TERADATA CORP /DE/, 10-K filed on 2/27/2015
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data in Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Jan. 30, 2015
Jun. 30, 2014
Document Information
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
TDC 
 
 
Entity Registrant Name
TERADATA CORP /DE/ 
 
 
Entity Central Index Key
0000816761 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
146.0 
 
Entity Public Float
 
 
$ 6.2 
Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue
 
 
 
Product revenue
$ 1,227 
$ 1,230 
$ 1,297 
Service revenue
1,505 
1,462 
1,368 
Total revenue
2,732 
2,692 
2,665 
Costs and operating expenses
 
 
 
Cost of products
443 
433 
416 
Cost of services
810 
786 
758 
Selling, general and administrative expenses
770 
757 
728 
Research and development expenses
206 
184 
183 
Total costs and operating expenses
2,229 
2,160 
2,085 
Income from operations
503 
532 
580 
Other expense, net
(9)
(24)
(2)
Income before income taxes
494 
508 
578 
Income tax expense
127 
131 
159 
Net income
$ 367 
$ 377 
$ 419 
Net income per common share
 
 
 
Basic (in usd per share)
$ 2.36 
$ 2.31 
$ 2.49 
Diluted (in usd per share)
$ 2.33 
$ 2.27 
$ 2.44 
Weighted average common shares outstanding
 
 
 
Basic (in shares)
155.3 
163.4 
168.2 
Diluted (in shares)
157.8 
166.4 
171.7 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
 
Net income
$ 367 
$ 377 
$ 419 
Other comprehensive income:
 
 
 
Foreign currency translation adjustments
(47)
Securities:
 
 
 
Unrealized gain on securities, before tax
50 
Unrealized gain on securities, tax portion
(19)
Unrealized gain on securities, net of tax
31 
Defined benefit plans:
 
 
 
Defined benefit plan adjustment, before tax
(28)
Defined benefit plan adjustment, tax portion
(3)
Defined benefit plan adjustment, net of tax
(21)
Other comprehensive (loss) income
(37)
13 
Comprehensive income
$ 330 
$ 381 
$ 432 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current Assets
 
 
Cash and cash equivalents
$ 834 
$ 695 
Accounts receivable, net
619 
717 
Inventories
38 
56 
Other current assets
81 
95 
Total current assets
1,572 
1,563 
Property and equipment, net
159 
161 
Capitalized software, net
199 
195 
Goodwill
948 
946 
Acquired intangible assets, net
136 
149 
Deferred income taxes
20 
24 
Other assets
98 
58 
Total assets
3,132 
3,096 
Current liabilities
 
 
Current portion of long-term debt
53 
26 
Short-term borrowings
220 
Accounts payable
126 
114 
Payroll and benefits liabilities
125 
136 
Deferred revenue
370 
390 
Other current liabilities
101 
110 
Total current liabilities
995 
776 
Long-term debt
195 
248 
Pension and other postemployment plan liabilities
99 
76 
Long-term deferred revenue
18 
25 
Deferred tax liabilities
86 
87 
Other liabilities
32 
27 
Total liabilities
1,425 
1,239 
Commitments and contingencies
   
   
Stockholders' equity
 
 
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at December 31, 2014 and 2013, respectively
Common stock: par value $0.01 per share, 500.0 shares authorized, 147.9 and 190.9 shares issued at December 31, 2014 and 2013, respectively
Paid-in capital
1,054 
973 
Treasury stock: 0.0 and 31.6 shares at December 31, 2014 and 2013, respectively
(1,184)
Retained earnings
656 
2,033 
Accumulated other comprehensive (loss) income
(4)
33 
Total stockholders’ equity
1,707 
1,857 
Total liabilities and stockholders’ equity
$ 3,132 
$ 3,096 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
100,000,000 
100,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
500,000,000 
500,000,000 
Common stock, shares issued
147,900,000 
190,900,000 
Treasury stock, shares
31,600,000 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Operating activities
 
 
 
Net income
$ 367 
$ 377 
$ 419 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
169 
147 
126 
Stock-based compensation expense
50 
49 
43 
Excess tax benefit from stock-based compensation
(2)
(7)
(37)
Deferred income taxes
(2)
18 
77 
Loss on investments
25 
Changes in assets and liabilities:
 
 
 
Receivables
101 
(46)
(165)
Inventories
18 
(9)
14 
Current payables and accrued expenses
(23)
(63)
105 
Deferred revenue
(28)
42 
Other assets and liabilities
21 
10 
(49)
Net cash provided by operating activities
680 
510 
575 
Investing activities
 
 
 
Expenditures for property and equipment
(54)
(60)
(67)
Additions to capitalized software
(75)
(78)
(81)
Business acquisitions and other investing activities, net
(69)
(36)
(274)
Net cash used in investing activities
(198)
(174)
(422)
Financing activities
 
 
 
Proceeds from short-term borrowings
220 
Repayments of long-term borrowings
(26)
(15)
(11)
Repurchases of common stock
(551)
(382)
(277)
Excess tax benefit from stock-based compensation
37 
Other financing activities, net
29 
28 
55 
Net cash used in financing activities
(326)
(362)
(196)
Effect of exchange rate changes on cash and cash equivalents
(17)
(8)
Increase (decrease) in cash and cash equivalents
139 
(34)
(43)
Cash and cash equivalents at beginning of year
695 
729 
772 
Cash and cash equivalents at end of year
834 
695 
729 
Cash paid during the year for:
 
 
 
Income taxes
133 
124 
54 
Interest
$ 3 
$ 4 
$ 4 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Millions, unless otherwise specified
Total
Common Stock
Treasury Stock
Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Beginning Balance at Dec. 31, 2011
$ 1,494 
$ 2 
$ (526)
$ 765 
$ 1,237 
$ 16 
Beginning Balance (in shares) at Dec. 31, 2011
 
187 
(19)
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Net income
419 
 
 
 
419 
 
Employee stock compensation, employee stock purchase programs and option exercises (in shares)
 
 
 
 
 
Employee stock compensation, employee stock purchase programs and option exercises
95 
 
 
95 
 
 
Income tax benefit from stock compensation plans
38 
 
 
38 
 
 
Purchases of treasury stock, not retired (in shares)
 
 
(5.0)
 
 
 
Purchases of treasury stock, not retired
(280)
 
(280)
 
 
 
Pension and postemployment benefit plans, net of tax
 
 
 
 
Unrealized gain on securities
 
 
 
 
 
Currency translation adjustment
 
 
 
 
Ending Balance at Dec. 31, 2012
1,779 
(806)
898 
1,656 
29 
Ending Balance (in shares) at Dec. 31, 2012
 
190 
(24)
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Net income
377 
 
 
 
377 
 
Employee stock compensation, employee stock purchase programs and option exercises (in shares)
 
 
 
 
 
Employee stock compensation, employee stock purchase programs and option exercises
68 
 
 
68 
 
 
Income tax benefit from stock compensation plans
 
 
 
 
Purchases of treasury stock, not retired (in shares)
 
 
(8.0)
 
 
 
Purchases of treasury stock, not retired
(378)
 
(378)
 
 
 
Pension and postemployment benefit plans, net of tax
 
 
 
 
Unrealized gain on securities
 
 
 
 
 
Currency translation adjustment
 
 
 
 
Ending Balance at Dec. 31, 2013
1,857 
(1,184)
973 
2,033 
33 
Ending Balance (in shares) at Dec. 31, 2013
 
191 
(32)
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Net income
367 
 
 
 
367 
 
Employee stock compensation, employee stock purchase programs and option exercises (in shares)
 
 
 
 
 
Employee stock compensation, employee stock purchase programs and option exercises
77 
 
 
78 
 
 
Employee stock compensation, employee stock purchase programs and option exercises
 
(1)
 
 
 
 
Income tax benefit from stock compensation plans
 
 
 
 
Purchases of treasury stock, not retired (in shares)
 
(32.0)
32.0 
 
 
 
Purchases of treasury stock, not retired
 
1,184 
 
(1,184)
 
Repurchases of Company common stock retired (in shares)
 
(13)
 
 
 
 
Repurchases of Company common stock, retired
(560)
 
 
 
(560)
 
Pension and postemployment benefit plans, net of tax
(21)
 
 
 
 
(21)
Unrealized gain on securities
31 
 
 
 
 
31 
Currency translation adjustment
(47)
 
 
 
 
(47)
Ending Balance at Dec. 31, 2014
$ 1,707 
$ 1 
$ 0 
$ 1,054 
$ 656 
$ (4)
Ending Balance (in shares) at Dec. 31, 2014
 
148 
 
 
 
Description of Business, Basis of Presentation and Significant Accounting Policies
Description of Business, Basis of Presentation and Significant Accounting Policies
Description of Business, Basis of Presentation and Significant Accounting Policies
Description of the Business. Teradata Corporation (“Teradata” or “the Company”) is a global leader in analytic data platforms, marketing and analytic applications, and related services. The Company’s analytic data platforms are comprised of software, hardware, and related business consulting and support services for data warehousing, and big data analytics.
Basis of Presentation. The financial statements are presented on a consolidated basis and include the accounts of the Company and its wholly-owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. On an ongoing basis, management evaluates these estimates and judgments, including those related to allowances for doubtful accounts, the valuation of inventory to net realizable value, impairments, stock-based compensation, pension and other postemployment benefits, and income taxes and any changes will be accounted for on a prospective basis. Actual results could differ from those estimates.
Revenue Recognition. Teradata’s solution offerings typically include software, software subscriptions (unspecified when-and-if-available upgrades), hardware, maintenance support services, and other consulting, implementation and installation-related (“consulting”) services. Teradata records revenue when it is realized, or realizable, and earned. Teradata considers these requirements met when:
Persuasive evidence of an arrangement exists
The products or services have been delivered to the customer
The sales price is fixed or determinable and free of contingencies or significant uncertainties
Collectibility is reasonably assured
Teradata reports revenue net of any taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. The Company assesses whether fees are fixed or determinable at the time of sale. Standard payment terms may vary based on the country in which the agreement is executed, but are generally between 30 days and 90 days. Payments that are due within six months are generally deemed to be fixed or determinable based on a successful collection history on such arrangements, and thereby satisfy the required criteria for revenue recognition. Teradata delivers its solutions primarily through direct sales channels, as well as through alliances with system integrators, other independent software vendors and distributors, and value-added resellers (collectively referred to as “resellers”). In assessing whether the sales price to a reseller is fixed or determinable, the Company considers, among other things, past business practices with the reseller, the reseller’s operating history, payment terms, return rights and the financial wherewithal of the reseller. When Teradata determines that the contract fee to a reseller is not fixed or determinable, that transaction is deferred and recognized upon sell-through to the end customer.
The Company’s deliverables often involve delivery or performance at different periods of time. Revenue for software is generally recognized upon delivery with the hardware once title and risk of loss have been transferred. Revenue for software subscriptions, which provide for unspecified upgrades or enhancements on a when-and-if-available basis, is recognized straight-line over the term of the subscription arrangement. Revenue for maintenance support services is also recognized on a straight-line basis over the term of the contract. Revenue for other consulting, implementation and installation services is recognized as services are provided. In certain instances, acceptance of the product or service is specified by the customer. In such cases, revenue is deferred until the acceptance criteria have been met. Delivery and acceptance generally occur in the same reporting period. The Company’s arrangements generally do not include any customer negotiated provisions for cancellation, termination or refunds that would significantly impact recognized revenue.

The Company evaluates all deliverables in an arrangement to determine whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value, and if the contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in the control of Teradata. Most of the Company’s products and services qualify as separate units of accounting and are recognized upon meeting the criteria as described above.
For multiple deliverable arrangements that contain non-software related deliverables, the Company allocates revenue to each deliverable based upon the relative selling price hierarchy and if software and software-related deliverables are also included in the arrangement, to those deliverables as a group based on the best estimate of selling price (“BESP”) for the group. The selling price for a deliverable is based on its vendor-specific objective evidence of selling price (“VSOE”) if available, third-party evidence of selling price (“TPE”) if VSOE is not available, or BESP if neither VSOE nor TPE is available. The Company then recognizes revenue when the remaining revenue recognition criteria are met for each deliverable. For the software group or arrangements that contain only software and software-related deliverables, the revenue is allocated utilizing the residual or fair value method. Under the residual method, the VSOE of the undelivered elements is deferred and accounted for under the applicable revenue recognition guidance, and the remaining portion of the software arrangement fee is allocated to the delivered elements and is recognized as revenue. The fair value method is similar to the relative selling price method used for non-software deliverables except that the allocation of each deliverable is based on VSOE. For software groups or arrangements that contain only software and software-related deliverables in which VSOE does not exist for each deliverable (fair value method) or does not exist for each undelivered element (residual method), revenue for the entire software arrangement or group is deferred and not recognized until delivery of all elements without VSOE has occurred, unless the only undelivered element is postcontract customer support (“PCS”) in which case the entire software arrangement or group is recognized ratably over the PCS period.
Teradata’s analytic database software and hardware products are sold and delivered together in the form of a “Node” of capacity as an integrated technology solution. Because both the analytic database software and hardware platform are necessary to deliver the analytic data platform’s essential functionality, the database software and hardware (Node) are excluded from the software rules and considered a non-software related deliverable. Teradata software applications and related support are considered software-related deliverables. Additionally, the amount of revenue allocated to the delivered items utilizing the relative selling price or fair value method is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (the non-contingent amount).
VSOE is based upon the normal pricing and discounting practices for those products and services when sold separately. Teradata uses the stated renewal rate approach in establishing VSOE for maintenance and subscriptions (collectively referred to as PCS). Under this approach, the Company assesses whether the contractually stated renewal rates are substantive and consistent with the Company’s normal pricing practices. Renewal rates greater than the lower level of our targeted pricing ranges are considered to be substantive and, therefore, meet the requirements to support VSOE. In instances where there is not a substantive renewal rate in the arrangement, the Company allocates revenue based upon BESP, using the minimum established pricing targets as supported by the renewal rates for similar customers utilizing the bell-curve method. Teradata also offers consulting and installation-related services to its customers, which are considered non-software deliverables if they relate to the nodes. These services are rarely considered essential to the functionality of the data warehouse solution deliverable and there is never software customization of the proprietary database software. VSOE for consulting services is based on the hourly rates for standalone consulting services projects by geographic region and are indicative of the Company’s customary pricing practices. Pricing in each market is structured to obtain a reasonable margin based on input costs.
In nearly all multiple-deliverable arrangements, the Company is unable to establish VSOE for all deliverables in the arrangement. This is due to infrequently selling each deliverable separately (such is the case with our nodes), not pricing products or services within a narrow range, or only having a limited sales history. When VSOE cannot be established, attempts are made to establish TPE of the selling price for each deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. However, Teradata’s offerings contain significant differentiation such that the comparable pricing of products with similar functionality cannot typically be obtained. This is because Teradata’s products contain a significant amount of proprietary technology and its solutions offer substantially different features and functionality than other available products. As Teradata’s products are significantly different from those of its competitors, the Company is unable to establish TPE for the vast majority of its products.
When the Company is unable to establish selling prices using VSOE or TPE, the Company uses BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service was sold on a standalone basis. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, geographies, market conditions, product life cycles, competitive landscape, internal costs, gross margin objectives, purchase volumes and pricing practices.
The primary consideration in developing BESP for the Company’s nodes is the bell-curve method based on historical transactions. The BESP analysis is at the geography level in order to align it with the way in which the Company goes to market and establishes pricing for its products. The Company has established discount ranges off of published list prices for different geographies based on strategy and maturity of Teradata’s presence in the respective geography. There are distinctions in each geography and product group which support the use of geographies and markets for the determination of BESP. For example, the Company’s U.S. market is relatively mature and most of the large transactions are captured in this market, whereas the International markets are less mature with generally smaller deal size. Additionally, the prices and margins for the Company’s products vary by geography and by product class. BESP is analyzed on a quarterly basis using data from the 4 previous quarters, which the Company believes best reflects most recent pricing practices in a changing marketplace.
The Company reviews VSOE, TPE and its determination of BESP on a periodic basis and updates it, when appropriate, to ensure that the practices employed reflect the Company’s recent pricing experience. The Company maintains internal controls over the establishment and updates of these estimates, which includes review and approval by the Company’s management. For the year ended December 31, 2014 there was no material impact to revenue resulting from changes in VSOE, TPE or BESP, nor does the Company expect a material impact from such changes in the near term.
Perpetual licenses, term licenses, hosting arrangements and software as a service. Teradata’s application offerings include perpetual licenses, term licenses, hosting arrangements and software as a service. For software arrangements that include a perpetual license, the residual method is typically used because the Company does not have VSOE for its perpetual licenses. This is because the perpetual license is never sold standalone. If the license is of limited life and does not require the Company to host the software for the customer, the software is considered a term license. Teradata’s term licenses are typically offered for application software and include a right-to-use license, PCS and consulting services. The revenue for these arrangements are typically recognized ratably over the contract term. The term of these arrangements varies between one and five years and may or may not include hosting services. In most arrangements the pricing is bundled to the customer. If the term license is hosted, the customer has the right to take possession of the software at any time during the hosting period. The customer’s rights to the software in these circumstances are not dependent on additional software payments or significant penalties, and the customer can feasibly run the software on its own hardware or contract with another party to host the software. If these criteria are not met, the hosting arrangement is accounted for outside the software rules as a software as a service arrangement. Under a software as a service arrangement, the license, PCS and hosting fee are recognized ratably over the term of the contract.
Shipping and Handling. Product shipping and handling costs are included in cost of products in the Consolidated Statements of Income.
Cash and Cash Equivalents. All short-term, highly-liquid investments having original maturities of three months or less are considered to be cash equivalents.
Allowance for Doubtful Accounts. Teradata establishes provisions for doubtful accounts using both percentages of accounts receivable balances to reflect historical average credit losses and specific provisions for known issues.
Inventories. Inventories are stated at the lower of cost or market. Cost of service parts is determined using the average cost method. Finished goods inventory is determined using actual cost.
Available-for-sale Securities. Available-for-sale securities are reported at fair value. Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income. Realized gains and losses are included in other income and expense in the Consolidated Statements of Income. Teradata's available-for-sale securities are for affiliation and other continuing business advantage and therefore recorded under non-current other assets in the Consolidated Balance Sheets.
Long-Lived Assets
Property and Equipment. Property and equipment, leasehold improvements and rental equipment are stated at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the related assets primarily on a straight-line basis. Equipment is depreciated over 3 to 20 years and buildings over 25 to 45 years. Leasehold improvements are depreciated over the life of the lease or the asset, whichever is shorter. Total depreciation expense on the Company’s property and equipment for December 31 was as follows:
In millions
2014
 
2013
 
2012
Depreciation expense
$
51

 
$
48

 
$
41


Capitalized Software. Direct development costs associated with internal-use software are capitalized and amortized over the estimated useful lives of the resulting software. The costs are capitalized when both the preliminary project stage is completed and it is probable that computer software being developed will be completed and placed in service. Teradata typically amortizes capitalized internal-use software on a straight-line basis over three years beginning when the asset is substantially ready for use.
Costs incurred for the development of big data, marketing and analytic applications are expensed as incurred based on the frequency and agile nature of development. Costs incurred for the development of data warehousing software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established. Technological feasibility is established when planning, designing and initial coding activities that are necessary to establish the product can be produced to meet its design specifications. In the absence of a program design, a working model is used to establish technological feasibility. These costs are included within capitalized software and are amortized over the estimated useful lives of four years using the greater of the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or the straight-line method over the remaining estimated economic life of the product beginning when the product is available for general release. Costs capitalized include direct labor and related overhead costs. Costs incurred prior to technological feasibility and after general release are expensed as incurred. The following table identifies the activity relating to capitalized software:
 
Internal-use Software
 
External-use Software
In millions
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Beginning balance at January 1
$
12

 
$
12

 
$
11

 
$
183

 
$
161

 
$
129

Capitalized
7

 
6

 
6

 
68

 
72

 
75

Amortization
(6
)
 
(6
)
 
(5
)
 
(65
)
 
(50
)
 
(43
)
Ending balance at December 31
$
13

 
$
12

 
$
12

 
$
186

 
$
183

 
$
161



The aggregate amortization expense (actual and estimated) for internal-use and external-use software for the following periods is:
 
