Motorola 2006 Annual Report Download - page 99

91
Stockholders' Equity
Derivative instruments activity, net of tax, included in Non-owner changes to equity within Stockholders'
Equity for the years ended December 31, 2006 and 2005 is as follows:
2006 2005
Balance at January 1 $2$(272)
Increase in fair value 75 28
Reclassifications to earnings (61) 246
Balance at December 31 $16 $2
Fair Value Hedges
The Company recorded income of $0.6 million, $1.5 million and $0.1 million for the years ended
December 31, 2006, 2005 and 2004, respectively, representing the ineffective portions of changes in the fair value of
fair value hedge positions. These amounts are included in Other within Other income (expense) in the Company's
consolidated statements of operations. The above amounts include the change in the fair value of derivative
contracts related to the changes in the difference between the spot price and the forward price. These amounts are
excluded from the measure of effectiveness. Expense (income) related to fair value hedges that were discontinued
for the years ended December 31, 2006, 2005 and 2004 are included in the amounts noted above.
Cash Flow Hedges
The Company recorded income (expense) of $13 million, $1 million and $(12) million for the years ended
December 31, 2006, 2005 and 2004, respectively, representing the ineffective portions of changes in the fair value of
cash flow hedge positions. These amounts are included in Other within Other income (expense) in the Company's
consolidated statements of operations. The above amounts include the change in the fair value of derivative
contracts related to the changes in the difference between the spot price and the forward price. These amounts are
excluded from the measure of effectiveness. Expense (income) related to cash flow hedges that were discontinued
for the years ended December 31, 2006, 2005 and 2004 are included in the amounts noted above.
During the years ended December 31, 2006, 2005 and 2004, on a pre-tax basis, income (expense) of
$(98) million, $21 million and $(27) million, respectively, was reclassified from equity to earnings in the
Company's consolidated statements of operations. If exchange rates do not change from year-end, the Company
estimates that $16 million of pre-tax net derivative income included in Non-owner changes to equity within
Stockholders' equity would be reclassified into earnings within the next twelve months and will be reclassified in
the same period that the hedged item affects earnings. The actual amounts that will be reclassified into earnings
over the next twelve months will vary from this amount as a result of changes in market conditions.
At December 31, 2006, the maximum term of derivative instruments that hedge forecasted transactions was
two years. However, the weighted average duration of the Company's derivative instruments that hedge forecasted
transactions was seven months.
Net Investment in Foreign Operations Hedge
At December 31, 2006 and 2005, the Company did not have any hedges of foreign currency exposure of net
investments in foreign operations.
Investments Hedge
During the first quarter of 2006, the Company entered into a zero-cost collar derivative (the ""Sprint Nextel
Derivative'') to protect itself economically against price fluctuations in its 37.6 million shares of Sprint Nextel
Corporation (""Sprint Nextel'') non-voting common stock. During the second quarter of 2006, as a result of Sprint
Nextel's spin-off of Embarq Corporation through a dividend to Sprint Nextel shareholders, the Company received
approximately 1.9 million shares of Embarq Corporation. The floor and ceiling prices of the Sprint Nextel
Derivative were adjusted accordingly. The Sprint Nextel Derivative was not designated as a hedge under the