-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FWFrem+zY9pNbHTpweMyAN2vGPQxE/2NIwPH3oC1AVFEVSD8TaIgT9w5gL4LnLRw rXMdioP6bp0cm1T/PfFhGA== 0000790070-95-000010.txt : 19950517 0000790070-95-000010.hdr.sgml : 19950516 ACCESSION NUMBER: 0000790070-95-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMC CORP CENTRAL INDEX KEY: 0000790070 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 042680009 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09853 FILM NUMBER: 95538309 BUSINESS ADDRESS: STREET 1: 35 PARKWOOD DR CITY: HOPKINTON STATE: MA ZIP: 01748-9103 BUSINESS PHONE: 5084351000 MAIL ADDRESS: STREET 1: 171 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748-9103 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarter Ended: April 1, 1995 Commission File Number 1-9853 EMC CORPORATION -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2680009 - -------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) organization or incorporation) 171 South Street Hopkinton, Massachusetts 01748-9103 - ------------------------------------------------------------ (Address of principal executive offices, including zip code) (508) 435-1000 ----------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ________ Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock, par value $.01 per share 213,268,346 - -------------------------------------- ------------------------------- Class Outstanding as of April 1, 1995 - -2- EMC CORPORATION Page No. Part I - Financial Information Consolidated Balance Sheets April 1, 1995 and December 31, 1994 3 Consolidated Statements of Operations for the Three Months Ended April 1, 1995 and April 2, 1994 4 Consolidated Statements of Cash Flows for the Three Months Ended April 1, 1995 and April 2, 1994 5 Notes to Interim Consolidated Financial Statements 6 - 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 12 Part II - Other Information 13 Signatures 14 Exhibit Index 15 - -3- EMC CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in thousands except share amounts) April 1, December 31, ASSETS 1995 1994 Current assets: Cash and cash equivalents $237,281 $240,506 Trade and notes receivable less allowance for doubtful accounts of $6,112 and $6,272, respectively 365,554 361,191 Inventories 290,812 251,096 Deferred income taxes 40,754 40,754 Other assets 11,302 8,258 Total current assets 945,703 901,805 Long-term investments, at cost 156,923 175,631 Notes receivable 37,126 38,945 Property, plant and equipment, net 187,674 173,016 Deferred income taxes 4,473 4,473 Other assets, net 34,223 23,630 Total assets $1,366,122 $1,317,500 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations $830 $9,502 Accounts payable 78,508 122,264 Accrued expenses 95,460 106,107 Income taxes payable 84,740 55,521 Deferred revenue 9,238 8,070 Total current liabilities 268,776 301,464 Deferred revenue 3,263 2,289 Long-term obligations: 4 1/4% Convertible Subordinated Notes due 2001 229,598 229,598 6 1/4% Convertible Subordinated Debentures due 2002 -- 39,536 Notes payable and capital lease obligations 17,216 16,972 Total liabilities 518,853 589,859 Stockholders' equity: Series Preferred Stock, par value $.01; authorized 25,000,000 shares --- --- Common Stock, par value $.01; authorized 330,000,000 shares; issued 215,911,355 and 201,738,042, in 1995 and 1994 respectively 2,159 2,017 Additional paid-in capital 323,205 281,625 Deferred compensation (2,348) (2,607) Retained earnings 521,694 443,713 Cumulative translation adjustment 3,720 3,716 Treasury stock, at cost, 2,643,009 and 2,627,467 shares, respectively (1,161) (823) Total stockholders' equity 847,269 727,641 Total liabilities and stockholders' equity $1,366,122 $1,317,500 The accompanying notes are an integral part of the consolidated financial statements. - -4- EMC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands except per share amounts) (unaudited) For the Three Months Ended April 1, April 2, 1995 1994 Revenues: Net sales $410,777 $257,720 Service and rental 9,821 9,338 420,598 267,058 Costs and expenses: Cost of sales and service 205,366 124,407 Research and development 37,438 22,348 Selling, general and administrative 70,712 51,604 Operating income 107,082 68,699 Investment income 6,325 4,979 Interest expense (3,488) (3,802) Other income / (expense), net 692 (608) Income before taxes 110,611 69,268 Income tax provision 32,630 20,428 Net income $77,981 $48,840 Net income per weighted average share, primary $0.36 $0.23 Net income per weighted average share, fully diluted $0.34 $0.22 Weighted average number of common shares outstanding, primary 221,513 214,242 Weighted average number of common shares outstanding, fully diluted 233,855 233,730 The accompanying notes are an integral part of the consolidated financial statements. - -5- EMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited) For the Three Months Ended April 1, April 2, 1995 1994 Cash flows from operating activities: Net income $77,981 $48,840 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,151 7,034 Deferred income taxes --- (2,062) Net loss on disposal of property and equipment --- 146 Changes in assets and liabilities: Trade and notes receivable (2,501) (46,137) Inventories (39,720) (26,570) Other assets (15,090) (15,137) Accounts payable (43,843) 17,341 Accrued expenses (10,498) 2,420 Income taxes payable 29,219 5,579 Deferred revenue 2,118 (59) Net cash provided/(used) by operating activities 9,817 (8,605) Cash flows from investing activities: Additions to property and equipment (25,387) (22,193) Net (purchase)/maturity of long-term investments 18,708 (117,638) Net cash used by investing