MSI 06-29-13-Q2-10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________ 
Form 10-Q
 ____________________________________________
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 29, 2013
or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission file number: 1-7221
____________________________________________ 
MOTOROLA SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
____________________________________________ 
DELAWARE
(State of Incorporation)
 
36-1115800
(I.R.S. Employer Identification No.)
1303 E. Algonquin Road,
Schaumburg, Illinois
(Address of principal executive offices)
 
60196
(Zip Code)
Registrant’s telephone number, including area code:
(847) 576-5000
____________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer x
  
Accelerated filer ¨
  
Non-accelerated filer 
  
Smaller reporting company ¨
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No x
The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on June 29, 2013:
 
Class
 
Number of Shares
Common Stock; $.01 Par Value
 
265,854,476




 
Page    
Item 1 Financial Statements
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 29, 2013 and June 30, 2012
Item 4 Mine Safety Disclosures



Part I—Financial Information
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

 
Three Months Ended  
 
Six Months Ended
(In millions, except per share amounts)
June 29, 2013
 
June 30, 2012
 
June 29, 2013
 
June 30, 2012
Net sales from products
$
1,479

 
$
1,563

 
$
2,860

 
$
3,007

Net sales from services
628

 
585

 
1,220

 
1,097

Net sales
2,107

 
2,148

 
4,080

 
4,104

Costs of product sales
695

 
712

 
1,346

 
1,370

Costs of service sales
383

 
376

 
750

 
701

Costs of sales
1,078

 
1,088

 
2,096

 
2,071

Gross margin
1,029

 
1,060

 
1,984

 
2,033

Selling, general and administrative expenses
470

 
496

 
930

 
968

Research and development expenditures
268

 
269

 
530

 
523

Other charges
25

 
17

 
42

 
32

Operating earnings
266

 
278

 
482

 
510

Other income (expense):
 
 
 
 

 

Interest expense, net
(32
)
 
(16
)
 
(57
)
 
(30
)
Gains on sales of investments and businesses, net

 
3

 
7

 
20

Other
(10
)
 
(25
)
 
(3
)
 
(16
)
Total other expense
(42
)
 
(38
)
 
(53
)
 
(26
)
Earnings from continuing operations before income taxes
224

 
240

 
429

 
484

Income tax expense (benefit)
(38
)
 
63

 
(25
)
 
148

Earnings from continuing operations
262

 
177

 
454

 
336

Earnings from discontinued operations, net of tax

 
5

 

 
3

Net earnings
262

 
182

 
454

 
339

Less: Earnings attributable to noncontrolling interests
4

 

 
4

 

Net earnings attributable to Motorola Solutions, Inc.
258

 
182

 
$
450

 
$
339

Amounts attributable to Motorola Solutions, Inc. common stockholders:
 
 
 
 
 
 
 
Earnings from continuing operations, net of tax
$
258

 
$
177

 
$
450

 
$
336

Earnings from discontinued operations, net of tax

 
5

 

 
3

Net earnings
$
258

 
$
182

 
$
450

 
$
339

Earnings per common share:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Continuing operations
$
0.96

 
$
0.61

 
$
1.66

 
$
1.11

Discontinued operations

 
0.02

 

 
0.01

 
$
0.96

 
$
0.63

 
$
1.66

 
$
1.12

Diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.94

 
$
0.60

 
$
1.62

 
$
1.09

Discontinued operations

 
0.01

 

 
0.01

 
$
0.94

 
$
0.61

 
$
1.62

 
$
1.10

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
269.5

 
290.6

 
271.9

 
302.1

Diluted
274.7

 
296.1

 
277.7

 
308.1

Dividends declared per share
$
0.26

 
0.22

 
$
0.52

 
0.44

See accompanying notes to condensed consolidated financial statements (unaudited).

1


Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months ended
(In millions)
June 29, 2013
 
June 30, 2012
Net earnings
$
262

 
$
182

Other comprehensive income (loss):
 
 
 
Amortization of retirement benefit adjustments, net of tax of $10 and $25
16

 
46

Foreign currency translation adjustment, net of tax of $(5) and $(6)
(5
)
 
(18
)
Net loss on derivative hedging instruments, net of tax of $0 and $0

 
(2
)
Net unrealized gain (loss) on securities, net of tax of $0 and $6
(1
)
 
8

Total other comprehensive income
10

 
34

Comprehensive income
272

 
216

Less: Earnings attributable to noncontrolling interest
4

 

Comprehensive income attributable to Motorola Solutions, Inc. common shareholders
$
268

 
$
216


 
Six Months Ended
(In millions)
June 29, 2013
 
June 30, 2012
Net earnings
$
454

 
$
339

Other comprehensive income (loss):
 
 
 
Amortization of retirement benefit adjustments, net of tax of $19 and $51
35

 
95

Foreign currency translation adjustment, net of tax of $(6) and $(10)
(42
)
 
(22
)
Net gain (loss) on derivative hedging instruments, net of tax of $0 and $0
(1
)
 
2

Net unrealized gain (loss) on securities, net of tax of $0 and $6
(1
)
 
8

Total other comprehensive income (loss)
(9
)
 
83

Comprehensive income
445

 
422

Less: Earnings attributable to noncontrolling interest
4

 

Comprehensive income attributable to Motorola Solutions, Inc. common shareholders
$
441

 
$
422

See accompanying notes to condensed consolidated financial statements (unaudited).