Actual
 
For the year ended (estimated)
In millions
2014
 
2015
 
2016
 
2017
 
2018
 
2019
Internal-use software amortization expense
$
6

 
$
5

 
$
4

 
$
3

 
$
1

 
$

External-use software amortization expense
$
65

 
$
67

 
$
55

 
$
38

 
$
20

 
$
6


Estimated expense is based on capitalized software at December 31, 2014 and does not include any new capitalization for future periods.
Valuation of Long-Lived Assets. Long-lived assets such as property and equipment, acquired intangible assets and internal capitalized software are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss would be recognized when estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount.
Goodwill. Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill amounts are not amortized, but rather are tested for impairment annually or upon occurrence of an event or change in circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company performs its annual goodwill impairment testing in the fourth quarter, and did not recognize any goodwill impairment charges in 2014, 2013 or 2012.
Warranty. Provisions for product warranties are recorded in the period in which the related revenue is recognized. The Company accrues warranty reserves using percentages of revenue to reflect the Company’s historical average warranty claims.
Research and Development Costs. Research and development costs are expensed as incurred (with the exception of the capitalized software development costs discussed above). Research and development costs primarily include labor-related costs, contractor fees, and overhead expenses directly related to research and development support.
Pension and Postemployment Benefits. The Company accounts for its pension and postemployment benefit obligations using actuarial models. The measurement of plan obligations was made as of December 31, 2014. Liabilities are computed using the projected unit credit method. The objective under this method is to expense each participant’s benefits under the plan as they accrue, taking into consideration salary increases and the plan’s benefit allocation formula. Thus, the total pension or postemployment benefit to which each participant is expected to become entitled is broken down into units, each associated with a year of past or future credited service.
The Company recognizes the funded status of its pension and postemployment plan obligations in its consolidated balance sheet and records in other comprehensive income certain gains and losses that arise during the period, but are deferred under pension accounting rules.
Foreign Currency. Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment are translated into U.S. dollars at period-end exchange rates. Income and expense accounts are translated at daily exchange rates prevailing during the period. Adjustments arising from the translation are included in accumulated other comprehensive income, a separate component of stockholders’ equity. Gains and losses resulting from foreign currency transactions are included in determining net income.
Income Taxes. Income tax expense is provided based on income before income taxes in the various jurisdictions in which the Company conducts its business. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred taxes are determined based on the enacted tax rates expected to apply in the periods in which the deferred assets or liabilities are expected to be settled or realized. Teradata recognizes tax benefits from uncertain tax positions only if it is more likely than not the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company records valuation allowances related to its deferred income tax assets when it is more likely than not that some portion or all of the deferred income tax assets will not be realized.
Stock-based Compensation. Stock-based payments to employees, including grants of stock options, restricted stock and restricted stock units, are recognized in the financial statements based on their fair value. The fair value of each stock option award on the grant date is estimated using the Black-Scholes option-pricing model with the following assumptions: expected dividend yield, expected stock price volatility, weighted-average risk-free interest rate and weighted average expected term of the options. The Company’s expected volatility assumption used in the Black-Scholes option-pricing model is based on Teradata's historical volatility. Prior to 2014, because the Company did not have a sufficient trading history as a stand-alone public company, the volatility was based on a blend of peer group volatility and Teradata volatility. The expected term assumption is based on the simplified method under GAAP, which is based on the vesting period and contractual term for each vesting tranche of awards. The mid-point between the vesting date and the expiration date is used as the expected term under this method. The risk-free interest rate used in the Black-Scholes model is based on the implied yield curve available on U.S. Treasury zero-coupon issues at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a cash dividend.
Treasury Stock. Prior to the fourth quarter of 2014, when all treasury stock shares were retired, shares of the Company’s common stock repurchased through the share repurchase programs were held as treasury stock. Treasury stock was accounted for using the cost method. Beginning in the fourth quarter of 2014, stock repurchased through the share repurchase programs will be retired upon repurchase. The excess repurchase price over the par value is charged to retained earnings.
Earnings Per Share. Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the reported period. The calculation of diluted earnings per share is similar to basic earnings per share, except that the weighted-average number of shares outstanding includes the dilution from potential shares added from stock options, restricted stock awards and other stock awards. Refer to Note 5 for share information on the Company’s stock compensation plans.
The components of basic and diluted earnings per share are as follows: 
 
For the year ended December 31
In millions, except earnings per share
2014
 
2013
 
2012
Net income available for common stockholders
$
367

 
$
377

 
$
419

Weighted average outstanding shares of common stock
155.3

 
163.4

 
168.2

Dilutive effect of employee stock options and restricted stock
2.5

 
3.0

 
3.5

Common stock and common stock equivalents
157.8

 
166.4

 
171.7

Earnings per share:
 
 
 
 
 
Basic
$
2.36

 
$
2.31

 
$
2.49

Diluted
$
2.33

 
$
2.27

 
$
2.44


Options to purchase 2.4 million and 0.9 million shares of common stock for the years ended December 31, 2014 and 2013, respectively, were not included in the computation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares and, therefore, the effect would have been anti-dilutive. No stock options were excluded from the computation of diluted earnings per share for the year ended December 31, 2012.
Recently Issued Accounting Pronouncements
Revenue Recognition. In May 2014, the Financial Accounting Standards Board ("FASB") issued new guidance that affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The new guidance will supersede the revenue recognition requirements in the current revenue recognition guidance, and most industry-specific guidance. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement in this update. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the FASB defines a five step process which includes the following: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early application not permitted. The standard allows entities to apply the standard retrospectively for all periods presented or alternatively an entity is permitted to recognize the cumulative effect of initially applying the guidance as an opening balance sheet adjustment to retained earnings in the period of initial application. The Company is currently evaluating the impact on its consolidated financial position, results of operations and cash flows, as well as the method of transition that will be used in adopting the standard.

Accounting for Share-based Payments with Performance Targets. In June 2014, the FASB issued new guidance that requires that a performance target that affects vesting and that could be achieved after the requisite service period, be treated as a performance condition. A reporting entity should apply existing guidance as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The amendments in this update are effective for annual periods, and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company is currently evaluating the impact on its consolidated financial position, results of operations and cash flows.
Recently Adopted Guidance
Income Taxes. In July 2013, the FASB issued new guidance requiring the financial statement presentation of an unrecognized tax benefit in a particular jurisdiction, or a portion thereof, as a reduction to a deferred tax asset for a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward, unless the uncertain tax position is not available to reduce, or would not be used to reduce, the NOL or carryforward under the tax law in the same jurisdiction; otherwise, the unrecognized tax benefit should be presented as a gross liability and should not be combined with a deferred tax asset. This new guidance is effective for interim and annual periods beginning after December 15, 2013. On January 1, 2014, the Company adopted the new guidance which did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Business Combinations. In November 2014, the FASB issued new guidance that will provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. The amendments in this update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The adoption of this new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Supplemental Financial Information
Supplemental Financial Information
Supplemental Financial Information
 
 
At December 31
In millions
2014
 
2013
Accounts receivable
 
 
 
Trade
$
635

 
$
731

Other
3

 
4

Accounts receivable, gross
638

 
735

Less: allowance for doubtful accounts
(19
)
 
(18
)
Total accounts receivable, net
$
619

 
$
717

Inventories
 
 
 
Finished goods
$
21

 
$
39

Service parts
17

 
17

Total inventories
$
38

 
$
56

Other current assets
 
 
 
Current deferred tax assets
$
28

 
$
34

Other
53

 
61

Total other current assets
$
81

 
$
95

Property and equipment
 
 
 
Land
$
8

 
$
8

Buildings and improvements
77

 
74

Machinery and other equipment
341

 
309

Property and equipment, gross
426

 
391

Less: accumulated depreciation
(267
)
 
(230
)
Total property and equipment, net
$
159

 
$
161

Other assets
 
 
 
Available-for-sale securities
$
78

 
$

Other
20

 
58

Total other assets
$
98

 
$
58

Other current liabilities
 
 
 
Sales and value-added taxes
$
40

 
$
34

Other
61

 
76

Total other current liabilities
$
101

 
$
110

Deferred revenue
 
 
 
Deferred revenue, current
$
370

 
$
390

Long-term deferred revenue
18

 
25

Total deferred revenue
$
388

 
$
415

Goodwill and Acquired Intangible Assets
Goodwill and Acquired Intangible Assets
Goodwill and Acquired Intangible Assets
The following table identifies the activity relating to goodwill by operating segment:
In millions
Balance
December 31,
2013
 
Additions
 
Currency
Translation
Adjustments
 
Balance
December 31,
2014
Goodwill
 
 
 
 
 
 
 
Americas
$
626

 
$
30

 
$
(2
)
 
$
654

International
320

 

 
(26
)
 
294

Total goodwill
$
946

 
$
30

 
$
(28
)
 
$
948


The change in goodwill for the year ended December 31, 2014 was primarily due to immaterial complementary acquisitions that were completed during the period, which was offset by the impact of currency translation adjustments. See Note 12 for additional information on the Company's business acquisitions. In the fourth quarter of 2014, the Company performed its annual impairment test of goodwill and determined that no impairment to the carrying value of goodwill was necessary, as the fair value of each reporting unit exceeded their respective carrying amounts, including goodwill. Teradata reviewed four reporting units in its 2014 goodwill impairment assessment, as both geographic operating segments consisted of separate reporting units for data warehouse and application software activities.
Acquired intangible assets were specifically identified when acquired, and are deemed to have finite lives. The gross carrying amount and accumulated amortization for Teradata’s acquired intangible assets were as follows: 
 
 
 
December 31, 2014
 
December 31, 2013
In millions
Amortization
Life (in Years)
 
Gross 
Carrying Amount
 
Accumulated
Amortization
and Currency
Translation
Adjustments
 
Gross
 Carrying
Amount
 
Accumulated
Amortization
and Currency
Translation
Adjustments
Acquired intangible assets
 
 
 
 
 
 
 
 
 
Intellectual property/developed technology
1 to 7
 
$
186

 
$
(95
)
 
$
153

 
$
(70
)
Customer relationships
3 to 10
 
77

 
(35
)
 
77

 
(23
)
Trademarks/trade names
5
 
1

 
(1
)
 
15

 
(7
)
In-process research and development
5
 
5

 
(2
)
 
5

 
(1
)
Non-compete agreements
3
 

 

 
1

 
(1
)
Total
 
 
$
269

 
$
(133
)
 
$
251

 
$
(102
)

The gross carrying amount of acquired intangible assets increased by $39 million with the addition of newly acquired intangible assets associated with immaterial acquisitions. This was partially offset by $21 million for certain intangible assets previously acquired that became fully amortized and were removed from the balance sheet.
The aggregate amortization expense (actual and estimated) for acquired intangible assets for the following periods is:
 
Actual
 
For the year ended (estimated)
In millions
2012
 
2013
 
2014
 
2015
 
2016
 
2017
 
2018
 
2019
Amortization expense
$
37

 
$
44

 
$
47

 
$
43

 
$
34

 
$
25

 
$
14

 
$
11

Income Taxes
Income Taxes
Income Taxes
For the years ended December 31, income before income taxes consisted of the following: 
In millions
2014
 
2013
 
2012
Income before income taxes
 
 
 
 
 
United States
$
301

 
$
362

 
$
388

Foreign
193

 
146

 
190

Total income before income taxes
$
494

 
$
508

 
$
578


For the years ended December 31, income tax expense consisted of the following: 
In millions
2014
 
2013
 
2012
Income tax expense
 
 
 
 
 
Current
 
 
 
 
 
Federal
$
94

 
$
78

 
$
50

State and local
8

 
10

 
9

Foreign
27

 
26

 
23

Deferred
 
 
 
 
 
Federal
1

 
18

 
72

State and local

 
2

 
7

Foreign
(3
)
 
(3
)
 
(2
)
Total income tax expense
$
127

 
$
131

 
$
159

Effective tax rate
25.7
%
 
25.8
%
 
27.5
%


The following table presents the principal components of the difference between the effective tax rate and the U.S. federal statutory income tax rate for the years ended December 31:
 
2014
 
2013
 
2012
Income tax expense at the U.S. federal tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Foreign income tax differential
(9.0
)%
 
(7.3
)%
 
(8.1
)%
State and local income taxes
0.5
 %
 
0.4
 %
 
0.7
 %
U.S. permanent book/tax differences
(1.7
)%
 
(1.6
)%
 
(0.5
)%
Other, net
0.9
 %
 
(0.7
)%
 
0.4
 %
Effective tax rate
25.7
 %
 
25.8
 %
 
27.5
 %

There were no material discrete tax items impacting the effective tax rate for 2014; the 2013 effective tax rate included a $4 million discrete tax rate benefit related to the 2012 U.S. Federal Research and Development ("R&D") Tax Credit, which was retroactively reinstated in the first quarter of 2013. The rate differential resulting from the higher foreign earnings mix in 2014 versus 2013 effectively offset the one-time discrete benefit reflected in the 2013 effective tax rate, resulting in comparable effective tax rates over both periods.
Deferred income tax assets and liabilities included in the balance sheets at December 31 were as follows:
In millions
2014
 
2013
Deferred income tax assets
 
 
 
Employee pensions and other liabilities
$
61

 
$
57

Other balance sheet reserves and allowances
22

 
22

Tax loss and credit carryforwards
59

 
41

Deferred revenue

 
2

Capitalized research and development

 
5

Other

 
1

Total deferred income tax assets
142

 
128

Valuation allowance
(20
)
 
(13
)
Net deferred income tax assets
122

 
115

Deferred income tax liabilities
 
 
 
Intangibles and capitalized software
102

 
117

Property and equipment
29

 
29

Deferred revenue
17

 

Other
12

 

Total deferred income tax liabilities
160

 
146

Total net deferred income tax liabilities
$
(38
)
 
$
(31
)

As of December 31, 2014, Teradata has NOL and tax credit carryforwards totaling $70 million (tax effected and before any valuation allowance offset and application of recognition criteria for uncertain tax positions). Of the total tax carryforwards, $18 million are NOLs in the U.S. and certain foreign jurisdictions, a small portion of which will begin to expire in 2015; $10 million is a U.S. capital loss carryforward which expires in 2019; $31 million are R&D tax credits, of which almost 90 percent are California R&D tax credits that have an indefinite carryforward period (which has a $20 million valuation allowance offset recorded); and the remaining $11 million are tax attributes that were acquired from various acquisitions and were not recorded for financial reporting purposes as they did not meet the recognition criteria for uncertain tax positions.
The Company’s intention is to permanently reinvest its foreign earnings outside of the U.S. As a result, the effective tax rates in the periods presented are largely based upon the pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business; these jurisdictions apply a broad range of statutory income tax rates. At December 31, 2014, the Company had not provided for federal income taxes on earnings of approximately $1 billion from its foreign subsidiaries. Should these earnings be distributed in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and potential withholding taxes in various international jurisdictions. The U.S. taxes would be partially offset by U.S. foreign tax credits. Determination of the amount of unrecognized deferred U.S. tax liability is not practical because of the complexities associated with this hypothetical calculation.
The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company reflects any interest and penalties recorded in connection with its uncertain tax positions as a component of income tax expense.
As of December 31, 2014, the Company’s uncertain tax positions totaled approximately $36 million, of which $18 million is reflected in the other liabilities section of the Company’s balance sheet as a non-current liability, and $3 million is recorded in current income taxes payable as the Company expects to settle this uncertain tax position within the next twelve months. The remaining balance of $15 million of uncertain tax positions relates to certain tax attributes both generated by the Company and acquired in various acquisitions, which are netted against the underlying deferred tax assets recorded on the balance sheet. The entire balance of $36 million in uncertain tax positions would cause a decrease in the effective income tax rate upon recognition. Teradata has recorded $2 million of interest accruals related to its uncertain tax liabilities as of December 31, 2014.
Below is a rollforward of the Company’s liability related to uncertain tax positions at December 31:
In millions
2014
 
2013
Balance at January 1
$
34

 
$
31

Gross increases for prior period tax positions
4

 
1

Gross decreases for prior period tax positions
(3
)
 
(3
)
Gross increases for current period tax positions
4

 
5

Decreases due to the lapse of applicable statute of limitations
(3
)
 

Balance at December 31
$
36

 
$
34


The Company and its subsidiaries file income tax returns in the U.S. federal and various state jurisdictions, as well as numerous foreign jurisdictions. As of December 31, 2014, the Company has ongoing tax audits in a limited number of state and foreign jurisdictions; however, no material adjustments have been proposed or made in any of these examinations to date which would result in any incremental income tax expense in future periods to the company. In addition, the Internal Revenue Service audit of the Company’s United States Federal tax filing for tax year 2011 was finalized in July of 2014 and resulted in a no change audit.
Employee Stock-based Compensation Plans
Employee Stock-based Compensation Plans
Employee Stock-based Compensation Plans
The Company recorded stock-based compensation expense for the years ended December 31 as follows: 
In millions
2014
 
2013
 
2012
Stock options
$
13

 
$
14

 
$
15

Restricted stock
33

 
32

 
28

Employee share repurchase program (compensatory effective 1/1/13)
4

 
3

 

Total stock-based compensation before income taxes
50

 
49

 
43

Tax benefit
(16
)
 
(16
)
 
(14
)
Total stock-based compensation, net of tax
$
34

 
$
33

 
$
29


The Teradata Corporation 2007 Stock Incentive Plan (the “2007 SIP”), as amended, and the Teradata 2012 Stock Incentive Plan (the “2012 SIP”) provide for the grant of several different forms of stock-based compensation. The 2012 SIP was adopted and approved by stockholders in April 2012 and no further awards may be made under the 2007 SIP after that time. A total of approximately 16.4 million shares were authorized to be issued under the 2012 SIP. New shares of the Company’s common stock are issued as a result of the vesting of restricted stock units and stock option exercises, and at the time of grant for restricted stock, for awards under both plans.
As of December 31, 2014, the Company’s primary types of stock-based compensation were stock options, restricted stock, restricted stock units and the employee stock purchase program (the “ESPP”).
Stock Options
The Compensation and Human Resource Committee of Teradata’s Board of Directors had discretion to determine the material terms and conditions of option awards under both the 2007 SIP and the 2012 SIP (collectively, the “Teradata SIP”), provided that (i) the exercise price must be no less than the fair market value of Teradata common stock (as defined in both plans) on the date of grant, and (ii) the term must be no longer than ten years. Option grants generally have a four-year vesting period.
For the years ended December 31, 2014, 2013 and 2012, the weighted-average fair value of options granted for Teradata equity awards was $17.67, $18.02 and $22.31, respectively. The fair value of each option award on the grant date was estimated using the Black-Scholes option-pricing model with the following assumptions:
 
2014
 
2013
 
2012
Dividend yield
%
 
%
 
%
Risk-free interest rate
1.73
%
 
1.77
%
 
0.87
%
Expected volatility
37.8
%
 
37.6
%
 
35.7
%
Expected term (years)
6.3

 
6.3

 
6.3


In 2014, the expected volatility was based on Teradata's historical volatility. Prior to 2014, the expected volatility assumption was based on a blend of peer group volatility and Teradata volatility. The expected term assumption is determined using the simplified method under GAAP, which is based on the vesting period and contractual term for each vesting tranche of awards. The mid-point between the vesting date and the expiration date is used as the expected term under this method. The risk-free interest rate for periods within the contractual life of the option is based on an average of the five-year and seven-year U.S. Treasury yield curve in effect at the time of grant.
The following table summarizes the Company’s stock option activity for the year ended December 31, 2014: 
Shares in thousands
Shares
Under
Option
 
Weighted-
Average
Exercise
Price per
Share
 
Weighted-
Average
Remaining
Contractual
Term (in
years)
 
Aggregate
Intrinsic
Value (in
millions)
Outstanding at January 1, 2013
7,012

 
$
33.27

 
6.3
 
$
100

Granted
921

 
$
44.43

 
 
 
 
Exercised
(561
)
 
$
19.02

 
 
 
 
Canceled
(36
)
 
$
41.83

 
 
 
 
Forfeited
(99
)
 
$
50.98

 
 
 
 
Outstanding at December 31, 2014
7,237

 
$
35.50

 
6.1
 
$
78

Fully vested and expected to vest at December 31, 2014
7,194

 
$
35.44

 
6.0
 
$
78

Exercisable at December 31, 2014
5,190

 
$
30.63

 
4.9
 
$
78


The following table summarizes the total intrinsic value of options exercised and the cash received by the Company from option exercises under all share-based payment arrangements at December 31:
In millions
2014
 
