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the fourth quarter of 2012. Changes in other income (expense), net were primarily due to lower foreign exchange
losses in 2012 resulting from the periodic re-measurement of our foreign currency balances and an increase in
interest income driven by higher invested cash balances.
2011 Compared to 2010. Interest and other income (expense), net in 2011 increased $37 million, or 154%,
compared to 2010. Interest expense increased by $20 million, driven by an increase in fees related to our credit
facility as described in "--Liquidity and Capital Resources," and the payments related to an increased volume of
property and equipment financed by capital leases. The change in other income (expense), net was primarily due
to $29 million in foreign exchange related losses in 2011. Foreign exchange losses in 2011 stemmed from the
periodic re-measurement of our intercompany Euro balances. Foreign currency balances were immaterial in
2010. These expenses were partially offset by an increase in interest income driven by larger invested cash
balances.
Provision for income taxes
Year Ended December 31,
2011 to 2012
% Change
2010 to 2011
% Change
2012
2011
2010
(dollars in millions)
Provision for income taxes . . . . . . . . . . . . . . . . .
$441
$695
$402
(37)%
73%
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . .
89%
41%
40%
2012 Compared to 2011. Our provision for income taxes in 2012 decreased $254 million, or 37%, compared
to 2011, primarily due to a decrease in pre-tax income. Our effective tax rate increased primarily due to the
impact of non-deductible share-based compensation and the losses arising outside the United States in
jurisdictions where we do not receive a tax benefit. Our effective tax rate in 2012 was also higher due to the
expiration of the federal tax credit for research and development activities.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted, which includes a reinstatement
of the federal research and development credit for the tax year ended December 31, 2012. We estimate that our
tax credit for 2012 would have been approximately $80 million to $120 million, which we will record as a
discrete benefit in the first quarter of 2013.
2011 Compared to 2010. Our provision for income taxes in 2011 increased $293 million, or 73%, compared
to 2010 primarily due to an increase in pre-tax income. Our effective tax rate increased primarily due to losses
arising outside the United States in jurisdictions where we do not receive a tax benefit and the impact of non-
deductible share-based compensation expense during the year.
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