摩托罗拉公司1962年年报

MOTOROLA ANNUAL REPORT 1962

D MENT

TABLE OF CONTENTS

Highlights of 1962 / 2 President's Letter to Shareholders / 3 DIVISIONAL REPORTS: Communications / 7 Consumer Products / 8 Semiconductor Products / 10 Automotive Products / 12 Military Electronics / 15 Solid State Systems / 16 FINANCIAL REPORT: Ten Year Financial Summary / 17 Balance Sheet / 18 Statement of Earnings / 20

MOTOROLA INC. WbST G R A N D AVENUE, FRANKLIN PARK, I L L I N O I S

MAJOR FACILITIES LOCATED I NARCADE, NEW YORK • CHICAGO, FRANKLIN PARK, A N D Q U I N C Y , ILLINOIS MINNEAPOLIS, MINNESOTA • PHOENIX A N D SCOTTSDALE, A R I Z O N A • CULVER CITY A N D RIVERSIDE. C A L I F O R N I A

DIVERSIFICATION IN ELECTRONICS • MOTOROLA ANNUAL REPORT 1962 II

f V L; A Lr I." L i -

President's Letter to the Shareholders This year's report emphasizes two subjects . . . the results for 1962 an the Company's increasing and successful diversification.

THE YEAR 1962 Sales Sales and other revenue increased 16% in 1962 over 1961 and totaled $346,881,779. This represents a new record to which all divisions contributed by improved sales performance.

Earnings Operating earnings after taxes of $12,192,862, the equivalent of $3.03 per share, increased 28% compared with $2.36 per share earned in 1961. All but one division contributed importantly to this improvement. As we stated in quarterly reports through the year and as described in the military division section of this report, particular contract problems effectively reduced our military results to a break-even point in 1962. These

problems are now largely behind us.

Finance Company In addition to the operating earnings reported above, we realized a capital gain of 25<# per share (approximately $1,000,000 after taxes) resulting fro the sale of our finance company to a subsidiary of Associates Investment Company. For six years Motorola Finance Company had successfully handled leases, conditional sales agreements, and secured inventory financing of Motorola products. As demands for such financing continued to increase, the supporting services had to become more extensive. Because of Associates Investment's 526 offices across the Nation, these expanded needs and services can more adequately be met, and at the same time we can conserve our resources for the expansion of our electronics businesses, where our primary skills and interests can most properly be directed.

Balance Sheet

The balance sheet is the strongest in

our history. At December 31, 1962, working capital was $96,804,189, an increase of $1,725,573 for the year. During 1962 the ratio of current assets to current liabilities improve from 2.6 to 3.1.

Capital Expenditures In 1962 the Company completed 266,500 square feet of new facilities at 4 sites. We have under construction 633,000 additional square feet at 2 sites. In 1962 capital expenditures were $13,960,395. We have budgeted a greater and record high amount for 1963. As we progress to more and more advanced electronic technologies, the requirement for highly sophisticated laboratory and production equipment causes a much more costly investment program than in the past.

Shareholders At year end our shareholders num-

bered 6,921, but in fact, many more people have a stake in Motorola (continu

because of holdings in numerous investmentfunds and insurance companies. Our own profit sharing fund holds 84,170 shares, giving the great majority of our 19,000 employees an ownership interest in the Company. You will note in our forthcoming proxy statement that the directors and officers also hold a large number of shares.

International

Again in 1962 we enjoyed an increase in international sales, as well as license income, and this department operated at an attractive profit. For its many recent accomplishments in international trade, the Company was awarded the "Export E Award" by the Department of Commerce. International business represents 3% of our total sales and has attractive promise for the future. The largest several arrangements concluded last year was the establishment of a joint venture, S.E.V./Motorola S.A. in France, to manufacture our automobile alternator. Our partner is the highly regarded French company, Societe Anonyme Pour L'Equipement Electrique des Vehicules. Many other highlights of this even ful and rewarding year are detailed on the Highlights page and in the following sections of this report.

DIVERSIFICATION Motorola is a diversified company in the field of electronics. The informe investor appreciates the value and strengths of purposeful diversifica-

tion. It is important in your evaluation of the Company to understand the breadth and the promise of the wide range of products which are listed on the front cover and pictured and described throughout this report. A brief description of how today's diversification came about may illustrate how tomorrow's growth is likely to unfold.

History

Motorola's first principal product was car radio. In the late 30's we be gan to adapt car radios for use as police radio receivers. This was the start of our now important two-way mobile communications business, in an industry which today serves widely diversified customers and which we continue to lead. Our car radio distributor organization was a natural for the distribution of home radios, which business was started in 1937 and which set the stage for our entry into television 10 years later. Part of the earnings from one business was thus invested in others, making possible our expansion into new fields. World War II diverted our skills and resources to military electronics which today represents some 15% of our total sales.

