EX-99.1 2 exhibit991q42014.htm PRESS RELEASE Exhibit 99.1 Q4 2014
Exhibit 99.1

Press Contact:
Katryn McGaughey
508-293-7717
katryn.mcgaughey@emc.com

EMC Reports Full-Year 2014 Financial Results, Record Fourth-Quarter Revenue
 
 
Highlights:

l
Record Q4 revenue of $7 billion, up 5% year over year

l
Q4 GAAP EPS up 17% year over year; Q4 non-GAAP EPS up 15% year over year

l
EMC Information Infrastructure, VMware and Pivotal Q4 revenue up 2%, 16% and 18% year over year, respectively

l
Q4 revenue from Emerging Storage grew 40% year over year; Full-year 2014 revenue grew 52% year over year


HOPKINTON, Mass. - January 29, 2015 - EMC Corporation (NYSE:EMC) today reported fourth-quarter and full-year 2014 financial results. Record fourth-quarter consolidated revenue was $7 billion, up 5% year over year. GAAP net income attributable to EMC was $1.15 billion, an increase of 12% compared with the year-ago quarter. GAAP earnings per weighted average diluted share was $0.56 in the fourth quarter, up 17% year over year. Non-GAAP1 net income attributable to EMC was $1.4 billion, an increase of 10% compared with the year-ago quarter. Non-GAAP1 earnings per weighted average diluted share was $0.69, up 15% compared with the year-ago quarter.

Full-year 2014 revenue was $24.4 billion, an increase of 5% year over year. GAAP net income attributable to EMC for 2014 was $2.7 billion, down 6% year over year, and GAAP earnings per weighted average diluted share was $1.32, down 1% year over year. Non-GAAP2 net income attributable to EMC for 2014 was $3.9 billion, an increase of 1% year over year, and non-GAAP2 earnings per weighted average diluted share was $1.90, an increase of 6% year over year.

For 2014, EMC generated $6.5 billion in operating cash flow and $5 billion in free cash flow3. The company closed 2014 with $14.7 billion in cash and investments. In the fourth quarter EMC repurchased approximately $1.6 billion worth of its common stock and returned approximately $240 million to shareholders via a quarterly dividend. Over the course of 2014 EMC returned $3.9 billion to shareholders through the repurchase of $3 billion worth of its common stock and approximately $900 million via quarterly dividends.

Joe Tucci, Chairman and CEO, said, “EMC demonstrated solid performance in the fourth quarter and over the course of 2014. Our strategy is working well despite a challenging and rapidly changing IT environment. The company stands at the forefront of our industry with a leading portfolio of solutions and services to help customers optimize their existing infrastructures and build new ones that take advantage of opportunities created by cloud, mobile, social and Big Data. We enter 2015 financially strong and well positioned to continue capturing greater market share.”

Zane Rowe, EMC CFO, said, “EMC is establishing a solid foundation for the future, while also delivering near-term growth as we transform our business. Thanks to the unified team effort, in 2014 EMC grew revenue and EPS, gained share, increased our dividend and accelerated our buyback program - returning



$3.9 billion to shareholders. Our strong operational results were impacted by currency fluctuations and EMC’s investments in high-growth businesses. While we expect these factors to continue to impact 2015 results, we remain focused on driving growth for shareholders and delivering best-in-class solutions for customers.”

David Goulden, CEO of EMC Information Infrastructure, said, “In 2014 EMC II invested aggressively in key technology areas, innovated across all businesses, and continued to extend our lead in slower-growing but massive storage markets while making enormous strides in faster-growing areas like all-flash, where we are also the market segment leader. We delivered new and differentiated solutions, like the Enterprise Hybrid Cloud solution to help customers bring cloud agility and flexibility to existing applications and a platform for rapid deployment of new applications - a key differentiator for EMC. We also continued our leadership in converged infrastructure, helping customers transform their IT infrastructure by significantly reducing time to deploy and cost to manage new IT infrastructure. Collectively, this will serve us well in 2015 and ensure our continued lead in information infrastructure well into the future.”

