Motorola 2012 Annual Report Download - page 45

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37
Tax Obligations: We have approximately $161 million of unrecognized income tax benefits relating to multiple tax
jurisdictions and tax years. Based on the potential outcome of our global tax examinations, or the expiration of the statute of
limitations for specific jurisdictions, it is reasonably possible that the unrecognized tax benefits will change within the next
twelve months. The associated net tax impact on the effective tax rate, exclusive of valuation allowance changes, is estimated
to be in the range of a $50 million tax charge to a $50 million tax benefit, with cash payments not expected to exceed $25
million.
Purchase Obligations: We have entered into agreements for the purchase of inventory, license of software, promotional
activities and research and development, which are firm commitments and are not cancelable. As of December 31, 2012 our
obligations in connection with these agreements run through 2015, and the total payments expected to be made by us under
these agreements totaled $50 million, of which $32 million relate to take or pay obligations from arrangements with suppliers
for the sourcing of inventory supplies and materials. We do not anticipate the cancellation of any of our take or pay agreements
in the future and estimate that purchases from these suppliers will exceed the minimum obligations during the agreement
periods.
Commitments Under Other Long-Term Agreements: We have entered into certain long-term agreements to purchase
software, components, supplies and materials from suppliers which are not "take or pay" in nature. Most of the agreements
extend for periods of one to three years (three to five years for software). Generally, these agreements do not obligate us to
make any purchases, and many permit us to terminate the agreement with advance notice (usually ranging from 60 to 180
days). If we were to terminate these agreements, we generally would be liable for certain termination charges, typically based
on work performed and supplier on-hand inventory and raw materials attributable to canceled orders. Our liability would only
arise in the event we terminate the agreements for reasons other than “cause.”
We outsource certain corporate functions, such as benefit administration and information technology-related services.
These contracts are expected to expire in 2017. Our remaining payments under these contracts are approximately $603 million
over the remaining life of the contracts; however, these contracts can be terminated. Termination would result in a penalty
substantially less than the remaining annual contract payments. We would also be required to find another source for these
services, including the possibility of performing them in-house.
As is customary in bidding for and completing certain projects and pursuant to a practice we have followed for many
years, we have a number of performance/bid bonds, standby letters of credit and surety bonds outstanding (collectively, referred
to as “Performance Bonds”), primarily relating to projects of the Government segment. These Performance Bonds normally
have maturities of multiple years and are standard in the industry as a way to give customers a convenient mechanism to seek
resolution if a contractor does not satisfy certain requirements under a contract. Typically, a customer can draw on the
Performance Bond only if we do not fulfill all terms of a project contract. If such an occasion occurred, we would be obligated
to reimburse the institution that issued the Performance Bond for the amounts paid. In our long history, it has been rare for us to
have a Performance Bond drawn upon. At December 31, 2012, outstanding Performance Bonds totaled approximately $891
million, compared to $1.1 billion at December 31, 2011. Any future disruptions, uncertainty, or volatility in bank, insurance or
capital markets, or a change in our credit ratings could adversely affect our ability to obtain Performance Bonds and may result
in higher funding costs.
Off-Balance Sheet Arrangements: Under the definition contained in Item 303(a)(4)(ii) of Regulation S-K, we do not
have any off-balance sheet arrangements.
Long-term Customer Financing Commitments
Outstanding Commitments: Certain purchasers of our infrastructure equipment may request that we provide long-term
financing (defined as financing with a term of greater than one year) in connection with the sale of equipment. These requests
may include all or a portion of the purchase price of the equipment. Our obligation to provide long-term financing may be
conditioned on the issuance of a letter of credit in favor of us by a reputable bank to support the purchaser's credit or a pre-
existing commitment from a reputable bank to purchase the long-term receivables from us. We had outstanding commitments
to provide long-term financing to third-parties totaling $84 million at December 31, 2012, compared to $138 million at
December 31, 2011.
Outstanding Long-Term Receivables: We had net non-current long-term receivables of $60 million at December 31,
2012, compared to net non-current long-term receivables of $37 million (net of allowances for losses of $10 million) at
December 31, 2011. These long-term receivables are generally interest bearing, with interest rates ranging from 1% to 13%.
Sales of Receivables
From time to time, we sell accounts receivable and long-term receivables on a non-recourse basis to third parties under
one-time arrangements while others have been sold to third-parties under committed facilities that involve contractual
commitments. We may or may not retain the obligation to service the sold accounts receivable and long-term receivables. We
had no significant committed facilities for the sale of long-term receivables at December 31, 2012 or at December 31, 2011.