Semiconductors Because our entry into the semiconductor business is having a profound impact on the Corporation and each of its divisions, the thinking that went into the establishment of that activity is described in somewhat

greater detail. More than 10 years ago, our principal technical managers predicted that the Company must eventually possess a semiconductor capability. The reason was that effective use of semiconductor would determine whether or not our equipments would in the future be "leader" or "follower" products.

External Sales

Having decided that we needed such a capability, we then asked, "Would requirements for semiconductors in Motorola products alone provide sufficient volume to enable a semiconductor operation to support the research and engineering and to achieve the yields and costs necessary to a viable business?" Our con clusion was that despite the large demands of our equipment divisions, this volume would not be adequate. We had to serve successfully the much greater outside market to grow big enough to survive and attain leadership in this new technology.

Components and Equipment Then we asked, "Can we succeed as a component supplier while continuing to grow as an equipment manufacturer?" Among other factors, we had to consider that the components business was different from the equipment business and that we would sometimes find ourselves a competitor of a company'while also attempting to be a supplier to it through the Semiconductor Products Division. We concluded, however,

that the component user always looks for the fresh,and better solution to his problems. There were already many examples of companies engaged successfully in such a dual role and this trend in American industry seems to be growing. This determined, however, that we must have distinctive values to offer our semiconductor customers, external and internal, and that we must earn this business on merit. We have done just this. Today ove 85% of our semiconductor shipments are outside the company and we maintain complete respect for the confidential relationship that must exist with each customer. At the same time, our equipment divisions continue to get specific benefits from close technical liaison wit the Semiconductor Products Division, each as a separate customer of that division.

Integrated Circuits Success in the semiconductor business has proven our competence in the technologies of physics, chem-

istry, metallurgy, and advanced mathematics . . . and n a t u r a l l prompted our investigations into the broad and revolutionary science of solid state physics and electronics. Integrated circuits in various for represent an important new product area based on these advanced scientific studies.

Control Instruments We have already developed unique

capabilities in application of these technologies to instrumentation products. In 1962 our Solid State Sys tems Division announced new lines of process and supervisory control products which are illustrated elsewhere in this report. These control and measuring devices can be better designed around solid state electronic concepts than with other approaches. Our work in basic materials has enabled us to design equipment with unique and distinctive features which promises early acceptance in such markets as petroleum pipeline refinery and distribution systems, and the chemical and power utility fields.

Future Growth Almost all of Motorola's diversification has come from internal development. It is likely that future growth will come primarily from the same source, as one new field of opportunity grows out of a previously established successful activity.

Present Products

The prospects for growth are not limited exclusively to new fields of endeavor. Each of our present businesses has attractive potential. Growth will be variously achieved by such conditions as an increase in the total demand for black and white and color television receivers; greater penetration of all the markets we serve; increasing new uses as well as replacement demand for two-way communications; an un-

ending requirement for military electronics; c o n t i n u a l l y expand demand for semiconductor devices; and untapped markets for integrated circuits and solid state equipments. We hope to apply wisely a proper portion of today's earnings and efforts to the further cultivation of these markets, as well as to new opportunities. Our dividend policy has been consistent with these objectives, and our divisional organization gives us a proper structure to effectively achieve them.

Long Range Planning To assure active and coordinated effort to energize this growth and diversification, the Company established a formal long range planning program in 1962. We expect that this program will assist us in defining an achieving proper goals for periods five and ten years hence.

The Year 7963 For 1963 we anticipate further sales growth and a proportionately greater

improvement in earnings. My associates in the Company have again made notable individual contributions to the success and advancement of our affairs. I know that you join with me in acknowledging with appreciation the unique contribution of each of them. For the Board of Directors

cJ March 13, 1963 Preside

: ; $i

A point of concentration in the Communications Division laboratories these days is the advanced technical work which will result in an improved and highly transistorized mobile radio for the nationwide mobile telephone service.

Communications Division Sales and earnings of the Communications Division reached new highs in 1962 and the Division maintained its leadership position in the twoway radio business. Highlights of the year included th development of a fully transistorized "Handie-Talkie" FM radiophone, introduction of new hospital communications products, a series of major contracts for two-way radio networks, and establishment of a fifth sales area. The new "Handie-Talkie" FM radiophone, designed for use in mobile two-way radio networks, provides vital communications for men away from vehicles. It further personalizes two-way radio and extends its usefulness for such customers as police and fire departments, construction companies, forestry and conservation departments as well as many other types of organizations. It is fully transistorized and weighs only 33 ounces. Two-way radio sales in 1962 were highlighted by a series of major contracts for extensive systems. A new state-wide communications network was delivered to the Michigan Highway Department. The system incorporates 550 mobile units tied into state headquarters and 10 district of

