MSI 09-28-13-Q3-10Q

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 September 28, 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 September 28, 2013:
 
Class
 
Number of Shares
Common Stock; $.01 Par Value
 
258,712,629




 
Page    
Item 1 Financial Statements
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 28, 2013 and September 29, 2012
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 28, 2013 and September 29, 2012
Item 4 Mine Safety Disclosures



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

 
Three Months Ended
 
Nine Months Ended
(In millions, except per share amounts)
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Net sales from products
$
1,482

 
$
1,567

 
$
4,342

 
$
4,574

Net sales from services
630

 
586

 
1,850

 
1,683

Net sales
2,112

 
2,153

 
6,192

 
6,257

Costs of product sales
674

 
682

 
2,019

 
2,052

Costs of services sales
395

 
384

 
1,145

 
1,085

Costs of sales
1,069

 
1,066

 
3,164

 
3,137

Gross margin
1,043

 
1,087

 
3,028

 
3,120

Selling, general and administrative expenses
438

 
485

 
1,369

 
1,454

Research and development expenditures
253

 
262

 
782

 
785

Other charges
32

 
16

 
75

 
48

Operating earnings
320

 
324

 
802

 
833

Other income (expense):
 
 
 
 
 
 
 
Interest expense, net
(29
)
 
(16
)
 
(85
)
 
(46
)
Gains on sales of investments and businesses, net
29

 
19

 
36

 
39

Other
5

 
(3
)
 
1

 
(18
)
Total other income (expense)
5

 

 
(48
)
 
(25
)
Earnings from continuing operations before income taxes
325

 
324

 
754

 
808

Income tax expense (benefit)
17

 
118

 
(8
)
 
266

Earnings from continuing operations
308

 
206

 
762

 
542

Earnings from discontinued operations, net of tax

 

 

 
3

Net earnings
308

 
206

 
762

 
545

Less: Earnings attributable to noncontrolling interests
1

 

 
5

 

Net earnings attributable to Motorola Solutions, Inc.
307

 
206

 
$
757

 
$
545

Amounts attributable to Motorola Solutions, Inc. common stockholders:
 
 
 
 
 
 
 
Earnings from continuing operations, net of tax
$
307

 
$
206

 
$
757

 
$
542

Earnings from discontinued operations, net of tax

 

 

 
3

Net earnings
$
307

 
$
206

 
$
757

 
$
545

Earnings per common share:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Continuing operations
$
1.17

 
$
0.73

 
$
2.82

 
$
1.83

Discontinued operations

 

 

 
0.01

 
$
1.17

 
$
0.73

 
$
2.82

 
$
1.84

Diluted:
 
 
 
 
 
 
 
Continuing operations
$
1.16

 
$
0.72

 
$
2.77

 
$
1.80

Discontinued operations

 

 

 
0.01

 
$
1.16

 
$
0.72

 
$
2.77

 
$
1.81

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
262.2

 
283.1

 
268.7

 
296.1

Diluted
265.3

 
287.4

 
273.5

 
301.5

Dividends declared per share
$
0.31

 
0.26

 
$
0.83

 
0.70

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)
September 28,
2013
 
September 29,
2012
Net earnings
$
308

 
$
206

Other comprehensive income (loss):
 
 
 
Amortization of retirement benefit adjustments, net of tax of $9 and $14
17

 
53

Remeasurement of retirement benefit adjustments, net of tax of $0 and $52

 
87

Foreign currency translation adjustment, net of tax of $2 and $21
20

 
4

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 $(5)
1

 
(6
)
Total other comprehensive income
37

 
140

Comprehensive income
345

 
346

Less: Earnings attributable to noncontrolling interest
1

 

Comprehensive income attributable to Motorola Solutions, Inc. common shareholders
$
344

 
$
346


 
Nine Months Ended
(In millions)
September 28,
2013
 
September 29,
2012
Net earnings
$
762

 
$
545

Other comprehensive income (loss):
 
 
 
Amortization of retirement benefit adjustments, net of tax of $28 and $65
52

 
148

Remeasurement of retirement benefit adjustments, net of tax of $0 and $52

 
87

Foreign currency translation adjustment, net of tax of $(4) and $11
(22
)
 
(18
)
Net gain (loss) on derivative hedging instruments, net of tax of $0 and $0
(2
)
 
4

Net unrealized gain on securities, net of tax of $0 and $1

 
2

Total other comprehensive income
28

 
223

Comprehensive income
790

 
768

Less: Earnings attributable to noncontrolling interest
5

 

