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TableofContents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Year Ended December 31,
VMware Employee Stock Purchase Plan 2015
2014
2013
Dividendyield None
None
None
Expectedvolatility 30.1%
32.3%
32.9%
Risk-freeinterestrate 0.1%
0.1%
0.1%
Expectedterm(inyears) 0.5
0.5
0.5
Weighted-averagefairvalueatgrantdate $ 20.59
$ 20.71
$ 20.45
Theweighted-averagegrantdatefairvalueofVMwarestockoptionscanfluctuatefromperiodtoperiodprimarilyduetohighervaluedoptionsassumed
throughbusinesscombinationswithexercisepriceslowerthanthefairmarketvalueofVMware’sstockonthedateofgrant.
ForequityawardsgrantedduringtheyearsendedDecember31,2015,2014and2013,volatilitywasbasedonananalysisofhistoricalstockpricesand
impliedvolatilitiesofVMware’sClassAcommonstock.Theexpectedtermisbasedonhistoricalexercisepatternsandpost-vestingterminationbehavior,theterm
ofthepurchaseperiodforgrantsmadeundertheESPP,ortheweighted-averageremainingtermforoptionsassumedinacquisitions.VMware’sexpecteddividend
yieldinputwaszeroasithasnothistoricallypaid,norexpectsinthefuturetopay,cashdividendsonitscommonstock.Therisk-freeinterestratewasbasedona
U.S.Treasuryinstrumentwhosetermisconsistentwiththeexpectedtermofthestockoptions.
Accumulated Other Comprehensive Income (Loss)
Thechangesincomponentsofaccumulatedothercomprehensiveincome(loss)duringtheyearsendedDecember31,2015and2014wereasfollows(tablesin
millions):
Unrealized Gain on
Available-for-Sale Securities
Unrealized Loss on
Forward Contracts
Total
Balance,January1,2014 $ 4
$ —
$ 4
Unrealizedgain(loss),netoftaxesof$0 (1)
(1)
(2)
Amountsreclassifiedfromaccumulatedothercomprehensive
incometotheconsolidatedstatementofincome,netoftaxesof
$(2),$0and$(2) (3)
—
(3)
Othercomprehensiveincome(loss),net (4)
(1)
(5)
Balance,December31,2014 —
(1)
(1)
Unrealizedgain(loss),netoftaxesof$(4),$0and$(4) (7)
—
(7)
Othercomprehensiveincome(loss),net (7)
—
(7)
Balance,December31,2015 $(7)
$(1)
$(8)
UnrealizedgainsonVMware’savailable-for-salesecuritiesarereclassifiedtoinvestmentincomeontheconsolidatedstatementsofincomeintheperiodthat
suchgainsarerealized.
Theeffectiveportionofgains(losses)resultingfromchangesinthefairvalueofforwardcontractsdesignatedascashflowhedginginstrumentsare
reclassifiedtoitsrelatedoperatingexpenselineitemontheconsolidatedstatementsofincomeinthesameperiodthattheunderlyingexpensesareincurred.The
amountsrecordedtotheirrelatedoperatingexpensefunctionallineitemsontheconsolidatedstatementsofincomeduringtheyearsendedDecember31,2015and
2014werenotmaterialtotheindividualfunctionallineitems.
N. Related Parties
TheinformationprovidedbelowincludesasummaryofthetransactionsenteredintowithEMCandEMC’sconsolidatedsubsidiaries(collectively“EMC”).
EMCacquiredthecontrollinginterestinVCECompanyLLC(“VCE”)duringthefourthquarterof2014.TransactionswithVCEfromthedateEMCacquired
VCEhavebeenincludedinthetablesbelow.
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