2


Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
(In millions, except par value amounts)
June 29, 2013
 
December 31, 2012
ASSETS
Cash and cash equivalents
$
1,457

 
$
1,468

Sigma Fund and short-term investments
1,759

 
2,135

Accounts receivable, net
1,707

 
1,881

Inventories, net
498

 
513

Deferred income taxes
641

 
604

Other current assets
779

 
800

Total current assets
6,841

 
7,401

Property, plant and equipment, net
830

 
839

Investments
142

 
144

Deferred income taxes
2,530

 
2,416

Goodwill
1,502

 
1,510

Other assets
315

 
369

Total assets
$
12,160

 
$
12,679

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt
$
4

 
$
4

Accounts payable
597

 
705

Accrued liabilities
2,193

 
2,626

Total current liabilities
2,794

 
3,335

Long-term debt
2,452

 
1,859

Other liabilities
4,095

 
4,195

Stockholders’ Equity
 
 
 
Preferred stock, $100 par value

 

Common stock, $.01 par value:
3

 
3

Authorized shares: 600.0
 
 
 
Issued shares: 6/29/13—267.4; 12/31/12—277.3
 
 
 
Outstanding shares: 6/29/13—265.9; 12/31/12—276.1
 
 
 
Additional paid-in capital
4,162

 
4,937

Retained earnings
1,935

 
1,625

Accumulated other comprehensive loss
(3,309
)
 
(3,300
)
Total Motorola Solutions, Inc. stockholders’ equity
2,791

 
3,265

Noncontrolling interests
28

 
25

Total stockholders’ equity
2,819

 
3,290

Total liabilities and stockholders’ equity
$
12,160

 
$
12,679

See accompanying notes to condensed consolidated financial statements (unaudited).


3


Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
 
(In millions)
Shares
 
Common
Stock and
Additional
Paid-in
Capital
 
Accumulated Other Comprehensive Income (Loss), Net of Tax
 
Retained
Earnings
 
Noncontrolling
Interests
Balance at December 31, 2012
277.3

 
$
4,940

 
$
(3,300
)
 
$
1,625

 
$
25

Net earnings

 

 


 
450

 
4

Net unrealized loss on securities, net of tax of $0

 

 
(1
)
 

 

Foreign currency translation adjustments, net of tax of $(6)

 

 
(42
)
 

 

Amortization of retirement benefit adjustments, net of tax of $19

 

 
35

 

 

Issuance of common stock and stock options exercised
5.5

 
38

 

 

 

Share repurchase program
(15.4
)
 
(907
)
 

 

 

Excess tax benefit from share-based compensation

 
18

 

 

 

Share-based compensation expense

 
79

 

 

 

Net loss on derivative hedging instruments, net of tax of $0

 

 
(1
)
 

 

Acquisition of noncontrolling interest

 
(3
)
 


 


 
(1
)
Dividends declared
 
 
 
 


 
(140
)
 
 
Balance at June 29, 2013
267.4

 
$
4,165

 
$
(3,309
)
 
$
1,935

 
$
28

See accompanying notes to condensed consolidated financial statements (unaudited).


4


Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended
(In millions)
June 29, 2013
 
June 30, 2012
Operating
 
 
 
Net earnings attributable to Motorola Solutions, Inc.
$
450

 
$
339

Earnings attributable to noncontrolling interests
4

 

Net earnings
454

 
339

Earnings from discontinued operations, net of tax

 
3

Earnings from continuing operations
454

 
336

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:
 
 
 
Depreciation and amortization
109

 
106

Non-cash other income
(5
)
 
(1
)
Share-based compensation expense
79

 
95

Gains on sales of investments and businesses, net
(7
)
 
(20
)
Loss from the extinguishment of long-term debt

 
6

Deferred income taxes
(154
)
 
93

Changes in assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Accounts receivable
132

 
262

Inventories
11

 
(8
)
Other current assets

 
(77
)
Accounts payable and accrued liabilities
(575
)
 
(383
)
Other assets and liabilities
7

 
(87
)
Net cash provided by operating activities from continuing operations
51

 
322

Investing
 
 
 
Acquisitions and investments, net
(15
)
 
68

Proceeds from (used for) sales of investments and businesses, net
21

 
(67
)
Capital expenditures
(89
)
 
(101
)
Proceeds from sales of property, plant and equipment
15

 
9

Proceeds from sales of Sigma Fund and short term investments, net
376

 
1,277

Net cash provided by investing activities from continuing operations
308

 
1,186

Financing
 
 
 
Repayment of debt
(2
)
 
(411
)
Net proceeds from issuance of debt
593

 
747

Contribution to Motorola Mobility

 
(73
)
Issuance of common stock
100

 
63

Purchase of common stock
(907
)
 
(1,804
)
Excess tax benefits from share-based compensation
18

 
17

Payments of dividends
(143
)
 
(134
)
Distribution to discontinued operations

 
(11
)
Net cash used for financing activities from continuing operations
(341
)
 
(1,606
)
Discontinued Operations
 
 
 
Net cash provided by operating activities from discontinued operations

 
2

Net cash provided by financing activities from discontinued operations

 
11

Effect of exchange rate changes on cash and cash equivalents from discontinued operations

 
(13
)
Net cash provided by (used for) discontinued operations

 

Effect of exchange rate changes on cash and cash equivalents from continuing operations
(29
)
 
(11
)
Net decrease in cash and cash equivalents
(11
)
 
(109
)
Cash and cash equivalents, beginning of period
1,468

 
1,881

Cash and cash equivalents, end of period
$
1,457

 
$
1,772

Supplemental Cash Flow Information
 
 
 
Cash paid during the period for:
 
 
 
Interest, net
$
58

 
$
54

Income and withholding taxes, net of refunds

68

 
91

See accompanying notes to condensed consolidated financial statements (unaudited).

