Motorola 2013 Annual Report Download - page 37

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During 2013, we implemented various productivity improvement plans aimed at continuing operating margin
improvements by driving efficiencies and reducing operating costs. In 2013, we recorded net reorganization of business
charges of $133 million relating to the separation of 2,200 employees, of which 1,400 were indirect employees and 800 were
direct employees. These charges included $26 million recorded to Costs of sales and $107 million of charges within Other
charges in our consolidated statements of operations. Included in the aggregate $133 million are charges of: (i) $146 million for
employee separation costs and (ii) $3 million for exit costs, partially offset by $16 million of reversals for accruals no longer
needed.
We realized cost-saving benefits of approximately $27 million in 2013 from the plans that were initiated during 2013,
primarily in operating expenses. Beyond 2013, we expect the reorganization plans initiated during 2013 to provide annualized
cost savings of approximately $159 million, consisting of $29 million of savings in Cost of sales, and $130 million of savings
in operating expenses. These cost savings may be payroll or other operating expenses; however, as we continue to outsource
manufacturing and other functions, these cost savings may not be realizable as variable outsourced manufacturing and other
activities increase.
During 2012, we recorded net reorganization of business charges of $50 million, including: (i) $54 million for employee
separation costs, and (ii) $7 million for building impairments, partially offset by $11 million for reversals of accruals no longer
needed. During 2011, we recorded net reorganization of business charges of $58 million, including: (i) $41 million for
employee separation costs and (ii) $19 million for exit costs, partially offset by $2 million of reversals for accruals no longer
needed.
The following table displays the net charges incurred by business segment:
Years ended December 31 2013 2012 2011
Government $ 86 $ 33 $ 40
Enterprise 47 17 18
$ 133 $ 50 $ 58
Cash payments for exit costs and employee separations in connection with these reorganization plans were $59 million in
2013, as compared to $55 million in 2012, and $81 million in 2011. The $109 million reorganization of businesses accrual
remaining at December 31, 2013, includes: (i) $103 million relating to employee separation costs that are expected to be paid
primarily in 2014 and (ii) $6 million relating to lease termination obligations that are expected to be paid over a number of
years.
Liquidity and Capital Resources
We decreased our total cash and cash equivalent balances, Sigma Fund, and short-term investments by $376 million from
$3.6 billion as of December 31, 2012 to $3.2 billion as of December 31, 2013. This decrease was primarily due to the return of
$2.0 billion of capital to shareholders through share repurchases and dividends paid during 2013, partially offset by: (i) $944
million of operating cash flow and (ii) $593 million of net proceeds from the issuance of debt.
Cash and Cash Equivalents
At December 31, 2013, our cash and cash equivalents (which are highly-liquid investments purchased with an original
maturity of three months or less) were $3.2 billion, an increase of $1.8 billion compared to $1.5 billion at December 31, 2012.
The increase in cash and cash equivalents is primarily due to the liquidation of the Sigma Fund which had a balance of $2.1
billion at December 31, 2012. At December 31, 2013, $1.8 billion of the $3.2 billion cash and cash equivalents balance was
held in the U.S. and $1.4 billion was held in other countries (including $732 million in the United Kingdom). At both
December 31, 2013 and December 31, 2012, restricted cash was $63 million.
We continue to analyze and review various repatriation strategies to efficiently repatriate cash. In 2013, we
repatriated approximately $777 million in cash to the U.S. from international jurisdictions. At December 31, 2013, we had
approximately $500 million of foreign earnings that are not permanently reinvested and may be repatriated without an
additional tax charge to our consolidated statements of operations, given the U.S. federal and foreign income tax accrued on the
undistributed earnings and the utilization of available foreign tax credits. Undistributed earnings that we intend to reinvest
indefinitely, and for which no income taxes have been provided, aggregate to $1.4 billion, $1.0 billion and $1.0 billion at
December 31, 2013, 2012 and 2011, respectively. We currently have no plans to repatriate the foreign earnings permanently
reinvested. If circumstances change and it becomes apparent that some or all of the permanently reinvested earnings will be
remitted to the U.S. in the foreseeable future, an additional income tax charge may be necessary. In the third quarter of 2013,
we made a $150 million cash tax payment, comprised of $87 million for withholding taxes associated with an intercompany
foreign dividend and $63 million for previously accrued non-U.S. income taxes associated with the settlement of an income tax