activities (6,679) (139,831) Cash flows from financing activities: Issuance of common stock 2,107 3,828 Issuance of 4 1/4% convertible subordinated notes due 2001, net of issuance cost --- 29,350 Payment of long-term and short-term obligations (8,675) (312) Issuance of long-term and short-term obligations 247 1,352 Net cash (used)/provided by financing activities (6,321) 34,218 Effect of exchange rate changes on cash (42) 518 Net decrease in cash and cash equivalents (3,183) (114,218) Cash and cash equivalents at beginning of period 240,506 345,300 Cash and cash equivalents at end of period $237,281 $231,600 Non-Cash Activity - Conversion of Debentures 39,536 353 The accompanying notes are an integral part of the consolidated financial statements. - -6- EMC CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Company EMC Corporation and its subsidiaries ("EMC" or the "Company") design, manufacture, market and support high performance storage products and provide related services for mainframe and midrange computer systems manufactured primarily by International Business Machines Corporation ("IBM"), Unisys Corporation ("Unisys") and Compagnie des Machines Bull S.A. ("Bull"). The Company has recently added a family of products aimed at the open systems storage marketplace. Accounting The accompanying consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles. These statements include the accounts of EMC and its subsidiaries. Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements have been condensed or omitted. The interim consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair statement of the results for the interim periods ended April 1, 1995 and April 2, 1994. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the entire fiscal year. It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1994, which are contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 1995. Acquisition In February 1995, the Company acquired Icon International, Inc. ("Icon"), accounted for under the purchase method. The Company intends to incorporate certain technology of Icon into its development of products for the open systems storage marketplace. The resulting goodwill from this transaction of $6,715,000 is included in other assets non-current at April 1, 1995, net of $224,000 of amortization, and is being amortized over five years. Proforma presentations have not been included as this acquisition was not material to the results of operations of the Company. 2. Inventory April 1, 1995 December 31, 1994 Inventories consist of: Purchased parts $ 14,284,000 $ 8,946,000 Work-in-process 142,905,000 133,116,000 Finished goods 133,623,000 109,034,000 $290,812,000 $251,096,000 -7- EMC CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 3. Convertible Subordinated Debentures In March 1992, the Company issued $60,000,000 of 6 1/4% convertible subordinated debentures due 2002 (the "Debentures"). The Debentures were generally convertible at the option of the holder at any time prior to maturity into shares of Common Stock of the Company at a conversion price of $3.063 per share, subject to adjustment in certain events. In February 1995, the Company notified holders of the Debentures that the Company intended to redeem the Debentures on April 1, 1995, unless the holders chose to convert on or prior to such date. The Company redeemed $1,000 of the Debentures on April 1, 1995. All other Debentures were converted on or prior to that date. 4. Net Income Per Share Net income per share was computed on the basis of weighted average common and dilutive common equivalent shares outstanding. Primary weighted average shares outstanding and earnings used in per share computations for the first quarters of 1995 and 1994 reflect the dilutive effects of the 4 1/4% convertible subordinated notes due 2001 (the "Notes") and outstanding stock options. Fully diluted weighted average shares outstanding and earnings used in per share computations for the first quarters of 1995 and 1994 reflect the dilutive effects of the Debentures, in addition to the dilutive effect of the Notes and outstanding stock options. 5. Litigation On June 10, 1993, Storage Technology Corporation ("STK") filed suit against EMC in the United States District Court for the District of Colorado alleging that EMC is infringing three patents. In the complaint, STK seeks injunctive relief, unspecified damages, including treble damages, plus attorney's fees and costs. On July 20, 1993, EMC answered the complaint, denied STK's allegations and counterclaimed. In the counterclaims, EMC seeks unspecified damages, attorney's fees, costs and interest. In a court hearing on October 12, 1994, STK's claims on two of the three patents were dismissed with prejudice. Discovery on the sole remaining patent in the matter is currently in process. The originally scheduled trial date of October 24, 1994 has been postponed. On September 23, 1994, EMC filed suit against STK in the United States District Court for Delaware alleging that STK is infringing one EMC patent. In the complaint, EMC seeks injunctive relief and unspecified damages, including treble damages, plus attorney's fees and costs. On October 12, 1994, STK answered the complaint, denied any infringement and counterclaimed. STK has subsequently filed an additional counterclaim. EMC has denied STK's allegations. Discovery on this case is currently in process. A trial is expected in late 1995. - -8- EMC CORPORATION The Company is a party to other litigation which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on the Company's business or financial condition. 