Fourth-Quarter and Full-Year 2014

EMC Information Infrastructure business fourth-quarter and full-year 2014 revenue were each up 2% year over year. Information Storage revenue in the fourth quarter grew 3% year over year and 2% for the full year. Emerging Storage4 revenue in the fourth quarter grew 40% year over year and 52% for the full-year 2014, achieving $2.3 billion in revenue over the course of 2014, with notably strong growth for EMC XtremIO, EMC ViPR, EMC Isilon and EMC ScaleIO. Within this, EMC XtremIO bookings more than doubled to nearly $300 million in the fourth quarter compared with the previous quarter, thereby securing a commanding lead over the all-flash array market segment. Unified and Backup and Recovery revenue grew in the fourth quarter and was up 4% for the full-year 2014. Within this, EMC VNX systems continue to do well, adding approximately 2,000 new customers in the fourth quarter, with the vast majority being new to EMC storage. RSA fourth-quarter revenue grew 4% year over year and grew 5% for 2014. Converged infrastructure offerings from VCE and VSPEX continued to drive revenue growth in the fourth quarter, with VCE adding a record number of new customers in the quarter.

VMware continued its rapid growth trajectory with fourth-quarter and full-year 2014 revenue within EMC each up 16% year over year as customers continue investing in software-defined data center, hybrid cloud solutions and end-user computing. 

Pivotal grew fourth-quarter revenue 18% and full-year 2014 revenue 27% year over year, and remains the fastest growing of EMC’s federated businesses, benefiting from customers leveraging the portfolio to build third platform applications that are transforming their business.

Global Highlights
EMC’s consolidated fourth-quarter revenue from North America grew 6% year over year, and within this revenue from the United States was up 7% year over year. Revenue from EMC’s Europe, Middle East and Africa region grew 6% year over year, Asia Pacific and Japan grew 2% year over year and Latin America grew 8% year over year. Revenue from the BRIC +13 markets grew 7% year over year in the fourth quarter.




Business Outlook
EMC’s business outlook reflects the negative impact of anticipated foreign currency fluctuations and the consolidation of VCE results. Further detail will be provided during today’s 8:30 a.m. ET live webcast for investors, which is available on the EMC Investor Relations website (http://www.emc.com/ir).

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 2015 financial results.

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

Consolidated revenues are expected to be $26.1 billion for 2015.

Consolidated GAAP operating income is expected to be 13.7% of revenues for 2015 and consolidated non-GAAP5 operating income is expected to be 21.4% of revenues for 2015.

Consolidated GAAP earnings per weighted average diluted share are expected to be $1.27 for 2015 and consolidated non-GAAP5 earnings per weighted average diluted share are expected to be $1.98 for 2015.

The consolidated GAAP income tax rate is expected to be 23.0% and the consolidated non-GAAP5 income tax rate is expected to be 23.6% for 2015. This assumes that the U.S. research and development tax credit is extended during 2015.

The weighted average outstanding diluted shares are expected to be 1.96 billion for 2015.

EMC expects to repurchase an aggregate of $3.0 billion of the company’s common stock in 2015.
 
Resources
The fourth-quarter and full-year 2014 webcast will be available for replay on the EMC Investor Relations website at http://www.emc.com/ir
EMC financial results are also available on the U.S. Securities and Exchange Commission website
Visit http://ir.vmware.com for more detail on VMware’s fourth-quarter 2014 financial results
Download the EMC Investor Relations App here
Visit EMC Pulse for breaking product and technology news from EMC
Visit EMC Reflections for executive insight on business and IT trends
Connect with EMC via @EMCCorp, LinkedIn and Facebook

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 2014 and 2013 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition and other related charges, the reversal of the R&D tax credit for 2014, a gain on previously held interests in strategic investments and joint venture, the amortization of VMware’s capitalized software from prior periods and special tax items. See attached schedules for GAAP to non-GAAP reconciliations.

2 Items excluded from the non-GAAP results for the full years 2014 and 2013 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition and other related charges, the R&D tax credit for 2012, a gain on previously held interests in strategic investments and joint venture, an impairment of strategic investment, VMware litigation and other contingencies, the amortization of VMware’s capitalized software from prior periods, special tax items and a net gain on the disposition of certain lines of business and other. See attached schedules for GAAP to non-GAAP reconciliations.