5


Motorola Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Dollars in millions, except as noted)
(Unaudited)
1.
Basis of Presentation
The condensed consolidated financial statements as of June 29, 2013 and for the three and six months ended June 29, 2013 and June 30, 2012, include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the condensed consolidated balance sheets, statements of operations, statements of comprehensive income, statement of stockholders' equity, and statements of cash flows of Motorola Solutions, Inc. (“Motorola Solutions” or the “Company”) for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2012. The results of operations for the three and six months ended June 29, 2013 are not necessarily indicative of the operating results to be expected for the full year.
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In February 2013, the Financing Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.” The standard addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. U.S. GAAP does not currently include specific guidance on accounting for such obligations with joint and several liability which has resulted in diversity in practice. The ASU requires an entity to measure these obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The ASU also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The ASU is to be applied retrospectively to all prior periods presented for those obligations resulting from joint and several liability arrangements within the updates scope that exist within the Company's statement of financial position at the beginning of the year of adoption. This guidance will be effective for the Company beginning January 1, 2014. The Company anticipates that the adoption of this standard will not have a material impact on its consolidated financial statements or footnote disclosures.

2.
Discontinued Operations
On January 1, 2012, the Company completed a series of transactions which resulted in exiting the amateur, marine and airband radio businesses.  The operating results of the amateur, marine and airband radio businesses, formerly included as part of the Government segment, are reported as discontinued operations in the condensed consolidated statements of operations for all periods presented. The results of certain purchase price adjustments for previous divestitures that were recorded during the periods presented have also been reported as discontinued operations.

6


During the three and six months ended June 29, 2013 the Company had no activity in the condensed consolidated statements of operations for discontinued operations. The following table displays summarized activity in the Company's condensed consolidated statements of operations for discontinued operations during the three and six months ended June 30, 2012.
 
Three Months Ended
 
Six Months Ended
  
June 30, 2012
 
June 30, 2012
Net sales
$

 
$

Operating earnings
10

 
11

Loss on sales of investments and businesses, net

 
(7
)
Earnings before income taxes
10

 
8

Income tax expense
5

 
5

Earnings from discontinued operations, net of tax
5

 
3


3.
Other Financial Data
Statement of Operations Information
Other Charges
Other charges included in Operating earnings consist of the following: 
 
Three Months Ended
 
Six Months Ended
  
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Other charges:
 
 
 
 
 
 
 
Amortization of intangible assets
$
6

 
$
6

 
$
12

 
$
12

Reorganization of business charges
19

 
11

 
30

 
20

 
$
25

 
$
17

 
$
42

 
$
32

Other Income (Expense)
Interest expense, net, and Other, both included in Other income (expense), consist of the following: 
 
Three Months Ended
 
Six Months Ended
  
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Interest income (expense), net:
 
 
 
 
 
 
 
Interest expense
$
(38
)
 
$
(25
)
 
$
(68
)
 
$
(50
)
Interest income
6

 
9

 
11

 
20

 
$
(32
)
 
$
(16
)
 
$
(57
)
 
$
(30
)
Other:
 
 
 
 
 
 
 
Loss from the extinguishment of long-term debt
$

 
$
(6
)
 
$

 
$
(6
)
Investment impairments
(4
)
 

 
(4
)
 
(2
)
Foreign currency loss
(8
)
 
(21
)
 
(4
)
 
(11
)
Other
2

 
2

 
5

 
3

 
$
(10
)
 
$
(25
)
 
$
(3
)
 
$
(16
)

7


Earnings Per Common Share
The computation of basic and diluted earnings per common share attributable to Motorola Solutions, Inc. common stockholders is as follows:
 
Amounts attributable to Motorola Solutions, Inc.
common stockholders
 
Earnings from
Continuing  Operations
 
Net Earnings
Three Months Ended
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Basic earnings per common share:
 
 
 
 
 
 
 
Earnings
$
258

 
$
177

 
$
258

 
$
182

Weighted average common shares outstanding
269.5

 
290.6

 
269.5

 
290.6

Per share amount
$
0.96

 
$
0.61

 
$
0.96

 
$
0.63

Diluted earnings per common share:
 
 
 
 
 
 
 
Earnings
$
258

 
$
177

 
$
258

 
$
182

Weighted average common shares outstanding
269.5

 
290.6

 
269.5

 
290.6

Add effect of dilutive securities:
 
 
 
 
 
 
 
Share-based awards
5.2

 
5.5

 
5.2

 
5.5

Diluted weighted average common shares outstanding
274.7

 
296.1

 
274.7

 
296.1

Per share amount
$
0.94

 
$
0.60

 
$
0.94

 
$
0.61

 
Amounts attributable to Motorola Solutions, Inc.
common stockholders
 
Earnings from
Continuing  Operations
 
Net Earnings
Six Months Ended
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Basic earnings per common share:
 
 
 
 
 
 
 
Earnings
$
450

 
$
336

 
$
450

 
$
339

Weighted average common shares outstanding
271.9

 
302.1

 
271.9

 
302.1

Per share amount
$
1.66

 
$
1.11

 
$
1.66

 
$
1.12

Diluted earnings per common share:
 
 
 
 
 
 
 
Earnings
$
450

 
$
336

 
$
450

 
$
339

Weighted average common shares outstanding
271.9

 
302.1

 
271.9

 
302.1

Add effect of dilutive securities:
 
 
 
 
 
 
 
Share-based awards
5.8

 
6.0

 
5.8

 
6.0

Diluted weighted average common shares outstanding
277.7

 
308.1

 
277.7

 
308.1

Per share amount
$
1.62

 
$
1.09

 
$
1.62

 
$
1.10

In the computation of diluted earnings per common share from both continuing operations and on a net earnings basis for the three and six months ended June 29, 2013, the assumed exercise of 4.3 million and 4.4 million stock options, respectively, were excluded because their inclusion would have been antidilutive. In the computation of diluted earnings per common share from both continuing operations and on a net earnings basis for the three and six months ended June 30, 2012, the assumed exercise of 6.2 million and 6.0 million stock options, respectively, were excluded because their inclusion would have been antidilutive.


