Motorola 2013 Annual Report Download - page 38

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audit. Where appropriate, we may also pursue capital reduction activities; however, such activities can be involved and
lengthy. While we regularly repatriate funds, and a portion of offshore funds can be repatriated with minimal adverse financial
impact, repatriation of some of these funds may be subject to delay for local country approvals and could have potential
adverse cash tax consequences.
On January 4, 2011, the distribution of Motorola Mobility from Motorola Solutions was completed. As part of the
distribution, we contributed $3.2 billion of cash and cash equivalents to Motorola Mobility. We had an obligation to fund an
additional $300 million, upon receipt of cash distributions as a result of future capital reductions of an overseas subsidiary, of
which $225 million was paid during 2011 and $73 million was paid during 2012. These contributions are reflected as financing
activities in our consolidated statements of cash flows for the years ended December 31, 2012 and 2011.
Operating Activities
Cash provided by operating activities from continuing operations in 2013 was $944 million, compared to $1.1 billion in
2012 and $848 million in 2011. Operating cash flows in 2013, as compared to 2012, were negatively impacted by: (i) higher
cash tax payments, including Indian tax deposits of $43 million, and (ii) lower collections and sales of long-term receivables,
including receivables related to the Networks divestiture that were retained after the sale and sold or collected in 2012, partially
offset by: (i) approximately $190 million of lower defined benefit plan contributions and (ii) improvements in accounts payable
metrics. Operating cash flows in 2012, as compared to 2011, were positively impacted by: (i) increased sales and the expansion
of operating margins, (ii) a $156 million decrease in contributions to our pension plans, and (iii) improvements in our working
capital management, including approximately $100 million of sold or collected long-term receivables related to the Networks
divestiture that were retained after the sale.
In the first quarter of 2013, the Indian rupee equivalent of $43 million was seized by the Indian tax authorities from our
Indian subsidiary related to Indian income tax and interest assessments currently under review by the Indian and U.S.
Competent Authorities. As a result of our appeals, the Supreme Court of India directed the Indian tax authorities to refund the
full amount of cash seized and such refund was received by our Indian subsidiary on January 17, 2014.
We contributed $150 million, $340 million, and $489 million to our U.S. pension plans during 2013, 2012, and 2011
respectively. In addition, we contributed $32 million, $31 million, and $38 million to our non-U.S. pension plans during 2013,
2012, and 2011 respectively.
Our pension deficit is impacted by the volatility of corporate bond rates which are used to determine the plan discount
rate as well as returns on the pension plan asset portfolio. The discount rate used to measure the U.S. liability at the end of
2013 was 5.15%, compared to 4.35% in the prior year. As a result of the increase in the discount rate, net of contributions and
other factors, our total underfunded U.S. pensions at year end decreased to approximately $1.2 billion. As of December 31,
2013, changing the U.S. pension plans discount rate by one percentage point would change the U.S. pension plans net periodic
pension cost in 2014 as follows:
1% Point
Increase 1% Point Decrease
Increase (decrease) in:
U.S. pension plan net periodic pension costs $ (11) $ 9
Investing Activities
Net cash provided by investing activities from continuing operations was $2.0 billion in 2013, compared to $797 million
in 2012 and $2.4 billion in 2011. The $1.2 billion increase in net cash provided by investing activities from 2012 to 2013 was
primarily due to a $1.1 billion increase in cash received from sales of Sigma Fund investments, which we exited in the fourth
quarter of 2013. The $1.6 billion decrease in net cash provided by investing activities from 2011 to 2012 was primarily due to:
(i) a $1.2 billion decrease in cash received from sales of investments and businesses relating to the sale of the Networks
business and (ii) a $433 million decrease in cash received from net sales of Sigma Fund investments.
Sigma Fund: Prior to December 2013, we invested most of our U.S. dollar-denominated cash in a fund (the “Sigma
Fund”) that was managed by independent investment management firms under specific investment guidelines restricting the
type of investments held and their time to maturity. In December 2013, we completed the liquidation of the Sigma Fund and
migrated the international U.S dollar-denominated cash to a U.S. dollar cash pool invested in U.S. dollar prime money market
funds. The creation of the international cash pool enhances our flexibility to fund global operations. These money market funds
are classified as Cash and cash equivalents within the consolidated balance sheets as of December 31, 2013. We had net
proceeds of $2.1 billion from sales of Sigma Fund investments in 2013, compared to $1.1 billion in net proceeds from sales of
Sigma Fund investments in 2012 and $1.5 billion from sales of Sigma Fund investments in 2011.
As of December 31, 2012, we had investments in the Sigma Fund of $2.1 billion (including $1.0 billion held outside the
U.S.) which was invested in cash and U.S. government, agency, and government-sponsored enterprise obligations.