摩托罗拉公司1968年年报

Motorola annual report ' 1968

creativity and diversification in electronics

\~£*>~' ^

Forty years in electronics . . . From its inception, Motorola concentrated in electronics. Yet, with unusual creativity, the company diversified into many applications of electronics to serve ever more diversified markets.

The cover background typifies this concentration in electronics and the products symbolize the broad diversification of Motorola's six divisions. The types and models of successfully developed products number in the thousands.

contents 1 financial highlights 2 letter to shareholders 4 communications division 6 semiconductor products division 8 consumer products division 10 government electronics division 12 automotive products division 14 control systems division 16 balance sheet 18 statement of earnings 18 additional paid-in capital 19 source and use of funds 19 ten year financial summary 20 annual meeting INSIDE .. . . ... BACK COVER d i r e c t o r s and officers

1968 1967

(dollar amounts in thousands except per Sales and other revenues $ 775,124 $ 629,975 Income before taxes 57,376 34,571

% to sales 7.40% 5.49%

Income taxes 26,413 15,755

New surtax 2,702

Earnings 28,261 18,816 % to shareholders' equity 11.84% 9.12% per share of common stock 4.61 3.08

Capital expenditures 32,009 28,091

Working capital 176,315 131,208 Current ratio 2.08 1.88

Shareholders' equity 238,778 206,286 common shares outstanding 6,133,470 6,112,101 Book value per share 38.84 33.69

Year-end employment 41,000 36,000

to our The company achieved improved performance in 1968. Record sales of $775,124,336 were 23% greater than in the previous year and earnings increased 50% to $28,261,196. Earnings per share rose from $3.08 in 1967 to $4.61 per share in 1968. The new surtax in 1968 amounted to 44 cents per share.

While the earnings improvement reflects recovery in our consumer products business, significant earnings increases were recorded in three of our five other businesses.

In 1968, each of the company's six divisions increased sales, with five divisions establishing new records. The semiconductor products division attained a sales increase greater than 35%, while total factory dollar sales for the industry were estimated to be up only 6%. Our people cart be justifiably proud of this achievement.

The communications division established another annual sales record while involved in an eighteen month expansion program. This included the construction and occupation of the new main plant and division headquarters in Schaumburg, Illinois. The division is ready with highly efficient facilities to accommodate the • expanding markets for its products and services.

Sales of the automotive products division exceeded the previous record by 25%. From practically a one-product, three-customer business a few years ago, this division has grown and diversified in both product line and markets served.

The significantly improved performance of the consumer products division was due largely to the "Quasar" color television. A marketing program was launched nationally in September after being carefully tested in nine markets

early in the year.

Our people in the government electronics division, as well as throughout the company, can be justifiably proud of their equipment which performed so perfectly on the Apollo 8 mission. The division's space equipment, for both manned and unmanned programs, continues to enjoy an excellent performance record.

The control systems division has been engaged in further diversification of its product line, with hopef results. Several of its new products are pictured on page 14.

Capital expenditures in 1968 exceeded $32 million. They are expected to be approximately $45 million in 1969, with an increasing amount being required for overseas expansion.

In July a newly formed subsidiary, Motorola International Development Corporation, sold $30 million of 41/2% convertible debentures outside this country. This will permit us to proceed with our longrange international expansion program while complying with government limitations on direct foreign investment. The debentures are convertible into the parent company's common stock of which 187,500 shares (approximately 3% of total outstanding) have been reserved.

To provide greater flexibility for future domestic planning, we obtained a two-year extension of the date when our revolving credit must be terminated or converted into a term loan.

An agreement was reached with the Columbia Broadcasting System whereby Motorola will manufacture and market the CBS Electronic Video Recording (EVR) player. This exciting move into a new product area can provide opportunities for several of our divisions.

Initially, we will launch this program in the educational, industrial and hospital markets where our communications division has an excellent position and the personnel to support such a new product program. Our consumer products division will pursue opportunities the home entertainment and hotel/motel markets.

