MOT » Topics » Share Repurchase Programs

This excerpt taken from the MOT 10-Q filed Nov 6, 2007.
Share Repurchase Programs
 
Through actions taken in July 2006 and March 2007, the Board of Directors has authorized the Company to repurchase an aggregate amount of up to $7.5 billion of its outstanding shares of common stock over a period ending in June 2009, subject to market conditions (the “2006 Stock Repurchase Program”).
 
In March 2007, the Company entered into an accelerated stock buyback agreement to repurchase $2.0 billion of its outstanding shares of common stock (the “March 2007 ASB”). In connection with the March 2007 ASB, the Company has received a total of 111.6 million shares, including an additional 9.2 million shares received during the third quarter of 2007 as the final adjustment under the March 2007 ASB.


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During the third quarter of 2007, the Company paid an aggregate of $118 million, including transactions costs, to repurchase 7.0 million shares (excluding the shares received under the March 2007 ASB during the quarter) at an average price of $16.90 per share. During the first nine months of 2007, the Company has paid $2.5 billion, including transaction costs, to repurchase approximately 137.5 million common shares (including the 111.6 million shares received under the March 2007 ASB) at an average price of $18.02.
 
Since announcing its first-ever share repurchase program in May 2005, the Company has repurchased a total of 350.9 million common shares for an aggregate cost of $7.2 billion, including transaction costs. All repurchased shares have been retired. As of September 29, 2007, the Company had remaining authorization for approximately $4.3 billion of future share repurchases under the 2006 Stock Repurchase Program.
 
3.  Income Taxes
 
The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007. As a result of the adoption of FIN 48, the Company reduced its unrecognized tax benefits and related interest accrual by $120 million. The change to unrecognized tax benefits and interest are reflected as a cumulative-effect adjustment to January 1, 2007 Retained earnings and Additional paid-in capital in the amounts of $27 million and $93 million, respectively, in the Company’s condensed consolidated statement of stockholders’ equity.
 
As of January 1, 2007, the Company had $1.3 billion in unrecognized tax benefits of which $877 million was reclassified from Deferred income taxes to Other liabilities in the Company’s condensed consolidated balance sheets. If the $1.3 billion in unrecognized tax benefits were recognized, approximately $560 million, net of federal tax benefits, would affect the Company’s effective tax rate.
 
For the three and nine month periods ended September 29, 2007, the Company recognized net tax benefits of $5 million and $47 million, respectively, relating to the settlement of tax positions of discontinued operations. Additionally, for the three and nine month periods ended September 29, 2007, the Company recognized tax benefits of $3 million and $15 million, respectively, relating to the settlement of tax positions, partially offset by an increase in unrecognized tax benefits taken in previously filed tax returns.
 
A summary of open tax years by major jurisdiction is presented below:
 
         
 
Jurisdiction:
       
United States(1)
  1996 — 2006    
Brazil
  2002 — 2006    
China
  2004 — 2006    
Germany(1)
  2002 — 2006    
India
  1995 — 2006    
Israel
  2002 — 2006    
Japan
  2002 — 2006    
Malaysia
  1997 — 2006    
Singapore
  1998 — 2006    
United Kingdom
  1998 — 2006    
 
 
(1) Includes federal as well as state, provincial or similar local jurisdictions, as applicable
 
The Company evaluates the recoverability of its deferred tax assets each quarter, and when necessary, adjusts its valuation allowances. During the third quarter of 2007 the Company reversed $31 million of deferred tax valuation allowances primarily relating to Israel. The Company concluded that the Israel valuation allowance should be reversed based on measuring both positive and negative evidence, including a shift from recent cumulative losses to cumulative profits and changes in the business model which increases future profitability. The Company believes that its remaining U.S. and non-U.S. deferred tax assets, net of existing valuation allowances, are realizable based on estimates of future taxable income and the implementation of tax planning strategies.