fices scattered throughout the state. Major systems were also delivered to the Washington Highway Department, Indiana Highway Department, and Georgia Department of Public Safety. Large city police departments ordering equipment included Cincinnati, Washington, D.C., Minneapolis, Philadelphia, and New York. Comprehensive systems were delivered to many prominent companies in the power utilities field. Leading the way in two-way equipment sales continues to be the Division's transistorized line—the broadl accepted MOTRAC Radio and the Business "Dispatcher" Radio. The latter is designed primarily for the gen eral and small business market which has become an important segment. An innovation in the mobile radio industry introduced in 1961—the Division's "Extender" noise suppression circuitry—received wide acceptance during the year. The circuitry increases radio system effectiveness by blanking out ignition noise interference. The Division's new line of transi torized closed-circuit television equipment improved its position in this potential market. The Communications Division engineered and constructed an ad-

vanced radio traffic control network for the city of Tampa in 1962 and put into operation a system for the New Jersey Turnpike Authority that controls road signs along the 131-mile highway from central headquarters. The Division's leadership in hospital communications systems was even more firmly established during the fourth quarter by the introduction of important new products. A comprehensive network that provides an answer to ail major communications requirements of a hospital gained wide recognition. An aggressive merchandising program which included expanded sales staff and a series of nationwide symposiums was also initiated. To meet the demands of the growing radio communications industry, a fifth sales area was established in 1962 by Motorola Communications and Electronics, Inc., sales subsidiary for the Division. The new area encompasses the southeastern section of the country and is headquartered in Atlanta, Georgia, where new office facilities have been constructed. Atlanta takes its place with Burlingame, California; Chicago; Dallas; and Fair Lawn, New Jersey, as headquarters for radio communications sales and service.

Motorola's Communications Division designs and manufactures systems to meet the communication needs of many different types of governmental and business organizations. Among its diversified products are: lithe transistorized MOTRAC Two-way Radio, now featuring built-in vehicle noise silencing circuitry called "Extender Operation" • 2/the new lightweight "Handie-Talkie" FM two-way radiophone • 3/radio traffic control systems to coordinate traffic flow by synchronizing intersection signals • 41 complete communications networks for hospitals, tying together vario devices for nurse call, hospita staff contact, and patient radi and television entertainment. (Shown is the internal radio station WELL Console, a part of the hospital network.)

Home entertainment and car radio products in a broad range of price categories and designs are produced by the Consumer Products Division for Motorola customers throughout the world. Some examples are: 7/Drexe/ contemporary television and stereo hi-fi console pieces • 2/table, clock, portable, shirtpocket-size, and car radios • 3/budget-minded portable TV and coffee table stereo hi-fi and 4/the exclusive Motorola Designer-Decorator Collection which includes a serving cart housing a TV receiver.

Consumer Products Division The year was one of notable progress in three principal ways. First, the Division attained the largest proportion of industry sales of black and white television receivers that it ever recorded as well as the largest percent of gain over the previous year since the early days of television manufacture. Second, it was a year of preparation in color television. The Divisio carried on extensive research, development and testing activities in components, circuitry, and finished receivers, pointing toward the Company's re-entry into the color television market mid-year 1963. Motorola's color television receivers are expected to be the industry's most advanced equipment in performance, design and reliability. Third, another significant step w taken in upgrading the consumer products customer image. An effective p r o m o t i o n was made in a selective market with the DesignerDecorator Collection of home entertainment equipment. This group is comprised of television receivers and stereo high fidelity instruments housed in fine furniture cabinets de signed to function as furniture piec

as well as entertainment equipment. The series includes such features as a room divider with a built-in record changer and radio, a serving cart equipped with a television set, and a hexagonal coffee table housing a stereo hi-fi phonograph and FM/AM radio combination. They were styled by Motorola's design department in conjunction with the Drexel and Heritage furniture companies. Distributor sales of television re ceivers increased 35%, with gains in consoles as well as compact units. Four factors are considered responsible for the increases: one, growth in consumer acceptance of the Motorola line as a result of outstanding engineering for reliability, performance, and value; two, a consistent advertising program of unusual freshness and attention-getting inter est; three, a line of merchandise in all price and style categories; and four, a stronger distributor organiza tion with higher quality dealers. Stereo hi-fi phonograph sales were greater than last year with the largest growth being in console equipment. Distributor sales of console sets were up 27% over the previous calendar year.

Another noteworthy product introduction in 1962 was the budgetpriced SK-100 stereo hi-fi, housed in a coffee table. Sales of this model greatly exceeded original estimates and the design started a new trend in styling. Stereo-FM radio was new to the market in 1962. Both a table model and a unit designed to be built into console hi-fi stereos were included in the line. Stereo radio should grad ually increase in demand. Car radio sales made through consumer product distributors showed a substantial increase over 1961. Considerable interest was shown in the FM car radio tuner introduced early in the year, necessitating an increa in original production estimates. Home, clock, table, and portable radio volume did not meet expectation, particularly the shirtpocket s radios which fell off sharply due to the distress market condition caused by foreign imports. The Motorola Courtesy Salon at the Palmer House arcade on Chicago's State Street has been a successful i n n o v a t i o n . Traffi through the salon is well beyond expectation.

