Motorola 2006 Annual Report Download - page 55

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47
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table displays a rollforward of the reorganization of business accruals established for exit costs
and employee separation costs from January 1, 2004 to December 31, 2004:
Accruals at 2004 Accruals at
January 1, Additional 2004(1) 2004 Amount December 31,
2004 Charges Adjustments Used 2004
Exit costsÌlease terminations $122 $Ì $(18) $ (31) $ 73
Employee separation costs 116 54 (34) (95) 41
$238 $54 $(52) $(126) $114
(1) Includes translation adjustments.
Exit CostsÌLease Terminations
At January 1, 2004, the Company had an accrual of $122 million for exit costs attributable to lease
terminations. The 2004 adjustments of $18 million represented reversals of $29 million for accruals no longer
needed, partially offset by an $11 million translation adjustment. The $31 million used in 2004 reflected cash
payments to lessors. The remaining accrual of $73 million, which was included in Accrued liabilities in the
Company's consolidated balance sheet at December 31, 2004, represents future cash payments for lease termination
obligations.
Employee Separation Costs
At January 1, 2004, the Company had an accrual of $116 million for employee separation costs, representing
the severance costs for approximately 2,100 employees, of which 1,000 were direct employees and 1,100 were
indirect employees. The 2004 additional charges of $54 million represented the severance costs for approximately
800 employees, of which 100 were direct employees and 700 were indirect employees. The adjustments of
$34 million represented reversals of accruals no longer needed.
During 2004, approximately 2,500 employees, of which 1,000 were direct employees and 1,500 were indirect
employees, were separated from the Company. The $95 million used in 2004 reflected cash payments to these
separated employees. The remaining accrual of $41 million was included in Accrued liabilities in the Company's
consolidated balance sheet at December 31, 2004.
Liquidity and Capital Resources
As highlighted in the consolidated statements of cash flows, the Company's liquidity and available capital
resources are impacted by four key components: (i) current cash and cash equivalents, (ii) operating activities,
(iii) investing activities, and (iv) financing activities.
Cash and Cash Equivalents
During 2006, the Company's cash and cash equivalents (which are highly-liquid investments with an original
maturity of three months or less) decreased by $562 million to $3.2 billion at December 31, 2006, compared to
$3.8 billion at December 31, 2005. At December 31, 2006, $300 million of this amount was held in the U.S. and
$2.9 billion was held by the Company or its subsidiaries in other countries.
The Company has approximately $2.5 billion of earnings in foreign subsidiaries that are not permanently
reinvested and may be repatriated without additional U.S. federal income tax charges to the Company's
consolidated statements of operations, given the U.S. federal tax provisions accrued on undistributed earnings and
the utilization of available foreign tax credits. On a cash basis, these repatriations from the Company's
non-U.S. subsidiaries could require the payment of additional foreign taxes, which would be creditable against
U.S. federal income taxes. The repatriation of some of these funds could also be subject to delay for local country
approvals.