6. Subsequent Events At the Annual Meeting held on May 10, 1995, the Company's stockholders elected three Class II members to the Board of Directors for a three-year term, approved an increase in the number of shares of authorized common stock of the Company to 500,000,000 shares and the addition of 2,000,000 shares of common stock to the Company's 1993 Stock Option Plan. - -9- EMC CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - First Quarter of 1995 compared to First Quarter of 1994 - ------------------------------------------------------------------------------- Revenues Revenues for the quarter ended April 1, 1995 were $420,598,000 compared to $267,058,000 for the first quarter of 1994, an increase of $153,540,000 or 57%. While the Company expects revenue to continue to increase in all of its markets throughout 1995 as compared to the respective periods in 1994, such increase may not, on a percentage basis, continue at the levels experienced in the first quarter of 1995. The increase in revenues was due primarily to the continued strong demand for the Company's series of Integrated Cached Disk Array ("ICDA") based products, which include the Symmetrix, Harmonix and Centriplex series of products. Revenues from the Symmetrix series of products in the IBM, Unisys and Bull mainframe markets increased by $156,926,000, or 74%, to $368,863,000 in the first quarter of 1995 from $211,937,000 in the first quarter of 1994. Revenues from the Harmonix series of IBM compatible midrange disk products, decreased by $7,980,000 or 25%, to $23,360,000 in the first quarter of 1995 from $31,340,000 in the first quarter of 1994. In the first quarter of 1995, the Company generated approximately 97% of its product revenues from sales of ICDA-based products versus approximately 94% in the same period a year ago. It is expected that revenues from ICDA-based products, including products for the mainframe and open systems storage markets, will remain the largest component of the Company's revenues throughout 1995. Revenues on sales into the markets of North and South America increased by $71,492,000, or 41% to $247,274,000 in the first quarter of 1995 from $175,782,000 in the first quarter of 1994. This increase was primarily due to growth in unit sales of the Symmetrix 5000 series of products in the IBM mainframe storage market. Revenues on sales into the markets of Europe, Africa, and the Middle East increased by $49,370,000, or 64%, to $126,500,000 in the first quarter of 1995 from $77,130,000 in the first quarter of 1994, due primarily to growth in unit sales of the Symmetrix 5000 series of products in the IBM, Bull and Unisys mainframe storage markets. Revenues on sales into the markets in the Asia Pacific region increased by $32,678,000, or 231%, to $46,824,000 in the first quarter of 1995 from $14,146,000 in the first quarter of 1994, due to growth in unit sales of the Symmetrix 5000 series of products in the IBM mainframe storage market. - -10- EMC CORPORATION The Company purchases certain components and products from suppliers who the Company believes are currently the only suppliers of those components or products that meet the Company's requirements. Among the most important components that the Company uses are high density memory components ("DRAMs") and 5 1/4" and 3 1/2" disk drives, which the Company purchases from a small number of qualified suppliers. In some instances, there is only a single source for such components. A failure by any supplier of high density DRAMs or disk drives to meet the Company's requirements for an extended period of time could have a material adverse effect on the Company. From time to time, because of high industry demand and/or the inability of certain vendors to consistently meet on a timely basis the Company's component quality standards, the Company experienced delays in deliveries of high density DRAMs and disk drives needed to satisfy orders for ICDA products. The Company is currently working with vendors to correct these problems and is also seeking alternative sources of supply. If shortages and quality problems were to intensify, the Company could lose some time-sensitive customer orders and this could affect quarterly revenues and earnings. Cost of Sales and Service As a percentage of revenues, cost of sales and service increased to 48.8% in the first quarter of 1995 from 46.6% in the first quarter of 1994, primarily due to a change in the cost mix of products sold in the first quarter of 1995 as compared to the first quarter of 1994. During the first quarter of 1995, the Company experienced lower costs associated with the disk mirroring program, as compared to the prior quarter, due to improved performance of the related disks, and a change in marketing strategy. Research and Development Research and development ("R&D") expenses were $37,438,000 and $22,348,000 in the first quarters of 1995 and 1994, respectively, an increase of $15,090,000, or 68%. R&D expenses were 8.9% and 8.4% of revenues in the first quarters of 1995 and 1994, respectively. Dollar increases in R&D spending reflect additional purchases of state-of-the-art CAE/CAD design tools and the cost of additional technical staff. The Company expects to continue to spend substantial amounts for R&D throughout 1995. Selling, General and Administrative Selling, general and administrative ("SG&A") expenses were $70,712,000 and $51,604,000 in the first quarters of 1995 and 1994, respectively, an increase of $19,108,000 or 37%. SG&A expenses were 16.8% and 19.3% of revenues in the first quarters of 1995 and 1994, respectively. The dollar increase is due primarily