Each model in the high fashion Designer-Decorator Collection of television and stereo high fidelity series starts with a Motorola furniture stylist at a drawing board trying out concepts of future consumer preferences.

Of the many devices produced by the Semiconductor Products Division during 1962, live were of particular significance. The photographs show the actual size of the devices. 7/silicon controlled rectifier • 2/ round base power transistor • 3/silicon power transistor • 4/"Surmetic" zener diode • 5/silicon epitaxial "Star" planar transistors.

Semiconductor Products Division During the past year Motorola's grated circuit production in Phoenix. Last year, the Division entered th Semiconductor Products Division Upon completion, the new facilities medium-current silicon controlled laid claim to leadership as the will provide an additional 425,000 rectifier market with two new prodcountry's second largest producer of square feet of research and manu- uct lines in the high efficiency semiconductor and integrated circuit facturing area bringing the total to Motorola diamond package. In the products. The Division has, in exist- about one million feet. power control field these devices ence and under construction, what Motorola offers a broad line of have unlimited applications. will be the second largest semicon- some 4,000 semiconductor devices, Development of a new series of ductor research and manufacturing and over the years the Division has power transistors with the highest facility in the world. In 1962 the achieved a reputation for its empha- available voltage ratings in germanDivision's dollar sales increased very sis on reliability. Each working week ium devices was announced by the substantially whereas industry dollar at Motorola results in a minimum of Division. Due to their improved sales figures indicate only a modest 8 million device hours logged in op- characteristics they can be used for growth. erating life tests of standard devices. numerous high-voltage applications Since the formation of the Divi- Research to develop new products where currently the use of much sion in 1955, the basic objective has is constantly underway. more expensive silicon transistors is been to emphasize research and de- The most notable development of required. At present, Motorola offers velopment to assure a steady flow of the year was the coming of age of the most complete line of power new products designed to meet the integrated circuits. The Division's in- transistors on the market. rapidly evolving needs of customers tegrated circuitry technology is be- The particular epitaxial technique and to take advantage of the devel- lieved to be at least as advanced as developed in 1961 by Motorola opments in production technology. any in the industry. It has evolved scientists have, together with the The Division's unrivalled growth in from the discovery phase to the prac- epitaxial process in general, made sales and earnings, in an industry tical stage. possible a new series of silicon tra which in the past two years has been Integrated circuits are being pro- sistors which will open new markets beset by chaotic price-cutting, has duced for both military and in- for Motorola transistors. been particularly gratifying. Inas- dustrial applications. Work with Major efforts are being put into much as the skills and technology of customers has already begun in de- reducing the costs of production, this Division will form the basis for signing and producing integrated packaging, and testing. the new developments in integrated circuits on a custom-built basis. The Division has recognized the circuitry, its fine performance has In 1961 the Division introduced great potential of overseas sales and importance beyond the present. the epitaxial "Star" planar silicon a special group within the Division's The Division is now engaged in an transistor which has achieved such marketing department has been es$8 million expansion program in- wide-spread acceptance that addi- tablished to develop sales abroad. cluding an additional building and tional production space was re- Field offices have been planned in new types of equipment for inte- quired to keep pace with demand. Paris, Milan, Munich, and London.

The microscope is an indispensable instrument in the inspection of tiny semiconductor devices. In some casesas with the sophisticated MECL integrated circuit seen here — each unit is projected on a display screen TOO times larger than actual, enabling several persons to examine the device in detail at the same time.

The contract car radio business ol the Automotive Products Division is now supplemented by diversification into new products which are made practical by new applications ol transistors. I/All Motorola car radios now are transistorized • 2/Transistorized alternator systems are available lor practically all automotive applications, the line consisting ol six models of alternators and three models of regulators • 3/A transistorized ignition systems kit is being marketed for all engines having battery ignition.

