EMC Reports Second Quarter Results.Business/Technology Editors EMC Corporation EMC Corporation (NYSE: EMC) is an American Fortune 500 and S&P 500 manufacturer of software and systems for information management and storage. It is headquartered in Hopkinton, Massachusetts, USA. (NYSE NYSE See: New York Stock Exchange :EMC (1) (EMC Corporation, Hopkinton, MA, www.emc.com) The leading supplier of storage products for midrange computers and mainframes. Founded in 1979 by Richard J. Egan and Roger Marino, EMC has developed advanced storage and retrieval technologies for the world's largest companies. ) today reported financial results for the second quarter of 2002, reflecting strong sequential growth in revenue from the company's industry-leading portfolio of storage software products and continued progress in lowering EMC's cost structure. Revenue for the second quarter was $1.39 billion, an increase of 7% compared to the $1.30 billion reported for the first quarter of 2002. Net loss for the second quarter, excluding the after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. effects of a $25 million reversal to the third-quarter 2001 restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , was $11 million or $0.01 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with a first-quarter 2002 net loss of $97 million or $0.04 per diluted share, also excluding the after-tax effects of a $28 million reversal to the third-quarter 2001 restructuring charge. Consolidated net income for the second quarter, including the after-tax benefit of the $25 million reversal, was nearly $1 million or $0.00 per share. In the year-ago second quarter, total revenue was $2.02 billion and net income was $109 million or $0.05 per diluted share. Joe Tucci Tucci is a surname, and may refer to:
Adjective unwilling to spend money; mean tight-fisted adj → tacaño tight-fisted adj → avaro/a environment comes from being the only company 100% dedicated to comprehensive networked storage solutions. Software revenue grew 14% compared with the first quarter, a clear sign that customers are embracing our AutoIS open software strategy. The other major factors in our improved sequential performance were better international results and our tenacious te·na·cious adj. 1. Clinging to another object or surface; adhesive. 2. Holding together firmly; cohesive. tenacious viscid; adhesive. attack on costs. We believe we gained market share in both hardware and software during the second quarter." Bill Teuber, EMC's Executive Vice President and Chief Financial Officer, said, "We saw an encouraging balance in our revenue performance in the second quarter, with solid sequential growth in storage systems, software and services. We continued to make great progress on our cost structure. With the additional cost reductions achieved in the second quarter, our cost savings have now reached an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. run rate in excess of $1 billion. Strong asset management helped increase cash and investments during the quarter by $171 million, to nearly $5.5 billion." Also during the quarter, $200 million was used to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. EMC common stock. EMC has now repurchased nearly half of the 50 million shares authorized Shares authorized The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding. shares authorized See authorized capital stock. under the stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program approved by its Board of Directors in May 2001. The many EMC customer wins during the quarter included, in the U.S., Ameritrade Holding Corporation, The Boeing (language) BOEING - An early system on the IBM 1130. [Listed in CACM 2(5):16, May 1959]. Company, BJ's Wholesale Club BJ's Wholesale Club, Inc. NYSE: BJ is a membership-only warehouse club chain operating in the East Coast of the United States, as well as in the state of Ohio. History , Inc., Kinko's, Inc., JC Penney Pen·ney , James Cash 1875-1971. American business executive who built the J.C. Penney chain and pioneered the practice of employee profit-sharing. , LexisNexis A service that provides online legal and business information. Lexis was the first full-text information service for the legal profession. Nexis provides the archives of The New York Times as well as Wall Street industry analysis, public records, tax information, political analysis, SEC , Michael's Stores, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Life, Naval Reserve A Naval Reserve is the reserve body of a nation's Navy, typically called-upon in times of conflict. Naval Reserves include;