Comprehensive income attributable to Motorola Solutions, Inc. common shareholders
$
785

 
$
768

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)
September 28,
2013
 
December 31,
2012
ASSETS
Cash and cash equivalents
$
1,721

 
$
1,468

Sigma Fund and short-term investments
1,169

 
2,135

Accounts receivable, net
1,823

 
1,881

Inventories, net
521

 
513

Deferred income taxes
586

 
604

Other current assets
760

 
800

Total current assets
6,580

 
7,401

Property, plant and equipment, net
841

 
839

Investments
259

 
240

Deferred income taxes
2,668

 
2,416

Goodwill
1,507

 
1,510

Other assets
203

 
273

Total assets
$
12,058

 
$
12,679

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

 
$
4

Accounts payable
633

 
705

Accrued liabilities
2,203

 
2,626

Total current liabilities
2,840

 
3,335

Long-term debt
2,458

 
1,859

Other liabilities
4,055

 
4,195

Stockholders’ Equity
 
 
 
Preferred stock, $100 par value

 

Common stock, $.01 par value:
3

 
3

Authorized shares: 600.0
 
 
 
Issued shares: 9/28/13—260.2; 12/31/12—277.3
 
 
 
Outstanding shares: 9/28/13—258.7; 12/31/12—276.1
 
 
 
Additional paid-in capital
3,783

 
4,937

Retained earnings
2,162

 
1,625

Accumulated other comprehensive loss
(3,272
)
 
(3,300
)
Total Motorola Solutions, Inc. stockholders’ equity
2,676

 
3,265

Noncontrolling interests
29

 
25

Total stockholders’ equity
2,705

 
3,290

Total liabilities and stockholders’ equity
$
12,058

 
$
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)
 
Retained
Earnings
 
Noncontrolling
Interests
Balance as of December 31, 2012
277.3

 
$
4,940

 
$
(3,300
)
 
$
1,625

 
$
25

Net earnings

 

 


 
757

 
5

Foreign currency translation adjustments, net of tax benefit of $(4)

 

 
(22
)
 

 

Amortization of retirement benefit adjustments, net of tax of $28

 

 
52

 

 

Issuance of common stock and stock options exercised
5.9

 
45

 

 

 

Share repurchase program
(23.0
)
 
(1,332
)
 

 

 

Excess tax benefit from share-based compensation

 
20

 

 

 

Share-based compensation expense

 
116

 

 

 

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

 

 
(2
)
 

 

Acquisition of noncontrolling interest

 
(3
)
 


 


 
(1
)
Dividends declared

 

 


 
(220
)
 

Balance as of September 28, 2013
260.2

 
$
3,786

 
$
(3,272
)
 
$
2,162

 
$
29

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


4


Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended
(In millions)
September 28,
2013
 
September 29,
2012
Operating
 
 
 
Net earnings attributable to Motorola Solutions, Inc.
$
757

 
$
545

Earnings attributable to noncontrolling interests
5

 

Net earnings
762

 
545

Earnings from discontinued operations, net of tax

 
3

Earnings from continuing operations, net of tax
762

 
542

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:
 
 
 
Depreciation and amortization
168

 
151

Non-cash other charges (income)
(9
)
 
12

Share-based compensation expense
116

 
139

Gains on sales of investments and businesses, net
(36
)
 
(39
)
Loss from the extinguishment of long term debt

 
6

Deferred income taxes
(242
)
 
203

Changes in assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Accounts receivable
29

 
189

Inventories
(10
)
 
(51
)
Other current assets
23

 
(147
)
Accounts payable and accrued liabilities
(573
)
 
(283
)
Other assets and liabilities
(25
)
 
(218
)
Net cash provided by operating activities from continuing operations
203

 
504

Investing
 
 
 
Acquisitions and investments, net
(27
)
 
61

Proceeds from (used for) sales of investments and businesses, net
54

 
(38
)
Capital expenditures
(125
)
 
(140
)
Proceeds from sales of property, plant and equipment
15

 
9

Proceeds from sales of Sigma Fund investments, net
966

 
1,450

Net cash provided by investing activities from continuing operations
883

 
1,342

Financing
 
 
 
Repayment of debt
(3
)
 
(412
)
Net proceeds from issuance of debt
593

 
747

Issuance of common stock
109

 
79

Purchase of common stock
(1,332
)
 