Automotive Products Division Sales volume of the Automotive "Jeep," and the Checker Motor's ignition system which results in Products Division increased along vehicles. breaker point life many times that of with the generally good acceptance Additional models of alternator conventional systems, provides easby consumers of the 1963 lines of systems were introduced having dif- ier cold weather starting, better hig automobiles. ferent voltages and capacities to speed performance, and eliminates This Division continued to supply broaden the total line for aftermarket the ignition condenser. all-transistorized car radios to Ford, fleet use. Motorola now supplies 6, In order to meet the need for a Chrysler, and American Motors. The 12, and 24-volt electronic alternator system which would greatly increase Division supplied the total car radio systems for practically all cars now the reliability and operational life requirement for Ford Motor's "Thun- in existence. over systems currently being used, a derbird," "Calaxie," "Comet," "Me- In mid-fall of the year, the Com- team of Motorola engineers develteor," and "Continental"; Chrysler pany completed a joint venture with oped an ignition system which could Corporation's Dodge and Plymouth Societe Anonyme Pour L'Equipe- be easily installed in automobiles cars; American Motors' "Rambler"; ment Electrique des Vehicules, Paris, now on the road by making use of Renault (U.S. sold); Checker Motors; France (S.E.V.) by forming a new the standard distributor and its and International Harvester. company, S. E.V./Motorola S.A. breaker points. Motorola all-electronic alternator Manufacture of alternator systems The Motorola Transistor Ignition systems, which take the place of gen- has already begun for the Renault System is designed for use on most erators on automobiles, have re- automobile in the new plant of automotive, marine, and stationary ceived wide attention at the domestic S.E.V./Motorola in Blois, France. It is engines having battery ignition. The marketplace. Numerous state and anticipated that several additional system greatly reduces the number city police departments, as well as automobile manufacturers in the of tune-ups required by convenlarge commercial automotive fleets, European Common Market will be- tional ignition systems. have converted to these systems as gin to install Motorola alternator sys- A magnetic-type transistorized igstandard equipment on their vehi- tems on their 1964 model cars. nition system is undergoing operacles. Motorola supplies original At the turn of the new year, the tional tests by several car and truck equipment alternator systems for Automotive Products Division intro- manufacturers for possible original American Motor's "Rambler," Willy's duced a newly developed transistor equipment use in the future.

With electronics technology promising many new potential efficiencies in the operation of automobiles, no longer is our electronics engineer concerned mainly with the radio and instrument panel. His laboratory more and more is under the hood. In this case he is testing a Motoroladeveloped electronic ignition system.

Mariner

—-O o—

-a Motorola-developed command receivers or transponders performed successfully in all the Mercury capsules, and on Mariner and Ranger flights. As a result, aerospace has become an environment in which Motorola scientists work with confidence and enthusiasm. The next order of business: contracts for spaceborne instruments in the Gemini two-man craft, and the Apollo three-man moon shot.

Military Electronics Division For the Military Electronics Division, minute, electronic page printer inently satisfactory. It is believed th the year 1962 can be summarized in system developed specifically for program will contribute significant terms of substantial sales growth, im- military data processing systems.The future sales and profits. provement in facilities, and note- "Teleprinter" translates digitally- The Division's role in NASA's Marworthy program achievements. In encoded messages into a print code iner program constitutes the most spite of this, however, earnings were and then prints the decoded mes- exciting and dramatic achievement disappointing. sage on paper. of 1962. The deepspace transponder Sales for 1962 were o n e - t h i r d Motorola has contracted to supply and the command system for the greater than 1961. At the close of 500 systems for use in the Air Force Mariner II space craft was built by 1962 the Division's backlog was up command and control communica- the Western Center for Cal Tech's 50% from a year ago. Profits were tions system. The equipment is also Jet Propulsion Laboratories. About down substantially in 1962 due pri- scheduled for use in NASA systems the size of a small radio, the transmarily to a very heavy loss incurred for monitoring future space shots ponder was responsible for the on one contract which is now under and is being evaluated by the Navy historic 36-million mile radio transcontrol. and the Army for future applications. mission between earth and Mariner A primary Division objective con- The Division's largest contract II as it passed near the planet Venus. tinues to be the expansion and award in 1962 was for the APS 94 The receiver portion of the system strengthening of its proprietary side looking radar system. It is now operated for all 109 days of the 180products business. In 1962 the West- operational and production quanti- million mile flight. ern Center enjoyed a good improve- ties will be delivered to the Army The Motorola-built transponder ment in sales and profits of its starting in May. This system, which is and command system, was used early proprietary command receiver and the first airborne radar surveillance in the Mariner flight to transmit midtransponder products. Motorola system to be standardized by the course maneuver commands. The command receivers have been used Army, provides a significant and mid-course maneuver was used to in such aerospace projects as "Sa- unique new capability to the coun- change the course of the space craft turn," "Agena," "Polaris," "Minute- try's limited-war requirements. when it was more than a million man," and "Mercury." Transponder "Radio Central," one of the Divi- miles from the earth, correcting the systems have been used in the sion's largest contracts, passed two trajectory to permit the craft to pass "Scout," "Pershing," and "Saturn" significant milestones this past year. within the desired range of the planet. programs. Further sales and profit in- After extensive field testing, the This unique c o m m u n i c a t i o creases are projected for these prod- Army granted design approval of the equipment, consisting of 2,925 parts ucts in 1963. system and in the summer of the —or the equivalent of those conThe Chicago Center began deliv- year the equipment was subjected to tained in 10 television sets, weighed eries of its proprietary "Teleprinter" rigorous operational tests while be- 8 pounds and required no more in the third quarter of the year. The ing employed in the "Swift-Strike" power to operate than is required to "Teleprinter" is a 3,000-word-per- war games. Its performance was em- light four Christmas tree bulbs.

