Exhibit 99.1
Contact: Dave Farmer
508-293-7206
farmer_dave@emc.com
EMC REPORTS THIRD-QUARTER
2009 FINANCIAL RESULTS;
REVENUE AHEAD OF COMPANY EXPECTATIONS
Highlights
| | • | | Third-quarter consolidated revenue up 8% sequentially; Ahead of prior company outlook of 4% to 5% sequential growth |
| | • | | Third-quarter GAAP net income up 45% sequentially; Non-GAAP net income up 34% sequentially |
| | • | | Third-quarter GAAP diluted EPS up 40% sequentially; Non-GAAP diluted EPS up 28% sequentially |
| | • | | Strong sequential increase in gross and operating margins |
| | • | | Year-to-date operating cash flow–$2.3 billion; Year-to-date free cash flow–$1.8 billion |
HOPKINTON, Mass. – October 22, 2009 – EMC Corporation (NYSE:EMC), the world leader in information infrastructure solutions, today reported third-quarter 2009 consolidated revenue that exceeded company expectations for the quarter. The company achieved third-quarter revenue of $3.52 billion, an increase of 8% compared with the second quarter of 2009. The results exceeded previous company outlook of 4% to 5% sequential revenue growth. Third-quarter GAAP net income attributable to EMC reached $298.2 million, an increase of 45% sequentially and GAAP diluted earnings per share were $0.14, an increase of 40% sequentially. Third-quarter 2009 non-GAAP1 net income attributable to EMC increased 34% sequentially, reaching $480.3 million or $0.23 per diluted share, an increase of 28% sequentially.
Third-quarter consolidated revenue of $3.52 billion declined 5% compared with the year-ago period. Third-quarter 2009 GAAP net income attributable to EMC compares with $393.4 million or $0.19 per diluted share for the third quarter of 2008 and third-quarter 2009 non-GAAP net income attributable to EMC compares with $510 million or $0.24 per diluted share achieved in the third quarter of 2008.2
In the third quarter, EMC generated operating cash flow of $888 million and free cash flow of $745 million and ended the quarter with cash and investments of $8.4 billion. Year to date, EMC has generated operating cash flow of $2.3 billion and free cash flow of $1.8 billion.
Joe Tucci, EMC Chairman and Chief Executive Officer, said, “I am very pleased with EMC’s solid financial performance in a challenging economic climate. While remaining closer than ever to customers, we made additional progress optimizing our cost structure, expanded our product portfolio, strengthened our partner ecosystem and positioned EMC to capitalize on four of the higher-growth, multi-billion-dollar market opportunities around fully virtualized data centers, cloud computing, virtualized desktops and clients, and next-generation backup and recovery. I am extremely proud of the EMC and VMware people around the world who achieved these results.”
Commenting further, Tucci said, “Customers are signaling more comfort spending their IT budgets, which gives EMC confidence in our ability to perform well and achieve our full-year 2009 targets. We are strategically aligned with the major technology shifts and well positioned to play a pivotal role in the IT industry for the next decade.”
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “EMC achieved solid sequential revenue and profit growth while continuing to generate strong free cash flow. Combined with a continued disciplined focus on cost control, this helped EMC deliver improved gross and operating margins, highlighting the resilience of our financial model and our crisp execution. We remain committed to driving growth and operating leverage through our business, while continuing to invest in strategic growth opportunities to further extend EMC’s market leadership.”
Third-Quarter Business Highlights
EMC’s Information Infrastructure business for the third quarter – comprising product and services revenue from Information Storage, RSA Security, and Content Management and Archiving – reached $3.03 billion, an increase of 8% sequentially. The Information Infrastructure business was driven by strong sequential growth of the market-leading EMC Symmetrix high-end storage systems including strong adoption of the new EMC Symmetrix V-Max line, EMC next-generation backup and recovery solutions and EMC Celerra unified storage systems. Further third-quarter highlights included customer demand for EMC’s RSA information security solutions, consumer and small business-focused Iomega products, content management and archiving solutions, and EMC’s broad consulting and professional services portfolio.
VMware (NYSE: VMW), which is majority-owned by EMC, contributed third-quarter revenue of $489 million.
EMC consolidated third-quarter revenue from the United States reached $1.90 billion, up 13% sequentially, and represented 54% of total third-quarter revenue. Revenue from EMC’s operations outside of the United States reached $1.62 billion, up 3% sequentially, and represented 46% of total third-quarter revenue.
Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof. These statements supersede all prior statements regarding business outlook and certain items impacting 2009 set forth in prior EMC news releases.
All dollar amounts and percentages set forth below should be considered to be approximations.
| | • | | Consolidated EMC revenues are expected to be $4.0 billion for the fourth quarter of 2009 and $13.9 billion for 2009. |
| | • | | Consolidated GAAP diluted earnings per share are expected to be $0.21 for the fourth quarter of 2009 and $0.55 for 2009. |
| | • | | Consolidated non-GAAP diluted earnings per share, excluding the impact of restructuring charges, stock-based compensation expense and intangible asset amortization, are expected to be $0.30 for the fourth quarter of 2009. |
| | • | | Consolidated non-GAAP diluted earnings per share, excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and gains recognized from holdings in Data Domain and SpringSource common stock, are expected to be $0.87 for 2009. |
| | • | | Consolidated restructuring charges, stock-based compensation expense and intangible asset amortization are expected to be $0.01, $0.06 and $0.02 per diluted share, respectively, for the fourth quarter of 2009. |
| | • | | Consolidated restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization are expected to be $0.04, $0.21 and $0.08 per diluted share, respectively, for 2009. Offsetting these charges is a $0.01 per diluted share gain recognized from holdings in Data Domain and SpringSource common stock. |
| | • | | The consolidated GAAP income tax rate is expected to be 13% for 2009. Excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and gains recognized from holdings in Data Domain and SpringSource common stock, which collectively impact the tax rate by 6%, the consolidated non-GAAP income tax rate is expected to be 19% for 2009. |
| | • | | The weighted average outstanding diluted shares are expected to be 2.12 billion for the fourth quarter of 2009. |
| | • | | In 2010, cost reduction actions are expected to generate savings of $500 million compared with 2008. |
Supporting Resources
| | • | | EMC will host its 2009 third-quarter earnings conference call today at 8:30 a.m. ET, which will be available on EMC’s web site athttp://www.emc.com/about/investor-relations/index.htm |
| | • | | Additional information regarding EMC’s financials, as well as a webcast of the conference call, will be available at 8:30 a.m. ET athttp://www.emc.com/about/investor-relations/index.htm |
| | • | | Visithttp://ir.vmware.com for more information about VMware’s third-quarter financial results. |
# # #
¹Items excluded from the non-GAAP results are gains on Data Domain and SpringSource common stock, restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization for the third quarter of 2009 and restructuring charge, special income tax benefit, stock-based compensation expense and intangible asset amortization for the third quarter of 2008. See attached schedules for reconciliation of GAAP to non-GAAP.
2The results for 2008 have been adjusted to give effect to the adoption of authoritative guidance relating to non-controlling interests and the accounting for convertible debt instruments.
EMC, Celerra, Symmetrix and V-Max are registered trademarks of EMC Corporation. RSA is a registered trademark of RSA Security Inc. VMware is a registered trademark of VMware, Inc. Iomega is a registered trademark of Iomega Corporation. Data Domain is a registered trademark of Data Domain, Inc. SpringSource is a registered trademark of SpringSource, Inc. All other trademarks used are the property of their respective owners.
Forward-Looking Statements
This release contains “forward-looking statements” as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) our ability to protect our proprietary technology; (iv) risks associated with managing the growth of our business, including risks associated with acquisitions and investments and the challenges and costs of integration, restructuring and achieving anticipated synergies; (v) fluctuations in VMware, Inc.’s operating results and risks associated with trading of VMware stock; (vi) competitive factors, including but not limited to pricing pressures and new product introductions; (vii) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (viii) component and product quality and availability; (ix) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (x) insufficient, excess or obsolete inventory; (xi) war or acts of terrorism; (xii) the ability to attract and retain highly qualified employees; (xiii) fluctuating currency exchange rates; (xiv) litigation that we may be involved in; and (xv) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this release.
Use of Non-GAAP Financial Measures
This release contains non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC’s performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC’s financial performance or liquidity prepared in accordance with GAAP. EMC’s non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures in this release.
Where specified in the accompanying schedules for various periods entitled “Reconciliation of GAAP to Non-GAAP,” certain items noted on each such specific schedule (including, where noted, amounts relating to gains on Data Domain and SpringSource common stock, restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization, special income tax benefit and restructuring charge) are excluded from the non-GAAP financial measures.
EMC’s management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above-listed items from its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by EMC’s management in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons. EMC’s management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC’s current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results.
This release also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.
EMC CORPORATION
Consolidated Income Statements
(in thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30,
2009 | | | September 30,
2008 | | | September 30,
2009 | | | September 30,
2008 | |
| | | | | | (As Adjusted) | | | | | | (As Adjusted) | |
Revenues: | | | | | | | | | | | | | | | | |
Product sales | | $ | 2,200,581 | | | $ | 2,492,941 | | | $ | 6,174,971 | | | $ | 7,295,022 | |
Services | | | 1,317,049 | | | | 1,222,651 | | | | 3,750,773 | | | | 3,564,503 | |
| | | | | | | | | | | | | | | | |
| | | 3,517,630 | | | | 3,715,592 | | | | 9,925,744 | | | | 10,859,525 | |
| | | | |
Cost and expenses: | | | | | | | | | | | | | | | | |
Cost of product sales | | | 1,107,400 | | | | 1,156,063 | | | | 3,177,935 | | | | 3,350,199 | |
Cost of services | | | 470,013 | | | | 500,809 | | | | 1,380,559 | | | | 1,512,641 | |
Research and development | | | 422,092 | | | | 410,793 | | | | 1,203,266 | | | | 1,286,809 | |
Selling, general and administrative | | | 1,177,775 | | | | 1,172,579 | | | | 3,253,752 | | | | 3,390,468 | |
In-process research and development | | | — | | | | — | | | | — | | | | 79,204 | |
Restructuring and acquisition-related charges | | | 34,781 | | | | 4,398 | | | | 83,587 | | | | 4,041 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating income | | | 305,569 | | | | 470,950 | | | | 826,645 | | | | 1,236,163 | |
| | | | |
Investment income | | | 38,106 | | | | 56,717 | | | | 109,293 | | | | 192,587 | |
Interest expense | | | (46,227 | ) | | | (44,501 | ) | | | (135,928 | ) | | | (131,614 | ) |
Other income (expense), net | | | 28,022 | | | | (13,313 | ) | | | 17,281 | | | | (20,887 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Income before tax | | | 325,470 | | | | 469,853 | | | | 817,291 | | | | 1,276,249 | |
Income tax provision | | | 20,602 | | | | 63,309 | | | | 96,462 | | | | 244,060 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income | | | 304,868 | | | | 406,544 | | | | 720,829 | | | | 1,032,189 | |
Less: Net income attributable to the non-controlling interests in VMware, Inc. | | | (6,688 | ) | | | (13,133 | ) | | | (23,348 | ) | | | (27,007 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net income attributable to EMC Corporation | | $ | 298,180 | | | $ | 393,411 | | | $ | 697,481 | | | $ | 1,005,182 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income per weighted average share, basic: | | | | | | | | | | | | | | | | |
common shareholders: | | $ | 0.15 | | | $ | 0.19 | | | $ | 0.35 | | | $ | 0.49 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income per weighted average share, diluted: | | | | | | | | | | | | | | | | |
common shareholders: | | $ | 0.14 | | | $ | 0.19 | | | $ | 0.34 | | | $ | 0.48 | |
| | | | | | | | | | | | | | | | |
| | | | |
Weighted average shares, basic | | | 2,027,347 | | | | 2,048,594 | | | | 2,015,920 | | | | 2,060,952 | |
| | | | |
Weighted average shares, diluted | | | 2,065,951 | | | | 2,077,474 | | | | 2,038,984 | | | | 2,095,116 | |
Reconciliation of GAAP to Non-GAAP
For the Three Months Ended September 30, 2009
(in thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Revenue | | | Cost of
Revenue | | | Research
and
Development | | | Selling,
General and
Administrative | | | Restructuring
and
Acquisition-
Related
Charges | | | Operating
Income | | Other
Income
(Expense),
net | | | Income
Before
Taxes | | | Income
Tax
Provision | | | Net
Income | | | Net Income
Attributable
to VMware | | | Net Income
Attributable
to EMC | | | Net
Income
per
Weighted
Average
Share,
Basic | | | Net
Income
per
Weighted
Average
Share,
Diluted | |
| EMC Consolidated GAAP | | $ | 3,517,630 | | | $ | 1,577,413 | | | $ | 422,092 | | | $ | 1,177,775 | | | $ | 34,781 | | | $ | 305,569 | | $ | 19,901 | | | $ | 325,470 | | | $ | 20,602 | | | $ | 304,868 | | | $ | (6,688 | ) | | $ | 298,180 | | | $ | 0.147 | | | $ | 0.144 | |
| | | | | | | | | | | | | | |
| Gain on Data Domain and SpringSource common stock | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | (25,822 | ) | | | (25,822 | ) | | | — | | | | (25,822 | ) | | | 1,025 | | | | (24,797 | ) | | $ | (0.012 | ) | | $ | (0.012 | ) |
| | | | | | | | | | | | | | |
| Restructuring and acquisition-related charges | | | — | | | | (12,485 | ) | | | — | | | | — | | | | (34,781 | ) | | | 47,266 | | | — | | | | 47,266 | | | | 14,724 | | | | 32,542 | | | | (135 | ) | | | 32,407 | | | $ | 0.016 | | | $ | 0.016 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Consolidated Adjusted (1) | | | 3,517,630 | | | | 1,564,928 | | | | 422,092 | | | | 1,177,775 | | | | — | | | | 352,835 | | | (5,921 | ) | | | 346,914 | | | | 35,326 | | | | 311,588 | | | | (5,798 | ) | | | 305,790 | | | $ | 0.151 | | | $ | 0.148 | |
| | | | | | | | | | | | | | |
| Stock-based compensation expense | | | — | | | | (27,106 | ) | | | (62,557 | ) | | | (99,915 | ) | | | — | | | | 189,578 | | | — | | | | 189,578 | | | | 47,078 | | | | 142,500 | | | | (9,181 | ) | | | 133,319 | | | $ | 0.066 | | | $ | 0.065 | |
| | | | | | | | | | | | | | |
| Intangible asset amortization | | | — | | | | (34,121 | ) | | | (3,261 | ) | | | (25,903 | ) | | | — | | | | 63,285 | | | — | | | | 63,285 | | | | 21,651 | | | | 41,634 | | | | (405 | ) | | | 41,229 | | | $ | 0.020 | | | $ | 0.020 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Consolidated Non-GAAP (2) | | $ | 3,517,630 | | | $ | 1,503,701 | | | $ | 356,274 | | | $ | 1,051,957 | | | $ | — | | | $ | 605,698 | | $ | (5,921 | ) | | $ | 599,777 | | | $ | 104,055 | | | $ | 495,722 | | | $ | (15,384 | ) | | $ | 480,338 | | | $ | 0.237 | | | $ | 0.232 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Information Infrastructure GAAP | | $ | 3,028,725 | | | $ | 1,481,485 | | | $ | 289,715 | | | $ | 944,637 | | | $ | 34,008 | | | $ | 278,880 | | $ | 14,334 | | | $ | 293,214 | | | $ | 26,897 | | | $ | 266,317 | | | $ | — | | | $ | 266,317 | | | $ | 0.131 | | | $ | 0.129 | |
| | | | | | | | | | | | | | |
| Gain on Data Domain common stock | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | (19,963 | ) | | | (19,963 | ) | | | — | | | | (19,963 | ) | | | — | | | | (19,963 | ) | | $ | (0.010 | ) | | $ | (0.010 | ) |
| | | | | | | | | | | | | | |
| Restructuring and acquisition-related charges | | | — | | | | (12,485 | ) | | | — | | | | — | | | | (34,008 | ) | | | 46,493 | | | — | | | | 46,493 | | | | 14,724 | | | | 31,769 | | | | — | | | | 31,769 | | | $ | 0.016 | | | $ | 0.015 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Information Infrastructure Adjusted (3) | | | 3,028,725 | | | | 1,469,000 | | | | 289,715 | | | | 944,637 | | | | — | | | | 325,373 | | | (5,629 | ) | | | 319,744 | | | | 41,621 | | | | 278,123 | | | | — | | | | 278,123 | | | $ | 0.137 | | | $ | 0.135 | |
| | | | | | | | | | | | | | |
| Stock-based compensation expense | | | — | | | | (17,608 | ) | | | (28,307 | ) | | | (76,146 | ) | | | — | | | | 122,061 | | | — | | | | 122,061 | | | | 32,023 | | | | 90,038 | | | | — | | | | 90,038 | | | $ | 0.044 | | | $ | 0.044 | |
| | | | | | | | | | | | | | |
| Intangible asset amortization | | | — | | | | (31,228 | ) | | | (3,221 | ) | | | (25,389 | ) | | | — | | | | 59,838 | | | — | | | | 59,838 | | | | 20,518 | | | | 39,320 | | | | — | | | | 39,320 | | | $ | 0.019 | | | $ | 0.019 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Information Infrastructure Non-GAAP (4) | | $ | 3,028,725 | | | $ | 1,420,164 | | | $ | 258,187 | | | $ | 843,102 | | | $ | — | | | $ | 507,272 | | $ | (5,629 | ) | | $ | 501,643 | | | $ | 94,162 | | | $ | 407,481 | | | $ | — | | | $ | 407,481 | | | $ | 0.201 | | | $ | 0.197 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| VMware standalone GAAP | | $ | 489,751 | | | $ | 96,073 | | | $ | 133,509 | | | $ | 236,933 | | | $ | — | | | $ | 23,236 | | $ | 8,638 | | | $ | 31,874 | | | $ | (6,345 | ) | | $ | 38,219 | | | $ | — | | | $ | 38,219 | | | $ | 0.019 | | | $ | 0.018 | |
| | | | | | | | | | | | | | |
| GAAP adjustments and eliminations | | | (846 | ) | | | (145 | ) | | | (1,132 | ) | | | (3,795 | ) | | | 773 | | | | 3,453 | | | (3,071 | ) | | | 382 | | | | 50 | | | | 332 | | | | (6,688 | ) | | | (6,356 | ) | | $ | (0.003 | ) | | $ | (0.003 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| VMware within EMC GAAP (5) | | | 488,905 | | | | 95,928 | | | | 132,377 | | | | 233,138 | | | | 773 | | | | 26,689 | | | 5,567 | | | | 32,256 | | | | (6,295 | ) | | | 38,551 | | | | (6,688 | ) | | | 31,863 | | | $ | 0.016 | | | $ | 0.015 | |
| | | | | | | | | | | | | | |
| Gain on SpringSource common stock | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | (5,859 | ) | | | (5,859 | ) | | | — | | | | (5,859 | ) | | | 1,025 | | | | (4,834 | ) | | $ | (0.002 | ) | | $ | (0.002 | ) |
| | | | | | | | | | | | | | |
| Acquisition-related charges | | | — | | | | — | | | | — | | | | — | | | | (773 | ) | | | 773 | | | — | | | | 773 | | | | — | | | | 773 | | | | (135 | ) | | | 638 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| VMware within EMC Adjusted (6) | | | 488,905 | | | | 95,928 | | | | 132,377 | | | | 233,138 | | | | — | | | | 27,462 | | | (292 | ) | | | 27,170 | | | | (6,295 | ) | | | 33,465 | | | | (5,798 | ) | | | 27,667 | | | $ | 0.014 | | | $ | 0.013 | |
| | | | | | | | | | | | | | |
| Stock-based compensation expense | | | — | | | | (9,498 | ) | | | (34,250 | ) | | | (23,769 | ) | | | — | | | | 67,517 | | | — | | | | 67,517 | | | | 15,055 | | | | 52,462 | | | | (9,181 | ) | | | 43,281 | | | $ | 0.021 | | | $ | 0.021 | |
| | | | | | | | | | | | | | |
| Intangible asset amortization | | | — | | | | (2,893 | ) | | | (40 | ) | | | (514 | ) | | | — | | | | 3,447 | | | — | | | | 3,447 | | | | 1,133 | | | | 2,314 | | | | (405 | ) | | | 1,909 | | | $ | 0.001 | | | $ | 0.001 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| VMware within EMC Non-GAAP (7) | | $ | 488,905 | | | $ | 83,537 | | | $ | 98,087 | | | $ | 208,855 | | | $ | — | | | $ | 98,426 | | $ | (292 | ) | | $ | 98,134 | | | $ | 9,893 | | | $ | 88,241 | | | $ | (15,384 | ) | | $ | 72,857 | | | $ | 0.036 | | | $ | 0.035 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wtd. Average Share O/S | | | | 2,027,347 | | | | 2,065,951 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of GAAP to Non-GAAP
For the Three Months Ended September 30, 2009
(in thousands, except per share amounts)
Unaudited
(Continued)
The following costs are included in EMC Consolidated Non-GAAP and EMC Information Infrastructure Non-GAAP results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Revenue | | Cost of
Revenue | | Research
and
Development | | Selling,
General and
Administrative | | Restructuring
and
Acquisition-
Related
Charges | | Operating
Income | | | Other
Income
(Expense),
net | | | Income
Before
Taxes | | | Income
Tax
Provision | | | Net
Income | | | Net Income
Attributable
to VMware | | Net Income
Attributable
to EMC | | | Net
Income
per
Weighted
Average
Share,
Basic | | | Net
Income
per
Weighted
Average
Share,
Diluted | |
| Non-cash interest expense on convertible debt (8) | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | $ | (27,483 | ) | | $ | (27,483 | ) | | $ | (9,153 | ) | | $ | (18,330 | ) | | $ | — | | $ | (18,330 | ) | | $ | (0.009 | ) | | $ | (0.009 | ) |
| Transition costs (9) | | | — | | | 789 | | | 3,159 | | | 12,825 | | | — | | | (16,773 | ) | | | — | | | | (16,773 | ) | | | (4,943 | ) | | | (11,830 | ) | | | — | | $ | (11,830 | ) | | $ | (0.006 | ) | | $ | (0.006 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | — | | $ | 789 | | $ | 3,159 | | $ | 12,825 | | $ | — | | $ | (16,773 | ) | | $ | (27,483 | ) | | $ | (44,256 | ) | | $ | (14,096 | ) | | $ | (30,160 | ) | | $ | — | | $ | (30,160 | ) | | $ | (0.015 | ) | | $ | (0.015 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Represents EMC Consolidated GAAP excluding gain on Data Domain and SpringSource common stock and restructuring and acquisition-related charges. |
| (2) | Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible asset amortization. |
| (3) | Represents EMC Information Infrastructure GAAP excluding gain on Data Domain common stock and restructuring and acquisition-related charges. |
| (4) | Represents EMC Information Infrastructure Adjusted excluding stock-based compensation expense and intangible asset amortization. |
| (5) | Represents VMware within EMC GAAP. |
| (6) | Represents VMware within EMC GAAP excluding gain on SpringSource common stock and acquisition-related charges. |
| (7) | Represents VMware within EMC excluding stock-based compensation expense and intangible asset amortization. |
| (8) | Represents the non-cash interest charge associated with our convertible senior notes due 2011 and 2013 totaling $3,450 million. |
| (9) | Represents incremental costs incurred to transform our current cost structure to a more streamlined cost structure. |
Note: schedule may not add due to rounding
Reconciliation of GAAP to Non-GAAP
For the Three Months Ended September 30, 2008
(in thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Revenue | | | Cost of
Revenue | | | Research
and
Development | | | Selling,
General and
Administrative | | | Restructuring
Charge | | | Operating
Income | | Other
Income,
net | | | Income
Before
Taxes | | Income
Tax
Provision | | Net
Income | | | Net Income
Attributable
to VMware | | | Net Income
Attributable
to EMC | | | Net
Income
per
Weighted
Average
Share,
Basic | | | Net
Income
per
Weighted
Average
Share,
Diluted | |
| EMC Consolidated GAAP | | $ | 3,715,592 | | | $ | 1,656,872 | | | $ | 410,793 | | | $ | 1,172,579 | | | $ | 4,398 | | | $ | 470,950 | | $ | (1,097 | ) | | $ | 469,853 | | $ | 63,309 | | $ | 406,544 | | | $ | (13,133 | ) | | $ | 393,411 | | | $ | 0.192 | | | $ | 0.189 | |
| | | | | | | | | | | | | | |
| Restructuring charge | | | — | | | | — | | | | — | | | | — | | | | (4,398 | ) | | | 4,398 | | | — | | | | 4,398 | | | 2,990 | | | 1,408 | | | | — | | | | 1,408 | | | $ | 0.001 | | | $ | 0.001 | |
| | | | | | | | | | | | | | |
| Special income tax benefit | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | | | — | | | 17,803 | | | (17,803 | ) | | | — | | | | (17,803 | ) | | $ | (0.009 | ) | | $ | (0.009 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Consolidated Adjusted (1) | | | 3,715,592 | | | | 1,656,872 | | | | 410,793 | | | | 1,172,579 | | | | — | | | | 475,348 | | | (1,097 | ) | | | 474,251 | | | 84,102 | | | 390,149 | | | | (13,133 | ) | | | 377,016 | | | $ | 0.184 | | | $ | 0.181 | |
| | | | | | | | | | | | | | |
| Stock-based compensation expense | | | — | | | | (21,052 | ) | | | (36,734 | ) | | | (60,475 | ) | | | — | | | | 118,261 | | | — | | | | 118,261 | | | 27,630 | | | 90,631 | | | | (4,437 | ) | | | 86,194 | | | $ | 0.042 | | | $ | 0.041 | |
| | | | | | | | | | | | | | |
| Intangible asset amortization | | | — | | | | (40,737 | ) | | | (2,804 | ) | | | (28,428 | ) | | | — | | | | 71,969 | | | — | | | | 71,969 | | | 24,725 | | | 47,244 | | | | (500 | ) | | | 46,744 | | | $ | 0.023 | | | $ | 0.023 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Consolidated Non-GAAP (2) | | $ | 3,715,592 | | | $ | 1,595,083 | | | $ | 371,255 | | | $ | 1,083,676 | | | $ | — | | | $ | 665,578 | | $ | (1,097 | ) | | $ | 664,481 | | $ | 136,457 | | $ | 528,024 | | | $ | (18,070 | ) | | $ | 509,954 | | | $ | 0.249 | | | $ | 0.245 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Information Infrastructure GAAP | | $ | 3,243,732 | | | $ | 1,582,588 | | | $ | 326,204 | | | $ | 963,428 | | | $ | 4,398 | | | $ | 367,114 | | $ | (2,342 | ) | | $ | 364,772 | | $ | 42,785 | | $ | 321,987 | | | $ | — | | | $ | 321,987 | | | $ | 0.157 | | | $ | 0.155 | |
| | | | | | | | | | | | | | |
| Restructuring charge | | | — | | | | — | | | | — | | | | — | | | | (4,398 | ) | | | 4,398 | | | — | | | | 4,398 | | | 2,990 | | | 1,408 | | | | — | | | | 1,408 | | | $ | 0.001 | | | $ | 0.001 | |
| | | | | | | | | | | | | | |
| Special income tax benefit | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | | | — | | | 17,803 | | | (17,803 | ) | | | — | | | | (17,803 | ) | | $ | (0.009 | ) | | $ | (0.009 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Information Infrastructure Adjusted (3) | | | 3,243,732 | | | | 1,582,588 | | | | 326,204 | | | | 963,428 | | | | — | | | | 371,512 | | | (2,342 | ) | | | 369,170 | | | 63,578 | | | 305,592 | | | | — | | | | 305,592 | | | $ | 0.149 | | | $ | 0.147 | |
| | | | | | | | | | | | | | |
| Stock-based compensation expense | | | — | | | | (15,251 | ) | | | (21,184 | ) | | | (44,414 | ) | | | — | | | | 80,849 | | | — | | | | 80,849 | | | 18,371 | | | 62,478 | | | | — | | | | 62,478 | | | $ | 0.030 | | | $ | 0.030 | |
| | | | | | | | | | | | | | |
| Intangible asset amortization | | | — | | | | (37,208 | ) | | | (2,804 | ) | | | (26,882 | ) | | | — | | | | 66,894 | | | — | | | | 66,894 | | | 22,823 | | | 44,071 | | | | — | | | | 44,071 | | | $ | 0.022 | | | $ | 0.021 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| EMC Information Infrastructure Non-GAAP (4) | | $ | 3,243,732 | | | $ | 1,530,129 | | | $ | 302,216 | | | $ | 892,132 | | | $ | — | | | $ | 519,255 | | $ | (2,342 | ) | | $ | 516,913 | | $ | 104,772 | | $ | 412,141 | | | $ | — | | | $ | 412,141 | | | $ | 0.201 | | | $ | 0.198 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| VMware standalone GAAP | | $ | 472,121 | | | $ | 74,454 | | | $ | 85,315 | | | $ | 211,332 | | | $ | — | | | $ | 101,020 | | $ | 2,510 | | | $ | 103,530 | | $ | 20,242 | | $ | 83,288 | | | $ | — | | | $ | 83,288 | | | $ | 0.041 | | | $ | 0.040 | |
| | | | | | | | | | | | | | |
| GAAP adjustments and eliminations | | | (261 | ) | | | (170 | ) | | | (726 | ) | | | (2,181 | ) | | | — | | | | 2,816 | | | (1,265 | ) | | | 1,551 | | | 282 | | | 1,269 | | | | (13,133 | ) | | | (11,864 | ) | | $ | (0.006 | ) | | $ | (0.006 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| VMware within EMC GAAP (5) | | | 471,860 | | | | 74,284 | | | | 84,589 | | | | 209,151 | | | | — | | | | 103,836 | | | 1,245 | | | | 105,081 | | | 20,524 | | | 84,557 | | | | (13,133 | ) | | | 71,424 | | | $ | 0.035 | | | $ | 0.034 | |
| | | | | | | | | | | | | | |
| Stock-based compensation expense | | | — | | | | (5,801 | ) | | | (15,550 | ) | | | (16,061 | ) | | | — | | | | 37,412 | | | — | | | | 37,412 | | | 9,259 | | | 28,153 | | | | (4,437 | ) | | | 23,716 | | | $ | 0.012 | | | $ | 0.011 | |
| | | | | | | | | | | | | | |
| Intangible asset amortization | | | — | | | | (3,529 | ) | | | — | | | | (1,546 | ) | | | — | | | | 5,075 | | | — | | | | 5,075 | | | 1,902 | | | 3,173 | | | | (500 | ) | | | 2,673 | | | $ | 0.001 | | | $ | 0.001 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| VMware within EMC Non-GAAP (6) | | $ | 471,860 | | | $ | 64,954 | | | $ | 69,039 | | | $ | 191,544 | | | $ | — | | | $ | 146,323 | | $ | 1,245 | | | $ | 147,568 | | $ | 31,685 | | $ | 115,883 | | | $ | (18,070 | ) | | $ | 97,813 | | | $ | 0.048 | | | $ | 0.047 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wtd. Average Share O/S | | | | 2,048,594 | | | | 2,077,474 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of GAAP to Non-GAAP
For the Three Months Ended September 30, 2008
(in thousands, except per share amounts)
Unaudited
(Continued)
The following costs are included in EMC Consolidated Non-GAAP and EMC Information Infrastructure Non-GAAP results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Revenue | | Cost of
Revenue | | Research
and
Development | | Selling,
General and
Administrative | | Restructuring
Charge | | Operating
Income | | Other
Income,
net | | | Income
Before
Taxes | | | Income
Tax
Provision | | | Net
Income | | | Net Income
Attributable
to VMware | | Net Income
Attributable
to EMC | | | Net
Income
per
Weighted
Average
Share,
Basic | | | Net
Income
per
Weighted
Average
Share,
Diluted | |
Non-cash interest expense on convertible debt (7) | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | (26,009 | ) | | $ | (26,009 | ) | | $ | (8,143 | ) | | $ | (17,866 | ) | | $ | — | | $ | (17,866 | ) | | $ | (0.009 | ) | | $ | (0.009 | ) |
| (1) | Represents EMC Consolidated GAAP excluding restructuring charge and special income tax benefit. |
| (2) | Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible asset amortization. |
| (3) | Represents EMC Information Infrastructure GAAP excluding restructuring charge and special income tax benefit. |
| (4) | Represents EMC Information Infrastructure Adjusted excluding stock-based compensation expense and intangible asset amortization. |
| (5) | Represents VMware within EMC GAAP. |
| (6) | Represents VMware within EMC excluding stock-based compensation expense and intangible asset amortization. |
| (7) | Represents the non-cash interest charge associated with our convertible senior notes due 2011 and 2013 totaling $3,450 million. |
Note: schedule may not add due to rounding
EMC CORPORATION
Consolidated Balance Sheets
(in thousands, except per share amounts)
Unaudited
| | | | | | | | |
| | | September 30,
2009 | | | December 31,
2008 | |
| | | | | | (As Adjusted) | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 5,518,359 | | | $ | 5,843,685 | |
Short-term investments | | | 617,535 | | | | 963,292 | |
Accounts and notes receivable, less allowance for doubtful accounts of $50,500 and $48,080 | | | 1,864,121 | | | | 2,252,640 | |
Inventories | | | 810,925 | | | | 842,803 | |
Deferred income taxes | | | 486,463 | | | | 477,101 | |
Other current assets | | | 331,162 | | | | 285,508 | |
| | | | | | | | |
Total current assets | | | 9,628,565 | | | | 10,665,029 | |
Long-term investments | | | 2,291,672 | | | | 2,370,493 | |
Property, plant and equipment, net | | | 2,218,632 | | | | 2,223,007 | |
Intangible assets, net | | | 1,245,447 | | | | 795,616 | |
Goodwill, net | | | 9,222,725 | | | | 7,046,799 | |
Other assets, net | | | 944,703 | | | | 773,631 | |
| | | | | | | | |
Total assets | | $ | 25,551,744 | | | $ | 23,874,575 | |
| | | | | | | | |
| | |
LIABILITIES & SHAREHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 819,204 | | | $ | 757,405 | |
Accrued expenses | | | 1,864,892 | | | | 1,901,884 | |
Securities lending payable | | | — | | | | 412,321 | |
Income taxes payable | | | 13,378 | | | | 136,802 | |
Deferred revenue | | | 2,220,602 | | | | 2,010,024 | |
| | | | | | | | |
Total current liabilities | | | 4,918,076 | | | | 5,218,436 | |
Income taxes payable | | | 241,506 | | | | 255,182 | |
Deferred revenue | | | 1,257,876 | | | | 1,182,360 | |
Deferred income taxes | | | 582,633 | | | | 389,787 | |
Long-term convertible debt | | | 3,072,505 | | | | 2,991,943 | |
Other liabilities | | | 212,880 | | | | 180,917 | |
| | | | | | | | |
Total Liabilities | | | 10,285,476 | | | | 10,218,625 | |
| | |
Commitments and contingencies | | | | | | | | |
EMC Corporation’s Shareholders’ equity: | | | | | | | | |
Preferred stock, par value $.01; authorized 25,000 shares, none outstanding | | | — | | | | — | |
Common stock, par value $.01; authorized 6,000,000 shares; issued 2,039,822 and 2,012,938 shares | | | 20,398 | | | | 20,129 | |
Additional paid-in capital | | | 3,536,678 | | | | 2,817,054 | |
Retained earnings | | | 11,368,693 | | | | 10,671,212 | |
Accumulated other comprehensive loss | | | (118,369 | ) | | | (179,952 | ) |
| | | | | | | | |
Total EMC Corporation’s shareholders’ equity | | | 14,807,400 | | | | 13,328,443 | |
Non-controlling interest in VMware, Inc. | | | 458,868 | | | | 327,507 | |
| | | | | | | | |
Total shareholders’ equity | | | 15,266,268 | | | | 13,655,950 | |
| | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 25,551,744 | | | $ | 23,874,575 | |
| | | | | | | | |
EMC CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
| | | | | | | | |
| | | Nine Months Ended | |
| | | September 30,
2009 | | | September 30,
2008 | |
| | | | | | (As Adjusted) | |
Cash flows from operating activities: | | | | | | | | |
Cash received from customers | | $ | 10,600,727 | | | $ | 11,437,259 | |
Cash paid to suppliers and employees | | | (8,098,216 | ) | | | (8,842,798 | ) |
Dividends and interest received | | | 95,024 | | | | 192,651 | |
Interest paid | | | (39,550 | ) | | | (55,270 | ) |
Income taxes paid | | | (232,257 | ) | | | (233,500 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 2,325,728 | | | | 2,498,342 | |
| | | | | | | | |
| | |
Cash flows from investing activities: | | | | | | | | |
Additions to property, plant and equipment | | | (277,589 | ) | | | (490,066 | ) |
Capitalized software development costs | | | (222,432 | ) | | | (209,441 | ) |
Purchases of short and long-term available for sale securities | | | (4,224,872 | ) | | | (2,200,508 | ) |
Sales and maturities of short and long-term available for sale securities | | | 4,880,173 | | | | 2,766,087 | |
Acquisitions, net of cash acquired | | | (2,664,141 | ) | | | (678,218 | ) |
Increase in strategic and other related investments | | | (152,667 | ) | | | (4,410 | ) |
| | | | | | | | |
Net cash used in investing activities | | | (2,661,528 | ) | | | (816,556 | ) |
| | | | | | | | |
| | |
Cash flows from financing activities: | | | | | | | | |
Issuance of EMC’s common stock from the exercise of stock options | | | 226,276 | | | | 176,774 | |
Issuance of VMware’s common stock from the exercise of stock options | | | 166,523 | | | | 167,417 | |
Repayments on securities lending | | | (412,321 | ) | | | — | |
Repurchase of EMC’s common stock | | | — | | | | (1,119,986 | ) |
Excess tax benefits from stock-based compensation | | | 25,355 | | | | 96,046 | |
Payment of short and long-term obligations | | | (19,836 | ) | | | (5,678 | ) |
Proceeds from short and long-term obligations | | | 1,615 | | | | 2,125 | |
| | | | | | | | |
Net cash used in financing activities | | | (12,388 | ) | | | (683,302 | ) |
| | | | | | | | |
| | |
Effect of exchange rate changes on cash | | | 22,862 | | | | (6,995 | ) |
| | | | | | | | |
| | |
Net (decrease) increase in cash and cash equivalents | | | (325,326 | ) | | | 991,489 | |
Cash and cash equivalents at beginning of period | | | 5,843,685 | | | | 4,482,211 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 5,518,359 | | | $ | 5,473,700 | |
| | | | | | | | |
| | |
Reconciliation of net income to net cash provided by operating activities: | | | | | | | | |
Net income | | $ | 720,829 | | | $ | 1,032,189 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 791,043 | | | | 785,871 | |
Non-cash interest expense on convertible debt | | | 80,562 | | | | 76,286 | |
Non-cash restructuring and in-process research and development | | | 22,138 | | | | 80,705 | |
Stock-based compensation expense | | | 420,947 | | | | 357,668 | |
Increase in provision for doubtful accounts | | | 15,160 | | | | 16,615 | |
Deferred income taxes, net | | | 8,101 | | | | 588 | |
Excess tax benefits from stock-based compensation | | | (25,355 | ) | | | (96,046 | ) |
Gain on Data Domain and SpringSource common stock | | | (25,822 | ) | | | — | |
Other | | | (13,567 | ) | | | (4,135 | ) |
