摩托罗拉公司1972年年报

Motorola

1972 Annual Report

The mind to imagine... the skill to do.

This year's annual report celebrates the dynamic spirit that unites Motorola people and their customers in a global network of performance. The men and women who create, produce and sell our products share conscientiously in the task of applying innovative technology to help serve increasingly complex human needs around the world. In appreciation, we dedicate this book to them.

To Our Shareholders and Friends 1972 was a banner year for Motorola. We are pleased to report that sales and earnings in every quarter, and for the full year, established records for each such period. The sales and earnings performance of every division increased substantially over 1971. Our earlier stated expectations of generally firming worldwide economic conditions and consistently improving Motorola results did materialize. Sales volume for the year broke through the billion dollar level, with sales and other revenue of $1,163,315,088 being up 26% from 1971's $926,592,871. Earnings increased at an even greater rate-$52,038,120 compared with $31,749,944-up 64% from 1971. Earnings per share of $3.81 compared with $2.37 the previous year. Each of our five divisions participated in reaching this milestone in the company's history. Major achievements of each division are detailed in the main body of this report. Progress made by our New Ventures group and the electronic watch components groups have also kept pace with our expectations. Financial. Motorola's financial position remains strong and is marked by a current ratio of $2.23 of current assets to every dollar of current liabilities. Consolidated worldwide long-term debt is at a low 15% of long term debt plus shareholders' equity. Fixed asset expenditures in 1972 were $48 million, compared with $32 million in 1971. Our current plans for 1973 provide for a sharp increase in such spending, to approximately $80 million. This large increase, which includes major projects initiated in 1972, is a function of: (1) the rapid growth in our business which has occurred over the past few years; (2) the simultaneous maturing of several major international business plans; and (3) the fact that some fixed asset expenditures normally anticipated for the 1970-72 period were deferred pending clear indication of the economic recovery which has now taken place. Research and development spending was $76 million, up from $65 million in 1971. A further increase is planned for 1973. The large fixed asset expenditures, increased R & D spending and the additional working capital needed to support continued sales growth in 1973, while significant in amount, are not expected to require equity financing in the foreseeable future. Our major sources of funds continue to be retained earnings and depreciation. 1972 depreciation was $30.5 million, up from $27.2 million in 1971. 1973's depreciation is expected to additionally increase as a consequence of greater fixed asset expenditures. Share distribution. In February 1973, the Motorola Board of Directors expressed its intention to effect a share-for-share distribution on or about June 1 to shareholders of record on or about May 18 subject to shareholder approval at the May 7 annual meeting of a proposal to increase the number of authorized shares of common stock of Motorola from 20,000,000 to 40,000,000. Also, the board expressed its intention to raise the quarterly dividend in June to 12.5 cents per share then outstanding. This would be equivalent to a 6 6 % % increase in the present annual dividend rate. If the new dividend rate is adopted and maintained during the remainder of 1973, cash dividends paid in 1973 would be equivalent to 80 cents per share on the presently outstanding shares and would be within the guideline established by the U.S. Committee on Interest and Dividend which permits aggregate dividend payment inl973 not exceeding 25% of 1972 net income. Continuation of the increased dividend would naturally depend on our operating results and financial position as well as on then current government regulations or guidelines at any given time. Delaware reincorporation. The 1973 annual meeting proxy material which will be mailed on or about March 29 will also contain a proposal

adopted by the board of directors on February 28, to reincorporate Motorola as a Delaware corporation. This proposal results from an extensive and detailed study by the board and legal counsel. Under the rules of the Securities and Exchange Commission governing the solicitation of proxies it would be inappropriate to describe the terms of the proposed reincorporation here; however, all details concerning this proposal, including a full statement of the board's reasons for adopting the proposal, will be included in the proxy material which will be mailed to shareholders shortly. Management and organization. The organization change we implemented in early 1972, and which we detailed in last year's shareholder report, is enabling us and our key associates to provide operational leadership to our rapidly growing businesses and simultaneously to devote more attention to the key issues and opportunities the company will face in the 1970s. As long planned, Elmer H. Wavering, previously vice chairman and chief operating officer, retired December 31 from these positions after completing more than 41 years of Motorola service and upon reaching the age of 65. It is impossible in the limited space of this letter to even mention Mr. Wavering's many contributions to Motorola's successes over the past four decades, or to adequately state the appreciation of ourselves and our associates for those contributions. We do gratefully acknowledge Mr. Wavering's magnificent service to the company and express our pleasure that he will remain a member of the board of directors. International trade and investment. Elsewhere in this report is included a commentary on international trade and investment. Since we recognize this issue to be of vital national concern, we want to communicate to all shareholders the company's position in this regard. Outlook. Because of the fine results achieved in 1972, it should not be expected that the magnitude of year-to-year comparisons will continue. However, as we enter 1973, we find the level of bookings, backlog and billings to be firm. This, along with the generally optimistic domestic and international economic outlook, supports our expectations of further increases in sales and earnings in all divisions in 1973.

1972's record results and the passing of the billion dollar milestone could not have been achieved without the splendid efforts of all members of the Motorola family worldwide, efforts which we do acknowledge with sincere gratitude.

For the Board of Directors,

Chairman of the Board

President

March 20, 1973

Financial Highlights 1972 1971

Sales and Other Revenues $1,163,315 $926,593 Income Before United States, Canada and Other Nations'Income Taxes 92,462 62,055 % to Sales 7.9% 6.7% United States, Canada and Other Nations'Income Taxes 40,424 30,305 Earnings 52,038 31,750 %toSales 4.5% 3.4% Per Share of Capital Stock 3.81 2.37 Weighted Average Shares Outstanding 13,648,443 13,410,794 Capital Expenditures 48,008 31,977 Depreciation 30,529 27,239 Working Capital 311,587 247,579 CurrentRatio 2.23 2.22 Shareholders' Equity 439,611 375,897 Book Value Per Share 31.89 27.88 Yearend Employment (approx.) 56,000 49,000

Dollar amounts in thousands, except per share data

Annual Meeting. The annual meeting will be held on Monday, May 7, 1973. A notice of the meeting, together with a form of proxy and a proxy statement, will be mailed to shareholders on or about March 29, 1973, at which time proxies will be solicited by management. Transfer Agents Harris Trust and Savings Bank, 111 W. Monroe St., Chicago, 111. 60690 First National City Bank, 111 Wall St., New York, N.Y. 10015 Registrars Continental Illinois National Bank and Trust Company of Chicago, 231 S. LaSalle St., Chicago, 111. 60690 Irving Trust Company, 1 Wall St., New York, N.Y. 10015 Auditors Peat, Marwick, Mitchell & Co., 222 S. Riverside Plaza, Chicago, 111. 60606.

