FORM 10-Q |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Massachusetts | 04-2680009 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
176 South Street Hopkinton, Massachusetts (Address of principal executive offices) | 01748 (Zip Code) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Page No. | |
FACTORS THAT MAY AFFECT FUTURE RESULTS This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Federal securities laws, about our business and prospects. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “plans,” “intends,” “expects,” “goals” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Our future results may differ materially from our past results and from those projected in the forward-looking statements due to various uncertainties and risks, including those described in Item 1A of Part II (Risk Factors). The forward-looking statements speak only as of the date of this Quarterly Report and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-looking statements contained herein after the date of this Quarterly Report. |
March 31, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 7,224 | $ | 6,549 | |||
Short-term investments | 2,577 | 2,726 | |||||
Accounts and notes receivable, less allowance for doubtful accounts of $83 and $90 | 2,941 | 3,977 | |||||
Inventories | 1,233 | 1,245 | |||||
Other current assets | 625 | 566 | |||||
Total current assets | 14,600 | 15,063 | |||||
Long-term investments | 5,169 | 5,508 | |||||
Property, plant and equipment, net | 3,806 | 3,850 | |||||
Intangible assets, net | 2,059 | 2,149 | |||||
Goodwill | 17,099 | 17,090 | |||||
Deferred income taxes | 1,173 | 1,164 | |||||
Other assets, net | 1,797 | 1,788 | |||||
Total assets | $ | 45,703 | $ | 46,612 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,038 | $ | 1,644 | |||
Accrued expenses | 2,722 | 3,123 | |||||
Income taxes payable | 124 | 609 | |||||
Short-term debt (See Note 3) | 925 | 1,299 | |||||
Deferred revenue | 6,477 | 6,210 | |||||
Total current liabilities | 11,286 | 12,885 | |||||
Income taxes payable | 466 | 461 | |||||
Deferred revenue | 4,741 | 4,592 | |||||
Long-term debt (See Note 3) | 5,477 | 5,475 | |||||
Other liabilities | 483 | 480 | |||||
Total liabilities | 22,453 | 23,893 | |||||
Commitments and contingencies (See Note 12) | |||||||
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 1,953 and 1,943 shares | 20 | 19 | |||||
Additional paid-in capital | — | — | |||||
Retained earnings | 22,111 | 21,700 | |||||
Accumulated other comprehensive loss, net | (558 | ) | (579 | ) | |||
Total EMC Corporation’s shareholders’ equity | 21,573 | 21,140 | |||||
Non-controlling interests | 1,677 | 1,579 | |||||
Total shareholders’ equity | 23,250 | 22,719 | |||||
Total liabilities and shareholders’ equity | $ | 45,703 | $ | 46,612 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Revenues: | |||||||
Product sales | $ | 2,682 | $ | 2,905 | |||
Services | 2,793 | 2,708 | |||||
5,475 | 5,613 | ||||||
Costs and expenses: | |||||||
Cost of product sales | 1,251 | 1,329 | |||||
Cost of services | 964 | 945 | |||||
Research and development | 814 | 788 | |||||
Selling, general and administrative | 1,987 | 2,037 | |||||
Restructuring and acquisition-related charges | 49 | 135 | |||||
Operating income | 410 | 379 | |||||
Non-operating income (expense): | |||||||
Investment income | 13 | 24 | |||||
Interest expense | (41 | ) | (40 | ) | |||
Other income, net | 4 | 10 | |||||
Total non-operating income (expense) | (24 | ) | (6 | ) | |||
Income before provision for income taxes | 386 | 373 | |||||
Income tax provision | 89 | 82 | |||||
Net income | 297 | 291 | |||||
