摩托罗拉公司1959年年报

M MOTOROLA INC.

ANNUAL REPORT 1959

More for Mankind... through Electronics

About the Co ver

Pictured on the cover is an electronics engineer observing the thin film evaporation process in a laboratory at Motorola's Solid State Electronics Department in Phoenix, Arizona. The growing complexity of electronic devices requires higher standards of reliability and a new approach to microminiaturization. The thin film art, which the cover

photograph depicts, is still in the developmental sta It promises complete electronic functional circuits less than the thickness of this page, and a solution to the problems of size, weight, power consumption, and reliability. For additional information concern-

ing solid state electronics see page 8 of this report

The annual meeting will be held on Monday, May

2, 1960. A notice of the meeting, together with a

form of proxy and a proxy statement, will be mailed

to shareholders on or about April 6, 1960, at which

time proxies will be solicited by the management.

CONTENTS

Directors and Officers 1 edication to Paul Galvin 2 President's Review 3

Divisional Report Communications 4 Automotive Products 7 Military Electronics 8

Semiconductor Products 10

Consumer Products 12 New Subsidiaries 16

Financial Report

Motorola Inc. and

onsolidated Subsidiaries ola Finance Corporation Year Financial Summary 18 21 22 Profit Sharing 24

Transfer Agents CHEMICAL CORN EXCHANGE BANK

30 Broad Street, New York 15, New York

HARRIS TRUST AND SAVINGS BANK 115 West Monroe Street, Chicago 90, Illinois

Registrars

IRVING TRUST COMPANY

One Wall Street, New York 15, New York

CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO

231 South La Salle Street, Chicago 90, Illino

Directors and Officers of Motorola

Robert W. Galvin Daniel E. Noble Edward R. Taylor Elmer H. Wavering Director, President Director, Executive Director, Executive Director, Executive Vice President, Vice President, Vice President, Communications, Consumer Products Automotive Products Semiconductor and Division Division Military Electronics Divisions

Matthew J. Hickey, Jr. Frank J. O'Brien Arthur L. Reese Walter B. Scott Edwin P. Vanderwicke Director Director, Vice President, Director, Director, Vice President, Communications Vice President, Vice President for Purchasing Division Consumer and Finance, Treasurer Automotive Production and Secretary

Alex Arnold Joseph A. Chambers John 1. Davis Sylvester R. Herkes William S. Wheeler Controller Vice President, Vice President, Vice President, Vice President, Western Area Military Consumer Products Consumer Products Military Electronics Electronics Center Engineering Marketing Division

PAUL VINCENT GALVIN

RESOLVEDThe Board of Directors of this corporation mourns the passing of Paul Galvin, founder, builder and leader of Motorola, on November 5, 1959. He was a just man and a courageous man and a man of vision. He was a warm and understanding friend. His inspiration, encouragement and high regard for human dignity endeared him to all of us. His humility testified to his greatness. On every hand we see the indestructible mark of Paul Galvin. For the opportunity to have been associated with him, we are deeply grateful.

PRESIDENT'S REVIEW

To the Shareholders of Motorola:

Motorola's sales and earnings in 1959 were the highest in its 31 year history. Consolidated sales, whic do not include Motorola Finance Corporation operations, were $289,529,444, a 33 per cent increase over 1958. Net earnings of $14,171,237 were 92 per cent larger than 1958. Earnings per share of common stock were $7.17 in 1959 compared with $3.80 in 1958. The enthusiastic acceptance by consumers of our home entertainment products resulted in substantially improved sales and earnings. An important reason is that we achieved a new high standard in performance and fine cabinetry, particularly in the higher end of our line. The Communications Division continued an unbroken record of increasing sales and earnings, aided by new and improved products and as a result of availability of two-way radio to more business uses. The Automotive Products Division benefited from the improved volume of its principal customers

March 10, 1960

Ford, Chrysler, American Motors, and International Harvester. The Semiconductor Products Division made important strides in development and production of new types of semiconductors. While continuing to supply many of our company's own needs, the majority of sales are now made to other users. The Military Electronics Division maintained its sales volume and improved its earnings. The reorganization of our international operations was completed in 1959 and its contribution to the company increased. The business of the company was further diversified by acquisition of The Dahlberg Company and the LearCal Division of Lear, Inc. whose business is described later in this report. At the end of 1959, consolidated working capital was $57,061,000 compared with $54,644,000 at the 1958 year-end. The increase in sales and the consequent need for more working capital and increased capital expenditures have dictated a conservative dividend policy. However, subject to approval of shareholders at the annual meeting, it is proposed to double the authorized common shares and to issue to shareholders of record June 30 one share for each share then held. It is also proposed to declare a quarterly dividend of 25 cents on the increased shares then outstanding, representing a 33 per cent increase in the dividend payment. We believe 1960 will be another good year for the country's economy and, particularly, for the electronics industry. If the general pace is maintained, we believe Motorola will experience a 10 per cent gain in sales in 1960 and a similar improvement in earnings. A record year such as 1959 does not occur without an imaginative, responsible, and responsive group of people making it occur. I am particularly grateful this year, when the loss of my father weighs heavily, to the management and all the employees of the company for their devotion to Motorola. No memorial would have pleased him more.