3 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 three and twelve months ended December 31, 2014 and 2013.

4 EMC’s Emerging Storage business primarily includes product and maintenance revenues from EMC Isilon, EMC Atmos, EMC VPLEX, EMC ViPR, EMC ScaleIO, EMC Elastic Cloud Storage Appliance, EMC RecoverPoint, Data Computing Appliance, ASD Suites and EMC vFlash and EMC XtremIO families.

5Items excluded from the non-GAAP business outlook for 2015 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges and acquisition and other related charges.  A benefit for an R&D tax credit is included in the GAAP and non-GAAP business outlook for 2015.  See attached schedules for GAAP to non-GAAP reconciliations.

EMC, Atmos, EMC RecoverPoint, Isilon, VNX, VPLEX, VSPEX, ViPR, ScaleIO and XtremIO are either registered trademarks or trademarks of EMC Corporation 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," certain items noted on each such specific schedule (including, where noted, amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition and other related charges, the reversal of the R&D tax credit for 2014, the R&D tax credit for 2012, a gain on previously held interests in strategic investments and joint venture, an impairment of strategic investment, VMware litigation and other contingencies, the amortization of VMware’s capitalized software from prior periods, special tax items and a net gain on the disposition of certain lines of business and other) 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 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, pay dividends, 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 millions, except per share amounts)
(unaudited)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
 
Product sales
$
4,322

 
$
4,155

 
$
14,051

 
$
13,690

 
Services
2,726

 
2,527

 
10,389

 
9,532

 
 
7,048

 
6,682

 
24,440

 
23,222

Cost and expenses:
 
 
 
 
 
 
 
 
Cost of product sales
1,669

 
1,630

 
5,738

 
5,650

 
Cost of services
874

 
828

 
3,453

 
3,099

 
Research and development
752

 
705

 
2,991

 
2,761

 
Selling, general and administrative
2,131

 
2,029

 
7,982

 
7,338

 
Restructuring and acquisition-related charges
52

 
29

 
239

 
224

Operating income
1,570

 
1,461

 
4,037

 
4,150

 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
 
Investment income
24

 
35

 
123

 
128

 
Interest expense
(39
)
 
(47
)
 
(147
)
 
(156
)
 
Other expense, net
(6
)
 
(61
)
 
(251
)
 
(257
)
Total non-operating income (expense)
(21
)
 
(73
)
 
(275
)
 
(285
)
Income before provision for income taxes
1,549

 
1,388

 
3,762

 
3,865

Income tax provision
336

 
298

 
868

 
772

Net income
1,213

 
1,090

 
2,894

 
3,093

Less: Net income attributable to the non-controlling interest in VMware, Inc.
(66
)
 
(68
)
 
(180
)
 
(204
)
Net income attributable to EMC Corporation
$
1,147

 
$
1,022

 
$
2,714

 
$
2,889

 
 
 
 
 
 
 
 
Net income per weighted average share, basic attributable to EMC Corporation common shareholders
$
0.57

 
$
0.50

 
$
1.34

 
$
1.39

Net income per weighted average share, diluted attributable to EMC Corporation common shareholders
$
0.56

 
$
0.48

 
$
1.32

 
$
1.33

 
 
 
 
 
 
 
 
Weighted average shares, basic
2,014

 
2,034

 
2,028

 
2,074

Weighted average shares, diluted
2,038

 
2,114

 
2,059

 
2,160

 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.12

 
$
0.10

 
$
0.45

 
$
0.30





EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
 
 
December 31,
 
December 31,
 
 
2014
 
2013
                                                   ASSETS
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
6,343

 
$
7,891

 
Short-term investments
1,978

 
2,773

 
Accounts and notes receivable, less allowance for doubtful accounts of $72 and $62
4,413