Less: Net income attributable to the non-controlling interests | (29 | ) | (39 | ) | |||
Net income attributable to EMC Corporation | $ | 268 | $ | 252 | |||
Net income per weighted average share, basic attributable to EMC Corporation common shareholders | $ | 0.14 | $ | 0.13 | |||
Net income per weighted average share, diluted attributable to EMC Corporation common shareholders | $ | 0.14 | $ | 0.13 | |||
Weighted average shares, basic | 1,949 | 1,974 | |||||
Weighted average shares, diluted | 1,965 | 1,996 | |||||
Cash dividends declared per common share | $ | 0.12 | $ | 0.12 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Net income | $ | 297 | $ | 291 | |||
Other comprehensive income (loss), net of taxes (benefits): | |||||||
Foreign currency translation adjustments | 3 | (104 | ) | ||||
Changes in market value of investments: | |||||||
Changes in unrealized gains, net of taxes of $12 and $13 | 20 | 19 | |||||
Reclassification adjustment for net losses (gains) realized in net income, net of benefits (taxes) of $0 and $(6) | 2 | (8 | ) | ||||
Net change in market value of investments | 22 | 11 | |||||
Changes in market value of derivatives: | |||||||
Changes in unrealized gains (losses), net of taxes (benefits) of $(1) and $3 | (4 | ) | 14 | ||||
Reclassification adjustment for net losses (gains) included in net income, net of benefits (taxes) of $2 and $0 | 4 | (11 | ) | ||||
Net change in the market value of derivatives | — | 3 | |||||
Change in actuarial net gain (loss) from pension and other postretirement plans: | |||||||
Other comprehensive income (loss) | 25 | (90 | ) | ||||
Comprehensive income | 322 | 201 | |||||
Less: Net income attributable to the non-controlling interests | (29 | ) | (39 | ) | |||
Less: Other comprehensive income attributable to the non-controlling interests | (4 | ) | (1 | ) | |||
Comprehensive income attributable to EMC Corporation | $ | 289 | $ | 161 |
EMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) | |||||||
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Cash flows from operating activities: | |||||||
Cash received from customers | $ | 6,878 | $ | 7,495 | |||
Cash paid to suppliers and employees | (5,373 | ) | (5,584 | ) | |||
Dividends and interest received | 21 | 24 | |||||
Interest paid | (3 | ) | — | ||||
Income taxes paid | (591 | ) | (855 | ) | |||
Net cash provided by operating activities | 932 | 1,080 | |||||
Cash flows from investing activities: | |||||||
Additions to property, plant and equipment | (188 | ) | (197 | ) | |||
Capitalized software development costs | (156 | ) | (128 | ) | |||
Purchases of short- and long-term available-for-sale securities | (1,361 | ) | (2,421 | ) | |||
Sales of short- and long-term available-for-sale securities | 887 | 1,311 | |||||
Maturities of short- and long-term available-for-sale securities | 965 | 422 | |||||
Business acquisitions, net of cash acquired | (10 | ) | (49 | ) | |||
Purchases of strategic and other related investments | (11 | ) | (106 | ) | |||
Sales of strategic and other related investments | 28 | 57 | |||||
Decrease in restricted cash | 2 | — | |||||
Net cash provided by (used in) investing activities | 156 | (1,111 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from the issuance of EMC’s common stock | 105 | 121 | |||||
Proceeds from the issuance of VMware’s common stock | 52 | 54 | |||||
EMC repurchase of EMC’s common stock | — | (1,346 | ) | ||||
VMware repurchase of VMware’s common stock | — | (438 | ) | ||||
Excess tax benefits from stock-based compensation | 2 | 20 | |||||
Net payments for the issuance of short-term obligations | (376 | ) | — | ||||
Dividend payment | (227 | ) | (232 | ) | |||