EVR is a convenient, flexible and inexpensive method of storing audio-visual material on cartridged film for display on any existing television receiver when the player is connected to the antenna terminals.

Our facility in Vail, Arizona provi a long-range educational program for management personnel. The program is of broad scale to help equip the individual executive to act more decisively and more effectively, and to meet the company's changing needs in a shifting economy. Approximately 100 executives attended the institute i 1968, strengthening the company's management resources.

In a major switch from general industrial practices, the company announced a plan effective January 1, 1969 to eliminate hourly rated payroll and time clocks in all domestic facilities. This places al production and maintenance employes on a weekly salary basis, giving them the same status as office and technical personnel.

Also part of the plan is a five-day attendance bonus. An employe with a perfect attendance record, or an unused portion of his allotment, will receive an extra paycheck just before Christmas.

We are encouraged by the deter-

mination of the new federal administration to regain proper control of monetary and fiscal policy in order to restrain inflation. When implemented, it is generally expected to moderate the boom conditions of the economy as a necessary corollary of avoiding more serious consequences. While this will naturally affect all of o businesses, we nonetheless will be sustained by natural growth inherent in most phases of the elec tronics field. We are therefore planning for further growth both in sales and earnings for 1969, encouraged by the renewed vigor and management capability in all of our divisions.

For the Board of Directors,

AX_ CHAIRMAN OF THE BOARD

• /If JLis-o+*~\f PRESIDENT

March 21, 1969

MOT

1. mobile two-way radio 2. hospital communications control center 3. customized communications console for centralized control 4. portable two-way radio

and pager

(major product lines) mobile and portable

two-way radio communications systems

hospital communications systems closed circuit television syste microwave communications systems pushbutton car telephone signaling and remote control systems

precision instruments and components

Both sales and earnings for the communications division rose to new highs in 1968. These increases were due in part to our entrance into new markets, both domestically and internationally. Technical advances in product design

and capability have kept the division i its position as the leading manufacturer of two-way radio communication systems. These advances were in

response to the many communication needs cited by government agencies, industries, institutions and commercial

businesses. In fulfilling these needs with newly designed products, the divi-

sion emphasized its total communica-

tions system capability—ability to provide research, engineering, installatio maintenance, training and financing.

In Chicago, a new computerized radioelectronic alarm system is being

built for 500 Chicago Transit Authority

buses to decrease crime and to

improve bus schedules. This will become part of a $2,000,000 demonstration project sponsored by the

Department of Transportation and the

CTA. This unique system will automati-

cally provide identification, location

and alarm status for every bus at a ce

tralized control point, as well as

provide direct two-way communication with each bus.

Typical of many major contract awards received in other market areas during the past year were: a large order for mobile and portable radio units from the Southern Railway System; a contract from the Washington, D.C. Metropolitan Police Department for the nation's model communications control center which utilizes the latest avail technology; a complete security radio system for all Chrysler Corporation plants in the Detroit area; and a complete audio and visual communications

system throughout the Fairfax Hospital of Falls Church, Virginia.

International awards included out-

standing contracts for radio systems

from the Korean .National Railways,

South African Railway Police and

Argentina Federal Police.

New products introduced during the past year include: economy mobile radios designed for the small business user; a solid state 12-channel UHF mobile radio; three vehicular repeater systems and a voice scrambler for public safety applications; a field co mand post and a portable repeater system for civil emergencies; a ninechannel VHF marine radio and a 12-channel HF-SSB marine radio for maritime customers; a mobile teleprinter for on-the-move printed messages via radio; a hands-free intercom system and several visual communication products for hospitals; and a

closed circuit television camera for light industrial and commercial use.

Plans were announced to begin manu-

facturing subassemblies in Fort

Lauderdale, Florida during the second

quarter of 1969. In the future, comple

products may be manufactured there

for direct shipment to the customer.