 r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Societe Generale Group (France), Banco Pastor Banco Pastor is the second oldest bank in Spain (after Banco Etcheverría).It was founded in 1776 by Jaime Dalmau Batista as Jaime Dalmau y Cía (Jaime Dalmau and Company), who had a shipping company operating between the port of A Coruña and several American ports. (Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. ), Clearstream International Clearstream International A European clearing corporation, this organization supports over 2500 different companies in 80 locations worldwide. Notes: Another clearing house, only this one is international. (Belgium Belgium (bĕl`jəm), Du. België, Fr. La Belgique, officially Kingdom of Belgium, constitutional kingdom (2005 est. pop. 10,364,000), 11,781 sq mi (30,513 sq km), NW Europe. ), Deutsche Post Deutsche Post AG (ISIN: DE0005552004, LSE: DPO) is a German post, logistics and courier headquartered in Bonn, previously the German state-owned mail monopoly. It has 520,000 employees in more than 220 countries and territories worldwide and generated revenue of € 60. AG (Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). ), Marks & Spencer and Tesco (U.K.), and Vodafone Vodafone Group Plc is a mobile network operator headquartered in Newbury, Berkshire, England, UK. It is the largest mobile telecommunications network company in the world by turnover and has a market value of about £84.7 billion (July 2007). in Germany; in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , Axtel Axtel S.A.B. de C.V. (BMV: AXTEL), is a Mexican telecommunications company, headquartered in Monterrey, that provides telecommunication products and services in Mexico. It is the main competitor of Telmex, who was a monopoly until very recently. (Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. ), Pan American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Energy (Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. ) and Banco Central do Brasil (Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. ); and in the Asia Pacific region, Agriculture Bank of China, Credit Lyonnais Lyonnais (lyônā`), region and former province, E central France, now divided into the Rhône and Loire depts. It included Lyonnais proper (the region around Lyons, its capital), which Philip IV acquired c. Securities Asia (Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. ), and Korea Exchange Bank Oehwan Bank or Korea Exchange Bank (KEB) (KSE: 004940) is South Korea's only exchange bank company. It is headquartered in Seoul, and was established in 1967. . Also during the quarter, EMC introduced Centera (TM), the world's first content-addressed storage (CAS) system, an entirely new software-driven, online networked storage architecture designed for fixed content; was honored hon·or n. 1. High respect, as that shown for special merit; esteem: the honor shown to a Nobel laureate. 2. a. Good name; reputation. b. as a General Motors Supplier of the Year for the third consecutive year for superior performance in quality, service, technology and price; re-affirmed its full support of cooperative industry activities to develop robust standards for open storage management by promoting the Common Information Model (CIM (1) (Computer-Integrated Manufacturing) Integrating office/accounting functions with automated factory systems. Point of sale, billing, machine tool scheduling and supply ordering are part of CIM. ) and Web-Based Enterprise Management (standard, system management) Web-Based Enterprise Management - (WBEM) A DMTF management standard using the Common Information Model to represent systems, applications, networks, devices and other managed components; developed to unify the management of distributed computing (WBEM (Web-Based Enterprise Management) An umbrella term for using Internet technologies to manage systems and networks throughout the enterprise. Both browsers and applications can be used to access the information that is made available in formats such as HTML and ) technologies designed to create a standard interface for the management of multi-vendor storage networks; and introduced new low-cost/high-density and high-performance Adj. 1. high-performance - modified to give superior performance; "a high-performance car" superior - of high or superior quality or performance; "superior wisdom derived from experience"; "superior math students" disk drive technology for EMC CLARiiON systems. Other highlights of the quarter included new reports from the leading market research firms on 2001 market share results, which confirmed that EMC widened its lead as the world's #1 provider of storage management software, networked storage, SANs (storage area networks), and, for the first time, led the NAS (1) See network