Net cash used in financing activities | (444 | ) | (1,821 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 31 | (103 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 675 | (1,955 | ) | ||||
Cash and cash equivalents at beginning of period | 6,549 | 6,343 | |||||
Cash and cash equivalents at end of period | $ | 7,224 | $ | 4,388 | |||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 297 | $ | 291 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 483 | 470 | |||||
Non-cash restructuring and other special charges | 3 | 11 | |||||
Stock-based compensation expense | 304 | 245 | |||||
Provision for (recovery of) doubtful accounts | (2 | ) | 16 | ||||
Deferred income taxes, net | (19 | ) | (20 | ) | |||
Excess tax benefits from stock-based compensation | (2 | ) | (20 | ) | |||
Other, net | 7 | — | |||||
Changes in assets and liabilities, net of acquisitions: | |||||||
Accounts and notes receivable | 1,019 | 1,420 | |||||
Inventories | (40 | ) | (69 | ) | |||
Other assets | (38 | ) | (45 | ) | |||
Accounts payable | (580 | ) | (575 | ) | |||
Accrued expenses | (421 | ) | (376 | ) | |||
Income taxes payable | (500 | ) | (754 | ) | |||
Deferred revenue | 415 | 494 | |||||
Other liabilities | 6 | (8 | ) | ||||
Net cash provided by operating activities | $ | 932 | $ | 1,080 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interests | Shareholders’ Equity | |||||||||||||||||||||
Shares | Par Value | |||||||||||||||||||||||||
Balance, January 1, 2016 | 1,943 | $ | 19 | $ | — | $ | 21,700 | $ | (579 | ) | $ | 1,579 | $ | 22,719 | ||||||||||||
Stock issued through stock option and stock purchase plans | 5 | 1 | 105 | — | — | — | 106 | |||||||||||||||||||
Tax benefit from stock options exercised | — | — | (16 | ) | — | — | — | (16 | ) | |||||||||||||||||
Restricted stock grants, cancellations and withholdings, net | 3 | — | (38 | ) | — | — | — | (38 | ) | |||||||||||||||||
Stock issued through 401(k) stock match program | 2 | — | 44 | — | — | — | 44 | |||||||||||||||||||
Reversal of reclass of previously repurchased common stock | — | — | (372 | ) | 372 | — | — | — | ||||||||||||||||||
Stock-based compensation | — | — | 313 | — | — | — | 313 | |||||||||||||||||||
Cash dividends declared | — | — | — | (229 | ) | — | — | (229 | ) | |||||||||||||||||
Impact from equity transactions of non-controlling interests | — | — | (36 | ) | — | — | 65 | 29 | ||||||||||||||||||
Change in market value of investments | — | — | — | — | 19 | 3 | 22 | |||||||||||||||||||
Change in market value of derivatives | — | — | — | — | (1 | ) | 1 | — | ||||||||||||||||||
Translation adjustment | — | — | — | — | 3 | — | 3 | |||||||||||||||||||
Net income | — | — | — | 268 | — | 29 | 297 | |||||||||||||||||||
Balance, March 31, 2016 | 1,953 | $ | 20 | $ | — | $ | 22,111 | $ | (558 | ) | $ | 1,677 | $ | 23,250 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interests | Shareholders’ Equity | |||||||||||||||||||||
Shares | Par Value | |||||||||||||||||||||||||
Balance, January 1, 2015 | 1,985 | $ | 20 | $ | — | $ | 22,242 | $ | (366 | ) | $ | 1,629 | $ | 23,525 | ||||||||||||
Stock issued through stock option and stock purchase plans | 6 | — | 121 | — | — | — | 121 | |||||||||||||||||||
Tax benefit from stock options exercised | — | — | 13 | — | — | — | 13 | |||||||||||||||||||
Restricted stock grants, cancellations and withholdings, net | 5 | — | (64 | ) | — | — | — | (64 | ) | |||||||||||||||||
Repurchase of common stock | (54 | ) | (1 | ) | (64 | ) | (1,381 | ) | — | — | (1,446 | ) | ||||||||||||||
Stock-based compensation | — | — | 295 | — | — | — | 295 | |||||||||||||||||||
Cash dividends declared | — | — | — | (226 | ) | — | — | (226 | ) | |||||||||||||||||
