The final amount of the pension charge will not be known until after December 31, when the pension plan’s yearly performance is calculated. Recent federal filings by Motorola anticipate a $500 million charge.
Motorola is reporting the charge to cover the gap between pension assets and pension obligations. The charge to equity is a non-cash, after-tax entry that does not affect Motorola’s earnings.
However, the charge will alter debt-to-equity ratios, making the company appear more highly leveraged.
Motorola is now taking steps to cut pension expenses, including “design changes” to the plan. Previous announcements included a $215 million pre-tax charge in the fourth quarter as part of the restructuring effort. Additionally, Motorola has announced plans to increase pension assets by putting between $150 million and $200 million cash into their plan in 2003.