 
3,861

 
Inventories
1,276

 
1,334

 
Deferred income taxes
1,070

 
912

 
Other current assets
653

 
507

Total current assets
15,733

 
17,278

Long-term investments
6,334

 
6,924

Property, plant and equipment, net
3,766

 
3,478

Intangible assets, net
2,125

 
1,780

Goodwill
16,134

 
14,424

Other assets, net
1,793

 
1,965

 
Total assets
$
45,885

 
$
45,849

 
 
 
 
 
                LIABILITIES & SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
$
1,696

 
$
1,434

 
Accrued expenses
3,141

 
2,783

 
Notes converted and payable

 
1,665

 
Income taxes payable
852

 
639

 
Deferred revenue
6,021

 
5,278

Total current liabilities
11,710

 
11,799

Income taxes payable
306

 
296

Deferred revenue
4,144

 
3,701

Deferred income taxes
274

 
421

Long-term debt
5,495

 
5,494

Other liabilities
431

 
352

 
Total liabilities
22,360

 
22,063

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

 

 
Common stock, par value $0.01; authorized 6,000 shares; issued and outstanding 1,985 and 2,020 shares
20

 
20

 
Additional paid-in capital

 
1,406

 
Retained earnings
22,242

 
21,114

 
Accumulated other comprehensive loss, net
(366
)
 
(239
)
 
Total EMC Corporation's shareholders' equity
21,896

 
22,301

Non-controlling interests
1,629

 
1,485

 
Total shareholders' equity
23,525

 
23,786

 
Total liabilities and shareholders' equity
$
45,885

 
$
45,849






EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
 
 
 
 
Twelve Months Ended
 
 
 
 
 
December 31,
 
December 31,
 
 
 
 
 
2014
 
2013
Cash flows from operating activities:
 
 
 
 
Cash received from customers
$
25,360

 
$
24,319

 
Cash paid to suppliers and employees
(17,893
)
 
(16,708
)
 
Dividends and interest received
143

 
169

 
Interest paid
(134
)
 
(96
)
 
Income taxes paid
(953
)
 
(761
)
 
 
 
Net cash provided by operating activities
6,523

 
6,923

 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Additions to property, plant and equipment
(979
)
 
(943
)
 
Capitalized software development costs
(509
)
 
(465
)
 
Purchases of short- and long-term available-for-sale securities
(9,982
)
 
(11,250
)
 
Sales of short- and long-term available-for-sale securities
8,722

 
5,292

 
Maturities of short- and long-term available-for-sale securities
2,651

 
2,845

 
Business acquisitions, net of cash acquired
(1,973
)
 
(770
)
 
Purchases of strategic and other related investments
(144
)
 
(131
)
 
Sales of strategic and other related investments
101

 
35

 
Joint venture funding
(360
)
 
(411
)
 
Proceeds from divestiture of business

 
38

 
Increase in restricted cash
(78
)
 

 
 
 
Net cash used in investing activities
(2,551
)
 
(5,760
)
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from the issuance of EMC's common stock
503

 
342

 
Proceeds from the issuance of VMware's common stock
164

 
197

 
EMC repurchase of EMC's common stock
(2,969
)
 
(3,015
)
 
EMC purchase of VMware's common stock

 
(160
)
 
VMware repurchase of VMware's common stock
(700
)
 
(508
)
 
Excess tax benefits from stock-based compensation
102

 
116

 
Payment of long- and short-term obligations
(1,665
)
 
(46
)
 
Proceeds from long- and short-term obligations

 
5,460

 
Contributions from non-controlling interests

7

 
105

 
Dividend payment
(879
)
 
(415
)
 
 
 
Net cash (used in) provided by financing activities
(5,437
)
 
2,076

 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(83
)
 
(62
)
 
 
 
 
 
 
 
 
Net (decrease) increase in cash and cash equivalents
(1,548
)
 
3,177

Cash and cash equivalents at beginning of period
7,891

 
4,714

Cash and cash equivalents at end of period
$
6,343

 
$
7,891

 
 
 
 
 
 
 
 
Reconciliation of net income to net cash provided by operating activities:
 
 
 
Net income
$
2,894

 
$
3,093

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
1,864

 
1,665

 
Non-cash interest expense on debt
1

 
62

 
Non-cash restructuring and other special charges
19

 
8

 
Stock-based compensation expense
1,031

 
935

 
Provision for (recovery of) doubtful accounts
10

 
(1
)
 