For the Board of Directors

PRESIDENT

District of Columbia's Deputy Commissioner of Traffic, Francis Twiss (L), discusses the new Motorola radio traffic control system with Regional Sales Manager, John Fussell.

COMMUNICATIONS DIVISION

Serving Industry and the Community

Electronic communications equipment plays an increasingly important part in Motorola's total performance and has proved the wisdom of the company's continuing policy of diversification in electronics.

Two-Way Radio The Motrac transistorized mobile two-way radio, completing its first year of mass production, surpassed sales expectations by more than 50 per cent. It provides another example of Motorola's leadership in design, reliability, and performance. The Motrac radio demonstrates that for many users, extra value and reduced long-run cost outweigh a higher initial cost. Mass production of Handie-Talkie pocket receivers and transmitters was achieved in 1959. Wireless radio-paging product sales to hospitals, hotels, industrial plants, and stores also exceeded expectations. These products represent another major step in miniaturization and personalization of two-way radio facilities. These "personal" radio systems, which provide selective, private communications, found application in coordinating efforts of work teams such as field engineers, military squads, and plant supervisors, whose personnel are dispersed over wide areas. Motorola expects an increasing demand for such mobile and portable personal communications equipment.

Doctors, busy executives, plant engineers—men who must be instantly available — can be reached immediately with the Motorola Handie-Talkie radio pager. The radio pager, whic weighs only 10 ounces, provides rapid, private communicat

Noticeably influencing the sales of two-way radio equipment this year was the impact of the Federal Communications Commission's earlier decision to extend availability of the radio spectrum for use by private business. Opening of the "Business Radio Service" band, making two-way radio licensing available to virtually all commercial enterprises, has greatly increased the number of new applications for radio licenses by small businesses across the nation.

Microwave Communications Systems Sales and installations of microwave point-to-point communications systems during 1959 substantiate Motorola's belief that this product will become increasingly important as industry and government organizations make greater use of computers and data processing devices. The United States Weather Bureau, for example, installed a Motorola microwave system in the District of Columbia area to link two computer centers. In the petroleum field, the new 450 mile Motorola microwave system of The Natural Gas Pipeline Company of America, a subsidiary of The Peoples Gas Light and Coke Company, brings vital computer data from Nebraska to Chicago where it is duplicated on punched cards and fed into an "electronic brain". Similarly, the Freeport Sulphur Company extended its Motorola microwave system to a new sulphur mine.

Communications Division Vice President, Arthur L. Reese (R) views latest production methods of Motorola Motrac units at the Chicago production facility with William J. Weisz, Mana of Motorola Mobile and Portable Communications Products.

The development of high speed facsimile equipment also promotes the use of microwave. Notable in 1959 was the sale of a 700 mile system to the Denver and Rio Grande Western Railroad. A major use of the network will be transmission of facsimile pictures of waybills between major rail terminals. Transistorization also emerged in microwave systems during the year with the introduction of the MC-22 multiplex unit. This is a fully transistorized package for use by power utilities in protective relaying functions.

Radio Traffic Control Systems Another highlight of the year, further evidence of Motorola's broad diversification in electronics, was the dedication of the first phase of the Washington, D. C , system for radio control of traffic signals. Some of this equipment is shown on the opposite page. The system, in which traffic light patterns are determined on punched tape, is designed to control the flow of normal traffic throughout the day, including rush-hour periods. It is capable of synchronizing lights instantly, via radio, for any given traffic situation. A contract for installation of a similar system has been received from New York City, differing only in the respect that its control patterns are set up on punched cards rather than by the tape method.

Twenty-four hour service for two-way radio users is p by some 800 Motorola system maintenance centers locat

Communications Division (continued)

Closed Circuit Television Motorola further developed its interest in closed circuit television. Its system was designed initially for municipal, educational, and private industry application. A thorough exploration of the many possible applications for military use of closed circuit television presently is being undertaken in anticipation of broadening the company's market in this field. In 1959 Motorola's Communications Division also entered the field of precision test and measurement equipment, not only for its own products, but for industrial use as well.

Communications Division Expansion The growth of the Communications Division necessitates a physical expansion in the near future. Its major facility located on Augusta Boulevard in Chicago is no longer adequate to meet requirements for production space and personnel. Upon c o m p l e t i o n of the new engineering laboratory and office space, and the consolidation of Consumer Product manufacturing at the present Franklin Park location, the Communications Division will take over an adjoining area on Augusta Boule-

throughout the U. S. Above, communications equipment o a fire truck is serviced by a Freeport, N.Y. service c

vard presently occupied by offices, laboratories, and consumer production lines. A major portion of the Augusta Boulevard plants will then be devoted to the Communications Division.