2013
 
2012
Intrinsic value of options exercised
$
14

 
$
19

 
$
113

Cash received from option exercises
$
11

 
$
9

 
$
43

Tax benefit realized from option exercises
$
5

 
$
6

 
$
38


As of December 31, 2014, there was $37 million of total unrecognized compensation cost related to unvested stock option grants. That cost is expected to be recognized over a weighted-average period of 3.1 years.
Restricted Stock and Restricted Stock Units
The Teradata SIP provides for the issuance of restricted stock, as well as restricted stock units. These grants consist of both service-based and performance-based awards. Service-based awards typically vest over a three-to four-year period beginning on the effective date of grant. These grants are not subject to future performance measures. The cost of these awards, determined to be the fair market value at the date of grant, is expensed ratably over the vesting period. For substantially all restricted stock grants, at the date of grant, the recipient has all rights of a stockholder, subject to certain restrictions on transferability and a risk of forfeiture. A recipient of restricted stock units does not have the rights of a stockholder and is subject to restrictions on transferability and risk of forfeiture. For both restricted stock grants and restricted stock units, any potential dividend rights would be subject to the same vesting requirements as the underlying equity award. As a result, such rights are considered a contingent transfer of value and consequently these equity awards are not considered participating securities. Performance-based grants are subject to future performance measurements over a one-to four-year period. All performance-based shares that are earned in respect of an award will become vested at the end of the performance and/or service period provided the employee is continuously employed by the Company and applicable performance measures are met. The fair value of each performance-based award is determined on the grant date, based on the Company’s stock price, and assumes that performance targets will be achieved. Over the performance period, the number of shares of stock that will be issued is adjusted upward or downward based upon management’s assessment of the probability of achievement of performance targets. The ultimate number of shares issued and the related compensation cost recognized as expense will be based on a comparison of the final achievement of performance metrics to the specified targets.
The following table reports restricted stock and restricted stock unit activity during the year ended December 31, 2014: 
Shares in thousands
Number of
Shares
 
Weighted-
Average 
Grant
Date Fair
 Value
per Share
Unvested shares at January 1, 2014
2,578

 
$
50.30

Granted
1,447

 
$
44.39

Vested
(537
)
 
$
50.91

Forfeited/canceled
(236
)
 
$
54.17

Unvested shares at December 31, 2014
3,252

 
$
47.18


The following table summarizes the weighted-average fair value of restricted stock units granted for Teradata equity awards and the total fair value of shares vested at December 31:
 
2014
 
2013
 
2012
Weighted-average fair value of restricted stock units granted
$
44.39

 
$
48.24

 
$
60.71

Total fair value of shares vested (in millions)
$
27

 
$
30

 
$
15


As of December 31, 2014, there was $87 million of unrecognized compensation cost related to unvested restricted stock grants. The unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 2.4 years.
The following table represents the composition of Teradata restricted stock unit grants in 2014: 
Shares in thousands
Number of
Shares
 
Weighted-
Average 
Grant
Date Fair 
Value
Service-based shares
1,361

 
$
44.28

Performance-based shares
86

 
$
46.26

Total stock grants
1,447

 
$
44.39



Approximately 0.3 million shares of the performance awards issued in December of 2012 also included a market-based component for certain key executives in connection with a restructuring of the Company’s management team. On March 1, 2013, these awards were amended to create two separate awards: (i) 70% of the units were allocated to 2016 performance-based restricted share units (“Special 2016 PBRSUs”); and (ii) 30% of the units were allocated to special long-term strategic performance-based restricted share units (“Long-Term Strategic PBRSUs”). This modification resulted in no incremental fair value on the date of modification. Consistent with a Type I modification, the original fair value was used to value the awards since the stock price and fair value was lower on the date of modification. Each recipient’s opportunity to earn the Special 2016 PBRSUs is based on the extent to which Teradata achieves certain challenging or “stretch” financial goals through 2016 based on a GAAP revenue and a non-GAAP earnings per share targets in 2016. Each recipient’s opportunity to earn the Long-Term Strategic PBRSUs generally is based on a subjective assessment of performance over a four-year period ending in 2016 relative to a mix of long-term strategic measures with respect to such matters as data warehousing technology and offerings and integrated marketing management solutions, among other things, provided that a stretch non-GAAP earnings per share threshold is achieved. There was no compensation expense related to the Special 2016 PBRSUs and Long-Term Strategic PBRSUs recorded in 2014 based on management’s determination that at December 31, 2014 it was not probable that performance targets for these awards would be achievable.
For the Special 2016 PBRSUs, payout in excess of target cannot occur unless the Company achieves certain non-GAAP earnings per share and stock price goals. In evaluating the fair value of the Special 2016 PBRSUs, the Company used a Monte Carlo simulation on the grant date and determined the fair value to be $26.78 per unit for the market component of the award. Compensation expense related to the performance portion of the award is valued based on the grant date stock price and is only recorded in a period when it is probable that the performance metrics will be met. Compensation expense related to the market portion is only recorded when it is probable that the performance metrics will be above target, regardless of the stock price. There was no compensation expense related to the market portion of these awards in 2014. The primary assumptions used in the valuation of the market component of the awards were as follows: 
 
2012
Grant date fair value per share of Company common stock
$
58.63

Expected volatility
36.44
%
Risk-free interest rate
0.47
%
Dividend yield

Performance vesting hurdle - future fair value per share of Company common stock
$
85.00


Employee Stock Purchase Program
The Company’s ESPP, effective on October 1, 2007, and as amended effective as of January 1, 2013, provides eligible employees of Teradata and its designated subsidiaries an opportunity to purchase the Company’s common stock at a discount to the average of the highest and lowest sale prices on the last trading day of each month. As of January 1, 2013, the ESPP discount was 15% of the average market price and considered compensatory. Prior to 2013, the ESPP discount was 5% of the average market price and this plan was considered non-compensatory.
Employees may authorize payroll deductions of up to 10% of eligible compensation for common stock purchases. A total of 4 million shares were authorized to be issued under the ESPP, with approximately 1.9 million shares remaining under that authorization at December 31, 2014. The shares of Teradata common stock purchased by a participant on an exercise date (the last day of each month), for all purposes, are deemed to have been issued and sold at the close of business on such exercise date. Prior to that time, none of the rights or privileges of a stockholder exists with respect to such shares. Employee purchases and aggregate cost were as follows at December 31:
In millions
2014
 
2013
 
2012
Employee share purchases
0.4

 
0.4

 
0.2

Aggregate cost
$
18

 
$
20

 
$
12

Employee Benefit Plans
Employee Benefit Plan
Employee Benefit Plans
Pension and Postemployment Plans. Teradata currently sponsors defined benefit pension plans for certain of its international employees. For those international pension plans for which the Company holds asset balances, those assets are primarily invested in common/collective trust funds (which include publicly traded common stocks, corporate and government debt securities, real estate indirect investments, cash or cash equivalents) and insurance contracts.
Postemployment obligations relate to benefits provided to involuntarily terminated employees and certain inactive employees after employment but before retirement. These benefits are paid in accordance with various foreign statutory laws and regulations, and Teradata’s established postemployment benefit practices and policies. Postemployment benefits may include disability benefits, supplemental unemployment benefits, severance, workers’ compensation benefits, continuation of health care benefits and life insurance coverage, and are funded on a pay-as-you-go basis.
Pension and postemployment benefit costs for the years ended December 31 were as follows: 
 
2014
 
2013
 
2012
In millions
Pension
 
Postemployment
 
Pension
 
Postemployment
 
Pension
 
Postemployment
Service cost
$
9

 
$
4

 
$
8

 
$
3

 
$
8

 
$
4

Interest cost
4

 
1

 
4

 
1

 
4

 
1

Expected return on plan assets
(2
)
 

 
(2
)
 

 
(3
)
 

Settlement charge
1

 

 
1

 

 
1

 

Amortization of actuarial loss (gain)
2

 
(1
)
 
2

 
(1
)
 
1

 

Amortization of prior service cost (credit)
(1
)
 

 

 

 

 

Total costs
$
13

 
$
4

 
$
13

 
$
3

 
$
11

 
$
5


The underfunded amount of pension and postemployment obligations is recorded as a liability in the Company’s consolidated balance sheet. The following tables present the changes in benefit obligations, plan assets, funded status and the reconciliation of the funded status to amounts recognized in the consolidated balance sheets and in accumulated other comprehensive income at December 31:
 
Pension
 
Postemployment
In millions
2014
 
2013
 
2014
 
2013
Change in benefit obligation
 
 
 
 
 
 
 
Benefit obligation at January 1
$
129

 
$
122

 
$
27

 
$
25

Service cost
9

 
8

 
4

 
3

Interest cost
4

 
4

 
1

 
1

Plan participant contributions
1

 
1

 

 

Actuarial loss
18

 
6

 
19

 
3

Benefits paid
(19
)
 
(6
)
 
(11
)
 
(4
)
Currency translation adjustments
(15
)
 
(6
)
 
(1
)
 
(1
)
New plans
3

 

 

 

Benefit obligation at December 31
130

 
129

 
39

 
27

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at January 1
$
76

 
$
69

 
$

 
$

Actual return on plan assets
7

 
9

 

 

Company contributions
8

 
10

 

 

Benefits paid
(19
)
 
(6
)
 

 

Currency translation adjustments
(7
)
 
(7
)
 

 

Plan participant contribution
1

 
1

 

 

New plans
1

 

 

 

Fair value of plan assets at December 31
67

 
76

 

 

Funded status (underfunded)
$
(63
)
 
$
(53
)
 
$
(39
)
 
$
(27
)
Amounts Recognized in the Balance Sheet
 
 
 
 
 
 
 
Non-current assets
$
4

 
$
1

 
$

 
$

Current liabilities
(1
)
 
(1
)
 
(5
)
 
(4
)
Non-current liabilities
(66
)
 
(53
)
 
(34
)
 
(23
)
Net amounts recognized
$
(63
)
 
$
(53
)
 
$
(39
)
 
$
(27
)
Amounts Recognized in Accumulated Other Comprehensive Income
 
 
 
 
 
 
 
Unrecognized Net actuarial loss (gain)
$
33

 
$
26

 
$
6

 
$
(12
)
Unrecognized Prior service (credit) cost

 
(2
)
 
1

 

Total
$
33

 
$
24

 
$
7

 
$
(12
)


The following table presents the accumulated pension benefit obligation at December 31:
In millions
2014
 
2013
Accumulated pension benefit obligation
$
118

 
$
120


The following table presents pension plans with accumulated benefit obligations in excess of plan assets at December 31:
In millions
2014
 
2013
Projected benefit obligation
$
69

 
$
55

Accumulated benefit obligation
$
61

 
$
49

Fair value of plan assets
$
3

 
$
3


The following table presents the pre-tax net changes in projected benefit obligations recognized in other comprehensive income during 2014 and 2013: 
 
Pension
 
Postemployment
In millions
2014
 
2013
 
2014
 
2013
Actuarial loss (gain) arising during the year
$
14

 
$
(1
)
 
$
18

 
$
2

Amortization of (gain) loss included in net periodic benefit cost
(2
)
 
(2
)
 
1

 
1

Prior service cost arising during the year
1

 

 

 


Recognition of loss due to settlement
(1
)
 
(1
)
 

 

Foreign currency exchange
(3
)
 
(1
)
 

 

Total recognized in other comprehensive income
$
9

 
$
(5
)
 
$
19

 
$
3



The following table presents the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost during 2015: 
In millions
Pension
 
Postemployment
Net loss to be recognized in other comprehensive income
$
3

 
$


The weighted-average rates and assumptions used to determine benefit obligations at December 31, 2014 and 2013, and net periodic benefit cost for the years ended December 31, 2014, 2013, and 2012, were as follows: 
 
Pension Benefit Obligations
 
Pension Benefit Cost
 
2014
 
2013
 
2014
 
2013
 
2012
Discount rate
2.3%
 
3.0%
 
3.0%
 
3.0%
 
3.7%
Rate of compensation increase
3.3%
 
3.2%
 
3.2%
 
3.3%
 
3.3%
Expected return on plan assets
N/A
 
N/A
 
3.4%
 
3.4%
 
4.0%
 
Postemployment 
Benefit Obligations
 
Postemployment 
Benefit Cost
 
2014
 
2013
 
2014
 
2013
 
2012
Discount rate
3.5%
 
3.8%
 
3.8%
 
3.4%
 
4.1%
Rate of compensation increase
3.0%
 
3.7%
 
3.7%
 
3.8%
 
3.7%
Involuntary turnover rate
1.3%
 
1.0%
 
1.0%
 
1.0%
 
1.5%

The Company determines the expected return on assets based on individual plan asset allocations, historical capital market returns, and long-term interest rate assumptions, with input from its actuaries, investment managers, and independent investment advisors. The company emphasizes long-term expectations in its evaluation of return factors, discounting or ignoring short-term market fluctuations. Expected asset returns are reviewed annually, but are generally modified only when asset allocation strategies change or long-term economic trends are identified.
The discount rate used to determine year-end 2014 U.S. benefit obligations was derived by matching the plans’ expected future cash flows to the corresponding yields from the Citigroup Pension Liability Index. This yield curve has been constructed to represent the available yields on high-quality fixed-income investments across a broad range of future maturities. International discount rates were determined by examining interest rate levels and trends within each country, particularly yields on high-quality long-term corporate bonds, relative to our future expected cash flows.
Gains and losses have resulted from changes in actuarial assumptions and from differences between assumed and actual experience, including, among other items, changes in discount rates and differences between actual and assumed asset returns. These gains and losses (except those differences being amortized to the market-related value) are only amortized to the extent that they exceed 10% of the higher of the market-related value of plan assets or the projected benefit obligation of each respective plan.
Plan Assets. The weighted-average asset allocations at December 31, by asset category are as follows: 
 
Actual Asset Allocation
As of December 31
 
Target Asset Allocation
 
2014
 
2013
 
Equity securities
32
%
 
34
%
 
31
%
Debt securities
41
%
 
37
%
 
44
%
Insurance (annuity) contracts
17
%
 
13
%
 
17
%
Real estate
5
%
 
6
%
 
3
%
Other
5
%
 
10
%
 
5
%
Total
100
%
 
100
%
 
100
%

Fair Value. Fair value measurements are established utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are more fully described in Note 9.
The following is a description of the valuation methodologies used for pension assets as of December 31, 2014.
Common/collective trust funds (which include money market funds, equity funds, bond funds, real-estate indirect investment, etc): Valued at the net asset value (“NAV”) of shares held by the Plan at year end, as reported to the Plan by the trustee, which represents the fair value of shares held by the Plan. Because the NAV of the shares held in the common/collective trust funds are derived by the value of the underlying investments, the Company has classified these underlying investments as Level 2 fair value measurements.
Insurance contracts: Valued by discounting the related future benefit payments using a current year-end market discount rate, which represents the fair value of the insurance contract. The Company has classified these contracts as Level 3 assets for fair value measurement purposes.
The following table sets forth by level, within the fair value hierarchy, the pension plan assets at fair value as of December 31, 2014: 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices in Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
In millions
December 31, 2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Money market funds
$
2

 
$

 
$
2

 
$

Equity funds
21

 

 
21

 

Bond/fixed-income funds
28

 

 
28

 

Real-estate indirect investment
4

 

 
4

 

Commodities/Other
1

 

 
1

 

Insurance contracts
11

 

 

 
11

Total Assets at fair value
$
67

 
$

 
$
56

 
$
11



The table below sets forth a summary of changes in the fair value of the pension plan level 3 assets for the year ended December 31, 2014:
In millions
Insurance
Contracts
Balance as of January 1, 2014
$
10

Purchases, sales and settlements, net
1

Balance as of December 31, 2014
$
11


The following table sets forth by level, within the fair value hierarchy, the pension plan assets at fair value as of December 31, 2013: 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices in Active 
Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
In millions
December 31, 2013
 
(Level 1)
 
(Level 2)
 
(Level 3)
Money market funds
$
3

 
$

 
$
3

 
$

Equity funds
26

 

 
26

 

Bond/fixed-income funds
28

 

 
28

 

Real-estate indirect investment
5

 

 
5

 

Commodities/Other
4

 

 
4

 

Insurance contracts
10

 

 

 
10

Total Assets at fair value
$
76

 
$

 
$
66

 
$
10


The table below sets forth a summary of changes in the fair value of the pension plan level 3 assets for the year ended December 31, 2013:
In millions
Insurance
Contracts
Balance as of January 1, 2013
$
8

Purchases, sales and settlements, net
2

Balance as of December 31, 2013
$
10


Investment Strategy. Teradata employs a number of investment strategies across its various international pension plans. In some countries, particularly where Teradata does not have a large employee base, the Company may use insurance (annuity) contracts to satisfy its future pension payment obligations, whereby the Company makes pension plan contributions to an insurance company in exchange for which the pension plan benefits will be paid when the members reach a specified retirement age or on earlier exit of members from the plan. In other countries, the Company may employ local asset managers to manage investment portfolios according to the investment policies and guidelines established by the Company, and with consideration to individual plan liability structure and local market environment and risk tolerances. The Company’s investment policies and guidelines primarily emphasize diversification across and within asset classes to maximize long-term returns subject to prudent levels of risk, with the overall objective of enabling the plans to meet their future obligations. The investment portfolios contain a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across domestic and international stocks, small and large capitalization stocks, and growth and value stocks. Fixed-income assets are diversified across government and corporate bonds. Where applicable, real estate investments are made through real estate securities, partnership interests or direct investment, and are diversified by property type and location.
Cash Flows Related to Employee Benefit Plans
Cash Contributions. The Company expects to contribute approximately $8 million to the international pension plans and $5 million for postemployment benefit obligations in 2015.
Estimated Future Benefit Payments. The Company expects to make the following benefit payments reflecting past and future service from its pension and postemployment plans: 
 
Pension Benefits
 
Postemployment Benefits
In millions
 
Year
 
 
 
2015
$
3

 
$
5

2016
$
5

 
$
5

2017
$
6

 
$
5

2018
$
6

 
$
5

2019
$
5

 
$
5

2020-2024
$
32

 
$
23


Savings Plans. U.S. employees and many international employees participate in defined contribution savings plans. These plans generally provide either a specified percent of pay or a matching contribution on participating employees’ voluntary elections. The Company’s matching contributions typically are subject to a maximum percentage or level of compensation. Employee contributions can be made pre-tax, after-tax or a combination thereof. The following table identifies the expense for the U.S and International subsidiary savings plans for the years ended December 31:
In millions
2014
 
2013
 
2012
U.S. savings plan
$
23

 
$
23

 
$
21

International subsidiary savings plans
$
18

 
$
17

 
$
18

Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities
As a portion of the Company’s operations and revenue occur outside the United States and in currencies other than the U.S. dollar, the Company is exposed to potential gains and losses from changes in foreign currency exchange rates. In an attempt to mitigate the impact of currency fluctuations, the Company uses foreign exchange forward contracts to hedge transactional exposures resulting predominantly from foreign currency denominated inter-company receivables and payables. The forward contracts are designated as fair value hedges of specified foreign currency denominated inter-company receivables and payables and generally mature in three months or less. The Company does not hold or issue derivative financial instruments for trading purposes, nor does it hold or issue leveraged derivative instruments. By using derivative financial instruments to hedge exposures to changes in exchange rates, the Company exposes itself to credit risk. The Company manages exposure to counterparty credit risk by entering into derivative financial instruments with highly rated institutions that can be expected to fully perform under the terms of the applicable contracts.
All derivatives are recognized in the Consolidated Balance Sheets at their fair value. The fair values of foreign exchange contracts are based on market spot and forward exchange rates and represent estimates of possible value that may not be realized in the future. Changes in the fair value of derivative financial instruments, along with the loss or gain on the hedged asset or liability, are recorded in current period earnings. The notional amounts represent agreed-upon amounts on which calculations of dollars to be exchanged are based, and are an indication of the extent of Teradata’s involvement in such instruments. These notional amounts do not represent amounts exchanged by the parties and, therefore, are not a measure of the instruments. Across its portfolio of contracts, Teradata has both long and short positions relative to the U.S. dollar. As a result, Teradata’s net involvement is less than the total contract notional amount of the Company’s foreign exchange forward contracts.
The following table identifies the contract notional amount of the Company’s foreign exchange forward contracts at December 31:
In millions
2014
 
2013
Contract notional amount of foreign exchange forward contracts
$
116

 
$
152

Net contract notional amount of foreign exchange forward contracts
$
17

 
$
24


The fair value derivative assets and liabilities recorded in other current assets and accrued liabilities at December 31, 2014 and 2013, were not material.
Gains and losses from the Company’s fair value hedges (foreign currency forward contracts and related hedged items) were immaterial for the years ended December 31, 2014, 2013 and 2012. Gains and losses from foreign exchange forward contracts are fully recognized each period and reported along with the offsetting gain or loss of the related hedged item, either in cost of products or in other income, depending on the nature of the related hedged item.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
In the normal course of business, the Company is subject to proceedings, lawsuits, governmental investigations, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, tax matters, and other regulatory compliance and general matters.
Guarantees and Product Warranties.
Guarantees associated with the Company’s business activities are reviewed for appropriateness and impact to the Company’s financial statements. Periodically, the Company’s customers enter into various leasing arrangements coordinated with a leasing company. In some instances, the Company guarantees the leasing company a minimum value at the end of the lease term on the leased equipment. As of December 31, 2014, the maximum future payment obligation of this guaranteed value and the associated liability balance was $4 million.
The Company provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls and cost of replacement parts. For each consummated sale, the Company recognizes the total customer revenue and records the associated warranty liability using pre-established warranty percentages for that product class.
The following table identifies the activity relating to the warranty reserve liability for the years ended December 31: 
In millions
2014
 
2013
 
2012
Beginning balance at January 1
$
8

 
$
8

 
$
6

Accruals for warranties issued
16

 
15

 
17

Settlements (in cash or kind)
(17
)
 
(15
)
 
(15
)
Balance at end of period
$
7

 
$
8

 
$
8


The Company also offers extended and/or enhanced coverage to its customers in the form of maintenance contracts. The Company accounts for these contracts by deferring the related maintenance revenue over the extended and/or enhanced coverage period. Costs associated with maintenance support are expensed as incurred. Amounts associated with these maintenance contracts are not included in the table above.
In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts patent or other infringement on the part of the customer for its use of the Company’s products. The Company has indemnification obligations under its charter and bylaws to its officers and directors, and has entered into indemnification agreements with the officers and directors of its subsidiaries. From time to time, the Company also enters into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of these indemnification
obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement, and as such the Company has not recorded a liability in connection with these indemnification arrangements. Historically, payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.
Leases. Teradata conducts certain of its sales and administrative operations using leased facilities, the initial lease terms of which vary in length. Many of the leases contain renewal options and escalation clauses that are not material to the overall lease portfolio. Future minimum operating lease payments and committed subleases under non-cancelable leases as of December 31, 2014, for the following fiscal years were: 
 
Total
 
 
 
 
 
 
 
 
 
 
In millions
Amounts
 
2015
 
2016
 
2017
 
2018
 
2019
Operating lease obligations
$
72

 
$
23

 
$
18

 
$
15

 
$
12

 
$
4

Sublease rentals
(8
)
 
(3
)
 
(3
)
 
(2
)
 

 

Total committed operating leases less sublease rentals
$
64

 
$
20

 
$
15

 
$
13

 
$
12

 
$
4


The following table represents the Company’s actual rental expense and sublease rental income for the years ended December 31:
In millions
2014
 
2013
 
2012
Rental expense
$
26

 
$
26

 
$
25

Sublease rental income
$
3

 
$
3

 
$
3


The Company had no contingent rentals for these periods.
Concentrations of Risk. The Company is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments, and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Teradata’s business often involves large transactions with customers, and if one or more of those customers were to default in its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses were adequate at December 31, 2014 and 2013.
The Company is also potentially subject to concentrations of supplier risk. Our hardware components are assembled exclusively by Flextronics International Ltd. (“Flextronics”). Flextronics procures a wide variety of components used in the manufacturing process on our behalf. Although many of these components are available from multiple sources, Teradata utilizes preferred supplier relationships to better ensure more consistent quality, cost and delivery. Typically, these preferred suppliers maintain alternative processes and/or facilities to ensure continuity of supply. Given the Company’s strategy to outsource its manufacturing activities to Flextronics and to source certain components from single suppliers, a disruption in production at Flextronics or at a supplier could impact the timing of customer shipments and/or Teradata’s operating results.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
Fair value measurements are established utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as significant other observable inputs, such as quoted prices in active markets for similar assets or liabilities, or quoted prices in less-active markets for identical assets; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The Company’s assets and liabilities measured at fair value on a recurring basis include money market funds, available-for-sale securities and foreign currency exchange contracts. A portion of the Company’s excess cash reserves are held in money market funds which generate interest income based on the prevailing market rates. Money market funds are included in cash and cash equivalents in the Company’s balance sheet. Money market fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy. Available-for-sale securities include equity securities that are traded in active markets, such as the National Association of Securities Dealers Automated Quotations Systems ("NASDAQ"), and are therefore included in Level 1 of the valuation hierarchy. Available-for-sale securities are included in other assets in the Company's balance sheet. Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income until realized.
When deemed appropriate, the Company minimizes its exposure to changes in foreign currency exchange rates through the use of derivative financial instruments, specifically, forward foreign exchange contracts. The fair value of these contracts are measured at the end of each interim reporting period using observable inputs other than quoted prices, specifically market spot and forward exchange rates. As such, these derivative instruments are classified within Level 2 of the valuation hierarchy. Fair value gains for open contracts are recognized as assets and fair value losses are recognized as liabilities. The fair value derivative assets and liabilities recorded in other current assets and accrued liabilities at December 31, 2014 and 2013, were not material. Any realized gains or losses would be mitigated by corresponding gains or losses on the underlying exposures. Further information on the Company’s use of forward foreign exchange contracts is included in Note 7.
The Company’s assets measured at fair value on a recurring basis and subject to fair value disclosure requirements at December 31, were as follows: 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices 
in Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant Unobservable Inputs
In millions
December 31, 2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
Money market funds
$
393

 
$
393

 
$

 
$

Available-for-sale securities
78

 
78

 

 

Total assets at fair value
$
471

 
$
471

 
$

 
$

 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices 
in Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant Unobservable Inputs
In millions
December 31, 2013
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
Money market funds
$
318

 
$
318

 
$

 
$

Debt
Debt
Debt
In June 2012, Teradata entered into a five-year revolving credit agreement (the “Credit Facility”), under which the Company may borrow up to $300 million. The Credit Facility expires June 15, 2017, at which point any remaining outstanding borrowings would be due for repayment unless extended by agreement of the parties for up to two additional one-year periods. The interest rate charged on borrowings pursuant to the Credit Facility can vary depending on the interest rate option the Company chooses to utilize and the Company’s leverage ratio at the time of the borrowing. The revolving credit facility carried a floating interest rate based on the London Interbank Offered Rate (“LIBOR”). The blended rate at December 31, 2014 was 1.14%. The Credit Facility is unsecured and contains certain representations and warranties, conditions, affirmative, negative and financial covenants, and events of default customary for such facilities. As of December 31, 2014, the Company had $220 million outstanding under the Credit Facility, leaving $80 million in additional borrowing capacity available. The Company was in compliance with all covenants at December 31, 2014.
In April 2011, Teradata obtained a senior unsecured $300 million five-year term loan. The term loan is payable in quarterly installments, commencing in June 2012, with all remaining principal due on April 5, 2016. The outstanding principal amount of the term loan agreement bears interest at a floating rate based upon a negotiated base rate or a Eurodollar rate plus in each case a margin based on the leverage ratio of the Company. As of December 31, 2014, the term loan principal outstanding was $248 million, carried an interest rate of 1.1875%, and the Company was in compliance with all covenants. Teradata’s term loan is recognized on the Company’s balance sheet at its unpaid principal balance, and is not subject to fair value measurement. However, given that the loan carries a variable rate, the Company estimates that the unpaid principal balance of the term loan would approximate its fair value.
Annual contractual maturities of principal on term loan outstanding at December 31, 2014, are as follows: 
In millions
 
2015
$
53

2016
195

Total
$
248


The following table presents interest expense on borrowings for the years ended December 31:
In millions
2014
 
2013
 
2012
Interest expense
$
3

 
$
4

 
$
4

Segment, Other Supplemental Information and Concentrations
Segment, Other Supplemental Information and Concentrations
Segment, Other Supplemental Information and Concentrations
Teradata has historically managed its business in two geographic regions, which are also the Company’s operating segments: (1) the Americas region (North America and Latin America); and (2) the International region (Europe, Middle East, Africa, Asia Pacific and Japan). Management evaluates the performance of its segments based on revenue and segment margin. Corporate-related costs are fully-allocated to the segments, but for management reporting purposes assets are not allocated to the segments.
The following table presents regional segment revenue and segment gross margin for the Company for the years ended December 31: 
In millions
2014
 
2013
 
2012
Segment revenue
 
 
 
 
 
Americas (1)
$
1,619

 
$
1,633

 
$
1,619

International
1,113

 
1,059

 
1,046

Total revenue
2,732

 
2,692

 
2,665

Segment gross margin
 
 
 
 
 
Americas
943

 
947

 
967

International
536

 
526

 
524

Total gross margin
1,479

 
1,473

 
1,491

Selling, general and administrative expenses
770

 
757

 
728

Research and development expenses
206

 
184

 
183

Total income from operations
503

 
532

 
580

Other expense, net
(9
)
 
(24
)
 
(2
)
Income before income taxes
$
494

 
$
508

 
$
578


 
(1)
The Americas region includes revenue generated in the United States of $1,458 million in 2014, $1,511 million in 2013 and $1,478 million in 2012.

The following table presents revenue by product and services revenue for the Company for the years ended December 31:
In millions
2014
 
2013
 
2012
Products (software and hardware)(1)
$
1,227

 
$
1,230

 
$
1,297

Consulting services
817

 
818

 
776

Maintenance services
688

 
644

 
592

Total services
1,505

 
1,462

 
1,368

Total revenue
$
2,732

 
$
2,692

 
$
2,665

 
(1)
Our analytic database software and hardware products are often sold and delivered together in the form of a “node” of capacity as an integrated technology solution. Accordingly, it is impracticable to provide the breakdown of revenue from various types of software and hardware products.
The following table presents property and equipment by geographic area at December 31: 
In millions
2014
 
2013
United States
$
130

 
$
131

Americas (excluding United States)
4

 
3

International
25

 
27

Property and equipment, net
$
159

 
$
161


Concentrations. No single customer accounts for more than 10% of the Company's revenue. As of December 31, 2014, the Company is not aware of any significant concentration of business transacted with a particular customer that could, if suddenly eliminated, have a material adverse effect on the Company’s operations. The Company also has no concentration of available sources of labor, services, licenses or other rights that could, if suddenly eliminated, have a material adverse effect on its operations.
Changes in segment reporting. Beginning January 2015, the Company will change its operating segments and report future results as two new separate segments: (a) data and analytics and (b) marketing applications.
Business Combinations and Other Investment Activities
Business Combinations and Other Investment Activities
Business Combinations and Other Investment Activities
During 2014, the Company completed six immaterial business acquisitions and other equity investments for $69 million. These acquisitions complement and strengthen the Company's global portfolio. In addition, the Company recognized a loss of $9 million in an equity investment arising from an impairment of carrying value.
During 2013, the Company completed two immaterial business acquisitions and two other equity investments for $36 million. In addition, the Company recognized a loss of $25 million on an equity investments arising from an impairment of carrying value, partially offset by a $3 million gain on sale. The gains and losses for these transactions were recorded in other income (expense) in the Consolidated Statements of Income.
During 2012, the Company completed the acquisition of eCircle, a leading full service digital marketing provider in Europe, and other equity investments for $274 million.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
The following table provides information on changes in accumulated other comprehensive income (“AOCI”), net of tax, for the three years ended December 31:
In millions
Available-for-sale securities
 
Defined 
benefit
plans
 
Foreign 
currency
translation
adjustments
 
Total 
AOCI
Balance as of December 31, 2011
$

 
$
(9
)
 
$
25

 
$
16

Other comprehensive income before reclassifications

 
2

 
9

 
11

Amounts reclassified from AOCI

 
2

 

 
2

Net other comprehensive income

 
4

 
9

 
13

Balance as of December 31, 2012
$

 
$
(5
)
 
$
34

 
$
29

Other comprehensive income before reclassifications

 

 
2

 
2

Amounts reclassified from AOCI

 
2

 

 
2

Net other comprehensive income

 
2

 
2

 
4

Balance as of December 31, 2013
$

 
$
(3
)
 
$
36

 
$
33

Other comprehensive income (loss) before reclassifications
31

 
(22
)
 
(47
)
 
(38
)
Amounts reclassified from AOCI

 
1

 

 
1

Net other comprehensive income (loss)
31

 
(21
)
 
(47
)
 
(37
)
Balance as of December 31, 2014
$
31

 
$
(24
)
 
$
(11
)
 
$
(4
)

The following table presents the impact and respective location of AOCI reclassifications in the Consolidated Statements of Income:
In millions
 
 
 
For the year ended December 31
AOCI Component
 
Location
 
2014
 
2013
 
2012
Defined benefit plans
 
Cost of services
 
$
1

 
$
2

 
$
1

Defined benefit plans
 
Selling, general and administrative expenses
 

 
1

 

Defined benefit plans
 
Research and development expenses
 

 
(1
)
 
1

Defined benefit plans
 
Net income
 
$
1

 
$
2

 
$
2


Further information on the Company’s defined benefit plans is included in Note 6.
Quarterly Information (unaudited)
Quarterly Information (unaudited)
Quarterly Information (unaudited)
In millions, except per share amounts
First
 
Second
 
Third
 
Fourth
2014
 
 
 
 
 
 
 
Total revenues
$
628

 
$
676

 
$
667

 
$
761

Gross margin
$
333

 
$
371

 
$
350

 
$
425

Operating income
$
89

 
$
133

 
$
123

 
$
158

Net income
$
59

 
$
96

 
$
94

 
$
118

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.37

 
$
0.61

 
$
0.61

 
$
0.78

Diluted
$
0.37

 
$
0.60

 
$
0.60

 
$
0.77

2013
 
 
 
 
 
 
 
Total revenues
$
587

 
$
670

 
$
666

 
$
769

Gross margin
$
305

 
$
379

 
$
358

 
$
431

Operating income
$
76

 
$
147

 
$
132

 
$
177

Net income
$
59

 
$
108

 
$
98

 
$
112

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.36

 
$
0.66

 
$
0.60

 
$
0.69

Diluted
$
0.35

 
$
0.65

 
$
0.59

 
$
0.68

Subsequent Events (Notes)
Subsequent Events
Subsequent Events
From January 1, 2015 through February 25, 2015, the Company purchased approximately 2.9 million shares for approximately $127 million. As of February 25, 2015 the Company had approximately $272 million of share repurchase authorization remaining.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(In millions)
 
Column A
 
Column B
 
Column C
 
Column D
 
Column E
Description
 
Balance at
Beginning
of Period
 
Additions
Charged
to Costs &
Expenses
 
Charged
to Other
Accounts*
 
Deductions
 
Balance
at End of
Period
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2014
 
$
18

 
$
3

 
$

 
$
2

 
$
19

Year ended December 31, 2013
 
$
18

 
$
1

 
$

 
$
1

 
$
18

Year ended December 31, 2012
 
$
13

 
$
2

 
$
3

 
$

 
$
18

Deferred tax valuation allowance
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2014
 
$
13

 
$
7

 
$

 
$

 
$
20

Year ended December 31, 2013
 
$
9

 
$
4

 
$

 
$

 
$
13

Year ended December 31, 2012
 
$

 
$
9

 
$

 
$

 
$
9

Description of Business, Basis of Presentation and Significant Accounting Policies (Policies)
Description of the Business. Teradata Corporation (“Teradata” or “the Company”) is a global leader in analytic data platforms, marketing and analytic applications, and related services. The Company’s analytic data platforms are comprised of software, hardware, and related business consulting and support services for data warehousing, and big data analytics.
Basis of Presentation. The financial statements are presented on a consolidated basis and include the accounts of the Company and its wholly-owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. On an ongoing basis, management evaluates these estimates and judgments, including those related to allowances for doubtful accounts, the valuation of inventory to net realizable value, impairments, stock-based compensation, pension and other postemployment benefits, and income taxes and any changes will be accounted for on a prospective basis. Actual results could differ from those estimates.
Revenue Recognition. Teradata’s solution offerings typically include software, software subscriptions (unspecified when-and-if-available upgrades), hardware, maintenance support services, and other consulting, implementation and installation-related (“consulting”) services. Teradata records revenue when it is realized, or realizable, and earned. Teradata considers these requirements met when:
Persuasive evidence of an arrangement exists
The products or services have been delivered to the customer
The sales price is fixed or determinable and free of contingencies or significant uncertainties
Collectibility is reasonably assured
Teradata reports revenue net of any taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. The Company assesses whether fees are fixed or determinable at the time of sale. Standard payment terms may vary based on the country in which the agreement is executed, but are generally between 30 days and 90 days. Payments that are due within six months are generally deemed to be fixed or determinable based on a successful collection history on such arrangements, and thereby satisfy the required criteria for revenue recognition. Teradata delivers its solutions primarily through direct sales channels, as well as through alliances with system integrators, other independent software vendors and distributors, and value-added resellers (collectively referred to as “resellers”). In assessing whether the sales price to a reseller is fixed or determinable, the Company considers, among other things, past business practices with the reseller, the reseller’s operating history, payment terms, return rights and the financial wherewithal of the reseller. When Teradata determines that the contract fee to a reseller is not fixed or determinable, that transaction is deferred and recognized upon sell-through to the end customer.
The Company’s deliverables often involve delivery or performance at different periods of time. Revenue for software is generally recognized upon delivery with the hardware once title and risk of loss have been transferred. Revenue for software subscriptions, which provide for unspecified upgrades or enhancements on a when-and-if-available basis, is recognized straight-line over the term of the subscription arrangement. Revenue for maintenance support services is also recognized on a straight-line basis over the term of the contract. Revenue for other consulting, implementation and installation services is recognized as services are provided. In certain instances, acceptance of the product or service is specified by the customer. In such cases, revenue is deferred until the acceptance criteria have been met. Delivery and acceptance generally occur in the same reporting period. The Company’s arrangements generally do not include any customer negotiated provisions for cancellation, termination or refunds that would significantly impact recognized revenue.

The Company evaluates all deliverables in an arrangement to determine whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value, and if the contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in the control of Teradata. Most of the Company’s products and services qualify as separate units of accounting and are recognized upon meeting the criteria as described above.
For multiple deliverable arrangements that contain non-software related deliverables, the Company allocates revenue to each deliverable based upon the relative selling price hierarchy and if software and software-related deliverables are also included in the arrangement, to those deliverables as a group based on the best estimate of selling price (“BESP”) for the group. The selling price for a deliverable is based on its vendor-specific objective evidence of selling price (“VSOE”) if available, third-party evidence of selling price (“TPE”) if VSOE is not available, or BESP if neither VSOE nor TPE is available. The Company then recognizes revenue when the remaining revenue recognition criteria are met for each deliverable. For the software group or arrangements that contain only software and software-related deliverables, the revenue is allocated utilizing the residual or fair value method. Under the residual method, the VSOE of the undelivered elements is deferred and accounted for under the applicable revenue recognition guidance, and the remaining portion of the software arrangement fee is allocated to the delivered elements and is recognized as revenue. The fair value method is similar to the relative selling price method used for non-software deliverables except that the allocation of each deliverable is based on VSOE. For software groups or arrangements that contain only software and software-related deliverables in which VSOE does not exist for each deliverable (fair value method) or does not exist for each undelivered element (residual method), revenue for the entire software arrangement or group is deferred and not recognized until delivery of all elements without VSOE has occurred, unless the only undelivered element is postcontract customer support (“PCS”) in which case the entire software arrangement or group is recognized ratably over the PCS period.
Teradata’s analytic database software and hardware products are sold and delivered together in the form of a “Node” of capacity as an integrated technology solution. Because both the analytic database software and hardware platform are necessary to deliver the analytic data platform’s essential functionality, the database software and hardware (Node) are excluded from the software rules and considered a non-software related deliverable. Teradata software applications and related support are considered software-related deliverables. Additionally, the amount of revenue allocated to the delivered items utilizing the relative selling price or fair value method is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (the non-contingent amount).
VSOE is based upon the normal pricing and discounting practices for those products and services when sold separately. Teradata uses the stated renewal rate approach in establishing VSOE for maintenance and subscriptions (collectively referred to as PCS). Under this approach, the Company assesses whether the contractually stated renewal rates are substantive and consistent with the Company’s normal pricing practices. Renewal rates greater than the lower level of our targeted pricing ranges are considered to be substantive and, therefore, meet the requirements to support VSOE. In instances where there is not a substantive renewal rate in the arrangement, the Company allocates revenue based upon BESP, using the minimum established pricing targets as supported by the renewal rates for similar customers utilizing the bell-curve method. Teradata also offers consulting and installation-related services to its customers, which are considered non-software deliverables if they relate to the nodes. These services are rarely considered essential to the functionality of the data warehouse solution deliverable and there is never software customization of the proprietary database software. VSOE for consulting services is based on the hourly rates for standalone consulting services projects by geographic region and are indicative of the Company’s customary pricing practices. Pricing in each market is structured to obtain a reasonable margin based on input costs.
In nearly all multiple-deliverable arrangements, the Company is unable to establish VSOE for all deliverables in the arrangement. This is due to infrequently selling each deliverable separately (such is the case with our nodes), not pricing products or services within a narrow range, or only having a limited sales history. When VSOE cannot be established, attempts are made to establish TPE of the selling price for each deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. However, Teradata’s offerings contain significant differentiation such that the comparable pricing of products with similar functionality cannot typically be obtained. This is because Teradata’s products contain a significant amount of proprietary technology and its solutions offer substantially different features and functionality than other available products. As Teradata’s products are significantly different from those of its competitors, the Company is unable to establish TPE for the vast majority of its products.
When the Company is unable to establish selling prices using VSOE or TPE, the Company uses BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service was sold on a standalone basis. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, geographies, market conditions, product life cycles, competitive landscape, internal costs, gross margin objectives, purchase volumes and pricing practices.
The primary consideration in developing BESP for the Company’s nodes is the bell-curve method based on historical transactions. The BESP analysis is at the geography level in order to align it with the way in which the Company goes to market and establishes pricing for its products. The Company has established discount ranges off of published list prices for different geographies based on strategy and maturity of Teradata’s presence in the respective geography. There are distinctions in each geography and product group which support the use of geographies and markets for the determination of BESP. For example, the Company’s U.S. market is relatively mature and most of the large transactions are captured in this market, whereas the International markets are less mature with generally smaller deal size. Additionally, the prices and margins for the Company’s products vary by geography and by product class. BESP is analyzed on a quarterly basis using data from the 4 previous quarters, which the Company believes best reflects most recent pricing practices in a changing marketplace.
The Company reviews VSOE, TPE and its determination of BESP on a periodic basis and updates it, when appropriate, to ensure that the practices employed reflect the Company’s recent pricing experience. The Company maintains internal controls over the establishment and updates of these estimates, which includes review and approval by the Company’s management. For the year ended December 31, 2014 there was no material impact to revenue resulting from changes in VSOE, TPE or BESP, nor does the Company expect a material impact from such changes in the near term.
Perpetual licenses, term licenses, hosting arrangements and software as a service. Teradata’s application offerings include perpetual licenses, term licenses, hosting arrangements and software as a service. For software arrangements that include a perpetual license, the residual method is typically used because the Company does not have VSOE for its perpetual licenses. This is because the perpetual license is never sold standalone. If the license is of limited life and does not require the Company to host the software for the customer, the software is considered a term license. Teradata’s term licenses are typically offered for application software and include a right-to-use license, PCS and consulting services. The revenue for these arrangements are typically recognized ratably over the contract term. The term of these arrangements varies between one and five years and may or may not include hosting services. In most arrangements the pricing is bundled to the customer. If the term license is hosted, the customer has the right to take possession of the software at any time during the hosting period. The customer’s rights to the software in these circumstances are not dependent on additional software payments or significant penalties, and the customer can feasibly run the software on its own hardware or contract with another party to host the software. If these criteria are not met, the hosting arrangement is accounted for outside the software rules as a software as a service arrangement. Under a software as a service arrangement, the license, PCS and hosting fee are recognized ratably over the term of the contract.
Shipping and Handling. Product shipping and handling costs are included in cost of products in the Consolidated Statements of Income.
Cash and Cash Equivalents. All short-term, highly-liquid investments having original maturities of three months or less are considered to be cash equivalents.
Allowance for Doubtful Accounts. Teradata establishes provisions for doubtful accounts using both percentages of accounts receivable balances to reflect historical average credit losses and specific provisions for known issues.
Inventories. Inventories are stated at the lower of cost or market. Cost of service parts is determined using the average cost method. Finished goods inventory is determined using actual cost.
Available-for-sale Securities. Available-for-sale securities are reported at fair value. Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income. Realized gains and losses are included in other income and expense in the Consolidated Statements of Income. Teradata's available-for-sale securities are for affiliation and other continuing business advantage and therefore recorded under non-current other assets in the Consolidated Balance Sheets.
Long-Lived Assets
Property and Equipment. Property and equipment, leasehold improvements and rental equipment are stated at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the related assets primarily on a straight-line basis. Equipment is depreciated over 3 to 20 years and buildings over 25 to 45 years. Leasehold improvements are depreciated over the life of the lease or the asset, whichever is shorter.
Capitalized Software. Direct development costs associated with internal-use software are capitalized and amortized over the estimated useful lives of the resulting software. The costs are capitalized when both the preliminary project stage is completed and it is probable that computer software being developed will be completed and placed in service. Teradata typically amortizes capitalized internal-use software on a straight-line basis over three years beginning when the asset is substantially ready for use.
Costs incurred for the development of big data, marketing and analytic applications are expensed as incurred based on the frequency and agile nature of development. Costs incurred for the development of data warehousing software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established. Technological feasibility is established when planning, designing and initial coding activities that are necessary to establish the product can be produced to meet its design specifications. In the absence of a program design, a working model is used to establish technological feasibility. These costs are included within capitalized software and are amortized over the estimated useful lives of four years using the greater of the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or the straight-line method over the remaining estimated economic life of the product beginning when the product is available for general release. Costs capitalized include direct labor and related overhead costs. Costs incurred prior to technological feasibility and after general release are expensed as incurred. The following table identifies the activity relating to capitalized software:
 
Internal-use Software
 
External-use Software
In millions
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Beginning balance at January 1
$
12

 
$
12

 
$
11

 
$
183

 
$
161

 
$
129

Capitalized
7

 
6

 
6

 
68

 
72

 
75

Amortization
(6
)
 
(6
)
 
(5
)
 
(65
)
 
(50
)
 
(43
)
Ending balance at December 31
$
13

 
$
12

 
$
12

 
$
186

 
$
183

 
$
161



The aggregate amortization expense (actual and estimated) for internal-use and external-use software for the following periods is:
 
Actual
 
For the year ended (estimated)
In millions
2014
 
2015
 
2016
 
2017
 
2018
 
2019
Internal-use software amortization expense
$
6

 
$
5

 
$
4

 
$
3

 
$
1

 
$

External-use software amortization expense
$
65

 
$
67

 
$
55

 
$
38

 
$
20

 
$
6


Estimated expense is based on capitalized software at December 31, 2014 and does not include any new capitalization for future periods.
Valuation of Long-Lived Assets. Long-lived assets such as property and equipment, acquired intangible assets and internal capitalized software are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss would be recognized when estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount.
Goodwill. Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill amounts are not amortized, but rather are tested for impairment annually or upon occurrence of an event or change in circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company performs its annual goodwill impairment testing in the fourth quarter, and did not recognize any goodwill impairment charges in 2014, 2013 or 2012.
Warranty. Provisions for product warranties are recorded in the period in which the related revenue is recognized. The Company accrues warranty reserves using percentages of revenue to reflect the Company’s historical average warranty claims.
Research and Development Costs. Research and development costs are expensed as incurred (with the exception of the capitalized software development costs discussed above). Research and development costs primarily include labor-related costs, contractor fees, and overhead expenses directly related to research and development support.
Pension and Postemployment Benefits. The Company accounts for its pension and postemployment benefit obligations using actuarial models. The measurement of plan obligations was made as of December 31, 2014. Liabilities are computed using the projected unit credit method. The objective under this method is to expense each participant’s benefits under the plan as they accrue, taking into consideration salary increases and the plan’s benefit allocation formula. Thus, the total pension or postemployment benefit to which each participant is expected to become entitled is broken down into units, each associated with a year of past or future credited service.
The Company recognizes the funded status of its pension and postemployment plan obligations in its consolidated balance sheet and records in other comprehensive income certain gains and losses that arise during the period, but are deferred under pension accounting rules.
Foreign Currency. Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment are translated into U.S. dollars at period-end exchange rates. Income and expense accounts are translated at daily exchange rates prevailing during the period. Adjustments arising from the translation are included in accumulated other comprehensive income, a separate component of stockholders’ equity. Gains and losses resulting from foreign currency transactions are included in determining net income.
Income Taxes. Income tax expense is provided based on income before income taxes in the various jurisdictions in which the Company conducts its business. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred taxes are determined based on the enacted tax rates expected to apply in the periods in which the deferred assets or liabilities are expected to be settled or realized. Teradata recognizes tax benefits from uncertain tax positions only if it is more likely than not the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company records valuation allowances related to its deferred income tax assets when it is more likely than not that some portion or all of the deferred income tax assets will not be realized.
Stock-based Compensation. Stock-based payments to employees, including grants of stock options, restricted stock and restricted stock units, are recognized in the financial statements based on their fair value. The fair value of each stock option award on the grant date is estimated using the Black-Scholes option-pricing model with the following assumptions: expected dividend yield, expected stock price volatility, weighted-average risk-free interest rate and weighted average expected term of the options. The Company’s expected volatility assumption used in the Black-Scholes option-pricing model is based on Teradata's historical volatility. Prior to 2014, because the Company did not have a sufficient trading history as a stand-alone public company, the volatility was based on a blend of peer group volatility and Teradata volatility. The expected term assumption is based on the simplified method under GAAP, which is based on the vesting period and contractual term for each vesting tranche of awards. The mid-point between the vesting date and the expiration date is used as the expected term under this method. The risk-free interest rate used in the Black-Scholes model is based on the implied yield curve available on U.S. Treasury zero-coupon issues at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a cash dividend.
Treasury Stock. Prior to the fourth quarter of 2014, when all treasury stock shares were retired, shares of the Company’s common stock repurchased through the share repurchase programs were held as treasury stock. Treasury stock was accounted for using the cost method. Beginning in the fourth quarter of 2014, stock repurchased through the share repurchase programs will be retired upon repurchase.
Earnings Per Share. Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the reported period. The calculation of diluted earnings per share is similar to basic earnings per share, except that the weighted-average number of shares outstanding includes the dilution from potential shares added from stock options, restricted stock awards and other stock awards. Refer to Note 5 for share information on the Company’s stock compensation plans.
The components of basic and diluted earnings per share are as follows: 
 
For the year ended December 31
In millions, except earnings per share
2014
 
2013
 
2012
Net income available for common stockholders
$
367

 
$
377

 
$
419

Weighted average outstanding shares of common stock
155.3

 
163.4

 
168.2

Dilutive effect of employee stock options and restricted stock
2.5

 
3.0

 
3.5

Common stock and common stock equivalents
157.8

 
166.4

 
171.7

Earnings per share:
 
 
 
 
 
Basic
$
2.36

 
$
2.31

 
$
2.49

Diluted
$
2.33

 
$
2.27

 
$
2.44

Recently Issued Accounting Pronouncements
Revenue Recognition. In May 2014, the Financial Accounting Standards Board ("FASB") issued new guidance that affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The new guidance will supersede the revenue recognition requirements in the current revenue recognition guidance, and most industry-specific guidance. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement in this update. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the FASB defines a five step process which includes the following: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early application not permitted. The standard allows entities to apply the standard retrospectively for all periods presented or alternatively an entity is permitted to recognize the cumulative effect of initially applying the guidance as an opening balance sheet adjustment to retained earnings in the period of initial application. The Company is currently evaluating the impact on its consolidated financial position, results of operations and cash flows, as well as the method of transition that will be used in adopting the standard.

Accounting for Share-based Payments with Performance Targets. In June 2014, the FASB issued new guidance that requires that a performance target that affects vesting and that could be achieved after the requisite service period, be treated as a performance condition. A reporting entity should apply existing guidance as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The amendments in this update are effective for annual periods, and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company is currently evaluating the impact on its consolidated financial position, results of operations and cash flows.
Recently Adopted Guidance
Income Taxes. In July 2013, the FASB issued new guidance requiring the financial statement presentation of an unrecognized tax benefit in a particular jurisdiction, or a portion thereof, as a reduction to a deferred tax asset for a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward, unless the uncertain tax position is not available to reduce, or would not be used to reduce, the NOL or carryforward under the tax law in the same jurisdiction; otherwise, the unrecognized tax benefit should be presented as a gross liability and should not be combined with a deferred tax asset. This new guidance is effective for interim and annual periods beginning after December 15, 2013. On January 1, 2014, the Company adopted the new guidance which did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Business Combinations. In November 2014, the FASB issued new guidance that will provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. The amendments in this update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The adoption of this new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Description of Business, Basis of Presentation and Significant Accounting Policies (Tables)
Total depreciation expense on the Company’s property and equipment for December 31 was as follows:
In millions
2014
 
2013
 
2012
Depreciation expense
$
51

 
$
48

 
$
41

The following table identifies the activity relating to capitalized software:
 
Internal-use Software
 
External-use Software
In millions
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Beginning balance at January 1
$
12

 
$
12

 
$
11

 
$
183

 
$
161

 
$
129

Capitalized
7

 
6

 
6

 
68

 
72

 
75

Amortization
(6
)
 
(6
)
 
(5
)
 
(65
)
 
(50
)
 
(43
)
Ending balance at December 31
$
13

 
$
12

 
$
12

 
$
186

 
$
183

 
$
161

The aggregate amortization expense (actual and estimated) for internal-use and external-use software for the following periods is:
 
Actual
 
For the year ended (estimated)
In millions
2014
 
2015
 
2016
 
2017
 
2018
 
2019
Internal-use software amortization expense
$
6

 
$
5

 
$
4

 
$
3

 
$
1

 
$

External-use software amortization expense
$
65

 
$
67

 
$
55

 
$
38

 
$
20

 
$
6

The components of basic and diluted earnings per share are as follows: 
 
For the year ended December 31
In millions, except earnings per share
2014
 
2013
 
2012
Net income available for common stockholders
$
367

 
$
377

 
$
419

Weighted average outstanding shares of common stock
155.3

 
163.4

 
168.2

Dilutive effect of employee stock options and restricted stock
2.5

 
3.0

 
3.5

Common stock and common stock equivalents
157.8

 
166.4

 
171.7

Earnings per share:
 
 
 
 
 
Basic
$
2.36

 
$
2.31

 
$
2.49

Diluted
$
2.33

 
$
2.27

 
$
2.44

Supplemental Financial Information (Tables)
Supplemental Financial Information
 
At December 31
In millions
2014
 
2013
Accounts receivable
 
 
 
Trade
$
635

 
$
731

Other
3

 
4

Accounts receivable, gross
638

 
735

Less: allowance for doubtful accounts
(19
)
 
(18
)
Total accounts receivable, net
$
619

 
$
717

Inventories
 
 
 
Finished goods
$
21

 
$
39

Service parts
17

 
17

Total inventories
$
38

 
$
56

Other current assets
 
 
 
Current deferred tax assets
$
28

 
$
34

Other
53

 
61

Total other current assets
$
81

 
$
95

Property and equipment
 
 
 
Land
$
8

 
$
8

Buildings and improvements
77

 
74

Machinery and other equipment
341

 
309

Property and equipment, gross
426

 
391

Less: accumulated depreciation
(267
)
 
(230
)
Total property and equipment, net
$
159

 
$
161

Other assets
 
 
 
Available-for-sale securities
$
78

 
$

Other
20

 
58

Total other assets
$
98

 
$
58

Other current liabilities
 
 
 
Sales and value-added taxes
$
40

 
$
34

Other
61

 
76

Total other current liabilities
$
101

 
$
110

Deferred revenue
 
 
 
Deferred revenue, current
$
370

 
$
390

Long-term deferred revenue
18

 
25

Total deferred revenue
$
388

 
$
415

Goodwill and Acquired Intangible Assets (Tables)
The following table identifies the activity relating to goodwill by operating segment:
In millions
Balance
December 31,
2013
 
Additions
 
Currency
Translation
Adjustments
 
Balance
December 31,
2014
Goodwill
 
 
 
 
 
 
 
Americas
$
626

 
$
30

 
$
(2
)
 
$
654

International
320

 

 
(26
)
 
294

Total goodwill
$
946

 
$
30

 
$
(28
)
 
$
948

The gross carrying amount and accumulated amortization for Teradata’s acquired intangible assets were as follows: 
 
 
 
December 31, 2014
 
December 31, 2013
In millions
Amortization
Life (in Years)
 
Gross 
Carrying Amount
 
Accumulated
Amortization
and Currency
Translation
Adjustments
 
Gross
 Carrying
Amount
 
Accumulated
Amortization
and Currency
Translation
Adjustments
Acquired intangible assets
 
 
 
 
 
 
 
 
 
Intellectual property/developed technology
1 to 7
 
$
186

 
$
(95
)
 
$
153

 
$
(70
)
Customer relationships
3 to 10
 
77

 
(35
)
 
77

 
(23
)
Trademarks/trade names
5
 
1

 
(1
)
 
15

 
(7
)
In-process research and development
5
 
5

 
(2
)
 
5

 
(1
)
Non-compete agreements
3
 

 

 
1

 
(1
)
Total
 
 
$
269

 
$
(133
)
 
$
251

 
$
(102
)
The aggregate amortization expense (actual and estimated) for acquired intangible assets for the following periods is:
 
Actual
 
For the year ended (estimated)
In millions
2012
 
2013
 
2014
 
2015
 
2016
 
2017
 
2018
 
2019
Amortization expense
$
37

 
$
44

 
$
47

 
$
43

 
$
34

 
$
25

 
$
14

 
$
11

Income Taxes (Tables)
For the years ended December 31, income before income taxes consisted of the following: 
In millions
2014
 
2013
 
2012
Income before income taxes
 
 
 
 
 
United States
$
301

 
$
362

 
$
388

Foreign
193

 
146

 
190

Total income before income taxes
$
494

 
$
508

 
$
578

For the years ended December 31, income tax expense consisted of the following: 
In millions
2014
 
2013
 
2012
Income tax expense
 
 
 
 
 
Current
 
 
 
 
 
Federal
$
94

 
$
78

 
$
50

State and local
8

 
10

 
9

Foreign
27

 
26

 
23

Deferred
 
 
 
 
 
Federal
1

 
18

 
72

State and local

 
2

 
7

Foreign
(3
)
 
(3
)
 
(2
)
Total income tax expense
$
127

 
$
131

 
$
159

Effective tax rate
25.7
%
 
25.8
%
 
27.5
%
The following table presents the principal components of the difference between the effective tax rate and the U.S. federal statutory income tax rate for the years ended December 31:
 
2014
 
2013
 
2012
Income tax expense at the U.S. federal tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Foreign income tax differential
(9.0
)%
 
(7.3
)%
 
(8.1
)%
State and local income taxes
0.5
 %
 
0.4
 %
 
0.7
 %
U.S. permanent book/tax differences
(1.7
)%
 
(1.6
)%
 
(0.5
)%
Other, net
0.9
 %
 
(0.7
)%
 
0.4
 %
Effective tax rate
25.7
 %
 
25.8
 %
 
27.5
 %
Deferred income tax assets and liabilities included in the balance sheets at December 31 were as follows:
In millions
2014
 
2013
Deferred income tax assets
 
 
 
Employee pensions and other liabilities
$
61

 
$
57

Other balance sheet reserves and allowances
22

 
22

Tax loss and credit carryforwards
59

 
41

Deferred revenue

 
2

Capitalized research and development

 
5

Other

 
1

Total deferred income tax assets
142

 
128

Valuation allowance
(20
)
 
(13
)
Net deferred income tax assets
122

 
115

Deferred income tax liabilities
 
 
 
Intangibles and capitalized software
102

 
117

Property and equipment
29

 
29

Deferred revenue
17

 

Other
12

 

Total deferred income tax liabilities
160

 
146

Total net deferred income tax liabilities
$
(38
)
 
$
(31
)
Below is a rollforward of the Company’s liability related to uncertain tax positions at December 31:
In millions
2014
 
2013
Balance at January 1
$
34

 
$
31

Gross increases for prior period tax positions
4

 
1

Gross decreases for prior period tax positions
(3
)
 
(3
)
Gross increases for current period tax positions
4

 
5

Decreases due to the lapse of applicable statute of limitations
(3
)
 

Balance at December 31
$
36

 
$
34

Employee Stock-based Compensation Plans (Tables)
The Company recorded stock-based compensation expense for the years ended December 31 as follows: 
In millions
2014
 
2013
 
2012
Stock options
$
13

 
$
14

 
$
15

Restricted stock
33

 
32

 
28

Employee share repurchase program (compensatory effective 1/1/13)
4

 
3

 

Total stock-based compensation before income taxes
50

 
49

 
43

Tax benefit
(16
)
 
(16
)
 
(14
)
Total stock-based compensation, net of tax
$
34

 
$
33

 
$
29

The fair value of each option award on the grant date was estimated using the Black-Scholes option-pricing model with the following assumptions:
 
2014
 
2013
 
2012
Dividend yield
%
 
%
 
%
Risk-free interest rate
1.73
%
 
1.77
%
 
0.87
%
Expected volatility
37.8
%
 
37.6
%
 
35.7
%
Expected term (years)
6.3

 
6.3

 
6.3

The following table summarizes the Company’s stock option activity for the year ended December 31, 2014: 
Shares in thousands
Shares
Under
Option
 
Weighted-
Average
Exercise
Price per
Share
 
Weighted-
Average
Remaining
Contractual
Term (in
years)
 
Aggregate
Intrinsic
Value (in
millions)
Outstanding at January 1, 2013
7,012

 
$
33.27

 
6.3
 
$
100

Granted
921

 
$
44.43

 
 
 
 
Exercised
(561
)
 
$
19.02

 
 
 
 
Canceled
(36
)
 
$
41.83

 
 
 
 
Forfeited
(99
)
 
$
50.98

 
 
 
 
Outstanding at December 31, 2014
7,237

 
$
35.50

 
6.1
 
$
78

Fully vested and expected to vest at December 31, 2014
7,194

 
$
35.44

 
6.0
 
$
78

Exercisable at December 31, 2014
5,190

 
$
30.63

 
4.9
 
$
78

The following table summarizes the total intrinsic value of options exercised and the cash received by the Company from option exercises under all share-based payment arrangements at December 31:
In millions
2014
 
2013
 
2012
Intrinsic value of options exercised
$
14

 
$
19

 
$
113

Cash received from option exercises
$
11

 
$
9

 
$
43

Tax benefit realized from option exercises
$
5

 
$
6

 
$
38

The following table reports restricted stock and restricted stock unit activity during the year ended December 31, 2014: 
Shares in thousands
Number of
Shares
 
Weighted-
Average 
Grant
Date Fair
 Value
per Share
Unvested shares at January 1, 2014
2,578

 
$
50.30

Granted
1,447

 
$
44.39

Vested
(537
)
 
$
50.91

Forfeited/canceled
(236
)
 
$
54.17

Unvested shares at December 31, 2014
3,252

 
$
47.18

The following table summarizes the weighted-average fair value of restricted stock units granted for Teradata equity awards and the total fair value of shares vested at December 31:
 
2014
 
2013
 
2012
Weighted-average fair value of restricted stock units granted
$
44.39

 
$
48.24

 
$
60.71

Total fair value of shares vested (in millions)
$
27

 
$
30

 
$
15

The following table represents the composition of Teradata restricted stock unit grants in 2014: 
Shares in thousands
Number of
Shares
 
Weighted-
Average 
Grant
Date Fair 
Value
Service-based shares
1,361

 
$
44.28

Performance-based shares
86

 
$
46.26

Total stock grants
1,447

 
$
44.39

The primary assumptions used in the valuation of the market component of the awards were as follows: 
 
2012
Grant date fair value per share of Company common stock
$
58.63

Expected volatility
36.44
%
Risk-free interest rate
0.47
%
Dividend yield

Performance vesting hurdle - future fair value per share of Company common stock
$
85.00

Employee purchases and aggregate cost were as follows at December 31:
In millions
2014
 
2013
 
2012
Employee share purchases
0.4

 
0.4

 
0.2

Aggregate cost
$
18

 
$
20

 
$
12

Employee Benefit Plans (Tables)
Pension and postemployment benefit costs for the years ended December 31 were as follows: 
 
2014
 
2013
 
2012
In millions
Pension
 
Postemployment
 
Pension
 
Postemployment
 
Pension
 
Postemployment
Service cost
$
9

 
$
4

 
$
8

 
$
3

 
$
8

 
$
4

Interest cost
4

 
1

 
4

 
1

 
4

 
1

Expected return on plan assets
(2
)
 

 
(2
)
 

 
(3
)
 

Settlement charge
1

 

 
1

 

 
1

 

Amortization of actuarial loss (gain)
2

 
(1
)
 
2

 
(1
)
 
1

 

Amortization of prior service cost (credit)
(1
)
 

 

 

 

 

Total costs
$
13

 
$
4

 
$
13

 
$
3

 
$
11

 
$
5

The following tables present the changes in benefit obligations, plan assets, funded status and the reconciliation of the funded status to amounts recognized in the consolidated balance sheets and in accumulated other comprehensive income at December 31:
 
Pension
 
Postemployment
In millions
2014
 
2013
 
2014
 
2013
Change in benefit obligation
 
 
 
 
 
 
 
Benefit obligation at January 1
$
129

 
$
122

 
$
27

 
$
25

Service cost
9

 
8

 
4

 
3

Interest cost
4

 
4

 
1

 
1

Plan participant contributions
1

 
1

 

 

Actuarial loss
18

 
6

 
19

 
3

Benefits paid
(19
)
 
(6
)
 
(11
)
 
(4
)
Currency translation adjustments
(15
)
 
(6
)
 
(1
)
 
(1
)
New plans
3

 

 

 

Benefit obligation at December 31
130

 
129

 
39

 
27

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at January 1
$
76

 
$
69

 
$

 
$

Actual return on plan assets
7

 
9

 

 

Company contributions
8

 
10

 

 

Benefits paid
(19
)
 
(6
)
 

 

Currency translation adjustments
(7
)
 
(7
)
 

 

Plan participant contribution
1

 
1

 

 

New plans
1

 

 

 

Fair value of plan assets at December 31
67

 
76

 

 

Funded status (underfunded)
$
(63
)
 
$
(53
)
 
$
(39
)
 
$
(27
)
Amounts Recognized in the Balance Sheet
 
 
 
 
 
 
 
Non-current assets
$
4

 
$
1

 
$

 
$

Current liabilities
(1
)
 
(1
)
 
(5
)
 
(4
)
Non-current liabilities
(66
)
 
(53
)
 
(34
)
 
(23
)
Net amounts recognized
$
(63
)
 
$
(53
)
 
$
(39
)
 
$
(27
)
Amounts Recognized in Accumulated Other Comprehensive Income
 
 
 
 
 
 
 
Unrecognized Net actuarial loss (gain)
$
33

 
$
26

 
$
6

 
$
(12
)
Unrecognized Prior service (credit) cost

 
(2
)
 
1

 

Total
$
33

 
$
24

 
$
7

 
$
(12
)
The following table presents the accumulated pension benefit obligation at December 31:
In millions
2014
 
2013
Accumulated pension benefit obligation
$
118

 
$
120

The following table presents pension plans with accumulated benefit obligations in excess of plan assets at December 31:
In millions
2014
 
2013
Projected benefit obligation
$
69

 
$
55

Accumulated benefit obligation
$
61

 
$
49

Fair value of plan assets
$
3

 
$
3

The following table presents the pre-tax net changes in projected benefit obligations recognized in other comprehensive income during 2014 and 2013: 
 
Pension
 
Postemployment
In millions
2014
 
2013
 
2014
 
2013
Actuarial loss (gain) arising during the year
$
14

 
$
(1
)
 
$
18

 
$
2

Amortization of (gain) loss included in net periodic benefit cost
(2
)
 
(2
)
 
1

 
1

Prior service cost arising during the year
1

 

 

 


Recognition of loss due to settlement
(1
)
 
(1
)
 

 

Foreign currency exchange
(3
)
 
(1
)
 

 

Total recognized in other comprehensive income
$
9

 
$
(5
)
 
$
19

 
$
3

The following table presents the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost during 2015: 
In millions
Pension
 
Postemployment
Net loss to be recognized in other comprehensive income
$
3

 
$

The weighted-average rates and assumptions used to determine benefit obligations at December 31, 2014 and 2013, and net periodic benefit cost for the years ended December 31, 2014, 2013, and 2012, were as follows: 
 
Pension Benefit Obligations
 
Pension Benefit Cost
 
2014
 
2013
 
2014
 
2013
 
2012
Discount rate
2.3%
 
3.0%
 
3.0%
 
3.0%
 
3.7%
Rate of compensation increase
3.3%
 
3.2%
 
3.2%
 
3.3%
 
3.3%
Expected return on plan assets
N/A
 
N/A
 
3.4%
 
3.4%
 
4.0%
 
Postemployment 
Benefit Obligations
 
Postemployment 
Benefit Cost
 
2014
 
2013
 
2014
 
2013
 
2012
Discount rate
3.5%
 
3.8%
 
3.8%
 
3.4%
 
4.1%
Rate of compensation increase
3.0%
 
3.7%
 
3.7%
 
3.8%
 
3.7%
Involuntary turnover rate
1.3%
 
1.0%
 
1.0%
 
1.0%
 
1.5%
The weighted-average asset allocations at December 31, by asset category are as follows: 
 
Actual Asset Allocation
As of December 31
 
Target Asset Allocation
 
2014
 
2013
 
Equity securities
32
%
 
34
%
 
31
%
Debt securities
41
%
 
37
%
 
44
%
Insurance (annuity) contracts
17
%
 
13
%
 
17
%
Real estate
5
%
 
6
%
 
3
%
Other
5
%
 
10
%
 
5
%
Total
100
%
 
100
%
 
100
%
The following table sets forth by level, within the fair value hierarchy, the pension plan assets at fair value as of December 31, 2013: 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices in Active 
Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
In millions
December 31, 2013
 
(Level 1)
 
(Level 2)
 
(Level 3)
Money market funds
$
3

 
$

 
$
3

 
$

Equity funds
26

 

 
26

 

Bond/fixed-income funds
28

 

 
28

 

Real-estate indirect investment
5

 

 
5

 

Commodities/Other
4

 

 
4

 

Insurance contracts
10

 

 

 
10

Total Assets at fair value
$
76

 
$

 
$
66

 
$
10

The following table sets forth by level, within the fair value hierarchy, the pension plan assets at fair value as of December 31, 2014: 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices in Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
In millions
December 31, 2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Money market funds
$
2

 
$

 
$
2

 
$

Equity funds
21

 

 
21

 

Bond/fixed-income funds
28

 

 
28

 

Real-estate indirect investment
4

 

 
4

 

Commodities/Other
1

 

 
1

 

Insurance contracts
11

 

 

 
11

Total Assets at fair value
$
67

 
$

 
$
56

 
$
11

The table below sets forth a summary of changes in the fair value of the pension plan level 3 assets for the year ended December 31, 2014:
In millions
Insurance
Contracts
Balance as of January 1, 2014
$
10

Purchases, sales and settlements, net
1

Balance as of December 31, 2014
$
11

The table below sets forth a summary of changes in the fair value of the pension plan level 3 assets for the year ended December 31, 2013:
In millions
Insurance
Contracts
Balance as of January 1, 2013
$
8

Purchases, sales and settlements, net
2

Balance as of December 31, 2013
$
10

The Company expects to make the following benefit payments reflecting past and future service from its pension and postemployment plans: 
 
Pension Benefits
 
Postemployment Benefits
In millions
 
Year
 
 
 
2015
$
3

 
$
5

2016
$
5

 
$
5

2017
$
6

 
$
5

2018
$
6

 
$
5

2019
$
5

 
$
5

2020-2024
$
32

 
$
23

The following table identifies the expense for the U.S and International subsidiary savings plans for the years ended December 31:
In millions
2014
 
2013
 
2012
U.S. savings plan
$
23

 
$
23

 
$
21

International subsidiary savings plans
$
18

 
$
17

 
$
18

Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities (Tables)
Schedule of Foreign Exchange Contracts
The following table identifies the contract notional amount of the Company’s foreign exchange forward contracts at December 31:
In millions
2014
 
2013
Contract notional amount of foreign exchange forward contracts
$
116

 
$
152

Net contract notional amount of foreign exchange forward contracts
$
17

 
$
24

Commitments and Contingencies (Tables)
The following table identifies the activity relating to the warranty reserve liability for the years ended December 31: 
In millions
2014
 
2013
 
2012
Beginning balance at January 1
$
8

 
$
8

 
$
6

Accruals for warranties issued
16

 
15

 
17

Settlements (in cash or kind)
(17
)
 
(15
)
 
(15
)
Balance at end of period
$
7

 
$
8

 
$
8

Future minimum operating lease payments and committed subleases under non-cancelable leases as of December 31, 2014, for the following fiscal years were: 
 
Total
 
 
 
 
 
 
 
 
 
 
In millions
Amounts
 
2015
 
2016
 
2017
 
2018
 
2019
Operating lease obligations
$
72

 
$
23

 
$
18

 
$
15

 
$
12

 
$
4

Sublease rentals
(8
)
 
(3
)
 
(3
)
 
(2
)
 

 

Total committed operating leases less sublease rentals
$
64

 
$
20

 
$
15

 
$
13

 
$
12

 
$
4


The following table represents the Company’s actual rental expense and sublease rental income for the years ended December 31:
In millions
2014
 
2013
 
2012
Rental expense
$
26

 
$
26

 
$
25

Sublease rental income
$
3

 
$
3

 
$
3

Fair Value Measurements (Tables)
Assets and Liabilities Measured at Fair Value on Recurring Basis and Subject to Fair Value Disclosure Requirements
The Company’s assets measured at fair value on a recurring basis and subject to fair value disclosure requirements at December 31, were as follows: 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices 
in Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant Unobservable Inputs
In millions
December 31, 2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
Money market funds
$
393

 
$
393

 
$

 
$

Available-for-sale securities
78

 
78

 

 

Total assets at fair value
$
471

 
$
471

 
$

 
$

 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices 
in Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant Unobservable Inputs
In millions
December 31, 2013
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
Money market funds
$
318

 
$
318

 
$

 
$

Debt (Tables)
Annual contractual maturities of principal on term loan outstanding at December 31, 2014, are as follows: 
In millions
 
2015
$
53

2016
195

Total
$
248

The following table presents interest expense on borrowings for the years ended December 31:
In millions
2014
 
2013
 
2012
Interest expense
$
3

 
$
4

 
$
4

Segment, Other Supplemental Information and Concentrations (Tables)
The following table presents regional segment revenue and segment gross margin for the Company for the years ended December 31: 
In millions
2014
 
2013
 
2012
Segment revenue
 
 
 
 
 
Americas (1)
$
1,619

 
$
1,633

 
$
1,619

International
1,113

 
1,059

 
1,046

Total revenue
2,732

 
2,692

 
2,665

Segment gross margin
 
 
 
 
 
Americas
943

 
947

 
967

International
536

 
526

 
524

Total gross margin
1,479

 
1,473

 
1,491

Selling, general and administrative expenses
770

 
757

 
728

Research and development expenses
206

 
184

 
183

Total income from operations
503

 
532

 
580

Other expense, net
(9
)
 
(24
)
 
(2
)
Income before income taxes
$
494

 
$
508

 
$
578

The following table presents revenue by product and services revenue for the Company for the years ended December 31:
In millions
2014
 
2013
 
2012
Products (software and hardware)(1)
$
1,227

 
$
1,230

 
$
1,297

Consulting services
817

 
818

 
776

Maintenance services
688

 
644

 
592

Total services
1,505

 
1,462

 
1,368

Total revenue
$
2,732

 
$
2,692

 
$
2,665

The following table presents property and equipment by geographic area at December 31: 
In millions
2014
 
2013
United States
$
130

 
$
131

Americas (excluding United States)
4

 
3

International
25

 
27

Property and equipment, net
$
159

 
$
161

Accumulated Other Comprehensive Income (Tables)
The following table provides information on changes in accumulated other comprehensive income (“AOCI”), net of tax, for the three years ended December 31:
In millions
Available-for-sale securities
 
Defined 
benefit
plans
 
Foreign 
currency
translation
adjustments
 
Total 
AOCI
Balance as of December 31, 2011
$

 
$
(9
)
 
$
25

 
$
16

Other comprehensive income before reclassifications

 
2

 
9

 
11

Amounts reclassified from AOCI

 
2

 

 
2

Net other comprehensive income

 
4

 
9

 
13

Balance as of December 31, 2012
$

 
$
(5
)
 
$
34

 
$
29

Other comprehensive income before reclassifications

 

 
2

 
2

Amounts reclassified from AOCI

 
2

 

 
2

Net other comprehensive income

 
2

 
2

 
4

Balance as of December 31, 2013
$

 
$
(3
)
 
$
36

 
$
33

Other comprehensive income (loss) before reclassifications
31

 
(22
)
 
(47
)
 
(38
)
Amounts reclassified from AOCI

 
1

 

 
1

Net other comprehensive income (loss)
31

 
(21
)
 
(47
)
 
(37
)
Balance as of December 31, 2014
$
31

 
$
(24
)
 
$
(11
)
 
$
(4
)
The following table presents the impact and respective location of AOCI reclassifications in the Consolidated Statements of Income:
In millions
 
 
 
For the year ended December 31
AOCI Component
 
Location
 
2014
 
2013
 
2012
Defined benefit plans
 
Cost of services
 
$
1

 
$
2

 
$
1

Defined benefit plans
 
Selling, general and administrative expenses
 

 
1

 

Defined benefit plans
 
Research and development expenses
 

 
(1
)
 
1

Defined benefit plans
 
Net income
 
$
1

 
$
2

 
$
2

Quarterly Information (unaudited) (Tables)
Quarterly Results of Operations
In millions, except per share amounts
First
 
Second
 
Third
 
Fourth
2014
 
 
 
 
 
 
 
Total revenues
$
628

 
$
676

 
$
667

 
$
761

Gross margin
$
333

 
$
371

 
$
350

 
$
425

Operating income
$
89

 
$
133

 
$
123

 
$
158

Net income
$
59

 
$
96

 
$
94

 
$
118

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.37

 
$
0.61

 
$
0.61

 
$
0.78

Diluted
$
0.37

 
$
0.60

 
$
0.60

 
$
0.77

2013
 
 
 
 
 
 
 
Total revenues
$
587

 
$
670

 
$
666

 
$
769

Gross margin
$
305

 
$
379

 
$
358

 
$
431

Operating income
$
76

 
$
147

 
$
132

 
$
177

Net income
$
59

 
$
108

 
$
98

 
$
112

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.36

 
$
0.66

 
$
0.60

 
$
0.69

Diluted
$
0.35

 
$
0.65

 
$
0.59

 
$
0.68

Description of Business Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Depreciation
$ 51,000,000 
$ 48,000,000 
$ 41,000,000 
Goodwill impairment charges
$ 0 
$ 0 
$ 0 
Antidilutive options to purchase were excluded from computation of diluted earnings per share
2,400,000 
900,000 
Internal-Use Software
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Period capitalized on a straight-line basis when the asset is substantially ready for use
3 years 
 
 
Capitalized Software
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Intangible assets amortizable period
4 years 
 
 
Minimum
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Fees payment term (in days)
30 days 
 
 
Intangible assets amortizable period
   
   
 
Maximum
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Fees payment term (in days)
90 days 
 
 
Intangible assets amortizable period
   
   
 
Equipment |
Minimum
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Estimated Useful Lives
3 years 
 
 
Equipment |
Maximum
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Estimated Useful Lives
20 years 
 
 
Building |
Minimum
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Estimated Useful Lives
25 years 
 
 
Building |
Maximum
 
 
 
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Estimated Useful Lives
45 years 
 
 
Description of Business, Basis of Presentation and Significant Accounting Policies Activities Relating to Capitalized Software (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Movement in Capitalized Computer Software, Net [Roll Forward]
 
 
 
Ending balance at December 31
$ 199 
$ 195 
 
Internal-Use Software
 
 
 
Movement in Capitalized Computer Software, Net [Roll Forward]
 
 
 