Deferred income taxes, net
(396
)
 
(202
)



 
Excess tax benefits from stock-based compensation
(102
)
 
(116
)
 
Gain on previously held interests in strategic investments and joint venture

(101
)
 

 
Impairment of strategic investment

33

 

 
Other, net
20

 
40

 
Changes in assets and liabilities, net of acquisitions:
 
 
 
 
 
Accounts and notes receivable
(309
)
 
(377
)
 
 
Inventories
(149
)
 
(408
)
 
 
Other assets
345

 
269

 
 
Accounts payable
167

 
380

 
 
Accrued expenses
(286
)
 
(162
)
 
 
Income taxes payable
314

 
222

 
 
Deferred revenue
1,126

 
1,475

 
 
Other liabilities
42

 
40

 
 
 
Net cash provided by operating activities
$
6,523

 
$
6,923





Reconciliation of GAAP to Non-GAAP*
(in millions, except per share amounts)
(unaudited)
 
Three Months Ended
 
 
 
Diluted
 
 
 
Diluted
 
December 31,
 
Earnings
 
December 31,
 
Earnings
 
2014
 
Per Share
 
2013
 
Per Share
Net Income Attributable to EMC GAAP
$
1,147

 
$
0.562

 
$
1,022

 
$
0.482

Stock-based compensation expense
190

 
0.093

 
176

 
0.083

Intangible asset amortization
68

 
0.034

 
62

 
0.030

Restructuring charges
34

 
0.017

 
19

 
0.009

Acquisition and other related charges
31

 
0.015

 

 

R&D tax credit
(32
)
 
(0.016
)
 

 

Gain on previously held interests in strategic investments and joint venture
(33
)
 
(0.016
)
 

 

Amortization of VMware's capitalized software from prior periods

 

 
1

 

Special tax items

 

 
(4
)
 
(0.002
)
Net Income Attributable to EMC Non-GAAP
$
1,405

 
$
0.689

 
$
1,276

 
$
0.602

 
 
 
 
 
 
 
 
Weighted average shares, diluted
 
 
2,038

 
 
 
2,114

Incremental VMware dilution
 
 
$
2

 
 
 
$
2

 
Twelve Months Ended
 
 
 
Diluted
 
 
 
Diluted
 
December 31,
 
Earnings
 
December 31,
 
Earnings
 
2014
 
Per Share
 
2013
 
Per Share
Net Income Attributable to EMC GAAP
$
2,714

 
$
1.315

 
$
2,889

 
$
1.333

Stock-based compensation expense
713

 
0.347

 
638

 
0.295

Intangible asset amortization
263

 
0.128

 
257

 
0.118

Restructuring charges
168

 
0.082

 
148

 
0.068

Acquisition and other related charges
108

 
0.052

 
8

 
0.004

R&D tax credit

 

 
(61
)
 
(0.028
)
Gain on previously held interests in strategic investments and joint venture
(77
)
 
(0.038
)
 

 

Impairment of strategic investment
23

 
0.011

 

 

VMware litigation and other contingencies
7

 
0.003

 

 

Amortization of VMware's capitalized software from prior periods

 

 
18

 
0.009

Special tax items

 

 
19

 
0.009

Net gain on disposition of certain lines of business and other

 

 
(22
)
 
(0.010
)
Net Income Attributable to EMC Non-GAAP
$
3,919

 
$
1.900

 
$
3,894

 
$
1.798

 
 
 
 
 
 
 
 
Weighted average shares, diluted
 
 
2,059

 
 
 
2,160

Incremental VMware dilution
 
 
$
7

 
 
 
$
8

*
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: Schedules may not add or recalculate due to rounding.



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

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Gross Margin GAAP
$
4,505

 
$
4,224

 
$
15,249

 
$
14,473

Stock-based compensation expense
39

 
32

 
146

 
124

Intangible asset amortization
64

 
59

 
247

 
232

Amortization of VMware's capitalized software from prior periods

 
1

 

 
34

Gross Margin Non-GAAP
$
4,608

 
$
4,316

 
$
15,642

 
$
14,863

 
 
 
 
 
 
 
 
Revenues
$
7,048

 
$
6,682

 
$
24,440

 
$
23,222

 
 
 
 
 
 
 
 
Gross Margin Percentages:
 
 
 
 
 
 
 
GAAP
63.9
%
 
63.2
%
 
62.4
%
 
62.3
%
Non-GAAP
65.4
%
 
64.6
%
 
64.0
%
 
64.0
%




 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Operating Margin GAAP
$
1,570

 
$
1,461

 
$
4,037

 
$
4,150

Stock-based compensation expense
260

 
239

 
1,020

 
935

Intangible asset amortization
102

 
98

 
402

 
389

Restructuring charges
47

 
27

 
226

 
212

Acquisition and other related charges
56

 
2

 
186

 
12

Amortization of VMware's capitalized software from prior periods

 
1

 

 
34

VMware litigation and other contingencies

 

 
11

 

Operating Margin Non-GAAP
$
2,035

 
$
1,828

 
$
5,882

 
$
5,732

 
 
 
 
 
 
 
 
Revenues
$
7,048

 
$
6,682

 
$
24,440

 
$
23,222

 
 
 
 
 
 
 
 
Operating Margin Percentages:
 
 
 
 
 
 
 
GAAP
22.3
%
 
21.9
%
 
16.5
%
 
17.9
%
Non-GAAP
28.9
%
 
27.4
%
 
24.1
%
 
24.7
%

Note: Schedules may not add or recalculate due to rounding.








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

 
Three Months Ended December 31, 2014
 
Twelve Months Ended December 31, 2014
 
Income Before
 
Tax Provision
 
Tax
 
Income Before
 
Tax Provision
 
Tax
 
Tax
 
(Benefit)
 
Rate
 
Tax
 
(Benefit)
 
Rate
EMC Consolidated GAAP
$
1,549

 
$
336

 
21.7
%
 
$
3,762

 
$
868

 
23.1
%
Stock-based compensation expense
260

 
49

 
18.7
%
 
1,021

 
224

 
22.0
%
Intangible asset amortization
102

 
28

 
27.8
%
 
402

 
118

 
29.2
%
Restructuring charges
47

 
12

 
25.8
%
 
226

 
56

 
24.6
%
Acquisition and other related charges
56

 
20

 
35.2
%
 
187

 
60

 
32.3
%
R&D tax credit

 
34

 
N/A

 

 

 
N/A

VMware litigation and other contingencies

 

 
N/A

 
11

 
2

 
19.0
%
Gain on previously held interests in strategic investments and joint venture
(44
)
 
(11
)
 
24.7
%
 
(88
)
 
(11
)
 
12.1
%
Impairment of strategic investment

 

 
N/A

 
33

 
10

 
28.8
%
EMC Consolidated Non-GAAP
$
1,970

 
$
468

 
23.8
%
 
$
5,554

 
$
1,327

 
23.9
%




 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
 
2014
 
2013
 
2014
 
2013
Cash Flow from Operations
 
$
2,231

 
$
2,190

 
$
6,523

 
$
6,923

Capital expenditures
 
(286
)
 
(270
)
 
(979
)
 
(943
)
Capitalized software development costs
 
(127
)
 
(123
)
 
(509
)
 
(465
)
Free Cash Flow
 
$
1,818

 
$
1,797

 
$
5,035

 
$
5,515


Note: Schedules may not add or recalculate due to rounding.





Reconciliation of GAAP to Non-GAAP
(in millions, except per share amounts)
(unaudited)
 
Twelve Months Ending December 31,
 
2015
Operating Income as a % of Revenue - GAAP
13.7
%
 
 
Stock-based compensation expense
4.6
%
Intangible asset amortization
1.5
%
Restructuring charges
0.9
%
Acquisition and other related charges
0.7
%
 
 
Operating Income as a % of Revenue - Non-GAAP
21.4
%
 
Twelve Months Ending December 31,
 
2015
Diluted Earnings Per Share - GAAP
$
1.27

 
 