to costs associated with additional sales and support personnel and their related overhead costs, both domestically and internationally, in connection with the Company's increased revenue levels and the Company's initiative to expand its OEM and international distribution programs. SG&A expenses are expected to increase throughout 1995 approximately in proportion to growth in revenues. - -11- EMC CORPORATION Investment Income and Interest Expense Investment income was $6,325,000 in the first quarter of 1995 compared with $4,979,000 in the same period a year ago. Interest income was earned from investments in cash equivalents and long-term investments and, to a lesser extent, from sales-type leases of the Company's products. Investment income increased in 1995 primarily due to increased rates of interest in the first quarter of 1995 over the same period in 1994. Interest expense decreased slightly in the first quarter of 1995 from the first quarter of 1994, primarily due to conversions of the Debentures. Provision for Income Taxes The provision for income taxes was $32,630,000 and $20,428,000 in the first quarters of 1995 and 1994, respectively, which resulted in an effective tax rate of 29.5% for both periods. The Company provides for income taxes based upon its estimate of full year earnings on a country-by-country basis. Earnings Fluctuations Due to (i) customers' tendencies to make purchase decisions late in each fiscal quarter, (ii) the desire by customers to evaluate new, more expensive products for longer periods of time, (iii) the timing of product and technology announcements by the Company and its competitors, and (iv) fluctuating currency exchange rates, the Company's period to period revenues and earnings can fluctuate significantly. - -12- EMC CORPORATION FINANCIAL CONDITION Cash and cash equivalents were $237,281,000 and $240,506,000 at April 1, 1995 and December 31, 1994. In the first three months of 1995, the Company's working capital increased by $75,586,000 from $600,341,000 at December 31, 1994 to $676,927,000 at April 1, 1995. In the first three months of 1994, the Company's working capital decreased by $57,558,000, from $516,876,000 at January 1, 1994 to $459,318,000 at April 2, 1994. At April 1, 1995, the Company had available for use its entire $65,000,000 of credit lines. Based on its current operating and capital expenditure forecasts, the Company believes funds currently available, funds generated from operations and its available lines of credit will be adequate to finance its operations. To date, inflation has not had a material impact on the Company's financial results. Cash Flows In the first three months of 1995, cash and cash equivalents decreased by $3,225,000. Cash provided by operating activities was $9,817,000 consisting primarily of net income and increased taxes payable balances, offset by increased inventory and other asset balances, and decreases in accounts payable and accrued expense balances. Cash used by investing activities was $6,679,000 caused by additions to property, plant and equipment of $25,387,000, partially offset by net maturities of long-term investments of $18,708,000. Cash used by financing activities was $6,321,000 caused primarily by payments of long- term and short-term obligations of $8,675,000, partially offset by net issuances of common stock of $2,107,000, pursuant to stock option exercises. - -13- EMC CORPORATION PART II. OTHER INFORMATION Item 1. Legal Proceedings On June 10, 1993, Storage Technology Corporation ("STK") filed suit against EMC in the United States District Court for the District of Colorado alleging that EMC is infringing three patents. In the complaint, STK seeks injunctive relief, unspecified damages, including treble damages, plus attorney's fees and costs. On July 20, 1993, EMC answered the complaint, denied STK's allegations and counterclaimed. In the counterclaims, EMC seeks unspecified damages, attorney's fees, costs and interest. In a court hearing on October 12, 1994, STK's claims on two of the three patents were dismissed with prejudice. Discovery on the sole remaining patent in the matter is currently in process. The originally scheduled trial date of October 24, 1994 has been postponed. On September 23, 1994, EMC filed suit against STK in the United States District Court for Delaware alleging that STK is infringing one EMC patent. In the complaint, EMC seeks injunctive relief and unspecified damages, including treble damages, plus attorney's fees and costs. On October 12, 1994, STK answered the complaint, denied any infringement and counterclaimed. STK has subsequently filed an additional counterclaim. EMC has denied STK's allegations. Discovery on this case is currently in process. A trial is expected in late 1995. The Company is a party to other litigation which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on the Company's business or financial condition. Item 5. Other Information Subsequent Events. See Footnote 6 to Notes to Interim Consolidated Financial Statements in Part I of this report. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 EMC Corporation 1993 Stock Option Plan, as amended (filed herewith). 