Motorola 2009 Annual Report Download - page 56

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48 MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, were impacted by these plans. The majority of the
employees affected were 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 were 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 Additional Amount Accruals at
2007 January 1 Charges Adjustments Used December 31
Exit costs $ 54 $ 19 $ 2 $ (33) $ 42
Employee separation costs 104 401 (64) (248) 193
$158 $420 $(62) $(281) $235
Adjustments include translation adjustments and $6 million of accruals established through purchase accounting for businesses acquired,
covering exit costs and separation costs for approximately 200 employees.
Exit Costs
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 were 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
represented 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 was included in
Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2007, represented 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 additional 2007 charges of $401 million represented
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 reflected $68 million of reversals of accruals no longer required, partially
offset by $4 million of accruals for severance plans established through purchase accounting for businesses
acquired. The $68 million of reversals represented previously accrued costs for 1,100 employees, and primarily
related to a strategic change regarding a plant closure and specific employees previously identified for separation
who resigned from the Company and did not receive severance or who were redeployed due to circumstances not
foreseen when the original plans were approved. The $4 million of accruals represents severance plans for
approximately 200 employees established through purchase accounting for businesses acquired.