EX-99.1 2 exhibit991.htm PRESS RELEASE Exhibit 99.1
Exhibit 99.1


Contact:
Lesley Ogrodnick
508-293-6961
lesley.ogrodnick@emc.com

EMC Reports Record Revenue and Profit for
Q4 and Full-Year 2012

 
 
Highlights:

l
Q4 revenue growth accelerates to 8% year over year

l
Full-year revenue growth of 9% year over year

l
Record Q4 and full-year net income and EPS

l
Record full-year operating cash flow of $6.3 billion and free cash flow of $5.0 billion

HOPKINTON, Mass. - January 29, 2013 - EMC Corporation (NYSE:EMC) today reported record financial results for both the fourth quarter and full year 2012. For the fourth quarter, the company achieved record quarterly consolidated revenue, net income and EPS on a GAAP and non-GAAP basis. Full-year 2012 results were highlighted by record revenue, net income, EPS, operating cash flow and free cash flow. The results were also highlighted by record quarterly and full-year gross margins on a GAAP and non-GAAP basis.

Fourth-quarter revenue was $6.0 billion, an increase of 8% compared with the year-ago quarter.  Fourth-quarter GAAP net income attributable to EMC increased 5% year over year to $870 million.  Fourth-quarter GAAP earnings per weighted average diluted share increased 3% year over year to $0.39.  Non-GAAP1 net income attributable to EMC for the fourth quarter was $1.2 billion, an increase of 12% compared with the year-ago quarter.  Fourth-quarter non-GAAP1 earnings per weighted average diluted share were $0.54, an increase of 10% year over year. 

Full-year 2012 revenue was $21.7 billion, an increase of 9% year over year. GAAP net income attributable to EMC for 2012 increased 11% year over year to $2.7 billion, and GAAP earnings per weighted average diluted share were $1.23, up 12% year over year.  Non-GAAP2 net income attributable to EMC for 2012 was $3.8 billion, an increase of 11% year over year, and non-GAAP2 earnings per weighted average diluted share were $1.70, an increase of 13% year over year. The company's fourth-quarter and full-year non-GAAP results include the tax benefit related to the U.S. research and development tax credit for 2012.3 

For 2012, EMC generated operating cash flow of $6.3 billion and free cash flow4 of $5.0 billion, increases of 10% and 14% year over year, respectively. For the quarter and full-year, EMC expanded GAAP and non-GAAP gross margin and operating margin percentages on a year-over-year basis. The company ended the year with $11.4 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “EMC achieved its first $6 billion quarter for revenue, capping off a record breaking 2012. Driving our strong results is the strength of our leading-edge products and services, our solid operational and financial model, and consistent execution against our strategy. EMC remains squarely at the center of the most disruptive and opportunity-rich shift in IT history, propelled by the benefits of cloud computing, Big Data and trusted IT.  These high-priority



IT spending areas are core to our strategic focus and represent market segments where EMC has established leadership positions and competitive advantage.”

David Goulden, EMC President and Chief Operating Officer, said, “With outstanding execution by EMC employees worldwide, we once again delivered our triple play in 2012 - simultaneously taking market share, reinvesting for growth and delivering improved earnings.  EMC's broad, best-of-breed portfolio of products and services, which offer customers greater efficiency, control and choice as they transform both their IT and their businesses, is a key and differentiating element of our continued financial success.  We believe EMC is well positioned to expand our leadership in the market segments we serve, deliver on our triple play again in 2013, and leverage our strong balance sheet to invest heavily in leading edge technology for cloud computing, Big Data and trusted IT.”

Fourth-Quarter Highlights

In the fourth quarter, revenue from EMC's networked storage platforms portfolio5, which includes EMC's high-end and mid-tier storage platform products, grew 6% year over year.  Revenue from EMC's high-end Symmetrix storage product portfolio increased 6% compared with the year-ago quarter.  Revenue from EMC's mid-tier storage products6 portfolio increased 5% year over year, led by continued strong revenue growth of EMC's Isilon scale-out NAS products. The company also saw continued strong demand for its Flash-based caching and Flash-based storage solutions.

Additional fourth-quarter highlights included strong year-over-year revenue growth for EMC's Greenplum product portfolio. VMware (NYSE: VMW), the global leader in virtualization and cloud infrastructure, grew revenue 22% year over year.  EMC's VSPEX reference architecture solutions continued to gain momentum with rapid adoption and increasing popularity among customers and partners who have sold more than 1,300 VSPEX solutions since their launch in April 2012.  VCE, the leader in converged cloud infrastructure systems, continued to gain traction and exceed company expectations as demand for Vblock systems showed strong year-over-year growth. Finally, EMC continued to expand its Service Provider Program with fourth-quarter revenue from service provider partners growing more than 70% year over year. 