11.1 Computation of Primary and Fully Diluted Net Income Per Share (filed herewith). (b) Reports on Form 8-K On March 3, 1995, the registrant filed a report (Date of Report: February 9, 1995) on Form 8-K reporting, under Item 5, that it intended to call for redemption on April 1, 1995, all of its outstanding 6 1/4% convertible subordinated debentures due 2002, unless the holders chose to convert on or prior to such date. - -14- EMC CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EMC CORPORATION Date: May 12, 1995 By: /s/ Colin G. Patteson Colin G. Patteson Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) - -15- EMC CORPORATION EXHIBIT INDEX Exhibit 10.1 EMC Corporation 1993 Stock Option Plan, as amended Exhibit 11.1 Computation of Primary and Fully Diluted Net Income Per Share Exhibit 10.1 EMC CORPORATION 1993 STOCK OPTION PLAN, as amended May 10, 1995 1. PURPOSE. The purpose of the EMC Corporation 1993 Stock Option Plan is to enable EMC Corporation to provide a special incentive to a limited number of key employees of the Company and its Subsidiaries, if any, who are in a position to have a significant effect upon the Company's business and earnings. In order to accomplish this purpose, the Plan authorizes the grant to such key employees of options to purchase Common Stock of the Company. Increased ownership of Common Stock will provide such key employees with an additional incentive to take into account the long-term interests of the Company. 2. DEFINITIONS. As used herein, the following words or terms have the meanings set forth below. The masculine gender is used throughout the Plan but is intended to apply to members of both sexes. 2.1 "Board of Directors" means the Board of Directors of the Company. 2.2 "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. 2.3 "Committee" means the Committee (which, following registration of the Common Stock under the Securities Exchange Act of 1934, shall consist of not less than three members of the Board of Directors) appointed by the Board of Directors to administer the Plan or the Board of Directors as a whole if no appointment is made. 2.4 "Common Stock" means the Common Stock of the Company. 2.5 "Company" means EMC Corporation, a corporation established under the laws of The Commonwealth of Massachusetts. 2.6 "Fair Market Value" in the case of a share of Common Stock on a particular day, means the fair market value as determined from time to time by the Board of Directors or, where appropriate, by the Committee, taking into account all information which the Board of Directors, or the Committee, considers relevant. 2.7 "Incentive Stock Option" means a stock option that satisfies the requirements of Section 422 of the Code. 2.8 "Participant" means an individual holding a stock option or stock options granted to him under the Plan. 2.9 "Plan" means the EMC Corporation 1993 Stock Option Plan set forth herein. 2.10 "Subsidiary" or "Subsidiaries" means a corporation or corporations in which the Company owns, directly or indirectly, stock possessing 50 percent or more of the total combined voting power of all classes of stock. 2.11 "Ten Percent Stockholder" means any person who, at the time an option is granted, owns or is deemed to own stock (as determined in accordance with Sections 422 and 424 of the Code) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its parent or a subsidiary. 3. ADMINISTRATION. 3.1 The Plan shall be administered by the Committee. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. Following registration of the Common Stock under the Securities Exchange of 1934, all members of the Committee shall be disinterested persons within the meaning of Rule 16b-3 under that act. 3.2 Subject to the provisions set forth herein, the Committee shall have full authority to determine the provisions of options to be granted under the Plan, to interpret the terms of the Plan and of options granted under the Plan, to adopt, amend and rescind rules and guidelines for the administration of the Plan and for its own acts and proceedings and to decide all questions and settle all controversies and disputes which may arise in connection with the Plan. 3.3 The decision of the Committee on any matter as to which the Committee is given authority under subsection 3.2 shall be final and binding on all persons concerned. 3.4 Nothing in the Plan shall be deemed to give any officer or employee, or his legal representatives or assigns, any right to participate in the Plan, except to such extent, if any, as the Committee may have determined or approved pursuant to the provisions of the Plan. 4. SHARES SUBJECT TO THE PLAN. 4.1 The maximum number of shares of Common Stock that may be delivered upon the exercise of options granted under the Plan shall be 8,000,000, subject to adjustment in accordance with the provisions of Section 8. 4.2 If any option granted under the Plan terminates without having been exercised in full (including an option which terminates by agreement between the Company and the Participant), the number of shares of Common Stock as to which such option has not been exercised prior to termination shall be available for future grants within the limits set forth in subsection 4.1. 4.3 Shares of Common Stock delivered upon the exercise of options shall consist of shares of authorized and unissued Common Stock, except that the Board of Directors may from time to time in its discretion determine in any case the shares to be so delivered shall consist of shares of authorized and issued Common Stock reaquired by the Company and held in its Treasury. No fractional shares of Common Stock shall be delivered upon the exercise of an option. 5. ELIGIBILITY FOR OPTIONS. Employees eligible to receive options under the Plan shall be those key employees of the Company and its Subsidiaries, if any, who, in the opinion of the Committee, are in a position to have a significant effect upon the Company's business and earnings. Members of the Board of Directors of the Company or a Subsidiary who are not employed as regular salaried officers or employees of the Company or a Subsidiary may not participate in the Plan. 6. GRANT OF OPTIONS. 