Motorola's military facilities serve the armed forces, NASA, and other government agencies, providing research, development, and production capabilities in electronic systems and equipment. Activities include aerospace, surface and sub-surface applications. 1 /NASA's Coddard Range and Range Rate Tracking System to accurately track space vehicles in near-earth orbit • 21'Automatic Microwave Data Acquisition and Relay Unit to monitor high-speed flight test programs • 3/Random Access Discrete Address System for self-organizing communications • 4/Sonobuoy undersea detection equipment' 5/Proprietary products: a) electronic teleprinter • b) MC-50 multiplex system for "Rally" Air Force project • c) command receivers and transponders.

Solid State Systems Division Following four years of research and development of solid state instrumentation and control equipment, market analysis, and organizational development, the Solid State Systems Division was formed early in 1962. It marked its first year as a divi sion with accelerated sales activities starting early in the year; the release and excellent customer approval of several new products during the summer and fall; the successful operation of several installed control systems; and a build-up in backlog and sales during the last six months of the year. Its three industrial product categories are: digital supervisory systems for remote monitoring and control of operations in the petroleum, gas, water, and power distrib u t i o n industries; digital data acquisition systems for the monitoring of loading operations at bulk petroleum plants and terminals; and analog control instrumentation for monitoring and control in the continuous process industries such as the chemical, oil refining, petrochemical, f o o d processing, and paper industries. Effort is continuing on the development of other new products with emphasis on the use of integrated solid state electronics in basic instrumentation for heavy electrical and mechanical equipment. Many of the results of previous research and development efforts in semiconductor, thin film, ceramic, and glass technology are being applied in the development of new applications.

1/TELEMEMORY EMORY solid soli

.-.. j...»...•_! *facilities industrial _ _ : i . - . : —• 2/ -,

operations • 3/VERITRAK analog control i

A subsidiary, Motorola Instrumentation and Control Incorporated, has been formed to market the products of the Division. Four sales regions have been established with headquarters in Fairlawn, New Jersey; Chicago; Houston; and Los Angeles. Canadian sales will be handled by Canadian Motorola Electronics, Inc. located in Toronto. Three important developments occurred. First, the installation of "Telememory" supervisory systems in the oil, gas, power, and water distribution industries to monitor pressures, levels, flows, electrical quantities, and the status of alarm contacts, enabling an operator to remotely control as well as interrogate the status of valves, water gates, pumps, and circuit breakers. Second, "Telememory" data acquisition systems were installed for two major oil companies to provide complete accounting for transactions at bulk loading terminals. The information provided includes identification of the driver, the carrier, the product withdrawn, and the volume; the date and time of each transaction; a daily accounting of accumulated transactions; and the incoming product and inventory balance. A Motorola-designed "card reader" permits driver operation of the system and activates the recording of the full transaction. The third development was the completion of a broad and competitive line of analog process control and instrumentation equipment. The new "Veritrak" line, containing some

ronic ctronic supervisory supervisorycontrol control systems systems

gned es/gnecf "card "card reader," reader," part part of of a a d d

n lor monitoring and control of contin

30 models of equipment, provides both flexibility and compatability. The equipment is designed with features for the sensing, recording, indi cating, and controlling of pressure, differential pressure, temperature, level, and flow. Its first application will be in the continuous process industries manufacturing petroleum, chemical, petro-chemical, and similar products. The line includes a complete group of accessory amplifiers and analog computers. As evidence of the fine start made by these new products, the backlog of orders at the end of 1962 equaled half of the sales projected for 1963. Research efforts in solid state tec nology continued during the year. Activities concerned better control over the processing of thin film, glasses, and ceramics, used in device and equipment development; the application of optical and acoustical coupling in radio frequency amplifiers constructed in the form of a completely solid block of material; miniaturization of portions of radio frequency receivers utilizing thin film electronics and tunnel diodes; application of thin film resistors and glass insulating layers to the construction of pressure sensitive elements; the movement into prototype production and the application of positive temperature coefficient thermistors to over-temperature protection of electric motors; and, the achievement of previously unobtainable power levels and switching characteristics in ferrite microwave devices.

control control remotely remotely located locatedororun; una

uisition uisition system system for for automating bul automating fai erat'ions.

TEN YEAR FINANCIAL SUMMARY

SALES

A N D OTHER

REVENUES

$15,512,489 16,523,889 18,740,426 16,936,334 15,756,431 15,171,013 27,756,237 26,548,813 19,900,308 26,514,514

INCOME BEFORE

INCOME TAXES

$7,076,335 7,572,024 8,490,539 7,966,817 7,824,431 7,356,213 14,171,237 12,633,813 9,517,308 13,206,514

EARNINGS

$1.83 1.96 2.19 2.06 2.02 1.90 3.59 3.14 2.36 3.03

EARNINGS

PER SHARE*

$38,222,001 38,308,612 42,892,165 54,936,569 56,425,360 59,585,830 63,336,998 73,790,019 95,078,616 96,804,189

WORKING

CAPITAL

$14,301,004 16,579,531 19,179,992 25,388,866 27,167,597 27,615,287 33,436,676 44,594,599 48,427,446 54,783,818

NET INVESTMENT

IN PLANT A N D

EQUIPMENT

$45,929,419 50,598,747 56,186,590 61,305,080 83,338,386 97,166,850 102,655,506 111,835,713

SHAREHOLDERS'

EQUITY

•Earnings per share are based on the number of shares outstanding at the end of the respective years, adjusted for subsequent share distributions.