Impact from equity transactions of non-controlling interests | — | — | (301 | ) | — | — | (114 | ) | (415 | ) | ||||||||||||||||
Change in market value of investments | — | — | — | — | 9 | 2 | 11 | |||||||||||||||||||
Change in market value of derivatives | — | — | — | — | 4 | (1 | ) | 3 | ||||||||||||||||||
Translation adjustment | — | — | — | — | (104 | ) | — | (104 | ) | |||||||||||||||||
Net income | — | — | — | 252 | — | 39 | 291 | |||||||||||||||||||
Balance, March 31, 2015 | 1,942 | $ | 19 | $ | — | $ | 20,887 | $ | (457 | ) | $ | 1,555 | $ | 22,004 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Net income attributable to EMC Corporation | $ | 268 | $ | 252 | |||
Transfers (to) from the non-controlling interests: | |||||||
Increase in EMC Corporation’s additional paid-in-capital for VMware and Pivotal equity issuances | 21 | 30 | |||||
Decrease in EMC Corporation’s additional paid-in-capital for VMware’s and Pivotal’s other equity activity | (57 | ) | (331 | ) | |||
Net transfers (to) from non-controlling interest | (36 | ) | (301 | ) | |||
Change from net income attributable to EMC Corporation and transfers from the non-controlling interest in VMware, Inc. | $ | 232 | $ | (49 | ) |
Senior Notes | Issued at Discount to Par | Carrying Value | |||||
$2.5 billion 1.875% Notes due 2018 | 99.943 | % | $ | 2,499 | |||
$2.0 billion 2.650% Notes due 2020 | 99.760 | % | 1,997 | ||||
$1.0 billion 3.375% Notes due 2023 | 99.925 | % | 1,000 | ||||
$ | 5,496 | ||||||
Debt issuance costs | (19 | ) | |||||
Net long-term debt | $ | 5,477 |
• | Level 1 – Quoted prices in active markets for identical assets or liabilities. |
• | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
• | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
March 31, 2016 | |||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized (Losses) | Aggregate Fair Value | ||||||||||||
U.S. government and agency obligations | $ | 2,054 | $ | 5 | $ | (1 | ) | $ | 2,058 | ||||||
U.S. corporate debt securities | 2,364 | 11 | (2 | ) | 2,373 | ||||||||||
High yield corporate debt securities | 220 | 3 | (8 | ) | 215 | ||||||||||
Asset-backed securities | 13 | — | — | 13 | |||||||||||
Municipal obligations | 640 | — | — | 640 | |||||||||||
Auction rate securities | 25 | — | (2 | ) | 23 | ||||||||||
Foreign debt securities | 2,298 | 6 | (2 | ) | 2,302 | ||||||||||
Total fixed income securities | 7,614 | 25 | (15 | ) | 7,624 | ||||||||||
Publicly traded equity securities | 113 | 18 | (9 | ) | 122 | ||||||||||
Total | $ | 7,727 | $ | 43 | $ | (24 | ) | $ | 7,746 |
December 31, 2015 | |||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized (Losses) | Aggregate Fair Value | ||||||||||||
U.S. government and agency obligations | $ | 2,449 | $ | — | $ | (8 | ) | $ | 2,441 | ||||||
U.S. corporate debt securities | 2,257 | 1 | (10 | ) | 2,248 | ||||||||||
High yield corporate debt securities | 307 | 2 | (22 | ) | 287 | ||||||||||
Asset-backed securities | 20 | — | — | 20 | |||||||||||
Municipal obligations | 731 | 1 | — | 732 | |||||||||||
Auction rate securities | 27 | — | (2 | ) | 25 | ||||||||||
Foreign debt securities | 2,332 | — | (9 | ) | 2,323 | ||||||||||
Total fixed income securities | 8,123 | 4 | (51 | ) | 8,076 | ||||||||||
Publicly traded equity securities | 126 | 40 | (8 | ) | 158 | ||||||||||
Total | $ | 8,249 | $ | 44 | $ | (59 | ) | $ | 8,234 |
March 31, 2016 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash | $ | 2,305 | $ | — | $ | — | $ | 2,305 | |||||||
Cash equivalents | 4,025 | 894 | — | 4,919 | |||||||||||
U.S. government and agency obligations | 1,258 | 800 | — | 2,058 | |||||||||||
U.S. corporate debt securities | — | 2,373 | — | 2,373 | |||||||||||
High yield corporate debt securities | — | 215 | — | 215 | |||||||||||
Asset-backed securities | — | 13 | — | 13 | |||||||||||
Municipal obligations | — | 640 | — | 640 | |||||||||||
Auction rate securities | — | — | 23 | 23 | |||||||||||
Foreign debt securities | — | 2,302 | — | 2,302 | |||||||||||
Publicly traded equity securities | 122 | — | — | 122 | |||||||||||
Total cash and investments | $ | 7,710 | $ | 7,237 | $ | 23 | $ | 14,970 | |||||||
Other items: | |||||||||||||||
Strategic investments held at cost | $ | — | $ | — | $ | 385 | $ | 385 | |||||||
Investment in joint venture | — | — | 39 | 39 | |||||||||||
Long-term debt carried at discounted cost | — | (5,186 | ) | — | (5,186 | ) | |||||||||
Foreign exchange derivative assets | — | 74 | — | 74 | |||||||||||
Foreign exchange derivative liabilities | — | (79 | ) | — | (79 | ) | |||||||||
Commodity derivative liabilities | — | (6 | ) | — | (6 | ) |
December 31, 2015 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash | $ | 2,095 | $ | — | $ | — | $ | 2,095 | |||||||
Cash equivalents | 3,861 | 593 | — | 4,454 | |||||||||||
U.S. government and agency obligations | 1,495 | 946 | — | 2,441 | |||||||||||
U.S. corporate debt securities | — | 2,248 | — | 2,248 | |||||||||||
High yield corporate debt securities | — | 287 | — | 287 | |||||||||||
Asset-backed securities | — | 20 | — | 20 | |||||||||||
Municipal obligations | — | 732 | — | 732 | |||||||||||
Auction rate securities | — | — | 25 | 25 | |||||||||||
Foreign debt securities | — | 2,323 | — | 2,323 | |||||||||||
Publicly traded equity securities | 158 | — | — | 158 | |||||||||||
Total cash and investments | $ | 7,609 | $ | 7,149 | $ | 25 | $ | 14,783 | |||||||
Other items: | |||||||||||||||
Strategic investments held at cost | $ | — | $ | — | $ | 384 | $ | 384 | |||||||
Investment in joint venture | — | — | 39 | 39 | |||||||||||
Long-term debt carried at discounted cost | — | (4,999 | ) | — | (4,999 | ) | |||||||||
Foreign exchange derivative assets | — | 39 | — | 39 | |||||||||||
Foreign exchange derivative liabilities | — | (78 | ) | — | (78 | ) | |||||||||
Commodity derivative liabilities | — | (4 | ) | — | (4 | ) |
Less Than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||
U.S. government and agency obligations | $ | 466 | $ | (1 | ) | $ | — | $ | — | $ | 466 | $ | (1 | ) | |||||||||
U.S. corporate debt securities | 485 | (2 | ) | — | — | 485 | (2 | ) | |||||||||||||||
High yield corporate debt securities | 99 | (6 | ) | 23 | (2 | ) | 122 | (8 | ) | ||||||||||||||
Auction rate securities | — | — | 23 | (2 | ) | 23 | (2 | ) | |||||||||||||||
Foreign debt securities | 721 | (1 | ) | 81 | (1 | ) | 802 | (2 | ) | ||||||||||||||
Publicly traded equity securities | 2 | (1 | ) | 2 | (8 | ) | 4 | (9 | ) | ||||||||||||||
Total | $ | 1,773 | $ | (11 | ) | $ | 129 | $ | (13 | ) | $ | 1,902 | $ | (24 | ) |
March 31, 2016 | |||||||
Amortized Cost Basis | Aggregate Fair Value | ||||||
Due within one year | $ | 2,542 | $ | 2,543 | |||
Due after 1 year through 5 years | 4,496 | 4,509 | |||||
Due after 5 years through 10 years | 332 | 330 | |||||
Due after 10 years | 244 | 242 | |||||
Total | $ | 7,614 | $ | 7,624 |
March 31, 2016 | December 31, 2015 | ||||||
Work-in-process | $ | 590 | $ | 592 | |||
Finished goods | 643 | 653 | |||||
$ | 1,233 | $ | 1,245 |
Year | Contractual Amounts Due Under Leases | ||
Due within one year | $ | 50 | |
Due within two years | 37 | ||
Due within three years | 26 | ||
Thereafter | 3 | ||
Total | 116 | ||
Less: Amounts representing interest | 7 | ||
Present value | 109 | ||
