M $935 $1,293 (28%) Sales $M $952 $1,085 (12%) Operating Earnings $M $23 ($51) >100% Operating Margin 2.4% (4.7%) 7.1 % Points ! Decline in Orders and Sales Indicative of Industry Condition ! Profitability Driven by Strong Execution: ! Higher Gross Margin & Lower Operating Expenses ! Four Consecutive Quarters with Positive Operating Earnings ! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 37
  38. 38. GTSS – Other Developments Breakeven Sales Now Reduced to Slightly Below $4.0B. # Announced Acquisition of Winphoria # Adds Next Generation Packet-based Switching to # Wireless Networking Solutions Portfolio Adding Soft-Switch, to Supplement Existing Outsourced # Circuit Switch Portfolio, Addresses Long-Standing Need for Core Switching Offering from GTSS Wireless Infrastructure Industry Revenue Expected to # Decline 6-12% in 2003. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 38
  39. 39. Global Telecom Solutions Segment Q2 2003 Forecast Compared to Compared to Q2 2002 Q1 2003 Down Substantially Up Sales Flat Flat Operating Margin % (Excluding Special Items) ! Financial Performance is Stabilizing on a Sequential Basis • GAAP Operating Margin % is Expected to be a Smaller Loss in Q2 2003 Compared to Q2 2002 and a Loss Compared to a Profit in Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release. • The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 39
  40. 40. Commercial Govt. and Industrial System Segment ( Excluding Special Items) Favorable Q1 2003 Q1 2002 (Unfavorable) Orders $M $905 $877 3% Sales $M $863 $802 8% Operating Earnings $M $69 $50 38% Operating Margin 8.0% 6.2% 1.8% Points ! Orders, Sales, Operating Earnings, Operating Margin All Increased ! Increase in Operating Earnings Driven by: ! Sales Growth Driven by Strength in North America ! Higher Gross Margin ! Positive Operating Cash Flow During Q1 2003 and In 4 of Last 5 Quarters Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 40
  41. 41. CGISS – Other Developments # U.S. Federal Government Business Improving # U.S. State and Local Government Business Still Weak # International Business Improving – Q1 Tetra Contracts − Hong Kong − Taiwan − UK − Venezuela − Mainland China − Singapore ! 2003 Two-Way Radio Industry Growth Forecasted to be 2-8% Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 41
  42. 42. Commercial Govt. and Industrial System Segment Q2 2003 Forecast Compared to Compared to Q2 2002 Q1 2003 Up Slightly Up Sales Higher Higher Operating Margin % (Excluding Special Items) • GAAP Operating Margin % is Expected to be a Profit in Q2 2003 Compared to a Loss in Q2 2002 and a Higher Profit in Q2 2003 Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release. • The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 42
  43. 43. Integrated Electronic Systems Segment ( Excluding Special Items) % Favorable Q1 2003 Q1 2002 (Unfavorable) Orders $M $529 $570 (7%) Sales $M $521 $509 2% Operating Earnings $M $23 $22 5% Operating Margin 4.4% 4.3% 0.1 % Points ! Sales, Operating Earnings and Operating Margin Slightly Higher ! Sales Growth in Automotive, Largely Offset By Declines in Other Groups ! Operating Cash Flow Slightly Positive During Q1 2003 and Positive In 4 of Last 5 Quarters Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 43
  44. 44. Integrated Electronic Systems Segment Q2 2003 Forecast Compared to Compared to Q2 2002 Q1 2003 Down Slightly Up Slightly Sales Slightly Higher Higher Operating Margin % (Excluding Special Items) ! Continued Strong Performance in Automotive Compared to Q2 2002 ! Compared to Q1 2003 Sales Expected to be Up Slightly in Energy and Motorola Computer Group and Flat in Automotive • GAAP Operating Margin % is Expected to be a Profit in Q2 2003 Compared to a Loss in Q2 2002 and a Higher Profit in Q2 2003 Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release. • The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 44
  45. 45. Broadband Communications Segment ( Excluding Special Items) % Favorable Q1 2003 Q1 2002 (Unfavorable) Orders $M $343 $537 (36%) Sales $M $405 $525 (23%) Operating Earnings $M $26 $47 (45%) Operating Margin 6.4% 9.0% -2.6 % Points ! Sales Decline Driven by Lower Capital Expenditures by Cable Operators ! Operating Margin Decline Due to Decrease in Sales Partially Offset by Lower Operating Expenses. ! Positive Operating Cash Flow During Q1 2003 and In Last 5 Quarters ! Remains Technology and Market Share Leader in Cable Equipment Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 45