(2,112
)
Excess tax benefit from share-based compensation
20

 
17

Payment of dividends
(212
)
 
(197
)
Distributions to discontinued operations

 
(84
)
Net cash used for financing activities from continuing operations
(825
)
 
(1,962
)
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 discontinued operations

 

Effect of exchange rate changes on cash and cash equivalents from continuing operations
(8
)
 
14

Net increase (decrease) in cash and cash equivalents
253

 
(102
)
Cash and cash equivalents, beginning of period
1,468

 
1,881

Cash and cash equivalents, end of period
$
1,721

 
$
1,779

Supplemental Cash Flow Information
 
 
 
Cash paid during the period for:
 
 
 
Interest, net
$
74

 
$
61

Income and withholding taxes, net of refunds
231

 
104

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 September 28, 2013 and for the three and nine months ended September 28, 2013 and September 29, 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 nine months ended September 28, 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 scope of updates 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 of fiscal year 2012. The results of certain purchase price adjustments for previous divestitures that were recorded during the periods presented have also been reported as discontinued operations for the nine months ended September 29, 2012.

6


During the three and nine months ended September 28, 2013, and the three months ended September 29, 2012, 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 nine months ended September 29, 2012.
 
Nine Months Ended
  
September 29,
2012
Net sales
$

Operating earnings
11

Loss on sales of investments and businesses, net
(7
)
Earnings before income taxes
8

Income tax expense
5

Earnings from discontinued operations, net of tax
3


3.
Other Financial Data
Statement of Operations Information
Other Charges
Other charges included in Operating earnings consist of the following: 
 
Three Months Ended
 
Nine Months Ended
  
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Other charges:
 
 
 
 
 
 
 
Intangibles amortization
$
8

 
$
6

 
$
20

 
$
18

Reorganization of businesses
24

 
10

 
55

 
30

 
$
32

 
$
16

 
$
75

 
$
48

Other Income (Expense)
Interest expense, net, and Other, both included in Other income (expense), consist of the following: 
 
Three Months Ended
 
Nine Months Ended
  
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Interest income (expense), net:
 
 
 
 
 
 
 
Interest expense
$
(33
)
 
$
(29
)
 
$
(100
)
 
$
(79
)
Interest income
4

 
13

 
15

 
33

 
$
(29
)
 
$
(16
)
 
$
(85
)
 
$
(46
)
Other:
 
 
 
 
 
 
 
Loss from the extinguishment of long-term debt
$

 
$

 
$

 
$
(6
)
Investment impairments
(1
)
 
(6
)
 
(5
)
 
(8
)
Foreign currency loss
(4
)
 

 
(8
)
 
(11
)
Gains on equity method investments
8

 
2

 
7

 
4

Other
2

 
1

 
7

 
3

 
$
5

 
$
(3
)
 
$
1

 
$
(18
)

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:
 
Earnings from Continuing Operations
 
Net Earnings
Three Months Ended
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Basic earnings per common share:
 
 
 
 
 
 
 
Earnings
$
307

 
$
206

 
$
307

 
$
206

Weighted average common shares outstanding
262.2

 
283.1

 
262.2

 
283.1

Per share amount
$
1.17

 
$
0.73

 
$
1.17

 
$
0.73

Diluted earnings per common share:
 
 
 
 
 
 
 
Earnings
$
307

 
$
206

 
$
307

 
$
206

Weighted average common shares outstanding
262.2

 
283.1

 
262.2

 
283.1

Add effect of dilutive securities:
 
 
 
 
 
 
 
Share-based awards
3.1

 
4.3

 
3.1

 
4.3

Diluted weighted average common shares outstanding
265.3

 
287.4

 
265.3

 
287.4

Per share amount
$
1.16

 
$
0.72

 
$
1.16

 
$
0.72

 
Earnings from Continuing Operations
 
Net Earnings
Nine Months Ended
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Basic earnings per common share:
 
 
 
 
 
 
 
Earnings
$
757

 
$
542

 
$
757

 
$
545

Weighted average common shares outstanding
268.7

 
296.1

 
268.7

 
296.1

Per share amount
$
2.82

 
$
1.83

 
$
2.82

 
$
1.84

Diluted earnings per common share:
 
 
 
 
 
 
 
Earnings
$
757

 
$
542

 
$
757

 
$
545

Weighted average common shares outstanding
268.7

 
296.1

 
268.7

 
296.1

Add effect of dilutive securities:
 