Earnings per share shown above for 1962 do not include 250 of nonrecurring capital gain from sale of finance subsidiary.

17

Motorola, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31

ASSETS Current assets Cash Short-term investments, at cost approximating market value Receivables Accounts United States government Other Notes and contracts (note 1) Lease and conditional sales contractsnet of unearned finance charges Other Allowance for doubtful accounts

Costs recoverable under United States government contracts, less progress billings

Inventories, at the lower of average cost or market

Other current assets

Total current assets

Plant and equipment—less depreciation (note 2) Sundry assets, net Patents, debenture expense, and other deferred items—less amortization

NOTES TO FINANCIAL STATEMENTS

1/The notes and contracts receivable in 1961 arose from financing o sales of the companies' products and were held by Motorola Finance Corporation, a wholly-owned subsidiary which was sold during 1962. The purchaser is providing similar financing services.

2/The companies' investment in plant and equipment at December 31, 1962 and 1961 was as follows: 1962 1961 Land—at cost $ 3,535,240 $ 3,395,726 Buildings —at cost, less depreciation (1962, $11,316,989; 1961, $8,902,050) 31,283,655 28,569,406 Machinery and equipment —at cost, less depreciation (1962, $15,525,093; 1961, $12,555,411) 17,628,179 14,451,480

Dies, tools, and leasehold improvements —

at cost, less amortization 2,336,744 2,010,834

Total $54,783,818 $48,427,446

The companies have adopted depreciation guidelines as provided unde Internal Revenue procedure, the effect of which was to increase 196 depreciation expense by approximately $1,050,000.

1962 1961

$ 6,951,241 $ 8,794,244

11,815,863

10,317,838 7,773,137 60,907,231 47,714,344

32,725,036 8,011,781 (1,621,023) (1,801,559)

9,915,619 8,440,774

42,633,352 39,958,980 2,702,538 2,865,560 143,622,659 154,482,297

54,783,818 48,427,446 3,889,812 3,648,892

532,933 1,242,955 $202,829,222 $207,801,590

Forty-eight per cent ($219,000) of the "investment credit" in respect o acquisition of qualified facilities, obtained under the Internal Revenu Act of 1962 as a credit against the 1962 federal income tax liability o the companies, has been applied by them as a reduction of federal income tax expense for the year; $224,000 has been deferred to subsequent periods to offset the effect of reduced depreciation allowances arising from the total credit.

3/Long-term debt at December 31, 1962 and 1961 consisted of the following: 1962 1961 43/4% Debentures due April 1,1986 (with annual sinking fund requirements commencing in 1967) !i 30,000,000 $ 30,000,000 Notes payable 33/4°/o, due $1,000,000 annually to 1965, $1,500,000 in 1966, and $500,000 annually thereafter to 1972 7,500,000 8,500,000

47s7o, due $500,000 annually 1963-1976 7,000,000 7,000,000

Real estate mortgages 1,242,463 1,306,825

45,742,463 46,806,825 Less current maturities, included in current liabilities 1,567,424 1,064,422 Noncurrent portion of long-term debt $ 44,175,039 $ 45,742,403

LIABILITIES Current liabilities Notes payable to banks and others Current maturities of long-term debt Accounts payable—trade Federal income taxes, less United States Treasury obligations of $8,282,316 in 1962 Other taxes Contribution to employees' profit sharing fund Product and service warranties Other Total current liabilities

Long-term debt (note 3)

Shareholders' equity Capital stock, $3.00 par value. Authorized, 6,000,000 shares. Outstanding: 1962, 4,026,872 shares; 1961, 4,028,652 shares (net of 3,410 and 1,610 treasury shares, respectively) (note 4) Additional paid-in capital (note 5) Retained earnings (note 6) Total shareholders' equity

4/Under the Employee Share Option Plan adopted in 1960, options may be granted to key employees to purchase Motorola, Inc. shares at not less than 95% of market value at date of grant. The options grante may be exercised two years after the date of grant; they expire at the end of ten years and are contingent upon continued employment by the company and its subsidiaries. At December 31,1962 options outstanding consisted of 39,980 shares at

$73.25 per share (granted in 1960 and all currently exercisable), 6,90

shares at $83,875 (granted in 1961) and 9,700 shares at $78.14 (grante

in 1962). During 1962 options for 20 shares were exercised (at $73.25) and options for 3,600 snares were terminated (3,000 from 1960 grant, 400 from 1961 and 200 from 1962). An additional 143,400 shares were reserved for options which may be granted by the Board of Directors until May 2, 1965.

