Motorola 2005 Annual Report Download - page 62

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net cash proceeds from the sale of commercial paper and short-term borrowings were $11 million in 2005,
compared to net cash used of $19 million in 2004. The Company had $300 million of outstanding commercial
paper on both December 31, 2005 and December 31, 2004.
Long-term Debt: At December 31, 2005, the Company had outstanding long-term debt of $3.8 billion,
compared to $4.6 billion at December 31, 2004. The change can be primarily attributed to: (i) the repurchase of
$1.0 billion principal amount of long-term debt in 2005, (ii) the reclassification of the $397 million of outstanding
2025 Debentures back to long-term debt as described above, and (iii) the reclassification of the $118 million of
outstanding 2007 Notes from long-term debt to current maturities of long-term debt as described above. The
Company used $1.1 billion to repurchase an aggregate principal amount of $1.0 billion of long-term debt in 2005,
compared to net cash used of $2.8 billion in 2004 to retire an aggregate principal amount of $2.2 billion of debt
and $500 million of TOPrS.
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Although the Company believes that it can continue to access the capital markets in 2006 on acceptable terms
and conditions, its flexibility with regard to short-term and long-term financing activity could be limited by: (i) the
Company's current levels of outstanding long-term debt, and (ii) the Company's credit ratings. In addition, many of
the factors that affect the Company's ability to access the capital markets, such as the liquidity of the overall capital
markets and the current state of the economy, in particular the telecommunications industry, are outside of the
Company's control. There can be no assurances that the Company will continue to have access to the capital
markets on favorable terms.
Redemptions and Repurchases of Outstanding Debt Securities: In August 2005, the Company commenced
cash tender offers for up to $1.0 billion of certain of its outstanding long-term debt. The tender offers expired on
September 28, 2005 and the Company repurchased an aggregate principal amount of $1.0 billion of its outstanding
long-term debt for an aggregate purchase price of $1.1 billion. Included in the $1.0 billion of long-term debt
repurchased were repurchases of a principal amount of: (i) $86 million of the $200 million of 6.50% Notes due
2008 outstanding, (ii) $241 million of the $325 million of 5.80% Notes due 2008 outstanding, and
(iii) $673 million of the $1.2 billion of 7.625% Notes due 2010 outstanding. In addition, the Company terminated
a notional amount of $1.0 billion fixed-to-floating interest rate swaps associated with the debt repurchased,
resulting in an expense of approximately $22 million. The aggregate charge for the repurchase of the debt and the
termination of the associated interest rate swaps, as presented in Other income (expense), was $137 million.
On September 1, 2005, the Company retired $1 million of the $398 million of the 2025 Debentures in
connection with the holders of the debentures right to put their debentures back to the Company. The residual put
options expired unexercised and the remaining $397 million of 2025 Debentures were reclassified back to long-term
debt.
In 2004, the Company: (i) repaid, at maturity, all $500 million aggregate principal amount outstanding of
6.75% Debentures due 2004, (ii) repurchased a principal amount of $110 million of the $409 million aggregate
principal amount outstanding of its 6.50% Debentures due 2028, (iii) repurchased a principal amount of
$182 million of the $300 million aggregate principal amount outstanding of its 7.6% Notes due 2007,
(iv) redeemed all $1.4 billion aggregate principal amount outstanding of its 6.75% Notes due 2006, and
(v) redeemed all outstanding Liquid Yield Option Notes due September 7, 2009 and all outstanding Liquid Yield
Option Notes due September 27, 2013 for an aggregate redemption price of approximately $4 million. In addition,
Motorola Capital Trust I, a Delaware statutory business trust and wholly-owned subsidiary of the Company,
redeemed all outstanding Trust Originated Preferred Securities
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(""TOPrS'') for an aggregate redemption price of
$500 million, plus accrued interest. Also, pursuant to the terms of the 7.00% Equity Security Units (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%. Additionally, in November 2004, pursuant to the terms of the MEUs, the Company
sold 69.4 million shares of common stock to the holders of the MEUs. The purchase price per share was $17.30
resulting in aggregate proceeds of $1.2 billion.
Given the Company's cash position, it may from time to time seek to opportunistically retire certain of its
outstanding debt through open market cash purchases, privately-negotiated transactions or otherwise. Such
repurchases, if any, will depend on prevailing market conditions, the Company's liquidity requirements, contractual
restrictions and other factors. Subject to these factors, the Company has announced a goal to further reduce its
total debt by an additional $1.0 billion during 2006.