 
 
 
 
 
 
Share-based awards
4.8

 
5.4

 
4.8

 
5.4

Diluted weighted average common shares outstanding
273.5

 
301.5

 
273.5

 
301.5

Per share amount
$
2.77

 
$
1.80

 
$
2.77

 
$
1.81

In the computation of diluted earnings per common share from both continuing operations and on a net earnings basis for the three and nine months ended September 28, 2013, the assumed exercise of 5.6 million and 4.8 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 nine months ended September 29, 2012, the assumed exercise of 6.1 million and 6.0 million stock options, respectively, were excluded because their inclusion would have been antidilutive.

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 $1.7 billion at September 28, 2013 and $1.5 billion at December 31, 2012. Of these amounts, $63 million at both September 28, 2013 and December 31, 2012 was restricted.

8


Sigma Fund
The Sigma Fund consists of the following: 
 
September 28,
2013
 
December 31,
2012
Cash
$
261

 
$
149

U.S. government, agency, and government-sponsored enterprise obligations
906

 
1,984

 
$
1,167

 
$
2,133

Investments
Investments consist of the following:
 
Recorded Value
 
Less
 
 
September 28, 2013
  Short-term  
Investments
 
Investments  
 
  Unrealized  
Gains
 
  Unrealized  
Loss
 
  Cost  
Basis
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations
$

 
$
17

 
$

 
$
(1
)
 
$
18

Corporate bonds
2

 
6

 

 

 
8

Mortgage-backed securities

 
2

 

 

 
2

Common stock and equivalents

 
11

 
4

 

 
7

 
2

 
36

 
4

 
(1
)
 
35

Other securities, at cost

 
206

 

 

 
206

Equity method investments

 
17

 

 

 
17

 
$
2

 
$
259

 
$
4

 
$
(1
)
 
$
258

 
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

 
189

 

 

 
189

Equity method investments

 
13

 

 

 
13

 
$
2

 
$
240

 
$
3

 
$

 
$
239

The Company reclassified $96 million of cash surrender values of its split-dollar value life insurance plans, as of December 31, 2012, from Other assets to Investments, to conform to the balance sheet presentation as of September 28, 2013. 
Accounts Receivable, Net
Accounts receivable, net, consists of the following: 
 
September 28,
2013
 
December 31,
2012
Accounts receivable
$
1,879

 
$
1,932

Less allowance for doubtful accounts
(56
)
 
(51
)
 
$
1,823

 
$
1,881


9


Inventories, Net
Inventories, net, consist of the following: 
 
September 28,
2013
 
December 31,
2012
Finished goods
$
234

 
$
244

Work-in-process and production materials
462

 
432

 
696

 
676

Less inventory reserves
(175
)
 
(163
)
 
$
521

 
$
513

Other Current Assets
Other current assets consist of the following: 
 
September 28,
2013
 
December 31,
2012
Costs and earnings in excess of billings
$
413

 
$
416

Contract-related deferred costs
111

 
141

Tax-related deposits and refunds receivable
98

 
95

Other
138

 
148

 
$
760

 
$
800

Property, Plant and Equipment, Net
Property, plant and equipment, net, consists of the following: 
 
September 28,
2013
 
December 31,
2012
Land
$
37

 
$
38

Building
748

 
739

Machinery and equipment
1,926

 
1,932

 
2,711

 
2,709

Less accumulated depreciation
(1,870
)
 
(1,870
)
 
$
841

 
$
839

Depreciation expense for the three months ended September 28, 2013 and September 29, 2012 was $51 million and $39 million, respectively. Depreciation expense for the nine months ended September 28, 2013 and September 29, 2012 was $148 million and $133 million, respectively.
Other Assets
Other assets consist of the following: 
 
September 28,
2013
 
December 31,
2012
Intangible assets
$
92

 
$
109

Long-term receivables
19

 
60

Other
92

 
104

 
$
203

 
$
273


10


Accrued Liabilities
Accrued liabilities consist of the following: 
 
September 28,
2013
 
December 31,
2012
Deferred revenue
$
766

 
$
820

Compensation
319

 
424

Billings in excess of costs and earnings
211

 
387

Tax liabilities
54

 
95

Customer reserves
126

 
144

Dividend payable
80

 
72

Other
647

 
684

 
$
2,203

 
$
2,626

Other Liabilities
Other liabilities consist of the following: 
 