Current portion (included in accounts and notes receivable) | 46 | ||
Long-term portion (included in other assets, net) | $ | 63 |
March 31, 2016 | December 31, 2015 | ||||||
Furniture and fixtures | $ | 286 | $ | 283 | |||
Equipment and software | 7,474 | 7,378 | |||||
Buildings and improvements | 2,382 | 2,373 | |||||
Land | 172 | 171 | |||||
Building construction in progress | 97 | 83 | |||||
10,411 | 10,288 | ||||||
Accumulated depreciation | (6,605 | ) | (6,438 | ) | |||
$ | 3,806 | $ | 3,850 |
March 31, 2016 | December 31, 2015 | ||||||
Salaries and benefits | $ | 957 | $ | 1,189 | |||
Product warranties | 151 | 172 | |||||
Dividends payable (see Note 10) | 239 | 234 | |||||
Partner rebates | 181 | 221 | |||||
Restructuring, current (See Note 11) | 250 | 333 | |||||
Derivatives | 85 | 82 | |||||
Other | 859 | 892 | |||||
$ | 2,722 | $ | 3,123 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Balance, beginning of the period | $ | 172 | $ | 207 | |||
Provision | 25 | 33 | |||||
Amounts charged against the accrual | (46 | ) | (52 | ) | |||
Balance, end of the period | $ | 151 | $ | 188 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Numerator: | |||||||
Net income attributable to EMC Corporation | $ | 268 | $ | 252 | |||
Incremental dilution from VMware | — | (1 | ) | ||||
Net income – dilution attributable to EMC Corporation | $ | 268 | $ | 251 | |||
Denominator: | |||||||
Weighted average shares, basic | 1,949 | 1,974 | |||||
Weighted common stock equivalents | 16 | 22 | |||||
Weighted average shares, diluted | 1,965 | 1,996 |
Declaration Date | Dividend Per Share | Record Date | Total Amount (in millions) | Payment Date | ||||||||
2016: | ||||||||||||
February 11, 2016 | $ | 0.115 | April 1, 2016 | $ | 229 | April 22, 2016 | ||||||
2015: | ||||||||||||
February 27, 2015 | $ | 0.115 | April 1, 2015 | $ | 229 | April 23, 2015 | ||||||
May 20, 2015 | $ | 0.115 | July 1, 2015 | $ | 226 | July 23, 2015 | ||||||
July 30, 2015 | $ | 0.115 | October 1, 2015 | $ | 229 | October 23, 2015 | ||||||
December 17, 2015 | $ | 0.115 | January 4, 2016 | $ | 230 | January 22, 2016 |
Foreign Currency Translation Adjustments | Unrealized Net Gains on Investments | Unrealized Net Losses on Derivatives | Recognition of Actuarial Net Loss from Pension and Other Postretirement Plans | Accumulated Other Comprehensive Income Attributable to the Non-controlling Interest in VMware, Inc. | Total | ||||||||||||||||||
Balance as of December, 31 2015(a) | $ | (356 | ) | $ | (10 | ) | $ | (89 | ) | $ | (125 | ) | $ | 1 | $ | (579 | ) | ||||||
Other comprehensive income (loss) before reclassifications | 3 | 20 | (4 | ) | — | (4 | ) | 15 | |||||||||||||||
Net losses (gains) reclassified from accumulated other comprehensive income | — | 2 | 4 | — | — | 6 | |||||||||||||||||
Net current period other comprehensive income (loss) | 3 | 22 | — | — | (4 | ) | 21 | ||||||||||||||||
Balance as of March 31, 2016(b) | $ | (353 | ) | $ | 12 | $ | (89 | ) | $ | (125 | ) | $ | (3 | ) | $ | (558 | ) |
(a) | Net of taxes (benefits) of $(5) million for unrealized net gains on investments, $(56) million for unrealized net losses on derivatives and $(71) million for actuarial net loss on pension plans. |
(b) | Net of taxes (benefits) of $7 million for unrealized net gains on investments, $(55) million for unrealized net losses on derivatives and $(71) million for actuarial net loss on pension plans. |
Foreign Currency Translation Adjustments | Unrealized Net Gains on Investments | Unrealized Net Losses on Derivatives | Recognition of Actuarial Net Loss from Pension and Other Postretirement Plans | Accumulated Other Comprehensive Income Attributable to the Non-controlling Interest in VMware, Inc. | Total | ||||||||||||||||||