8


Balance Sheet Information
Cash and Cash Equivalents
The Company’s cash and cash equivalents (which are highly-liquid investments with an original maturity of three months or less) were $1.5 billion at both June 29, 2013 and December 31, 2012. Of these amounts, $63 million at both June 29, 2013 and December 31, 2012 was restricted.
Sigma Fund
The Sigma Fund consists of the following: 
 
June 29,
2013
 
December 31,
2012
Cash
$
46

 
$
149

Securities:
 
 
 
U.S. government, agency, and government-sponsored enterprise obligations
1,710

 
1,984

 
$
1,756

 
$
2,133

Investments
Investments consist of the following:
 
Recorded Value
 
Less
 
 
June 29, 2013
  Short-term  
Investments
 
Investments  
 
  Unrealized  
Gains
 
  Unrealized  
Loss
 
  Cost  
Basis
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations
$

 
$
18

 
$

 
$
(1
)
 
$
19

Corporate bonds
3

 
6

 

 

 
9

Mortgage-backed securities

 
2

 

 

 
2

Common stock and equivalents

 
9

 
3

 

 
6

 
3

 
35

 
3

 
(1
)
 
36

Other securities, at cost

 
96

 

 

 
96

Equity method investments

 
11

 

 

 
11

 
$
3

 
$
142

 
$
3

 
$
(1
)
 
$
143

 
Recorded Value
 
Less
 
 
December 31, 2012
  Short-term  
Investments
 
Investments  
 
  Unrealized  
Gains
 
  Unrealized  
Loss
 
  Cost  
Basis
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations
$

 
$
15

 
$

 
$

 
$
15

Corporate bonds
2

 
11

 

 

 
13

Mortgage-backed securities

 
2

 

 

 
2

Common stock and equivalents

 
10

 
3

 

 
7

 
2

 
38

 
3

 

 
37

Other securities, at cost

 
93

 

 

 
93

Equity method investments

 
13

 

 

 
13

 
$
2

 
$
144

 
$
3

 
$

 
$
143


9


Accounts Receivable, Net
Accounts receivable, net, consists of the following: 
 
June 29,
2013
 
December 31,
2012
Accounts receivable
$
1,762

 
$
1,932

Less allowance for doubtful accounts
(55
)
 
(51
)
 
$
1,707

 
$
1,881

Inventories, Net
Inventories, net, consist of the following: 
 
June 29,
2013
 
December 31,
2012
Finished goods
$
231

 
$
244

Work-in-process and production materials
436

 
432

 
667

 
676

Less inventory reserves
(169
)
 
(163
)
 
$
498

 
$
513

Other Current Assets
Other current assets consist of the following: 
 
June 29,
2013
 
December 31,
2012
Costs and earnings in excess of billings
$
424

 
$
416

Contract-related deferred costs
115

 
141

Tax-related deposits and refunds receivable
103

 
95

Other
137

 
148

 
$
779

 
$
800

Property, Plant and Equipment, Net
Property, plant and equipment, net, consists of the following: 
 
June 29,
2013
 
December 31,
2012
Land
$
36

 
$
38

Building
736

 
739

Machinery and equipment
1,894

 
1,932

 
2,666

 
2,709

Less accumulated depreciation
(1,836
)
 
(1,870
)
 
$
830

 
$
839

Depreciation expense for the three months ended June 29, 2013 and June 30, 2012 was $51 million and $48 million, respectively. Depreciation expense for the six months ended June 29, 2013 and June 30, 2012 was $96 million and $94 million, respectively.

10


Other Assets
Other assets consist of the following: 
 
June 29,
2013
 
December 31,
2012
Intangible assets
$
96

 
$
109

Long-term receivables
22

 
60

Other
197

 
200

 
$
315

 
$
369

Accrued Liabilities
Accrued liabilities consist of the following: 
 
June 29,
2013
 
December 31,
2012
Deferred revenue
$
766

 
$
820

Billings in excess of costs and earnings
242

 
387

Compensation
296

 
424

Tax liabilities
123

 
95

Customer reserves
120

 
144

Dividend payable
71

 
72

Other
575

 
684

 
$
2,193

 
$
2,626

Other Liabilities
Other liabilities consist of the following: 
 
June 29,
2013
 
December 31,
2012
Defined benefit plans, including split dollar life insurance policies
$
3,334