Contents Letter to Shareholders 1 Financial Highlights 3 Directors and Officers 5 Communications Division 6 Semiconductor Products Division 8 Consumer Products Division 10 Government Electronics Division 12 Automotive Products Division 14 New Ventures Activity 16 Other Businesses 17 International Trade and Investment Statement 18 Major Facilities and Product Lines 19 Financial Statements 20 Ten Year Financial Summary 28

Officers Directors AGE YEARSOF SERVICE

ROBERT W. GALVIN Chairman of the Board and Chief Executive Officer 50 32 ROBERT W. GALVIN WILLIAM J. WEISZ President and Chief Operating Officer 46 25 BENJAMIN W. BORNE Vice President, Human Relations 48 1 J.PAUL JONES

ALLEN H. CENTER Vice President, Public Relations 60 19 OSCAR P. KUSISTO EDWARD J. HARTY Controller 57 21 JOHN T. HICKEY Vice President for Finance and Secretary 47 25 STEPHEN L. LEVY JOHN A. HUBENY Vice President and Assistant to the Chief Financial Officer 62 38

DONALD R. JONES Treasurer 43 22 HOMER L. MARRS J. PAUL JONES Vice President and Director of Corporate Staff 49 21 ARTHUR C. NIELSEN, J STEPHEN L. LEVY Vice President, New Ventures 51 9

HOMER L. MARRS Vice President and General Manager, Equipment Divisions 56 35 ARTHUR L. REESE WALTER B. SCOTT Vice President and Director of Manufacturing and Facilities 57 27

LEWIS D. SPENCER Vice President and General Attorney 56 22 ELMER H. SCHULZ COMMUNICATIONS DIVISION WALTER B. SCOTT JOHN F. MITCHELL Vice President and General Manager 45 20

CARL E. LINDHOLM Vice President and Assistant General Manager 44 6 EDWIN P. VANDERWICKE MARTIN COOPER Vice President and Director of Systems Operations 44 19 Chairman, Finance and Audit Committees JACK GERMAIN Vice President and Director of Product Operations 46 23

JOSEPH F. MILLER Vice President and Director of Domestic Distribution 48 21 ELMER H. WAVERING ROBERT N. SWIFT Vice President and Director of Marketing 49 21 WILLIAM J. WEISZ SEMICONDUCTOR PRODUCTS DIVISION THOMAS J. CONNORS Vice President and General Manager 43 9 KENNETH V. ZWIENER J O H N R. W E L T Y Vice President and Assistant General Manager 50 15

CHRISTIAN J. G O O D M A N Vice President and Director of Division Staff 52 11

JACK C. H A E N I C H E N Vice President and Director of Operations, MOS 37 14

PATRICK D. L Y N C H Vice President and Director of Operations, Bipolar ICs 39 13

CONSUMER PRODUCTS DIVISION EDWARD P. REAVEY, JR. Vice President and General Manager 49 HERBERT D. DeBORDE Vice President, Operations 53 GOVERNMENT ELECTRONICS DIVISION R A L P H W. E L S N E R Vice President and General Manager 52 24

AUTOMOTIVE PRODUCTS DIVISION OSCAR P. KUSISTO Vice President and General Manager 59 24 Director Emeritus: JAMES A. T O R R E N C E Vice President and Assistant General Manager 42 20 DANIEL E. NOBLE Chairman, FRED P. HILL Vice President and Director of Entertainment Products 52 34 Science Advisory Boa and International Operations

ommunications Division Division sales and earnings reached record highs. Sales increase exceeded the long term growth rate and the profit margin improved over the previous year. New order for Metrocom system was placed by Maryland Department of Transportation for Baltimore. Communicates voice messages, automatic status reports and emergency alarms from public transport vehicles to dispatchers. Fort Lauderdale Police Department purchased a Total Alone in a city of strangers Area Coverage (TAC) system of personal portable radios and woman waits. After dark the solid state modular communications control centers. Police of- empty streets add fear to her ficers communicate via personal portable radios to their dis- loneliness. But unknown to her, patchers from anywhere within the city. strangers are helping to make h Computer-aided dispatch vehicle status system was pur- world a safer place through bet chased by the police department in Huntington Beach, Calif. communications — The system is designed to enable police to command and control their vehicles more efficiently in emergency situations. New Motorcall system bought by Florida State Department of Transportation. This system is designed to help stranded motorists summon aid through roadside radios. '72 product introductions: A new line of UHF Micor mobile radios and medium power base stations to complement existing models, and a low frequency, 100-watt version of the Mocom-70 mobile radio were added. Personal radio highlights included the Handie-Com MH 10 two-way portable radio in VHF band and the Pagecom pager as economy models to supplement the existing Handie-Talkie portable radio and the Pageboy II pager line. Modcom, modular communications control console, a desk top communications center, also introduced. Coronary Observation Radio (COR), a mobile telemetry unit which monitors cardiac functions, was introduced for ambulance and medical personnel. Continued upward trend in international sales: Canada continued service to public safety markets in Edmonton, Hamilton and Windsor with expanded mobile and portable radio systems. Spanish telephone company made a major Pageboy II purchase. The Royal Netherlands Air Force ordered large quantities of UHF radios and pagers. French taxi system placed a major order for mid-band radios. '72 brought increased European acceptance of paging systems and mobile radios. Order input growth is on target in other world markets. Argentine federal police placed a large equipment order in '72. Expanding markets for reliable communications equipment have emerged in Africa, Middle East, Latin America and in the Asia/Pacific area. Current trends of order input and backlog indicate further growth in world markets and greater sales volume for the division.