September 28,
2013
 
December 31,
2012
Defined benefit plans, including split dollar life insurance policies
$
3,270

 
$
3,389

Postretirement health care benefit plan
166

 
167

Deferred revenue
311

 
304

Unrecognized tax benefits
99

 
98

Other
209

 
237

 
$
4,055

 
$
4,195

Stockholders’ Equity
Share Repurchase Program: The Company paid an aggregate of $1.3 billion during the first nine months of 2013, including transactions costs, to repurchase approximatley 23 million shares at an average price of $58.05 per share. During the first nine months of 2012, the Company paid an aggregate of $2.1 billion, including transaction costs, to repurchase 37.1 million shares at an average price of $48.50 per share. All repurchased shares have been retired.
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. As of September 28, 2013, the Company had used approximately $4.9 billion of the share repurchase authority, including transaction costs, to repurchase shares, leaving $2.1 billion of authority available for future repurchases.
Payment of Dividends: 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. During the nine months ended September 28, 2013 and September 29, 2012, the Company paid $212 million and $197 million, respectively, in cash dividends to holders of its 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 September 28, 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 as of January 1, 2013
$
1

 
$
2

 
$
(3,211
)
 
$
(92
)
 
$
(3,300
)
Other comprehensive losses before reclassifications
(1
)
 

 

 
(22
)
 
(23
)
Amounts reclassified from Accumulated other comprehensive loss
$
(1
)
 
$

 
$
52

 
$

 
$
51

Current period change in Other comprehensive income (loss)
(2
)
 

 
52

 
(22
)
 
28

Balance as of September 28, 2013
$
(1
)
 
$
2

 
$
(3,159
)
 
$
(114
)
 
$
(3,272
)

The following table displays the amounts reclassified from Accumulated other comprehensive loss and the affected line item in the condensed consolidated statement of operations during the three and nine months ended September 28, 2013:
  
September 28, 2013
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
Gains on cash flow hedges:
 
 
 
 
 
Foreign exchange contracts
$

 
$
(1
)
 
Cost of sales
 
$

 
$
(1
)
 
Net of tax
Amortization of Retirement Benefit Items:
 
 
 
 
 
Prior-service costs
$
(13
)
 
$
(38
)
 
Selling, general, and administrative expenses
Actuarial net losses
39

 
118

 
Selling, general, and administrative expenses
 
26

 
80

 
Total before tax
 
(9
)
 
(28
)
 
Tax expense
 
$
17

 
$
52

 
Net of tax
 
 
 
 
 
 
Total reclassifications for the period, net of tax
$
17

 
$
51

 
 

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 principal 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 principal 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 September 28, 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

12


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 September 28, 2013. The Company did not borrow under the 2011 Motorola Solutions Credit Agreement during the three and nine months ended September 28, 2013.

5.
Risk Management
Foreign Currency Risk
At September 28, 2013, the Company had outstanding foreign exchange contracts with notional amounts totaling $762 million, compared to $523 million outstanding at December 31, 2012. The Company does not believe these financial instruments should subject it 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.
The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of September 28, 2013, and the corresponding positions as of December 31, 2012: 
 
Notional Amount
Net Buy (Sell) by Currency
September 28,
2013
 
December 31,
2012
British Pound
$
213

 
$
225

Chinese Renminbi
(155
)
 
(99
)
Norwegian Krone
(107
)
 
(48
)
Euro
(88
)
 
(9
)
Malaysian Ringgit
65

 
30

Interest Rate Risk
At September 28, 2013, including the current portion, the Company had $2.5 billion 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 September 28, 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 September 28, 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 September 28, 2013, the Company was exposed to an aggregate net credit risk of approximately $5 million with all counterparties.

13


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 September 28, 2013 and December 31, 2012:
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
September 28, 2013
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$

 
Other assets
 
$
1

 
Other liabilities
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
5

 
Other assets
 

 
Other liabilities
Interest agreements

 
Other assets
 
3

 
Other liabilities
Total derivatives not designated as hedging instruments
$
5

 
 
 
$
3

 
 
Total derivatives
$
5

 
 
 
$
4

 
 
 
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 nine months ended September 28, 2013 and September 29, 2012:
 
Three Months Ended
 
Statement of
Operations Location
Gain (loss) on Derivative Instruments
September 28,
2013
 
September 29,
2012
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
Interest rate contracts
$

 
$

 
Other income (expense)
Foreign exchange contracts
8

 
(1
)
 