Nationwide Field Service For Customers During 1960, the Communications Division also will occupy a new eastern headquarters foF sales, parts, and service in Fair Lawn, New Jersey, to accommodate eastern seaboard states from the Carolinas to New England. Other Motorola sales, parts, and service area offices are located in Burlingame, California, Chicago, Illinois, and Dallas, Texas. There also are Motorola communications sales and service personnel in 20 regional offices throughout the United States. In addition, contract maintenance and installation of Motorola communications equipment is provided by a national service organization of more than 800 independently owned stations operating under Motorola supervision and providing 24-hours-a-day,seven-days-a-week service. Including both Motorola employees and independent service stations, there are more than 4,000 people engaged primarily in service activities for Motorola communications systems.

AUTOMOTIVE PRODUCTS DIVISION Serving the Automotive Industry

With the recovery of the automobile industry from the 1958 recession period, sales of radios by Motorola's Automotive Products Division in 1959 showed a substantial increase over the previous year Motorola continued to have an excellent working association with Ford, Chrysler, American Motors, and International Harvester.

Contracts Include Radios For New "Compact" Automobiles Contract relationships with the automotive companies were renewed with the announcement of the 1960 auto models. Of special interest were the contracts as sole producer of auto radios for the new compact cars, the Ford "Falcon" and "Comet", the Chrysler "Valiant", and the American Motors "Rambler" and "American". Motorola also will supply all the requirements for auto radios to the "Thunderbird" and "Plymouth" along with one-half the needs of "Ford", "Dodge", and "Dart". Push-button and manual sets are manufactured and custom designed to the individual car builder's requirements. The trend toward miniaturization was accelerated with the introduction of a new, compact push-button tuner, and further development in this area is expected. During 1959, almost all contract auto radios were produced with Motorola's plated circuit chassis and mechanized assembly techniques. Circuitry for the new models was re-designed, resulting in improved reliability. Research is being actively pursued in other automotive areas where electronics and transistorized circuitry are applicable.

Higher Volume, Improved Quality With the recently developed mechanized assembly methods associated with plated circuitry, the quantity of radios manufactured at the Quincy, Illinois, plant reached a substantially greater volume. In addition, an improved quality control program has

been introduced to insure maximum quality of outgoing products. All contract auto radios are manufactured at Quincy, Illinois, the tuners for these sets being supplied from the Motorola plant in Arcade, New York.

Elmer H. Wavering (L), Automotive Division Executive V dent, discusses quality control for auto radio receive circuitry with Frank Brewster, Director, Automotive En

t-1 »»» Reliability is mandatory in complex military electronic prod- Airborne digital com putors undergoing reliability tests above a re ucts. Optical comparators, above, are one of the many devices examples of the "sophisticated hardware" being developed by used for precision inspection by Military Division personnel. technical personnel in Motorola's Military Electronics Division.

MILITARY ELECTRONICS DIVISION Serving the Military Establishment for National Defense

Since 1940, Motorola has carried on aggressive re- Solid State Electronics search, development, and production in the field of The natural extension of performance requirements military electronics. Today, in research and produc- for military electronics systems demands an accomtion centers in Chicago, Illinois, in Phoenix, Arizona, panying increase in equipment complexity. For and in Riverside, California, Motorola engineers and present construction techniques dependent upon the scientists are at work on a broad range of military interconnection of multitudes of components, a projects. Included in Motorola's military capability saturation point is rapidly approaching, beyond which are: communication systems and equipment; data an acceptable level of reliability cannot be achieved. transmission, processing, and display programs; mis- The imperative need for new high levels of reliability sile systems, testing, and instrumentation; electronic is the prime motivation behind Motorola's interest warfare and countermeasures; anti-submarine war- in solid state electronics. fare systems and equipment; applied research and development in microelectronics; advanced radar and sensor developments; solid state developments Chicago Military Electronics Center in materials and devices; navigation systems and equipment; surveillance systems.

Sales About Same As 1958 In 1959, sales of the Military Electronics Division were about the same as in 1958. The cancellation of the management contract for development of the Mission and Traffic Control System for the B-70 tri-sonic bomber program will adversely affect the planned increase in sales volume for 1960, and the division now expects to do about the same volume in military electronics as it did in 1959.

While the need for more reliable systems is the dominating reason for vigorous emphasis in the field of solid state electronics, the successful development of equipment for missiles, satellites, and space exploration will depend heavily on advancements in this new art to provide functional units of minimum weight, minimum cubical contents, and low power consumption.