... In Motorola's Schaumburg, 111. plant, Neysa Thompson supervises people who assemble Micor two-way radios. Solid state, modular construction has replaced vacuum tubes with easy to install circuit boards. Neysa and her people are dedicated to meeting the quality standards set by Motorola engineering. Besides Neysa, another stranger is watching out for the waiting woman's safety. Every evening Officer Hammond's patrol takes him past streets where lonely crowds hurry by. His police car, equipped with Micor radio communications, is in constant contact with a citywide network of police patrols. Like the men in hundreds of law enforcement agencies across the country, Officer Hammond depends on his Micor radio for its advanced performance capabilities. Motorola communications technology brings strangers together and helps them help each other. And that's good to know when a woman must wait alone after dark.

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Semiconductor Products Division

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"Pete, my printout from the STARS system this morning shows a backorder on those ROMs I ordered yesterday. My customer can't wait. Can you do anything?" "I'll try, Ralph." Pete Myslinski and Ralph Giessen have never met. But, twice a day, Pete phones Ralph in Schiller Park, 111. from Motorola's semiconductor Customer Service headquarters in Phoenix. Ralph works for Hamilton/Avnet, a topranked nationwide distributor of electronic components. As Hamilton's manager for Motorola's semiconductor products in the Chicago area, Ralph can count on Motorola's Pete and the daily STARS teletype report to help him take care of his customers. STARS is a unique, daily order activity report system serving Motorola's franchised U.S. distributors. On a coded teletype command to the STARS computer in Phoenix, in minutes the distributor can receive a complete printout of his previous day's orders for Motorola parts. Forewarned by STARS, Ralph had time to track down most of the Motorola ROM integrated circuits his customer needed from other Hamilton/Avnet offices. Now the rest was up to Pete. "Ralph, I put a priority rush on your order, and we're getting out a partial shipment immediately." Electronics equipment manufacturers may not know about Pete 'n Ralph, or the STARS program. But they do know that their Motorola distributor offers them the same reliability in delivery that they depend on in Motorola semiconductors.

Record high sales and earnings were due to resurgent worldwide demand in most major semiconductor markets. Significant growth factors: the computer markets' revival plus new applications for discrete semiconductors and integrated circuits in consumer and industrial electronics. These positive trends are expected to continue. '72 industry sales were estimated up by about 25% in worldwide semiconductor market. The European market growth was estimated to be 20-25%; Asia/Pacific, 19-22%; and U.S. domestic about 28%. Motorola semiconductor products also recorded significant growth in all three markets. MECL 10,000 circuits became a standard logic for computer industry, with 18 new devices added to this high speed integrated circuit family in '72. The line now has 37 standard circuits plus 17 wide temperature functions for military use. Metal-oxide-semiconductor (MOS) integrated circuit sales for Motorola during '72 grew at a faster rate than the world industry, whose growth was an estimated 60-70%. In complementary MOS (CMOS), 41 new devices were introduced. Linear integrated circuit sales accelerated well beyond initial estimates. Further expansion is predicted for '73. A major factor: the automotive market, prompted by new fed eral safety standards. Sales of discrete semiconductors increased, especially in silicon small signal and power transistors. Small signal growth was caused largely by the improved entertainment products market, particularly TV receivers. Power transistors are expected to enjoy strong growth through the mid '70s, primarily due to vital role in "all solid state" TV, portable electronics and electronic ignition systems. It is doubtful that integrated circuits will penetrate these high-growth discrete product areas. Production capacity is being increased to meet worldwide semiconductor demand. A 67,000 sq. ft. plant was completed in East Kilbride, Scotland; and a 62,000 sq. ft. addition, more than doubling the size of the Guadalajara, Mexico plant, will be completed by Fall '73. Increased production space at the main Phoenix plant will become available upon completion of a 67,000 sq. ft. office building, scheduled for mid '73. Customer service "first" was scored in the industry with the newly opened "LocaLogic" Design Center in Lexington (Boston), Mass. Eastern area equipment manufacturers are using the center to design their own complex LSI circuits without traveling to the Phoenix design headquarters. More centers are planned. Semiconductor prospects excellent for '73. Total U.S. factory sales are forecast to continue their upward trend, as will sales in the international markets. Motorola is confident of retaining its share of this industry growth.

Consumer Products Division Color TV sales set second straight annual record. Unit sales increased (distributor to dealer) by about 40% — nearly double the U.S. industry figure. Black-and-white TV sales climbed 40% in contrast to the U.S. industry average of about 8%. Continuing trend: Despite shift in demand to portables from color consoles, Motorola console sales remained generally above industry averages. Portables kept pace with increased demand. Strong national advertising program established for Quasar color TV on the three major national television networks — concentrated on college and professional football plus prime time shows. Customer Satisfaction Program to upgrade consumer service —now fully underway in Wisconsin, Michigan and Texas. Established television set service centers are chosen on the basis of technical proficiency, employe training programs, availability and maintenance of equipment and parts. Expansion plans are underway for U.S. and Canadian dealers. The division continued to apply video expertise in its newly developing visual display business. The displays are used for readouts in computer terminals and closed circuit TV systems. A major expansion program is closing the gap on increased production requirements. Opened in '71, the Toronto, Ont. color TV assembly plant was enlarged from 45,000 sq. ft. to 65,000 sq. ft. An adjacent facility was leased to provide 42,600 sq. ft. of additional production and office space. The Taiwan plant, also opened in '71, was expanded from 123,000 sq. ft. to 161,000 sq. ft. In Quincy, 111., 145,000 sq. ft. were added to the original 710,000 sq. ft. plant. Completion is due in '73. In Webb City (near Joplin, Mo.), Motorola purchased a 38,000 sq. ft. plant and additional land for future expansion. '73 plans call for a 40,000 sq. ft. addition to Webb City plant. The division is reaping benefits of technical leadership. Motorola was first to mass-produce color TV receivers with rectangular picture tubes; first in U.S. with all solid state modular color sets; and first in the U.S. with five-function, onebutton tuning. Now the only manufacturer offering up-front, "works in a drawer" service accessibility. Excellent showing in Canadian color TV sales. Motorola Canada Limited sales, earnings and market share met expectations. Growing sales penetration is expected in '73 with consumer demand reinforced by advertising on Canadian TV networks.

