Motorola 2002 Annual Report Download - page 19

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Intelligence Everywhere™17
In the second half of 2002, w e returned M otorola to profitability. We turned our earnings performance
around in the face of declining sales and started building earnings momentum w ell ahead of top-line
growth. Motorola exceeded the vast majority of the financial metrics we set out to achieve in this
middle phase of our turnaround in 2002.
Gross margins were up. Overhead was down. Operating margins were up. Positive operating
cash flow was generated. Debt shrunk.
FINANCIAL RESULTS
Sales decreased to $26.7 billion compared with $29.9 billion in 2001. In accordance with generally
accepted accounting principles (GAAP) we incurred a net loss of $2.5 billion, compared with a net
loss of $3.9 billion the prior year. The loss per share was $(1.09) compared to a loss per share of
$(1.78) in 2001.
Included in the loss for both 2002 and 2001 were special items related largely to:
>Restructuring to low er costs and improve productivity; and
>Asset revaluations required by GAAP because of declining values.
Special items resulted in a net charge of $2.8 billion after tax in 2002 and $3.3 billion after tax in
2001. Excluding special items, the company had net earnings of $314 million, or $0.14 per share, in
2002 versus a net loss of $697 million, or $(0.31) per share, in 2001.
We compiled these results by focusing on our own ability to execute even as we encountered a
difficult economy and a continuing steep decline in most of the high-tech markets we serve. While
moving aggressively to restore profitability and growth, we were – and are – alw ays insistent on living
up to our 74-year-old reputation for being a highly principled and ethical global corporation.
A reconciliation of our non-GAAP measurements to our GAAP financial data can be found on
pages 27-30. Full GAAP financial data can be found in the Proxy Statement.
THE FIVE-POINT PLAN
The five-point plan introduced in 2001 has served us well by helping us focus on critical priorities
to drive profitable growth:
1. To aggressively focus on the balance sheet.
2. To lower our break-even sales level by reducing SG&A and manufacturing costs.
3. To continually strengthen our management team.
4. To pursue grow th through innovative products, softw are applications and customer relationships.
5. To constantly evaluate our strategic options and business portfolio.
1. Focusing on the Balance Sheet
The numbers tell the story. We have delivered positive operating cash flow for eight quarters in a
row, generating $1.3 billion in 2002 and $2.0 billion in 2001. We reduced net accounts receivable to
$4.4 billion from $4.6 billion. We reduced net debt to $2.3 billion from $3.1 billion. We reduced our
ratio of net debt to net debt plus equity to 16.7% in the fourth quarter of 2002 from 18.4% in the fourth
quarter of 2001.
At year end, we were holding more than $6.5 billion in cash, cash equivalents and short-term
investments worldwide. We held $4.2 billion of that total in the United States, after moving
approximately $3.0 billion from overseas to U.S. accounts during the year.
TO OUR STOCKHOLDERS AND OTHER FRIENDS,