EMC's consolidated fourth-quarter revenue from the United States increased 5% year over year to $3.1 billion, representing 52% of consolidated fourth-quarter revenue.  Revenue from EMC's business operations outside of the United States increased 12% year over year to $2.9 billion and represented 48% of consolidated fourth-quarter revenue. Within this, revenue from EMC's Europe, Middle East and Africa region grew 11% year over year, and revenue from EMC's Asia Pacific and Japan region increased 19% year over year.  

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 made by EMC regarding 2013 financial results.

All dollar amounts and percentages set forth below should be considered to be approximations.

Consolidated revenues are expected to be $23.5 billion for 2013.




Consolidated GAAP operating income is expected to be 18% of revenues for 2013 and consolidated non-GAAP operating income is expected to be 25.5% of revenues for 2013. Excluded from consolidated non-GAAP operating income are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware's capitalized software from prior periods which account for 4.7%, 1.7%, 1.0% and 0.1% of revenues, respectively.

Total consolidated GAAP and non-GAAP non-operating expense, which includes investment income, interest expense and other income and expense, is expected to be $280 million in 2013.

Consolidated GAAP net income attributable to EMC is expected to be $3.0 billion in 2013 and consolidated non-GAAP net income attributable to EMC is expected to be $4.1 billion in 2013. Excluded from consolidated non-GAAP net income attributable to EMC are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods and the benefit of the 2012 R&D tax credit which account for $730 million, $260 million, $160 million, $15 million and ($60 million), respectively.

Consolidated GAAP earnings per weighted average diluted share are expected to be $1.35 for 2013 and consolidated non-GAAP earnings per weighted average diluted share are expected to be $1.85 for 2013. Excluded from consolidated non-GAAP earnings per weighted average diluted share are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods and the benefit of the 2012 R&D tax credit which account for $0.33, $0.12, $0.07, $0.01 and ($0.03) per weighted average diluted share, respectively.

The consolidated GAAP income tax rate is expected to be 20.5% for 2013. Excluding the tax impact of stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods, and the benefit of the 2012 R&D tax credit which collectively impact the tax rate by 3%, the consolidated non-GAAP income tax rate is expected to be 23.5% for 2013.

GAAP net income attributable to the non-controlling interest in VMware is expected to be $160 million and non-GAAP net income attributable to the non-controlling interest in VMware is expected to be $280 million for 2013. Excluded from non-GAAP net income attributable to the non-controlling interest in VMware are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods, and the benefit of the 2012 R&D tax credit which account for $89 million, $19 million, $14 million, $4 million and ($6 million), respectively. The incremental dilution attributable to the shares of VMware held by EMC is expected to be $15 million for 2013.

The weighted average outstanding diluted shares are expected to be 2.2 billion for 2013.

EMC expects to repurchase $1 billion of the company's common stock in 2013.




Supporting Resources

EMC will host its 2012 fourth-quarter earnings conference call today at 8:30 a.m. ET, which will be available via EMC's web site at http://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 at http://www.emc.com/about/investor-relations/index.htm

Visit http://ir.vmware.com for more information about VMware's fourth-quarter financial results.

About EMC

EMC Corporation is a global leader in enabling businesses and service providers to transform their operations and deliver IT as a service. Fundamental to this transformation is cloud computing. Through innovative products and services, EMC accelerates the journey to cloud computing, helping IT departments to store, manage, protect and analyze their most valuable asset - information - in a more agile, trusted and cost-efficient way. Additional information about EMC can be found at www.EMC.com.
 
# # #

1 Items excluded from the non-GAAP results for the fourth quarters of 2012 and 2011 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods and special tax charges. The benefit of the U.S. research and development (“R&D”) tax credit for 2012 is included in the non-GAAP results for the fourth quarter 2012. See attached schedules for GAAP to non-GAAP reconciliations.

2 Items excluded from the non-GAAP results for the full years 2012 and 2011 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition related charges, the amortization of VMware's capitalized software from prior periods, an RSA special charge (release), a loss on interest rate swaps, a gain on strategic investment and special tax charges. The benefit of the R&D tax credit for 2012 is included in the non-GAAP results for the full year 2012. See attached schedules for GAAP to non-GAAP reconciliations.

3 As a result of the fact that the American Taxpayer Relief Act of 2012 was not enacted until 2013, the U.S. R&D tax credit for 2012 cannot be recognized in EMC's 2012 GAAP results but is included in the non-GAAP results for the fourth quarter and full year 2012. See attached schedules for GAAP to non-GAAP reconciliations.

4 Free cash flow is a non-GAAP financial measure which is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized software development costs. See attached schedules for a reconciliation of net cash provided by operating activities to free cash flow for the twelve months ended December 31, 2012.

