SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For The Quarter Ended: June 30, 2003 | Commission File Number 1-9853 |
EMC CORPORATION
(Exact name of registrant as specified in its charter)
| Massachusetts | 04-2680009 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
176 South Street
Hopkinton, Massachusetts 01748
(Address of principal executive offices, including zip code)
(508) 435-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| YES x | NO ¨ |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| YES x | NO ¨ |
The number of shares of common stock, par value $.01 per share, of the registrant outstanding as of June 30, 2003 was 2,193,846,899.
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| PART I—FINANCIAL INFORMATION |
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| Item 1. Financial Statements (unaudited) |
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| Consolidated Balance Sheets at June 30, 2003 and December 31, 2002 |
3 | |
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Consolidated Statements of Operations for the Three and Six Months Ended |
4 | |
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Consolidated Statements of Cash Flows for the Six Months Ended |
5 | |
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| 7 | ||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of |
17 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
33 | |
| 33 | ||
| PART II—OTHER INFORMATION |
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| 34 | ||
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| 37 | ||
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
EMC CORPORATION
(in thousands, except per share amounts)
| June 30, 2003 |
December 31, 2002 |
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| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 1,904,558 | $ | 1,686,598 | ||||
| Short-term investments |
969,477 | 864,743 | ||||||
| Accounts and notes receivable, less allowance for doubtful accounts of $47,211 and $50,551 |
734,255 | 881,325 | ||||||
| Inventories |
523,148 | 437,805 | ||||||
| Deferred income taxes |
237,026 | 250,197 | ||||||
| Other current assets |
128,799 | 96,580 | ||||||
| Total current assets |
4,497,263 | 4,217,248 | ||||||
| Long-term investments |
3,187,505 | 3,134,290 | ||||||
| Property, plant and equipment, net |
1,577,440 | 1,624,396 | ||||||
| Intangible and other assets, net |
382,335 | 365,557 | ||||||
| Goodwill, net |
216,694 | 205,030 | ||||||
| Deferred income taxes |
67,316 | 43,926 | ||||||
| Total assets |
$ | 9,928,553 | $ | 9,590,447 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
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| Notes payable and current portion of long-term obligations |
$ | 12,736 | $ | 27,507 | ||||
| Accounts payable |
376,880 | 429,732 | ||||||
| Accrued expenses |
878,096 | 948,357 | ||||||
| Income taxes payable |
438,393 | 187,695 | ||||||
| Deferred revenue |
499,157 | 448,359 | ||||||
| Total current liabilities |
2,205,262 | 2,041,650 | ||||||
| Deferred revenue |
277,694 | 156,412 | ||||||
| Other liabilities |
62,434 | 166,383 | ||||||
| Commitments and contingencies |
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| Stockholders’ equity: |
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| Series preferred stock, par value $.01; authorized 25,000 shares, none outstanding |
— | — | ||||||
| Common stock, par value $.01; authorized 6,000,000 shares; issued 2,244,502 and 2,235,930 |
22,445 | 22,359 | ||||||
| Additional paid-in capital |
3,622,568 | 3,580,025 | ||||||
| Deferred compensation |
(6,693 | ) | (10,762 | ) | ||||
| Retained earnings |
4,186,971 | 4,070,049 | ||||||
| Accumulated other comprehensive loss, net |
(59,217 | ) | (53,488 | ) | ||||
| Treasury stock, at cost; 50,655 and 50,555 shares |
(382,911 | ) | (382,181 | ) | ||||
| Total stockholders’ equity |
7,383,163 | 7,226,002 | ||||||
| Total liabilities and stockholders’ equity |
$ | 9,928,553 | $ | 9,590,447 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
3
EMC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| For the Three Months Ended |