  46. 46. BCS – Other Developments # Shipped 1.1 Million Set Top Boxes During Q1 2003, Down 300K from Q102 # Shipped 1.0 Million Cable Modems During Q1 2003, Up 400K from Q102 # Still Investing in Brand Advertising and R&D for Broadband # Expanded Motorola’s Presence in the Consumer Market, Launching the Broadband “Connected Home” Strategy # Significant Win from MTV for Their Multi-network Conversion from Analog to Digital # Two Major Technology Wins in Mexico – Cablevisión Monterrey -Infrastructure & Digital Set-tops – Multioperadora de Sistemas -Motorola IP Technology for the Delivery of High-Speed Data ! Broadband Equipment Industry Revenue Expected to decline 10%-15% in 2003 as Cable Operators Continue To Reduce Capital Expenditures Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 46
  47. 47. Broadband Communications Segment Q2 2003 Forecast Compared to Compared to Q2 2002 Q1 2003 Down Very Flat to Up Slightly Sales Substantially Lower Flat Operating Margin % (Excluding Special Items) ! Sales Decline Compared to Prior Year Driven by Lower Capital Spending from Cable Operators, Product Mix and Reduced ASPs ! Operating Margins Compared to prior Year Impacted by Lower Sales and ASP Reductions, Partially Offset by Lower Operating Expenses • GAAP Operating Margin % is Expected to be Lower in Q2 2003 Compared to Q2 2002 and Lower Compared to Q1 2003. Special Items Excluded Above are Described Further in the Company's Q1 2003 Earnings Press Release. • The terms Flat, Slightly, Substantially and Very Substantially are Only Used in Forecasting Sales on this Slide • Flat Indicates a Variance of 0.5% or Less, Slight or Slightly Indicates a Variance of up to 5%, Substantial or Substantially Indicates a Variance From 15% up to 25%. Very Substantial or Very Substantially Indicates a Variance of 25% or More. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 47
  48. 48. Motorola Objectives for 2003 Commitment to Continued Earnings And Balance # Sheet Improvement Conservatively Managing Cost Structure ― Continued Focus on Positive Cash Flow ― Drive Continuous Improvement ― 90% of Employee Bonuses Based on Achieving Operating Earnings and Cash Flow Goals Return to Growth # Accelerate Addressing Opportunities and Fixing # Strategic Issues Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 48
  49. 49. Motorola, Inc. Driving the Next Step Change in our Cost Competitiveness Phase II Phase I Digital Six Sigma Mostly Restructuring Actions •Cost of Poor Quality • Staff Reductions •Sourcing Effectiveness • Facility Closures • New Product Intro./ Eng. Effectiveness • Outsourcing Targeting $3 B Approximately $4B Cost Reductions Cost Reductions 2003/2004 2001/2002 Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 49
  50. 50. Guidance Update David Devonshire Chief Financial Officer Executive Vice President, Motorola Inc. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 50
  51. 51. Q2 2003 Guidance Favorable (Unfavorable) Q2 2003 Q2 Q1 Q2 2002 Q1 2003 2002 2003 Sales $6.4B-$6.6B $6.9B $6.0B (4%)-(7%) 6%-9% Earnings Per Share $0.03 -$0.05 $0.02 $0.01 $0.01 -$0.03 $0.02 -$0.04 (Excluding Special Items) Earnings Per Share $0.01-$0.03 ($1.02) $1.03 -$1.05 ($0.04)-($0.06) $0.07 (on a GAAP Basis) ! Versus Q2 2002 Improvement in Operating Earnings On Sales Decline of 4-7% Due to Beneficial Results of Restructuring and Cost Reductions ! Expect Special Items Charge of Approx. $0.02 Per Share Consisting Mostly of: quot; Acquisition Related Charges for Winphoria/Next Level Transactions quot; Charges For Additional Cost Reduction Actions Which Could Not Be Recorded in Q1 2003 Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 51
  52. 52. Annual 2003 Guidance Previous 2003 Guidance 2002 2001 Sales $27.5 to $28.0B ~$28.0B $27.3B $30.5B Earnings Per Share $0.35 to $0.40 ~$0.40 $0.12 ($0.33) (Excluding Special Items) $0.35 to $0.40 ~$0.40 ($1.09) ($1.78) Equal To Or Greater Earnings Per Share Than EPS Excluding (GAAP) Special Items ! Sales Guidance Lowered Slightly Due to Slow Pace of Economic Recovery which Slightly Reduced our Industry Forecasts for Handsets, Semiconductors and Broadband ! Sales Growth Expected in PCS, CGISS, SPS and IESS ! Expect Positive Operating Earnings and Positive Operating Cash Flow in Each of our Six Major Business Segments ! Earnings Leverage Potential When Served Markets Improve Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 52
