Motorola 2006 Annual Report Download - page 62

54 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
terminated. Termination would result in a penalty substantially less than the remaining annual contract payments.
The Company would also be required to find another source for these services, including the possibility of
performing them in-house.
As is customary in bidding for and completing network infrastructure projects and pursuant to a practice the
Company has followed for many years, the Company has a number of performance/bid bonds and standby letters
of credit outstanding, primarily relating to projects of the Networks and Enterprise segment. These instruments
normally have maturities of up to three years and are standard in the industry as a way to give customers a
convenient mechanism to seek resolution if a contractor does not satisfy performance requirements under a
contract. A customer can draw on the instrument only if the Company does not fulfill all terms of a project
contract. If such an occasion occurred, the Company would be obligated to reimburse the financial institution that
issued the bond or letter of credit for the amounts paid. The Company is not generally required to post any cash in
connection with the issuance of these bonds or letters of credit. In its long history, it has been extraordinarily
uncommon for the Company to have a performance/bid bond or standby letter of credit drawn upon. At
December 31, 2006, outstanding performance/bid bonds and standby letters of credit totaled approximately
$1.5 billion, compared to $1.0 billion at the end of 2005.
Off-Balance Sheet Arrangements: Under the definition contained in Item 303(a)(4)(ii) of Regulation S-K,
the Company does not have any off-balance sheet arrangements.
Adequate Internal and External Funding Resources
The Company believes that it has adequate internal and external resources available to fund expected working
capital and capital expenditure requirements for the next twelve months as supported by the level of cash, cash
equivalents and Sigma Funds in the U.S., the ability to repatriate cash, cash equivalents and Sigma Funds from
foreign jurisdictions, the ability to borrow under existing or future credit facilities, the ability to issue commercial
paper, and access to the short-term and long-term debt markets.
Customer Financing Commitments and Guarantees
Outstanding Commitments: Certain purchasers of the Company's infrastructure equipment continue to
request that suppliers provide financing in connection with equipment purchases. These requests may include all or
a portion of the purchase price of the equipment. Periodically, the Company makes commitments to provide
financing to purchasers in connection with the sale of equipment. However, the Company's obligation to provide
financing is often conditioned on the issuance of a letter of credit in favor of the Company by a reputable bank to
support the purchaser's credit or a pre-existing commitment from a reputable bank to purchase the receivable from
the Company. The Company had outstanding commitments to extend credit to third-parties totaling $398 million at
December 31, 2006, compared to $689 million at December 31, 2005. Of these amounts, $262 million was
supported by letters of credit or by bank commitments to purchase receivables at December 31, 2006, compared to
$594 million at December 31, 2005.
Guarantees of Third-Party Debt: In addition to providing direct financing to certain equipment customers,
the Company also assists customers in obtaining financing directly from banks and other sources to fund equipment
purchases. The Company had committed to provide financial guarantees relating to customer financing totaling
$122 million and $140 million at December 31, 2006 and December 31, 2005, respectively (including $19 million
and $66 million, respectively, relating to the sale of short-term receivables). Customer financing guarantees
outstanding were $47 million and $79 million at December 31, 2006 and December 31, 2005, respectively
(including $2 million and $42 million, respectively, relating to the sale of short-term receivables).
Customer Financing Arrangements
Outstanding Finance Receivables: The Company had net finance receivables of $269 million at December 31,
2006, compared to $260 million at December 31, 2005 (net of allowances for losses of $10 million at
December 31, 2006 and $12 million at December 31, 2005). These finance receivables are generally interest
bearing, with rates ranging from 2% to 11%. Interest income recognized on finance receivables for the years ended
December 31, 2006, 2005 and 2004 was $9 million, $7 million and $9 million, respectively.
Telsim Loan: On October 28, 2005, the Company entered into an agreement to resolve disputes regarding
Telsim Mobil Telekomunikasyon Hizmetleri A.S. (""Telsim'') with Telsim and the government of Turkey. The