Motorola 2008 Annual Report Download - page 127

For many years the Company has utilized a number of receivables programs to sell a broadly-diversified group
of accounts receivables to third parties. Certain of the accounts receivables are sold to a multi-seller commercial
paper conduit. This program provided for up to $400 million of accounts receivables to be outstanding with the
conduit at any time. Subsequent to December 31, 2008, this $400 million committed facility expired and the
Company is negotiating a replacement facility under different terms. The Company is also negotiating an
additional committed revolving receivable sales facility for European receivables, with the intent that the combined
capacity of the two new facilities will be greater than the facility that expired. However, it is not certain when or if
the Company will be successful in securing such facilities.
For the year ended December 31, 2008, 2007 and 2006, total accounts receivables and long-term receivables
sold by the Company were $3.7 billion, $4.9 billion and $6.4 billion, respectively (including $3.4 billion,
$4.7 billion and $6.2 billion, respectively, of accounts receivables). As of December 31, 2008 and 2007, there were
$1.0 billion and $978 million, respectively, of receivables outstanding under these programs for which the
Company retained servicing obligations (including $621 million and $587 million, respectively, of accounts
receivable).
Under certain receivables programs, the value of the receivables sold is covered by credit insurance obtained
from independent insurance companies, less deductibles or self-insurance requirements under the policies (with the
Company retaining credit exposure for the remaining portion). The Company’s total credit exposure to outstanding
short-term receivables that have been sold was $23 million at both December 31, 2008 and 2007. Reserves of
$4 million and $1 million were recorded for potential losses at December 31, 2008 and 2007, respectively.
11. Commitments and Contingencies
Legal
Iridium Program: The Company was named as one of several defendants in putative class action securities
lawsuits arising out of alleged misrepresentations or omissions regarding the Iridium satellite communications
business which, on March 15, 2001, were consolidated in the federal district court in the District of Columbia
under Freeland v. Iridium World Communications, Inc., et al., originally filed on April 22, 1999. In April 2008,
the parties reached an agreement in principle, subject to court approval, to settle all claims against Motorola in
exchange for Motorola’s payment of $20 million. During the three months ended March 29, 2008, the Company
recorded a charge associated with this settlement. On October 23, 2008, the court granted final approval of the
settlement and dismissed the claims with prejudice.
The Company was sued by the Official Committee of the Unsecured Creditors of Iridium (the “Committee”)
in the United States Bankruptcy Court for the Southern District of New York (the “Iridium Bankruptcy Court”) on
July 19, 2001. In re Iridium Operating LLC, et al. v. Motorola asserted claims for breach of contract, warranty
and fiduciary duty and fraudulent transfer and preferences, and sought in excess of $4 billion in damages. On
May 20, 2008, the Bankruptcy Court approved a settlement in which Motorola is not required to pay anything,
but released its administrative, priority and unsecured claims against the Iridium estate and withdrew its objection
to the 2001 settlement between the unsecured creditors of the Iridium Debtors and the Iridium Debtors’ pre-
petition secured lenders. This settlement, and its approval by the Bankruptcy Court, extinguished Motorola’s
financial exposure and concluded Motorola’s involvement in the Iridium bankruptcy proceedings.
Telsim Class Action Securities: In April 2007, the Company entered into a settlement agreement in regards to
In re Motorola Securities Litigation, a class action lawsuit relating to the Company’s disclosure of its relationship
with Telsim Mobil Telekomunikasyon Hizmetleri A.S. Pursuant to the settlement, Motorola paid $190 million to
the class and all claims against Motorola by the class have been dismissed and released.
During the three months ended March 31, 2007, the Company recorded a charge of $190 million for the legal
settlement, partially offset by $75 million of estimated insurance recoveries, of which $50 million had been
tendered by certain insurance carriers. During the three months ended June 30, 2007, the Company commenced
actions against the non-tendering insurance carriers. In response to these actions, each insurance carrier who has
responded denied coverage citing various policy provisions. As a result of this denial of coverage and related
actions, the Company recorded a reserve of $25 million in the three months ended June 30, 2007 against the
receivable from insurance carriers. During the three months ended September 27, 2008, the Company received the
$50 million tendered by the insurance carriers. During the three months ended December 31, 2008, the Company
received a net $43 million tendered by other insurance carriers.
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