Motorola 2007 Annual Report Download - page 55

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representing: (i) $251 million of savings in R&D expenditures, (ii) $167 million of savings in SG&A expenses, and
(iii) $130 million of savings in Cost of sales.
2007 Charges
During 2007, the Company committed to implement various productivity improvement plans aimed at
achieving long-term, sustainable profitability by driving efficiencies and reducing operating costs. All three of the
Company’s business segments, as well as corporate functions, are impacted by these plans. The majority of the
employees affected are located in North America and Europe. The Company recorded net reorganization of
business charges of $394 million, including $104 million of charges in Costs of sales and $290 million of charges
under Other charges (income) in the Company’s consolidated statements of operations. Included in the aggregate
$394 million are charges of $401 million for employee separation costs, $42 million for fixed asset impairment
charges and $19 million for exit costs, offset by reversals for accruals no longer needed.
The following table displays the net reorganization of business charges by segment:
Year Ended December 31, 2007
Mobile Devices $229
Home and Networks Mobility 71
Enterprise Mobility Solutions 30
330
General Corporate 64
$394
The following table displays a rollforward of the reorganization of businesses accruals established for exit
costs and employee separation costs from January 1, 2007 to December 31, 2007:
Accruals at
January 1,
2007
2007
Additional
Charges 2007
(1)(2)
Adjustments
2007
Amount
Used
Accruals at
December 31,
2007
Exit costs—lease terminations $ 54 $ 19 $ 2 $ (33) $ 42
Employee separation costs 104 401 (64) (248) 193
$158 $420 $(62) $(281) $235
(1) Includes translation adjustments.
(2) Includes $6 million of accruals established through purchase accounting for businesses acquired, covering exit
costs and separation costs for approximately 200 employees.
Exit Costs—Lease Terminations
At January 1, 2007, the Company had an accrual of $54 million for exit costs attributable to lease
terminations. The 2007 additional charges of $19 million are primarily related to the exit of certain activities and
leased facilities in Ireland by the Home and Networks Mobility segment. The 2007 adjustments of $2 million
represent accruals for exit costs established through purchase accounting for businesses acquired. The $33 million
used in 2007 reflects cash payments. The remaining accrual of $42 million, which is included in Accrued liabilities
in the Company’s consolidated balance sheets at December 31, 2007, represents future cash payments for lease
termination obligations.
Employee Separation Costs
At January 1, 2007, the Company had an accrual of $104 million for employee separation costs, representing
the severance costs for approximately 2,300 employees. The 2007 additional charges of $401 million represent
severance costs for approximately 6,700 employees, of which 2,400 were direct employees and 4,300 were indirect
employees.
The adjustments of $64 million reflect $68 million of reversals of accruals no longer needed, partially offset
by $4 million of accruals for severance plans established through purchase accounting for businesses acquired. The
$68 million of reversals represent previously accrued costs for 1,100 employees, and primarily relates to a strategic
47
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS