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2016 AnnuAl RepoRt JOB TITLE Teradata 10-K
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2016 FINANCIAL REPORT
1
Letter to Shareholders
2 Management’s Discussion and Analysis (MD&A)
16 Reports of Management
17 Report of Independent Registered Public Accounting Firm
18 Consolidated Statements of Income (Loss)
19 Consolidated Statements of Comprehensive Income (Loss)
20 Consolidated Balance Sheets
21 Consolidated Statements of Cash Flows
22 Consolidated Statements of Changes in Stockholders’ Equity
23 Notes to Consolidated Financial Statements
53 Common Stock Information
53 Total Return to Shareholders
54 Selected Financial Data
55 Corporate Information
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LETTER TO ShAREhOLdERS
Dear Shareholders,
It seems hard to believe it was almost a year ago I was given the honor to serve as President and CEO of Teradata by our Board
of Directors. I wasn’t exactly sure what to expect when I accepted the opportunity, but I knew it would be interesting as well as
challenging. Both have turned out to be true.
It has been an interesting year as I have taken time to understand, at a deeper level, what makes Teradata function. I knew
we had loyal customers, a dedicated group of employees, and shareholders who were concerned about our future. I found a
Teradata team that is not only dedicated, but intelligent winners. Our customers, however, like our team, were concerned that
Teradata had lost its edge. They worried that we were not keeping abreast of the changing technology environment and, more
importantly, of the analytic solutions that would help them drive their business to higher levels. Finally, you, our shareholders,
knew the concerns of our customers, and that as a company, we had not given adequate explanations of where we were and
where we were going.
The remainder of our Annual Report details our new strategy around leading with business outcomes, supported by the world’s
best technology and our new deployment and purchasing options that give our customers what they want. I am very proud
of the progress our team has made so far. They have embraced our strategy, have regained our customers’ respect as trusted
advisors, and are accepting the responsibility of executing our strategy to benefit our customers and, as a result, benefit you,
our shareholders.
As for the challenging part, that is also true. The complexity of what we are undertaking cannot be minimized. We are
deploying our technology in multiple ways to meet our customers’ needs, through Teradata Everywhere™, which allows
customers to purchase and deploy Teradata where they want. We are building a broader consulting business to deliver analytics
that perform at scale and address the complex questions our customers need answered. Finally, we are helping our customers
understand how they should architect their technology infrastructure to take maximum advantage of opportunities available
to them, not only today, but in the future. All of these objectives are intended to increase customer consumption of Teradata’s
technology and drive increased product revenue. Clearly, this is not an easy task and that is what makes it so interesting,
compelling, and rewarding. I am happy to report that our team is up to the task. I also want you to know that we are not naive
about the difficulty in completing this transformation. We are vigilant in our efforts to monitor our day-to-day progress against
a well-laid-out operational plan. We will not initially get everything right. However, we will remain flexible, creative, and
resourceful in making sure we move forward in a way that fulfills the commitments we have made to those who rely on us and
in ensuring that we live up to our potential.
I am personally humbled and appreciative of the warm reception I have received from our team, our customers, and of course
you, our shareholders. I remain excited about the bright future of Teradata. That optimism is driven by the commitment of our
team, the support of our Board, acceptance by our customers and, of course, the willingness of our shareholders to provide the
support to make it happen.
In closing, I want to again thank the people of Teradata. Your efforts in the past year were amazing. You chose optimism over
skepticism. You chose trust over doubt. And finally, you believed in yourselves and in the future you are capable of delivering.
We are off to a good start, which I know will lead to a great future for Teradata.
Victor Lund
President and CEO
Teradata Corporation
LETTER TO Sh AREhOLdERS › › › 1 › › › TERAdATA 2016
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MANAGEMENT’S dISCUSSION ANd ANALYSIS (“Md&A”)
OF FINANCIAL CONdITION ANd RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the consolidated financial statements and the notes to those
statements included elsewhere in this Annual Report. This Annual Report contains certain statements that are forward-looking
within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are
forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather
are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results.
Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of
factors, including those discussed in other sections of this Annual Report.
BUSINESS OVERVIEW
Teradata is a global leader in analytic data solutions and related services. Our analytic data solutions comprise software,
hardware, and related business consulting and support services for analytics across a company’s entire analytical ecosystem.
We help customers access and manage data and extract business value and insight from their data. Our applications are
designed to leverage data to help customers discover and exploit new insights such as:
• determining and maximizing customer and product profitability,
• more accurately forecasting consumer demand, and
• creating more predictable and less costly supply chains.
Our consulting services allow customers to maximize use and obtain great value from their analytics investments. Our services
include a broad range of offerings including consulting to help organizations design, optimize and manage their analytic and
big data environments, either on-premises or in the cloud. Our value-added consulting services provide expertise in data
architecture services, cloud (“software as a service”, “analytics as a service”), private cloud, managed services, and related
installation services. In addition to our consulting services we offer a comprehensive set of support services. We serve customers
around the world across a broad set of industries, including communications, ecommerce, financial services, government,
gaming, healthcare, insurance, manufacturing, media and entertainment, oil and gas, retail, travel and transportation,
and utilities - with offerings ranging from small departmental implementations to many of the world’s largest analytic
data platforms. To meet evolving trends in information management, we provide our offerings on-premises, in the cloud, or
“as a service”.
2016 FINANCIAL OVERVIEW
As more fully discussed in later sections of this MD&A, the following are the financial highlights for 2016:
• Revenue decreased 8% in 2016 from 2015 to $2,322 million. The year-over-year revenue comparison was negatively
impacted by 1 percentage point from foreign currency fluctuations and the sale of the marketing applications business
in 2016.
• Gross margin was 51.2% in 2016, up from 50.4% in 2015, which was largely due to improved deal mix and product mix.
• Operating income was $232 million in 2016, up from operating loss of $(195) million in 2015. The year-over-year increase
was primarily due to more significant impairments of goodwill and acquired intangibles in 2015 than 2016, as well as a
decrease in operating expenses.
• Net income of $125 million in 2016 versus a net loss of $(214) million in 2015. Net income per diluted share was $0.95
in 2016 compared to net loss per common share of $(1.53) in 2015. Net income for 2016 includes a $70 million after-tax
impairment loss for goodwill and acquired intangibles, approximately $47 million in after-tax impacts of acquisition-related
transaction, integration and reorganization expenses, and amortization of acquired intangible assets, compared to
$502 million of such costs and expenses in 2015.
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STRATEGIC OVERVIEW
Teradata’s strategy is based around our core belief that analytics and data unleash the potential of great companies.
We empower companies to achieve high-impact business outcomes through scalable analytics on an agile data foundation.
Through our focus on leading with business outcomes and a consultative approach, our goal is to serve as a trusted advisor to
both the business and technical leaders in our customers’ organizations. Our business analytics solutions are ideally suited for
the world’s largest companies who have the most complex analytics requirements and the need to scale.
Our strategy is to provide a differentiated set of offerings to this target market through the following portfolio of solutions,
including the following:
• Hybrid Cloud: leading technology and services to deliver an analytic ecosystem deployed in a hybrid cloud architecture,
including offerings such as managed cloud, private cloud, public cloud, and on premises software and hardware;
• Business Analytics Solutions: deliver high-value business outcomes realized by engaging with business users through
solution-based selling that leverages analytic consulting and repeatable analytical intellectual property (“IP”); and
• Ecosystem Architecture Consulting: best-in-class architecture consulting expertise to help customers build optimized
analytical ecosystems independent of technology, leveraging both open source and commercial solutions.
We deliver our solutions on-premises, via the cloud, and “as a service”; offering customers choice in how they deploy a Teradata
analytics environment and leverage the power of our solutions. These flexible delivery options are designed to extend our
market opportunity.
In support of our strategy, we plan to optimize our go-to-market and sales approach to improve effectiveness in demand
creation and address new and expanded market opportunities, such as with our consultative business solutions and cloud
offerings. We will continue investing in partnerships to increase the number of solutions available on Teradata platforms,
maximize customer value, and increase our market coverage.
We believe that our more consultative, solution-selling approach and portfolio of offerings that support customers’ choice
in procuring and deploying analytics will best position us to be our customers’ trusted advisor and partner of choice for
architecting, implementing, and managing their analytic solutions.
In summary, our long-term strategic objectives are to:
• deliver business outcomes for our customers through technology-enabled analytics at scale,
• by focusing on companies with the largest analytic opportunities,
• by offering market-leading hybrid cloud technology,
•
that is enabled by a world class go-to-market sales and support team,
• with the ultimate goal of generating revenue, earnings, and cash flow growth.
FUTURE TRENdS
We believe that future demand for our analytic solutions will increase based on the growth of new, high volume data sources
such as sensor and machine-generated data, and based on data and analytics enabled use cases in areas such as seismic/
exploration, genomics and biological research, connected cars, and smart cities.
Analytic environments are becoming more complex to design and manage as there are increasing types of analytic tools and
techniques, multiple data management systems both on-premises and in the cloud, commercial and open source technologies
to be integrated, varying service level requirements, and the growth and volume of data. This complexity drives the need for an
overall architecture to manage such environments. Demand for value-added consulting and services is growing as customers
seek help with evolving their analytic architectures, rapidly deploying their analytic architectural solutions, and increasingly
look to purchase analytic capabilities “as a service”.
Overall, analytics are growing in importance as global businesses seek new means to drive business value from the ever-
increasing amounts and types of data. As a result, we expect that Teradata’s leadership status and investments in our strategic
areas of focus will position us for future growth.
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This growth, however, is not expected to be without its challenges from general economic conditions, competitive pressures,
alternative technologies, and other risks and uncertainties. Over the past few years, we have seen a shift in the market
that included a reduction in customers’ large capital investments in traditional data analytic systems and related services.
Specifically, customers have been focusing investments in their analytical ecosystems on products which have lower average
selling prices than traditional integrated data warehouse (“IDW”) environments, and changing their buying behavior with
decisions shifting from IT to business users who typically want operating expense purchasing options. As a result, our revenue
has been impacted by our customers’ focus on less capital intensive options like cloud, subscription-based licenses, rental and
usage-based models. In addition, an increasing percentage of our customers want to buy easy-to-use, vendor managed, on-line
delivery “as-a-service” analytics rather than analytic systems. Currently, we believe that the greatest challenge for future revenue
growth relates to our ability to adapt and respond to this market shift with respect to the way customers want to purchase and
deploy analytic technologies.
Overall, we believe that the IDW will remain a critical part of companies’ analytical ecosystems and Teradata’s technology
is highly differentiated with our ability to handle the concurrency and service level agreements of hundreds to thousands of
mission-critical users and applications. Further, we believe the Company has the opportunity for continued revenue growth
from both the expansion of our existing customers’ analytical ecosystems as well as the addition of new customers. Teradata has
expanded our offerings as well as our pricing options to make it easier for customers to buy and expand with Teradata including
flexible offerings including availability in the cloud and over time pricing programs.
There is risk that pricing and competitive pressures on our solutions could increase in the future as major customers evaluate
and rationalize their analytics infrastructure, particularly to the extent that cost becomes the top focus and lower-cost/lower
performing alternatives are more seriously and frequently considered. However, such alternatives generally do not enable
companies to perform mission-critical, complex analytic workloads to address customer’s needed business outcomes from
large-scale analytics, discovery analytics, and data management such as those enabled by Teradata’s portfolio of offerings. As
the market continues to evolve, we will be challenged to generate revenue growth shorter term as customers purchase in smaller
deal sizes, and more of our customers shift from upfront perpetual licenses to over time models at a pace which is difficult
to predict.
As described above, we are also transforming our go-to-market approach to better position Teradata with both business
buyers and IT buyers, and to expand with our existing customers as well as add more customers. To meet this objective, we
will focus on execution and monitoring our progress with respect to this evolution, as well as working to infuse talent into our
organization with key skill sets to support our strategy. We continue to believe that analytics will remain a high priority for
companies and longer term will drive growth for Teradata’s leading solutions. Moreover, we continue to be committed to new
product development and achieving a positive yield from our research and development spending and resources, which are
intended to drive future demand. In addition, we will continue to optimize our go-to-market structure to focus on the greatest
analytic opportunities, and to manage our cost structure as we work to broaden our product and consulting services portfolios
and market penetration.
As a portion of the Company’s operations and revenue occur outside the United States (“U.S.”), and in currencies other than the
U.S. dollar, the Company is exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of January 31,
2017, Teradata is expecting one point of negative impact from currency translation on our full year projected revenue growth rate.
BUSINESS TRANSFORMATION
Teradata continues to advance in the execution of its business transformation plan to return the Company to profitable growth.
As described above, we are strengthening our consultative approach to selling data analytics that enable high-impact business
outcomes for our customers and extend our portfolio of hybrid cloud solutions. We are also realigning our go-to-market
approach to improve sales effectiveness and achieve better financial results. We will continue to invest and prioritize initiatives
that strengthen our ability to be our customers’ trusted advisor for data and analytics.
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In addition, our broad-reaching transformation is intended to drive change across our Company, including in the following key
areas:
• Cloud - We plan to continue to expand our data warehouse offerings in the public cloud and in Teradata’s managed
cloud environments. With our “Teradata Everywhere” initiative, we offer our customers greater flexibility and agility
through the same Teradata database that we offer on premises, now in a managed cloud, public cloud, or private cloud
environment. Teradata Everywhere is designed to speed time to value, save costs, and encourage analytics use throughout
the organization. We are building new services for cloud migration as well as for design, implementation and management
of cloud and hybrid cloud environments.
• On-premises data warehouse - We have introduced methods to make it easier to buy, expand, and seamlessly upgrade
data warehouses. We expect that our IntelliFlex platform architecture, released in early 2016, will provide more flexible
configurations and seamless expansions of our customers’ IDW environments, and that the software-only version of our
Teradata database will allow us to expand with both new and existing customers.
• Analytical ecosystem - We are adding to our data load and integration software and service offerings capabilities that
manage customers’ analytical ecosystems with new products such as Teradata UnityTM, QueryGridTM, and ListenerTM. These
offerings help connect and manage the customers’ ecosystems to help manage and extract value from their data.
We expect the mix of our revenues to shift toward cloud, analytical ecosystem, and analytic consulting services over time, as
these are faster growing markets, which we believe will help increase our recurring revenue over time.
Another element that is critical to Teradata’s successful transformation plan is modifying our go-to-market efforts to a more
consultative approach to better address the increasing relevance of business buyers and to help customers build analytical
ecosystems that include our own technologies as well as open source and other commercial solutions. We have actions
underway to adjust our go-to-market efforts to address these new approaches and to align with the way we believe that our
customers want to buy data analytics solutions.
We have reviewed and rationalized the Company’s expense structure and are now moving from a cost reduction initiative to
a cost management approach as we invest for Teradata’s future, including investments to support our cloud-based initiatives,
analytical solutions, realignment of our go-to-market approach, and modernizing our infrastructure.
One of Teradata’s key strategic initiatives is to enable analytics for companies by making it easier to buy and easier to grow
from traditional on-premises deployments to hybrid cloud solutions. These hybrid solutions offer simplified and consistent
approaches with operating expense alternatives in addition to traditional capital intensive outlays. This strategy should
accelerate our move away from traditional, upfront revenue sales and deployment models to a model where revenue is
recognized over time. As a result, the Company’s revenue could decline in the short-term as customers transition to these
purchasing models. Therefore, Teradata is introducing additional financial and performance measures to allow for greater
transparency regarding the progress we are making toward achieving our strategic objectives. These new financial and
performance measures currently include the following:
• TCORE Growth - a measure of consumption of the Teradata database solution. It is based on the performance of a
system as calculated by number of cores reduced by an input/output (“I/O”) factor, recognizing that an I/O starved central
processing unit (“CPU”) will not provide optimum performance.
• Annual Recurring Revenue (ARR) - is the annual value at a point in time of all of our recurring contracts, including
support, software upgrade rights, subscription licenses, rental and cloud.
• Recurring Revenue as a % of Total Revenue - revenue from all recurring contracts, including support, software upgrade
rights, subscription licenses, rental and cloud divided by total Company revenue.
• Business Consulting Revenue Growth - revenue growth from our strategic service offerings around Analytics Consulting,
Business Consulting, and Ecosystem Architecture consulting. Although the revenue from Business Consulting represents a
small percent of total Company revenue, it is a leading indicator of future TCORE growth and measures our effectiveness of
becoming a “Trusted Advisor” within our customers and targeted prospects.
MANAGEMENT’S dISCUSSION ANd ANALYSIS › › › 5 › › › TERAdATA 2016
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RESULTS FROM OPERATIONS FOR ThE YEARS ENdEd dECEMBER 31:
Revenue
in millions
Product revenue
Service revenue
Total revenue
2016
% of Revenue
2015
% of Revenue
2014
% of Revenue
$ 889
1,433
$2,322
38.3%
61.7%
100%
$ 1,057
1,473
$2,530
41.8%
58.2%
100%
$1,227
1,505
$2,732
44.9%
55.1%
100%
Total revenue decreased 8% in 2016 as compared to 2015. The revenue decrease included a 1% adverse impact from foreign
currency fluctuations. The revenue decline was primarily due to customers increasingly opting for subscription-based (term)
licenses, rental of hardware, and cloud adoption. This has an impact on the amount of revenue that is booked upfront versus
over the term of the contract. In addition, the sale of the marketing applications business, which generated $69 million in
revenue in 2016 (before the sale on July 1, 2016) compared to $153 million in 2015, had a negative impact on total revenue of 3%.
Product revenue decreased 16% in 2016 from 2015 primarily due to customers increasingly opting for our subscription-based
purchase options. Service revenue decreased 3% in 2016 from 2015, with an underlying 6% decrease in consulting services
revenue and 1% increase in maintenance services revenue compared to 2015. Services revenue declined primarily due to the
sale of the marketing applications business on July 1, 2016 and foreign currency fluctuations, which had a 2% adverse impact on
services revenue.
In 2015, total revenue decreased 7% as compared to 2014. The revenue decrease included a 5% adverse impact from foreign
currency fluctuations. The revenue decline was due primarily to constrained information technology budgets, extended sales
cycles, and a reduction in large customer orders, as well as the impact currency translation had on reported revenue growth.
Product revenue decreased 14% in 2015 from 2014 primarily due to a decrease in customers’ large capital expenditures and
foreign currency fluctuations, which had a 5% adverse impact on product revenue. Service revenue decreased 2% in 2015
from 2014, with an underlying 5% decrease in consulting services revenue and 1% increase in maintenance services revenue
compared to 2014. Services revenue declined due to foreign currency fluctuations, which had a 6% adverse impact on
services revenue.
Gross Margin
The Company often uses specific terms/definitions to describe variances in gross margin. The terms and definitions most often
used are as follows:
• Revenue Mix - The proportion of products and services that generates the total revenue of the Company. Changes in
revenue mix can have an impact on gross margin even if total revenue remains unchanged.
• Services Mix - The proportion of higher-margin maintenance revenue versus lower-margin consulting revenue that
generates the total services revenue of the Company.
• Product Mix - The proportion of various products that generate the total product revenue of the Company. For example, a
higher mix of IDW products versus departmental data mart, Aster, our Extreme Data Appliance or Hadoop products would
have a positive impact on product gross margins. This definition also includes the mix of Company sourced and third party
products.
• Deal Mix - Refers to the type of transactions closed within the period and includes such transactions as capacity on demand
(“COD”), floor sweeps versus capacity additions, enterprise license agreements (“ELA”), hardware versus software, and
discounting (new customers versus existing customers, large customers versus smaller customers).
•
•
COD is a common offering used by Teradata and other information technology vendors that allows the customer to
purchase extra capacity in the future, which is already delivered and integrated into their existing systems, typically
within 12-18 months. COD enables customers to “activate” or add capacity quickly. Product cost is recognized upon
delivery with no corresponding revenue. When customers activate the COD, we record and recognize the revenue
associated with the added capacity and the gross margin is recovered.
Floor sweeps take place when an existing customer replaces their older Teradata platform with a new Teradata
platform, which can result in a large revenue transaction, but typically also results in a higher mix of lower-margin
hardware revenue versus higher-margin software revenue.
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•
ELA transactions allow customers to purchase as much software as needed for current production use for a period of
time in exchange for a fixed fee that is typically recognized as revenue upfront or as payments become due if the terms
of the payments are extended. Additional capacity during the term results in lower-margin hardware revenue versus
higher-margin software revenue.
Gross margin for the following years ended December 31 was as follows:
Gross margin
in millions
Product gross margin
Service gross margin
Total gross margin
2016
% of Revenue
2015
% of Revenue
2014
% of Revenue
$ 537
651
$ 1,188
60.4%
45.4%
51.2%
$ 617
659
$1,276
58.4%
44.7%
50.4%
$ 784
695
$1,479
63.9%
46.2%
54.1%
In 2016, product margin increased 2% points due to favorable deal and product mix. Service gross margin improved 1% points
driven by the exiting of the marketing applications business which had a lower service margin rate than the Data and Analytics
service rate.
In 2015, product margin declined 5.5% points due to deal mix (including a higher mix of hardware versus software deals as
well as pricing programs that are intended to make it easier to buy Teradata), foreign currency, a lower mix of integrated data
warehousing products and a reduction in product volume. Service gross margin declined 1.5% points due to investments
in our big data consulting capabilities, the marketing applications business (prior to the decision to exit this business), and
investments in our Teradata cloud capabilities.
Operating expenses
2016
% of Revenue
2015
% of Revenue
2014
% of Revenue
in millions
Selling, general and administrative
Research and development
Impairment of goodwill, acquired
intangibles and other assets
Total operating expenses
$664
212
80
$956
28.6%
9.1%
3.4%
41.2%
$ 765
228
478
$1,471
30.2%
9.0%
18.9%
58.1%
$ 770
206
–
$ 976
28.2%
7.5%
–
35.7%
In 2016, selling, general and administrative (“SG&A”) expense decreased by $101 million or 13% compared to 2015. The
decrease is driven by the exit of the marketing applications business and cost reduction initiatives, partially offset by higher
annual incentive payment accruals.
Research and development (“R&D”) expenses decreased $16 million or 7% in 2016 due to the exit of the marketing applications
business and cost reduction initiatives partially offset by additional spending for strategic initiatives including further
investment in our managed and public cloud offerings, Teradata software-only and our Intelliflex platform.
In 2015, SG&A expense decreased by $5 million or 1% compared to 2014. The decrease is a result of the change in foreign
currency exchange rates, partially offset by increased investments in demand creation resulting from our strategic investment
initiatives. R&D expenses increased $22 million or 11% in 2015 due to additional investments in big data analytics, cloud and
marketing applications, which included incremental expenses from acquisitions. The increase in R&D expense was also caused
by a decrease in capitalized software of $7 million compared to 2014.
The Company recognized an impairment of goodwill of $57 million and acquired intangibles of $19 million in 2016 to
adjust the marketing applications business, which was sold on July 1, 2016, to its fair value less cost to sell. In addition, the
Company recorded a $4 million impairment charge related to the sale of its corporate plane. The Company recorded a goodwill
impairment of $437 million and an impairment of acquired intangibles of $41 million in 2015, also related to the marketing
applications business (see Note 15 of Notes to Consolidated Financial Statements).
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Other (Expense) Income, net
in millions
Gain (loss) on securities
Interest income
Interest expense
Other
Total Other (Expense) Income, net
2016
$ 2
7
(12)
(8)
$(11)
2015
$57
5
(9)
(2)
$51
2014
$(9)
5
(3)
(2)
$(9)
In 2016, other expense included a foreign exchange loss of $9 million related to the devaluation of the Egyptian pound. The
increase in interest expense and interest income compared to 2015 was due to an increase in interest rates. In 2015, other income
primarily included a gain of $57 million from sale of equity investments. This was partially offset by an increase in interest expense
due to an increase in debt. In 2014, other expense primarily included a loss of $9 million on an equity investment arising from an
impairment of carrying value.
Income Taxes
The effective income tax rate for the following years ended December 31 was as follows:
Effective Tax Rate
2016
43.4%
2015
(48.6%)
2014
25.7%
The 2016 effective tax rate was impacted by the $57 million of goodwill impairment charge recorded in the first quarter of
2016, all of which were treated as a permanent non-deductible tax item. In addition, a discrete tax charge of $22 million was
recorded in the third quarter of 2016 for the tax impact of the sale of the marketing applications business, which occurred on
July 1, 2016. In the fourth quarter of 2016, the Company recorded $8 million of tax expense associated with the issuance of
new U.S. Treasury Regulations under Internal Revenue Code Section 987 on December 7, 2016, which clarified how companies
calculate foreign currency translation gains and losses for income tax purposes for branches whose accounting records are
kept in a currency other than the currency of the company. Also in the fourth quarter of 2016, the Company elected to early
adopt Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting. As a result, the
Company incurred a $5 million discrete tax expense associated with the net shortfall arising from 2016 equity compensation
vestings and exercises.
The 2015 effective tax rate was impacted by the $437 million of goodwill impairment charges recorded for 2015, of which
$414 million was treated as a permanent non-deductible tax item. This resulted in full-year income tax expense in 2015 of
$70 million, on a pre-tax net loss of $(144) million, causing a negative tax rate of 48.6%. There were no material discrete tax
items impacting the effective tax rate for full year 2014.
Revenue and Gross Margin by Operating Segment
Effective January 1, 2016, Teradata implemented an organizational change in which it now manages the Company’s business
under two geographic regions and the marketing applications division (prior to its sale on July 1, 2016); which are also the
Company’s operating segments: (1) Americas Data and Analytics (North America and Latin America); (2) International Data
and Analytics (Europe, Middle East, Africa, Asia Pacific and Japan); and (3) Marketing Applications. Effective July 1, 2016,
following the sale of the marketing applications business, Teradata is managing its business in two operating segments:
(1) Americas region (North America and Latin America); and (2) International region (Europe, Middle East, Africa, Asia Pacific
and Japan). For purposes of discussing results by segment, management excludes the impact of certain items, consistent with
the manner by which management evaluates the performance of each segment. This format is useful to investors because
it allows analysis and comparability of operating trends. It also includes the same information that is used by Teradata
management to make decisions regarding the segments and to assess financial performance. The chief operating decision maker
evaluates the performance of the segments based on revenue and multiple profit measures, including segment gross margin. For
management reporting purposes assets are not allocated to the segments. Our segment results are reconciled to total company
results reported under U.S. generally accepted accounting principles (“GAAP”) in Note 11 of Notes to Consolidated Financial
Statements. Prior period segment information has been reclassified to conform to the current period presentation.
TERAdATA 2016 › › › 8 › › › MANAGEMENT’S dISCUSSION ANd ANALYSIS
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
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JOB NUMBER 261647
TYPE
PAGE NO. 9
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The following table presents revenue and operating performance by segment for the years ended December 31:
in millions
2016
% of Revenue
2015
% of Revenue
2014
% of Revenue
Segment revenue
Americas Data and Analytics
International Data and Analytics
Total Data and Analytics
Marketing Applications
Total segment revenue
Segment gross margin
Americas Data and Analytics
International Data and Analytics
Total Data and Analytics
Marketing Applications
Total segment gross margin
$ 1,334
919
2,253
69
$2,322
$ 754
425
1,179
33
$ 1,212
57.4%
39.6%
97.0%
3.0%
100%
56.5%
46.2%
52.3%
47.8%
52.2%
$1,470
907
2,377
153
$2,530
$ 824
429
1,253
63
$ 1,316
58.2%
35.8%
94.0%
6.0%
100%
56.1%
47.3%
52.7%
41.2%
52.0%
$ 1,534
1,034
2,568
164
$ 2,732
$ 917
523
1,440
78
$ 1,518
56.2%
37.8%
94.0%
6.0%
100%
59.8%
50.6%
56.1%
47.6%
55.6%
Americas Data and Analytics: Revenue decreased 9% as customers continue to evaluate lower cost (and less capital intensive)
alternatives as well as our new purchasing and deployment options. As discussed in the future trends section of this MD&A,
the revenue decline was driven by our customers’ focus on less capital intensive options like cloud, subscription licenses, rental
and usage-based models, which results in revenue being recognized over time instead of upfront. Segment gross margins as a
percentage of revenue were higher driven by an increase in product gross margin. The increase in the product gross margin was
driven by favorable deal and product mix.
In 2015, revenue was down 4% primarily driven by a decrease in customer large capital expenditure transactions. The results
included a 2% adverse impact from foreign currency fluctuations. Gross margins as a percentage of revenue were down in 2015
compared to 2014 due to the high mix of hardware versus software deals and the impact of foreign currency exchange rates.
International Data and Analytics: Revenue increased by 1%, which included a 2% adverse impact from foreign currency
fluctuations. The revenue increase was led by good growth in Western Europe and China. Gross margins were down due to a
higher mix of service revenue, which has a lower margin profile versus product revenue.
In 2015, revenue was down 12%, which was almost entirely due to a 11% adverse impact from foreign currency fluctuation.
Gross margins were down due to lower revenue volume from foreign currency fluctuations and a higher mix of service revenue,
which has a lower margin profile versus product revenue.
Marketing Applications: Revenue decreased by $84 million or 55% in 2016 from 2015. The decline in revenue was driven by
the divestiture of the marketing applications business on July 1, 2016. Prior to its divestiture, the overall segment gross margin
increase was primarily driven by higher product and professional services margins. In 2015, the Company made investments to
help better position the Company to go broader in the market, which resulted in lower service margins in 2015.
In 2015, revenue decreased $11 million or 7% from 2014. The revenue decrease included a 6% adverse impact from foreign
currency fluctuations. The overall gross margin decrease in 2015 from 2014 is primarily driven by investments in the cloud
business as well as lower professional services margins, which were impacted by investments to help better position the
Company to go broader in the market and drive long-term growth in this business.
FINANCIAL CONdITION, LIQUIdITY ANd CAPITAL RESOURCES
Teradata ended 2016 with $974 million in cash and cash equivalents, a $135 million increase from the December 31, 2015
balance, after using approximately $82 million for repurchases of Company common stock, and approximately $16 million for
acquisitions and investment activities which were completed during the year. Cash provided by operating activities increased
by $45 million to $446 million in 2016. The increase in cash provided by operating activities was primarily due to favorable
changes in net working capital, primarily due to a larger collection of receivables as compared to the prior year.
Teradata’s management uses a non-GAAP measure called “free cash flow,” which is not a measure defined under GAAP.
We define free cash flow as net cash provided by operating activities less capital expenditures for property and equipment,
and additions to capitalized software, as one measure of assessing the financial performance of the Company, and this may
MANAGEMENT’S dISCUSSION ANd ANALYSIS › › › 9 › › › TERAdATA 2016
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 10
OPERATOR S-w-300
differ from the definition used by other companies. The components that are used to calculate free cash flow are GAAP
measures taken directly from the Consolidated Statements of Cash Flows. We believe that free cash flow information is useful
for investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve
business operations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among
other things, investments in the Company’s existing businesses, strategic acquisitions and repurchase of Teradata common
stock. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other
non-discretionary expenditures that are not deducted from the measure. This non-GAAP measure should not be considered a
substitute for, or superior to, cash flows from operating activities under GAAP.
The table below shows net cash provided by operating activities and capital expenditures for the following periods:
in millions
Net cash provided by operating activities
Less:
Expenditures for property and equipment
Additions to capitalized software
Free cash flow
2016
$446
(53)
(65)
$328
2015
$ 401
(52)
(68)
$ 281
2014
$ 680
(54)
(75)
$ 551
Financing activities and certain other investing activities are not included in our calculation of free cash flow. In 2016 and 2015,
these other investing activities primarily consisted of immaterial complementary business acquisitions and equity investment
activities that were closed during these years along with the sale of the marketing applications business on July 1, 2016.
Teradata’s financing activities for the years ended December 31, 2016 primarily consisted of cash outflows of $82 million for
share repurchases, repayments of credit facility borrowings of $180 million, repayment of existing term loan of $30 million
and $30 million from other financing activities, net of tax paid for shares withheld upon equity award settlement. Teradata’s
financing activities for the year ended December 31, 2015 primarily consisted of cash outflows of $657 million for share
repurchases, proceeds from credit facility borrowings of $180 million, repayments of credit facility borrowings of $220 million,
and proceeds from a new term loan of $600 million and repayment of an existing term loan of $247 million. The Company
purchased 3.4 million shares of its common stock at an average price per share of $24.25 in 2016, 19 million shares at an average
price per share of $34.15 in 2015, and 13 million shares at an average price per share of $43.09 in 2014.
Share repurchases were made under two share repurchase programs initially authorized by our Board of Directors in 2008. The
first program (the “dilution offset program”) authorizes the Company to repurchase Teradata common stock to the extent of
cash received from the exercise of stock options and the Teradata Employee Stock Purchase Plan (“ESPP”) to offset dilution
from shares issued pursuant to these plans. On February 6, 2012, the board approved a new $300 million share repurchase
authorization to replace a prior $300 million authorization (the “general share repurchase program”), that was to expire on
February 10, 2012. Since February 2012, Teradata’s Board of Directors has approved, in $300 million increments, additional
share repurchase authorizations for a total of $2.0 billion under the Company’s general share repurchase program on each of
the following dates: December 10, 2012, October 14, 2013, May 5, 2014, December 18, 2014 and May 4, 2015. An additional
share repurchase authorization of $500 million was approved by the board on August 20, 2015. As of December 31, 2016, the
Company had $512 million of authorization remaining to repurchase outstanding shares of Teradata common stock under
the general share repurchase program. Share repurchases made by the Company are reported on a trade date basis. Our share
repurchase activity depends on factors such as our working capital needs, our cash requirements for capital investments, our
stock price, and economic and market conditions, as well as merger and acquisition opportunities. Proceeds from the ESPP and
the exercise of stock options were $31 million in 2016, $24 million in 2015 and $29 million in 2014. These proceeds are included
in other financing activities, net in the Consolidated Statements of Cash Flows.
Our total cash and cash equivalents held outside the U.S. in various foreign subsidiaries was $957 million as of December 31,
2016 and $819 million as of December 31, 2015. The remaining balance held in the U.S. was $17 million as of December 31,
2016 and $20 million as of December 31, 2015. Under current tax laws and regulations, if cash and cash equivalents held outside
the U.S. are distributed to the U.S. in the form of dividends or otherwise, we would be subject to additional U.S. income taxes
(subject to an adjustment for foreign tax credits) and potential foreign withholding taxes. As of December 31, 2016, we have
not provided for the U.S. federal tax liability on approximately $1.3 billion of foreign earnings that are considered permanently
reinvested outside of the U.S.
TERAdATA 2016 › › › 10 › › › MANAGEMENT’S dISCUSSION ANd ANALYSIS
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 11
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On March 25, 2015, Teradata replaced its existing five-year, $300 million revolving credit facility with a new $400 million
revolving credit facility (the “Credit Facility”). The Credit Facility ends on March 25, 2020 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. In 2016, Teradata chose
a floating rate based on the London Interbank Offered Rate (“LIBOR”). 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, 2016, the Company had no outstanding borrowings on the Credit Facility, leaving $400
million in additional borrowing capacity available. The Company was in compliance with all covenants as of December 31,
2016.
Also on March 25, 2015, Teradata closed on a new senior unsecured $600 million five-year term loan, the proceeds of which were
used to pay off the remaining $247 million of principal on its existing term loan, pay off the $220 million outstanding balance
on the prior credit facility, and fund share repurchases. The $600 million term loan is payable in quarterly installments, which
commenced on March 31, 2016, with all remaining principal due in March 2020. The outstanding principal amount under 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, 2016, the term loan principal outstanding was $570
million and carried an interest rate of 2.1875%. The Company was in compliance with all covenants as of December 31, 2016.
Management believes current cash, cash flows from operations and the $400 million available under the Credit Facility will be
sufficient to satisfy future working capital, research and development activities, capital expenditures, pension contributions,
severance benefits and other financing requirements for at least the next twelve months. The Company principally holds its
cash and cash equivalents in bank deposits and highly-rated money market funds.
The Company’s ability to generate positive cash flows from operations is dependent on general economic conditions,
competitive pressures, and other business and risk factors described elsewhere in this Annual Report. If the Company is unable
to generate sufficient cash flows from operations, or otherwise to comply with the terms of the credit facility and term loan
agreement, the Company may be required to seek additional financing alternatives.
Contractual and Other Commercial Commitments. In the normal course of business, we enter into various contractual
obligations that impact, or could impact, our liquidity. The following table and discussion outlines our material obligations at
December 31, 2016, with projected cash payments in the periods shown:
in millions
Principal payments on long-term debt
Interest payments on long-term debt
Lease obligations
Purchase obligations
Total debt, lease and purchase obligations
Total
Amounts
$570
36
67
17
$690
2017
2018-2019
2020-2021
2022 and
Thereafter
$30
13
22
7
$72
$127
21
28
8
$184
$ 413
2
9
2
$426
$–
–
8
–
$8
Our principal payments on long-term debt represent the expected cash payments on our $600 million term loan and do
not include any fair value adjustments or discounts and premiums. Our interest payments on long-term debt represent the
estimated cash interest payments based on the prevailing interest rate as of December 31, 2016. As of December 31, 2016, the
Company had no borrowings outstanding under the Credit Facility, leaving $400 million in additional borrowing capacity
available. Our lease obligations in the above table include Company facilities in various domestic and international locations.
Purchase obligations are committed purchase orders and other contractual commitments for goods and services, and include
non-cancelable contractual payments for fixed or minimum amounts to be purchased in relation to service agreements with
various vendors for ongoing telecommunications, information technology, hosting and other services.
Additionally, the Company has $20 million in total uncertain tax positions recorded as non-current liabilities on its balance
sheet as of December 31, 2016. These items are not included in the table of obligations shown above. The settlement period for
the non-current income tax liabilities cannot be reasonably estimated as the timing and the amount of the payments, if any, will
depend on possible future tax examinations with the various tax authorities. However, it is not expected that any payments will
be due within the next 12 months.
MANAGEMENT’S dISCUSSION ANd ANALYSIS › › › 11 › › › TERAdATA 2016
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 12
OPERATOR S-w-300
We also have product warranties and guarantees to third parties, as well as postemployment and international pension
obligations that may affect future cash flow. These items are not included in the table of obligations shown above. Product
warranties and third-party guarantees are described in detail in “Note 8—Commitments and Contingencies” in the Notes to
Consolidated Financial Statements. Postemployment and pension obligations are described in detail in “Note 6—Employee
Benefit Plans” in the Notes to Consolidated Financial Statements.
Off-Balance Sheet Arrangements. We do not participate in transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which
would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or
limited purposes.
CRITICAL ACCOUNTING POLICIES ANd ESTIMATES
Our financial statements are prepared in accordance with GAAP. In connection with the preparation of these financial
statements, we are required to make assumptions, estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, expenses and the related disclosure of contingent liabilities. These assumptions, estimates and judgments
are based on historical experience and assumptions that are believed to be reasonable at the time. However, because future
events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment.
Our critical accounting policies are those that require assumptions to be made about matters that are highly uncertain.
Different estimates could have a material impact on our financial results. Judgments and uncertainties affecting the application
of these policies and estimates may result in materially different amounts being reported under different conditions or
circumstances. Our management periodically reviews these estimates and assumptions to ensure that our financial statements
are presented fairly and are materially correct.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require
significant management judgment in its application. There are also areas in which management’s judgment in selecting among
available alternatives would not produce a materially different result. The significant accounting policies and estimates that
we believe are the most critical to aid in fully understanding and evaluating our reported financial results are discussed in
the paragraphs below. Teradata’s senior management has reviewed these critical accounting policies and related disclosures
with the Audit Committee of Teradata’s Board of Directors. For additional information regarding our accounting policies and
other disclosures required by GAAP, see “Note 1—Description of Business, Basis of Presentation and Significant Accounting
Policies” in the Notes to Consolidated Financial Statements.
Revenue Recognition
Revenue recognition for complex contractual arrangements requires judgment, including a review of specific contracts, past
experience, creditworthiness of customers, international laws and other factors. Specifically, complex arrangements with
nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting. We
must also apply judgment in determining all deliverables of the arrangement, and in determining the relative selling price of
each deliverable, considering the price charged for each product when sold on a standalone basis, and applicable renewal rates
for services. Changes in judgments about these factors could impact the timing and amount of revenue recognized between
periods.
The Company reviews the relative selling price 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, 2016 there was no material impact to revenue resulting from changes in the relative selling price, nor does the
Company expect a material impact from such changes in the near term.
Capitalized Software
Costs incurred in researching and developing a computer software product that will be sold, leased or otherwise marketed are
charged to expense until technological feasibility has been established. Technological feasibility is established when planning,
designing and initial coding activities that are necessary to establish that the product can be produced to meet its design
specifications are complete. In the absence of a detailed program design or for agile development activities, a working model
is used to establish technological feasibility. Once technological feasibility is established, all development costs are capitalized
TERAdATA 2016 › › › 12 › › › MANAGEMENT’S dISCUSSION ANd ANALYSIS
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REVISION 3
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DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 13
OPERATOR S-w-300
until the product is available for general release to customers. Judgment is required in determining when technological
feasibility of a product is established. The timing of when various research and development projects become technologically
feasible or ready for release can cause fluctuations in the amount of research and development costs that are expensed or
capitalized in any given period, thus impacting our reported profitability for that period.
In the fourth quarter of 2016, the Company began moving towards more frequent releases of its products, which significantly
shortens the opportunity to capitalize software development costs. Our research and development efforts have become
more driven by market requirements and rapidly changing customers’ needs. In addition, the Company started applying
agile development methodologies to help respond to new technologies and trends. Agile development methodologies are
characterized by a more dynamic development process with more frequent and iterative revisions to a product releases’
features and functions as the software is being developed. Due to the shorter development cycle and focus on rapid production
associated with agile development, the Company does not anticipate capitalizing significant amounts of external use software
development costs in future periods due to the relatively short duration between the completion of the working model and the
point at which a product is ready for general release. Prior capitalized costs will continue to be amortized under the greater of
revenue-based or straight-line method over the estimated useful life.
Income Taxes
In accounting for income taxes, we recognize deferred tax assets and liabilities based on the differences between the financial
statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined
based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are expected to be
settled or realized.
The Company’s intention is to permanently reinvest its foreign earnings outside of the U.S. As a result, the effective tax rates
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; the U.S. statutory
corporate income tax rate is currently 35% as compared to the overall statutory effective tax rate of our various foreign
jurisdictions of approximately 12%. As of December 31, 2016, the Company has not provided for federal income taxes on
earnings of approximately $1.3 billion from its foreign subsidiaries.
We account for uncertainty in income taxes by prescribing thresholds and attributes for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. We 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. We record any interest and/or penalties related to uncertain tax
positions in the income tax expense line on our Consolidated Statements of Income. As of December 31, 2016, the Company
has a total of $30 million of unrecognized tax benefits, of which $20 million is included in the other liabilities section of
the Company’s consolidated balance sheet as a non-current liability. The remaining balance of $10 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.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not
that some portion or all of a deferred tax asset will not be realized. We recorded $26 million in 2016 and $25 million in 2015 for
valuation allowances. Due to a change in tax law enacted in the state of California in the fourth quarter of 2012, the Company
established a valuation allowance to partially offset its California R&D tax credit carryforward deferred tax asset, as the
Company expects to continue to generate excess California R&D tax credits into the foreseeable future.
Stock-based Compensation
We measure compensation cost for stock awards at fair value and recognize compensation expense over the service period
for which awards are expected to vest. We utilize pricing models, including the Black-Scholes option pricing model and
Monte Carlo simulation model, to estimate the fair value of stock-based compensation at the date of grant. These valuation
models require the input of subjective assumptions, including expected volatility and expected term. In addition, we issue
performance-based awards that vest only if specific performance conditions are satisfied. The number of shares that will
be earned can vary based on actual performance. No shares will vest if the threshold objectives are not met. In the event
the objectives are exceeded, additional shares will vest up to a maximum payout. The cost of these awards is expensed over
the performance period based upon management’s estimate and analysis of the probability of meeting the performance
criteria. Because the actual number of shares to be awarded is not known until the end of the performance period, the actual
compensation expense related to these awards could differ from our current expectations.
MANAGEMENT’S dISCUSSION ANd ANALYSIS › › › 13 › › › TERAdATA 2016
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 14
OPERATOR S-w-300
Goodwill and Acquired Intangible Assets
The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate the
carrying value of goodwill may not be recoverable. The Company tests goodwill by first performing a qualitative analysis
(Step 0) to determine if it is more likely than not that the fair value of the reporting unit is below its carrying value. Qualitative
factors may include, but are not limited to, economic, market and industry conditions, and overall financial performance of
the reporting unit. If the Company determines that it is more likely than not that the fair value of the reporting unit is below
its carrying value after assessing these qualitative factors, then the guidance on goodwill impairment requires the company to
perform a two-step impairment test. In the first step, the Company compares the fair value of each reporting unit to its carrying
value. The Company typically determines the fair value of its reporting units using a weighting of fair values derived from the
income and market approaches. Under the income approach, the Company calculates the fair value of a reporting unit based on
the present value of estimated future cash flows. The market approach estimates fair value based on market multiples of revenue
and earnings derived from comparable companies with similar operating and investment characteristics as the reporting unit.
If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired.
If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the second
step of the impairment test is performed in order to determine the implied fair value of the reporting unit’s goodwill in the
same manner as if the reporting unit was being acquired in a business combination. The implied fair value of the goodwill in
step two analysis is determined by the acquisition method of accounting for business combinations which requires the company
to estimate the fair value of assets and liabilities and to allocate the fair value between net assets and goodwill. If the carrying
value of a reporting unit’s goodwill exceeds its implied fair value, then the company records an impairment loss equal to the
difference. Teradata reviewed two reporting units in its 2016 goodwill impairment assessment, as each operating segment
was deemed as a reporting unit for purposes of testing. Based on the Company’s evaluation and weighting of the events and
circumstances that have occurred since the most recent Step 1 test, the Company concluded that it was not more likely than
not that the fair value of each reporting unit was below its carrying value. Therefore, the Company determined that it was not
necessary to perform a Step 1 goodwill impairment test for the reporting units in 2016. See “Note 3—Goodwill and Acquired
Intangible Assets” for additional information.
The acquisition method of accounting for business combinations requires the Company to estimate the fair value of assets
acquired, liabilities assumed, and any noncontrolling interest in the acquiree to properly allocate any excess purchase price
consideration between net assets and goodwill. Impairment testing for assets, other than goodwill, requires the allocation of
cash flows to those assets or group of assets and if required, an estimate of fair value for the assets or group of assets.
Determining the fair value of goodwill and acquired intangibles is judgmental in nature and involves the use of significant
estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to
calculate projected future cash flows, discount rates and future economic and market conditions. The company’s estimates are
based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations
require the use of management’s assumptions, which may not reflect unanticipated events and circumstances that may occur.
Pension and Postemployment Benefits
We measure pension and postemployment benefit costs and credits using actuarial valuations. Actuarial assumptions attempt
to anticipate future events and are used in calculating the expense and liability relating to these plans. These factors include
assumptions we make about interest rates, expected investment return on plan assets, total and involuntary turnover rates, and
rates of future compensation increases. In addition, our actuarial consultants also use subjective factors such as withdrawal
rates and mortality rates to develop our valuations. We review and update these assumptions on an annual basis at the
beginning of each fiscal year. We are required to consider current market conditions, including changes in interest rates, in
making these assumptions. The actuarial assumptions that we use may differ materially from actual results due to changing
market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These
differences may result in a significant impact to the measurement of our pension and postemployment benefit obligations,
and to the amount of pension and postemployment benefits expense we have recorded or may record. For example, as of
December 31, 2016, a one-half percent increase/decrease in the discount rate would change the projected benefit obligation
of our pension plans by approximately $6 million, and a one-half percent increase/decrease in our involuntary turnover
assumption would change our postemployment benefit obligation by approximately $11 million.
TERAdATA 2016 › › › 14 › › › MANAGEMENT’S dISCUSSION ANd ANALYSIS
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 15
OPERATOR S-w-300
RECENTLY ISSUEd ACCOUNTING PRONOUNCEMENTS
A discussion of recently issued accounting pronouncements is described in “Note 1—Description of Business, Basis of
Presentation and Significant Accounting Policies” in the Notes to Consolidated Financial Statements elsewhere in this Annual
Report, and we incorporate such discussion by reference.
QUANTITATIVE ANd QUALITATIVE dISCLOSURES ABOUT MARKET RISK
The Company employs a foreign currency hedging strategy to limit potential losses in earnings or cash flows from adverse
foreign currency exchange rate movements. Foreign currency exposures arise from transactions denominated in a currency
other than the Company’s functional currency and from foreign denominated revenue and profit translated into U.S. dollars.
The primary currencies to which the Company is exposed include the euro, the British pound, the Japanese yen, the Australian
dollar, the Canadian dollar and other Asian and South American currencies. Exposures are hedged with foreign currency
forward contracts with maturity dates of twelve months or less. The potential loss in fair value at December 31, 2016, for such
contracts resulting from a hypothetical 10% adverse change in all foreign currency exchange rates is approximately $2 million.
This loss would be mitigated by corresponding gains on the underlying exposures. For additional information regarding the
Company’s foreign currency hedging strategy, see “Note 7— Derivative Instruments and Hedging Activities” in the Notes to
Consolidated Financial Statements elsewhere in this Annual Report.
MANAGEMENT’S dISCUSSION ANd ANALYSIS › › › 15 › › › TERAdATA 2016
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 16
OPERATOR S-w-300
REPORTS OF MANAGEMENT
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
We are responsible for the preparation, integrity and objectivity of our consolidated financial statements and other financial
information presented in this Annual Report. The accompanying consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include certain
amounts based on currently available information and our judgment of current conditions and circumstances.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, is engaged to perform audits of our
consolidated financial statements and the effectiveness of the internal control over financial reporting. These audits are
performed in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our
independent registered public accounting firm was given unrestricted access to all financial records and related data, including
minutes of all meetings of stockholders, the Board of Directors, and committees of the board.
The Audit Committee of the Board of Directors, consisting entirely of independent directors who are not employees of
Teradata, monitors our accounting, reporting, and internal control structure. Our independent registered public accounting
firm, internal auditors, and management have complete and free access to the Audit Committee, which periodically meets
directly with each group to ensure that their respective duties are being properly discharged.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such
term is defined in Rule 13a-15(f) under the Exchange Act. Teradata’s internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Teradata’s internal control over financial reporting as of the end of the period
covered by this report. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on our
assessment and those criteria, management concluded that Teradata’s internal control over financial reporting was effective as
of December 31, 2016.
Teradata’s independent registered public accounting firm has issued their report on the effectiveness of Teradata’s internal
control over financial reporting as of December 31, 2016, which appears in this Annual Report.
Victor L. Lund
Director, President and Chief Executive Officer Executive Vice President and Chief Financial Officer
Stephen M. Scheppmann
TERAdATA 2016 › › › 16 › › › REPORTS OF MANAGEMENT
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 17
OPERATOR S-w-300
REPORT OF INdEPENdENT REGISTEREd PUBLIC ACCOUNTING FIRM
TO ThE BOARd OF dIRECTORS ANd STOCKhOLdERS OF TERAdATA CORPORATION:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income (loss),
comprehensive income (loss), changes in stockholders’ equity and cash flows present fairly, in all material respects, the
financial position of Teradata Corporation and its subsidiaries at December 31, 2016 and December 31, 2015, and the results
of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with
accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 15(a)(2) of the Company’s 2016 Annual Report on Form 10-K presents fairly,
in all material respects, the information set forth therein when read in conjunction with the related consolidated financial
statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible
for these financial statements and financial statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting
based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Atlanta, GA
February 27, 2017
REPORT OF INdEPENdENT REGISTEREd PUBLIC ACCOUNTING FIRM › › › 17 › › › TERAdATA 2016
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 18
OPERATOR S-w-300
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the Years Ended December 31
2016
2015
2014
in millions, except per share amounts
Revenue
Product revenue
Service revenue
Total revenue
Costs and operating expenses
Cost of products
Cost of services
Selling, general and administrative expenses
Research and development expenses
Impairment of goodwill, acquired intangibles and other assets
Total costs and operating expenses
Income (loss) from operations
Other (expense) income, net
Interest expense
Other income (expense), net
Total other (expense) income, net
Income (loss) before income taxes
Income tax expense
Net income (loss)
Net income (loss) per common share
Basic
Diluted
Weighted average common shares outstanding
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
$ 889
1,433
2,322
352
782
664
212
80
2,090
232
(12)
1
(11)
221
96
$ 125
$ 0.96
$ 0.95
129.7
131.5
$ 1,057
1,473
2,530
440
814
765
228
478
2,725
(195)
(9)
60
51
(144)
70
$ (214)
$ (1.53)
$ (1.53)
139.6
139.6
$ 1,227
1,505
2,732
443
810
770
206
–
2,229
503
(3)
(6)
(9)
494
127
$ 367
$ 2.36
$ 2.33
155.3
157.8
TERADATA 2016 › › › 18 › › › CONSOLIDATED STATEMENTS OF INCOME (LOSS)
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 19
OPERATOR S-w-300
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31
in millions
Net income (loss)
Other comprehensive (loss) income:
Foreign currency translation adjustments
Securities:
Reclassification of gain to net income
Unrealized (loss) gain on securities, before tax
Tax impact on securities
Net change in securities
Defined benefit plans:
Reclassification of loss to net income
Defined benefit plan adjustment, before tax
Defined benefit plan adjustment, tax portion
Defined benefit plan adjustment, net of tax
Other comprehensive loss
Comprehensive income (loss)
The accompanying notes are an integral part of the consolidated financial statements.
2016
$125
(7)
–
–
–
–
3
(12)
3
(6)
(13)
$112
2015
$ (214)
(36)
(26)
(7)
2
(31)
3
(9)
1
(5)
(72)
$(286)
2014
$367
(47)
–
50
(19)
31
1
(29)
7
(21)
(37)
$330
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) › › › 19 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 20
OPERATOR S-w-300
CONSOLIDATED BALANCE SHEETS
At December 31
in millions, except per share amounts
Assets
Current assets
Cash and cash equivalents
Accounts receivable, net
Inventories
Assets held for sale
Other current assets
Total current assets
Property and equipment, net
Capitalized software, net
Goodwill
Acquired intangible assets, net
Deferred income taxes
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities
Current portion of long-term debt
Short-term borrowings
Accounts payable
Payroll and benefits liabilities
Deferred revenue
Liabilities held for sale
Other current liabilities
Total current liabilities
Long-term debt
Pension and other postemployment plan liabilities
Long-term deferred revenue
Deferred tax liabilities
Other liabilities
Total liabilities
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued
and outstanding at December 31, 2016 and 2015, respectively
Common stock: par value $0.01 per share, 500.0 shares authorized, 130.6 and
130.7 shares issued at December 31, 2016 and 2015, respectively
Paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of the consolidated financial statements.
TERADATA 2016 › › › 20 › › › CONSOLIDATED BALANCE SHEETS
2016
2015
$ 974
548
34
–
65
1,621
138
187
390
11
49
17
$ 2,413
$
30
–
103
139
369
–
88
729
538
96
14
33
32
$ 839
580
49
214
52
1,734
143
190
380
22
41
17
$2,527
$
30
180
96
120
367
58
102
953
567
89
15
28
26
1,442
1,678
–
–
1
1,220
(161)
(89)
971
$ 2,413
1
1,128
(204)
(76)
849
$2,527
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 21
OPERATOR S-w-300
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
2016
2015
2014
in millions
Operating activities
Net income (loss)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Excess tax benefit from stock-based compensation
Deferred income taxes
(Gain) loss on investments
Impairment of goodwill, acquired intangibles and other assets
Changes in assets and liabilities, net of acquisitions:
Receivables
Inventories
Account payables and accrued expenses
Deferred revenue
Other assets and liabilities
Net cash provided by operating activities
Investing activities
Expenditures for property and equipment
Additions to capitalized software
Proceeds from sales of property and equipment
Proceeds from disposition of investments
Proceeds from sale of business
Business acquisitions and other investing activities, net
Net cash used in investing activities
Financing activities
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from credit facility borrowings
Repayments of credit-facility borrowings
Repurchases of common stock
Excess tax benefit from stock-based compensation
Other financing activities, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental data
Cash paid during the year for:
Income taxes
Interest
The accompanying notes are an integral part of the consolidated financial statements.
$ 125
$ (214)
$ 367
128
62
–
(3)
(2)
80
40
14
11
1
(10)
446
(53)
(65)
5
2
92
(16)
(35)
–
(30)
–
(180)
(82)
–
30
(262)
(14)
135
839
$ 974
170
56
(2)
(39)
(57)
478
1
(11)
(8)
24
3
401
(52)
(68)
–
85
–
(17)
(52)
600
(247)
180
(220)
(657)
2
18
(324)
(20)
5
834
$ 839
169
50
(2)
(2)
9
–
101
18
(23)
(28)
21
680
(54)
(75)
–
–
–
(69)
(198)
–
(26)
220
–
(551)
2
29
(326)
(17)
139
695
$ 834
$ 105
$ 12
$ 98
8
$
$ 133
3
$
CONSOLIDATED STATEMENTS OF CASH FLOWS › › › 21 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 3
SERIAL <12345678>
DATE Tuesday, March 10, 2015
JOB NUMBER 261647
TYPE
PAGE NO. 22
OPERATOR S-w-300
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Treasury Stock
Common Stock
Shares Amount Shares Amount
Paid-in
Capital
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
191
$ 2
(32)
$(1,184)
$ 973
$ 2,033
367
$ 33
in millions
December 31, 2013
Net income
Employee stock compensation,
employee stock purchase programs
and option exercises
2
(1)
78
3
(32)
(13)
32
1,184
(1,184)
(560)
Income tax benefit from stock
compensation plans
Retirement of common stock
previously held as treasury
Repurchases of common stock, retired
Pension and postemployment benefit
plans, net of tax
Unrealized gain on securities
Currency translation adjustment
December 31, 2014
Net loss
Employee stock compensation,
148
$ 1
–
$
–
$1,054
$
656
(214)
(646)
(204)
125
(82)
employee stock purchase programs
and option exercises
2
Income tax benefit from stock
compensation plans
Repurchases of common stock, retired
Pension and postemployment benefit
(19)
78
(4)
plans, net of tax
Securities, net of tax
Currency translation adjustment
December 31, 2015
Net income
Employee stock compensation,
131
$ 1
–
$
–
$ 1,128
$
employee stock purchase programs
and option exercises
Repurchases of common stock, retired
Pension and postemployment benefit
3
(3)
92
plans, net of tax
Currency translation adjustment
December 31, 2016
131
$ 1
–
$
–
$ 1,220
$
(161)
The accompanying notes are an integral part of the consolidated financial statements.
TERADATA 2016 › › › 22 › › › CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Total
$1,857
367
77
3
(560)
(21)
31
(47)
$1,707
(214)
78
(4)
(646)
(5)
(31)
(36)
$ 849
125
92
(82)
(6)
(7)
$ 971
(21)
31
(47)
$ (4)
(5)
(31)
(36)
$ (76)
(6)
(7)
$ (89)
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 23
OPERATOR MARIANB
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: 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,
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 of goodwill and other intangibles, 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, 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 unspecified upgrades
or enhancements on a when-and-if-available basis are recognized straight-line over the term of the 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 23 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 24
OPERATOR MARIANB
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 when-and-if-available upgrades
(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.
TERADATA 2016 › › › 24 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 25
OPERATOR MARIANB
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 semi-annual basis using data from the four 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, 2016 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.
Teradata’s new go-to-market offerings introduced in the second half of 2016, which are part of the overall business
transformation strategy, include the following offerings:
• Subscription license - Teradata’s subscription licenses include a right-to-use license and are typically sold with PCS. The
revenue for these arrangements is typically recognized ratably over the contract term. The term of these arrangements varies
between one and five years.
• Software as a service or Cloud - These arrangements include a right-to-access software license that the customer does not
have a right to take possession of without significant penalty during the hosting period and the services can be delivered
through a managed cloud, private cloud or public cloud. These arrangements are recognized outside the software rules
and revenue is recognized ratably over the contract term. The term of these arrangements typically varies between one and
five years.
• Rentals - Teradata owns the equipment and may or may not provide managed services. The revenue for these arrangements
is generally recognized straight-line over the term of the contract. The term of these arrangements typically varies between
one and three years and are generally accounted for as operating leases.
• Utility model - Teradata owns the equipment and may or may not provide managed services. Utility models typically
include a minimum fixed amount that is recognized ratably over the contract term in addition to an elastic amount for
usage above the minimum, which is recognized monthly based on actual utilization. The term of these arrangements varies
between one and five years.
Shipping and Handling. Product shipping and handling costs are included in cost of products in the Consolidated Statements
of Income (Loss).
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 (loss). Realized gains and losses are included in other
income and expense in the Consolidated Statements of Income (loss).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 25 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 26
OPERATOR MARIANB
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
Depreciation expense
2016
$49
2015
$53
2014
$51
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 and analytic applications are expensed as incurred based on the frequency and
agile nature of development. Prior to December 31, 2016, costs incurred for the development of analytic database software that
will be sold, leased or otherwise marketed were capitalized between technological feasibility and the point at which a product is
ready for general release. 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 are complete. 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:
in millions
Beginning balance at January 1
Capitalized
Amortization
Ending balance at December 31
Internal-use Software
2015
$13
6
(6)
$13
2016
$13
6
(6)
$13
2014
$12
7
(6)
$13
External-use Software
2015
$186
61
(70)
2016
$177
59
(62)
$ 174
$177
2014
$183
68
(65)
$186
The aggregate amortization expense (actual and estimated) for internal-use and external-use software for the following
periods is:
in millions
Internal-use software amortization expense
External-use software amortization expense
Actual
2016
$ 6
$62
For the years ended (estimated)
2017
$ 6
$68
2018
$ 4
$49
2019
$ 3
$34
2020
$ –
$23
2021
$ –
$ –
Estimated expense, which is recorded to cost of sales for external use software, is based on capitalized software at December 31,
2016 and does not include any new capitalization for future periods.
Our research and development efforts have recently become more driven by market requirements and rapidly changing
customers’ needs. In addition, the Company started applying agile development methodologies to help respond to new
technologies and trends. Agile development methodologies are characterized by a more dynamic development process with
more frequent and iterative revisions to a product release features and functions as the software is being developed. Due
to the shorter development cycle and focus on rapid production associated with agile development, the Company does not
anticipate capitalizing significant amounts of external use software development costs in future periods due to the relatively
short duration between the completion of the working model and the point at which a product is ready for general release. Prior
capitalized costs will continue to be amortized under the greater of revenue-based or straight-line method over the estimated
useful life.
TERADATA 2016 › › › 26 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 27
OPERATOR MARIANB
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. See Note 3- Goodwill and Acquired Intangibles for additional information.
Assets and Liabilities Held for Sale. The Company classifies assets and liabilities (disposal groups) to be sold as held for sale in
the period in which all of the following criteria are met:
• Management, having the authority to approve the action, commits to a plan to sell the disposal group;
• The disposal group is available for immediate sale in its present condition subject only to terms that are usual and
customary for sales of such disposal groups;
• An active program to locate a buyer and other actions required to complete the plan to sell the disposal group have been
initiated;
• The sale of the disposal group is probable, and transfer of the disposal group is expected to qualify for recognition as a
completed sale, within one year, except if events or circumstances beyond the Company’s control extend the period of time
required to sell the disposal group beyond one year;
• The disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and
• Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the
plan will be withdrawn.
The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value
less costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.
Conversely, gains are not recognized until the date of sale. The Company assesses the fair value of a disposal group less costs
to sell each reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the
carrying value of the disposal group, as long as the new carrying value does not exceed the carrying value of the disposal group
at the time it was initially classified as held for sale.
Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and
liabilities of the disposal group under Assets held for sale and Liabilities held for sale in the Consolidated Balance Sheets. Refer
to Note 15 for further information on the Company’s assets and liabilities held for sale.
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, 2016. 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 27 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 28
OPERATOR MARIANB
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 shares and
restricted share 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. The expected term for options granted is based upon historical observation of actual time elapsed between
date of grant and exercise of options for all employees. Prior to 2015, the expected term assumption was 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 was 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 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 2015 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 2015, 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 (Loss) Per Share. Basic earnings (loss) per share is calculated by dividing net income (loss) 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 share 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 (loss) per share for the years ended December 31:
in millions, except earnings (loss) per share
Net income (loss) attributable to common stockholders
Weighted average outstanding shares of common stock
Dilutive effect of employee stock options, restricted shares and other stock awards
Common stock and common stock equivalents
Earnings (loss) per share:
Basic
Diluted
2016
$ 125
129.7
1.8
131.5
$ 0.96
$ 0.95
2015
$ (214)
139.6
–
139.6
$ (1.53)
$ (1.53)
2014
$ 367
155.3
2.5
157.8
$ 2.36
$ 2.33
Options to purchase 5.2 million in 2016, 4.5 million shares in 2015 and 2.4 million shares in 2014 of common stock, 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.
For 2015, due to the net loss attributable to Teradata common stockholders, largely due to the goodwill and acquired intangibles
impairment charges, potential common shares that would cause dilution, such as employee stock options, restricted shares and
other stock awards, have been excluded from the diluted share count because their effect would have been anti-dilutive. For
2015, the fully diluted shares would have been 141.9 million.
TERADATA 2016 › › › 28 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 29
OPERATOR MARIANB
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. In July 2015, the FASB issued a one-year delay in the effective date of the new standard. Under this
guidance, the new revenue standard will be effective for annual reporting periods beginning after December 15, 2017, with
early application 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.
In March 2016, the FASB issued an update that amends and clarifies the implementation guidance on principal versus agent
considerations for reporting revenue gross rather than net. In April 2016, the FASB issued an update that amends and clarifies
the identification of performance obligations and accounting for licenses of intellectual property.
In May 2016, the FASB issued an update which addresses the narrow-scope improvements to the guidance on collectibility,
non-cash consideration, and completed contracts at transition. Additionally, the amendments in this update provide a
practical expedient for contract modifications at transition and an accounting policy election related to the presentation of
sales taxes and other similar taxes collected from customers. All updates issued in 2016 have the same deferred effective date.
The Company plans to adopt the new accounting guidance effective January 1, 2018. 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.
Although the Company is still evaluating the impact on its consolidated financial statements, including evaluating the different
adoption methodologies, the Company believes the most significant impacts may include the following items:
• As the Company transitions to the new go-to-market offerings, such as subscription licenses, the Company could
potentially see a more significant impact in the amount of revenue recognized over time under the current rules but upfront
under the new rules.
• The Company currently expenses contract acquisition costs and believes that the requirement to defer incremental contract
acquisition costs and recognize them over the term of the contract to which the costs relate could have an impact, especially
as the Company transitions to longer-term, over-time revenue contracts.
• The amount of revenue allocated to the delivered items and recognized upfront utilizing the relative selling price model is
limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance
conditions (i.e. the non-contingent amount) under current rules. Under the new rules, the amounts allocated to delivered
items and recognized upfront could be higher if it is probable that a significant reversal in the amount of revenue recognized
will not occur in future periods upon the delivery of additional items or meeting other specified performance conditions.
The Company does not expect that the new standard will result in substantive changes in our deliverables or the amounts of
revenue allocated between multiple deliverables, with the exception of contingent revenue discussed above. The Company
is still in the process of evaluating these impacts, and our initial assessment may change as the Company continues with
implementing new systems, processes, accounting policies and internal controls.
Leases. In February 2016, the FASB issued new guidance which requires a lessee to account for leases as finance or operating
leases. Both leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance
sheet, with differing methodology for income statement recognition. For lessors, the standard modifies the classification
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 29 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 30
OPERATOR MARIANB
criteria and the accounting for sales-type and direct financing leases. Entities will classify leases to determine how to recognize
lease-related revenue and expense. This standard is effective for public entities for fiscal years, and interim periods within those
years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required for
leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements.
The Company is currently assessing the impact of this update on its consolidated financial statements.
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. In August 2016, the FASB issued an
update addressing eight specific cash flow issues in an effort to reduce diversity in practice. The amended guidance is effective
for fiscal years beginning after December 31, 2017, and for interim periods within those years. Early adoption is permitted. The
Company is currently assessing the impact of this update on its consolidated statements of cash flows.
Financial Instruments. In January 2016, the FASB issued new guidance which enhances the reporting model for financial
instruments and related disclosures. This update requires equity securities to be measured at fair value with changes in fair
value recognized through net income and will eliminate the cost method for equity securities without readily determinable fair
values. The provisions are effective for public entities with fiscal years beginning after December 15, 2017, including interim
periods within those fiscal years. Early adoption is permitted, in certain circumstances. The Company is currently evaluating
the impact of this guidance on its consolidated financial position, results of operations and cash flows.
Intra-entity asset transfers. In October 2016, the FASB issued accounting guidance to simplify the accounting for income
tax consequences of intra-entity transfers of assets other than inventory. Under this guidance, companies will be required to
recognize the income tax consequences of an intra-entity asset transfer when the transfer occurs. Current guidance prohibits
companies from recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold
to an outside party. The guidance must be applied on a modified retrospective basis through a cumulative-effect adjustment
to retained earnings as of the period of adoption. The guidance is effective for periods beginning after December 15, 2017 and
early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its
consolidated financial statements.
Classification of restricted cash. In December 2016, the FASB issued accounting guidance to address diversity in the
classification and presentation of changes in restricted cash on the statement of cash flows. Under this guidance, companies
will be required to present restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period amounts shown on the statement of cash flows. The guidance is required to be applied
retrospectively and is effective for periods beginning after December 15, 2017, with early adoption permitted. The Company
does not expect the adoption of this guidance to have a material effect on its statement of cash flows.
Clarification on the definition of a business. In January 2017, the FASB issued accounting guidance to clarify the definition
of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted
for as acquisitions (or disposals) of assets or businesses. This new guidance is effective for reporting periods beginning after
December 15, 2017 with early adoption permitted. The Company is currently evaluating the impact this guidance may have on
its consolidated financial statements.
Simplifying the measurement for goodwill. In January 2017, the FASB issued guidance to simplify the accounting for
the impairment of goodwill. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical
purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds
its fair value, not to exceed the carrying amount of goodwill. The guidance is required to be applied prospectively and is
effective for periods beginning after December 15, 2019, with early adoption permitted. The Company expects to early adopt
this accounting guidance effective January 1, 2017. The Company does not expect any impact from the adoption of the new
accounting guidance on its consolidated financial statements.
Recently Adopted Guidance
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
TERADATA 2016 › › › 30 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 31
OPERATOR MARIANB
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 Company adopted this guidance on January 1, 2016. This amendment did not
have an impact on the Company’s consolidated financial statements.
Simplifying the Presentation of Debt Issuance Costs. To simplify presentation of debt issuance costs, the amendments in
this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs are not affected by the amendments in this update. The Company adopted this guidance on
January 1, 2016 on a retrospective basis. Debt issuance costs of $3 million at December 2015 and $2 million at December 31,
2016 have been presented as a deduction from the carrying value of the related long-term liabilities in our Consolidated
Balance Sheets.
Intangibles, Goodwill and Other Internal-Use Software. The amendments in this update provide guidance to customers
about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a
software license, then the customer should account for the software license element of the arrangement consistent with the
acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer
should account for the arrangement as a service contract. The guidance will not change current guidance for a customer’s
accounting for service contracts. The Company adopted this guidance on January 1, 2016. This amendment did not have an
impact on the Company’s consolidated financial statements.
Stock Compensation: Improvements to Employee Share-Based Payment Accounting. In March 2016, the FASB issued
an update which simplifies several aspects of the accounting for share-based payment transactions, including the income tax
consequences, classification of awards as either equity or liabilities, and classification on the Statements of Cash Flows. The
Company elected to early adopt this standard in the quarter ended December 31, 2016 retroactively to January 1, 2016. The
impact of early adoption resulted in the following:
• The new guidance requires excess tax benefits and tax deficiencies (shortfalls) from vested or settled share-based awards
to be recorded in the provision for income taxes on the income statement rather than in paid-in capital. This change was
applied on a prospective basis as of January 1, 2016, which resulted in additional tax expense of $5 million for the year ended
December 31, 2016.
• The tax withholding threshold for triggering liability accounting on a net settlement transaction has been increased from
the minimum statutory rate to the maximum. This change was applied on a modified retrospective basis as of January 1,
2016, which resulted in no impact to retained earnings as of January 1, 2016 where the cumulative effect of this change is
required to be recorded.
• The Company elected to change its accounting policy for forfeitures to record them as they occur. The change was applied
on a modified retrospective basis with a cumulative effect adjustment to retained earnings of less than $1 million as of
January 1, 2016.
• The Company no longer reflects the cash received from the excess tax benefits within cash flows from financing activities
but instead now reflects this benefit within cash flows from operating activities. This change in presentation was applied
prospectively as of January 1, 2016, which resulted in an increase in net cash provided by operating activities and net cash
used by financing activities of $3 million for the year ended December 31, 2016.
• The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the
periods presented on our Consolidated Statement of Cash Flows since these cash flows have historically been presented as a
financing activity.
• The Company excluded excess tax benefits from the assumed proceeds available to repurchase shares in the computation of
our diluted earnings per share. This change was applied on a prospective basis as of January 1, 2016, which decreased diluted
weighted average common shares outstanding by approximately 131 thousand shares in 2016.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 31 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 32
OPERATOR MARIANB
NOTE 2: Supplemental Financial Information
At December 31
in millions
Accounts receivable
Trade
Other
Accounts receivable, gross
Less: allowance for doubtful accounts
Total accounts receivable, net
Inventories
Finished goods
Service parts
Total inventories
Property and equipment
Land
Buildings and improvements
Machinery and other equipment
Property and equipment, gross
Less: accumulated depreciation
Total property and equipment, net
Other current liabilities
Sales and value-added taxes
Pension and other postemployment plan liabilities
Other
Total other current liabilities
Deferred revenue
Deferred revenue, current
Long-term deferred revenue
Total deferred revenue
2016
2015
$ 561
6
567
(19)
$ 548
$ 20
14
$ 34
$
8
77
354
439
(301)
$ 138
$ 28
7
53
$ 88
$ 369
14
$ 383
$ 591
6
597
(17)
$ 580
$ 32
17
$ 49
$
8
78
336
422
(279)
$ 143
$ 35
17
50
$ 102
$ 367
15
$ 382
Above amounts exclude assets and liabilities held for sale. Refer to Note 15 for further information on the Company’s assets and liabilities held for sale.
TERADATA 2016 › › › 32 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 33
OPERATOR MARIANB
NOTE 3: Goodwill and Acquired Intangible Assets
The following table identifies the activity relating to goodwill by operating segment:
in millions
Goodwill
Americas Data and Analytics
International Data and Analytics
Total goodwill
Balance At
December 31,
2015
Additions
Currency
Translation
Adjustments
Balance At
December 31,
2016
$251
129
$380
$ –
11
$11
$ –
(1)
$(1)
$251
139
$390
In the fourth quarter of 2015, the Company committed to a plan to exit the marketing applications business, which met the
criteria for held for sale and continued to be reported under continuing operations. The business was subsequently sold on
July 1, 2016. Not included in the table above is $113 million at December 31, 2015 for goodwill that had been classified as held
for sale. See Note 15 for additional disclosures related to the sale of the business and impairment charges recorded for goodwill
that had been classified as held for sale. During the third quarter of 2016, the Company recorded additional goodwill of
$11 million, for an immaterial acquisition that occurred during the period.
In the fourth quarter of 2016, the Company performed its annual impairment test of goodwill and determined that no
impairment to the carrying value of goodwill was necessary. The Company reviewed two reporting units in its 2016 goodwill
impairment assessment, as both geographic operating segments were considered separate reporting units for purposes of
testing. Based on the Company’s evaluation and weighting of the events and circumstances that have occurred since the most
recent Step 1 test, the Company concluded that it was not more likely than not that each reporting unit’s fair value was below its
carrying value. Therefore, the Company determined that it was not necessary to perform a Step 1 goodwill impairment test for
the reporting units in 2016.
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:
in millions
Acquired intangible assets
Intellectual property/developed technology
Customer relationships
Trademarks/trade names
In-process research and development
Total
December 31, 2016
December 31, 2015
Amortization
Life
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
and Currency
Translation
Adjustments
Gross
Carrying
Amount
Accumulated
Amortization
and Currency
Translation
Adjustments
1 to 7
3 to 10
5
5
$71
–
1
5
$77
$(61)
–
(1)
(4)
$(66)
$83
3
1
5
$92
$(63)
(3)
(1)
(3)
$(70)
The gross carrying amount of acquired intangibles was reduced by certain intangible assets previously acquired that became
fully amortized and were removed from the balance sheet. Not included in the table above is $44 million at December 31, 2015
for intangible assets that were classified as held for sale. See Note 15 for additional disclosures related to the sale of the business
and impairment charges recorded for intangible assets that had been classified as held for sale.
The aggregate amortization expense (actual and estimated) for acquired intangible assets for the following periods is:
in millions
Amortization expense
Actual
2015
$40
2014
$47
2016
$10
For the years ended (estimated)
2020
2017
2019
2018
$7
$3
$1
$ –
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 33 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 34
OPERATOR MARIANB
NOTE 4:
Income Taxes
For the years ended December 31, income (loss) before income taxes consisted of the following:
in millions
Income (loss) before income taxes
United States
Foreign
Total income (loss) before income taxes
For the years ended December 31, income tax expense consisted of the following:
in millions
Income tax expense
Current
Federal
State and local
Foreign
Deferred
Federal
State and local
Foreign
Total income tax expense
Effective income tax rate
2016
2015
2014
$ 93
128
$221
$ (88)
(56)
$(144)
$ 301
193
$ 494
2016
2015
2014
$ 67
7
25
7
1
(11)
$ 96
43.4%
$
74
9
26
(19)
(3)
(17)
$
70
(48.6%)
$ 94
8
27
1
–
(3)
$ 127
25.7%
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:
in millions
Income tax expense at the U.S. federal tax rate
Foreign income tax differential
State and local income taxes
U.S. permanent book/tax differences
U.S. manufacturing deduction permanent difference
Goodwill impairment
Tax impact of sale of marketing applications business
Impact of excess tax benefits and tax deficiencies
Tax impact of U.S. tax law change - IRC Section 987
Other, net
Effective income tax rate
2016
35.0%
(13.2%)
0.2%
(0.1%)
(3.5%)
8.9%
9.9%
2.2%
3.5%
0.5%
43.4%
2015
35.0%
14.0%
0.5%
3.1%
5.5%
(100.1%)
–%
–%
–%
(6.6%)
(48.6%)
2014
35.0%
(9.0%)
0.5%
0.4%
(2.1%)
–%
–%
–%
–%
0.9%
25.7%
The 2016 effective tax rate was impacted by the $57 million of goodwill impairment charges recorded in the first quarter
of 2016, all of which was treated as a permanent, non-deductible tax item. In addition, a discrete tax charge of $22 million was
recorded in the third quarter of 2016 related to the tax impact of the sale of the marketing applications business, which occurred
on July 1, 2016. In the fourth quarter of 2016, the Company recorded $8 million of tax expense associated with the issuance of
new U.S. Treasury Regulations under Internal Revenue Code Section 987 on December 7, 2016, which clarified how companies
calculate foreign currency translation gains and losses for income tax purposes for branches whose accounting records are
kept in a currency other than the currency of the company. Also in the fourth quarter of 2016, the Company elected to early
adopt Accounting Standards Update 2016-09, Improvements to Employee Share-based Payment Accounting. As a result, the
Company incurred a $5 million discrete tax expense associated with the net shortfall arising from 2016 equity compensation
vestings and exercises.
TERADATA 2016 › › › 34 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 35
OPERATOR MARIANB
The 2015 effective tax rate was impacted by the $437 million of goodwill impairment charges recorded for 2015, of which
$414 million was treated as a permanent non-deductible tax item. This resulted in full-year income tax expense in 2015 of
$70 million, on a pre-tax net loss of $(144) million, causing a negative tax rate of (48.6)%. There were no material discrete tax
items impacting the effective tax rate for full year 2014.
Deferred income tax assets and liabilities included in the balance sheets at December 31 were as follows:
in millions
Deferred income tax assets
Employee pensions and other liabilities
Other balance sheet reserves and allowances
Tax loss and credit carryforwards
Deferred revenue
Total deferred income tax assets
Valuation allowance
Net deferred income tax assets
Deferred income tax liabilities
Intangibles and capitalized software
Property and equipment
Other
Total deferred income tax liabilities
Total net deferred income tax assets
2016
2015
$ 59
18
53
3
133
(26)
107
63
22
6
91
$ 16
$ 62
23
62
3
150
(25)
125
81
30
1
112
$ 13
As of December 31, 2016, Teradata has net operating loss (“NOL”) and tax credit carryforwards totaling $56 million
(tax effected and before any valuation allowance offset and application of recognition criteria for uncertain tax positions).
Of the total tax carryforwards, $13 million are NOL’s in the U.S. and certain foreign jurisdictions, a small portion of which will
begin to expire in 2019; $2 million are U.S. foreign tax credit carryforwards, which expire in 2021; $37 million are California
R&D tax credits that have an indefinite carryforward period (which has a $26 million valuation allowance offset recorded);
and the remaining $4 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, 2016, the Company had not provided for federal income taxes on earnings of approximately $1.3 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, 2016, the Company’s uncertain tax positions totaled approximately $30 million, of which $20 million is
reflected in the other liabilities section of the Company’s balance sheet as a non-current liability. The remaining balance of
$10 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
$30 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, 2016.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 35 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 36
OPERATOR MARIANB
Below is a rollforward of the Company’s liability related to uncertain tax positions at December 31:
in millions
Balance at January 1
Gross decreases for prior period tax positions
Gross increases for current period tax positions
Decreases due to the lapse of applicable statute of limitations
Decreases relating to settlements with taxing authorities
Balance at December 31
2016
$38
(7)
3
(4)
–
$30
2015
$36
–
6
(1)
(3)
$38
The Company and its subsidiaries file income tax returns in the U.S. and various state jurisdictions, as well as numerous
foreign jurisdictions. As of December 31, 2016, 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 U.S. Federal tax filing for tax year 2011 was finalized in July of 2014 and resulted in a no change audit.
NOTE 5: Employee Stock-based Compensation Plans
The Company recorded stock-based compensation expense for the years ended December 31 as follows:
in millions
Stock options
Restricted shares
Employee share repurchase program
Total stock-based compensation before income taxes
Tax benefit
Total stock-based compensation, net of tax
2016
$ 9
51
2
62
(13)
$ 49
2015
$ 12
41
3
56
(17)
$ 39
2014
$ 13
33
4
50
(16)
$ 34
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 17.5 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 share units and stock option exercises, and at the time of grant for restricted
shares, for awards under both plans.
As of December 31, 2016, the Company’s primary types of stock-based compensation were stock options, restricted shares,
restricted share units and the employee stock purchase program (the “ESPP”).
Stock Options
The Compensation and Human Resource Committee of Teradata’s Board of Directors has 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.
The weighted-average fair value of options granted for Teradata equity awards was $10.68 in 2016, $11.37 in 2015 and 17.67 in
2014. The fair value of each option award on the grant date was estimated using the Black-Scholes option-pricing model with
the following assumptions:
Dividend yield
Risk-free interest rate
Expected volatility
Expected term (years)
2016
–%
2.08%
35.2%
6.3
2015
–%
1.76%
34.4%
6.3
2014
–%
1.73%
37.8%
6.3
TERADATA 2016 › › › 36 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 37
OPERATOR MARIANB
The following table summarizes the Company’s stock option activity for the year ended December 31, 2016:
shares in thousands
Outstanding at January 1, 2016
Granted
Exercised
Canceled
Forfeited
Outstanding at December 31, 2016
Fully vested and expected to vest at December 31, 2016
Exercisable at December 31, 2016
Weighted-
Average
Exercise
Price per
Share
$34.91
$ 28.17
$16.48
$43.48
$ 39.63
$36.22
$36.22
$ 38.16
Shares
Under
Option
7,574
1,013
(1,136)
(311)
(631)
6,509
6,509
4,487
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
(in millions)
5.7
5.3
5.3
3.6
$ 20
$ 8
$ 8
$ 8
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
Intrinsic value of options exercised
Cash received from option exercises
Tax benefit realized from option exercises
2016
$13
$18
$ 5
2015
$8
$9
$3
2014
$14
$11
$ 5
As of December 31, 2016, there was $24 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 3.2 years.
Restricted Shares and Restricted Share Units
The Teradata SIP provides for the issuance of restricted shares, as well as restricted share units. These grants consist of both
service-based and performance-based awards. Service-based awards typically vest over a three 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 share
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 share units does not have the rights of a stockholder and is subject to restrictions on
transferability and risk of forfeiture. For both restricted share grants and restricted share 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 and other vesting conditions 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 37 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 38
OPERATOR MARIANB
The following table reports restricted shares and restricted share unit activity during the year ended December 31, 2016:
shares in thousands
Unvested shares at January 1, 2016
Granted
Vested
Forfeited/canceled
Unvested shares at December 31, 2016
Weighted-
Average
Grant Date
Fair Value
per Share
$38.58
$26.61
$38.09
$ 33.75
$ 31.57
Number of
Shares
4,146
2,209
(1,612)
(701)
4,042
The following table summarizes the weighted-average fair value of restricted share units granted for Teradata equity awards and
the total fair value of shares vested.
Weighted-average fair value of restricted share units granted
Total fair value of shares vested (in millions)
2016
$26.61
61
$
2015
$32.82
45
$
2014
$44.39
27
$
As of December 31, 2016, there was $86 million of unrecognized compensation cost related to unvested restricted share grants.
The unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 2.3 years.
The following table represents the composition of Teradata restricted share unit grants in 2016:
shares in thousands
Service-based shares
Performance-based shares
Total stock grants
Number of
Shares
1,566
643
2,209
Weighted-
Average
Grant Date
Fair Value
$ 27.73
$23.90
$26.61
In 2012, approximately 0.3 million shares of the performance awards issued included challenging or “stretch” financial goals
through 2016 based on a GAAP revenue and/or non-GAAP earnings per share targets in 2016. Each recipient’s opportunity to
earn the award is based on performance over a four-year period ending in 2016. There was no compensation expense related to
these awards recorded in 2016 as the performance targets for these awards were not achieved.
Performance-based share units granted as part of our long-term incentive program for certain corporate officers and key
executives will be earned based on Teradata’s total shareholder return (“TSR”) over a three-year performance period relative
to the other companies in the S&P 1500 Technology Index. The number of shares actually issued, as a percentage of the
amount subject to the performance share award, could range from 0% to 200%. The grant date fair value of the non-vested
performance-based awards was determined through the use of a Monte Carlo simulation model, which utilized multiple
input variables that determined the probability of satisfying the market condition requirements applicable to each award. The
compensation expense for the award will be recognized as long as the requisite service is rendered, regardless of whether the
market conditions are achieved.
Modifications In connection with the plan to exit most of the marketing applications business and the departure of certain
executives, the Company modified its awards for certain employees to accelerate the vesting of any unvested awards at the date
of sale. This modification resulted in a Type III modification (improbable to probable). In addition, a modification to extend
the exercise period of all vested options from 59 days to one year resulted in a Type I modification (probable to probable).
Related to the awards that were modified, the Company recognized a net increase in compensation expense of $1 million
in 2016.
TERADATA 2016 › › › 38 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 39
OPERATOR MARIANB
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. The ESPP discount was 15% of the average
market price and is considered 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 1.0 million shares remaining under that
authorization at December 31, 2016. 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
Employee share purchases
Aggregate cost
NOTE 6: Employee Benefit Plans
2016
0.6
$ 13
2015
0.5
$ 17
2014
0.4
$ 18
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.
In 2016 the Company eliminated the accumulation of postemployment benefits based on service for the U.S. separation plan.
As a result of this change, postemployment benefits for the U.S. will no longer be accounted for using actuarial models.
Pension and postemployment benefit costs for the years ended December 31 were as follows:
in millions
2015
Pension Postemployment Pension Postemployment Pension Postemployment
2016
2014
Service cost
Interest cost
Expected return on plan assets
Settlement charge
Amortization of actuarial loss (gain)
Amortization of prior service cost (credit)
Divestiture
Total costs
$ 8
3
(2)
1
1
–
(2)
$ 9
$ 6
1
–
–
1
2
(1)
$ 9
$ 8
3
(2)
1
2
–
–
$12
$6
1
–
–
–
–
–
$7
$ 9
4
(2)
1
2
(1)
–
$13
$ 4
1
–
–
(1)
–
–
$ 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 39 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 40
OPERATOR MARIANB
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:
in millions
Change in benefit obligation
Benefit obligation at January 1
Service cost
Interest cost
Plan participant contributions
Actuarial loss (gain)
Benefits paid
Currency translation adjustments
Divestiture
Benefit obligation at December 31
Change in plan assets
Fair value of plan assets at January 1
Actual return on plan assets
Company contributions
Benefits paid
Currency translation adjustments
Plan participant contribution
Fair value of plan assets at December 31
Funded status (underfunded)
Amounts Recognized in the Balance Sheet
Non-current assets
Current liabilities
Non-current liabilities
Net amounts recognized
Amounts Recognized in Accumulated Other Comprehensive Income
Unrecognized Net actuarial loss
Unrecognized Prior service (credit) cost
Total
Pension
2016
2015
Postemployment
2015
2016
$ 115
8
3
1
5
(8)
(2)
(2)
$120
$ 63
2
6
(8)
–
1
64
$ (56)
$
5
(1)
(60)
$ (56)
$ 21
(1)
$ 20
$130
8
3
1
(9)
(9)
(9)
–
$115
$ 67
1
5
(9)
(2)
1
63
$ (52)
$
5
(1)
(56)
$ (52)
$ 19
(1)
$ 18
$ 49
6
1
–
12
(20)
(1)
(5)
$ 42
$ –
–
–
–
–
–
–
$(42)
$ –
(6)
(36)
$(42)
$ 26
4
$ 30
$ 39
6
1
–
20
(15)
(2)
–
$ 49
$ –
–
–
–
–
–
–
$(49)
$ –
(16)
(33)
$(49)
$ 23
2
$ 25
The following table presents the accumulated pension benefit obligation at December 31:
in millions
Accumulated pension benefit obligation
2016
$110
2015
$106
The following table presents pension plans with accumulated benefit obligations in excess of plan assets at December 31:
in millions
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2016
$60
$53
–
2015
$ 58
$ 50
–
TERADATA 2016 › › › 40 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 41
OPERATOR MARIANB
The following table presents the pre-tax net changes in projected benefit obligations recognized in other comprehensive income:
in millions
Actuarial loss (gain) arising during the year
Amortization of loss included in net periodic benefit cost
Prior service cost arising during the year
Recognition of loss due to settlement
Foreign currency exchange
Total recognized in other comprehensive income (loss)
Pension
2016
$ 5
(1)
–
(1)
(1)
$ 2
2015
$ (9)
(2)
–
(1)
–
$(12)
Postemployment
2015
$18
–
–
–
–
$18
2016
$ 4
(1)
2
–
–
$ 5
The following table presents the amounts in accumulated other comprehensive income expected to be recognized as
components of net periodic benefit cost during 2017:
in millions
Net loss to be recognized in other comprehensive income
Pension
Postemployment
$3
$(1)
The weighted-average rates and assumptions used to determine benefit obligations at December 31, and net periodic benefit
cost for the years ended December 31, were as follows:
Discount rate
Rate of compensation increase
Expected return on plan assets
Discount rate
Rate of compensation increase
Involuntary turnover rate
Pension Benefit
Obligations
2016
2.0%
3.3%
N/A
2015
2.4%
3.2%
N/A
Postemployment
Benefit
Obligations
2016
3.4%
3.0%
2.0%
2015
3.6%
3.0%
1.8%
Pension Benefit
Cost
2014
2015
2016
2.4% 2.3%
3.0%
3.2% 3.3% 3.2%
3.0% 3.3%
3.4%
Postemployment
Benefit Cost
2015
2016
3.4% 3.5%
3.0% 3.0%
2.0% 1.3%
2014
3.8%
3.7%
1.0%
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 2016 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 41 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 42
OPERATOR MARIANB
Plan Assets. The weighted-average asset allocations at December 31, by asset category are as follows:
Equity securities
Debt securities
Insurance (annuity) contracts
Real estate
Other
Total
Actual Asset
Allocation
As of December 31
2015
31%
43%
16%
6%
4%
100%
2016
32%
42%
17%
7%
2%
100%
Target
Asset
Allocation
31%
46%
17%
3%
3%
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, 2016.
Common/collective trust funds (which include money market funds, equity funds, bond funds, real-estate indirect investments,
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, 2016:
in millions
Money market funds
Equity funds
Bond/fixed-income funds
Real-estate indirect investments
Insurance contracts
Total Assets at fair value
December 31, 2016
$ 1
21
27
4
11
$64
Fair Value Measurements at Reporting Date Using
Significant
Other
Observable
Inputs
(Level 2)
$ 1
21
27
4
–
$53
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
$ –
–
–
–
–
$ –
Significant
Unobservable
Inputs
(Level 3)
$ –
–
–
–
11
$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, 2016:
in millions
Balance as of January 1, 2016
Purchases, sales and settlements, net
Balance as of December 31, 2016
Insurance
Contracts
$10
1
$11
TERADATA 2016 › › › 42 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 43
OPERATOR MARIANB
The following table sets forth by level, within the fair value hierarchy, the pension plan assets at fair value as of December 31, 2015:
in millions
Money market funds
Equity funds
Bond/fixed-income funds
Real-estate indirect investments
Insurance contracts
Total assets at fair value
December 31, 2015
$ 3
19
27
4
10
$63
Fair Value Measurements at Reporting Date Using
Significant
Other
Observable
Inputs
(Level 2)
$ 3
19
27
4
–
$53
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
$–
–
–
–
–
$–
Significant
Unobservable
Inputs
(Level 3)
$ –
–
–
–
10
$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, 2015:
in millions
Balance as of January 1, 2015
Purchases, sales and settlements, net
December 31, 2015
Insurance
Contracts
$11
(1)
$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 $5 million to the international pension plans, in 2017.
Estimated Future Benefit Payments. The Company expects to make the following benefit payments reflecting past and future
service from its pension and postemployment plans:
in millions
Year
2017
2018
2019
2020
2021
2022-2026
Pension
Benefits
Postemployment
Benefits
$ 5
$ 5
$ 4
$ 4
$ 5
$29
$ 6
$ 6
$ 6
$ 6
$ 6
$27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 43 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 44
OPERATOR MARIANB
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
U.S. savings plan
International subsidiary savings plans
2016
$19
$16
2015
$22
$18
2014
$23
$ 17
NOTE 7: Derivative Instruments and Hedging Activities
As a portion of the Company’s operations and revenue occur outside the U.S. 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
Contract notional amount of foreign exchange forward contracts
Net contract notional amount of foreign exchange forward contracts
2016
$156
$ 16
2015
$138
$ 25
The fair value derivative assets and liabilities recorded in other current assets and accrued liabilities at December 31, 2016 and
2015, 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, 2016, 2015 and 2014. 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.
TERADATA 2016 › › › 44 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
JOB TITLE Teradata 10-K
REVISION 2
REVISION 2
SERIAL <12345678>
SERIAL <12345678>
DATE Wednesday, March 12, 2014
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
JOB NUMBER 261647
TYPE
TYPE
PAGE NO. 45
PAGE NO. 45
OPERATOR MARIANB
OPERATOR MARIANB
NOTE 8: 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, 2016, 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
Beginning balance at January 1
Accruals for warranties issued
Settlements (in cash or kind)
Balance at end of period
2016
$ 6
8
(9)
$ 5
2015
$ 7
9
(10)
$ 6
2014
$ 8
16
(17)
$ 7
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, including the sale of the marketing applications business. The fair value of these indemnification
obligations is typically 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. As such, the Company has generally 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,
2016, for the following fiscal years were:
in millions
Operating lease obligations
Sublease rentals
Total committed operating leases less sublease rentals
Total
Amounts
$ 67
(2)
$ 65
2017
$22
(2)
$20
2018
$18
–
$18
2019
$10
–
$10
2020
$6
–
$6
2021 and
Thereafter
$11
–
$11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 45 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 46
OPERATOR MARIANB
The following table represents the Company’s actual rental expense and sublease rental income for the years ended
December 31:
in millions
Rental expense
Sublease rental income
The Company had no contingent rentals for these periods.
2016
$24
$ 3
2015
$26
$ 3
2014
$26
$ 3
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, 2016 and 2015.
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.
NOTE 9: 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 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.
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, 2016 and 2015, 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.
TERADATA 2016 › › › 46 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
JOB TITLE Teradata 10-K
REVISION 2
REVISION 2
SERIAL <12345678>
SERIAL <12345678>
DATE Wednesday, March 12, 2014
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
JOB NUMBER 261647
TYPE
TYPE
PAGE NO. 47
PAGE NO. 47
OPERATOR MARIANB
OPERATOR MARIANB
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
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
December 31, 2016
$473
$473
$ –
$ –
Fair Value Measurements at Reporting Date Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
December 31, 2015
$351
$351
$ –
$–
in millions
Assets
Money market funds
in millions
Assets
Money market funds
NOTE 10: Debt
Teradata’s $600 million term loan is payable in quarterly installments, which commenced on March 31, 2016, with all remaining
principal due in March 2020. The outstanding principal amount under the term loan agreement bears interest at a floating
rate based upon a negotiated base rate or a Eurodollar rate plus a margin based on the leverage ratio of the Company. As of
December 31, 2016, the term loan principal outstanding was $570 million and carried an interest rate of 2.1875%. Unamortized
deferred issuance costs of approximately $2 million are being amortized over the five-year term of the loan. The Company was
in compliance with all covenants as of December 31, 2016.
Annual contractual maturities of principal on term loan outstanding at December 31, 2016, are as follows:
in millions
2017
2018
2019
2020
Total
$ 30
60
67
413
$570
The following table presents interest expense on borrowings for the years ended December 31:
In millions
Interest expense
2016
$12
2015
$9
2014
$3
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. If measured at fair value in the financial statements, the Company’s
term loan would be classified as Level 2 in the fair value hierarchy.
Teradata’s revolving credit facility (the “Credit Facility”) has a borrowing capacity of $400 million. The Credit Facility ends
on March 25, 2020 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 47 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 48
OPERATOR MARIANB
ratio at the time of the borrowing. In the near term, Teradata would anticipate choosing a floating rate based on the London
Interbank Offered Rate (“LIBOR”). 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,
2016, the Company had no borrowings outstanding under the Credit Facility, leaving $400 million in additional borrowing
capacity available. Unamortized deferred costs on the original credit facility and new lender fees of approximately $1 million
are being amortized over the five-year term of the credit facility. The Company was in compliance with all covenants as of
December 31, 2016.
NOTE 11: Segment, Other Supplemental Information and Concentrations
Effective January 1, 2016, Teradata implemented an organizational change in which it decided to manage the Company’s
business under two geographic regions and the marketing applications division (prior to its completed sale on July 1, 2016);
which are also the Company’s operating segments: (1) Americas Data and Analytics (North America and Latin America);
(2) International Data and Analytics (Europe, Middle East, Africa, Asia Pacific and Japan); and (3) Marketing Applications.
Effective July 1, 2016, following the sale of the marketing applications business, Teradata is managing its business in two
operating segments: (1) Americas region (North America and Latin America); and (2) International region (Europe, Middle
East, Africa, Asia Pacific and Japan). For purposes of discussing results by segment, management excludes the impact of certain
items, consistent with the manner by which management evaluates the performance of each segment. This format is useful to
investors because it allows analysis and comparability of operating trends. It also includes the same information that is used
by Teradata management to make decisions regarding the segments and to assess financial performance. The chief operating
decision maker evaluates the performance of the segments based on revenue and multiple profit measures, including segment
gross margin. For management reporting purposes assets are not allocated to the segments. Prior period segment information
has been reclassified to conform to the current period presentation.
The following table presents segment revenue and segment gross margin for the Company for the years ended December 31:
2016
2015
2014
$ 1,334
919
2,253
69
2,322
754
425
1,179
33
1,212
14
2
8
1,188
664
212
80
$ 232
$1,470
907
2,377
153
2,530
824
429
1,253
63
1,316
13
19
8
1,276
765
228
478
$ (195)
$1,534
1,034
2,568
164
2,732
917
523
1,440
76
1,516
11
21
5
1,479
770
206
–
$ 503
in millions
Segment revenue
Americas Data and Analytics
International Data and Analytics
Total Data and Analytics
Marketing Applications
Total revenue
Segment gross margin
Americas Data and Analytics
International Data and Analytics
Total Data and Analytics
Marketing Application
Total segment gross margin
Stock-based compensation expense
Amortization of acquisition-related intangible assets
Acquisition, integration and reorganization-related costs
Total gross margin
Selling, general and administrative expenses
Research and development expenses
Impairment of goodwill, acquired intangibles and other assets
Total income (loss) from operations
TERADATA 2016 › › › 48 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
JOB TITLE Teradata 10-K
REVISION 2
REVISION 2
SERIAL <12345678>
SERIAL <12345678>
DATE Wednesday, March 12, 2014
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
JOB NUMBER 261647
TYPE
TYPE
PAGE NO. 49
PAGE NO. 49
OPERATOR MARIANB
OPERATOR MARIANB
The following table presents revenue by product and services revenue for the Company for the years ended December 31:
in millions
Products (software and hardware)(1)
Consulting services
Maintenance services
Total services
Total revenue
2016
$ 889
730
703
1,433
$2,322
2015
$1,057
780
693
1,473
$ 2,530
2014
$1,227
817
688
1,505
$ 2,732
(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 revenues by geographic area for the years ended December 31:
in millions
United States
Americas (excluding United States)
International
Total revenue
The following table presents property and equipment by geographic area at December 31:
in millions
United States
Americas (excluding United States)
International
Property and equipment, net
2016
$1,246
123
953
$2,322
2015
$1,428
125
977
$2,530
2016
$113
4
21
$138
2014
$1,458
161
1,113
$2,732
2015(1)
$129
3
23
$155
(1) 2015 amounts include property and equipment held for sale for $12 million.
Concentrations. No single customer accounts for more than 10% of the Company’s revenue. As of December 31, 2016, 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’s hardware components are assembled
exclusively by Flextronics. In addition, the Company utilizes preferred supplier relationships to better ensure more consistent
quality, cost and delivery. There can be no assurances that a disruption in production at Flextronics or at a supplier would not
have a material adverse effect on the Company’s operations.
NOTE 12: Business Combinations and Other Investment Activities
During 2016, the Company completed one immaterial business acquisition, which complements and strengthens the
Company’s global portfolio, and released hold-back amounts from several prior-year acquisitions for $16 million. The
Company also sold the marketing applications business on July 1, 2016 (see Note 15).
During 2015, the Company completed two immaterial business acquisitions for $17 million, which complemented and
strengthened the Company’s global portfolio. One of the acquisitions pertained to the marketing applications business, which
the Company exited on July 1, 2016 and therefore was classified in the assets held for sale (see Note 15) as of December 31, 2015.
In addition, the Company sold two equity investments for $85 million and recognized a gain of $57 million.
During 2014, the Company completed six immaterial business acquisitions and other equity investments for $69 million.
These acquisitions complemented and strengthened the Company’s global portfolio. Two of these acquisitions pertained to the
marketing applications business. In addition, the Company recognized a loss of $9 million in an equity investment arising from
an impairment of carrying value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 49 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 50
OPERATOR MARIANB
NOTE 13: Accumulated Other Comprehensive (Loss) Income
The following table provides information on changes in accumulated other comprehensive income (“AOCI”), net of tax, for the
years ended December 31:
in millions
Balance as of December 31, 2013
Other comprehensive income before reclassifications
Amounts reclassified from AOCI
Net other comprehensive income (loss)
Balance as of December 31, 2014
Other comprehensive income (loss) before reclassifications
Amounts reclassified from AOCI
Net other comprehensive loss
Balance as of December 31, 2015
Other comprehensive loss before reclassifications
Amounts reclassified from AOCI
Net other comprehensive loss
Balance as of December 31, 2016
Available-
for-sale
securities
$ –
31
–
31
$ 31
(5)
(26)
(31)
$ –
–
–
–
$ –
Defined
benefit
plans
$ (3)
(22)
1
(21)
$(24)
(8)
3
(5)
$(29)
(9)
3
(6)
$(35)
Foreign
currency
translation
adjustments
$ 36
(47)
–
(47)
$ (11)
(36)
–
(36)
$ (47)
(7)
–
(7)
$(54)
Total
AOCI
$ 33
(38)
1
(37)
$ (4)
(49)
(23)
(72)
$ (76)
(16)
3
(13)
$(89)
The following table presents the impact and respective location of AOCI reclassifications in the Consolidated Statements of
Income for the years ended December 31:
AOCI Component
Location
in millions
Defined benefit plans
Defined benefit plans
Defined benefit plans
Available for sale securities
Tax portion
Total reclassifications
Cost of services
Selling, general and administrative expenses
Research and development expenses
Other income
Income tax benefit (expense)
Net income (loss)
Further information on the Company’s defined benefit plans is included in Note 6.
2016
2015
2014
$(3)
(1)
–
–
1
$(3)
$ (2)
(1)
–
42
(16)
$ 23
$(1)
–
–
–
–
$(1)
NOTE 14: Reorganization and Business Transformation
In the fourth quarter of 2015 the Company announced a plan to realign Teradata’s business by reducing its cost structure
and focusing on the Company’s core data and analytics business. This business transformation included exiting the marketing
applications business (see Note 15), rationalizing costs, and modifying the Company’s go-to-market approach. The Company
incurred the following costs related to these actions for the years ended December 31:
in millions
Employee severance and other employee related cost
Asset write-downs
Professional services, legal and other associated cost
Total reorganization and business transformation cost
2016
$ 14
80
35
$129
2015
4
$
140
8
$152
The charges for asset write-downs were for non-cash write-downs of goodwill, acquired intangibles and other assets (see
Note 15). In addition to the costs and charges incurred above, the Company made cash payments of $20 million in 2016 and
$14 million in 2015 for employee severance that did not have a material impact on its Statement of Operations due to Teradata
TERADATA 2016 › › › 50 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
JOB TITLE Teradata 10-K
REVISION 2
REVISION 2
SERIAL <12345678>
SERIAL <12345678>
DATE Wednesday, March 12, 2014
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
JOB NUMBER 261647
TYPE
TYPE
PAGE NO. 51
PAGE NO. 51
OPERATOR MARIANB
OPERATOR MARIANB
accounting for its postemployment benefits under Accounting Standards Codification 712, Compensation - Nonretirement
Postemployment Benefits (“ASC 712”), which uses actuarial estimates and defers the immediate recognition of gains or losses.
Because the Company accounts for postemployment benefits under ASC 712, it did not record any liability associated with
ASC 420, Exit or Disposal Cost Obligations.
NOTE 15:
Impairment and Sale of the Marketing Applications Business
The Company reviews goodwill for impairment annually in the fourth quarter and whenever events or changes in
circumstances indicate it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
During the second quarter of 2015, the Company determined that indicators were present in the marketing applications
business which would suggest the fair value may have declined below the carrying value. The indicators were primarily lower
than forecasted revenue and profitability levels for 2015 and future periods. Based on our analysis, the implied fair value of
goodwill was substantially lower than the carrying value of goodwill. As a result, the Company recorded an impairment charge
of $340 million during the second quarter of 2015.
In the fourth quarter of 2015, the Company committed to a plan to exit the marketing applications business. The assets and
liabilities for this business, which were included within our marketing applications segment, were classified as held for sale in
the fourth quarter of 2015 and, therefore, the corresponding depreciation and amortization expense ceased at that time. The
divestiture was not presented as discontinued operations in our consolidated financial statements because it did not have a
major effect on the Company’s operations and financial results. The Company then performed a goodwill impairment analysis
of the business to be disposed of. As a result of this analysis, the Company recognized an additional goodwill impairment of
$97 million in the fourth quarter of 2015. In addition, acquired intangible assets were reduced by $41 million to adjust the
carrying amount of the disposal group’s net assets and liabilities down to its fair value less cost to sell.
On April 22, 2016, the Company entered into a definitive Asset Purchase Agreement (the “Purchase Agreement”) with TMA
Solutions, L.P., a Cayman Islands exempted limited partnership and affiliate of Marlin Equity Partners (“Marlin Equity”), to
sell the marketing applications business for $90 million in cash, subject to a post-closing adjustment for working capital, debt
and other metrics. We recognized an impairment of goodwill of $57 million and acquired intangibles of $19 million in the first
quarter of 2016 to adjust the carrying value of the net assets of our marketing applications business to fair value less cost to sell.
Prior to the sale that occurred on July 1, 2016, the marketing applications business that was classified as held for sale
generated revenue of $69 million and an operating loss of $112 million (which includes loss from impairment of goodwill
and acquired intangibles of $76 million) for the six months ended June 30, 2016. For the year ended December 31, 2015, the
marketing applications business generated revenue of $153 million and an operating loss of $561 million (which includes loss
from impairment of goodwill and acquired intangibles of $478 million). The net assets held for sale as of July 1, 2016 and
December 31, 2015 were as follows:
in millions
Current assets held for sale
Account receivable, net
Other current asset
Total current assets held for sale
Property and equipment, net
Goodwill
Acquired intangibles, net
Other assets
Total assets held for sale
Current liabilities held for sale
Account payable
Payroll and benefit liabilities
Deferred Revenue
Other current liabilities
Total current liabilities held for sale
Other liabilities
Total liabilities held for sale
At July 1, 2016
At December 31, 2015
$ 35
2
37
11
57
25
–
$130
$
4
4
28
2
38
5
$ 43
$ 41
3
44
12
113
44
1
$214
$ 10
12
30
5
57
1
$ 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS › › › 51 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 52
OPERATOR MARIANB
On July 1, 2016, pursuant to the Purchase Agreement, Teradata completed the sale of Teradata’s marketing applications business
to Marlin Equity. The purchase price received for this business was approximately $92 million in cash, subject to a post-closing
adjustment for working capital, debt and other metrics. Transaction costs and post-closing obligations were approximately
$5 million. Upon completion of the divestiture of the held for sale assets in July 2016, no material gain or loss was recognized as
the carrying value of the held for sale assets was equal to the purchase price received less costs to sell.
The Company recorded tax expense of approximately $22 million in the third quarter of 2016 related to this transaction. The
total tax expense, of which $14 million is cash taxes due to having zero tax basis in goodwill, was calculated based on the
amount of proceeds allocated to the various jurisdictions in accordance with the Purchase Agreement at the local statutory
rates. The tax expense reported in the third quarter of 2016 is subject to change pending finalization of the working capital,
transaction costs and other adjustments.
In connection with the closing of the transaction, the parties entered into a transition services agreement, pursuant to which
Teradata will provide certain services to Marlin Equity, including accounting, human resources, order processing and invoicing
and information technology services for a service period of up to 15 months after the closing of the transaction.
NOTE 16: Quarterly Information (unaudited)
in millions, except per share amounts
2016
Total revenues
Gross margin
Operating (loss) income
Net (loss) income
Net (loss) income per share:
Basic
Diluted
2015
Total revenues
Gross margin
Operating income (loss)
Net income (loss)
Net income (loss) per share:
Basic
Diluted
First(1)
Second(2)
Third
Fourth(3)
$ 545
$ 269
$ (42)
$ (46)
$(0.36)
$(0.36)
$ 582
$ 277
30
$
22
$
$ 0.15
$ 0.15
$ 599
$ 310
87
$
64
$
$ 0.49
$ 0.49
$ 623
$ 327
$ (262)
$ (265)
$(1.87)
$(1.87)
$ 552
$ 294
$ 89
$ 49
$0.38
$0.37
$ 606
$ 307
$ 77
$ 78
$ 0.56
$ 0.55
$ 626
$ 315
98
$
58
$
$ 0.45
$ 0.44
$ 719
$ 365
$ (40)
$ (49)
$(0.37)
$(0.37)
(1) Loss from operation for the three months ended March 31, 2016 includes goodwill and acquired intangibles impairment charges of $76 million for the
marketing application business.
(2) Loss from operations for the three months ended June 30, 2015 includes a goodwill impairment charge of $340 million for the marketing applications business.
(3) Loss from operations for the three months ended December 31, 2015 includes goodwill and acquired intangibles impairment charges of $138 million for
the marketing applications business.
TERADATA 2016 › › › 52 › › › NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOB TITLE Teradata 10-K
JOB TITLE Teradata 10-K
REVISION 2
REVISION 2
SERIAL <12345678>
SERIAL <12345678>
DATE Wednesday, March 12, 2014
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
JOB NUMBER 261647
TYPE
TYPE
PAGE NO. 53
PAGE NO. 53
OPERATOR MARIANB
OPERATOR MARIANB
COMMON STOCK INFORMATION
Teradata common stock trades on the New York Stock Exchange under the symbol “TDC.” There were approximately 59,638
registered holders of Teradata common stock as of February 9, 2017. The following table presents the high and low closing per
share prices of Teradata common stock traded on the New York Stock Exchange during the calendar quarter indicated.
Common Stock Closing Market Price
2016
Fourth quarter
Third quarter
Second quarter
First quarter
2015
Fourth quarter
Third quarter
Second quarter
First quarter
High
$30.63
$32.62
$29.05
$27.48
$ 30.63
$ 37.11
$ 45.89
$ 46.98
Low
$26.42
$24.78
$24.40
$22.60
$ 25.58
$ 27.70
$ 36.95
$ 41.63
Teradata has not paid cash dividends and does not anticipate the payment of cash dividends to holders of Teradata common
stock in the immediate future. The declaration of dividends in the future would be subject to the discretion of Teradata’s Board
of Directors.
TOTAL RETURN TO SHAREHOLDERS
The following graph compares the relative performance of Teradata stock, the Standard & Poor’s (“S&P”) 500 Stock Index and
the S&P Information Technology Index. This graph illustrates the five-year performance period from December 31, 2011 to
December 31, 2016, assuming an initial investment of $100 and reinvestment of all dividends, if any.
$250
$200
$150
$100
$50
$0
1
1
/
1
3
/
2
1
2
1
/
1
3
/
2
1
3
1
/
1
3
/
2
1
4
1
/
1
3
/
2
1
5
1
/
1
3
/
2
1
6
1
/
1
3
/
2
1
Teradata Corporation
S&P 500 Index
S&P Information Technology Index
Company/Index
Teradata Corporation
S&P 500 Index
S&P Information Technology Index
As of December 31,
2011
$100
$100
$100
2012
$128
$116
$115
2013
$ 94
$154
$147
2014
$ 90
$175
$177
2015
$ 54
$177
$188
2016
$ 56
$198
$214
COMMON STOCK INFORMATION AND TOTAL RETURN TO SHAREHOLDERS › › › 53 › › › TERADATA 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 54
OPERATOR MARIANB
SELECTED FINANCIAL DATA
For the Years Ended December 31
in millions, except per share and employee amounts
Revenue
Income (loss) from operations
Other (expense) income, net
Income tax expense
Net income (loss)
Net income (loss) per common share
Basic
Diluted
At December 31
Total assets
Debt, including current portion
Total stockholders’ equity
Number of employees
2016(1)
2015(2)
2014(3)
2013(4)
2012(5)
$2,322
$ 232
(11)
$
96
$
$ 125
$ 0.96
$ 0.95
2016
$ 2,413
$ 570
$ 971
10,100
$2,530
$ (195)
$
51
70
$
$ (214)
$2,732
$ 503
$
(9)
$ 127
$ 367
$ (1.53)
$ (1.53)
$ 2.36
$ 2.33
2015
$ 2,527
$ 780
$ 849
11,300
2014
$ 3,132
$ 468
$ 1,707
11,500
$2,692
$ 532
$ (24)
$ 131
$ 377
$ 2.31
$ 2.27
2013
$ 3,096
$ 274
$ 1,857
10,800
$ 2,665
$ 580
$
(2)
$ 159
$ 419
$ 2.49
$ 2.44
2012
$ 3,066
$ 289
$ 1,779
10,200
(1) Included 65 million ($41 million after-tax) for acquisition-related transaction, integration and reorganization costs and expenses, $9 million
($6 million after-tax) for amortization of acquired intangible assets, $76 million ($70 million after-tax) for impairment of goodwill and acquired
intangibles, $4 million ($3 million after tax) for impairment of other assets, and $8 million of additional tax expense from a change in U.S. tax law.
(2) Includes $31 million ($20 million after-tax) for acquisition-related transaction, integration and reorganization costs and expenses, $39 million
($25 million after-tax) for amortization of acquired intangible assets, $478 million ($457 million after-tax) for impairment of goodwill and acquired
intangibles, offset by $57 million ($35 million after-tax) gain on equity investments.
(3) Includes $22 million ($14 million after-tax) for acquisition-related transaction, integration and reorganization costs and expenses, $47 million
($31 million after-tax) for amortization of acquired intangible assets, and $8 million ($6 million after-tax) for expenses related to a net loss on equity
investments.
(4) Includes $17 million ($11 million after-tax) for acquisition-related transaction, integration and reorganization costs and expenses, $43 million
($28 million after-tax) for amortization of acquired intangible assets, $22 million ($14 million after-tax) for expenses related to a net loss on equity
investments, offset by a $4 million tax credit due to the 2012 U.S. R&D tax credit not being enacted until 2013
(5) Includes $17 million ($13 million after-tax) for acquisition-related transaction, integration and reorganization costs and expenses, $36 million
($23 million after-tax) for amortization of acquired intangible assets, and $4 million of additional tax expense due to the 2012 U.S. R&D tax credit
not being enacted until 2013.
TERADATA 2016 › › › 54 › › › SELECTED FINANCIAL DATA
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 55
OPERATOR MARIANB
Leadership
Victor L. Lund
President and
Chief Executive Officer
Mikael Bisgaard-Bohr
Executive Vice President and
Chief Business Development Officer
Stephen A. Brobst
Chief Technology Officer
John D. Dinning
Executive Vice President and
Chief Business Officer
Daniel L. Harrington
Executive Vice President,
Consulting and Support Services
Peter Mikkelsen
Executive Vice President,
International
Laura K. Nyquist
General Counsel and Secretary
Oliver G. Ratzesberger
Executive Vice President and
Chief Product Officer
Stephen M. Scheppmann
Executive Vice President and
Chief Financial Officer
Karen S. Thomas
Executive Vice President,
Americas Sales and Services
Suzanne C. Zoumaras
Executive Vice President and
Chief Human Resource Officer
Corporate InformatIon
Annual Meeting of Stockholders
Stockholders are invited to attend
Teradata’s Annual Meeting of
Stockholders at 8 a.m. on Wednesday,
April 19, 2017, to be held at the:
Waldorf Astoria Chicago
11 East Walton Street
Chicago, IL 60611
Stockholder Account Inquiries
Information regarding “registered”
stockholder accounts is available
from Teradata’s stock transfer agent,
Computershare Shareholder Services, at
www.computershare.com/investor or by
contacting:
Teradata Corporation
c/o Computershare Shareholder Services
P.O. Box 30170
College Station, TX 77842-3176
E-mail: web.queries@computershare.com
Phone:
888-730-8825 (U.S.)
781-575-4592 (International)
TDD for the hearing impaired:
800-952-9245 (U.S.)
781-575-4592 (International)
Company Information
Information regarding Teradata’s filings
with the U.S. Securities and Exchange
Commission (“SEC”), annual report on
Form 10-K, quarterly reports, and other
financial information can be accessed at
www.teradata.com/investor, or obtained
without charge by contacting:
Teradata Investor Relations
10000 Innovation Drive
Dayton, OH 45342
Phone: 937-242-4878
E-mail: investor.relations@teradata.com
CEO and CFO Certifications
In 2016, the company’s CEO provided the
New York Stock Exchange (“NYSE”)
with the annual CEO certification
regarding Teradata’s compliance with the
NYSE’s corporate governance listing
standards. In addition, the company’s CEO
and CFO filed with the SEC all required
certifications regarding the quality
of Teradata’s public disclosures in its
fiscal 2016 periodic reports.
Board of Directors
James M. Ringler
Chairman of the Board
Teradata Corporation
Lisa R. Bacus
Executive Vice President and
Global Chief Marketing Officer
Cigna Corporation
Timothy C.K. Chou
Retired President
Oracle on Demand, a division of
Oracle Corporation
Nancy E. Cooper
Retired Executive Vice President
and Chief Financial Officer
CA Technologies
Cary T. Fu
Co-Founder
Benchmark Electronics, Inc.
Daniel R. Fishback
Former President and
Chief Executive Officer
DemandTec, Inc.
Michael P. Gianoni
President and
Chief Executive Officer
Blackbaud, Inc.
David E. Kepler
Retired Executive Vice President,
Chief Sustainability Officer, and
Chief Information Officer
The Dow Chemical Company
Victor L. Lund
President and
Chief Executive Officer
Teradata Corporation
John G. Schwarz
Founder and
Chief Executive Officer
Visier Inc.
William S. Stavropoulos
Chairman Emeritus
The Dow Chemical Company
Corporate InformatIon › › › 55 › › › teraData 2016
JOB TITLE Teradata 10-K
REVISION 2
SERIAL <12345678>
DATE Wednesday, March 12, 2014
JOB NUMBER 261647
TYPE
PAGE NO. 56
OPERATOR MARIANB
teraData CorporatIon
10000 Innovation Drive
Dayton, OH 45342
www.teradata.com
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