1962 1961

$ - $ 20,500,000 1,567,424 1,064,422 21,942,506 14,085,533

5,956,588 3,681,571 3,077,136 4,236,647 2,624,174 1,178,234 969,649 14,212,088 11,126,179 46,818,470 59,403,681

44,175,039 45,742,403

12,080,616 12,085,956 13,844,820 13,838,015 85,910,277 76,731,535 111,835,713 102,655,506 $202,829,222 $207,801,590

5/Additional paid-in capital was increased during 1962 by the excess of the option price over the par value of twenty shares of capital stock issued under the Employee Share Option Plan, $1,405, and by the par value of 1,800 shares of the company's capital stock returned as an adjustment of shares issued in 1959 in the acquisition of the capital st of a subsidiary, $5,400.

6/At December 31, 1962 approximately $24,650,000 of retained earn-

ings was free from dividend restrictions contained in the debenture and

note agreements.

7/The companies are obligated under repurchase and other agreements, principally in connection with the financing of sales of products to con sumers, and are defendants in suits and claims, which it is believed wil have no material effect on the business of the companies.

19

Motorola, Inc. and Subsidiaries STATEMENT OF CONSOLIDATED EARNINGS AND RETAINED EARNINGS

YEARS ENDED DECEMBER 31 1962 1961

SALES AND OTHER REVENUES $346,881,779 $298,219,845

Manufacturing and other costs of sales 250,434,021 214,871,908

Selling, service, and administrative expenses 55,788,368 52,409,790

Depreciation of plant and equipment (note 2) 7,416,150 5,276,286 Contribution to employees' profit sharing fund 4,236,647 2,624,174 Interest and amortization of debenture expense 2,492,079 3,137,379 Total costs and other expenses 320,367,265 278,319,537 Income before federal income taxes 26,514,514 19,900,308 Federal income taxes 13,308,000 10,383,000

EARNINGS (per share outstanding at end of year: 1962, $3.03 plus 250 of nonrecurring capital gain from sale of finance subsidiary; 1961, $2.36) 13,206,514 9,517,308

Retained earnings at beginning of year 76,731,535 71,242,879

Total 89,938,049 80,760,187

Cash dividends declared—$1.00 per share 4,027,772 4,028,652

Retained earnings at end of year (note 6) $ 85,910,277 $ 76,731,535

See accompanying notes to financial statements.

The A C C O U N T A N T S ' REPORT Board of Directors and Shareholders of Motorola, Inc.: We have examined the consolidated balance sheet of Motorola, Inc. and subsidiaries as of December 31, 1962 and the related statement of earnings and retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. It was not practicable to confirm accounts receivable from United States government departments or agencies by communication with them but we satisfied ourselves as to such accounts by means of other auditing procedures. In our opinion, the accompanying consolidated balance sheet and statement of consolidated earnings and retained earnings present fairly the financial position of Motorola, Inc. and subsidiaries at December 31, 1962 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. 20 Chicago, Illinois, February 21,7963 PEAT, MARWICK, MITCHELL & CO.

DIRECTORS A N D OFFICERS

Board of Directors ROBERT W. GALVIN MATTHEW ). HICKEY, JR. DANIEL E. NOBLE FRANK J. O'BRIEN ARTHUR L. REESE WALTER B. SCOTT EDWARD R. TAYLOR EDWIN P. VANDERWICKEN ELMER H. WAVERING

Officers ROBERT W. GALVIN

DANIEL E. NOBLE Executive Vice President, Communications, Semiconductor, Military Electronics, and Solid State Systems Divisions "FRANK J. O'BRIEN Vice President, Purchasing ARTHUR L. REESE Vke President nnd General Manager, Communications Division WALTER B. SCOTT Vice President, Consumer and Automotive Production EDWARD R. TAYLOR Executive Vice President, Consumer Products Division EDWIN P. VANDERWICKEN Vice President for Finance, Treasurer, and Secretary ELMER H. WAVERING Executive Vice President, Automotive Products Division ALEX ARNOLD Vice President, Controller ALLEN H. CENTER Vice President, Public Relations JOSEPH A. CHAMBERS Vice President and Manager, Western Center, Military Electronics Division JOHN I. DAVIS Vice President, Consumer Products Engineering SYLVESTER R. HERKES Vice President, Consumer Products Marketing C. LESTER HOGAN Vice President and General Manager, Semiconductor Products Division HOMER L. MARRS Vice President, Communications Sales KENNETH M. PIPER Vice President, Human Relations WILLIAM J. WEISZ Vice President, Communications Products WILLIAM S. WHEELER Vice President and General Manager, Military Electronics Division