The division is planning further signi cant technical advances in its product line during 1969, and for continued growth in both sales and earnings for the conning year.

1. leader in plastic encapsulated devices 2. Large Scale Integration .. .

6x8 mil cell replaces 30 mil core 3. magnified integrated circuit

4. cutting hundreds of circuits from 2" wafer 5. packaged integrated circuits (over 1500 standard types)

(major product lines)

integrated circuits transistors

diodes and rectifiers thyristors and triggers multiple devices special devices

w JSM wMwamnsi mi

The year 1968 marked a decade of continuous and extraordinary growth for Motorola's semiconductor products division. This milestone year was highlighted by two significant accomplishments. First, the division set its tenth consecutive record-year in sales. The dollar sales for the division increase more than 35 per cent, while sales for

the semiconductor industry increased by approximately 6 per cent according to Electronic Industries Association

figures. Second, it is believed the

division became the country's largest domestic producer of semiconductors.

Throughout the year, the division con-

tinued to diversify its product line,

to increase production efficiency which resulted in larger quantities an lower cost, and to increase its share of domestic and foreign markets. Important advances in the develop-

3, 4

ment of highly complex integrated facilities is presently under construccircuits, which account for an increas- tion at the site. In addition, the ing portion of the total dollar sales applications engineering laboratories were made during the year. The and computer services department division, which is believed to have the were centralized,in a new 50,000 broadest line of integrated circuits in square foot building in Tempe, Arizona the industry, now produces over 1,500 for more efficient operation. Early in different standard integrated devices, the year, production was brought on plus hundreds of specialized circuits stream at manufacturing facilities in for unique applications, with the list Seoul, Korea and Toulouse, France. growing at the rate of 200 new inteAlso during the year, the division grated circuits per year. began the enlargement of its Nogales, Emphasis also continued on future Mexico facility from 5,000 to 25,000 product development and increasing square feet, and firmed plans for the both domestic and foreign production construction of a 40,000 square foot capacity to better serve today's production facility in Guadalajara, expanding worldwide demand for Mexico. semiconductors. The integrated circuit The division is intent on further growth center in Mesa, Arizona was increased through the pattern of product by 100,000 square feet during the diversity, production capability and year, bringing the total footage to marketing depth that has resulted in nearly half a million. Another 133,000 fine performance over the past square feet of production and support ten years.

1. Quasar color television with "the works in the drawer 2. stereophonic high fidelity phonographs

and for the active ones . .. portable phonographs (3) television (4) and radio

(not shown) table and clock radios tape players car radios

The consumer products division made

significant progress during 1968 in sales, earnings, product, personnel and programs. The "Quasar" color television marketing program, which had been carefully and rewardingly tested in nine markets early in the year, was launched nationally in September. For the total year of 1968 this program more than doubled Motorola's previous year's share of the above $600 console color television market. This remains an important segment of the total color

television business. With important consumer benefits of relatively fast

and economical service, due to the

modular, mini-circuit design of the "works in the drawer," the "Quasar"

concept has clearly demonstrated its singular and strong appeal to retailer and consumers alike.

Another service-convenient color

television chassis has been introduced under the promotional banner of "Fast-Back," for those consumers shopping in a price range under the "Quasar" line.

The division has allocated consider-

able funds during the past few years to

the expansion of the field service training organization, seeking to keep retail service technicians informed on current and developing technology. An important part of the total "Quasar" marketing program includes an aftersale follow-through into the home to increase consumer satisfaction.

The product development program for all the division's products has been pointed in the same direction, seeking designs that produce greater customer satisfaction through service simplicity

A management organizational structure, by product, was adopted during

the year and significant steps were taken toward full implementation of this management concept. Product management groups were formed with separate and skilled staffs for television, radio and audio and auto sound

products. At the same time, the mar-

keting department added experienced managers at several key positions.