Other income (expense)
Total derivatives not designated as hedging instruments
$
8

 
$
(1
)
 
 
 
Nine Months Ended
 
Statement of
Operations Location
Gain (loss) on Derivative Instruments
September 28,
2013
 
September 29,
2012
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
Interest rate contracts
$
1

 
$
(1
)
 
Other income (expense)
Foreign exchange contracts
(1
)
 
(5
)
 
Other income (expense)
Total derivatives not designated as hedging instruments
$

 
$
(6
)
 
 

14


The following tables summarize the gains and losses recognized in the condensed consolidated financial statements for the three and nine months ended September 28, 2013 and September 29, 2012: 
 
Three Months Ended
 
Nine Months Ended
 
Financial Statement
Location
Foreign Exchange Contracts
September 28,
2013
 
September 29,
2012
 
September 28, 2013
 
September 29, 2012
 
Derivatives in cash flow hedging relationships:
 
 
 
 
 
 
 
 
 
Other comprehensive gains (losses) before reclassifications
$
(1
)
 
$
1

 
$
(1
)
 
$
2

 
Accumulated other
comprehensive loss
Losses (gains) reclassified from Accumulated other comprehensive loss into Net earnings

 
1

 
(1
)
 
2

 
Costs of sales

6.
Income Taxes
At September 28, 2013 and December 31, 2012, the Company had valuation allowances of $274 million and $308 million, respectively, including $249 million and $272 million, respectively, relating to deferred tax assets for non-U.S. subsidiaries. The decrease of $34 million in valuation allowances is primarily due to the expiration of net operating loss carryforwards and foreign exchange rate fluctuations. 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 were permanently invested overseas. The Company intends to utilize the offshore earnings to fund foreign investments, such as potential acquisitions and capital expenditures. In 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 September 28, 2013 and December 31, 2012, respectively.
At September 28, 2013, the Company has approximately $1.0 billion of earnings in foreign subsidiaries that are not permanently reinvested and may be repatriated without an additional income tax charge, given the U.S. federal and foreign tax accrued on undistributed earnings and the utilization of available foreign tax credits.
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 three and nine months ended September 28, 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 by $96 million and $224 million, respectively, and will continue to favorably impact the effective tax rate for the remainder of 2013. In the third quarter of 2013, the Company made an $87 million withholding tax payment associated with an intercompany foreign dividend, for which it expects to realize a foreign tax credit.
The Company had unrecognized tax benefits of $152 million and $161 million at September 28, 2013 and December 31, 2012, respectively, of which $132 million and $138 million, respectively, if recognized, would affect the effective tax rate, net of resulting changes to valuation allowances. During the nine months ended September 28, 2013, the Company recorded a net increase in unrecognized tax benefits related to prior year tax positions of $61 million, of which $63 million related to previously accrued non-U.S. income taxes. The Company recorded a net reduction in unrecognized tax benefits of $81 million for settlements with tax authorities, of which $63 million resulted in a cash tax payment and the remainder 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 not to exceed $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

15


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: 
 
September 28, 2013
 
September 29, 2012
Three Months Ended
U.S.
 
Non
U.S.
 
U.S.
 
Non
U.S.
Service cost
$

 
$
2

 
$

 
$
3

Interest cost
88

 
19

 
87

 
18

Expected return on plan assets
(91
)
 
(21
)
 
(105
)
 
(19
)
Amortization of:
 
 
 
 
 
 
 
Unrecognized net loss
31

 
5

 
65

 
6

Unrecognized prior service cost

 
(1
)
 

 
(1
)
Net periodic pension costs
$
28

 
$
4

 
$
47

 
$
7

 
September 28, 2013
 
September 29, 2012
Nine Months Ended
U.S.
 
Non
U.S.
 
U.S.
 
