Motorola 2004 Annual Report Download - page 45

37
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
$145 million of reversals for employee separation and exit cost reserves no longer needed, $38 million in charges
for the impairment of assets classiÑed as held-for-sale, and $28 million in Ñxed asset adjustments, primarily for
assets which the Company intends to use that were previously classiÑed as held-for-sale. The $145 million of
reversals constituted 11% of the Company's $1.4 billion in earnings from continuing operations before income taxes
in 2003. These charges are discussed in further detail in the ""Reorganization of Businesses Programs'' section
below.
Other Charges (Income)
The Company recorded net charges of $111 million in Other Charges (Income) in 2004, compared to net
income of $57 million in 2003. The net charges of $111 million in 2004 primarily consist of: (i) a $125 million
impairment charge related to goodwill associated with a sensor business within the Other Products segment, and
(ii) $34 million of charges for in-process research and development (""IPR&D'') related to the acquisitions by
CGISS of MeshNetworks, Inc. and CRISNET, Inc., by BCS of Quantum Bridge, and by IESS of Force Computers.
These items were partially oÅset by $44 million in income from the reversal of Ñnancing receivable reserves due to
the partial collection of the previously-uncollected receivable from Telsim.
The net income of $57 million in 2003 primarily consisted of: (i) $69 million in income from the reversal of
accruals no longer needed due to a settlement with the Company's insurer on items related to previous
environmental claims, (ii) $59 million in income due to the reassessment of remaining reserve requirements as a
result of a litigation settlement agreement with The Chase Manhattan Bank regarding Iridium, and (iii) $41 million
in income from the sale of Iridium-related assets that were previously written down. These items were partially
oÅset by: (i) a $73 million impairment charge relating to goodwill associated with the infrastructure business of
BCS, and (ii) $32 million of IPR&D charges related to the acquisition of Winphoria Networks, Inc. by GTSS.
Net Interest Expense
Net interest expense was $199 million in 2004, compared to $294 million in 2003. Net interest expense in
2004 included interest expense of $353 million, partially oÅset by interest income of $154 million. Net interest
expense in 2003 included interest expense of $423 million, partially oÅset by interest income of $129 million. The
decrease in net interest expense in 2004 compared to 2003 reÖects: (i) a reduction in total debt during 2004,
(ii) beneÑts derived from Ñxed-to-Öoating interest rate swaps, and (iii) an increase in interest income due to higher
average cash balances.
Gains on Sales of Investments and Businesses
Gains on sales of investments and businesses were $460 million in 2004, compared to $539 million in 2003.
The 2004 net gains were primarily: (i) a $130 million gain on the sale of the Company's remaining shares in
Broadcom Corporation, (ii) a $122 million gain on the sale of a portion of the Company's shares in Nextel
Communications, Inc. (""Nextel''), (iii) an $82 million gain on the sale of a portion of the Company's shares in
Telus Corporation, and (iv) a $68 million gain on the sale of a portion of the Company's shares in Nextel
Partners, Inc. (""Nextel Partners'').
The 2003 net gains were primarily: (i) a $255 million gain on the sale of a portion of the Company's shares in
Nextel, (ii) an $80 million gain on the sale of the Company's shares in Symbian Limited, (iii) a $65 million gain
on the sale of the Company's shares in UAB Omnitel of Lithuania, and (iv) a $61 million gain on the sale of a
portion of the Company's shares in Nextel Partners.
Other
Charges classiÑed as Other, as presented in Other Income (Expense), were $141 million in 2004, compared to
$142 million in 2003. The $141 million of charges in 2004 primarily related to: (i) net charges of $81 million for
costs related to the redemption of debt, (ii) foreign currency losses of $44 million, (iii) $36 million of investment
impairment charges, and (iv) $18 million in minority interest expense. These items were partially oÅset by:
(i) $29 million of equity in net earnings of aÇliated companies, and (ii) $20 million in income related to the
recovery of a previously-impaired debt holding in a European cable operator.
The $142 million of charges in 2003 primarily related to: (i) $96 million of investment impairment charges,
partially comprised of a $29 million charge to write down to zero the Company's debt holding in a European cable