Four Capabilities Needed For Progress In Solid State Art Significant progress in the solid state art requires four prime capabilities in addition to breadth and depth of experience with equipment circuitry and systems. Required are: a well developed semiconductor capability; a fundamental research capability in the thin-film art; thorough competence in the field of electronic ceramics, such as ferrites, ferroelectri and piezoelectric ceramics; a mastery of surface passivation techniques. Motorola's Phoenix solid state and semiconductor laboratories have developed substantial capabilities in all of these fields, and in some the activity is already moving at advanced levels. The Solid State Electronics Department and the Semiconductor Products Division comprise Motorola's team for progress in solid state electronics — today's most

promising field of research, and tomorrow's source

for new ideas, new products, and new systems which will pace the progress of the electronics industry for the next forty years.

litary Electronics Center, Phoenix Solid State Elect

Shown in the Materials Laboratory of the Solid State Dept. are

Daniel E. Noble (L), Executive Vice President for Military, Semiconductor, and Communications divisions; William S. Wheeler, Vice President, Military Electronics Division; and Dr William Welch, Director of Military Research and Development.

t., Phoenix Systems Research Laboratory, Riverside, Cal

SEMICONDUCTOR PRODUCTS DIVISION Volume Production • Exacting Standards of Quality

During the next ten years the design, production, and application of electronic equipment will undergo a transition with the use of semiconductor devices. A great many of Motorola's products already utilize the tiny transistor, and aggressive research is moving toward advances in microelectronics which will radically reduce size, weight, and power consumption of equipment and effectively increase reliability.

Improved Earning Potential Motorola's investment in expanded production facilities and transistor development and engineering has resulted in improved earning possibilities for its semiconductor business. While the division is a major

At the far right is Motorola's 1959 addition to its semiconductor building in Phoenix. The division plans additional major ex

supplier to other divisions of Motorola, a large and increasing part of its production is sold to customers outside the company. Motorola is currently a leader in the manufacture of both power transistors and the ultra-precision Mesa transistor. Diversification of the semiconductor line to include families of audio transistors, switching transistors, zener diodes, and rectifiers was accomplished during 1959. Considerable expansion of the division's marketing organization took place this year to increase the sale of semiconductors for military and industrial application. Regional offices have been established in Ridgefield, New Jersey, Chicago, Illinois, Boston,

pansion over the next 18 months, permitting greatly increase output of Mesa transistors and other semiconductor products.

Massachusetts, and Los Angeles, California, with an automotive representative in Detroit, Michigan, and a district sales manager in Phoenix, Arizona. Twentythree distributorships are located throughout the U. S., with one representative in Canada. Overseas sales are handled by Motorola's international operations. Plans are underway presently to establish additional sales offices to better serve customers.

Production Facilities Greatly Expanded Last summer, Motorola added some 129,000 square feet to its Semiconductor Products Division building in Phoenix, Arizona. The construction provided more than five times the previous production facilities for Mesa transistors and permitted a threefold expansion of other semiconductor product lines. Major additional construction will be started in 1960. The" Meg-A-Life program of component reliability assurance was developed this year by Motorola. Each production lot of industrial alloy transistors fo use by non-military customers undergoes complete mechanical, electrical, environmental, and life tests in accordance with general military specifications for transistors . . . MIL-T-19500A. All tests represent

the most adverse conditions under which the device

would be used, and provide evidence of the extreme reliability for user applications.

The Motorola Mesa Transistor We believe the Motorola Mesa units are the most advanced transistor devices in the semiconductor art. Their adaptability to miniaturization of complete electronic systems helps answer the need for reduction in size and weight of electronic devices for aircraft, missiles, and rockets. We also believe the Motorola Mesa is the most precise semiconductor available today, and the smallest, mass-produced transistor manufactured. The active region of Mesa transistors can be covered by an area less than the cross-sectional area of a human hair, yet they are manufactured by methods so precise that they are turned out on a production line basis to meet rigid standards of reliability. Mes transistors are produced in meticulously clean laboratories having closely regulated temperature and humidity. Production personnel wear special uniforms to minimize dust contamination. Extension of the Mesa design to higher powers and higher frequencies will be introduced in the near future. Soon there will be an entire family of the highly-precisioned Mesa transistors, devices that wil open whole new areas of transistor application.

1

Dr. C. Lester Hogan (R), General Manager of Semiconductor Products Division, and C. Harry Knowles, Mesa Transistor Pro

uct Manager, examine Mesa production yield figures. The clos circuit television system aids in monitoring production qual

Below is a greatly magnified view of the very small Motorola Mesa transistor with the cap removed. Gold contact wires are visible. The active region of the Mesa transistor can be cov by an area less than the cross-section area of a human hair.

CONSUMER PRODUCTS

More to Enjoy in Sight and Sound

Motorola had the most successful year in its history in 1959 in the acceptance of its products by consumers. One of the significant reasons for success was the genuine enthusiasm among Motorola distributors and dealers for our stereo, television, and radio products. This enthusiasm became all the more evident early last summer with the introduction of the 1960 lines at 15 product meetings throughout the country, attended by over 10,000 Motorola dealers and distributors.