During 1968, the Motorola color tube facility supplied the majority of the division's needs for 20- and 23-inch color picture tubes, and also sold a portion of the output of 20-inch tubes to other set manufacturers. Continuing improvement in cost enabled the color tube facility to remain profitabl while industry prices for picture tubes were reduced.

The sales and earnings achieved by the division during 1968 are planned to show further gains during 1969.

1.advanced side-looking

airborne radar surveillance system

2. vital moon mission communication and tracking units with model of Apollo/Saturn 3. rugged radar transmitting and receiving set in 40mm shell

(major product lines) aerospace communications systems

range instrumentation equip

missile guidance systems electronic ordnance devices

tactical radar and communic systems spacecraft tracking devices undersea electronic systems

10

The division achieved significant improvements in sales and earnings during 1968. To improve long-range profitability, a move was begun in August to consolidate all division operations. This consolidation of the division's Chicag

based operations with the division headquarters operation in Scottsdale,

Arizona eliminated the requirement

for duplicating overheads and substantial investments in facilities. In

addition, combining the division's entire engineering capability at a

single location will provide opportunities to participate in more of the larger, increasingly complex systems

contracts being awarded by the

government.

All research and development pro-

grams for the division were moved to Scottsdale during the fall of 1968 wit only a few production contracts

remaining to be completed in Chicago during 1969. In 1968, sales of an increased variety

of products were made in more

countries throughout the free world.

Activities of the international office

Brussels were supported by the open-

ing of a sales and service operation

in Paris and a sales office in Canada.

The division continues to focus its efforts on obtaining advanced technology programs with a high probability of being continued following a ceasefire agreement in Viet Nam. Typical of the present business mix are: civilian and military spaceborne and ground station equipment for both manned and unmanned space programs; airborne side-looking radar surveillance systems; an expanding line of proprietary transponder products; a new system for drone control, called MINTACTS, designed to

fit military needs for the 197D's; programs further extending the division's proven capability in developing and building in-flight data transfer system

for handling optical, infrared and

radar imagery; production of solid

state radar displays for the Navy; the

Motorola environmental telemetry

system, a new proprietary

product; production of electronic proximity fuzes based on research begun in 1964, with total bookings to to date on this program alone now over 50 million dollars; and continuing work on other advanced electronic fuzing systems for small ordnance.

Continued profitable growth for the division is projected based on these and similar high technology programs.

1. eight-track tape players 2. car radios 3. alternator systems 4. electronic tachome and hour meters

(not shown)

capacitor discharge i systems

12

The division achieved record sales in 1968, exceeding the previous high by 25 per cent. The division expanded its product lines and added new original equipment manufacturer, fleet, and aftermarket accounts. Major strides were taken to gain a larger share of the original equipment auto tape player and private label home and automotive markets. Significant progress was made in penetrating the AM/FM car radio market. The underhood product line made important inroads into the military, truck, tractor, heavy machinery, industrial, agricultural, and marine markets.

Technological innovation, service, and excellent manufacturing capability are enabling growth at an accelerated rate

The division achieved an increased

percentage of the total non-captive

automobile radio business, supplying

3,4

100 per cent of the AM and AM/FM Chrysler. Shipment of Playtape tape to the development and marketing radios for American Motors Corpo- players for Volkswagen vehicles com- of all new products to serve all ma ration, Volkswagen Distributors of menced in June. world marketplaces with joint venAmerica and Volkswagen of Canada, tures, licensees, and other active The sale of alternators, capacitor and others. Substantial quantities of programs. discharge ignition systems, solid state radios were sold to Chrysler, Ford hourmeters, tachometers, and hour- Current commitments from major Motor Company, International Har- meter-tachometer combinations original equipment manufacturers fo vester, White Truck, Volvo, and Kaiser continued to grow at a steady pace. 1970 models, as well as other sales Jeep Corporation. A milestone was forecasts, indicate another year of reached in September when the An extensive investment is being made growth in sales and earnings. Midland, Ontario plant shipped its in research and development to 1,000,000th car radio. enhance existing products and to develop new product lines. Our excelAuto, home, and portable tape players lent advanced research staff should are being manufactured for many assure a technological vanguard nationally known manufacturers and position. private label customers. A major highlight was a 3-year contract from Ford Internationally, the division continues to continue to supply 100 per cent to grow and carefully search out new markets. A global concept is applied of Ford's 8-track tape players through 1971. Motorola is the sole supplier of tape players for American Motors and Volvo in the United States, and substantial quantities are supplied to