Stock-based compensation expense
0.44

Intangible asset amortization
0.14

Restructuring charges
0.08

Acquisition and other related charges
0.05

 
 
Diluted Earnings Per Share - Non-GAAP
$
1.98

 
Twelve Months Ending December 31,
 
2015
Tax Rate - GAAP
23.0
%
 
 
Impact of stock-based compensation expense, intangible asset amortization, restructuring charges and acquisition and other related charges
0.6
%
 
 
Tax Rate - Non-GAAP
23.6
%
Impact of VCE Acquisition
Twelve Months Ending December 31,
 
2015
Diluted Earnings Per Share - GAAP
$
0.06

 
 
Stock-based compensation expense
(0.01
)
Intangible asset amortization
(0.01
)
 
 
Diluted Earnings Per Share - Non-GAAP
$
0.04

Note: Schedules may not add or recalculate due to rounding.



Supplemental Information
For the Three Months Ended December 31, 2014
(in millions)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring Charges
 
Acquisition and Other Related Charges
 
R&D Tax Credit
 
Gain on Previously Held Interests in Strategic Investments and Joint Venture
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(39
)
 
$
(64
)
 
$

 
$

 
$

 
$

Research and development
(93
)
 
4

 

 

 

 

Selling, general and administrative
(128
)
 
(42
)
 

 
(51
)
 

 

Restructuring and acquisition-related charges

 

 
(47
)
 
(5
)
 

 

Non-operating (income) expense

 

 

 

 

 
(44
)
Income tax provision
49

 
28

 
12

 
20

 
34

 
(11
)
Net income attributable to VMware
(21
)
 
(6
)
 
(1
)
 
(5
)
 
2

 

 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(27
)
 
$
(35
)
 
$

 
$

 
$

 
$

Research and development
(36
)
 
(1
)
 

 

 

 

Selling, general and administrative
(66
)
 
(31
)
 

 
(10
)
 

 

Restructuring and acquisition-related charges

 

 
(36
)
 
(3
)
 

 

Non-operating (income) expense

 

 

 

 

 
(44
)
Income tax provision
21

 
21

 
8

 
2

 
22

 
(11
)
Net income attributable to VMware

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(12
)
 
$
(29
)
 
$

 
$

 
$

 
$

Research and development
(57
)
 
5

 

 

 

 

Selling, general and administrative
(62
)
 
(11
)
 

 
(41
)
 

 

Restructuring and acquisition-related charges

 

 
(11
)
 
(2
)
 

 

Non-operating (income) expense

 

 

 

 

 

Income tax provision
28

 
7

 
4

 
18

 
12

 

Net income attributable to VMware
(21
)
 
(6
)
 
(1
)
 
(5
)
 
2

 




Supplemental Information
For the Three Months Ended December 31, 2013
(in millions)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring Charges
 
Acquisition and Other Related Charges
 
Amortization of VMware's Capitalized Software from Prior Periods
 
Special Tax Items
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(32
)
 
$
(59
)
 
$

 
$

 
$
(1
)
 
$

Research and development
(94
)
 
(2
)
 

 

 

 

Selling, general and administrative
(113
)
 
(37
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(27
)
 
(2
)
 

 

Non-operating (income) expense

 

 

 

 

 

Income tax provision
41

 
32

 
8

 
2

 

 
5

Net income attributable to VMware
(22
)
 
(4
)
 

 

 

 
1

 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(24
)
 
$
(36
)
 
$

 
$

 
$

 
$

Research and development
(32
)
 
(1
)
 

 

 

 

Selling, general and administrative
(61
)
 
(36
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(23
)
 

 

 

Non-operating (income) expense

 

 

 

 

 

Income tax provision
28

 
27

 
4

 
1

 

 

Net income attributable to VMware

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(8
)
 
$
(23
)
 
$

 
$

 
$
(1
)
 
$

Research and development
(62
)
 
(1
)
 

 

 

 

Selling, general and administrative
(52
)
 
(1
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(4
)
 
(2
)
 

 

Non-operating (income) expense

 

 

 

 

 

Income tax provision
13

 
5

 
4

 
1

 