Leadership In Stereo-Hi-Fi Electronic advancements to further improve home entertainment products and provide additional quality features also played an important part in stimulating customer demand for Motorola consumer products. In stereo-hi-fi, for example, an outstanding improvement in phonograph sound reproduction was achieved by Motorola in its engineering of instruments having three separate amplifiers^ and speaker systems. From a standard stereo record, the Motorola Golden Audio Separator separates the low frequency note,s of the record from the high and mid-range notes. The audio is then fed into three separate amplifiers and three separate speaker systems. Previous stereo systems required listeners to be in a certain location to enjoy stereo effects. However, with Motorola's new instruments, wall-to-wall stereo sound can be enjoyed from any part of the room. Because this system permits stereo sound from a single cabinet, Motorola was able to lead in the trend away from multiple speaker cabinets which had proved awkward to place in most homes. Three separate amplifiers and speaker systems, emphasis on single cabinets, and outstanding design in furniture styling helped Motorola distributors and dealers to greatly increase their stereo-hi-fi sales in 1959 de-

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DIVISION

spite lagging sales in the industry as a whole. Today, Motorola is acknowledged to be the number one producer and seller of packaged stereo high-fidelity instruments.

Reputation For TV Quality Increases Increased public acceptance also resulted in a rise in unit television sales of nearly 35 per cent over 1958, a substantially higher increase than the TV industry average. Motorola believes the year's sales performance has demonstrated that the consumer, while cost conscious, has become dissatisfied with the least expensive TV on the market and is now more interested in improved sound and picture, increased reliability, and fine cabinet styling. A greatly improved plated circuit television chassis was introduced by Motorola in its new 17-inch slim-line portable model. The set was thoroughly tested before being released to the public and was found to be extremely rugged and dependable. Color coding on both sides of the board, improved strength of the board, and rapid chassis removal permits greater ease in servicing the set. The Golden "M" series of features which include Golden "M" tubes and parts, the Super Golden "M" Chassis, the Frame Grid Tube, the Aluminized Picture Tube, and the Tube Sentry unit, continued to establish Motorola as a quality leader in television. And Motorola's new "Custom-Matic" tuner ends the need for fine tuning every time a channel is changed.

Drexel And Heritage The association of Motorola with the fine furniture styling of the Drexel Furniture Company and Heritage Furniture Inc. further contributed to Motorola's leadership in the appearance design field, complementing the company's reputation for quality in electronic engineering. At the annual

13

Consumer Products Division (continued) Winter Home Furnishings Market in Chicago last January, the Mahogany Industry Association sponsored a competition to select the finest designs in six different categories of furniture. We are pleased that the Motorola-Heritage "Laureate" stereo instrument received the highest design award for electronic home products. At the same time, the Drexel "Triune" group not only won the award in the correlated furniture category but was chosen "best of show" as well.

Motorola Car Radios Motorola maintained its leadership in the branded car radio business with sales setting a new record. These are car radios sold through distributor-dealer outlets to individual car owners. In December, Motorola revealed the FM-900 and

Edward R. Taylor (R), Executive Vice President for the Consumer Products Division, is shown making the final selectio

has become the first major American company to mass produce an FM car radio. With the ever-increasing popularity of home FM and the large number of cars today in which the FM-900 can be installed, Motorola's FM car radio should add substantially to the success of the Motorola brand car radio business.

Significant Rise In Radio Sales Unit sales of table, clock, and portable radios substantially increased during 1959. Table radio was up nearly 70 per cent, with clock and portable radio up 80 per cent over unit sales for the previous year. Portable radio continued a transition in 1959 from tubes to transistors, with Motorola's shirt-pocket size transistor portable attracting the most consumer attention.

television cabinetry designs with Herbert J. Zeller, Di the Motorola Design and Cabinet Engineering Department.

Sales of Motorola's home radios continued to rise significantly home radio products extends from AM/FM sets to multi-feature with the company gaining an increased share of the nine million clock radios, low-priced and deluxe table models, various units sold by the industry during 1959. The range of Motorola sized portables, and the popular shirt-pocket size portable.

Designed for under-the-dash installation, the new Motorola FM car radio operates independently of or in addition to the car's AM set. The FM-900 can reproduce the entire hi-fi audio range.

"Camera look" styling gives Motorola's 17-inch portable TV an appearance to match its reliability and performance. This set, like all Motorola TV's, has full-year warranty on tubes and parts.

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NEW SUBSIDIARIES DIVERSIFY MOTOROLA

The Dahlberg Company Continuation of Motorola's policy of diversification in electronics resulted in the acquisition of The Dahlberg Company in the fall of 1959. Dahlberg is the fourth largest producer of hearing aids in this country, and a number of hearing aid "firsts" prove the ability of its young and aggressive management. The hearing aid industry was early to use transistors in a consumer product, and Dahlberg was one of the first companies to market an all-transistor hearing aid. It was a leader in marketing a onepiece hearing aid small enough to be worn wholly inside the ear, and pioneered eyeglass hearing aids. Dahlberg hospital communications began with a pillow speaker radio system. This business evolved into a complete communications system that includes: automatic remote control radio and TV

Kenneth H. Dahlberg (R), President of The Dahlberg Company, and Arnold R. Dahlberg, Executive Vice President, show the newest of their hearing aid product line—the V* ounce Miracle Ear II I—believed to be the world's smallest, complete hearin

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operated through the Pillow Speaker; two-way communications between the patient and the nurse, including audio-visual nurse call; closed circuit television for hospital use for both staff administration purposes and patient recreation and comfort. Dahlberg also manufactures the broadcasting console responsible for operating the complete external and internal communications system. The Dahlberg Company operates from a 38,000 square foot plant in Golden Valley (Minneapolis), Minnesota. Some 200 distributors handle Dahlberg products in the U. S. and 18 foreign countries. Dahlberg is accelerating its efforts in miniaturization of electronic components and bringing to bear the research and engineering of Motorola to its own areas of electronic activity.