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"When I make my follow-up calls to customers," says Dolores O'Toole, "I hear comments like — 'I didn't believe you were really from Motorola until the serviceman came and fixed our TV set'; or, 'imagine a manufacturer caring about someone who has already bought his product!'." As consumer coordinator Dolores starts her workday in the afternoon and stays well into the evening to reach customers at home. Representing Motorola's customer satisfaction program, she has telephoned hundreds of people who recently purchased a Quasar color TV to explain that buying a Motorola product means the beginning of a relationship, not the end. Although most of the customers she talks to are satisfied with their new TVs, if one has a problem he can depend on Dolores to help. Often the only service needed consists of some minor adjustment covered by the Quasar guarantee, whose basic terms are on the back of every color TV set. In calling back to make sure that the customer's problem has been solved, Dolores usually finds the person still a bit astonished but appreciative. As Motorola's customer satisfaction program has revealed, personal contact and consideration can build bonds of trust between manufacturer and consumer.

Government Electronics Division

• * * • • « • •

In space, a minor malfunction may signify a fatal flaw. When NASA asked Motorola to design and install a device to test a piece of Apollo equipment not produced by Motorola, Cullen Moore, senior staff engineer at GED, knew how much could be at stake. Working under a support contract with NASA, Cullen's team had just one week to build the unit, ship and install it in a key tracking station outside Madrid, Spain. As Cullen says, to get a score of people working with total dedication on a project, you must fire their imaginations. Give them the challenge of an "almost impossible task." Five and one half days later, the test equipment, cannibalized from a Block II Apollo lunar module transponder, was on its way. After Cullen and another Motorola engineer made the final preparations at the Madrid station, the testing device was able to produce the data requested by NASA during the next flight. The way Cullen Moore sees it, with so much riding on communications, nothing should be left to chance. Dedicated engineering backed up the Motorola communications equipment aboard Lunar Roving Vehicles, Lunar Modules and Command Modules that helped link the Apollo astronauts to Earth. Motorola transponders helped relay TV pictures and biomedical data from the astronauts and provided two-way radio contact with tracking stations around the world.

Sales were up over the previous year and earnings were at an all-time high. Yearend backlog was up more than 60% over '71. Space activity continuing. During '72, division delivered NASA equipment for manned Skylab program — hardware for earth-to-space communications and the relay unit for the command module's docking with the orbiting Skylab. Development is underway for NASA and the Jet Propulsion Lab on three major communication/electronic subsystems for the '73 deep space probe to Venus and Mercury. Five subsystems are in preparation for a '75 Viking/Mars unmanned orbiter and lander mission. Contracts awarded in '72 include production of communications transponders for Earth Resources Technology Satellites and the Atmospheric Explorer Satellite. Another is to develop a transponder for the Smithsonian Institute's Red Shift relativity experiment to be orbited by NASA. Development and shipboard tests completed on Fleet Broadcast receiving systems. Designed to provide primary satellite communications for U.S. Navy's major ships. Followon production opportunities are significant. Multimillion dollar Defense Department contract awarded to develop secure voice communications for the armed forces. Initial development was completed on U.S. Army's Position and Survey System (PASS). A new contract was also received for 20 additional precision PASS sets, used in mapping and artillery location. In radar development, initial contract was received for the first units of Motorola's new Totalscope II visual display device. Several production prototype ground stations were delivered to the U.S. Navy Department for the tri-service Integrated Target Control System. Additional funding was provided for work on a new system configuration for an airborne control station. A second Slot Buoy contract was received and production continued on these undersea electronic one-way tactical communications devices. Multimillion dollar contract opens new market. Several years of R&D investment brought award of a major U.S. Air Force contract for active Electronic Countermeasures equipment. International sales. Canadian government purchased special transponders for use in a drone tracking project in Canada, the United Kingdom and West Germany. Brazil joined seven other countries using electronic positioning systems in a wide variety of marine applications, including hydrographic and geophysical studies. Outlook for '73: Government procurement trends should strengthen the division's opportunities for further growth.

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Automotive Products Division Division sales and earnings records reflected worldwide automobile demand and growing preferences for more sophisticated and higher priced entertainment products. Car radio sales to auto manufacturers continued strong. Motorola remained the sole outside supplier for '73 model Chrysler Corp. and American Motors cars. Also supplied Ford Motor Co. and other manufacturers with selected models. Company continued as major source for Volkswagen in U.S. and Canada. In entertainment centers—which combine AM/FM radio, FM stereo and an 8-track tape player in a single unit—the division was the only supplier to Ford and Chrysler for these products. Tape players continued to be a growing area of division business. Motorola was the only supplier to Chrysler, Ford and American Motors for '73 models. Also major supplier to Volkswagen in U.S. and Canada. Private label tape deck sales were up considerably, as were aftermarket sales for Motorola-branded radios. Alternator sales for '72 increased more than 40%. The division was sole supplier to American Motors for '73 models. Volkswagen awarded a multimillion dollar contract beginning with the '73 model year for Beetles and KarmannGhias. Alternators are shipped to Germany for installation in cars primarily destined for the U.S. market. Thick film technology was introduced into the new Volkswagen voltage regulators, and will also be applied to other products. Electronic solid state ignition systems are now being supplied to Chrysler Outboard Corp. for its marine engines. Expansion plans include enlarging the Arcade, N.Y., and Midland, Ont. facilities to meet the production demand for entertainment and automotive and industrial products. In Seguin, Tex., car radio production began in a leased 48,000 sq. ft. plant. A new, considerably larger facility will be built there this year. A major new facility is scheduled for Angers, France. This plant will produce automotive and industrial products for European distribution, including a new generation of alternators designed in ' 72 for the European market. International operations improved sales performance. The division's subsidiary in the United Kingdom set a sales record and became profitable in '72. Canadian car radio sales increased over previous year. Autovox in Italy, a majorityowned subsidiary, did not operate at a profit in '72. AlpsMotorola of Japan achieved record sales with improved profits.