Non
U.S.
Service cost
$

 
$
8

 
$

 
$
8

Interest cost
264

 
52

 
262

 
55

Expected return on plan assets
(273
)
 
(58
)
 
(316
)
 
(58
)
Amortization of:
 
 
 
 
 
 
 
Unrecognized net loss
95

 
11

 
195

 
16

Unrecognized prior service cost

 
(5
)
 

 
(2
)
Net periodic pension costs
$
86

 
$
8

 
$
141

 
$
19

During the nine months ended September 28, 2013, contributions of $122 million were made to the Company’s U.S. plans, and $24 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
 
Nine Months Ended
  
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Service cost
$
1

 
$
1

 
$
2

 
$
3

Interest cost
3

 
4

 
9

 
14

Expected return on plan assets
(2
)
 
(3
)
 
(7
)
 
(9
)
Amortization of:
 
 
 
 
 
 
 
Unrecognized net loss
5

 
3

 
12

 
9

Unrecognized prior service cost
(11
)
 
(5
)
 
(33
)
 
(5
)
Net postretirement health care expense (benefits)
$
(4
)
 
$

 
$
(17
)
 
$
12


16


During the three months ended September 29, 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 the three and nine months ended September 29, 2012 which reduced the net liability $139 million and generated deferred prior service costs recorded within Accumulated other comprehensive income of $87 million, net of taxes. 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 nine months ended September 28, 2013.
Deferred Compensation Plan
During the nine months ended September 28, 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 for the following: (i) the first 4% of compensation deferred under the Plan, subject to a maximum of $50,000 for certain officers, (ii) lost matching amounts that would have been made under the 401(k) plan if participants had not participated in the Plan, and (iii) discretionary amounts as approved by the Compensation Committee of the Board of Directors.

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
 
Nine Months Ended
  
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Share-based compensation expense included in:
 
 
 
 
 
 
 
Costs of sales
$
5

 
$
6

 
$
15

 
$
19

Selling, general and administrative expenses
22

 
27

 
71

 
84

Research and development expenditures
10

 
11

 
30

 
36

Share-based compensation expense included in Operating earnings
37

 
44

 
116

 
139

Tax benefit
12

 
14

 
36

 
47

Share-based compensation expense, net of tax
$
25

 
$
30

 
$
80

 
$
92

Decrease in basic earnings per share
$
(0.10
)
 
$
(0.11
)
 
$
(0.30
)
 
$
(0.31
)
Decrease in diluted earnings per share
$
(0.09
)
 
$
(0.11
)
 
$
(0.29
)
 
$
(0.30
)
For the nine months ended September 28, 2013, the Company granted 1.5 million RSUs and 1.6 million stock options. The total aggregate compensation expense, net of estimated forfeitures, for these RSUs and stock options was $69 million and $14 million, respectively, which will be recognized over a weighted average vesting period of three years.

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.

17


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.
The fair values of the Company’s financial assets and liabilities by level in the fair value hierarchy as of September 28, 2013 and December 31, 2012 were as follows: 
September 28, 2013
Level 1
 
Level 2
 
Total
Assets:
 
 
 
 
 
Sigma Fund securities:
 
 
 
 
 
U.S. government, agency and government-sponsored enterprise obligations
$

 
$
906

 
$
906

Foreign exchange derivative contracts

 
5

 
5

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

 
17

 
17

Corporate bonds

 
8

 
8

Mortgage-backed securities

 
2

 
2

Common stock and equivalents
3

 
8

 
11

Liabilities:
 
 
 
 
 
Foreign exchange derivative contracts
$

 
$
1

 
$
1

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

 
13

 
13

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 September 28, 2013 or December 31, 2012.
At September 28, 2013, the Company had $495 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 September 28, 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.

18


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: 
 
September 28,
2013
 
December 31,
2012
Long-term customer financing receivables
$
57

 
$
101

Less current portion
(38
)
 
(41
)
Non-current long-term receivables, net
$
19

 
$
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 $108 million at September 28, 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 nine months ended September 28, 2013 and September 29, 2012: 
 
Three Months Ended
 
Nine Months Ended
  
September 28,
2013
 
September 29,
2012
 
September 28,
2013
 
September 29,
2012
Proceeds received:
 
 
 
 
 
 
 
Accounts receivable sales proceeds
$
4

 
$
5

 
$
6

 
$
12

Long-term receivable sales proceeds
37

 
32

 
90

 
156

Total proceeds from sales of accounts receivable
$
41

 
$
37

 
$
96

 
$
168

At September 28, 2013, the Company had retained servicing obligations for $391 million of long-term receivables, compared to $375 million of long-term receivables at December 31, 2012. Servicing obligations are limited to collection activities related to the sales of accounts receivables and long-term receivables.
Credit Quality of Customer Financing Receivables and Allowance for Credit Losses
An aging analysis of financing receivables at September 28, 2013 and December 31, 2012 is as follows: 
September 28, 2013
Total
Long-term
Receivable
 
Current Billed
Due
 
Past Due Under 90 Days