Western Digital 2015 Annual Report Download - page 49

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During 2014, we recorded $95 million of employee termination, asset impairment and other charges. These
charges consisted of $27 million of employee termination costs, $62 million of asset impairment charges and $6 mil-
lion of other charges. During 2013, we recorded $138 million of employee termination, asset impairment and other
charges. These charges consisted of $109 million of employee termination costs, $14 million of asset impairment
charges and $15 million of other charges.
Other Expense, net. Other expense, net was $39 million in 2014 compared to $44 million in 2013. Interest and
other income increased from $11 million in 2013 to $17 million in 2014 primarily due to a $3 million gain on the
sale of our auction-rate securities in 2014 and a higher average daily invested cash balance for the period. Interest and
other expense increased from $55 million in 2013 to $56 million in 2014, primarily due to a $4 million write-off of
debt issuance costs associated with lenders that extinguished or reduced their participation in our new credit agree-
ment, offset by lower variable interest rates on our average debt balance in 2014.
Income Tax Provision. Income tax expense was $135 million in 2014 as compared to $242 million in 2013. Tax
expense as a percentage of income before taxes was 7.7% in 2014 compared to 19.8% in 2013. We recorded an $88
million charge to reduce our previously recognized California deferred tax assets in fiscal 2013 as a result of the
enactment of California Proposition 39. California Proposition 39, which was approved by California voters on
November 6, 2012, affects California state income tax apportionment for most multi-state taxpayers for tax years
beginning on or after January 1, 2013. This proposition reduces our future income apportioned to California, making
it less likely for us to realize certain California deferred tax assets. In addition, our income tax provision for 2013 also
reflects a tax benefit of $37 million as a result of the retroactive extension of the R&D credit. The R&D credit, which
had previously expired on December 31, 2011, was extended through December 31, 2013 as part of the American
Taxpayer Relief Act of 2012. The differences between the effective tax rate and the U.S. Federal statutory rate are
primarily due to tax holidays in Malaysia, the Philippines, Singapore and Thailand that expire at various dates from
2016 through 2025 and the current year generation of income tax credits.
As of June 27, 2014, we had a recorded liability for unrecognized tax benefits of $300 million. We recognized a
net increase of $60 million in our liability for unrecognized tax benefits during 2014. Interest and penalties recog-
nized on such amounts were not material.
Liquidity and Capital Resources
We ended 2015 with total cash and cash equivalents of $5.0 billion, an increase of $220 million from June 27,
2014. The following table summarizes our statements of cash flows for the three years ended July 3, 2015 (in
millions):
Years Ended
July 3,
2015
June 27,
2014
June 28,
2013
Net cash flow provided by (used in):
Operating activities ............................... $2,242 $ 2,816 $ 3,119
Investing activities ................................ (953) (1,936) (970)
Financing activities ............................... (1,069) (385) (1,048)
Net increase in cash and cash equivalents ................. $ 220 $ 495 $1,101
Our investment policy is to manage our investment portfolio to preserve principal and liquidity while maximizing
return through the full investment of available funds. We believe our current cash, cash equivalents and cash generated
from operations as well as our available credit facilities will be sufficient to meet our working capital, debt, dividend,
stock repurchase and capital expenditure needs for at least the next twelve months. Our ability to sustain our working
capital position is subject to a number of risks that we discuss in Part I, Item 1A in this Annual Report on Form 10-K.
A total of $4.3 billion and $3.5 billion of our cash and cash equivalents were held outside of the United States at
July 3, 2015 and June 27, 2014, respectively. Substantially all of the amounts held outside of the United States are
intended to be indefinitely reinvested in foreign operations. As described in Part II, Item 8, Note 5 of the Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K, we paid $773 million to Seagate in
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