Changes in assets and liabilities, net of acquisitions: | | | | | | | | |
Accounts and notes receivable | | | 455,116 | | | | 270,942 | |
Inventories | | | (61,265 | ) | | | 4,039 | |
Other assets | | | (35,483 | ) | | | (68,180 | ) |
Accounts payable | | | 66,868 | | | | 14,096 | |
Accrued expenses | | | (175,982 | ) | | | (286,691 | ) |
Income taxes payable | | | (143,896 | ) | | | 4,326 | |
Deferred revenue | | | 204,707 | | | | 290,177 | |
Other liabilities | | | 21,627 | | | | 19,892 | |
| | | | | | | | |
Net cash provided by operating activities | | $ | 2,325,728 | | | $ | 2,498,342 | |
| | | | | | | | |
EMC Corporation
Reconciliation of Cash Flow from Operations to Free Cash Flow
(in thousands)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30,
2009 | | | September 30,
2008 | | | September 30,
2009 | | | September 30,
2008 | |
EMC Consolidated | | | | | | | | | | | | | | | | |
| | | | |
Cash flow from Operations | | $ | 887,649 | | | $ | 961,473 | | | $ | 2,325,728 | | | $ | 2,498,342 | |
| | | | |
Capital Expenditures | | | (72,077 | ) | | | (163,617 | ) | | | (277,589 | ) | | | (490,066 | ) |
| | | | |
Capitalized Software | | | (70,658 | ) | | | (90,593 | ) | | | (222,432 | ) | | | (209,441 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Free Cash Flow | | $ | 744,914 | | | $ | 707,263 | | | $ | 1,825,707 | | | $ | 1,798,835 | |
| | | | | | | | | | | | | | | | |
| | | | |
VMware within EMC | | | | | | | | | | | | | | | | |
| | | | |
Cash flow from Operations | | $ | 196,516 | | | $ | 238,544 | | | $ | 662,810 | | | $ | 471,301 | |
| | | | |
Capital Expenditures | | | (18,455 | ) | | | (32,042 | ) | | | (66,104 | ) | | | (118,385 | ) |
| | | | |
Capitalized Software | | | (8,844 | ) | | | (37,961 | ) | | | (53,524 | ) | | | (53,895 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Free Cash Flow | | $ | 169,217 | | | $ | 168,541 | | | $ | 543,182 | | | $ | 299,021 | |
| | | | | | | | | | | | | | | | |
| | | | |
EMC Information Infrastructure | | | | | | | | | | | | | | | | |
| | | | |
Cash flow from Operations | | $ | 691,133 | | | $ | 722,929 | | | $ | 1,662,918 | | | $ | 2,027,041 | |
| | | | |
Capital Expenditures | | | (53,622 | ) | | | (131,575 | ) | | | (211,485 | ) | | | (371,681 | ) |
| | | | |
Capitalized Software | | | (61,814 | ) | | | (52,632 | ) | | | (168,908 | ) | | | (155,546 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Free Cash Flow | | $ | 575,697 | | | $ | 538,722 | | | $ | 1,282,525 | | | $ | 1,499,814 | |
| | | | | | | | | | | | | | | | |
Free cash flow for the three and nine months ended September 30, 2009 includes intercompany tax payments of $8.0 million and $93.4 million, respectively, from EMC Information Infrastructure to VMware within EMC.
EMC Corporation
Reconciliation of GAAP to Non-GAAP
(in thousands)
Unaudited
| | | | | | | | | | |
| | | Income Before
Tax | | | Tax
Provision | | Tax
Rate | |
| | | |
EMC Consolidated GAAP | | $ | 325,470 | | | $ | 20,602 | | 6 | % |
Stock-based compensation expense | | | 189,578 | | | | 47,078 | | 25 | % |
Intangible asset amortization | | | 63,285 | | | | 21,651 | | 34 | % |
Restructuring and acquisition-related charges | | | 47,266 | | | | 14,724 | | 31 | % |
Gain on Data Domain and SpringSource common stock | | | (25,822 | ) | | | — | | 0 | % |
| | | | | | | | | | |
EMC Consolidated Non-GAAP | | $ | 599,777 | | | $ | 104,055 | | 17 | % |
| | | | | | | | | | |
EMC Corporation
Reconciliation of EMC Information Infrastructure Gross Margin GAAP to Non-GAAP
(in thousands)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q1 ‘07 | | | Q2 ‘07 | | | Q3 ‘07 | | | Q4 ‘07 | | | Q1 ‘08 | | | Q2 ‘08 | | | Q3 ‘08 | | | Q4 ‘08 | | | Q1 ‘09 | | | Q2 ‘09 | | | Q3 ‘09 | |
EMC Information Infrastructure Gross Margin GAAP | | $ | 1,356,449 | | | $ | 1,452,198 | | | $ | 1,526,004 | | | $ | 1,774,212 | | | $ | 1,548,285 | | | $ | 1,656,440 | | | $ | 1,661,144 | | | $ | 1,783,145 | | | $ | 1,287,536 | | | $ | 1,369,676 | | | $ | 1,547,240 | |
Less: Stock-based compensation expense | | | 13,028 | | | | 12,456 | | | | 12,652 | | | | 10,557 | | | | 12,136 | | | | 12,486 | | | | 15,251 | | | | 16,665 | | | | 14,233 | | | | 15,224 | | | | 17,608 | |
Intangible asset amortization | | | 23,792 | | | | 23,970 | | | | 25,003 | | | | 26,011 | | | | 35,888 | | | | 36,974 | | | | 37,208 | | | | 37,253 | | | | 27,853 | | | | 27,778 | | | | 31,228 | |
Acquisition-related charges | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 12,485 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
EMC Information Infrastructure Gross Margin Non-GAAP | | $ | 1,393,269 | | | $ | 1,488,624 | | | $ | 1,563,659 | | | $ | 1,810,780 | | | $ | 1,596,309 | | | $ | 1,705,900 | | | $ | 1,713,603 | | | $ | 1,837,063 | | | $ | 1,329,622 | | | $ | 1,412,678 | | | $ | 1,608,561 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Revenues | | $ | 2,718,987 | | | $ | 2,826,575 | | | $ | 2,945,463 | | | $ | 3,418,367 | | | $ | 3,031,889 | | | $ | 3,221,299 | | | $ | 3,243,732 | | | $ | 3,502,307 | | | $ | 2,680,361 | | | $ | 2,802,239 | | | $ | 3,028,725 | |
% GAAP | | | 49.9 | % | | | 51.4 | % | | | 51.8 | % | | | 51.9 | % | | | 51.1 | % | | | 51.4 | % | | | 51.2 | % | | | 50.9 | % | | | 48.0 | % | | | 48.9 | % | | | 51.1 | % |
% Non-GAAP | | | 51.2 | % | | | 52.7 | % | | | 53.1 | % | | | 53.0 | % | | | 52.7 | % | | | 53.0 | % | | | 52.8 | % | | | 52.5 | % | | | 49.6 | % | | | 50.4 | % | | | 53.1 | % |
EMC Corporation
Reconciliation of EMC Information Infrastructure Operating Margin GAAP to Non-GAAP
(in thousands)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q1 ‘07 | | | Q2 ‘07 | | | Q3 ‘07 | | | Q4 ‘07 | | | Q1 ‘08 | | | Q2 ‘08 | | | Q3 ‘08 | | | Q4 ‘08 | | | Q1 ‘09 | | | Q2 ‘09 | | | Q3 ‘09 | |
EMC Information Infrastructure Operating Margin GAAP | | $ | 308,372 | | | $ | 346,018 | | | $ | 391,816 | | | $ | 479,218 | | | $ | 263,370 | | | $ | 391,523 | | | $ | 367,114 | | | $ | 228,453 | | | $ | 170,216 | | | $ | 220,545 | | | $ | 278,880 | |