5 EMC's networked storage platforms include EMC Symmetrix, EMC VNX, EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Isilon, EMC Avamar and EMC Atmos hardware and software products.

6 EMC's mid-tier storage products include EMC VNX, EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Isilon, EMC Avamar and EMC Atmos hardware and software products.

EMC, Atmos, Avamar, Celerra, Centera, CLARiiON, Data Domain, Greenplum, Isilon, RSA, Symmetrix, VMAX, VSPEX, Vblock, and VNX are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries. VMware is a registered trademark or trademark of VMware, Inc. in the United States and/or other countries. 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) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) component and product quality and availability; (vi) fluctuations in VMware, Inc.'s operating results and risks associated with trading of VMware stock; (vii) the transition to new products, the uncertainty of customer



acceptance of new product offerings and rapid technological and market change; (viii) 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; (ix) the ability to attract and retain highly qualified employees; (x) insufficient, excess or obsolete inventory; (xi) fluctuating currency exchange rates; (xii) threats and other disruptions to our secure data centers or networks; (xiii) our ability to protect our proprietary technology; (xiv) war or acts of terrorism; 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, the accompanying schedules and the additional content that is available on EMC's website contain 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," (a) certain items noted on each such specific schedule (including, where noted, amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods beginning in 2012, an RSA special charge, a loss on interest rate swaps, a gain on strategic investment and special tax charges) are excluded from the non-GAAP financial measures and (b) the benefit of the R&D tax credit for 2012 is included in 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 includes the benefit of the R&D tax credit in, 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
 
Twelve Months Ended
 
 
December 31,

 
December 31,
 
December 31,
 
December 31,
 
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
 
Product sales
$
3,728,488

 
$
3,541,132

 
$
13,060,523

 
$
12,590,742

 
Services
2,301,467

 
2,033,299

 
8,653,379

 
7,416,846

 
 
6,029,955

 
5,574,431

 
21,713,902

 
20,007,588

Cost and expenses:
 
 
 
 
 
 
 
 
Cost of product sales
1,409,530

 
1,402,733

 
5,258,164

 
5,319,761

 
Cost of services
730,211

 
648,359

 
2,817,375

 
2,518,885

 
Research and development
662,956

 
560,767

 
2,559,612

 
2,149,787

 
Selling, general and administrative
1,928,646

 
1,794,848

 
7,004,287

 
6,479,382

 
Restructuring and acquisition-related charges
30,030

 
28,923

 
110,590

 
97,334

Operating income
1,268,582

 
1,138,801

 
3,963,874

 
3,442,439

 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
 
Investment income
29,713

 
22,742

 
114,993

 
129,248

 
Interest expense
(20,696
)
 
(34,689
)
 
(78,903
)
 
(170,466
)
 
Other income (expense), net
(38,645
)
 
(79,335
)
 
(196,349
)
 
(151,951
)
Total non-operating income (expense)
(29,628
)
 
(91,282
)
 
(160,259
)
 
(193,169
)
Income before provision for income taxes
1,238,954

 
1,047,519

 
3,803,615

 
3,249,270

Income tax provision
326,998

 
174,929

 
917,598

 
640,385

Net income
911,956

 
872,590

 
2,886,017

 
2,608,885

Less: Net income attributable to the non-controlling interest in VMware, Inc.
(42,037
)
 
(40,544
)
 
(153,404
)
 
(147,548
)
Net income attributable to EMC Corporation
$
869,919

 
$
832,046

 
$
2,732,613

 
$
2,461,337

 
 
 
 
 
 
 
 
Net income per weighted average share, basic attributable to EMC Corporation common shareholders
$
0.41

 
$
0.41

 
$
1.31

 
$
1.20

 
 
 
 
 
 
 
 
Net income per weighted average share, diluted attributable to EMC Corporation common shareholders
$
0.39

 
$
0.38

 
$
1.23

 
$
1.10

 
 
 
 
 
 
 
 
Weighted average shares, basic
2,104,869

 
2,041,587

 
2,093,372

 
2,055,536

 
 
 
 
 
 
 
 
Weighted average shares, diluted
2,201,031

 
2,182,933

 
2,205,639

 
2,229,113





EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
 
December 31,
 
December 31,
 
 
2012
 
2011
                                                   ASSETS
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
4,754,060

 
$
4,531,036

 
Short-term investments
1,413,060

 
1,786,987

 
Accounts and notes receivable, less allowance
 
 
 
 
     for doubtful accounts of $68,465 and $61,804
3,433,389

 
2,937,499

 
Inventories
1,201,020

 
1,009,968

 
Deferred income taxes
941,775

 
852,848

 
Other current assets
465,305

 
583,885

Total current assets
12,208,609

 
11,702,223

Long-term investments
5,228,608

 
4,525,106

Property, plant and equipment, net
3,144,548

 
2,833,149

Intangible assets, net
2,035,340

 
1,766,115

Goodwill
13,839,700

 
12,154,970

Other assets, net
1,611,880

 
1,487,704

 
     Total assets
$
38,068,685

 
$
34,469,267

 
 
 
 
 
                LIABILITIES & SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
$
1,040,664

 
$
1,101,659

 
Accrued expenses
2,522,059

 
2,354,979

 
Notes converted and payable

 
1,699,832

 
Income taxes payable
514,302

 
155,909

 
Convertible debt
1,652,442

 
1,605,142

 
Deferred revenue
4,574,529

 
3,458,689

Total current liabilities
10,303,996

 
10,376,210

Income taxes payable
293,105

 
238,851

Deferred revenue
2,976,328

 
2,715,361

Deferred income taxes
574,846

 
451,905

Other liabilities
338,915

 
287,912

 
Total liabilities
14,487,190

 
14,070,239

 
 
 
 
 
Convertible debt
57,704

 
119,325

 
 
 
 
 
Commitments and contingencies
 
 
 
Shareholders' equity:
 
 
 
 
Preferred stock, par value $0.01; authorized 25,000
 
 
 
 
    shares; none outstanding

 

 
Common stock, par value $0.01; authorized 6,000,000
 
 
 
 
    shares; issued and outstanding 2,106,959 and 2,048,890 shares
21,070

 
20,489

 
Additional paid-in capital
3,691,112

 
3,405,513

 
Retained earnings
18,853,234

 
16,120,621

 
Accumulated other comprehensive loss, net
(208,273
)
 
(235,009
)
 
Total EMC Corporation's shareholders' equity
22,357,143

 
19,311,614

 
Non-controlling interest in VMware, Inc.
1,166,648

 
968,089

 
Total shareholders' equity
23,523,791

 
20,279,703

 
     Total liabilities and shareholders' equity
$
38,068,685

 
$
34,469,267






EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
 
 
 
Twelve Months Ended
 
 
 
 
 
December 31,
 
December 31,
 
 
 
 
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
Cash received from customers
$
22,584,805

 
$
21,144,690

 
Cash paid to suppliers and employees
(16,018,457
)
 
(15,218,678
)
 
Dividends and interest received
103,174

 
135,971

 
Interest paid
(32,751
)
 
(70,071
)
 
Income taxes paid
(374,352
)
 
(323,097
)
 
 
 
Net cash provided by operating activities
6,262,419

 
5,668,815

 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Additions to property, plant and equipment
(819,159
)
 
(801,375
)
 
Capitalized software development costs
(419,079
)
 
(442,341
)
 
Purchases of short- and long-term available-for-sale securities
(6,346,580
)
 
(7,180,169
)
 
Sales of short- and long-term available-for-sale securities
4,982,790

 
5,121,454

 
Maturities of short- and long-term available-for-sale securities
1,048,979

 
1,130,321

 
Business acquisitions, net of cash acquired
(2,135,758
)
 
(536,624
)
 
Purchases of strategic and other related investments
(117,103
)
 
(329,483
)
 
Sales of strategic and other related investments, net
70,623

 
29,007

 
Joint venture funding
(227,881
)
 
(383,211
)
 
Proceeds from divestiture of business
58,100

 

 
Purchase of leasehold interest

 
(151,083
)
 
 
 
Net cash used in investing activities
(3,905,068
)
 
(3,543,504
)
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Issuance of EMC's common stock from the exercise of stock options
560,275

 
673,389

 
Issuance of VMware's common stock from the exercise of stock options
253,159

 
337,618

 
EMC repurchase of EMC's common stock
(684,559
)
 
(1,999,968
)
 
EMC purchase of VMware's common stock
(290,294
)
 
(399,984
)
 
VMware repurchase of VMware's common stock
(467,534
)
 
(526,203
)
 
Excess tax benefits from stock-based compensation
260,747

 
361,632

 
Payment of short- and long-term obligations
(15,629
)
 
(27,089
)
 
Proceeds from short- and long-term obligations
4,604

 
3,096

 
Payment of convertible debt
(1,699,816
)
 

 
Interest rate contract settlement
(69,905
)
 
(140,993
)
 
 
 
Net cash used in financing activities
(2,148,952
)
 
(1,718,502
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
14,625

 
5,089

 
 
 
 
 
 
 
 
Net increase in cash and cash equivalents
223,024

 
411,898

Cash and cash equivalents at beginning of period
4,531,036

 
4,119,138

Cash and cash equivalents at end of period
$
4,754,060

 
$
4,531,036

 
 
 
 
 
 
 
 
Reconciliation of net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
Net income
$
2,886,017

 
$
2,608,885

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
1,527,748

 
1,421,598

 
Non-cash interest expense on convertible debt
46,178

 
102,907

 
Non-cash restructuring and other special charges
12,974

 
(1,484
)
 
Stock-based compensation expense
895,384

 
822,576

 
Provision for doubtful accounts
39,313

 
20,255




 
Deferred income taxes, net
(63,861
)
 
(19,423
)
 
Excess tax benefits from stock-based compensation
(260,747
)
 
(361,632
)
 
Gain on XtremIO common stock
(31,599
)
 

 
Other, net
20,337

 
4,573

 
Changes in assets and liabilities, net of acquisitions:
 
 
 
 
 
Accounts and notes receivable
(535,371
)
 
(391,672
)
 
 
Inventories
(458,663
)
 
(393,156
)
 
 
Other assets
174,386

 
(61,830
)
 
 
Accounts payable
89,299

 
34,871

 
 
Accrued expenses
(64,238
)
 
5,147

 
 
Income taxes payable
607,107

 
336,711

 
 
Deferred revenue
1,366,961

 
1,508,520

 
 
Other liabilities
11,194

 
31,969

 
 
 
Net cash provided by operating activities
$
6,262,419

 
$
5,668,815





Reconciliation of GAAP to Non-GAAP*
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
 
 
 
Diluted
 
 
 
Diluted
 
December 31,
 
Earnings
 
December 31,
 
Earnings
 
2012
 
Per Share
 
2011
 
Per Share
Net Income Attributable to EMC GAAP
$
869,919

 
$
0.394

 
$
832,046

 
$
0.380

Stock-based compensation expense
159,633

 
0.073

 
151,809

 
0.070

Intangible asset amortization
63,947

 
0.029

 
56,124

 
0.026

Restructuring and acquisition-related charges
22,699

 
0.010

 
25,220

 
0.012

Amortization of VMware's capitalized software
from prior periods
6,669

 
0.003

 

 

Special tax charges
10,660

 
0.005

 

 

R&D tax credit
60,044

 
0.027

 

 

Net Income Attributable to EMC Non-GAAP
$
1,193,571

 
$
0.541

 
$
1,065,199

 
$
0.487

 
 
 
 
 
 
 
 
Weighted average shares, diluted
 
 
2,201,031

 
 
 
2,182,933

Incremental VMware Dilution
 
 
$
2,252

 
 
 
$
3,154



 
Twelve Months Ended
 
 
 
Diluted
 
 
 
Diluted
 
December 31,
 
Earnings
 
December 31,
 
Earnings
 
2012
 
Per Share
 
2011
 
Per Share
Net Income Attributable to EMC GAAP
$
2,732,613

 
$
1.234

 
$
2,461,337

 
$
1.098

Stock-based compensation expense
622,504

 
0.282

 
587,040

 
0.263

Intangible asset amortization
237,626

 
0.108

 
223,937

 
0.100

Restructuring and acquisition-related charges
88,279

 
0.040

 
80,944

 
0.036

Amortization of VMware's capitalized software
from prior periods
32,996

 
0.015

 

 

RSA special charge (release)
(18,097
)
 
(0.008
)
 
56,222

 
0.025

Loss on interest rate swaps
24,461

 
0.011

 

 

Gain on strategic investment
(31,599
)
 
(0.014
)
 
(28,938
)
 
(0.013
)
Special tax charges
10,660

 
0.005

 

 

R&D tax credit
60,044

 
0.027

 

 

Net Income Attributable to EMC Non-GAAP
$
3,759,487

 
$
1.700

 
$
3,380,542

 
$
1.510

 
 
 
 
 
 
 
 
Weighted average shares, diluted
 
 
2,205,639

 
 
 
2,229,113

Incremental VMware Dilution
 
 
$
9,977

 
 
 
$
14,082

* Net of tax and non-controlling interest in VMware, Inc., except Weighted average shares, diluted. See Income Tax Provision and Net Income Attributable to VMware lines in Supplemental Information schedules.
 
Note: Schedule may not add due to rounding.



Reconciliation of GAAP to Non-GAAP
(in thousands)
(unaudited)

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
Gross Margin GAAP
$
3,890,214

 
$
3,523,339

 
$
13,638,363

 
$
12,168,942

Stock-based compensation expense
30,835

 
31,720

 
125,467

 
123,677

Intangible asset amortization
57,061

 
40,757

 
199,098

 
157,191

Amortization of VMware's capitalized software from prior periods
12,511

 

 
61,480

 

RSA special charge (release)

 

 
(23,771
)
 
66,300

Gross Margin Non-GAAP
$
3,990,621

 
$
3,595,816

 
$
14,000,637

 
$
12,516,110

 
 
 
 
 
 
 
 
Revenues
$
6,029,955

 
$
5,574,431

 
$
21,713,902

 
$
20,007,588

 
 
 
 
 
 
 
 
Gross Margin Percentages:
 
 
 
 
 
 
 
GAAP
64.5
%
 
63.2
%
 
62.8
%
 
60.8
%
Non-GAAP
66.2
%
 
64.5
%
 
64.5
%
 
62.6
%

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
Operating Margin GAAP
$
1,268,582

 
$
1,138,801

 
$
3,963,874

 
$
3,442,439

Stock-based compensation expense
246,928

 
213,945

 
920,307

 
836,171

Intangible asset amortization
98,101

 
86,155

 
364,664

 
341,796

Restructuring and acquisition-related charges
30,030

 
28,923

 
110,590

 
97,334

Amortization of VMware's capitalized software from prior periods
12,511

 

 
61,480

 

RSA special charge (release)

 

 
(23,771
)
 
66,300

Operating Margin Non-GAAP
$
1,656,152

 
$
1,467,824

 
$
5,397,144

 
$
4,784,040

 
 
 
 
 
 
 
 
Revenues
$
6,029,955

 
$
5,574,431

 
$
21,713,902

 
$
20,007,588

 
 
 
 
 
 
 
 
Operating Margin Percentages:
 
 
 
 
 
 
 
GAAP
21.0
%
 
20.4
%
 
18.3
%
 
17.2
%
Non-GAAP
27.5
%
 
26.3
%
 
24.9
%
 
23.9
%




Reconciliation of GAAP to Non-GAAP
(in thousands)
(unaudited)
 
Twelve Months Ended December 31, 2012
 
Income Before
 
Tax
 
Tax
 
Tax
 
Provision
 
Rate
EMC Consolidated GAAP
$
3,803,615

 
$
917,598

 
24.1
%
Stock-based compensation expense
923,450

 
230,489

 
25.0
%
Intangible asset amortization
364,664

 
112,675

 
30.9
%
Restructuring and acquisition-related charges
110,590

 
21,538

 
19.5
%
Amortization of VMware's capitalized software from prior periods
61,480

 
19,933

 
32.4
%
RSA special charge (release)
(23,771
)
 
(5,674
)
 
23.9
%
Loss on interest rate swaps
39,453

 
14,992

 
38.0
%
Gain on strategic investment
(31,599
)
 

 
0.0%

Special tax charges

 
(11,514
)
 
%
R&D tax credit

 
(66,500
)
 
%
EMC Consolidated Non-GAAP
$
5,247,882

 
$
1,233,537

 
23.5
%



 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
Cash Flow from Operations
$
1,899,338

 
$
2,184,218

 
$
6,262,419

 
$
5,668,815

Capital expenditures
(295,700
)
 
(200,198
)
 
(819,159
)
 
(801,375
)
Capitalized software development costs
(103,281
)
 
(100,250
)
 
(419,079
)
 
(442,341
)
Free Cash Flow
$
1,500,357

 
$
1,883,770

 
$
5,024,181

 
$
4,425,099

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Supplemental Information
For the Three Months Ended December 31, 2012
(in thousands)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring and Acquisition-Related Charges
 
Amortization of VMware's Capitalized Software from Prior Periods
 
Special Tax Charges
 
R&D Tax Credit
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(30,835
)
 
$
(57,061
)
 
$

 
$
(12,511
)
 
$

 
$

Research and development
(91,041
)
 
(2,378
)
 

 

 

 

Selling, general and administrative
(125,052
)
 
(38,662
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(30,030
)
 

 

 

Non-operating (income) expense
470

 

 

 

 

 

Income tax provision
68,834

 
29,054

 
7,262

 
4,130

 
(11,514
)
 
(66,500
)
Net income attributable to VMware
(18,931
)
 
(5,100
)
 
(69
)
 
(1,712
)
 
(854
)
 
(6,456
)
 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(20,878
)
 
$
(31,378
)
 
$

 
$

 
$

 
$

Research and development
(28,262
)
 
(1,124
)
 

 

 

 

Selling, general and administrative
(72,058
)
 
(35,566
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(29,536
)
 

 

 

Non-operating (income) expense
470

 

 

 

 

 

Income tax provision
35,771

 
23,986

 
7,106

 

 
(7,334
)
 
(34,900
)
Net income attributable to VMware

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(9,957
)
 
$
(25,683
)
 
$

 
$
(12,511
)
 
$

 
$

Research and development
(62,779
)
 
(1,254
)
 

 

 

 

Selling, general and administrative
(52,994
)
 
(3,096
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(494
)
 

 

 

Non-operating (income) expense

 

 

 

 

 