The unique Pillow Speaker, heart of a complete hospital communications system produced by The Dahlberg Company, is ready at the patient's pillow to bring him TV or radio, chang stations, or put him in direct communications with his nurse.

Motorola International, S. A. While Motorola will continue to aggressively market its American-made products overseas, it is evident that the new opportunities for serving foreign markets lie in the manufacturing or assembly of Motorola products in the countries where they will be sol Consequently, in 1959, the company established Motorola International, S. A., a wholly owned subsidiary, to provide for overseas licensing, manufacturing, and assembly. New production arrangements were completed for marketing of Motorola products in Argentina and Mexico, while existing manufacturing operations were strengthened in Canada, England, and Australia. Sales-were substantially higher than in 1958, and we expect further improvement in 1960. Negotiations presently are underway to participate in the European Common Market and the newly created European Free Trade Association. These combined markets offer excellent potential for local manufac-

turing and sale of Motorola consumer products, communications products, and semiconductor devices.

Motorola Aviation Electronics Inc.

Negotiations also took place in 1959 for the acquisition of the LearCal Division of Lear, Inc., locate in Santa Monica, California. This business has now become a part of the company's Communications Division, and markets its products through a new subsidiary, Motorola Aviation Electronics Inc. The subsidiary markets commercial air-borne communications and navigation equipment and light aircraft autopilots designed for broad coverage of the non-military aircraft market. Diversification by Motorola into commercial aviation electronics was a move complementing Motorola's position in the commercial communications field. Motorola believes it can make a distinctive contribution to this new field, not only in research development, and engineering, but also by its long experience in serving the needs of radio communications users. The acquisition provides Motorola the opportunity to become a major factor in serving the aviation market.

Thomas P. Collier, President of Motorola International, S. A., directs distributorships, licensees, and joint venture manufacturing operations in over 60 countries throughout the world.

Kenneth M. Miller, Manager of Motorola's aviation products activity, holds the transmitter portion of a VHFcommunicationssys tem, one of the new aviation product lines acquired by Motorola

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MOTOROLA INC. AND CONSOLIDATED SUBSIDIARI

Balance Sheets as of December 31, 1959 and 1958

ASSETS 1959 1958

Current assets:

Cash $ 9,764,963 $ 6,659,888

Accounts and notes receivable: United States Government 8,211,446 11,962,424

Other trade receivables (less allowance for doubtful accounts—I 959, $1,280,000; 1958, $823,000) 42,177,791 35,031,700

Other 811,391 558,052

Costs recoverable under United States Government contracts, less progress billings 6,987,467 11,660,723

Inventories, at the lower of average co$t or market 37,073,833 26,666,528

Prepaid expenses 586,072 423,890

Total current assets 105,612,963 92,963,205

Investment in Motorola Finance Corporation, subsidiary not consolidated (see accompanying balance sheet) 6,275,059 4,941,391

Other assets 4,268,196 2,196,979

Plant and equipment—less depreciation (Note A) 33,436,676 27,615,287

Patents and trademarks—less amortization 170,666 184,924

$149,763,560 $127,901,786

Notes to Consolidated Financial Statements B—Long-term debt on December 31, 1959 and 1958 consisted of the following: Notes payable: 1959 1958 A—The companies' investment in plant and equipment on Decem- VAC/,, maturing $1,000,000 annuber 31, 1959 and 1958 was as follows: ally to 1965, $1,500,000 in 1966. and $500,000 annually 1959 1958 thereafter to 1972 $10,500,000 $11,500,000 Land-at cost $ 2.902,444 $ 2,531.231 4%Vr, maturing $500,000 annually Buildings—at cost, less depreciation 1963 to 1976 7,000,000 7,000,000 (1959, $5,126,978; 1958, $3,876,323) 18.947,221 13,735,990 Real estate mortgages: Machinery and equipment—at cost, Maturing serially to 1974 885.908 4,756 less depreciation (1959, $8,743,004; Due in 1966 and 1968 _ 550,000 550,000 1958, $7,109,917) 10.117,611 9.372.123 18,935,9O8~ "T9T()54,756" Dies, tools, and leasehold improve- Less current maturities, included in ments—at cost, less amortization. . 1,469,400 1,975,943 current liabilities 1,061,758 1,004,756 18 $33,436,676 $27,6X5,287 $17,874,150 $18,050,000

LIABILITIES

Current liabilities:

Notes payable to banks

Current maturities of long-term debt

Accounts payable—trade

Accrued taxes

Contribution to employees' profit sharing fund

Product and service warranties Other

Total current liabilities

Long-term debt (Note B)

Shareholders' equity:

Capital stock, $3.00 par value —authorized, 3,000,000 shares; issued and outstanding—1959, 1,975,131 shares; 1958, 1,935,131 shares

Additional paid-in capital (Note C)

Retained earnings (Note B)

Total shareholders' equity

On December 31, 1959 approximately $14,000,000 of retained earnings was free from dividend restrictions contained in the long-term notes payable agreements.