Less: Restructuring and acquisition-related charges | | | — | | | | — | | | | — | | | | 34,901 | | | | 79,204 | | | | — | | | | 4,398 | | | | 240,694 | | | | 15,572 | | | | 33,234 | | | | 46,493 | |
Stock-based compensation expense | | | 71,703 | | | | 71,233 | | | | 68,896 | | | | 61,627 | | | | 74,460 | | | | 75,424 | | | | 80,849 | | | | 94,824 | | | | 60,949 | | | | 67,156 | | | | 122,061 | |
Intangible asset amortization | | | 41,958 | | | | 42,308 | | | | 44,280 | | | | 50,510 | | | | 62,149 | | | | 65,038 | | | | 66,894 | | | | 68,263 | | | | 55,879 | | | | 56,143 | | | | 59,838 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
EMC Information Infrastructure Operating Margin Non-GAAP | | $ | 422,033 | | | $ | 459,559 | | | $ | 504,992 | | | $ | 626,256 | | | $ | 479,183 | | | $ | 531,985 | | | $ | 519,255 | | | $ | 632,234 | | | $ | 302,616 | | | $ | 377,078 | | | $ | 507,272 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Revenues | | $ | 2,718,987 | | | $ | 2,826,575 | | | $ | 2,945,463 | | | $ | 3,418,367 | | | $ | 3,031,889 | | | $ | 3,221,299 | | | $ | 3,243,732 | | | $ | 3,502,307 | | | $ | 2,680,361 | | | $ | 2,802,239 | | | $ | 3,028,725 | |
% GAAP | | | 11.3 | % | | | 12.2 | % | | | 13.3 | % | | | 14.0 | % | | | 8.7 | % | | | 12.2 | % | | | 11.3 | % | | | 6.5 | % | | | 6.4 | % | | | 7.9 | % | | | 9.2 | % |
% Non-GAAP | | | 15.5 | % | | | 16.3 | % | | | 17.1 | % | | | 18.3 | % | | | 15.8 | % | | | 16.5 | % | | | 16.0 | % | | | 18.1 | % | | | 11.3 | % | | | 13.5 | % | | | 16.7 | % |
EMC Corporation
Supplemental
Revenue Analysis
(in thousands)
Unaudited
Supplemental Revenue Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | Q1 2008 | | | Q2 2008 | | | Q3 2008 | | | Q4 2008 | | | YTD 2008 | | | Q1 2009 | | | Q2 2009 | | | Q3 2009 | |
Storage: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product Revenue | | $ | 1,903,639 | | | $ | 2,018,026 | | | $ | 2,056,498 | | | $ | 2,285,366 | | | $ | 8,263,529 | | | $ | 1,572,408 | | | $ | 1,632,309 | | | $ | 1,818,230 | |
Services Revenue | | | 808,190 | | | | 855,221 | | | | 851,825 | | | | 853,539 | | | | 3,368,775 | | | | 790,932 | | | | 842,558 | | | | 880,807 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total Storage Revenue | | $ | 2,711,829 | | | $ | 2,873,247 | | | $ | 2,908,323 | | | $ | 3,138,905 | | | $ | 11,632,304 | | | $ | 2,363,340 | | | $ | 2,474,867 | | | $ | 2,699,037 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Content Management and Archiving: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product Revenue | | $ | 61,128 | | | $ | 73,415 | | | $ | 62,576 | | | $ | 81,054 | | | $ | 278,173 | | | $ | 58,710 | | | $ | 60,792 | | | $ | 58,209 | |
Services Revenue | | | 124,075 | | | | 130,591 | | | | 125,493 | | | | 127,316 | | | | 507,475 | | | | 115,605 | | | | 119,445 | | | | 118,979 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total Content Management and Archiving Revenue | | $ | 185,203 | | | $ | 204,006 | | | $ | 188,069 | | | $ | 208,370 | | | $ | 785,648 | | | $ | 174,315 | | | $ | 180,237 | | | $ | 177,188 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Security: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product Revenue | | $ | 81,683 | | | $ | 89,067 | | | $ | 88,779 | | | $ | 95,534 | | | $ | 355,063 | | | $ | 80,671 | | | $ | 84,080 | | | $ | 84,080 | |
Services Revenue | | | 53,174 | | | | 54,979 | | | | 58,561 | | | | 59,498 | | | | 226,212 | | | | 62,035 | | | | 63,055 | | | | 68,420 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total Security Revenue | | $ | 134,857 | | | $ | 144,046 | | | $ | 147,340 | | | $ | 155,032 | | | $ | 581,275 | | | $ | 142,706 | | | $ | 147,135 | | | $ | 152,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
EMC Information Infrastructure: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product Revenue | | $ | 2,046,450 | | | $ | 2,180,508 | | | $ | 2,207,853 | | | $ | 2,461,954 | | | $ | 8,896,765 | | | $ | 1,711,789 | | | $ | 1,777,181 | | | $ | 1,960,519 | |
Services Revenue | | | 985,439 | | | | 1,040,791 | | | | 1,035,879 | | | | 1,040,353 | | | | 4,102,462 | | | | 968,572 | | | | 1,025,058 | | | | 1,068,206 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total EMC Information Infrastructure Revenue | | $ | 3,031,889 | | | $ | 3,221,299 | | | $ | 3,243,732 | | | $ | 3,502,307 | | | $ | 12,999,227 | | | $ | 2,680,361 | | | $ | 2,802,239 | | | $ | 3,028,725 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
VMware: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product Revenue | | $ | 293,980 | | | $ | 281,143 | | | $ | 285,088 | | | $ | 314,840 | | | $ | 1,175,051 | | | $ | 257,331 | | | $ | 228,089 | | | $ | 240,062 | |
Services Revenue | | | 144,190 | | | | 171,432 | | | | 186,772 | | | | 199,491 | | | | 701,885 | | | | 213,070 | | | | 227,024 | | | | 248,843 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total VMware Revenue | | $ | 438,170 | | | $ | 452,575 | | | $ | 471,860 | | | $ | 514,331 | | | $ | 1,876,936 | | | $ | 470,401 | | | $ | 455,113 | | | $ | 488,905 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Consolidated Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product Revenue | | $ | 2,340,430 | | | $ | 2,461,651 | | | $ | 2,492,941 | | | $ | 2,776,794 | | | $ | 10,071,816 | | | $ | 1,969,120 | | | $ | 2,005,270 | | | $ | 2,200,581 | |
Services Revenue | | | 1,129,629 | | | | 1,212,223 | | | | 1,222,651 | | | | 1,239,844 | | | | 4,804,347 | | | | 1,181,642 | | | | 1,252,082 | | | | 1,317,049 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Total Consolidated Revenues | | $ | 3,470,059 | | | $ | 3,673,874 | | | $ | 3,715,592 | | | $ | 4,016,638 | | | $ | 14,876,163 | | | $ | 3,150,762 | | | $ | 3,257,352 | | | $ | 3,517,630 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year | | | 2.3 | % | | | 2.7 | % | | | 1.2 | % | | | (2.3 | )% | | | 0.8 | % | | | (3.5 | )% | | | (3.7 | )% | | | (1.3 | )% |