 
5

Net income attributable to VMware
(22
)
 
(4
)
 

 

 

 
1





Supplemental Information
For the Twelve Months Ended December 31, 2014
(in millions)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring Charges
 
Acquisition and Other Related Charges
 
Gain on Previously Held Interests in Strategic Investments and Joint Venture
 
Impairment of Strategic Investment
 
VMware Litigation and Other Contingencies
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(146
)
 
$
(247
)
 
$

 
$

 
$

 
$

 
$

Research and development
(382
)
 
(5
)
 

 

 

 

 

Selling, general and administrative
(492
)
 
(150
)
 

 
(173
)
 

 

 
(11
)
Restructuring and acquisition-related charges

 

 
(226
)
 
(13
)
 

 

 

Non-operating (income) expense
1

 

 

 
1

 
(88
)
 
33

 

Income tax provision
224

 
118

 
56

 
60

 
(11
)
 
10

 
2

Net income attributable to VMware
(84
)
 
(21
)
 
(2
)
 
(19
)
 

 

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(102
)
 
$
(138
)
 
$

 
$

 
$

 
$

 
$

Research and development
(138
)
 
(5
)
 

 

 

 

 

Selling, general and administrative
(251
)
 
(122
)
 

 
(31
)
 

 

 

Restructuring and acquisition-related charges

 

 
(210
)
 
(6
)
 

 

 

Non-operating (income) expense
1

 

 

 

 
(88
)
 
33

 

Income tax provision
111

 
84

 
50

 
4

 
(11
)
 
10

 

Net income attributable to VMware

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(44
)
 
$
(109
)
 
$

 
$

 
$

 
$

 
$

Research and development
(244
)
 

 

 

 

 

 

Selling, general and administrative
(241
)
 
(28
)
 

 
(142
)
 

 

 
(11
)
Restructuring and acquisition-related charges

 

 
(16
)
 
(7
)
 

 

 

Non-operating (income) expense

 

 

 
1

 

 

 

Income tax provision
113

 
34

 
6

 
56

 

 

 
2

Net income attributable to VMware
(84
)
 
(21
)
 
(2
)
 
(19
)
 

 

 
(2
)




Supplemental Information
For the Twelve Months Ended December 31, 2013
(in millions)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring Charges
 
Acquisition and Other Related Charges
 
Amortization of VMware's Capitalized Software from Prior Periods
 
Net Gain on Disposition of Certain Lines of Business and Other
 
Special Tax Items
 
R&D Tax Credit
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(124
)
 
$
(232
)
 
$

 
$

 
$
(34
)
 
$

 
$

 
$

Research and development
(357
)
 
(8
)
 

 

 

 

 

 

Selling, general and administrative
(454
)
 
(149
)
 

 

 

 

 

 

Restructuring and acquisition-related charges

 

 
(212
)
 
(12
)
 

 

 

 

Non-operating (income) expense
1

 

 

 

 

 
(31
)
 

 

Income tax provision
225

 
117

 
54

 
3

 
11

 
(3
)
 
(18
)
 
67

Net income attributable to VMware
(73
)
 
(15
)
 
(10
)
 
(1
)
 
(5
)
 
6

 
1

 
6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(88
)
 
$
(141
)
 
$

 
$

 
$

 
$

 
$

 
$

Research and development
(134
)
 
(5
)
 

 

 

 

 

 

Selling, general and administrative
(256
)
 
(142
)
 

 

 

 

 

 

Restructuring and acquisition-related charges

 

 
(144
)
 
(7
)
 

 

 

 

Non-operating (income) expense
1

 

 

 

 

 

 

 

Income tax provision
128

 
95

 
31

 
2

 

 

 
(23
)
 
35

Net income attributable to VMware



 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(36
)
 
$
(91
)
 
$

 
$

 
$
(34
)
 
$

 
$

 
$

Research and development
(223
)
 
(3
)
 

 

 

 

 

 

Selling, general and administrative
(198
)
 
(7
)
 

 

 

 

 

 

Restructuring and acquisition-related charges

 

 
(68
)
 
(5
)
 

 

 

 

Non-operating (income) expense