Motorola 2014 Annual Report Download - page 35

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Reorganization of Businesses
During 2014 we implemented various productivity improvement plans aimed at continuing operating margin improvements
by driving efficiencies and reducing operating costs. In 2014, we recorded net reorganization of business charges of $96 million
relating to the separation of 1,200 employees, of which 900 were indirect employees and 300 were direct employees. Of these
charges, $23 million related to discontinued operations. The remaining $73 million of charges in earnings (loss) from continuing
operations included $9 million recorded to Cost of sales and $64 million recorded to Other charges. Included in the aggregate
$73 million are charges of: (i) $67 million for employee separation costs and (ii) $7 million for exit costs, partially offset by $1
million of reversals for accruals no longer needed.
We realized cost-saving benefits of approximately $26 million in 2014 from the plans that were initiated during 2014,
primarily in operating expenses. Beyond 2014, we expect the reorganization plans initiated during 2014 to provide annualized
cost savings of approximately $90 million, consisting of $12 million of savings in Cost of sales, and $78 million of savings in
operating expenses. These cost savings include reduced payroll and other operating expenses; however, as we continue to
outsource manufacturing and other functions, some of these cost savings may not be realizable as variable outsourced
manufacturing and other activities increase.
During 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. Of these charges, $47 million related to
discontinued operations. The remaining $86 million of charges in earnings from continuing operations included $16 million
recorded to Cost of sales and $70 million recorded to Other charges. Included in the aggregate $86 million are charges of: (i)
$94 million for employee separation costs and (ii) $2 million related to charges for exit costs, partially offset by $10 million for
reversals of accruals no longer needed.
During 2012, we recorded net reorganization of business charges of $50 million relating to the separation of 1,000
employees, of which 700 were indirect employees and 300 were direct employees. Of these charges, $17 million related to
discontinued operations. The remaining $33 million of charges in earnings from continuing operations included $6 million
recorded to Cost of sales and $27 million recorded to Other charges. Included in the aggregate $33 million are charges of: (i)
$35 million for employee separation costs and (ii) $5 million for building impairments, partially offset by $7 million of reversals for
accruals no longer needed.
The following table displays the net charges incurred by business segment:
Years ended December 31 2014 2013 2012
Products $ 48 $ 57 $ 22
Services 25 29 11
$ 73 $ 86 $ 33
Cash payments for exit costs and employee separations in connection with these reorganization plans were $148 million,
$59 million, and $55 million in 2014, 2013, and 2012, respectively. The cash payments included $50 million in 2014, $20 million
in 2013, and $20 million in 2012 related to employees of discontinued operations. The $57 million reorganization of businesses
accrual remaining at December 31, 2014, relates entirely to employee separation costs that are expected to be paid in 2015. As
part of the sale of its Enterprise business, the Company retained the reorganization of business charges accruals and the
responsibility to pay affected employees for those charges incurred prior to the closing of the sale of the Enterprise business.
Liquidity and Capital Resources
At December 31, 2014, our cash and cash equivalents (which are highly-liquid investments purchased with an original
maturity of three months or less) were $4.0 billion, an increase of $729 million, compared to $3.2 billion at December 31, 2013.
The increase in cash and cash equivalents is primarily due to: (i) $3.4 billion of cash generated from the sale of the Enterprise
business and (ii) the issuance of $1.4 billion of Senior Notes, partially offset by: (i) the return of $2.9 billion of capital to
shareholders through share repurchases and dividends paid during 2014, (ii) $685 million of cash used for operating activity,
including pension contributions of $1.3 billion, and (iii) $465 million of debt repayment. At December 31, 2014, $3.3 billion of the
$4.0 billion cash and cash equivalents balance was held in the U.S. and $647 million was held in other countries. Subsequent to
December 31, 2014, we transferred $423 million of cash proceeds from the sale of the Enterprise business from the U.S to our
foreign subsidiaries. At both December 31, 2014 and December 31, 2013, restricted cash was $63 million.
We continue to analyze and review various repatriation strategies to efficiently repatriate cash. In 2014, we repatriated
approximately $570 million in cash to the U.S. from international jurisdictions. At December 31, 2014, we had approximately
$400 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 $1.5 billion at December 31, 2014. 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.
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,