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Final adjustments on a production-ready entertainment center are underway inside a new' 73 car at Motorola's Franklin Park, 111. automotive test facility. Two years ago, when Frank Drong first saw the design specifications drawn up by Motorola's customer, a major automobile manufacturer, he knew that a lot of man hours had already gone into working out the details of a contract which would benefit both Motorola and the customer. Viewing the finished product, Frank is satisfied that his electrical engineering input contributed in an essential way to this compact unit. But the key to its total development has been cooperation. Cooperation at all levels of Motorola's participation, and cooperation with the customer. So, before the public will see this new car, it is here, because only an actual test can reveal how the car and the entertainment center will interact. "Let's see. Is there any possibility of interference here? No, OK. Let's hear how it sounds." Frank checks the tape, then turns on the radio. "Beautiful!"

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ew Ventures Activity Two years ago, when Dick Harasek was new products manager for Motorola's Consumer Products Division, he and his friend, Herman Pedtke, began looking for ways to advance a revolutionary new product idea. Dick enjoyed his job; but he was ambitious for a chance to control his own destiny—to reach beyond his grasp —to a new venture. And New Ventures backing, Dick believes, can give a solid competitive edge to his potential innovative enterprise. With Herman Pedtke as a Motorola consultant, Dick is refining, quantifying and organizing their original concept into a formal schedule for producing and marketing a whole new application of electronics technology to the field of music. This may be formalized as a New Venture for Motorola. With New Ventures, Dick and others like him who have New Ventures activity was formalized in February 1972. Its viable business propositions purpose: to generate and launch new businesses from within and the drive to make them Motorola; to manage businesses acquired by Motorola; and to successful, are assured of aid in researching and developing possible acquisitions. careful consideration from a Two New Ventures laboratories were established in Chimajor corporation. One with cago and Phoenix as a focus for venture activities. an appreciation for the entrepreneurial spirit, and the cre- American Regitel Corp., San Carlos, Calif., became a ativity to encourage it. New majority-owned subsidiary of Motorola Inc. in March '72. Regit Ventures —a part of Motor- manufactures electronic cash registers, credit terminals and m ola's investment in the future. chandise ticket readers. Store-based minicomputer/controllers can command up to 120 cash registers. 4,000 Regitel registers and credit terminals are currently in use at 40 major departme stores nationally; several are operating in Europe. Retail point-of-sale electronics is predicted to mushroom. '72 industry sales neared $60 million. Estimated sales for '73 stand at about $140 million.

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Other Businesses Institutional Electronics Unit (IEU) markets a variety of electronic products to the lodging industry, and provides related systems engineering, maintenance and financing. Total product sales volume was up about 30% over '71. Quasar lodging color TV unit sales increased 52% over '71. '72 product introductions for the lodging market included Pagecom radio pagers and Quasar Colorviewer TV with AM/FM radio. IEU is the leading supplier of color TV and electronic communications systems to Holiday Inns Inc. The unit is also the major U.S. supplier of color TV to ITT Sheraton Corporation of America, Western International Hotels and Del Webb Hotels International. 1,400 Quasar Colorviewer TVs were provided for four Pacific Southwest Airways' hotels. New O'Hare International Towe? hotel plans to use 1,000 Quasar Colorviewer TV sets and Motorola radio paging and electronic management systems. The Travelodge near Disney World was equipped with Quasar Colorviewer TVs. Other '72 customers included the new Crown Center, Kansas City, Mo.; Hyatt House on Union Square, San Francisco; and Host Airport Hotel, Houston. Four unique Inn Scan 400 electronic management systems are scheduled for introduction in '73. They are designed to help optimize productivity and profitability of hotels and motels.

Demand for matched sets of electronic watch components, introduced in '72, exceeded expectations, and order backlog is steadily increasing. Primary U.S. customer is Benrus, user of all three Motorola components (quartz crystal, integrated circuit and micro-watt motor). Several others, including Girard Perregaux in Switzerland, are customers for individual components.

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International Trade and Investment Motorola's markets and operations are worldwide. Our increasing role in international trade and investment not only profits the company but helps foster world peace, understanding and improved quality of personal living as our employment, investment and business grow in each country. However, the environment for international trade is not as good as it should be and is threatened further by well-intentioned but shortsighted political efforts that ignore basic business strengths while also overlooking the real problems. Of particular concern throughout the world are certain legislative proposals, like Burke-Hartke in the United States. Because of the effect of the large U.S. market on world trade, passage of these proposals would have a detrimental effect on the world economy due to the reaction such constraints, if established by a major nation, would certainly provoke elsewhere. These proposals seem to ignore the positive benefits contributed within countries such as the United States by worldwide corporations like Motorola. For example,as we have established marketing, warehousing or manufacturing operations in other nations, Motorola's U.S. employment rose, particularly its employment in support of those operations. Plants in Europe, South America, Israel, etc. producing for their local markets have increased U.S. exports of parts and complementary finished products to those markets, creating jobs both in the United States and the other countries. This has further permitted Motorola, like most multinational companies, to contribute a significant company-wide trade surplus to the United States. Our total U.S. exports for 1972 were twice our total U.S. imports. More than half of our U.S. exports were to Motorola subsidiaries elsewhere. As these investments have increased so also have our U.S. exports to them. Motorola also had a positive impact on the 1972 U.S. balance of payments, which would have been true even if we had financed all non-U.S. fund requirements from U.S. sources. These basic business strengths and contributions are characteristic of a worldwide corporation. Yet, there is a particular fundamental trade and investment problem that needs to be resolved promptly among the developed nations of Europe, Japan and the United States: that is, removal of inequities on a product for product basis of duty differences, non-tariff barriers, subsidies and investment restraints that distort commerce. It is to this objective that governmental efforts should be directed.