1. optical reader provides low-cost means of source-data input 2. small computer for contr

systems and data collection 3. first fully automated bulk-loading terminal uses Motorola computer

4. VERITRAK system controls crystal-growing process for Motorola SPD

(major product lines) process control systems and instrumentation supervisory control systems

information systems industrial automation syste

14

The division increased its product

diversification and announced major new technical contributions in three of its principal areas of activity. Information systems, the major new product area, got off to an excellent start in 1968. The division's "Indiscriminate Reader," industry's first low-cost answer to data-input problems, has application in such highdensity markets as communications,

transportation, hospital, telephone, food, insurance, petroleum, and education.

Also in 1968, the division introduced

its first computer — a small-scale,

general-purpose,modestly priced unit. Orders were received from several sources, including oil companies, the

telephone industry, and the management information field. In phase with the development of the

• in tif in in i li u

computer has been another significant innovation in Motorola data systems activity, that of computerized industrial automation. Recently developed for a major oil company was the industry's first computer-controlled bulk loading terminal. This system will greatly increase efficiency of bulk loading terminal operation since it provides instant credit and product

quota information, and facilitates completely automated direct billing from a remotely located central computer.

In addition, the data systems line is

experiencing interest from new markets such as the agricultural chemical market and the automated fueling of jet aircraft.

In the process control field, Motorola's

basic VERITRAK line of all-electronic

instrumentation, introduced in 1962, continued to outpace the controls

industry. At a recent Instrument Society of America Show Motorola introduced a generically new instrument for continuous process optimizing. Called the VERITRAK Performance Optimizing Controller, it represents the first industrial application of sel corrective techniques. This equipment has application in automated oil and petrochemical plants and in many other continuous-process industries.

Historically, the TELEMEMORY line of supervisory control products represents the earliest established business

of the division. Included among the TELEMEMORY systems developed are some of the most sophisticated pipeline and electrical utility supervisory networks. Work is in progress to define a new generation of advanced super-

visory control equipment to satisfy the

markets of the 1970's.

Looking ahead, the division anticipates

increased sales in the areas of process control systems, information systems and industrial automation. Substantial additional investment has been scheduled to expand our penetration into the burgeoning electronic data processing market wit the sale of computer ancillary hardware and software systems.

1

CONSOLIDATED BALANCE SHEET as of December 31 Motorola, Inc. and Subsidiaries

ASSETS

Current Assets Cash Short-term investments, at cost (approximating market) Accounts receivable United States government Other Allowance for doubtful accounts Costs recoverable under United States government contracts, less progress billings Inventories, at the lower of cost (first-in, first-out) or market Future income tax benefits (note 2) Other current assets TOTAL CURRENT ASSETS Plant and Equipment, at Cost Land Buildings Machinery and equipment Accumulated depreciation (note 3) NET PLANT AND EQUIPMENT Sundry assets, net (note 4)

Notes To Financial Statements

1 The accounts of all majority-owned foreign subsidiaries are included the consolidated financial statements. At December 31, 1968 the net assets of subsidiaries operating outside of the United States and Canada aggregated $43,600,000 (including $30,000,000 net current assets) before deducting $30,000,000 of 4Va% convertible debentures guaranteed by Motorola, Inc. and included in consolidated long-term debt (see note 4). 2 Future income tax benefits may result from the deduction from taxabl income of reserves which have been provided on the books of the company but are not yet allowable as deductions in determining income

taxes currently payable. Such benefits have been reclassified in the 1967 balance sheet to conform to the 1968 presentation.