 
$
3,389

Postretirement health care benefit plan
167

 
167

Deferred revenue
296

 
304

Unrecognized tax benefits
95

 
98

Other
203

 
237

 
$
4,095

 
$
4,195

Stockholders’ Equity
Share Repurchase Program: The Company paid an aggregate of $550 million during the second quarter of 2013, including transactions costs, to repurchase 9.5 million shares at an average price of $57.80 per share. The Company paid an aggregate of $907 million during the first half of 2013, including transactions costs, to repurchase 15.4 million shares at an average price of $58.75 per share. During the first half of 2012, the Company paid an aggregate of $1.8 billion, including transaction costs, to repurchase 37.1 million shares at an average price of $48.69 per share. All repurchased shares have been retired.
As of June 29, 2013, the Company had used approximately $4.5 billion of the share repurchase authority, including transaction costs, to repurchase shares, leaving $545 million of authority available for future repurchases. On July 24, 2013, the Company announced that its Board of Directors authorized up to $2.0 billion in additional funds for share repurchase, bringing the aggregate amount of the share repurchase program to $7.0 billion.
Payment of Dividends: During the three months ended June 29, 2013 and June 30, 2012, the Company paid $71 million and $64 million, respectively, in cash dividends to holders of its common stock. During the six months ended June 29, 2013 and June 30, 2012, the Company paid $143 million and $134 million, respectively, in cash dividends to holders of its common stock. On July 24, 2013, the Company announced that its Board of Directors approved an increase in the quarterly cash dividend from $0.26 per share to $0.31 per share of common stock.

11


Accumulated Other Comprehensive Loss
The following table displays the changes in Accumulated other comprehensive loss, net of tax, by component from January 1, 2013 to June 29, 2013:
 
Gains and Losses on Cash Flow Hedges
 
Unrealized Gains and Losses on Available-for-Sale Securities
 
Retirement Benefit Items
 
Foreign Currency Translation Adjustments
 
Total
Balance at December 31, 2012:
$
1

 
$
2

 
$
(3,211
)
 
$
(92
)
 
$
(3,300
)
Other comprehensive loss before reclassifications

 

 

 
(37
)
 
(37
)
Amounts reclassified from accumulated other comprehensive loss
$
(1
)
 
$

 
$
19

 
$

 
$
18

Net current-period other comprehensive income (loss)
(1
)
 

 
19

 
(37
)
 
(19
)
Balance at March 30, 2013
$

 
$
2

 
$
(3,192
)
 
$
(129
)
 
$
(3,319
)
Other comprehensive losses before reclassifications

 
(1
)
 

 
(5
)
 
(6
)
Amounts reclassified from accumulated other comprehensive loss
$

 
$

 
$
16

 
$

 
$
16

Net current-period other comprehensive income (loss)

 
(1
)
 
16

 
(5
)
 
10

Balance at June 29, 2013
$

 
$
1

 
$
(3,176
)
 
$
(134
)
 
$
(3,309
)

Amounts reclassified from Accumulated other comprehensive loss during the three months ended June 29, 2013:
Three months ended June 29, 2013
Amount Reclassified from Accumulated Other Comprehensive Loss
Affected Line Item in the Condensed Consolidated Statement of Operations
Amortization of retirement benefit items:
 
 
Prior service costs
$
(14
)
Selling, general, and administrative expenses
Unrecognized net losses
40

Selling, general, and administrative expenses
 
26

Total before tax
 
(10
)
Tax benefit
Total reclassifications for the period, net of tax
$
16

 


12


Amounts reclassified from Accumulated other comprehensive loss during the six months ended June 29, 2013:
Six months ended June 29, 2013
Amount Reclassified from Accumulated Other Comprehensive Loss
Affected Line Item in the Condensed Consolidated Statement of Operations
Gain on cash flow hedges:
 
 
Foreign exchange contracts
$
(1
)
Cost of sales
 
(1
)
Total before tax
 

Tax expense
 
$
(1
)
Net of tax
Amortization of retirement benefit items:
 
 
Prior service costs
$
(25
)
Selling, general, and administrative expenses
Unrecognized net losses
79

Selling, general, and administrative expenses
 
54

Total before tax
 
(19
)
Tax benefit
 
35

Net of tax
Total reclassifications for the period, net of tax
$
34

 

4.
Debt and Credit Facilities
During the first quarter of 2013, the Company issued an aggregate face principal amount of $600 million of 3.500% Senior Notes due 2023, of which, after debt issuance costs and debt discounts, the Company recognized net proceeds from issuance of this debt of $588 million.
In May 2012 , the Company issued an aggregate face principle amount of $750 million of 3.750% Senior Notes due May 15, 2022 (the “2022 Senior Notes”), which after debt issuance and debt discounts, the Company recognized net proceeds of $740 million from the issuance of this debt.  Also in May 2012, the Company called for the redemption of the $400 million aggregate principle amount outstanding of its 5.375% Senior Notes due November 2012 (the “2012 Senior Notes”).  All of the 2012 Senior Notes were redeemed in June 2012 for an aggregate purchase price of approximately $408 million.  After accelerating the amortization of debt issuance costs and debt discounts, the Company recognized a loss of approximately $6 million related to this redemption within Other income (expense) in the condensed consolidated statements of operations.  This debt was repurchased with a portion of the proceeds from the issuance of the 2022 Senior Notes.
As of June 29, 2013, the Company had a $1.5 billion unsecured syndicated revolving credit facility (the “2011 Motorola Solutions Credit Agreement”) scheduled to mature on June 30, 2014. The Company must comply with certain customary covenants, including maximum leverage and minimum interest coverage ratios as defined in the 2011 Motorola Solutions Credit Agreement. The Company was in compliance with its financial covenants as of June 29, 2013. The Company did not borrow under the 2011 Motorola Solutions Credit Agreement during the three and six months ended June 29, 2013.

5.
Risk Management
Foreign Currency Risk
At June 29, 2013, the Company had outstanding foreign exchange contracts with notional amounts totaling $667 million, compared to $523 million outstanding at December 31, 2012. Management believes that these financial instruments should not subject the Company to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset gains and losses on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income (expense) in the Company’s condensed consolidated statements of operations.

