Motorola 2010 Annual Report Download - page 49

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Other Charges
The Company recorded net charges of $577 million in Other charges in 2009, compared to net charges of
$2.2 billion in 2008. The charges in 2009 included: (i) $277 million of charges relating to the amortization of
intangibles, (ii) $235 million of net reorganization of business charges included in Other charges, (iii) $23 million of
charges related to an environmental reserve, and (iv) $42 million of separation-related transaction costs. The net
charges in 2008 included: (i) $1.6 billion of asset impairment charges, (ii) $294 million of charges relating to the
amortization of intangible assets, (iii) $216 million of net reorganization of business charges included in Other
charges, and (iv) $59 million of separation-related transaction costs, partially offset by a $48 million gain on the
sale of property, plant and equipment. The net reorganization of business charges are discussed in further detail in
the “Reorganization of Businesses” section. The asset impairment charges are discussed in further detail in the
“Valuation and Recoverability of Goodwill and Long-lived Assets” section.
Net Interest Income (Expense)
Net interest expense was $132 million in 2009, compared to net interest income of $38 million in 2008. Net
interest expense in 2009 includes interest expense of $211 million, partially offset by interest income of $79 million.
Net interest income in 2008 included interest income of $261 million, partially offset by interest expense of
$223 million. The significant decline in interest income reflects: (i) the significant decrease in average short-term
interest rates in 2009 compared to 2008, (ii) a change in the investment mix of the Sigma Fund to more liquid
securities with shorter maturities and lower interest rates, and (iii) the decrease in average cash, cash equivalents and
Sigma Fund balances in 2009 compared to 2008. This decline in interest income was slightly offset by a decrease in
interest expense, primarily driven by a decrease in the Company’s level of outstanding debt during 2009.
Gains on Sales of Investments and Businesses
Gains on sales of investments and businesses were $74 million in 2009, compared to gains of $76 million in
2008. In 2009, the net gain primarily relates to sales of certain of the Company’s equity investments, of which
$32 million of gain was attributed to a single investment. These gains were partially offset by a net loss from the
sale of specific businesses. In 2008, the net gain primarily related to sales of a number of the Company’s equity
investments, of which $29 million of gain was attributed to a single investment.
Other
Net income classified as Other, as presented in Other income (expense), was $47 million in 2009, compared to
net charges of $425 million in 2008. The net income in 2009 was primarily comprised of: (i) $80 million of gains
from Sigma Fund investments, and (ii) a $67 million gain related to the extinguishment of a portion of the
Company’s outstanding long-term debt, partially offset by: (i) $77 million of investment impairment charges, and
(ii) $30 million of foreign currency losses. The net charges in 2008 were primarily comprised of: (i) $365 million of
investment impairment charges, of which $138 million related to a single strategic investment, (ii) $186 million of
impairment charges on Sigma Fund investments, (iii) $136 million of foreign currency losses, and (iv) $101 million
of losses on Sigma Fund investments, partially offset by: (i) a $237 million curtailment gain associated with the
decision to freeze benefit accruals for U.S. pension plans, (ii) $56 million of gains related to the extinguishment of a
liability, (iii) $24 million of gains relating to several interest rate swaps not designated as hedges, and (iv) a
$14 million gain related to the extinguishment of a portion of the Company’s outstanding long-term debt.
Effective Tax Rate
The Company recorded $159 million of net tax benefits in 2009, resulting in an effective tax rate of 32%,
compared to $1.6 billion of net tax expense, resulting in a negative effective tax rate of (56) % in 2008. The
Company’s effective tax rate for 2009 was lower than the U.S. statutory tax rate of 35% primarily due to a
reduction in valuation allowances relating to refundable general business credits and a reduction in unrecognized
tax benefits for facts that now indicate the extent to which certain tax positions are more-likely-than-not of being
sustained. The Company’s 2008 effective tax rate was less than the U.S. statutory tax rate of 35% primarily due to
the recording of a $2.1 billion non-cash tax charge to establish deferred tax valuation allowances against a portion
of the Company’s U.S. deferred tax assets and the recording of non-deductible goodwill impairment charges.