3 Depreciation of plant and equipment is provided on the basis of the estimated useful lives generally by the declining-balance method fo items acquired subsequent to December 31, 1953 and by the straightline method for items acquired prior to that date.

16

1968

$ 23,369,706 26,254,590

17,006,595 124,218,265 (3,512,000)

11,377,685 121,063,571 10,894,516 8,612,627 339,285,555

8,437,157 111,993,701 107,455,665 (82,304,817) 145,581,706 13,482,988 $498,350,249

Long-term debt at December 31 consisted of the followin 1968 4'/2% convertible guaranteed debentures due July 1, 1983 $30,000,000 4 % % debentures due April 1, 1986 (less $500,000 debentures held in treasury for sinking fund payment) 28,500,000 Revolving credit notes (U.S.) 30,000,000

Revolving credit notes (foreign) due $1,020,408 annually, 1971 to 1973 . . . 3,061,224 Notes payable 3 % % , due $500,000 annually to 1972 2,000,000 4 % % due $500,000 annually to 1976 4,000,000

Real estate mortgage 79,491

97,640,715 Less current maturities, included in current liabilities 1,039,42

Noncurrent portion of longterm debt $96,601,294

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities Notes payable Current maturities of long-term debt Accounts payable Accrued compensation Federal income taxes Other (including withheld) taxes Contribution to employees' profit sharing funds Product and service warranties Other TOTAL CURRENT LIABILITIES

Long-Term Debt (note 4)

Shareholders' Equity Capital stock, $3.00 par value (note 5) Authorized: 10,000,000 shares Outstanding: 1968, 6,148,371 shares; 1967, 6,122,483 shares Additional paid-in capital Retained earnings (notes 1 and 4)

TOTAL SHAREHOLDERS' EQUITY

In July, 1968, a subsidiary formed for the purpose of financing international activities of Motorola, Inc. and its subsidiaries operating ou side the United States issued $30,000,000 of 41/2% convertible guaranteed debentures due in 1983. The debentures are convertible into common stock of Motorola, Inc. at the rate of 6.25 shares of common stock 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 under varying conditions at redemption prices reducing from 1041/2% to 100% of the principal amount thereof. Proceeds of $8,550,000 are attributable to the conversion feature and have been credited to additional paid-in capital; debt discount in that amount (included in sundr assets) will be charged to earnings over the term of the debentures.

Under the terms of the revolving credit (U.S.), the company has the option of converting the notes to a five-year term loan on or prior to Fe 1, 1971; no reduction is contemplated in 1969. The agreement contains provisions restricting, among other things, the payment of cash dividends which are not to exceed $10,000,000 plus earnings (as defined) after December 31, 1965. It also requires the company to maintain consolidated working capital of not less than $75,000,000. At December 31, 1968,$72,000,000 of retained earnings was not restricted as to dividend payments.

In 1968 the shareholders approved a stock option plan providing for the granting of options through May 5, 1973, to key employees to pur-

1968 1967

96,601,294 65,079,480

18,445,113 18,367,449 28,002,604 17,712,959 192,330,354 170,205,973

238,778,071 206,286,381 $498,350,249 $419,949,300

chase 300,000 Motorola, Inc. shares at not less than market value on date of grant. These options become exercisable one year from date of grant and expire at the end of five years. Options granted through 1965 under a former plan are all currently exercisable and expire at various dates through 1973.

During 1968 options to purchase 187,050 shares were granted, options on 18,600 shares were terminated, and options on 21,160 shares were exercised. The excess ($1,185,765) of the option price over the par value of shares issued was credited to additional paid-in capital. At year end 222,975 shares were under option at an aggregate option price of $23,080,909, of which 54,525 shares were currently exercisable in th amount of $3,328,284; 131,550 shares were reserved for future grants.

