Motorola 2009 Annual Report Download - page 128

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the event that employment is involuntarily terminated as a result of a reduction-in-force or restructuring. Effective
August 1, 2009, the Company amended and restated the Severance Plan. Under the amended Severance Plan,
severance benefits will be paid in bi-weekly installments to impacted employees rather than in lump sum
payments. The Company recognizes termination benefits based on formulas per the Severance Plan at the point in
time that future settlement is probable and can be reasonably estimated based on estimates prepared at the time a
restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated
facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for
employee separation and exit costs to ensure the accruals are still appropriate. In certain circumstances, accruals
are no longer needed because of efficiencies in carrying out the plans or because employees previously identified
for separation resigned from the Company and did not receive severance or were redeployed due to circumstances
not foreseen when the original plans were initiated. In these cases, the Company reverses accruals through the
consolidated statements of operations where the original charges were recorded when it is determined they are no
longer needed.
2009 Charges
During the year ended December 31, 2009, in light of the macroeconomic decline that adversely affected
sales, the Company continued 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, with the majority of
the impact in the Mobile Devices segment. The employees affected are located in all geographic regions.
During the year ended December 31, 2009, the Company recorded net reorganization of business charges of
$336 million, including $78 million of charges in Costs of sales and $258 million of charges under Other charges
in the Company’s consolidated statements of operations. Included in the aggregate $336 million are charges of
$363 million for employee separation costs, $36 million for exit costs and $20 million for fixed asset impairment
charges, partially offset by $83 million of reversals for accruals no longer needed.
The following table displays the net charges incurred by business segment:
Year Ended December 31 2009
Mobile Devices $184
Home and Networks Mobility 52
Enterprise Mobility Solutions 70
306
Corporate 30
$336
The following table displays a rollforward of the reorganization of businesses accruals established for exit
costs and employee separation costs from January 1, 2009 to December 31, 2009:
Accruals at Additional Amount Accruals at
2009 January 1 Charges Adjustments Used December 31
Exit costs $ 80 $ 36 $ (9) $ (49) $ 58
Employee separation costs 170 363 (70) (383) 80
$250 $399 $(79) $(432) $138
Adjustments include translation adjustments.
Exit Costs
At January 1, 2009, the Company had an accrual of $80 million for exit costs attributable to lease
terminations. The additional 2009 charges of $36 million are primarily related to the exit of leased facilities and
contractual termination costs. The adjustments of $9 million reflect: (i) $8 million of reversals of accruals no
longer needed, and (ii) $1 million of translation adjustments. The $49 million used in 2009 reflects cash
payments. The remaining accrual of $58 million, which is included in Accrued liabilities in the Company’s
consolidated balance sheets at December 31, 2009, represents future cash payments, primarily for lease
termination obligations.