6.1 From time to time while the Plan is in effect the Committee may, in its absolute discretion, select from among the persons eligible to receive options (including persons to whom options were previously granted) those persons to whom options are to be granted. 6.2 The Committee shall, in its absolute discretion, determine the number of shares of Common Stock to be subject to each option granted under the Plan. 6.3 No Incentive Stock Option may be granted under the Plan after May 12, 2003, but options theretofore granted may extend beyond that date. 7. PROVISIONS OF OPTIONS. 7.1 Incentive Stock Options or Other Options. Options granted under the Plan may be either Incentive Stock Options or options which do not qualify as Incentive Stock Options, as the Committee shall determine at the time of each grant of options hereunder. 7.2 Stock Option Certificates or Agreements. Options granted under the Plan shall be evidenced by certificates or agreements in such form as the Committee shall from time to time approve. Such certificates or agreements shall comply with the terms and conditions of the Plan and may contain such other provisions not inconsistent with the terms and conditions of the Plan as the Committee shall deem advisable. In the case of options intended to qualify as Incentive Stock Options, the certificates or agreements shall contain such provisions relating to exercise and other matters as are required of incentive stock options under the Code. 7.3 Terms and Conditions. All options granted under the Plan shall be subject to the following terms and conditions to the extent applicable and to such other terms and conditions not inconsistent therewith as the Committee shall determine: 7.3.1 Exercise Price. The exercise price per share of Common Stock with respect to each option shall be as determined by the Committee but in the case of an Incentive Stock Option not less than 100% (110% in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) of the Fair Market Value per share at the time the option is granted. In the case of an option which does not qualify as an Incentive Stock Option, the exercise price per share of Common Stock shall be not less than par value. 7.3.2 Value of Shares of Common Stock Subject to Incentive Stock Options. Each eligible employee may be granted Incentive Stock Options only to the extent that, in the aggregate under this Plan and all incentive stock option plans of the Company and any related corporation, such Incentive Stock Options do not become exercisable for the first time by such employee during any calendar year in a manner which would entitle the employee to purchase more than $100,000 in fair market value (determined at the time the Incentive Stock Options were granted) of Common Stock in that year. Any options granted to an employee in excess of such amount will be granted as Non-Qualified Options. 7.3.3 Period of Options. An option shall be exercisable during such period of time as the Committee may specify (subject to subsection 7.4 below), but in the case of an Incentive Stock Option not after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) from the date the option is granted. 7.3.4 Exercise of Options. 7.3.4.1 Each option shall be made exercisable at such time or times as the Committee shall determine. In the case of an option made exercisable in installments, the Committee may later determine to accelerate the time at which one or more of such installments may be exercised. 7.3.4.2 Any exercise of an option shall be in writing signed by the proper person and delivered or mailed to the General Counsel of the Company, accompanied by an option exercise notice and payment in full for the number of shares in respect to which the option is exercised. 7.3.4.3 In the event an option is exercised by the executor or administrator of a deceased Participant, or by the person or persons to whom the option has been transferred by the Participant's will or the applicable laws of descent and distribution, the Company shall be under no obligation to deliver stock thereunder until the Company is satisfied that the person or persons exercising the option is or are the duly appointed executor or administrator of the deceased Participant or the person or persons to whom the option has been transferred by the Participant's will or by the applicable laws of descent and distribution. 7.3.4.4 The Committee may at the time of grant condition the exercise of an option upon agreement by the Participant to subject the Common Stock to any restrictions on transfer or repurchase rights in effect on the date of exercise, upon representations of continued employment and upon other terms not inconsistent with this Plan. Any such conditions shall be set forth in the option certificate or other document evidencing the option. 7.3.4.5 In the case of an option that is not an Incentive Stock Option, the Committee shall have the right to require that the individual exercising the option to remit to the Company an amount sufficient to satisfy any federal, state, or local withholding tax requirements (or makes other arrangements satisfactory to the Company with regard to such taxes) prior to the delivery of any Common Stock pursuant to the exercise of the option. In the case of an Incentive Stock Option, if at the time the Incentive Stock Option is exercised the Committee determines that under applicable law and regulations the Company could be liable for the withholding of any federal or state tax with respect to a disposition of the Common Stock received upon exercise, the Committee may require as a condition of exercise that the individual exercising the Incentive Stock Option agree (i) to inform the Company promptly of any disposition (within the meaning of Section 422 (a) (1) of the Code and the regulations thereunder) of Common Stock received upon exercise, and (ii) to give such security as the Committee deems adequate to meet the potential liability of the Company for the withholding of tax, and to augment such security from time to time in any amount reasonably deemed necessary by the Committee to preserve the adequacy of such security. 