13


The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of June 29, 2013, and the corresponding positions as of December 31, 2012: 
 
Notional Amount
Net Buy (Sell) by Currency
June 29,
2013
 
December 31,
2012
British Pound
$
231

 
$
225

Chinese Renminbi
(141
)
 
(99
)
Norwegian Krone
(75
)
 
(48
)
Brazilian Real
(75
)
 
3

Israeli Shekel
(43
)
 
(35
)
Interest Rate Risk
At June 29, 2013, the Company had $2.5 billion of long-term debt, including the current portion of long-term debt, which is primarily priced at long-term, fixed interest rates.
As part of its liability management program, one of the Company’s European subsidiaries has outstanding interest rate agreements (“Interest Agreements”) relating to Euro-denominated loans. The interest on the Euro-denominated loans is variable. The Interest Agreements change the characteristics of interest payments from variable to maximum fixed-rate payments. The Interest Agreements are not accounted for as a part of a hedging relationship and, accordingly, the changes in the fair value of the Interest Agreements are included in Other income (expense) in the Company’s condensed consolidated statements of operations. The fair value of the Interest Agreements was in a liability position of $3 million and $4 million, at June 29, 2013 and December 31, 2012, respectively.
Counterparty Risk
The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of non-performance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. As of June 29, 2013, all of the counterparties have investment grade credit ratings. The Company is not exposed to material net credit risk with any single counterparty. As of June 29, 2013, the Company was exposed to an aggregate net credit risk of approximately $2 million with all counterparties.
The following tables summarize the fair values and location in the condensed consolidated balance sheets of all derivative financial instruments held by the Company at June 29, 2013 and December 31, 2012:
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
June 29, 2013
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
4

 
Other assets
 
$
5

 
Other liabilities
Interest agreements

 
Other assets
 
3

 
Other liabilities
Total derivatives not designated as hedging instruments
$
4

 
 
 
$
8

 
 

14


 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
December 31, 2012
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
1

 
Other assets
 
$

 
Other liabilities
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
2

 
Other assets
 
3

 
Other liabilities
Interest agreements

 
Other assets
 
4

 
Other liabilities
Total derivatives not designated as hedging instruments
2

 
 
 
7

 
 
Total derivatives
$
3

 
 
 
$
7

 
 
The following tables summarize the effect of derivative instruments in the Company's condensed consolidated statements of operations for the three and six months ended June 29, 2013 and June 30, 2012:
 
Three Months Ended
 
Statement of
Operations Location
Gain on Derivative Instruments
June 29,
2013
 
June 30,
2012
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
Interest rate contracts
$
1

 
$

 
Other income (expense)
Foreign exchange contracts
8

 
1

 
Other income (expense)
Total derivatives not designated as hedging instruments
$
9

 
$
1

 
 
 
Six Months Ended
 
Statement of
Operations Location
Gain (loss) on Derivative Instruments
June 29,
2013
 
June 30,
2012
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
Interest rate contracts
$
1

 
$

 
Other income (expense)
Foreign exchange contracts
(9
)
 
(3
)
 
Other income (expense)
Total derivatives not designated as hedging instruments
$
(8
)
 
$
(3
)
 
 
The following tables summarize the gains and losses recognized in the condensed consolidated financial statements for the three and six months ended June 29, 2013 and June 30, 2012: 
 
Three Months Ended
 
Financial Statement
Location
Foreign Exchange Contracts
June 29,
2013
 
June 30,
2012
 
Derivatives in cash flow hedging relationships:
 
 
 
 
 
Loss recognized in Accumulated other comprehensive loss
$

 
$
(2
)
 
Accumulated other
comprehensive loss
 
Six Months Ended
 
Financial Statement
Location
Foreign Exchange Contracts
June 29,
2013
 
June 30,
2012
 
Derivatives in cash flow hedging relationships:
 
 
 
 
 
Gain recognized in Accumulated other comprehensive loss
$

 
$
1

 
Accumulated other
comprehensive loss
Gain (loss) reclassified from Accumulated other comprehensive loss into Net earnings
1

 
(1
)
 
Costs of sales


15


6.
Income Taxes
At June 29, 2013 and December 31, 2012, the Company had valuation allowances of $293 million and $308 million, respectively, including $266 million and $272 million, respectively, relating to deferred tax assets for non-U.S. subsidiaries. The Company believes the remaining deferred tax assets are more-likely-than-not to be realizable based on estimates of future taxable income and the implementation of tax planning strategies.
The Company evaluates its permanent reinvestment assertions with respect to foreign earnings at each reporting period
and, except for certain earnings the Company intends to reinvest indefinitely, accrues for the U.S. federal and foreign income tax applicable to the earnings. During the first quarter of 2013, the Company reassessed its unremitted earnings position and concluded that certain of its non-U.S. subsidiaries' earnings are permanently invested overseas. The Company intends to utilize the offshore earnings to fund foreign investments, such as potential acquisitions and capital expenditures. During the first quarter of 2013, the Company recorded a net tax benefit of $25 million related to reversals of deferred tax liabilities for undistributed foreign earnings, primarily due to the change in permanent reinvestment assertion. Undistributed earnings that the Company intends to reinvest indefinitely, and for which no income taxes have been accrued, aggregate to $1.3 billion and $1.0 billion at June 29, 2013 and December 31, 2012, respectively.
During 2012, the Company began to reorganize certain of its non-U.S. subsidiaries under a holding company structure in order to facilitate the efficient movement of non-U.S. cash and provide a platform to fund foreign investments, such as potential acquisitions and capital expenditures. In the second quarter of 2013, the recently implemented foreign holding company structure provided the ability to realize excess foreign tax credits associated with undistributed foreign earnings, which favorably impacted the effective tax rate in the second quarter of 2013 by $128 million of tax benefit and will continue to favorably impact the annual effective tax rate for the remainder of 2013.
The Company had unrecognized tax benefits of $147 million and $161 million at June 29, 2013 and December 31, 2012, respectively, of which $123 million and $138 million, respectively, if recognized, would affect the effective tax rate, net of resulting changes to valuation allowances. During the six months ended June 29, 2013, the Company reduced its unrecognized tax benefits for settlements with tax authorities in the amount of $17 million, all of which resulted in a reduction to tax carryforwards and prepaid tax assets.
Based on the potential outcome of the Company’s 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 12 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 $75 million tax benefit, with cash payments in the range of $0 to $25 million.
The Company has audits pending in several tax jurisdictions. Although the final resolution of the Company's global tax disputes is uncertain, based on current information, in the opinion of the Company's management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company's consolidated financial position, liquidity or results of operations. However, an unfavorable resolution of the Company's global tax disputes could have a material adverse effect on the Company's consolidated financial position, liquidity or results of operations in the periods in which the matters are ultimately resolved.