For the Six Months Ended |
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| June 30, 2003 |
June 30, 2002 |
June 30, 2003 |
June 30, 2002 |
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| Revenues: |
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| Net sales |
$ | 1,125,063 | $ | 1,099,671 | $ | 2,176,041 | $ | 2,124,294 | ||||||||
| Services |
354,237 | 287,867 | 687,410 | 565,222 | ||||||||||||
| 1,479,300 | 1,387,538 | 2,863,451 | 2,689,516 | |||||||||||||
| Costs and expenses: |
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| Cost of sales |
660,735 | 653,263 | 1,274,079 | 1,287,862 | ||||||||||||
| Cost of services |
174,483 | 177,874 | 347,469 | 344,208 | ||||||||||||
| Research and development |
176,788 | 202,027 | 357,202 | 402,978 | ||||||||||||
| Selling, general and administrative |
393,262 | 420,779 | 777,813 | 875,447 | ||||||||||||
| Restructuring and other special charges |
3,566 | — | 24,089 | — | ||||||||||||
| Operating income (loss) |
70,466 | (66,405 | ) | 82,799 | (220,979 | ) | ||||||||||
| Investment income |
51,186 | 57,823 | 104,323 | 113,348 | ||||||||||||
| Interest expense |
(1,175 | ) | (2,720 | ) | (2,039 | ) | (5,581 | ) | ||||||||
| Other expense, net |
(274 | ) | (5,650 | ) | (5,984 | ) | (13,540 | ) | ||||||||
| Income (loss) before taxes |
120,203 | (16,952 | ) | 179,099 | (126,752 | ) | ||||||||||
| Income tax provision (benefit) |
38,464 | (17,760 | ) | 62,177 | (50,701 | ) | ||||||||||
| Net income (loss) |
$ | 81,739 | $ | 808 | $ | 116,922 | $ | (76,051 | ) | |||||||
| Net income (loss) per weighted average share, basic |
$ | 0.04 | $ | 0.00 | $ | 0.05 | $ | (0.03 | ) | |||||||
| Net income (loss) per weighted average share, diluted |
$ | 0.04 | $ | 0.00 | $ | 0.05 | $ | (0.03 | ) | |||||||
| Weighted average shares, basic |
2,187,267 | 2,208,383 | 2,187,134 | 2,214,997 | ||||||||||||
| Weighted average shares, diluted |
2,210,614 | 2,215,903 | 2,205,629 | 2,214,997 | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
4
EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| For the Six Months Ended |
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| June 30, 2003 |
June 30, 2002 |
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| Cash flows from operating activities: |
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| Net income (loss) |
$ | 116,922 | $ | (76,051 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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| Depreciation and amortization |
265,670 | 334,782 | ||||||
| Non-cash restructuring, inventory and other special charges (reversals) |
5,732 | (52,840 | ) | |||||
| Amortization of deferred compensation |
4,939 | 7,552 | ||||||
| Provision for doubtful accounts |
10,416 | 26,822 | ||||||
| Deferred income taxes, net |
41,943 | 40,286 | ||||||
| Other |
(2,240 | ) | 36,138 | |||||
| Changes in assets and liabilities: |
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| Accounts and notes receivable |
153,492 | 300,956 | ||||||
| Inventories |
(65,916 | ) | 188,791 | |||||
| Other assets |
(63,392 | ) | 36,910 | |||||
| Accounts payable |
(56,049 | ) | 1,901 | |||||
| Accrued expenses |
(72,093 | ) | (132,376 | ) | ||||
| Income taxes payable |
198,397 | 4,639 | ||||||
| Deferred revenue |
173,488 | 107,678 | ||||||
| Other liabilities |
(99,889 | ) | (9,594 | ) | ||||
| Net cash provided by operating activities |
611,420 | 815,594 | ||||||
| Cash flows from investing activities: |
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| Additions to property, plant and equipment |
(180,552 | ) | (218,836 | ) | ||||
| Capitalized software development costs |
(57,250 | ) | (64,261 | ) | ||||
| Purchases of short and long-term available for sale securities |
(2,529,704 | ) | (5,324,084 | ) | ||||
| Sales of short and long-term available for sale securities |
2,245,272 | 4,345,908 | ||||||
| Maturities of short and long-term available for sale securities |
111,289 | 121,646 | ||||||
| Other |
(7,626 | ) | — | |||||
| Net cash used in investing activities |
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