Beginning balance at January 1
12 
12 
11 
Capitalized
Amortization
(6)
(6)
(5)
Ending balance at December 31
13 
12 
12 
External-Use Software
 
 
 
Movement in Capitalized Computer Software, Net [Roll Forward]
 
 
 
Beginning balance at January 1
183 
161 
129 
Capitalized
68 
72 
75 
Amortization
(65)
(50)
(43)
Ending balance at December 31
$ 186 
$ 183 
$ 161 
Description of Business, Basis of Presentation and Significant Accounting Policies Aggregate Amortization Expense for Internal and External-Use Software (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Acquired Intangible Assets Amortization [Line Items]
 
 
 
Actual 2014
$ 47 
$ 44 
$ 37 
2015
43 
 
 
2016
34 
 
 
2017
25 
 
 
2018
14 
 
 
2019
11 
 
 
Internal-use software amortization expense
 
 
 
Acquired Intangible Assets Amortization [Line Items]
 
 
 
Actual 2014
 
 
2015
 
 
2016
 
 
2017
 
 
2018
 
 
2019
 
 
External-use software amortization expense
 
 
 
Acquired Intangible Assets Amortization [Line Items]
 
 
 
Actual 2014
65 
 
 
2015
67 
 
 
2016
55 
 
 
2017
38 
 
 
2018
20 
 
 
2019
$ 6 
 
 
Description of Business, Basis of Presentation and Significant Accounting Policies Components of Basic and Diluted Earnings Per Share (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Description of Business, Basis of Presentation and Significant Accounting Policies [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net income available for common stockholders
$ 118 
$ 94 
$ 96 
$ 59 
$ 112 
$ 98 
$ 108 
$ 59 
$ 367 
$ 377 
$ 419 
Weighted average outstanding shares of common stock
 
 
 
 
 
 
 
 
155.3 
163.4 
168.2 
Dilutive effect of employee stock options and restricted stock
 
 
 
 
 
 
 
 
2.5 
3.0 
3.5 
Common stock and common stock equivalents
 
 
 
 
 
 
 
 
157.8 
166.4 
171.7 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
Basic (in usd per share)
$ 0.78 
$ 0.61 
$ 0.61 
$ 0.37 
$ 0.69 
$ 0.60 
$ 0.66 
$ 0.36 
$ 2.36 
$ 2.31 
$ 2.49 
Diluted (in usd per share)
$ 0.77 
$ 0.60 
$ 0.60 
$ 0.37 
$ 0.68 
$ 0.59 
$ 0.65 
$ 0.35 
$ 2.33 
$ 2.27 
$ 2.44 
Supplemental Financial Information (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Accounts receivable
 
 
Trade
$ 635 
$ 731 
Other
Accounts receivable, gross
638 
735 
Less: allowance for doubtful accounts
(19)
(18)
Total accounts receivable, net
619 
717 
Inventories
 
 
Finished goods
21 
39 
Service parts
17 
17 
Total inventories
38 
56 
Other current assets
 
 
Current deferred tax assets
28 
34 
Other
53 
61 
Total other current assets
81 
95 
Property and equipment
 
 
Land
Buildings and improvements
77 
74 
Machinery and other equipment
341 
309 
Property and equipment, gross
426 
391 
Less: accumulated depreciation
(267)
(230)
Total property and equipment, net
159 
161 
Other assets
 
 
Available-for-sale securities
78 
Other
20 
58 
Total other assets
98 
58 
Other current liabilities
 
 
Sales and value-added taxes
40 
34 
Other
61 
76 
Total other current liabilities
101 
110 
Deferred revenue
 
 
Deferred revenue, current
370 
390 
Long-term deferred revenue
18 
25 
Total deferred revenue
$ 388 
$ 415 
Goodwill and Acquired Intangible Assets Goodwill by Operating Segment (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Goodwill
 
December 31, 2013
$ 946 
Additions
30 
Currency Translation Adjustments
(28)
December 31, 2014
948 
Americas
 
Goodwill
 
December 31, 2013
626 
Additions
30 
Currency Translation Adjustments
(2)
December 31, 2014
654 
International
 
Goodwill
 
December 31, 2013
320 
Additions
Currency Translation Adjustments
(26)
December 31, 2014
$ 294 
Goodwill and Acquired Intangible Assets Gross Carrying Amount and Accumulated Amortization for Teradata Acquired Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Acquired Finite-Lived Intangible Assets
 
 
Accumulated Amortization and Currency Translation Adjustments
$ (133)
$ (102)
Gross Carrying Amount
269 
251 
Intellectual property/developed technology
 
 
Acquired Finite-Lived Intangible Assets
 
 
Accumulated Amortization and Currency Translation Adjustments
(95)
(70)
Gross Carrying Amount
186 
153 
Customer relationships
 
 
Acquired Finite-Lived Intangible Assets
 
 
Accumulated Amortization and Currency Translation Adjustments
(35)
(23)
Gross Carrying Amount
77 
77 
Trademarks/trade names
 
 
Acquired Finite-Lived Intangible Assets
 
 
Accumulated Amortization and Currency Translation Adjustments
(1)
(7)
Gross Carrying Amount
15 
In-process research and development
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
5 years 
5 years 
Accumulated Amortization and Currency Translation Adjustments
(2)
(1)
Gross Carrying Amount
Non-compete agreements
 
 
Acquired Finite-Lived Intangible Assets
 
 
Accumulated Amortization and Currency Translation Adjustments
(1)
Gross Carrying Amount
$ 0 
$ 1 
Minimum
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
   
   
Minimum |
Intellectual property/developed technology
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
1 year 
1 year 
Minimum |
Customer relationships
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
3 years 
3 years 
Minimum |
Trademarks/trade names
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
5 years 
5 years 
Minimum |
Non-compete agreements
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
3 years 
3 years 
Maximum
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
   
   
Maximum |
Intellectual property/developed technology
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
7 years 
7 years 
Maximum |
Customer relationships
 
 
Acquired Finite-Lived Intangible Assets
 
 
Amortization Life (in Years)
10 years 
10 years 
Goodwill and Acquired Intangible Assets Aggregate Amortization Expense for Acquired Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
 
Amortization expense - Actual 2014
$ 47 
$ 44 
$ 37 
Amortization expense - 2015
43 
 
 
Amortization expense - 2016
34 
 
 
Amortization expense - 2017
25 
 
 
Amortization expense - 2018
14 
 
 
Amortization expense - 2019
$ 11 
 
 
Goodwill and Acquired Intangible Assets Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Goodwill [Line Items]
 
Fully amortized intangible assets
$ 21 
Series of Individually Immaterial Business Acquisitions
 
Goodwill [Line Items]
 
Increase to gross carrying amount of acquired intangible assets
$ 39 
Income Taxes - Additional information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Taxes
 
 
 
Tax loss and credit carryforwards
$ 59,000,000 
$ 41,000,000 
 
Total income tax expense (in percentage)
25.70% 
25.80% 
27.50% 
Material discrete tax items reflected in the effective tax rate
 
 
Other tax expense/ benefit
4,000,000 
 
 
Net operating loss and tax credit carryforwards
70,000,000 
 
 
Research and development tax credit carryforwards
31,000,000 
 
 
Tax credit carryforwards recognized as deferred tax assets on balance sheet
11,000,000 
 
 
Deferred tax asset valuation allowance
20,000,000 
13,000,000 
 
Deferred tax liability from foreign subsidiaries
1,000,000,000 
 
 
Tax liability related to uncertain tax positions
36,000,000 
34,000,000 
31,000,000 
Uncertain tax positions recognized as noncurrent liability on balance sheet
18,000,000 
 
 
Uncertain tax positions related to business acquisitions not recognized on balance sheet
15,000,000 
 
 
Interest accruals related to uncertain tax liabilities
2,000,000 
 
 
United States And Certain Foreign Jurisdictions
 
 
 
Income Taxes
 
 
 
Net operating loss carryforwards in the United States and certain foreign jurisdictions
18,000,000 
 
 
Operating Loss Carryforwards Expiration Year
2015 
 
 
Capital Loss Carryforward [Member]
 
 
 
Income Taxes
 
 
 
Tax Credit Carryforward, Amount
10,000,000 
 
 
Research Tax Credit Carryforward |
State and Local Jurisdiction
 
 
 
Income Taxes
 
 
 
Tax Credit Carryforward, Percentage of Credits Indefinite
0.90 
 
 
Tax Credit Carryforward, Valuation Allowance
20,000,000 
 
 
Current Income Taxes Payable
 
 
 
Income Taxes
 
 
 
Tax liability related to uncertain tax positions
$ 3,000,000 
 
 
Income Taxes Income Before Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest [Abstract]
 
 
 
United States
$ 301 
$ 362 
$ 388 
Foreign
193 
146 
190 
Income before income taxes
$ 494 
$ 508 
$ 578 
Income Taxes Income Tax Expense (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current
 
 
 
Federal
$ 94 
$ 78 
$ 50 
State and local
10 
Foreign
27 
26 
23 
Deferred
 
 
 
Federal
18 
72 
State and local
Foreign
(3)
(3)
(2)
Total income tax expense
$ 127 
$ 131 
$ 159 
Effective Income Tax Rate Reconciliation, Percent
25.70% 
25.80% 
27.50% 
Income Taxes Difference Between the Effective Tax Rate and the U.S. Federal Statutory Income Tax Rate (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Income tax expense at the U.S. federal tax rate
35.00% 
35.00% 
35.00% 
Foreign income tax differential
(9.00%)
(7.30%)
(8.10%)
State and local income taxes
0.50% 
0.40% 
0.70% 
U.S. permanent book/tax differences
(1.70%)
(1.60%)
(0.50%)
Other, net
0.90% 
(0.70%)
0.40% 
Effective tax rate
25.70% 
25.80% 
27.50% 
Income Taxes Deferred Income Tax Assets and Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred income tax assets
 
 
Employee pensions and other liabilities
$ 61 
$ 57 
Other balance sheet reserves and allowances
22 
22 
Tax loss and credit carryforwards
59 
41 
Deferred revenue
Capitalized research and development
Other
Total deferred income tax assets
142 
128 
Valuation allowance
(20)
(13)
Net deferred income tax assets
122 
115 
Deferred income tax liabilities
 
 
Intangibles and capitalized software
102 
117 
Property and equipment
29 
29 
Deferred revenue
17 
Other
12 
Total deferred income tax liabilities
160 
146 
Total net deferred income tax liabilities
$ (38)
$ (31)
Employee Stock-based Compensation Plans Stock-Based Compensation Expense (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
 
 
Stock options
$ 13 
$ 14 
$ 15 
Restricted stock
33 
32 
28 
Employee share repurchase program (compensatory effective 1/1/13)
Total stock-based compensation before income taxes
50 
49 
43 
Tax benefit
(16)
(16)
(14)
Total stock-based compensation, net of tax
$ 34 
$ 33 
$ 29 
Employee Stock-based Compensation Plans Fair Value of Each Option Award on the Grant Date Using the Black-Scholes Option-Pricing Model (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
 
 
Dividend yield
0.00% 
0.00% 
0.00% 
Risk-free interest rate
1.73% 
1.77% 
0.87% 
Expected volatility
37.80% 
37.60% 
35.70% 
Expected term (years)
6 years 3 months 18 days 
6 years 3 months 18 days 
6 years 3 months 18 days 
Employee Stock-based Compensation Plans Summary of Stock Option Activity (Detail) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Shares Under Option
 
 
Outstanding at January 1, 2013 (in shares)
7,012 
 
Granted (in shares)
921 
 
Exercised (in shares)
(561)
 
Canceled (in shares)
(36)
 
Forfeited (in shares)
(99)
 
Outstanding at December 31, 2014 (in shares)
7,237 
7,012 
Fully vested and expected to vest at December 31, 2014 (in shares)
7,194 
 
Exercisable at December 31, 2014 (in shares)
5,190 
 
Weighted-Average Exercise Price per Share
 
 
Outstanding at January 1, 2013 (in usd per share)
$ 33.27 
 
Granted (in usd per share)
$ 44.43 
 
Exercised (in usd per share)
$ 19.02 
 
Canceled (in usd per share)
$ 41.83 
 
Forfeited (in usd per share)
$ 50.98 
 
Outstanding at December 31, 2014 (in usd per share)
$ 35.50 
$ 33.27 
Fully vested and expected to vest at December 31, 2014 (in usd per share)
$ 35.44 
 
Exercisable at December 31, 2014 (in usd per share)
$ 30.63 
 
Weighted-Average Remaining Contractual Term
 
 
Outstanding at January 1, 2013 (in years)
6 years 1 month 6 days 
6 years 3 months 18 days 
Outstanding at December 31, 2014 (in years)
6 years 1 month 6 days 
6 years 3 months 18 days 
Fully vested and expected to vest at December 31, 2014 (in years)
6 years 
 
Exercisable at December 31, 2014 (in years)
4 years 10 months 24 days 
 
Aggregate Intrinsic Value
 
 
Outstanding at January 1, 2013
$ 100 
 
Outstanding at December 31, 2014
78 
100 
Fully vested and expected to vest at December 31, 2014
78 
 
Exercisable at December 31, 2014
$ 78 
 
Employee Stock-based Compensation Plans Total Intrinsic Value of Options Exercised and The Cash Received (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Intrinsic value of options exercised
$ 14 
$ 19 
$ 113 
Cash received from option exercises
11 
43 
Employee Service Share-based Compensation, Tax Benefit Realized from Exercise of Stock Options
$ 5 
$ 6 
$ 38 
Employee Stock-based Compensation Plans Restricted Stock and Restricted Stock Unit Activity (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Number of Shares
 
Unvested shares at January 1, 2013 (in shares)
2,578 
Granted (in shares)
1,447 
Vested (in shares)
(537)
Forfeited/canceled (in shares)
(236)
Unvested shares at December 31, 2014 (in shares)
3,252 
Weighted-Average Grant Date Fair Value
 
Unvested shares at January 1, 2013 (in usd per share)
$ 50.30 
Granted (in usd per share)
$ 44.39 
Vested (in usd per share)
$ 50.91 
Forfeited/canceled (in usd per share)
$ 54.17 
Unvested shares at December 31, 2014 (in usd per share)
$ 47.18 
Employee Stock-based Compensation Plans Weighted-Average Fair Value and Total Fair Value of Shares Vested (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Weighted-average fair value of restricted stock units granted (in usd per share)
$ 44.39 
 
 
Restricted Stock Units
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Weighted-average fair value of restricted stock units granted (in usd per share)
$ 44.39 
$ 48.24 
$ 60.71 
Total fair value of shares vested (in millions)
$ 27 
$ 30 
$ 15 
Employee Stock-based Compensation Plans Composition of Teradata Restricted Stock Grants (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Number of Shares
1,447 
Weighted-average fair value of restricted stock units granted (in usd per share)
$ 44.39 
Service-based shares
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Number of Shares
1,361 
Weighted-average fair value of restricted stock units granted (in usd per share)
$ 44.28 
Performance-based shares
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Number of Shares
86 
Weighted-average fair value of restricted stock units granted (in usd per share)
$ 46.26 
Employee Stock-based Compensation Plans Primary Assumptions Valuation Market Component Awards (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share based Compensation Arrangement by Share based Payment Award, Fair Value Assumptions, Method Used [Line Items]
 
 
 
Grant date fair value per share of Company common stock
$ 47.18 
$ 50.30 
 
Expected volatility
37.80% 
37.60% 
35.70% 
Risk-free interest rate
1.73% 
1.77% 
0.87% 
Dividend yield
0.00% 
0.00% 
0.00% 
Restricted Stock Units With Market Based Performance Criteria
 
 
 
Share based Compensation Arrangement by Share based Payment Award, Fair Value Assumptions, Method Used [Line Items]
 
 
 
Grant date fair value per share of Company common stock
 
$ 58.63 
 
Expected volatility
 
36.44% 
 
Risk-free interest rate
 
0.47% 
 
Dividend yield
 
0.00% 
 
Performance vesting hurdle - future fair value per share of Company common stock
 
$ 85.00 
 
Employee Stock-based Compensation Plans Employee Purchases and Aggregate Cost (Details) (Employee Stock Puchase Program, USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Employee Stock Puchase Program
 
 
 
Equity, Class of Treasury Stock [Line Items]
 
 
 
Employee share purchases (in shares)
0.4 
0.4 
0.2 
Aggregate cost
$ 18 
$ 20 
$ 12 
Employee Stock-based Compensation Plans - Additional Information (Detail) (USD $)
0 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended
Mar. 1, 2013
Award
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Mar. 1, 2013
Long-Term Strategic PBRSUs
Jan. 31, 2013
Employee Stock Purchase Program
Dec. 31, 2012
Employee Stock Purchase Program
Dec. 31, 2014
Employee Stock Purchase Program
Dec. 31, 2013
Employee Stock Purchase Program
Dec. 31, 2014
Long-Term Strategic PBRSU
Dec. 31, 2014
Special 2016 PSRSU
Dec. 31, 2014
Stock Option
Dec. 31, 2014
Restricted Stock
Dec. 31, 2012
Restricted Stock Units With Market Based Performance Criteria
Dec. 31, 2014
Restricted Stock Units With Market Based Performance Criteria
Dec. 31, 2013
Restricted Stock Units With Market Based Performance Criteria
Dec. 31, 2014
Service-Based Awards
Minimum
Dec. 31, 2014
Service-Based Awards
Maximum
Dec. 31, 2014
Performance Based Awards
Minimum
Dec. 31, 2014
Performance Based Awards
Maximum
Dec. 31, 2014
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares authorized to be issued under the Teradata SIP
 
16,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option, term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 years 
Vesting period (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 years 
4 years 
1 year 
4 years 
4 years 
Weighted-average fair value of options granted for Teradata equity awards
 
$ 17.67 
$ 18.02 
$ 22.31 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk-free interest rate within the contractual life of the option
 
 
 
 
 
 
 
 
 
 
 
The risk-free interest rate for periods within the contractual life of the option is based on an average of the five-year and seven-year 
 
 
 
 
 
 
 
 
 
Tax benefit realized from stock options exercises
 
$ 5,000,000 
$ 6,000,000 
$ 38,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total unrecognized compensation cost related to unvested stock grants
 
 
 
 
 
 
 
 
 
 
 
37,000,000 
87,000,000 
 
 
 
 
 
 
 
 
Cost expected to be recognized over a weighted-average period (in years)
 
 
 
 
 
 
 
 
 
 
 
3 years 1 month 6 days 
2 years 4 months 24 days 
 
 
 
 
 
 
 
 
Restricted stock unit awards granted
 
1,447,000 
 
 
 
 
 
 
 
 
 
 
 
300,000 
 
 
 
 
 
 
 
Number of types of market based performance awards
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance based restricted units percentage of total units allocated
70.00% 
 
 
 
30.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Award Subjective Performance Period
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
 
 
 
 
 
 
 
 
Weighted-average fair value of restricted stock units granted (in usd per share)
 
$ 44.39 
 
 
 
 
 
 
 
 
 
 
 
 
$ 26.78 
 
 
 
 
 
 
Compensation expense for restricted stock awards
 
$ 33,000,000 
$ 32,000,000 
$ 28,000,000 
 
 
 
 
 
$ 0 
$ 0 
 
 
 
 
$ 0 
 
 
 
 
 
Employee stock purchase program discount from average market price
 
 
 
 
 
15.00% 
5.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of authorized payroll deductions for common stock purchases by employees
 
 
 
 
 
 
10.00% 
10.00% 
10.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Shares authorized to be issued under the Employee Stock Purchase Program
 
 
 
 
 
 
 
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remaining shares authorized to be issued under the Employee Stock Purchase Program
 
 
 
 
 
 
 
1,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Benefit Plans Schedule of Pension and Postemployment Benefit Costs (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Postemployment
 
 
 
Service cost
$ 4 
$ 3 
$ 4 
Interest cost
Amortization of actuarial loss (gain)
(1)
(1)
Amortization of prior service cost (credit)
Total costs
Foreign Pension Plan
 
 
 
Pension
 
 
 
Service cost
Interest cost
Expected return on plan assets
(2)
(2)
(3)
Settlement charge
Amortization of actuarial loss (gain)
Amortization of prior service cost (credit)
(1)
Total costs
$ 13 
$ 13 
$ 11 
Employee Benefit Plans Changes in Benefit Obligations Plan Assets Funded Status and Reconciliation of Funded Status to Amounts Recognized in Consolidated Balance Sheets and in Accumulated Other Comprehensive Income (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Change in Postemployment Benefit Obligation
 