Income tax provision
33,063

 
5,068

 
156

 
4,130

 
(4,180
)
 
(31,600
)
Net income attributable to VMware
(18,931
)
 
(5,100
)
 
(69
)
 
(1,712
)
 
(854
)
 
(6,456
)



Supplemental Information
For the Twelve Months Ended December 31, 2012
(in thousands)
(unaudited)

 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring and Acquisition-Related Charges
 
Amortization of VMware's Capitalized Software from Prior Periods
 
RSA Special (Charge) Release
 
Loss on Interest Rate Swaps
 
Gain on Strategic Investment
 
Special Tax Charges
 
R&D Tax Credit
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(125,467
)
 
$
(199,098
)
 
$

 
$
(61,480
)
 
$
23,771

 
$

 
$

 
$

 
$

Research and development
(324,727
)
 
(10,043
)
 

 

 

 

 

 

 

Selling, general and administrative
(470,113
)
 
(155,523
)
 

 

 

 

 

 

 

Restructuring and acquisition-related charges

 

 
(110,590
)
 

 

 

 

 

 

Non-operating (income) expense
3,143

 

 

 

 

 
39,453

 
(31,599
)
 

 

Income tax provision
230,489

 
112,675

 
21,538

 
19,933

 
(5,674
)
 
14,992

 

 
(11,514
)
 
(66,500
)
Net income attributable to VMware
(70,457
)
 
(14,363
)
 
(773
)
 
(8,551
)
 

 

 

 
(854
)
 
(6,456
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(84,758
)
 
$
(125,844
)
 
$

 
$

 
$
23,771

 
$

 
$

 
$

 
$

Research and development
(114,350
)
 
(6,325
)
 

 

 

 

 

 

 

Selling, general and administrative
(272,127
)
 
(143,280
)
 

 

 

 

 

 

 

Restructuring and acquisition-related charges

 

 
(106,694
)
 

 

 

 

 

 

Non-operating (income) expense
3,143

 

 

 

 

 
39,453

 
(31,599
)
 

 

Income tax provision
123,766

 
93,335

 
21,382

 

 
(5,674
)
 
14,992

 

 
(7,334
)
 
(34,900
)
Net income attributable to VMware

 

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(40,709
)
 
$
(73,254
)
 
$

 
$
(61,480
)
 
$

 
$

 
$

 
$

 
$

Research and development
(210,377
)
 
(3,718
)
 

 

 

 

 

 

 

Selling, general and administrative
(197,986
)
 
(12,243
)
 

 

 

 

 

 

 

Restructuring and acquisition-related charges

 

 
(3,896
)
 

 

 

 

 

 

Non-operating (income) expense

 

 

 

 

 

 

 

 

Income tax provision
106,723

 
19,340

 
156

 
19,933

 

 

 

 
(4,180
)
 
(31,600
)
Net income attributable to VMware
(70,457
)
 
(14,363
)
 
(773
)
 
(8,551
)
 

 

 

 
(854
)
 
(6,456
)





Supplemental Information
For the Three Months Ended December 31, 2011
(in thousands)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring and Acquisition-Related Charges
EMC Consolidated
 
 
 
 
 
Cost of revenue
$
(31,720
)
 
$
(40,757
)
 
$

Research and development
(71,246
)
 
(3,914
)
 

Selling, general and administrative
(110,979
)
 
(41,484
)
 

Restructuring and acquisition-related charges

 

 
(28,923
)
Non-operating (income) expense
(616
)
 

 

Income tax provision
47,580

 
27,273

 
3,663

Net income attributable to VMware
(13,940
)
 
(2,758
)
 
(40
)
 
 
 
 
 
 
EMC Information Infrastructure
 
 
 
 
 
Cost of revenue
$
(22,122
)
 
$
(27,014
)
 
$

Research and development
(31,603
)
 
(3,117
)
 

Selling, general and administrative
(76,191
)
 
(38,582
)
 

Restructuring and acquisition-related charges

 

 
(28,726
)
Non-operating (income) expense
(616
)
 

 

Income tax provision
32,463

 
23,465

 
3,663

Net income attributable to VMware

 

 

 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
Cost of revenue
$
(9,598
)
 
$
(13,743
)
 
$

Research and development
(39,643
)
 
(797
)
 

Selling, general and administrative
(34,788
)
 
(2,902
)
 

Restructuring and acquisition-related charges

 

 
(197
)
Non-operating (income) expense

 

 

Income tax provision
15,117

 
3,808

 

Net income attributable to VMware
(13,940
)
 
(2,758
)
 
(40
)




Supplemental Information
For the Twelve Months Ended December 31, 2011
(in thousands)
(unaudited)

 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring and Acquisition-Related Charges
 