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otorola Major Worldwide Product Lines Canada Communications Division Markham, Ontario Mobile and portable FM two-way radio communica Midland, Ontario Radio paging systems Willowdale, Ontario Communications control centers France Visual communications systems Toulouse Signaling and remote control systems West Germany Car telephone systems Wiesbaden Microwave communications systems Great Britain Health care communications systems East Kilbride, Scotland Precision instruments Stotfold, England Component products Hong Kong Semiconductor Products Division Kowloon Integrated circuits (Bipolar and MOS) Israel^ Linear integrated circuits Tel-Aviv MSI/LSI integrated circuits (Bipolar and MOS) Italy Silicon and germanium power and small signal t Rome Silicon rectifiers and "Annular" transistors Korea Field effect transistors Seoul RF small signal and power transistors Mexico Thyristors and varactors Guadalajara, Jalisco Zener and tuning diodes Mexico, D.F. Functional circuits Nogales, Sonora Optoelectronics Puerto Rico Consumer Products Division Vega Baja Quasar color television Switzerland Monochrome television Geneva Console and component audio products Taiwan Visual display monitors Taipei Government Electronics Division United States Aerospace communications systems Chicago, World Headquarters Tactical radio and microwave communications sy Franklin Park, Illinois Radar systems, data links, and display systems Pontiac, Illinois Range positioning and navigation systems Quincy, Illinois ASW tracking systems Schaumburg, Illinois Instrumentation products Webb City, Missouri Countermeasures systems Mesa, Arizona Missile guidance and drone systems Phoenix, Arizona Electronic ordnance devices Tempe, Arizona Automotive Products Division Scottsdale, Arizona Car radios Fort Lauderdale, Florida Stereo tape players Arcade, New York Alternator charging systems Seguin, Texas Solid state ignition systems Motorola Executive Institute Electronic instrumentation Oracle, Arizona New Ventures Activity and Other Businesses Training and educational films Point-of-sale electronic systems Hotel/motel electronic management, communicati and entertainment systems Timepiece electronics

Consolidated Balance Sheet as of December 31, Motorola, Inc. and Subsidiaries

Assets 1972 1971

Current Assets (Thousands of dollars)

Cash $20,040 19,068 Short-term investments, at cost (approximating market) 30,092 4,230 Accounts receivable 254,387 209,393 Allowance for doubtful accounts (6,843) (5,945) Costs recoverable under United States government contracts, less progress billings 8,766 6,983 Inventories, at the lower of cost (first-in, first-out) or market Finished goods 59,520 57,512 Work in process and production materials 157,913 122,803 Future income tax benefits 23,817 19,822 Other current assets 16,626 17,087 Total Current Assets 564,318 450,953

Plant and Equipment, at Cost

See accompanying notes to consolidated financial statements

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as of December 31, Motorola, Inc. and Subsidiaries

Liabilities and Shareholders'Equity 1972 1971

Current Liabilities (Thousands of dollars)

Notes payable — banks and other United States and Canada $31,376 24,950 Other nations 19,473 18,852 Current maturities of long-term debt (note 3) .. 3,026 3,273 Accounts payable 87,262 67,328 Accrued compensation 26,019 17,710 United States, Canada and other nations' income taxes (note 4) 12,593 10,883 Other (including withheld) taxes 12,272 12,023 Contribution to employes' profit sharing funds (note 7) 13,897 8,577 Product and service warranties 14,070 9,755 Accrued expenses and other 32,743 30,024 Total Current Liabilities 252,731 203,375

Long-Term Debt (note 3) 80,302 63,780 Minority Interest in Majority-Owned Subsidiaries. 2,860 3,689

Shareholders' Equity (note 9)

Capital stock, $3.00 par value (notes 3 and 5) Authorized: 20,000,000 shares Outstanding: 1972, 13,785,488 shares; 1971, 13,480,798 shares. 41,356 40,442 Additional paid-in capital (notes 3 and 5) 114,645 95,349 Retained earnings (notes 2 and 3) 283,610 240,106 Total Shareholders'Equity 439,611 375,897 $775,504 646,741

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Consolidated Earnings and Retained Earnings Years ended December 31, 1972 1971 Motorola, Inc. and Subsidiaries

(Thousands of dollars, except per share figures)

Sales and other revenues $1,163,315 926,593 Manufacturing and other costs of sales 808,286 632,313 Selling, service and administrative expense (notes6and7) 222,888 196,993 Depreciation of plant and equipment 30,529 27,239 Interest and amortization of debenture discount, expense and premium, net 10,417 7,714 Minority interest in net earnings (losses) of majority-owned subsidiaries (1,267) 279 Total Costs and Other Expenses 1,070,853 864,538

Income before United States, Canada and other nations' income taxes 92,462 62,055 United States, Canada and other nations' income taxes, net of investment credit of $1,922,000 in 1972, $554,000 in 1971 (note 4) 40,424 30,305

Net earnings 52,038 31,750 Retained earnings at beginning of year 240,106 216,414 Less cash dividends declared (per share: 1972, $.624; 1971, $.60) (note 9) 8,534 8,058 Retained earnings at end of year (notes 2, 3 and 9) $283,610 240,106 Earnings per weighted average share outstanding during the year (note 9) $3.81 2.37

See accompanying notes to consolidated financial statements

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Consolidated Changes in Financial Position Years ended December 31, 1972 1971 Motorola, Inc. and Subsidiaries

(Thousands of dollars)