An Executive Incentive Plan, adopted in 1968, provides that certain of the companies may reserve up to 4% of their annual consolidated net earnings (as defined) for the payment of cash incentive awards. Such awards are payable generally in equal annual installments over a period of five years and are generally subject to the recipients' continued em ployment. At December 31, 1968 a reserve was provided for such awards reducing net earnings by $706,000.

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

CONSOLIDATED EARNINGS AND RETAINED EARNINGS Motorola, Inc. and Subsidiaries

Years Ended December 31 1968 1967

Sales and other revenues $775,124,336 $629,975,344 Manufacturing and other costs of sales 542,172,890 460,922,148 Selling, service, and administrative expenses 137,754,304 105,132,184 Depreciation of plant and equipment (note 3) 20,071,002 17,771,882 Contribution to employees' profit sharing funds 9,884,454 4,956,347 Interest and amortization of debenture expense 7,865,490 6,621,636 TOTAL COSTS AND OTHER EXPENSES 717,748,140 595,404,197 Income before federal income taxes 57,376,196 34,571,147 Federal income taxes, net of investment credit of $1,157,000 in 1968; $1,230,000 in 1967 29,115,000 15,755,000

Earnings (per share outstanding during the year: 1968, $4.61; 1967, $3.08) 28,261,196 18,816,147 Retained earnings at beginning of year 170,205,973 157,503,963 198,467,169 176,320,110 Less cash dividends declared—$1.00 per share 6,136,815 6,114,137 Retained earnings at end of year (notes 1 and 4) $192,330,354 $170,205,973

CONSOLIDATED ADDITIONAL PAID-IN CAPITAL 1968 1967

Balance at beginning of year $17,712,959 $16,781,521 Excess of proceeds over the par value of shares issued under share option plan . . 1,185,765 931,438 Excess of market value over the par value of 4,728 shares issued in acquisition of a subsidiary's stock 553,880 Proceeds from sale of convertible debentures attributable to conversion feature (note 4) 8,550,000

Balance at end of year $28,002,604 $17,712,959

See accompanying notes to financial statements.

Peat, Marwick, Mitchell & Co. communication with them but we satisfied ourselves as to such Certified Public Accountants accounts by means of other auditing procedures. 111 West Monroe Street Chicago, Illinois 60603 In our opinion, the accompanying consolidated balance sheet and statements of consolidated earnings and retained earnings The Board of Directors and Shareholders of Motorola, Inc.: and additional paid-in capital present fairly the financial posiWe have examined the consolidated balance sheet of Motorola, tion of Motorola, Inc. and subsidiaries at December 31, 1968 and Inc. and subsidiaries as of December 31, 1968 and the related the results of their operations for the year then ended, in constatements of earnings and retained earnings and additional formity with generally accepted accounting principles applied on paid-in capital and the statement of source and use of funds for a basis consistent with that of the preceding year. Also, in our the year then ended. Our examination was made in accordance opinion, the accompanying statement of consolidated source and with generally accepted auditing standards, and accordingly in- use of funds for the year ended December 31, 1968 presents cluded such tests of the accounting records and such other fairly the information shown therein. auditing procedures as we considered necessary in the circumPEAT, MARWICK, MITCHELL & CO. stances. It was not practicable to confirm accounts receivable from United States government departments or agencies by February 26, 1969

18

CONSOLIDATED SOURCE AND USE OF FUNDS Motorola, Inc. and Subsidiaries

Years Ended December 31 1968 1967

Source of Funds

Earnings $28,261,196 $18,816,147

Depreciation 20,071,002 17,771,882

Increase (decrease) in long-term debt 31,521,814 (1,664,092)

Additional capital 10,367,309 986,098

TOTAL 90,221,321 35,910,035

Use of Funds

Additions to plant and equipment, net 28,689,921 27,515,450 Cash dividends 6,136,815 6,114,137

Increase (decrease) in sundry assets 10,288,141 (769,237) Increase in working capital 45,106,444 3,049,685