 
 
Benefit obligation at January 1
$ 27 
$ 25 
 
Service cost
Interest cost
Actuarial loss
19 
 
Benefits paid
(11)
(4)
 
Currency translation adjustments
(1)
(1)
 
Benefit obligation at December 31
39 
27 
25 
Postemployment Benefits, Funded Status (Underfunded)
(39)
(27)
 
Change in Pension Benefit Plan Assets
 
 
 
Fair value of plan assets at January 1
76 
 
 
Fair value of plan assets at December 31
67 
76 
 
Amounts Recognized in the Balance Sheet, Postemployment
 
 
 
Current liabilities
(5)
(4)
 
Non-current liabilities
(34)
(23)
 
Non-current liabilities
(39)
(27)
(25)
Amounts Recognized in Accumulated Other Comprehensive Income, Postemployment
 
 
 
Unrecognized Net actuarial loss (gain)
(12)
 
Unrecognized Prior service (credit) cost
 
Total
(12)
 
Foreign Pension Plan
 
 
 
Change in Pension Benefit Obligation
 
 
 
Benefit obligation at January 1
129 
122 
 
Service cost
 
Interest cost
 
Plan participant contributions
 
Actuarial loss
18 
 
Benefits paid
(19)
(6)
 
Currency translation adjustments
(15)
(6)
 
New plans
 
Benefit obligation at December 31
130 
129 
 
Change in Pension Benefit Plan Assets
 
 
 
Fair value of plan assets at January 1
76 
69 
 
Actual return on plan assets
 
Company contributions
10 
 
Benefits paid
(19)
(6)
 
Currency translation adjustments
(7)
(7)
 
Plan participant contribution
 
New plans
 
Fair value of plan assets at December 31
67 
76 
 
Funded status (underfunded)
(63)
(53)
 
Amounts Recognized in Balance Sheet, Pension
 
 
 
Non-current assets
 
Current liabilities
(1)
(1)
 
Non-current liabilities
(66)
(53)
 
Net amounts recognized
(63)
(53)
 
Amounts Recognized in Accumulated Other Comprehensive Income, Pension
 
 
 
Unrecognized Net actuarial loss (gain)
33 
26 
 
Unrecognized Prior service (credit) cost
(2)
 
Total
$ 33 
$ 24 
 
Employee Benefit Plans Accumulated Pension Benefit Obligation (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]
 
 
Accumulated pension benefit obligation
$ 118 
$ 120 
Employee Benefit Plans Accumulated Benefit Obligation in Excess of Plan Assets (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]
 
 
Projected benefit obligation
$ 69 
$ 55 
Accumulated benefit obligation
61 
49 
Fair value of plan assets
$ 3 
$ 3 
Employee Benefit Plans Pre-tax Net Changes in Projected Benefit Obligations Recognized in Other Comprehensive Income (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Pension
 
 
 
Total recognized in other comprehensive income
$ (28)
$ 2 
$ 7 
Postemployment
 
 
 
Actuarial loss (gain) arising during the year
18 
 
Amortization of (gain) loss included in net periodic benefit cost
Prior service cost arising during the year
   
 
Total recognized in other comprehensive income
19 
 
Foreign Pension Plan
 
 
 
Pension
 
 
 
Actuarial loss (gain) arising during the year
14 
(1)
 
Amortization of (gain) loss included in net periodic benefit cost
(2)
(2)
(1)
Prior service cost arising during the year
 
Recognition of loss due to settlement
(1)
(1)
(1)
Foreign currency exchange
(3)
(1)
 
Total recognized in other comprehensive income
$ 9 
$ (5)
 
Employee Benefit Plans Amounts in Accumulated Other Comprehensive Income Expected to be Recognized as Components of Net Periodic Benefit Cost (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
 
Net loss to be recognized in other comprehensive income
$ 0 
Foreign Pension Plan
 
Defined Benefit Plan Disclosure [Line Items]
 
Net loss to be recognized in other comprehensive income
$ 3 
Employee Benefit Plans Weighted Average Assumptions Used to Determine Benefit Obligations and Net Periodic Benefit (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Postemployment
 
 
 
Discount rate
3.50% 
3.80% 
 
Rate of compensation increase
3.00% 
3.70% 
 
Involuntary turnover rate
1.30% 
1.00% 
 
Discount rate
3.80% 
3.40% 
4.10% 
Rate of compensation increase
3.70% 
3.80% 
3.70% 
Involuntary turnover rate
1.00% 
1.00% 
1.50% 
Foreign Pension Plan
 
 
 
Pension Benefit
 
 
 
Discount rate
2.30% 
3.00% 
 
Rate of compensation increase
3.30% 
3.20% 
 
Discount rate
3.00% 
3.00% 
3.70% 
Rate of compensation increase
3.20% 
3.30% 
3.30% 
Expected return on plan assets
3.40% 
3.40% 
4.00% 
Employee Benefit Plans Weighted Average Asset Allocations by Asset Category (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
 
 
Actual Asset Allocation As of December 31
100.00% 
100.00% 
Target Asset Allocation
100.00% 
 
Equity securities
 
 
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
 
 
Actual Asset Allocation As of December 31
32.00% 
34.00% 
Target Asset Allocation
31.00% 
 
Debt securities
 
 
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
 
 
Actual Asset Allocation As of December 31
41.00% 
37.00% 
Target Asset Allocation
44.00% 
 
Insurance (annuity) contracts
 
 
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
 
 
Actual Asset Allocation As of December 31
17.00% 
13.00% 
Target Asset Allocation
17.00% 
 
Real estate
 
 
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
 
 
Actual Asset Allocation As of December 31
5.00% 
6.00% 
Target Asset Allocation
3.00% 
 
Other
 
 
Schedule of Defined Benefit Plan Asset Allocation Targets [Line Items]
 
 
Actual Asset Allocation As of December 31
5.00% 
10.00% 
Target Asset Allocation
5.00% 
 
Employee Benefit Plans Schedule of Pension Plan Assets at Fair Value (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Money market funds
$ 2 
$ 3 
 
Equity funds
21 
26 
 
Bond/fixed-income funds
28 
28 
 
Real-estate indirect investment
 
Commodities/Other
 
Insurance contracts
11 
10 
Total Assets at fair value
67 
76 
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Money market funds
 
Equity funds
 
Bond/fixed-income funds
 
Real-estate indirect investment
 
Commodities/Other
 
Insurance contracts
 
Total Assets at fair value
 
Significant Other Observable Inputs (Level 2)
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Money market funds
 
Equity funds
21 
26 
 
Bond/fixed-income funds
28 
28 
 
Real-estate indirect investment
 
Commodities/Other
 
Insurance contracts
 
Total Assets at fair value
56 
66 
 
Significant Unobservable Inputs (Level 3)
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Money market funds
 
Equity funds
 
Bond/fixed-income funds
 
Real-estate indirect investment
 
Commodities/Other
 
Insurance contracts
11 
10 
 
Total Assets at fair value
$ 11 
$ 10 
 
Employee Benefit Plans Summary of Changes in Fair Value of Pension Plan Level 3 Assets (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Insurance Contracts Pension Plan Assets Fair Value [Roll Forward]
 
 
Balance as of January 1
$ 10 
$ 8 
Purchases, sales and settlements, net
Balance as of December 31
$ 11 
$ 10 
Employee Benefit Plans Estimated Future Benefit Payments (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Postemployment Benefits
 
2015
$ 5 
2016
2017
2018
2019
2020-2024
23 
Foreign Pension Plan
 
Pension Benefits
 
2015
2016
2017
2018
2019
2020-2024
$ 32 
Employee Benefit Plans U.S and International Subsidiary Savings Plans (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
U.S. savings plan
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Defined Contribution Plan, Cost Recognized
$ 23 
$ 23 
$ 21 
International subsidiary savings plans
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Defined Contribution Plan, Cost Recognized
$ 18 
$ 17 
$ 18 
Employee Benefit Plans - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
 
Amount of gains and losses to be amortized to the extent that they exceed 10% of the higher of the market-related value or the projected benefit obligation of each respective plan
10.00% 
Amount Company plans to contribute for postemployment benefit obligations plan
$ 5 
Foreign Pension Plan
 
Defined Benefit Plan Disclosure [Line Items]
 
Amount Company plans to contribute to the international pension plans
$ 8 
Derivative Instruments and Hedging Activities - Schedule of Foreign Exchange Contracts (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Derivative
 
 
Net contract notional amount of foreign exchange forward contracts
$ 17 
$ 24 
Foreign Exchange Contract
 
 
Derivative
 
 
Contract notional amount of foreign exchange forward contracts
$ 116 
$ 152 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
 
Maximum future payment obligation of the guaranteed value and associated liabilities
$ 4 
Commitments and Contingencies Warranty Reserve Activity (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Movement in Standard Product Warranty Accrual [Roll Forward]
 
 
 
Beginning balance at January 1
$ 8 
$ 8 
$ 6 
Accruals for warranties issued
16 
15 
17 
Settlements (in cash or kind)
(17)
(15)
(15)
Balance at end of period
$ 7 
$ 8 
$ 8 
Commitments and Contingencies Future Minimum Operating Lease Payments and Committed Subleases Under Non-cancelable Leases (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
 
 
 
Operating lease obligations - Total Amounts
$ 72 
 
 
Operating lease obligations - 2015
23 
 
 
Operating lease obligations - 2016
18 
 
 
Operating lease obligations - 2017
15 
 
 
Operating lease obligations - 2018
12 
 
 
Operating lease obligations - 2019
 
 
Sublease rentals - Total Amounts
(8)
 
 
Sublease rentals - 2015
(3)
 
 
Sublease rentals - 2016
(3)
 
 
Sublease rentals - 2017
(2)
 
 
Sublease rentals - 2018
 
 
Sublease rentals - 2019
 
 
Total committed operating leases less sublease rentals - Total Amounts
64 
 
 
Total committed operating leases less sublease rentals - 2015
20 
 
 
Total committed operating leases less sublease rentals - 2016
15 
 
 
Total committed operating leases less sublease rentals - 2017
13 
 
 
Total committed operating leases less sublease rentals - 2018
12 
 
 
Total committed operating leases less sublease rentals - 2019
 
 
Rental expense
26 
26 
25 
Sublease rental income
$ 3 
$ 3 
$ 3 
Fair Value Measurements Assets and Liabilities Measured at Fair Value on Recurring Basis and Subject to Fair Value Disclosure Requirements (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Assets
 
 
Available-for-sale securities
$ 78 
$ 0 
Total assets at fair value
471 
 
Recurring
 
 
Assets
 
 
Money market funds
393 
318 
Available-for-sale securities
78 
 
Recurring |
Quoted Price as in Active Markets for Identical Assets (Level 1)
 
 
Assets
 
 
Money market funds
393 
318 
Available-for-sale securities
78 
 
Total assets at fair value
471 
 
Recurring |
Significant Other Observable Inputs (Level 2)
 
 
Assets
 
 
Money market funds
Available-for-sale securities
 
Total assets at fair value
 
Recurring |
Significant Unobservable Inputs (Level 3)
 
 
Assets
 
 
Money market funds
Available-for-sale securities
 
Total assets at fair value
$ 0 
 
Debt - Additional Information (Detail) (USD $)
1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended
Jun. 30, 2012
Apr. 30, 2011
Dec. 31, 2014
Dec. 31, 2014
Term Loan
Jun. 30, 2012
Revolving Credit Facility
Dec. 31, 2014
Revolving Credit Facility
Jun. 30, 2013
Revolving Credit Facility
Period
Debt Instrument
 
 
 
 
 
 
 
Revolving credit agreement period (in years)
 
 
 
5 years 
5 years 
 
 
Credit facility maximum borrowing capacity
 
 
 
 
$ 300,000,000 
 
 
Credit facility agreement expiration date
Jun. 15, 2017 
 
 
 
 
 
 
Credit facility, number of one-year extensions
 
 
 
 
 
 
Credit facility, duration of extension term (in years)
 
 
 
 
1 year 
 
 
Blended interest rate during the period
 
 
 
 
 
1.14% 
 
Credit facility outstanding balance
 
 
 
 
 
220,000,000 
 
Credit facility borrowing capacity
 
 
 
 
 
80,000,000 
 
Term loan, face amount
 
300,000,000 
 
 
 
 
 
Repayment terms
 
 
The term loan is payable in quarterly installments, commencing in June 2012, with all remaining principal due on April 5, 2016.  
 
 
 
 
Loans Payable
 
 
$ 248,000,000 
 
 
 
 
Interest rate on term loan
 
 
1.1875% 
 
 
 
 
Term loan, due date
 
Apr. 05, 2016 
 
 
 
 
 
Debt Annual Contractual Maturities of Principal on Debt Outstanding (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Debt Disclosure [Abstract]
 
2015
$ 53 
2016
195 
Total
$ 248 
Debt Interest Expense (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Debt Disclosure [Abstract]
 
 
 
Interest Expense, Debt
$ 3 
$ 4 
$ 4 
Segment and Other Supplemental Information - Additional Information (Detail)
12 Months Ended 1 Months Ended
Dec. 31, 2014
Segment
Jan. 31, 2015
Subsequent Event
Segment
Segment Reporting Information [Line Items]
 
 
Number of operating segments
Segment, Other Supplemental Information and Concentrations Regional Segment Revenue and Gross Margin for Company (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment revenue
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 761 
$ 667 
$ 676 
$ 628 
$ 769 
$ 666 
$ 670 
$ 587 
$ 2,732 
$ 2,692 
$ 2,665 
Segment gross margin
 
 
 
 
 
 
 
 
 
 
 
Gross margin
425 
350 
371 
333 
431 
358 
379 
305 
1,479 
1,473 
1,491 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
770 
757 
728 
Research and development expenses
 
 
 
 
 
 
 
 
206 
184 
183 
Income from operations
158 
123 
133 
89 
177 
132 
147 
76 
503 
532 
580 
Other expense, net
 
 
 
 
 
 
 
 
(9)
(24)
(2)
Income before income taxes
 
 
 
 
 
 
 
 
494 
508 
578 
Americas
 
 
 
 
 
 
 
 
 
 
 
Segment revenue
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
1,619 
1,633 
1,619 
Segment gross margin
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
 
 
 
 
 
 
 
943 
947 
967 
International
 
 
 
 
 
 
 
 
 
 
 
Segment revenue
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
1,113 
1,059 
1,046 
Segment gross margin
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
 
 
 
 
 
 
 
536 
526 
524 
United States
 
 
 
 
 
 
 
 
 
 
 
Segment revenue
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
$ 1,458 
$ 1,511 
$ 1,478 
Segment, Other Supplemental Information and Concentrations Revenue by Product and Services (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment Reporting [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Products (software and hardware)
 
 
 
 
 
 
 
 
$ 1,227 
$ 1,230 
$ 1,297 
Consulting services
 
 
 
 
 
 
 
 
817 
818 
776 
Maintenance services
 
 
 
 
 
 
 
 
688 
644 
592 
Total services
 
 
 
 
 
 
 
 
1,505 
1,462 
1,368 
Total revenue
$ 761 
$ 667 
$ 676 
$ 628 
$ 769 
$ 666 
$ 670 
$ 587 
$ 2,732 
$ 2,692 
$ 2,665 
Segment, Other Supplemental Information and Concentrations Schedule of Property and Equipment by Geographic Area (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Schedule Of Identifiable Assets By Segment [Line Items]
 
 
Property and equipment, net
$ 159 
$ 161 
United States
 
 
Schedule Of Identifiable Assets By Segment [Line Items]
 
 
Property and equipment, net
130 
131 
Americas (excluding United States)
 
 
Schedule Of Identifiable Assets By Segment [Line Items]
 
 
Property and equipment, net
International
 
 
Schedule Of Identifiable Assets By Segment [Line Items]
 
 
Property and equipment, net
$ 25 
$ 27 
Business Combinations and Other Investment Activities - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Business Acquisition
 
 
 
Business Acquisitions And Other Investing Activities Net
$ 69 
$ 36 
$ 274 
Equity investment arising from an impairment of carrying value
25 
 
Series of Individually Immaterial Business Acquisitions
 
 
 
Business Acquisition
 
 
 
Number of business acquisitions and other equity investments
 
 
Business Acquisitions And Other Investing Activities Net
69 
36 
 
Number of businesses acquired
 
 
Number of equity investments
 
 
Other Nonoperating Income (Expense)
 
 
 
Business Acquisition
 
 
 
Gain (loss) on sale of equity investment
 
$ (3)
 
Accumulated Other Comprehensive Income Changes in Accumulated Other Comprehensive Income (AOCI) (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
 
 
 
Beginning Balance
$ 33 
$ 29 
$ 16 
Other comprehensive income (loss) before reclassifications
(38)
11 
Amounts reclassified from AOCI
Net other comprehensive income (loss)
(37)
13 
Ending Balance
(4)
33 
29 
Accumulated Defined Benefit Plans Adjustment
 
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
 
 
 
Beginning Balance
(3)
(5)
(9)
Other comprehensive income (loss) before reclassifications
(22)
Amounts reclassified from AOCI
Net other comprehensive income (loss)
(21)
Ending Balance
(24)
(3)
(5)
Foreign Currency Translation Adjustments
 
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
 
 
 
Beginning Balance
36 
34 
25 
Other comprehensive income (loss) before reclassifications
(47)
Amounts reclassified from AOCI
Net other comprehensive income (loss)
(47)
Ending Balance
(11)
36 
34 
Available-for-sale Securities
 
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
 
 
 
Beginning Balance
Other comprehensive income (loss) before reclassifications
31 
Amounts reclassified from AOCI
Net other comprehensive income (loss)
31 
Ending Balance
$ 31 
$ 0 
$ 0 
Accumulated Other Comprehensive Income Impact and Location of AOCI Reclassifications in Consolidated Statements of Income (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
 
 
 
 
 
 
 
$ 810 
$ 786 
$ 758 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
770 
757 
728 
Research and development expenses
 
 
 
 
 
 
 
 
206 
184 
183 
Net income
118 
94 
96 
59 
112 
98 
108 
59 
367 
377 
419 
Amount Reclassified from of Accumulated Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
Amount Reclassified from of Accumulated Other Comprehensive Income |
Accumulated Defined Benefit Plans Adjustment
 
 
 
 
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Cost of services
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
 
 
 
 
Research and development expenses
 
 
 
 
 
 
 
 
$ 0 
$ (1)
$ 1 
Quarterly Information (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$ 761 
$ 667 
$ 676 
$ 628 
$ 769 
$ 666 
$ 670 
$ 587 
$ 2,732 
$ 2,692 
$ 2,665 
Gross margin
425 
350 
371 
333 
431 
358 
379 
305 
1,479 
1,473 
1,491 
Operating income
158 
123 
133 
89 
177 
132 
147 
76 
503 
532 
580 
Net income
$ 118 
$ 94 
$ 96 
$ 59 
$ 112 
$ 98 
$ 108 
$ 59 
$ 367 
$ 377 
$ 419 
Net income per share:
 
 
 
 
 
 
 
 
 
 
 
Basic (in usd per share)
$ 0.78 
$ 0.61 
$ 0.61 
$ 0.37 
$ 0.69 
$ 0.60 
$ 0.66 
$ 0.36 
$ 2.36 
$ 2.31 
$ 2.49 
Diluted (in usd per share)
$ 0.77 
$ 0.60 
$ 0.60 
$ 0.37 
$ 0.68 
$ 0.59 
$ 0.65 
$ 0.35 
$ 2.33 
$ 2.27 
$ 2.44 
Subsequent Events (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 2 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Feb. 25, 2015
Subsequent Event
Subsequent Event [Line Items]
 
 
 
 
Amount of shares purchased
 
 
 
2.9 
Shares purchased
$ 0 
$ 378 
$ 280 
$ 127 
Remaining authorized amount of shares repurchased
 
 
 
$ 272 
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Valuation and Qualifying Accounts (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Increase in allowance for doubtful accounts
 
 
$ 3 
Allowance for doubtful accounts
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Balance at Beginning of Period
18 
18 
13 
Additions Charged to Costs & Expenses
Charged to Other Accounts
Deductions
Balance at End of Period
19 
18 
18 
Deferred tax valuation allowance
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Balance at Beginning of Period
13 
Additions Charged to Costs & Expenses
Charged to Other Accounts
Deductions
Balance at End of Period
$ 20 
$ 13 
$ 9