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The Internal Revenue Service (“IRS”) began its field examination of the Company’s 2004 and 2005 tax returns in March 2007. In April 2007, the IRS completed its field examinations of the Company’s 2001 through 2003 tax returns and issued a revenue agent’s report that proposes certain adjustments to the Company’s income and tax credits that would result in additional tax. It includes proposed adjustments received in June 2006 for the 2001 and 2002 taxable years relating to transfer pricing. These proposed adjustments are similar to those previously made by the IRS for the Company’s 1996-2000 taxable years. The Company is currently contesting the 1996 through 2002 adjustments at the appellate level of the IRS. The Company disagrees with all of these proposed transfer pricing-related adjustments and intends to vigorously dispute them through applicable IRS and judicial procedures, as appropriate. However, if the IRS were to ultimately prevail on these matters, it could result in: (i) additional taxable income for the years 1996 through 2000 of approximately $1.4 billion, which could result in additional income tax liability for the Company of approximately $500 million, and (ii) additional taxable income for the years 2001 and 2002 of approximately $800 million, which could result in additional income tax liability for the Company of approximately $300 million. Although the final resolution of these matters is uncertain, based on current information, in the opinion of the Company’s management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations. However, an unfavorable resolution could have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations in the periods in which the matter is ultimately resolved.
 
The Company has several other non-U.S. income tax audits pending and while the final resolution is uncertain, in the opinion of the Company’s management, the ultimate disposition of the audits will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations.
 
Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns, will materially change from those recorded as liabilities for uncertain tax positions in our financial statements at January 1, 2007. The Company anticipates that it is reasonably possible that within the next twelve months several of the audits may be finalized resulting in a reduction in unrecognized tax benefits of approximately $33 million. However, based on the number of tax years currently under audit by the relevant federal, state and foreign tax authorities, the status of these examinations, and the protocol of finalizing audits by the relevant tax authorities, which could include formal legal proceedings, it is not possible to estimate the impact of any other amounts of such changes, if any, to previously recorded uncertain tax positions.
 
The Company records interest accrued relating to unrecognized tax benefits in Interest expense within Other income (expense) and penalties in Selling, general and administrative expenses both included in the Company’s condensed consolidated statements of operations. Accrued interest and penalties were $71 million and $13 million, respectively, as of the transition date of January 1, 2007.
 
This excerpt taken from the MOT 10-Q filed Aug 2, 2007.
Share Repurchase Programs
 
In July 2006, the Board of Directors authorized the Company to repurchase up to $4.5 billion of its outstanding shares of common stock over a period of up to 36 months ending in June 2009, subject to market conditions (the “2006 Stock Repurchase Program”). In March 2007, the Board of Directors authorized a $3.0 billion increase in the 2006 Stock Repurchase Program, over the same timeframe. This increased the total size of the 2006 Stock Repurchase Program to an aggregate of $7.5 billion.
 
In March 2007, the Company announced that it had entered into an accelerated stock buyback agreement to repurchase $2.0 billion of its outstanding shares of common stock (the “March 2007 ASB”). In connection with the March 2007 ASB, the Company received 68 million shares in the first quarter of 2007 and an additional 34.4 million shares in the second quarter of 2007. The 102.4 million shares received to date represents the minimum number of shares to be


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received under the March 2007 ASB. The number of additional shares the Company may receive over the remaining term of the March 2007 ASB, which expires in the fourth quarter of 2007, will generally be based upon the volume-weighted average price of the Company’s common stock during that term, subject to the collar provisions that establish the minimum and maximum number of shares.
 
During the first half of 2007, the Company spent an aggregate of $2.4 billion, including transaction costs, to repurchase approximately 121.4 million common shares (including the 102.4 million shares received to date under the March 2007 ASB) at an average price of $19.41.
 
Since announcing its first-ever share repurchase program in May 2005, the Company has repurchased a total of 335 million common shares for an aggregate cost of $7.1 billion, including transaction costs. All repurchased shares have been retired. As of June 30, 2007, the Company had remaining authorization for approximately $4.4 billion of future share repurchases under the 2006 Stock Repurchase Program.
 

EXCERPTS ON THIS PAGE:

10-Q
Nov 6, 2007
10-Q
Aug 2, 2007
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