Motorola 2005 Annual Report Download - page 55

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48 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2005 Charges
During the year ended December 31, 2005, the Company initiated various productivity improvement plans
aimed principally at improving manufacturing and distribution efficiencies and reducing costs in its integrated
supply-chain organization, as well as reducing other operating expenses. The Company recorded net reorganization
of business charges of $106 million, including $40 million of charges in Costs of sales and $66 million of charges
under Other charges in the Company's consolidated statement of operations. Included in the aggregate $106 million
are charges of $102 million for employee separation costs, $15 million for fixed asset adjustments and $5 million
for exit costs, partially offset by $16 million of reversals for accruals no longer needed. Total employees impacted
by these actions are 2,625.
The following table displays the net reorganization of business charges by segment:
Year Ended
December 31,
Segment 2005
Mobile Devices $27
Government and Enterprise Mobility Solutions 64
Networks 3
Connected Home Solutions 4
98
General Corporate 8
$106
The following table displays a rollforward of the reorganization of business accruals established for exit costs
and employee separation costs from January 1, 2005 to December 31, 2005:
Accruals at 2005 2005 Accruals at
January 1, Additional 2005(1) Amount December 31,
2005 Charges Adjustments Used 2005
Exit costsÌlease terminations $ 84 $ 5 $ (7) $ (27) $ 55
Employee separation costs 46 102 (16) (79) 53
$130 $107 $(23) $(106) $108
(1) Includes translation adjustments.
Exit CostsÌLease Terminations
At January 1, 2005, the Company had an accrual of $84 million for exit costs attributable to lease
terminations. The 2005 additional charges of $5 million were primarily related to a lease cancellation by the
Government and Enterprise Mobility Solutions segment. The 2005 adjustments of $7 million represent reversals of
$1 million for accruals no longer needed and $6 million of translation adjustments. The $27 million used in 2005
reflects cash payments to lessors. The remaining accrual of $55 million, which is included in Accrued liabilities in
the Company's consolidated balance sheet at December 31, 2005, represents future cash payments for lease
termination obligations.
Employee Separation Costs
At January 1, 2005, the Company had an accrual of $46 million for employee separation costs, representing the
severance costs for approximately 500 employees, of which 50 were direct employees and 450 were indirect
employees. The 2005 additional charges of $102 million represent costs for an additional 2,625 employees, of
which 1,350 were direct employees and 1,275 were indirect employees. The adjustments of $16 million represent
reversals of accruals no longer needed.
During 2005, approximately 1,500 employees, of which 300 were direct employees and 1,200 were indirect
employees, were separated from the Company. The $79 million used in 2005 reflects cash payments to these
separated employees. The remaining accrual of $53 million, which is included in Accrued Liabilities in the
Company's consolidated balance sheet at December 31, 2005, is expected to be paid to approximately 1,600
employees to be separated in 2006.