7.3.4.6 In the case of an option that is exercised by an individual that is subject to taxation in a foreign jurisdiction, the Committee shall have the right to require the individual exercising the option to remit to the Company an amount sufficient to satisfy any federal or withholding requirement of that foreign jurisdiction (or make other arrangements satisfactory to the Company with regard to such taxes prior to the delivery of any Common Stock pursuant to the exercise of the option). 7.3.5 Payment for and Delivery of Stock. The shares of stock purchased on any exercise of an option granted hereunder shall be paid for in full in cash or, if permitted by the terms of the option, in shares of unrestricted Common Stock at the time of such exercise or, if so permitted, a combination of such cash and Common Stock. A Participant shall not have the rights of a stockholder with respect to awards under the Plan except as to stock actually issued to him. 7.3.6 Listing of Stock, Withholding and Other Legal Requirements. The Company shall not be obligated to deliver any stock until all federal and state laws and regulations which the Company may deem applicable have been complied with, nor, in the event the outstanding Common Stock is at the time listed upon any stock exchange, until the stock to be delivered has been listed or authorized to be added to the list upon official notice of issuance to such exchange. In addition, if the shares of stock subject to any option have not been registered in accordance with the Securities Act of 1933, as amended, the Company may require the person or persons who wishes or wish to exercise such option to make such representation or agreement with respect to the sale of stock acquired on exercise of the option as will be sufficient, in the opinion of the Company's counsel, to avoid violation of said Act, and may also require that the certificates evidencing said stock bear an appropriate restrictive legend. 7.3.7 Non-transferability of Options. No option may be transferred by the Participant otherwise than by will or by the laws of descent and distribution, and during the Participant's lifetime the option may be exercised only by him. 7.3.8 Death. If a Participant dies at a time when he is entitled to exercise an Incentive Stock Option, then at any time or times within three years after his death such Incentive Stock Option may be exercised, as to all or any of the shares which the Participant was entitled to purchase thereunder immediately prior to his death, by his executor or administrator or the person or persons to whom the Incentive Stock Option is transferred by will or the applicable laws of descent and distribution, and except as so exercised such Incentive Stock Option shall expire at the end of such three-year period. In no event, however, may any Incentive Stock Option granted under the Plan be exercised after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) from the date the Incentive Stock Option was granted. 7.3.9 Termination of Employment. If the employment of a Participant terminates for any reason other than his death, all options held by the Participant shall thereupon expire on the date of termination unless the option by its terms, or the Committee by resolution, shall allow the Participant to exercise any or all of the options held by him after termination. In the case of an Incentive Stock Option, the Incentive Stock Option shall in any event expire at the end of three months after such termination of employment, or after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) from the date the Incentive Stock Option was granted, whichever occurs first. If the Committee so decides, an option may provide that a leave of absence granted by the Company or Subsidiary is not a termination of employment for the purpose of this subsection 7.3.9, and in the absence of such a provision the Committee may in any particular case determine that such a leave of absence is not a termination of employment for such purpose. The Committee shall also determine all other matters relating to continuous employment. 7.4 Authority of the Committee. The Committee shall have the authority, either generally or in particular instances, to waive compliance by a Participant with any obligation to be performed by him under an option and to waive any condition or provision of an option, except that the Committee may not (i) increase the total number of shares covered by any Incentive Stock Option (except in accordance with Section 8), (ii) reduce the option price per share of any Incentive Stock Option (except in accordance with Section 8) or (iii) extend the term of any Incentive Stock Option to more than ten years, subject, however, to the provisions of Section 10. 