MOBILE EXPERIENCES
|
MOTOROLA, INC., AND SUBSIDIARIES* |
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Years Ended December 31, |
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|
(In millions, except per share amounts) |
2008 |
2007 |
2006 |
|
Net sales |
$30,146 |
$36,622 |
$42,847 |
|
Cost of sales |
21,751 |
26,670 |
30,120 |
|
Gross margin |
8,395 |
9,952 |
12,727 |
|
Selling, general, and administrative expenses |
4,330 |
5,092 |
4,504 |
|
Research and development expenditures |
4,109 |
4,429 |
4,106 |
|
Other charges |
2,347 |
984 |
25 |
|
Operating earnings (loss) |
2,391 |
553 |
4,092 |
|
Other income (expense): |
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Interest income, net |
48 |
91 |
326 |
|
Gains on sales of investments and businesses, net |
82 |
50 |
41 |
|
Other |
376 |
22 |
151 |
|
Total other income (expense) |
246 |
163 |
518 |
|
Earnings (loss) from continuing operations before income taxes |
2,637 |
390 |
4,610 |
|
Income tax expense (benefit) |
1,607 |
285 |
1,349 |
|
Earnings (loss) from continuing operations |
4,244 |
105 |
3,261 |
|
Earnings from discontinued operations, net of tax |
— |
56 |
400 |
|
Net earnings (loss) |
($4,244) |
($49) |
$3,661 |
|
Earnings (loss) per common share: |
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Basic: |
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|
Continuing operations |
($1.87) |
($0.05) |
$1.33 |
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Discontinued operations |
— |
0.03 |
0.17 |
|
($1.87) |
($0.02) |
$1.50 |
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Diluted: |
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Continuing operations |
($1.87) |
($0.05) |
$1.30 |
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Discontinued operations |
— |
0.03 |
0.16 |
|
($1.87) |
($0.05) |
$1.46 |
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Weighted average common shares outstanding: |
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|
Basic |
2,265.40 |
2,312.70 |
2,446.30 |
|
Diluted |
2,265.40 |
2,312.70 |
2,504.20 |
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Dividends paid per share |
$0.20 |
$0.20 |
$0.18 |
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See accompanying notes to consolidated financial statements. |
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3. Other Financial Data (In Part) Statement of Operations Information Other Charges Other charges included in Operating earnings (loss) consist of the following:
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Years Ended December 31 |
2008 |
2007 |
2006 |
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Other charges (income): |
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Goodwill impairment |
$1,619 |
$ |
$ |
|
Intangibles amortization |
318 |
369 |
100 |
|
Reorganization of business |
248 |
290 |
172 |
|
Asset impairments |
136 |
89 |
— |
|
Separationrelated transaction costs |
59 |
— |
— |
|
Legal settlements and related insurance matters, net |
14 |
140 |
50 |
|
Inprocess research and development charges |
1 |
96 |
33 |
|
Gain on sale of property, plant and equipment |
48 |
— |
— |
|
Charitable contribution to Motorola Foundation |
— |
— |
88 |
|
Settlements and collections related to Telsim |
— |
— |
418 |
|
$2,347 |
$984 |
$25 |
Other Income (Expense) Interest income, net, and Other both included in Other income (expense) consist of the following:
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Years Ended December 31 |
2008 |
2007 |
2006 |
|
Interest income, net: |
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|
Interest income |
$272 |
$456 |
$661 |
|
Interest expense |
224 |
365 |
335 |
|
$48 |
$91 |
$326 |
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Other: |
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Investment impairments |
($365) |
($44) |
($27) |
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Impairment charges in Sigma Fund investments |
186 |
18 |
— |
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Temporary unrealized losses of the Sigma Fund investments |
101 |
— |
— |
|
Foreign currency gain (loss) |
84 |
97 |
60 |
|
U.S. pension plan freeze curtailment gain |
237 |
— |
— |
|
Liability extinguishment gain |
56 |
— |
— |
|
Gain on interest rate swaps |
24 |
— |
— |
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Gain on Spring Nextel derivatives |
— |
— |
99 |
|
Other |
43 |
13 |
19 |
|
($376) |
$22 |
$151 |
Required
a. Would you consider the presentation to be a multiple step income statement or a single step income statement? Comment.
b. Does it appear that there is a 100% ownership in all consolidated subsidiaries?
c. If a subsidiary were not consolidated but rather accounted for using the equity method, would this change net earnings (loss)? Explain.
d. 1. Comment on the goodwill impairment. What does this imply?
2. Comment on the investment impairments. What does this imply?
3. How significant are these impairments in relation to earnings (loss) from continuing operations before income taxes?
e. 1. How significant is selling, general, and administrative expenses in relation to gross margin?
2. How significant is research and development expenditures in relation to gross margin?
3. How significant are dividends paid in relation to net earnings (loss)?
4. a. Considering the above items, which one would you reduce first?
b. Considering the above items, which one would you protect the most?