Motorola 2004 Annual Report Download - page 57

49
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cash used for Ñnancing activities in 2003 was primarily used: (i) to repay $1.1 billion of total debt (including
commercial paper), primarily through the redemption of all of the Company's $825 million of Puttable Reset
Securities (PURS) and the retirement of $98 million of Liquid Yield Option Notes (LYONs), and (ii) to pay
dividends of $332 million. These items were partially oÅset by: (i) net proceeds of $556 million from distributions
from Freescale Semiconductor through the cash management system and (ii) proceeds of $158 million from the
issuance of common stock in connection with the Company's employee stock purchase plan and employee stock
option plan.
Short-Term Debt: At December 31, 2004, the Company's outstanding short-term debt was $717 million,
compared to $869 million of outstanding short-term debt at December 31, 2003. The decrease in short-term debt
during 2004 primarily reÖects the repayment, at maturity, of the $500 million of 6.75% Debentures due 2004,
partially oÅset by the reclassiÑcation to current maturities of $398 million of 6.50% Debentures due 2025 that are
puttable in 2005. At December 31, 2004, the Company had $300 million of outstanding commercial paper,
compared to $304 million outstanding at December 31, 2003. The Company currently expects its outstanding
commercial paper balances to average $300 million throughout 2005.
Long-Term Debt: At December 31, 2004, the Company had outstanding long-term debt of $4.6 billion,
compared to $6.7 billion of outstanding long-term debt at December 31, 2003. This reduction in long-term debt, as
further described below under ""Redemptions and Repurchases of Outstanding Securities in 2004,'' consists primarily
of: (i) the redemption of the $1.4 billion aggregate principal amount outstanding of 2006 Debentures, (ii) the
reclassiÑcation to current maturities of $398 million of 6.50% Debentures due 2025 that are puttable in 2005,
(iii) the retirement of $182 million of the $300 million aggregate principal amount outstanding of 2007 Notes,
(iv) the retirement of $110 million of the $409 million aggregate principal amount outstanding of 2028 Debentures,
and (v) the redemption of the $4 million of Liquid Yield Option Notes due September 7, 2009 (the ""2009
LYONs'') and the Liquid Yield Option Notes due September 27, 2013 (the ""2013 LYONs'') not validly exchanged
for stock.
Remarketing of Senior Note Component of MEUs in August 2004: In August 2004, pursuant to the terms of
the MEUs, the $1.2 billion of 6.50% Senior Notes due 2007 (the ""2007 MEU Notes'') that comprised a portion of
the MEUs were remarketed to a new set of holders. In connection with the remarketing, the interest rate on the
2007 MEU Notes was reset to 4.608%. None of the other terms of the 2007 MEU Notes were changed. Shortly
after the remarketing, the Company entered into interest rate swaps to change the characteristics of the interest rate
payments from Ñxed-rate payments to short-term LIBOR-based variable rate payments.
Redemptions and Repurchases of Outstanding Securities in 2004
$500 Million of TOPrS: In March 2004, Motorola Capital Trust I, a Delaware statutory business trust and
wholly-owned subsidiary of the Company (the ""Trust''), redeemed all outstanding TOPrS plus accrued interest. In
February 1999, the Trust sold 20 million TOPrS to the public for an aggregate oÅering price of $500 million. The
Trust used the proceeds from that sale, together with the proceeds from its sale of common stock to the Company,
to buy a series of 6.68% Deferrable Interest Junior Subordinated Debentures due March 31, 2039 (the
""Subordinated Debentures'') from the Company with the same payment terms as the TOPrS. The sole assets of the
Trust were the Subordinated Debentures. Historically, the TOPrS have been reÖected as ""Company-Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Company-Guaranteed Debentures''
in the Company's consolidated balance sheets. No TOPrS or Subordinated Debentures remain outstanding.
$4 Million of LYONS: In March 2004, the Company also redeemed all outstanding 2009 LYONs and 2013
LYONs. On March 26, 2004, all then-outstanding 2009 LYONs and 2013 LYONs, not validly exchanged for stock,
were redeemed for an aggregate redemption price of approximately $4 million. No 2009 LYONs or 2013 LYONs
remain outstanding.
$500 Million of 6.75% Debentures due 2004: In June 2004, the Company repaid, at maturity, all $500 million
aggregate principal amount outstanding of its 6.75% Debentures due 2004.
$182 Million of 7.60% Notes due 2007: In July 2004, the Company commenced a cash tender oÅer for any
and all of the $300 million aggregate principal amount outstanding of its 2007 Notes. The tender oÅer expired in
August 2004 and an aggregate principal amount of approximately $182 million of 2007 Notes was validly tendered.
In August 2004, the Company repurchased the validly tendered 2007 Notes for an aggregate purchase price of
approximately $202 million. This debt was repurchased with proceeds distributed to the Company by Freescale
Semiconductor.