  53. 53. Estimated Quarterly EPS (Excluding Special Items) $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 Q1 Q2 EST Q3 EST Q4 EST -$0.05 -$0.10 -$0.15 2002 2003 Lower End of Range 2003 Upper End of Range 2nd Half Increase in EPS and Operating Margin Driven By: ! Continued Implementation of Margin Improvement Programs in PCS (Platform Strategy, Supply Chain Savings and Q3/Q4 2003 New Products) ! Volume Leverage Expected To Return SPS to Profitability in 2nd Half of 2003 ! Impact of Additional Cost Reduction Actions To Be Implemented in 2003 ! Normal Seasonal Q4 Operating Margin Improvements In PCS and CGISS Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 53
  54. 54. Chris Galvin Chief Executive Officer Chairman of the Board of Directors Motorola,Inc. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 54
  55. 55. Motorola Q&A Participants Mike Zafirovski Chris Galvin Chief Executive Officer President Chairman of the Board of Directors Chief Operating Officer Ed Gams David Devonshire Senior Vice President Executive Vice President Director of Investor Relations Chief Financial Officer Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 55
  56. 56. Use of Non-GAAP Measurements In addition to the GAAP results provided during this conference call, non-GAAP measurements, which present operating results on a basis excluding special items, have been provided. Management, as well as certain investors, use these results of operations, excluding special items, to measure Motorola's current and future financial performance. The non-GAAP measurements do not replace the presentation of Motorola's GAAP financial results. These measurements provide supplemental information to assist investors in analyzing Motorola's financial position and results of operations. Motorola has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of core on-going operations. Details of the special items and reconciliations of the non-GAAP measurements provided during this call to GAAP measurements can be found: (i) in the Form 8-K filed by Motorola on April 8, 2003, (ii) in the Form 8-K filed by Motorola on April 15, 2003 (which attached yesterday’s earnings press release, and (iii) within the text of the slides that accompany this webcast. Each of these items can be found on Motorola’s website at www.motorola.com/investor Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 56
  57. 57. Safe Harbor Statement During this call we have made a number of forward-looking statements that are based on current expectations and involve risks and uncertainties. Such forward-looking statements include, but are not limited to, our comments and answers relating to the following topics: (1) expectations for Motorola sales and earnings per share for Q2 2003 and full year 2003; (2) the expected timing for completion of our restructuring actions, including the reduction of our employee population and the closing of facilities; (3) the impact of our restructuring actions on our financial performance, including cost savings; (4) expectations for Motorola’s operating cash flow and free cash flow during 2003; (5) selling, general and administrative expenses; (6) research and development expenses; (7) capital expenditures; (8) depreciation expense; (9) working capital plans; (10) expectations for sales, profitability, orders, cash flow, operating earnings, operating margin and market share for each of Motorola’s segments; (11) trends in average selling prices; (12) the timing, sales impact and pricing of new products; (13) order and backlog positions over the next several quarters, including the impact of new business models on these numbers; (14) projected worldwide industry shipments of wireless handsets; (15) the future direction of Chinese markets; (16) worldwide semiconductor industry growth; (16) the continued implementation and effectiveness of the “asset-light” semiconductor business model; (17) worldwide wireless infrastructure industry growth; (18) growth in the worldwide two-way radio industry; (19) timing and impact of governmental spending on homeland security, and (20) projected broadband equipment industry revenue. Motorola’s actual results could differ materially from those stated in the forward looking statements and information about factors that could cause such differences can be found in yesterday’s press release, on pages F-33 through F-40 of Motorola’s Proxy Statement for the 2003 annual meeting of stockholders and in Motorola’s other SEC filings. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 57
  58. 58. Q1 EARNINGS RELEASE – April 16, 2003 SLIDE 58

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