Working Capital Provided Net earnings $52,038 31,750 Add expenses not requiring outlay of working capital: Depreciation 30,529 27,239 Amortization of deferred debenture discount, expense and premium, net 555 632 Minority interest in net earnings (losses) of majority-owned subsidiaries (1,267) 279 Working capital provided from operations 81,855 59,900 Disposals of plant and equipment (and tooling, net) 3,971 722 Decrease in sundry assets (exclusive of amortization of deferred debenture discount, expense and premium) ..... 808 1,292 Increase in long-term debt 29,334 4,914 Increase in minority interest in majority-owned subsidiaries (exclusive of current year's net earnings) 438 2,704 Proceeds from issuance of capital stock 20,210 8,120 Total working capital provided 136,616 77,652 Working Capital Used Additions to plant and equipment (includes net balances of subsidiaries acquired: 1972-$1,126,000; 1971 -$5,673,000) 49,134 37,650 Equipment rented to others, at cost 2,127 Reduction of long-term debt 12,812 6,482 Cash dividends 8,534 8,058 Total working capital used 72,607 52,190 Increase in working capital $64,009 25,462 Increase (Decrease) in Components of Working Capital Cash $ 972 (2,155) Short-term investments 25,862 (1,840) Accounts receivable, net 44,096 35,318 Cost recoverable under United States Government contracts, less progress billings 1,783 1,287 Inventories 37,118 34,051 Future income tax benefits 3,995 1,174 Other current assets (461) 1,589 Total current assets 113,365 Notes payable 7,047 Current maturities of long-term debt (247) Accounts payable 19,934 Accrued compensation 8,309 United States, Canada and other nations' income taxes 1,710 Other (including withheld) taxes 249 Contribution to employes' profit sharing funds 5,320 Product and service warranties 4,315 Accrued expenses and other 2,719 Total current liabilities 49,356 43,962 Increase in working capital $64,009 25,462

See accompanying notes to consolidated financial statements

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Consolidated Additional Paid-in Capital Years ended December 31, 1972 1971 Motorola, Inc. and Subsidiaries

(Thousands of dollars)

Balance at beginning of year $95,349 87,643 Share option plans (notes 5 and 9) 12,848 6,017 Conversion of 4 xh % convertible guaranteed debentures, (principal amount: 1972, $8,786,000; 1971, $2,366,000) (notes 3 and 9) 6,448 1,689 Balance at end of year $114,645 95,349

See accompanying notes to consolidated financial statements

Notes to Consolidated Financial Statements 1 Accounting policies. Following is a summary of significant accounting policies followed in the preparation of these consolidated financial statements which policies are in accordance with generally accepted accounting principles. Consolidation. The consolidated financial statements include the accounts of the company and all majority-owned subsidiaries. Commencing in 1972, certain other investments (20% to 50% owned affiliates) previously carried at cost were adjusted (not materially) to recognize earnings since acquisition, less dividends received. Other investments are carried at cost unless a permanent decline in value is deemed to have occurred. All significant intercompany accounts and transactions have been eliminated in consolidation. International. The accounts of the company's operations outside the United States have been translated as follows: plant and equipment at currency exchange rates prevailing when acquired; other assets and liabilities at year-end rates; operating accounts at rates prevailing during the year except depreciation charges which are translated at the historic rates of the related assets. The net currency translation loss for the year of $56,000 (1971 recognized a gain of $879,000} was charged to deferred exchange gains provided in prior years. The company's equity in undistributed earnings of the non-U.S. subsidiaries and affiliates included in consolidated retained earnings at December 31, 1972 amounted to $14,750,000 ($7,670,000 in 1971). Certain of these earnings may be taxable in the United States upon distribution; however, it is intended that these earnings be permanently invested in operations outside the United States and accordingly, no provision has been made for United States taxes. Inventories. Inventories are valued at the lower of cost (first-in, first-out) or market. Market value of work in process and production materials is represented by replacement cost and for finished goods by net realizable value. Income tax. Future income tax benefits relate to current charges against income which will be deductible for tax purposes in the future. Plant and equipment. Plant and equipment is stated at cost. The related cost and accumulated depreciation on property sold, retired or fully depreciated are cleared from the accounts with the net difference, less any amount realized from disposals, reflected in current operations. Depreciation is provided on the basis of the estimated useful lives generally by the declining balance method for items acquired subsequent to December 31, 1953, and by the straight-line method for items acquired prior to that date. Debenture discount, expense and premium. Deferred debenture discount,

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expense and premium are included in sundry assets at unamortized cost. Amortization is being charged to interest expense over the terms of the debentures by the straight-line method. Share options. When share options are exercised, the proceeds received are credited to the capital stock account to the extent of the par value of shares issued, and the excess is credited to additional paid-in capital. The tax benefit the company receives from disqualifying dispositions by optionees of exercised qualified stock options is credited to additional paid-in capital. Research and development. R&D expenditures are charged to operations as incurred. Advertising and sales promotion. The costs of advertising and promotional programs are charged to operations during the year generally in relation to sales, and are fully expensed by the end of the year. Anticipated future promotional costs on current sales are also charged against operations in the current year. Product and service warranties. Anticipated costs related to product and service warranties are recorded at the time of the sale of the products. At December 31, 1972 and 1971 net assets of consolidated operations outside the United States and Canada aggregated $78,500,000 and $49,900,000 respectively. Export sales of U.S. companies, and sales and other revenues of operations outside the United States and Canada were 14% and 13%, respectively, of 1972 and 1971 consolidated amounts. Long-term debt at December 31 consisted of the following:

1972 1971 Debt outside the United States and Canada: (Thousands of dollars) 4% % convertible guaranteed debentures due July 1, 1983 $18,848 $27,634 8% guaranteed sinking fund debentures dueMarch 1, 1987 25,000 — Notes payable (generally at prevailing prime rates) due in installments to 1981 10,224 9,419 Debt in the United States: 4% % debentures due April 1, 1986 (excluding $1,000,000 debentures held by the company for sinking fund payment) 26,000 27,000 3%% and 4%% notes due in annual installments to 1976 2,000 3,000 Notes payable (generally at prevailing prime rates) due in installments to 1977 1,256 — $83,328 $67,053 Less current maturities, included in current liabilities 3,026 3,273 Net long-term debt $80,302 $63,780

The 4Vfe% convertible guaranteed debentures (issued by Motorola International Development Corporation) are convertible into capital stock of Motorola, Inc. at the rate of 12.6 shares for each $1,000 principal amount, subject to adjustment in certain events, and are guaranteed as to the payment of principal and interest by Motorola, Inc. The debentures are redeemable at various dates at redemption prices reducing from 104% to 100% of the principal amount thereof. In 1972, $8,786,000 in debentures ($2,366,000 in 1971) were converted into 110,693 shares (29,807 in 1971). At December 31, 1972, there were 237,500 shares (348,193 in 1971) of Motorola, Inc. capital stock reserved for issuance upon the conversion of these debentures. The 8% guaranteed sinking fund debentures (issued by Motorola International Capital Corporation) are redeemable at various dates beginning after March 1, 1977, at redemption prices reducing from 102% to 100% of the principal amount thereof. Annual sinking fund payments are required beginning March 1, 1977 in progressive amounts sufficient to retire 76% of the issue prior to maturity. The issue is guaranteed as to payment of principal and interest by Motorola, Inc.