RSA Special (Charge) Release
 
Gain on Strategic Investment
EMC Consolidated
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(123,677
)
 
$
(157,191
)
 
$

 
$
(66,300
)
 
$

Research and development
(299,255
)
 
(16,409
)
 

 

 

Selling, general and administrative
(413,239
)
 
(168,196
)
 

 

 

Restructuring and acquisition-related charges

 

 
(97,334
)
 

 

Non-operating (income) expense
3,818

 

 

 

 
(56,000
)
Income tax provision
194,594

 
107,902

 
15,894

 
10,078

 
(19,600
)
Net income attributable to VMware
(58,355
)
 
(9,957
)
 
(496
)
 

 
7,462

 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(84,570
)
 
$
(108,208
)
 
$

 
$
(66,300
)
 
$

Research and development
(124,991
)
 
(13,221
)
 

 

 

Selling, general and administrative
(277,345
)
 
(157,838
)
 

 

 

Restructuring and acquisition-related charges

 

 
(94,911
)
 

 

Non-operating (income) expense
3,818

 

 

 

 

Income tax provision
131,814

 
94,252

 
15,894

 
10,078

 

Net income attributable to VMware

 

 

 

 

 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(39,107
)
 
$
(48,983
)
 
$

 
$

 
$

Research and development
(174,264
)
 
(3,188
)
 

 

 

Selling, general and administrative
(135,894
)
 
(10,358
)
 

 

 

Restructuring and acquisition-related charges

 

 
(2,423
)
 

 

Non-operating (income) expense

 

 

 

 
(56,000
)
Income tax provision
62,780

 
13,650

 

 

 
(19,600
)
Net income attributable to VMware
(58,355
)
 
(9,957
)
 
(496
)
 

 
7,462


























Supplemental Information
For the Three Months Ended December 31, 2012
(in thousands)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
1,293,155

 
$
(2,045
)
 
$
1,291,110

Cost of revenue
191,824

 
(1,057
)
 
190,767

Gross margin
1,101,331

 
(988
)
 
1,100,343

Research and development
268,323

 
(2,225
)
 
266,098

Selling, general and administrative
580,483

 
1,281

 
581,764

Restructuring and acquisition-related charges

 
494

 
494

Operating income
252,525

 
(538
)
 
251,987

Non-operating income (expense)
7,399

 
(156
)
 
7,243

Income before taxes
259,924

 
(694
)
 
259,230

Income tax provision
54,155

 
4,874

 
59,029

Net income
$
205,769

 
(5,568
)
 
200,201

Net income attributable to VMware
 
 
(42,037
)
 
(42,037
)
Net income attributable to EMC
 
 
$
(47,605
)
 
$
158,164


Supplemental Information
For the Three Months Ended December 31, 2011
(in thousands)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
1,060,302

 
$
(1,783
)
 
$
1,058,519

Cost of revenue
166,874

 
(642
)
 
166,232

Gross margin
893,428

 
(1,141
)
 
892,287

Research and development
216,992

 
(1,225
)
 
215,767

Selling, general and administrative
462,380

 
(1,513
)
 
460,867

Restructuring and acquisition-related charges

 
197

 
197

Operating income (expense)
214,056

 
1,400

 
215,456

Non-operating income
(5,190
)
 
7,458

 
2,268

Income before taxes
208,866

 
8,858

 
217,724

Income tax provision
8,438

 
(2,440
)
 
5,998

Net income
$
200,428

 
11,298

 
211,726

Net income attributable to VMware
 
 
(40,544
)
 
(40,544
)
Net income attributable to EMC
 
 
$
(29,246
)
 
$
171,182






Supplemental Information
For the Twelve Months Ended December 31, 2012
(in thousands)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
4,605,047

 
$
(9,446
)
 
$
4,595,601

Cost of revenue
721,323

 
(2,937
)
 
718,386

Gross margin
3,883,724

 
(6,509
)
 
3,877,215

Research and development
999,214

 
(8,772
)
 
990,442

Selling, general and administrative
2,012,567

 
(2,968
)
 
2,009,599

Restructuring and acquisition-related charges

 
3,896

 
3,896

Operating income (expense)
871,943

 
1,335

 
873,278

Non-operating income
21,171

 
6,409

 
27,580

Income before taxes
893,114

 
7,744

 
900,858

Income tax provision
147,412

 
2,581

 
149,993

Net income
$
745,702

 
5,163

 
750,865

Net income attributable to VMware
 
 
(153,404
)
 
(153,404
)
Net income attributable to EMC
 
 
$
(148,241
)
 
$
597,461



Supplemental Information
For the Twelve Months Ended December 31, 2011
(in thousands)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
3,767,096

 
$
(4,242
)
 
$
3,762,854

Cost of revenue
621,987

 
(568
)
 
621,419