7.
Retirement and Other Employee Benefits
Pension Benefit Plans
The net periodic pension costs for the U.S. and Non-U.S. plans were as follows: 
 
June 29, 2013
 
June 30, 2012
Three Months Ended
U.S.
 
Non
U.S.
 
U.S.
 
Non
U.S.
Service cost
$

 
$
3

 
$

 
$
3

Interest cost
88

 
16

 
87

 
18

Expected return on plan assets
(90
)
 
(18
)
 
(105
)
 
(19
)
Amortization of:
 
 
 
 
 
 
 
Unrecognized net loss
33

 
3

 
62

 
6

Unrecognized prior service cost

 
(2
)
 

 
(1
)
Net periodic pension costs
$
31

 
$
2

 
$
44

 
$
7


16


 
June 29, 2013
 
June 30, 2012
Six Months Ended
U.S.
 
Non
U.S.
 
U.S.
 
Non
U.S.
Service cost
$

 
$
6

 
$

 
$
6

Interest cost
176

 
33

 
175

 
36

Expected return on plan assets
(182
)
 
(37
)
 
(211
)
 
(38
)
Amortization of:
 
 
 
 
 
 
 
Unrecognized net loss
66

 
6

 
130

 
11

Unrecognized prior service cost

 
(4
)
 

 
(2
)
Net periodic pension costs
$
60

 
$
4

 
$
94

 
$
13

During the six months ended June 29, 2013, contributions of $50 million were made to the Company’s U.S. plans, and $17 million to the Company’s Non-U.S. plans.
Postretirement Health Care Benefits Plan
Net postretirement health care expenses (benefits) consist of the following: 
 
Three Months Ended
 
Six Months Ended
  
June 29, 2013
 
June 30, 2012
 
June 29, 2013
 
June 30, 2012
Service cost
$

 
$
1

 
$
1

 
$
2

Interest cost
3

 
5

 
6

 
10

Expected return on plan assets
(3
)
 
(3
)
 
(5
)
 
(6
)
Amortization of:
 
 
 
 
 
 
 
Unrecognized net loss
3

 
3

 
7

 
6

Unrecognized prior service cost
(11
)
 

 
(22
)
 

Net postretirement health care expense (benefits)
$
(8
)
 
$
6

 
$
(13
)
 
$
12

During the year ended December 31, 2012, the Company announced an amendment to the Postretirement Health Care Benefits Plan. Starting January 1, 2013, benefits under the plan to participants over age 65 are paid to a retiree health reimbursement account instead of directly providing health insurance coverage to the participants. Covered retirees will be able to use the annual subsidy they receive through this account toward the purchase of their own health care coverage from private insurance companies and for reimbursement of eligible health care expenses. This change resulted in a remeasurement of the plan during 2012 which reduced the liability through an increase in deferred prior service cost. The majority of the deferred prior service cost will be recognized over approximately three years, which is the period in which the remaining employees eligible for the plan will qualify for benefits under the plan.
The Company made no contributions to its postretirement health care fund during the six months ended June 29, 2013.
Defined Contribution Plans
The Company and certain subsidiaries have various defined contribution plans, in which all eligible employees participate. In the U.S., the 401(k) plan is a contributory plan. Matching contributions are based upon the amount of the employees' contributions. For the three and six months ended June 29, 2013 and the June 30, 2012, the Company did not make any discretionary matching contributions.
Deferred Compensation Plan
On June 5, 2013, the Company reinstated a deferred compensation plan (“the Plan”) effective June 1, 2013.  Under the Plan, participating executives may elect to defer base salary and cash incentive compensation in excess of 401(k) plan limitations.  Participants under the Plan may choose to invest their deferred amounts in the same investment alternatives available under the Company's 401(k) plan, other than the Company stock fund.  The Plan also allows for Company matching contributions (i) with respect to the first 4% of compensation deferred under the Plan, subject to a maximum of $50,000 for board officers, (ii) to restore lost matching amounts that would have been made under the 401(k) plan if participants had not participated in the Plan, and (iii) in such discretionary amounts, as approved by the Compensation Committee of the Board of Directors.