C — During 1959 the company acquired all of the outstanding capital stock of The Dahlberg Company and an affiliate in exchange for shares of Motorola, Inc. This transaction has been treated as a pooling of interests. The excess of the par value o Motorola shares issued over the paid-in capital of the companies acquired ($34,720) has been charged to additional paid-in capital. The retained earnings as of January 1, 1959 of the companie acquired have been credited to consolidated retained earnings. The results of operations for 1959 of the companies acquired have been included in the accompanying statement of earnings.

1959 1958

12,150,000 9,500,000

1,061,758 1,004,756

9,530,791 10,034,733

11,566,558 6,597,591

5,147,133 2,401,376

590,000 678,853 8,504,784 8,101,457

48,551,024 38,318,766

17,874,150 18,050,000

5,925,393 5,805,393

8,983,786 9,018,506

68,429,207 56,709,121

83,338,386 71,533,020

$149,763,560 $127,901,786

The financial statements for 1958 do not include amounts with respect to these companies.

D-Effective January 1, 1960 the company purchased certain assets pertaining to aviation radio, navigation, and flight control products of Lear, Incorporated, as agreed upon in November, 1959. On January 12, 1960 the company issued 40,000 shares of its capital stock in payment therefor subject to final adjustment of the purchase price, expected to be nominal in amount.

E—In connection with the financing of sales of products to consumers. Motorola, Inc. and consolidated subsidiaries are obligated under repurchase and other agreements with Motorola Finance Corporation and other financing agencies. It is believed that these obligations will have no material effect on the business of the companies.

MOTOROLA INC. AND CONSOLIDATED SUBSIDIARIES

Statement of Consolidated Earnings and Retained Earnings Years ended December 3 1 , 1959 and 1958

Sales Net earnings of Motorola Finance Corporation — subsidiary not consolidated Other income

Total income

Manufacturing and other costs of sales Selling, service, and administrative expenses Depreciation of plant and equipment Contribution to employees' profit sharing fund Interest and other expenses

Total costs and other expenses.

Net income before federal taxes on income

Federal taxes on income

Net earnings (per share outstanding at end of year1959, $7.17; 1958, $3.80)

Retained earnings at beginning of year

Retained earnings at January 1, 1 959 of companies acquired during 1 959 (Note C)

Credit for adjustment of inventory valuation

Total

Less dividends — $1.50 per share

Retained earnings at end of year (Note B) See accompanying notes to consolidated financial statements.

ACCOUNTANTS' REPORT The Board of Directors and Shareholders of Motorola, Inc.: We have examined the balance sheet of Motorola, Inc. and consolidated subsidiaries as of December 31, 1959 and the related statement of consolidated earnings and retained earnings for the year then ended, and the balance sheet of Motorola Finance Corporation as of

20

1959 1958 $289,529,444 $216,590,325

333,668 231,863 2,013,846 1,273,014

291,876,958 218,095,202

215,241,106 167,839,009 38,579,284 28,173,818 3,696,916 3,101,868 5,147,133 2,401,376 1,806,282 1,647,918

264,470,721 203,163,989

27,406,237 14,931,213

13,235,000 7,575,000

14,171,237 7,356,213

56,709,121 51,348,547

466,546

907,057

71,346,904 59,611,817

2,917,697 2,902,696

$ 68,429,207 $ 56,709,121

December 31, 1959. 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 pra ticable to attempt to obtain confirmations of certain receivables from the United States Government, but we

OTOROLA FINANCE

Balance Sheets as of December 31, 1959 and 1958

ASSETS Cosh Rece/vob/es: Lease and conditional sales contracts (including instalments maturing beyond one year—1959, $ 1 2,91 5,000; 1958, $10,636,000) Notes receivable, distributors—maturing within one year Total Less unearned income on lease and conditional sales contracts Net Ofher assefs

LIABILITIES Current liabilities: Notes payable to banks Accrued taxes Other Total current liabilities Subordinated notes payable to Motorola, Inc. — due 1961 and 1962 Shareholder's equity: Capital stock, $1.00 par value—authorized and issued, 20,000 shares Additional paid-in capital Retained earnings (net earnings since inception, March 7, 1956) Total shareholder's equity Total subordinated notes and holder's equity

All receivables of Motorola Finance Corporation are covere ther agreements mentioned in Note E of notes to consolidat

satisfied ourselves as to their substantial accuracy by means of other auditing procedures. In our opinion, the accompanying financial statements present fairly (a) thefinancialposition of Motorola, Inc. and consolidated subsidiaries at December 31, 1959 and the results of their operations for the year then ended and (b) the financial position of Motorola Finance