TOTAL $90,221,321 $35,910,035

TEN YEAR FINANCIAL SUMMARY

1959 1960 1961 1962 1963 1964 1965 1966 1967 1968

Net Investment In Plant and $ 33,436 ,676 44,594,599 48,427,446 54,783,818 67,283,543 67,836,835 81,082,588 127,219,219 136,962,787 145.581.706 Equipment

• Earnings per share are based on shares outstanding during the respective years, adjusted for share distributions. The conversion of 41A>% debentures and the exercise of outstanding stock options would not result in a significant dilution of earnings per share. Earnings per share shown above for 1962 do not include 171 of nonrecurring capital gain from sale of finance subsidiary.

19

Major Facilities Located At: Chicago, Franklin Park, Quin Elgin, Pontiac, and Schaumburg, Illinois Phoenix, Scottsdale, Mesa an Tempe, Arizona Arcade, New York Midland and Toronto, Canada Toulouse, France Seoul, Korea Nogales, Mexico

Annual Meeting The annual meeting will be held on Monday, May 5,1969. A notice of the meeting, together with a form of prox and a proxy statement, will be mailed to shareholders on or about April 7, 1969, at which time proxies will be solicited by management.

Transfer Agents Harris Trust and Savings Bank, 111 W. Monroe St., Chicago, Illinois 60690 Chemical Bank New York Trust Company, 165 Broadway, New York, New York 10015

Registrars Continental Illinois National Bank and Trust Company of Chicago, 231 S. LaSalle St., Chicago, Illinois 60690 Irving Trust Company, 1 Wall St., New York, New York 10015

MOTOROLA A

ARD OF DIRECTORS OFFICERS

ROBERT W. GALVIN ROBERT W. GALVIN GEORGE L. MANSOUR Chairman of the Board Vice President and Manager, UR C. NIELSEN, JR. Television Products, ELMER H. WAVERING Consumer Products Division DANIEL E. NOBLE President HOMER L. MARRS ARTHUR L. REESE DANIEL E. NOBLE Vice President and Director of Vice Chairman of the Board and Communications Division ELMER H. SCHULZ Group Executive, Technical Divisions JOHN F. MITCHELL WALTER B. SCOTT EDWIN P. VANDERWICKEN Vice President and Director of Executive Vice President, Finance Communications Products, N P. VANDERWICKEN and Secretary Communications Division ELMER H. WAVERING KENNETH M. PIPER WILLIAM J. WEISZ ARTHUR L. REESE Vice President, Human Relation Executive Vice President and General ENNETH V. ZWIENER Manager, EDWARD P. REAVEY, JR. Consumer Products Division Vice President, Marketing, Consumer Products Division J. PAUL JONES Vice President and General Manager, WALTER B. SCOTT Government Electronics Division Vice President, Assistant to t OSCAR P. KUSISTO ROGER C. SMITH Vice President and General Manager, Vice President and Treasurer Automotive Products Division LEWIS D. SPENCER STEPHEN L. LEVY Vice President and General Att Vice President and General Manager, Semiconductor Products Division ROBERT N. SWIFT Vice President and Director of WILLIAM J. WEISZ Domestic Sales, Vice President and General Manager, Communications Division Communications Division JAMES A. TORRENCE RAYMOND A. ZACK Vice President and Manager, Vice President and General Manager, Color Tube Plant Control Systems Division JOHN R. WELTY Vice President and Director of and Services, ALLEN H. CENTER Semiconductor Products Divisio Vice President, Public Relations

THOMAS J. CONNORS Vice President and Director of Marketing, Semiconductor Products Division

HERBERT D. DE BORDE Vice President and Manager of Operations, Consumer Products Division

RALPH W. ELSNER Vice President and Assistant General Manager, Government Electronics Division

JOHN T. HICKEY Vice President, Planning JOHN A. HUBENY Vice President and Controller

MOTOROLA 9401 west grand avenue franklin park, Illinois 60131