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At December 31, 1972, $165,000,000 (1971-$137,000,000) of retained earnings were not restricted by loan agreements as to dividend payments. See note 9. The provision for taxes on income includes $39,503,000 United States and Canada and $921,000 in other nations. The effective tax rate for 1972 reflects tax benefits principally arising from United States investment credit accounted for on the flow through method; and tax holidays and tax loss carryovers which offset 1972 earnings in other than the United States or Canada. Under the company's Employe Share Option Plans, shares of capital stock have been made available for qualified or non-qualified option to employes of the company and certain subsidiaries. Options may be granted at not less than fair market value on the dates of grant, and become exercisable one year from date of grant. Qualified options expire at the end of five years and non-qualified options expire at the end of ten years. Data on share options are summarized as follows: 1972 1971 Options Outstanding Beginning of Year 514,845 508,170 Options Granted 164,570 124,900 679,415 633,070 Less: Options Exercised 193,997 108,325 Options Terminated 3,500 9,900 197,497 118,225 Options Outstanding End of Year 481,918 514,845 Shares Reserved for Possible Future Options 424,790 585,860 Total Shares Reserved 906,708 1,100,705 Aggregate Option Price of Outstanding Options $42,753,000 $32,820,000 Aggregate Option Price of Exercisable Options $21,804,000 $22,148,000 Excess of the Option Price Over the Par Value of Shares Issued $10,201,000 $ 5,429,000 Tax Benefit Resulting from Disqualifying Dispositions by Optionees $ 2,647,000 $ 588,000 See note 9.

An Executive Incentive Plan provides that the company and certain subsidiaries may reserve up to 4% of their annual consolidated pre-tax earnings (as defined) for the payment of cash incentive awards. Such awards are payable, except for awards of $1,000 or less, generally in equal annual installments over a period of five years and are generally subject to the recipients' continued em* ployment. Reserves of $2,642,000 and $1,614,000 representing 4% of defined earnings were provided in 1972 and 1971 respectively for such awards. Awards of $1,632,000 were made in 1972 ($1,284,000 in 1971), and $3,846,000 (subject to Pay Board limitations under the Economic Stabilization Act of 1970) was available for awards at December 31, 1972 ($2,836,000 in 1971). The company and certain subsidiaries have contributory profit sharing plans in which all eligible employes participate. The companies' contributions to profit sharing funds in the United States, Canada and other nations, based upon percentages of pre-tax earnings, were $13,897,000 in 1972 and $8,577,000 in 1971. The company and certain subsidiaries have a voluntary, contributory pension plan. The company's policy is to fund pension costs accrued, 1972, $2,416,000; 1971, $2,578,000. At December 31, 1971, date of the latest actuarial determination, vested benefits were fully funded. In the event that the amount actually payable annually under the plan does not amount to 40% or more of an officer's rate of salary at retirement, it is the intention of the company (subject to certain qualifications and conditions) to make supplementary payments so that the total annual payments will aggregate at least 40% (or 30% in the case of payments to widows) of the officer's rate of salary at retirement. The company is providing a reserve for the supplementary payments on a current basis. The companies are obligated under repurchase and other agreements principally in connection with the financing of sales of products to consumers, and

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are defendants in suits and claims, which management believes will have no material effect on the business of the companies. On February 28, 1973 the Board of Directors, subject to shareholders' approval, proposed an amendment to the Articles of Incorporation to increase the authorized shares of the company from 20,000,000 shares to 40,000,000 shares. If approved, the Board intends to authorize a share for share distribution in May 1973. References to the number of shares in notes 3 and 5 are based on shares authorized and outstanding at December 31, 1972.

Accountants' Report The Board of Directors and Shareholders of Motorola, Inc.:

We have examined the consolidated balance sheet of Motorola, Inc. and subsidiaries as of December 31, 1972 and 1971 and the related statements of earnings and retained earnings, additional paid-in capital and changes in financial position for the years then ended. Our examinations were 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. In our opinion, the aforementioned financial statements present fairly the financial position of Motorola, Inc. and subsidiaries at December 31, 1972 and 1971 and the results of their operations and changes in financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

Peat, Marwick, Mitchell & Co.

Chicago, Illinois February 14, 1973, except for Note 9 as to which the date is February 28, 1973

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Ten Year Financial Summary Motorola, Inc. and Subsidiaries

Sales and Income Net Earnings Working Net ShareOther before Earnings Per Capital Invest- holders' Revenues United Share* mentin Equity States, Plant & Canada Equipment and Other Nations' Income Taxes 1972 $1,163,315 $92,462 $52,038 $3.81 $311,587 $200,980 $439,611

1971 926,593 62,055 31,750 2.37 247,579 184,219 375,897

1970 796,418 51,813 25,663 1.93 222,117 174,530 344,085

1969 873,224 71,843 33,793 2.74 235,593 167,500 326,134

1968 775,124 57,376 28,261 2.30 176,414 145,582 238,778

1967 629,975 34,571 18,816 1.54 131,358 136,963 206,286

1966 682,375 60,013 32,953 2.70 128,159 127,219 192,598

1965 516,973 57,839 31,839 2.62 118,015 81,083 165,002

1964 419,067 38,927 20,667 1.71 107,626 67,837 137,533

1963 377,853 27,127 12,927 1.07 92,359 67,284 120,735

Thousands of dollars, except per share figures

• Earnings per share are based on the weighted average shares outstanding during the respective years, adjusted for share distributions.

The conversion of 4V2% debentures and the exercise of outstanding share options would not result in a significant dilution of earnings per share.

Earnings per share shown above do not include 11? of non-recurring charge from discontinuance of color TV picture tube manufacturing operation in 1970.

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