CORPORATION

1959 1958 4,160,881 4,273,186

20,210,058 16,082,874 7,842,626 5,454,179 28,052,684 21,537,053

3,794,675 3,023,405 24,258,009 18,513,648 359,727 403,907 $ 28,778,617 23,190,741

22,000,000 1 8,000,000 235,296 200,067 268,262 49,283 22,503,558 18,249,350

3,500,000 2,500,000

20,000 20,000 1,980,000 1,980,000

775,059 441,391 2,775,059 2,441,391

6,275,059 4,941,391 $ 28,778,617 23,190,741

Corporation at December 31, 1959, all in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. PEAT, MARW1CK, MITCHELL & CO.

Chicago, Illinois February 19, 1960

21

TEN YEAR FINANCIAL SUMMARY

EARNINGS BEFORE NET SALES TAXES ON INCOME NET EARNINGS

Net earnings per share are based upon 1,935,1 31 shares for 1 958 and prior years and upon 1,975,1 31 shares for I 959.

NET SALES NET EARNINGS

300

280

260

240 MILLIONS 220 OF DOLLARS 200 180 160 140 120

NET INVESTMENT IN WORKING CAPITAL PLANT AND EQUIPMENT

40 36 32 I J

/ MILLIONS 40 / MILLIONS •><?

24 OF DOLLARS 35 J OF DOLLARS 20 / 30 / 16 25 12 s 20 y / 15 4

22

ET EARNINGS NET INVESTMENT IN PER SHARE WORKING CAPITAL PLANT AND EQUIPMENT

6.78 20,731,871 5,794,309

NET EARNINGS PER SHARE TAXES PAID

DOLLARS

SHAREHOLDERS' EQUITY EXPANSION OVER PAST 1O YEARS

00 26

90 24 BUILDING n AREA... 70 >/ HUNDREDS 20

MILLIONS 60 THOUSANDS 8 OF 50 OF 16 DOLLARS 40 SQUARE 14 /

30 t / FEET 12 / y / 20 10

10 g

EMPLOYEES' SAVINGS AND PROFIT SHARING FUND

When Motorola's founder, Paul V. Galvin, established the Employees' Savings and Profit Sharing Fund in 1947, he laid the cornerstone for what was to become the second largest deferred-type profit sharing plan in the world. As of December 31, 1959, the value of the Fund reached a total of approximately 45 million dollars. All employees of Motorola with one year of service or more are eligible to participate in the company's profit sharing plan by voluntarily contributing from two to five per cent of their earnings to the Fund, subject to a maximum of $200 during any one year. The company contributes a portion" of its profits to the Fund which is distributed on a pro rata basis to each employee's account in proportion to his contributions during the year. Employee and company contributions are invested in a diversified

The Motorola Profit Sharing Council, having a representative from each principal Motorola facility, assists the Advisory Com mittee in communicating profit sharing information to employees. Below, councilors gather in Chicago for first official meeting. (L. to R.) first row: Marty Abenanti, South Plant, Chi cago; Bill Bashem, Edgington Plant, Chicago; John Bleistein, Arcade; Ken Bowen, Quincy; Bob Brach, Research, Phoenix; and Marge Donahue, CMEC, Chicago. Second row:

portfolio of government and corporate bonds, and common and preferred stock. Annual earnings of the Fund increase each participant's individual account, in proportion to the value of his account as of the preceding year. The increase in participants in the Motorola Fund has climbed to a high in 1959 of 10,132 employees. Of the total participation, there are 1,896 employees with 10 years or more service with the company. Profit sharing has encouraged employee interest in producing and increasing profits because the individual employee will share in those profits. In addition, the success and growth of Motorola profit sharing has helped to encourage experienced personnel to remain with the company. Profit sharing emphasizes the common interest between employees, the stockholders, and the company.

Nick Gill, Flournoy Plant, Chicago; Bill Hull, Semiconduct Plant, Phoenix; Ann Just, WMEC, Phoenix; Al Murawski, Communications, Chicago; Carl Ohlund, Riverside; and Ed Paczosa, North Plant, Chicago. Third row: Mike Rekowski, Cicer Plant, Chicago; Ted Rybicki, Clybourn Plant, Chicago; Jay Schude, Motorola-Chicago; Chuck Yost, Franklin Park; and Ed Wolfgram, Lamon Plant, Chicago. Standing: Mike Rosnick, Ray Orth, and Frank Maher, profit sharing representatives.

MOTOROLA INC.

4 5 4 5 W E S T A U G U S T A B O U L E V A R D , C H I C A G O 5 1 , I L L I N O I S

Major Facilities Located In:

Arcade, New York Chicago, Illinois Franklin Park, Illinois Quincy, Illinois Minneapolis, Minnesota Phoenix, Arizona Riverside, California Santa Monica, California

LITHO IN U.S.A.