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Table of Contents
Realignment Charges
During the second half of 2014, we eliminated approximately 180
positions across all major functional groups and geographies to streamline
our operations. As a result of these actions, $16 of realignment charges was recognized in 2014 on the consolidated statements of income, which
consisted of workforce reduction charges. As of December 31, 2014 , $8 remained in accrued expenses and other on the consolidated balance
sheets and is expected to be paid during 2015.
Realignment charges in 2013 were incurred in connection with the realignment plan we initiated in January 2013. The plan included the
elimination of approximately 710 positions and personnel across all major functional groups and geographies. The total cash and non-cash
charges for workforce reductions of $54 and costs primarily associated with asset impairments of $14 were recorded on the consolidated
statements of income in 2013. The realignment plan was completed by the end of December 31, 2013.
Interest Expense with EMC
Interest expense with EMC of $24
in 2014, representing an increase of $21 compared to 2013 primarily as a result of the additional debt that
we obtained from EMC in connection with the AirWatch acquisition and the change of interest rate from 90-
day LIBOR plus 55 basis points to a
fixed rate of 1.75%. Refer to “Our Relationship with EMC” discussion below for further information.
Other Income (Expense), Net
Other income (expense), net in 2013 was primarily due to the recognition of a pre-tax gain of $44 as a result of exiting certain lines of
business under our business realignment plan. Partially offsetting this gain was an other-than-temporary impairment charge of $13 that we
recognized in connection with a strategic investment.
Income Tax Provision
Our annual effective income tax rate was 15.5% , 11.6% and 16.5% for 2014, 2013, and 2012, respectively. Our effective rate in 2014 is
higher than 2013 primarily due to the fact that the 2013 effective tax rate includes the benefit of the federal research tax credit for both 2013 and
2012, whereas the 2014 effective tax rate only includes the benefit of the federal research tax credit for 2014. Our annual effective tax rate in
2012 does not include any benefit from the federal research tax credit.
Our rate of taxation in foreign jurisdictions is lower than our U.S. tax rate. Our foreign earnings are primarily earned by our subsidiaries
organized in Ireland, and as such, our annual effective tax rate can be significantly impacted by the mix of our earnings in the U.S. and foreign
jurisdictions.
During October 2014, Ireland announced revisions to its tax regulations that will require income earned by our subsidiaries organized in
Ireland to be taxed at higher rates. We will be impacted by the changes in tax regulations in Ireland beginning in 2021. All income earned
abroad, except for previously taxed income for U.S. tax purposes, is considered indefinitely reinvested in our non-U.S. operations and no
provision for U.S. taxes has been provided with respect to such income. As of December 31, 2014 and 2013 , the undistributed earnings of our
non-U.S. subsidiaries were approximately $3,594 and $2,830 , respectively. Our intent is to indefinitely reinvest our non-U.S. funds in our
foreign operations, and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations. At this time, it is not
practicable to estimate the amount of tax that may be payable if we were to repatriate these earnings.
We are included in the EMC consolidated group for U.S. federal income tax purposes, and expect to continue to be included in such
consolidated group for periods in which EMC owns at least 80% of the total voting power and value of our combined outstanding Class A and
Class B common stock as calculated for U.S. federal income tax purposes. The percentage of voting power and value calculated for U.S. federal
income tax purposes may differ from the percentage of outstanding shares
48
For the Year Ended
December 31,
2014
2013
$ Change
% Change
Realignment charges
$
16
$
62
$
(47
)
(75
)%
Stock-based compensation
—
6
(6
)
(100
)
Total expenses
$
16
$
68
$
(53
)
(77
)
For the Year Ended December 31,
2014 vs. 2013
2013 vs. 2012
2014
2013
2012
$ Change
$ Change
Other income (expense), net
$
7
$
28
$
(1
)
$
(21
)
$
29