17


8.
Share-Based Compensation Plans
Compensation expense for the Company’s employee stock options, stock appreciation rights, employee stock purchase plan, restricted stock and restricted stock units (“RSUs”) was as follows: 
 
Three Months Ended
 
Six Months Ended
  
June 29, 2013
 
June 30, 2012
 
June 29, 2013
 
June 30, 2012
Share-based compensation expense included in:
 
 
 
 
 
 
 
Costs of sales
$
4

 
$
7

 
$
10

 
$
13

Selling, general and administrative expenses
21

 
31

 
49

 
57

Research and development expenditures
9

 
14

 
20

 
25

Share-based compensation expense included in Operating earnings
34

 
52

 
79

 
95

Tax benefit
10

 
21

 
24

 
34

Share-based compensation expense, net of tax
$
24

 
$
31

 
$
55

 
$
61

Decrease in basic earnings per share
$
(0.09
)
 
$
(0.11
)
 
$
(0.20
)
 
$
(0.20
)
Decrease in diluted earnings per share
$
(0.09
)
 
$
(0.10
)
 
$
(0.20
)
 
$
(0.20
)
For the three months ended June 29, 2013, the Company granted 1.3 million and 1.4 million RSUs and stock options, respectively. The total aggregate compensation expense, net of estimated forfeitures, for these RSUs and stock options was $63 million and $13 million, respectively, which will be recognized over a weighted average vesting period of three years. For the six months ended June 29, 2013, the Company granted 1.4 million RSUs and 1.5 million stock options. The total aggregate compensation expense, net of estimated forfeitures, for these RSUs and stock options was $68 million and $14 million, respectively, which will be recognized over a weighted average vesting period of three years.
Employee Stock Purchase Plan
The employee stock purchase plan allows eligible participants to purchase shares of the Company's common stock through payroll deductions of eligible compensation on an after-tax basis. Effective April 1, 2012, the Company increased the maximum purchase from 10% to 20% of eligible compensation. Plan participants cannot purchase more than $25,000 of stock in any calendar year.

9.
Fair Value Measurements
The Company holds certain fixed income securities, equity securities and derivatives, which are recognized and disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Fair value is measured using the fair value hierarchy and related valuation methodologies as defined in the authoritative literature. This guidance specifies a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions about current market conditions. The fair value hierarchy and related valuation methodologies are as follows:
Level 1—Quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
Level 3—Valuations derived from valuation techniques, in which one or more significant inputs are unobservable.

18


The fair values of the Company’s financial assets and liabilities by level in the fair value hierarchy as of June 29, 2013 and December 31, 2012 were as follows: 
June 29, 2013
Level 1
 
Level 2
 
Total
Assets:
 
 
 
 
 
Sigma Fund securities:
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations
$

 
$
1,710

 
$
1,710

Foreign exchange derivative contracts

 
4

 
4

Available-for-sale securities:
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations

 
18

 
18

Corporate bonds

 
6

 
6

Mortgage-backed securities

 
2

 
2

Common stock and equivalents
2

 
7

 
9

Liabilities:
 
 
 
 
 
Foreign exchange derivative contracts
$

 
$
5

 
$
5

Interest agreement derivative contracts

 
3

 
3

December 31, 2012
Level 1
 
Level 2
 
Total
Assets:
 
 
 
 
 
Sigma Fund securities:
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations
$

 
$
1,984

 
$
1,984

Foreign exchange derivative contracts

 
3

 
3

Available-for-sale securities:
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations

 
15

 
15

Corporate bonds

 
11

 
11

Mortgage-backed securities

 
2

 
2

Common stock and equivalents
3

 
7

 
10

Liabilities:
 
 
 
 
 
Foreign exchange derivative contracts
$

 
$
3

 
$
3

Interest agreement derivative contracts

 
4

 
4

The Company had no Level 3 holdings as of June 29, 2013 or December 31, 2012.
At June 29, 2013, the Company had $379 million of investments in money market mutual funds classified as Cash and cash equivalents in its condensed consolidated balance sheet, compared to $422 million at December 31, 2012. The money market funds had quoted market prices that are equivalent to par.
Using quoted market prices and market interest rates, the Company determined that the fair value of long-term debt at June 29, 2013 was $2.5 billion (Level 2), consistent with the instruments' face value of $2.5 billion. Since considerable judgment is required in interpreting market information, the fair value of the long-term debt is not necessarily indicative of the amount which could be realized in a current market exchange.
All other financial instruments are carried at cost, which is not materially different from the instruments’ fair values.


19


10.
Long-term Customer Financing and Sales of Receivables
Long-term Customer Financing
Long-term customer financing receivables consist of trade receivables with payment terms greater than twelve months, long-term loans and lease receivables under sales-type leases. Long-term customer financing receivables consist of the following: 
 
June 29,
2013
 
December 31,
2012
Long-term customer financing receivables
$
63

 
$
101

Less current portion
(41
)
 
(41
)
Non-current long-term receivables, net
$
22

 
$
60

The current portion of long-term receivables is included in Accounts receivable, net and the non-current portion of long-term receivables is included in Other assets in the Company’s condensed consolidated balance sheets.
Certain purchasers of the Company’s products and services may request that the Company provide long-term financing (defined as financing with a term of greater than one year) in connection with the sale of products and services. These requests may include all or a portion of the purchase price of the products and services. The Company’s obligation to provide long-term financing may be conditioned on the issuance of a letter of credit in favor of the Company 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 the Company. The Company had outstanding commitments to provide long-term financing to third parties totaling $91 million at June 29, 2013, compared to $84 million at December 31, 2012.
Sales of Receivables
The following table summarizes the proceeds received from sales of accounts receivable and long-term receivables for the three and six months ended June 29, 2013 and June 30, 2012: 
 
Three Months Ended
 
Six Months Ended
  
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Cumulative quarterly proceeds received from sales:
 
 
 
 
 
 
 
Accounts receivable sales proceeds
$
2

 
$
2