8. CHANGES IN STOCK. In the event of a stock dividend, stock split or other change in corporate structure or capitalization affecting the Common Stock that becomes effective after the adoption of the Plan by the Board of Directors, the Committee shall make appropriate adjustments in (i) the number and kind of shares of stock on which options may thereafter be granted hereunder, (ii) the number and kind of shares of stock remaining subject to each option outstanding at the time of such change and (iii) the option price. The Committee's determination shall be binding on all persons concerned. Subject to any required action by the stockholders, if the Company shall be the surviving corporation in any merger or consolidation (other than a merger or consolidation in which the Company survives but in which a majority of its outstanding shares are converted into securities of another corporation or are exchanged for other consideration), any option granted hereunder shall pertain and apply to the securities which a holder of the number of shares of stock of the Company then subject to the option would have been entitled to receive, but a dissolution or liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation or in which a majority of its outstanding shares are so converted or exchanged shall cause every option hereunder to terminate; provided that if any such dissolution, liquidation, merger or consolidation is contemplated, the Company shall either arrange for any corporation succeeding to the business and assets of the Company to issue to the Participants replacement options (which, in the case of Incentive Stock Options, satisfy, in the determination of the Committee, the requirements of Section 424 of the Code) on such corporation's stock which will to the extent possible preserve the value of the outstanding options or shall make the outstanding options fully exercisable at least 20 days before the effective date of any such dissolution, liquidation, merger or consolidation. The existence of the Plan shall not prevent any such change or other transaction and no Participant thereunder shall have any right except as herein expressly set forth. 9. EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor any grant of options confers upon any employee of the Company or a Subsidiary any right to continued employment with the Company or a Subsidiary, as the case may be, nor does it interfere in any way with the right of the Company or a Subsidiary to terminate the employment of any of its employees at any time. 10. DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION. The Committee may at any time discontinue granting options under the Plan and, with the consent of the Participant, may at any time cancel an existing option in whole or in part and grant another option to the Participant for such number of shares as the Committee specifies. The Board of Directors may at any time or times amend the Plan for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law or may at any time terminate the Plan as to any further grants of options, provided that no such amendment shall without the approval of the stockholders of the Company (a) increase the maximum number of shares available under the Plan, (b) change the group of employees eligible to receive options under the Plan, (c) reduce the exercise price of outstanding incentive options or reduce the price at which incentive options may be granted, (d) extend the time within which options may be granted, (e) alter the Plan in such a way that incentive options granted or to be granted hereunder would not be considered incentive stock options under Section 422 of the Code, or (f) amend the provisions of this Section 10, and no such amendment shall adversely affect the rights of any employee (without his consent) under any option previously granted. 11. EFFECTIVE DATE. The Plan shall become effective immediately upon its approval by the stockholders of the Company at the Annual Meeting on May 12, 1993. EMC CORPORATION Exhibit 11.1 Computation of Primary and Fully Diluted Net Income Per Share (Amounts in thousands except share and per share data) Three Months Ended April 1, April 2, 1995 1994 Primary Net income $77,981 $48,840 Add back interest expense on convertible notes 2,440 2,412 Less tax effect on interest expense on convertible notes (976) (965) Net income for purposes of calculating primary net income per share $79,445 $50,287 Weighted average shares outstanding during the period 200,478,499 188,470,638 Common equivalent shares 21,034,178 25,771,555 Common and common equivalent shares outstanding for purpose of calculating primary net income per share 221,512,677 214,242,193 Primary net income per share (Note 4) $0.36 $0.23 Fully Diluted Net income $77,981 $48,840 Add back interest expense on convertible notes and debentures 3,055 3,332 Less tax effect on interest expense on convertible notes and debentures (1,222) (1,333) Net income for purpose of calculating fully diluted net income per share $79,814 $50,839 Common and common equivalent shares outstanding for purpose of calculating primary net income per share 221,512,677 214,242,193 Incremental shares to reflect full dilution, primarily from convertible subordinated debentures 12,342,764 19,487,994 Total shares for purpose of calculating fully diluted net income per share 233,855,441 233,730,187 Fully diluted net income per share (Note 4) $0.34 $0.22 EX-27 2
5 This schedule contains summary financial information extracted from EMC Corporation financial statements and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-30-1995 APR-01-1995 237,281 0 371,666 6,112 290,812 945,703 278,468 90,794 1,366,122 268,776 246,814 2,159 0 0 845,110 1,366,122 420,598 420,598 205,366 205,366 180,150 0 3,488 110,611 32,630 77,981 0 0 0 77,981 $0.36 $0.34
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