access server. (2) (Network Attached Storage) A specialized file server that connects to the network. A NAS device contains a slimmed-down operating system and a file system and processes only I/O requests by supporting the popular (networked attached storage) market as the #1 supplier. EMC Corporation is the world leader in information storage systems, software, networks and services, providing the information infrastructure for a connected world. Information about EMC's products and services can be found at http://www.EMC.com. EMC, Centera, CLARiiON and AutoIS, are either registered trademarks or trademarks of EMC Corporation. Other trademarks are the property of their respective owners. This release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " 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) declines in revenues; (iv) insufficient, excess or obsolete inventory Obsolete Inventory Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company. ; (v) competitive factors, including but not limited to pricing pressures; (vi) component quality and availability; (vii) rapid technological and market change, the transition to new products and the uncertainty of customer acceptance of new product offerings; (viii) the relative and varying rates of product price and component cost declines; (ix) the ability to attract and retain highly qualified employees; (x) fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. currency exchange rates; (xi) risks associated with strategic investments and acquisitions; and (xii) 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 CORPORATION
Consolidated Statements of Operations
Three Months Ended June 30, 2002
(in thousands, except per share amounts)
(unaudited)
Restructuring
As Reported Reversal Adjusted
Revenues:
Net sales $ 1,099,671 $ 1,099,671
Services 287,867 287,867
1,387,538 1,387,538
Costs and expenses:
Cost of sales 653,263 24,769(1) 678,032
Cost of services 177,874 177,874
Research and development 202,027 202,027
Selling, general and
administrative 420,779 420,779
Operating loss (66,405) (24,769) (91,174)
Investment income 57,823 57,823
Interest expense (2,720) (2,720)
Other expense, net (5,650) (5,650)
Loss before taxes (16,952) (24,769) (41,721)
Income tax benefit (17,760) (12,715)(1) (30,475)
Net income (loss) $ 808 $ (12,054) $ (11,246)
Net income (loss) per weighted
average share, basic $ 0.00 $ 0.01 $ (0.01)
Net income (loss) per weighted
average share, diluted $ 0.00 $ 0.01 $ (0.01)
Weighted average shares,
basic 2,208,383 2,208,383
Weighted average shares,
diluted 2,215,903 2,208,383
As a % of total revenue:
Gross margin 40.1% 38.3%
Selling, general and
administrative 30.3% 30.3%
Research and development 14.6% 14.6%
Operating loss -4.8% -6.6%
Net income (loss) 0.1% -0.8%
(1) Reversal of restructuring inventory provision taken in the third
quarter of 2001 and related tax impact.
EMC CORPORATION
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 (1) 2002 2001 (2)
Revenues:
Net sales $ 1,099,671 $ 1,736,485 $ 2,124,294 $ 3,793,411
Services 287,867 284,370 565,222 572,239
1,387,538 2,020,855 2,689,516 4,365,650
Cost and expenses:
Cost of sales 653,263 892,221 1,287,862 1,768,832
Cost of services 177,874 179,322 344,208 354,995
Research and
development 202,027 245,627 402,978 469,667
Selling, general
and
administrative 420,779 617,336 875,447 1,210,372
Operating income
(loss) (66,405) 86,349 (220,979) 561,784
Investment income 57,823 64,239 113,348 135,848
Interest expense (2,720) (3,597) (5,581) (6,855)
Other income
(expense), net (5,650) 2,136 (13,540) 4,642
Income (loss)
before taxes (16,952) 149,127 (126,752) 695,419
Provision (benefit)
for income taxes (17,760) 40,265 (50,701) 187,762
Net income (loss) $ 808 $ 108,862 $ (76,051) $ 507,657
Net income (loss)
per weighted
average share,
basic $ 0.00 $ 0.05 $ (0.03) $ 0.23
Net income (loss)
per weighted
average share,
diluted $ 0.00 $ 0.05 $ (0.03) $ 0.23
Weighted average
shares, basic 2,208,383 2,207,655 2,214,997 2,205,770
Weighted average
shares, diluted 2,215,903 2,239,799 2,214,997 2,247,021
As a % of total
revenue:
Gross margin 40.1% 47.0% 39.3% 51.4%
Selling, general
and
administrative 30.3% 30.5% 32.6% 27.7%
Research and
development 14.6% 12.2% 15.0% 10.8%
Operating income
(loss) -4.8% 4.3% -8.2% 12.9%
Net income (loss) 0.1% 5.4% -2.8% 11.6%
(1) Includes $11,121 in goodwill amortization classified in cost of
sales and $3,105 of goodwill amortization classified in research and
development that would have been excluded if Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets"
was in effect in 2001. Excluding the goodwill amortization would have
resulted in after-tax net income of $121,577 or $0.05 per diluted
share.
(2) Includes $22,242 in goodwill amortization classified in cost of
sales and $3,466 of goodwill amortization classified in research and
development that would have been excluded if Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets"
was in effect in 2001. Excluding the goodwill amortization would have
resulted in after-tax net income of $531,399 or $0.24 per diluted
share.
EMC CORPORATION
Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
June 30, December 31,
2002 2001
ASSETS
Current assets:
Cash and cash equivalents $ 1,632,354 $ 2,129,019
Short-term investments 591,877 445,428
Accounts and notes receivable,
less allowance for doubtful
accounts of $48,922 and $36,169 1,022,836 1,348,569
Inventories 456,935 583,985
Deferred income taxes 261,584 287,597
Other current assets 116,030 128,644
Total current assets 4,081,616 4,923,242
Long-term investments 3,238,524 2,509,112
Property, plant and equipment, net 1,773,741 1,827,331
Intangible and other assets, net 547,726 583,110
Deferred income taxes 45,508 46,840
Total assets $ 9,687,115 $ 9,889,635
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term obligations $ 47,851 $ 56,677
Accounts payable 415,944 424,132
Accrued expenses 897,756 1,024,211
Income taxes payable 350,686 315,368
Deferred revenue 471,930 359,026
Total current liabilities 2,184,167 2,179,414
Other liabilities 87,076 109,401
Commitments and contigencies
Stockholders' equity:
Series preferred stock, par value
$.01; authorized 25,000 shares,
none outstanding - -
Common stock, par value $.01;
authorized 6,000,000 shares;
issued 2,228,041 and 2,221,442
shares 22,280 22,214
Additional paid-in capital 3,532,009 3,470,325
Deferred compensation (17,375) (29,209)
Retained earnings 4,112,704 4,188,755
Accumulated other comprehensive
loss, net (15,479) (33,007)
Treasury stock, at cost; 24,474
and 1,060 shares (218,267) (18,258)
Total stockholders' equity 7,415,872 7,600,820
Total liabilities and
stockholders' equity $ 9,687,115 $ 9,889,635
EMC CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the Six Months Ended
June 30, 2002 June 30, 2001
Cash flows from operating activities:
Net income (loss) $ (76,051) $ 507,657
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 334,782 311,127
Reversal of non-cash inventory
provision (52,840) --
Other than temporary declines in
equity investments 6,315 --
Amortization of deferred
compensation 7,552 10,837
Provision for doubtful accounts 26,822 11,282
Deferred income taxes, net 40,286 4,647
Net loss on disposal of property,
plant, and equipment 6,821 1,049
Tax benefit from stock options
exercised 23,002 129,194
Minority interest -- 29
Changes in assets and liabilities:
Accounts and notes receivable 300,956 372,992
Inventories 188,791 (82,628)
Other assets 36,910 (34,665)
Accounts payable 1,901 (90,101)
Accrued expenses (132,376) (20,785)
Income taxes payable 4,639 (164,707)
Deferred revenue 107,678 59,789
Other liabilities (9,594) 3,074
Net cash provided by
operating activities 815,594 1,018,791
Cash flows from investing activities:
Additions to property, plant and
equipment (218,836) (507,476)
Proceeds from sales of property,
plant and equipment -- 17,143
Capitalized software development
costs (64,261) (59,557)
Purchases of short and long-term
available-for-sale securities (5,324,084) (3,072,293)
Sales of short and long-term
available-for-sale securities 4,345,908 2,709,376
Maturity of short and long-term
available-for-sale securities 121,646 84,020
Business acquisitions, net of cash
acquired -- (51,051)
Net cash used by investing
activities (1,139,627) (879,838)
Cash flows from financing activities:
Issuance of common stock 43,030 103,050
Purchase of treasury stock (200,009) (2,293)
Payment of short-term obligations,
net (796) --
Payment of long-term obligations (8,099) (9,163)
Issuance of long-term obligations -- 5
Cash portion of McDATA Corporation
spin-off dividend -- (141,981)
Net cash used by financing
activities (165,874) (50,382)
Effect of exchange rate changes on cash (6,758) (2,970)
Net increase (decrease) in cash and
cash equivalents (489,907) 88,571
Cash and cash equivalents at beginning
of period 2,129,019 1,983,221
Cash and cash equivalents at end of
period $ 1,632,354 $ 2,068,822
Non-cash activity:
Distribution of net assets in
McData Corporation dividend $ -- $ 234,152
Issuance of capital lease
obligations -- 24,490
EMC CORPORATION
Supplemental Schedule of Earnings Adjusted to Expense Stock Options
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
Net income (loss) $ 808 $ 108,862 $ (76,051) $ 507,657
Stock option expense (92,051) (82,126) (191,541) (150,043)
Adjusted net income (loss) $(91,243) $ 26,736 $(267,592) $ 357,614
Net income (loss) per
weighted average share,
basic - as reported $ 0.00 $ 0.05 $ (0.03) $ 0.23
Net income (loss) per
weighted average share,
diluted - as reported $ 0.00 $ 0.05 $ (0.03) $ 0.23
Adjusted net income (loss)
per weighted average
share, basic $ (0.04) $ 0.01 $ (0.12) $ 0.16
Adjusted net income (loss)
per weighted average
share, diluted $ (0.04) $ 0.01 $ (0.12) $ 0.16
EMC Corporation
Supplemental Financial Data
Revenue Analysis
(in thousands)
(unaudited)
Q1 2000 Q2 2000 Q3 2000 Q4 2000 YTD 2000
Storage
Revenue
Information
Storage
Systems $ 1,267,164 $ 1,515,916 $ 1,646,869 $ 1,815,816 $ 6,245,765
Information
Storage
Software 269,988 350,257 332,344 482,544 1,435,133
Information
Storage
Services 116,405 134,437 161,395 199,852 612,089
Total
Information
Storage
Revenues 1,653,557 2,000,610 2,140,608 2,498,212 8,292,987
Other
Businesses 169,041 145,317 142,397 123,074 579,829
Total
Consolidated
Revenues $ 1,822,598 $ 2,145,927 $ 2,283,005 $ 2,621,286 $ 8,872,816
Q1 2001 Q2 2001 Q3 2001 Q4 2001 YTD 2001
Storage
Revenue
Information
Storage
Systems $ 1,564,312 $ 1,225,600 $ 675,591 $ 841,741 $ 4,307,244
Information
Storage
Software 467,519 497,538 242,521 352,444 1,560,022
Information
Storage
Services 231,986 231,995 236,734 271,559 972,274
Total
Information
Storage
Revenues 2,263,817 1,955,133 1,154,846 1,465,744 6,839,540
Other
Businesses 80,978 65,722 57,427 46,966 251,093
Total
Consolidated
Revenues $ 2,344,795 $ 2,020,855 $ 1,212,273 $ 1,512,710 $ 7,090,633
Q1 2002 Q2 2002 YTD 2002
Storage
Revenue
Information
Storage
Systems $ 741,578 $ 779,109 $ 1,520,687
Information
Storage
Software 282,323 320,568 602,891
Information
Storage
Services 238,530 251,148 489,678
Total
Information
Storage
Revenues 1,262,431 1,350,825 2,613,256
Other
Businesses 39,547 36,713 76,260
Total
Consolidated
Revenues $ 1,301,978 $ 1,387,538 $ 2,689,516
Note: Amounts may not foot due to rounding
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