Balance as of December, 31 2014(a) | $ | (187 | ) | $ | 49 | $ | (99 | ) | $ | (126 | ) | $ | (3 | ) | $ | (366 | ) | ||||||
Other comprehensive income (loss) before reclassifications | (104 | ) | 19 | 14 | — | (1 | ) | (72 | ) | ||||||||||||||
Net losses (gains) reclassified from accumulated other comprehensive income | — | (8 | ) | (11 | ) | — | — | (19 | ) | ||||||||||||||
Net current period other comprehensive income (loss) | (104 | ) | 11 | 3 | — | (1 | ) | (91 | ) | ||||||||||||||
Balance as of March 31, 2015(b) | $ | (291 | ) | $ | 60 | $ | (96 | ) | $ | (126 | ) | $ | (4 | ) | $ | (457 | ) |
(a) | Net of taxes (benefits) of $31 million for unrealized net gains on investments, $(64) million for unrealized net losses on derivatives and $(70) million for actuarial net loss on pension plans. |
(b) | Net of taxes (benefits) of $38 million for unrealized net gains on investments, $(61) million for unrealized net losses on derivatives and $(70) million for actuarial net loss on pension plans. |
For the Three Months Ended | ||||||||||
Accumulated Other Comprehensive Income Components | March 31, 2016 | March 31, 2015 | Impacted Line Item on Consolidated Income Statements | |||||||
Net (loss) gain on investments: | $ | (2 | ) | $ | 14 | Investment income | ||||
— | (6 | ) | Provision for income tax | |||||||
Net of tax | $ | (2 | ) | $ | 8 | |||||
Net (loss) gain on derivatives: | ||||||||||
Foreign exchange contracts | $ | — | $ | 20 | Product sales revenue | |||||
Foreign exchange contracts | — | (3 | ) | Cost of product sales | ||||||
Interest rate swap | (6 | ) | (6 | ) | Other interest expense | |||||
Total net (loss) gain on derivatives before tax | (6 | ) | 11 | |||||||
2 | — | Provision for income tax | ||||||||
Net of tax | $ | (4 | ) | $ | 11 |
Other EMC Programs | |||||||||||||||
Category | Balance as of December 31, 2015 | 2016 Charges | Utilization | Balance as of March 31, 2016 | |||||||||||
Workforce reductions | $ | 322 | $ | (10 | ) | $ | (99 | ) | $ | 213 | |||||
Consolidation of excess facilities and other contractual obligations | 20 | 5 | (3 | ) | 22 | ||||||||||
Total | $ | 342 | $ | (5 | ) | $ | (102 | ) | $ | 235 |
VMware Programs | |||||||||||||||
Category | Balance as of December 31, 2015 | 2016 Charges | Utilization | Balance as of March 31, 2016 | |||||||||||
Workforce reductions | $ | 3 | $ | 50 | $ | (26 | ) | $ | 27 | ||||||
Consolidation of excess facilities and other contractual obligations | — | 3 | — | 3 | |||||||||||
Total | $ | 3 | $ | 53 | $ | (26 | ) | $ | 30 |
2015 EMC Programs | |||||||||||||||
Category | Balance as of December 31, 2014 | 2015 Charges | Utilization | Balance as of March 31, 2015 | |||||||||||
Workforce reductions | $ | — | $ | 107 | $ | (11 | ) | $ | 96 | ||||||
Consolidation of excess facilities and other contractual obligations | — | 6 | — | 6 | |||||||||||
Total | $ | — | $ | 113 | $ | (11 | ) | $ | 102 |
Other EMC Programs | |||||||||||||||
Category | Balance as of December 31, 2014 | Adjustments to the Provision | Utilization | Balance as of March 31, 2015 | |||||||||||
Workforce reductions | $ | 102 | $ | (2 | ) | $ | (39 | ) | $ | 61 | |||||
Consolidation of excess facilities and other contractual obligations | 19 | — | (5 | ) | 14 | ||||||||||
Total | $ | 121 | $ | (2 | ) | $ | (44 | ) | $ | 75 |
VMware Programs | |||||||||||||||
Category | Balance as of December 31, 2014 | 2015 Charges | Utilization | Balance as of March 31, 2015 | |||||||||||
Workforce reductions | $ | 8 | $ | 22 | $ | (14 | ) | $ | 16 | ||||||
Consolidation of excess facilities and other contractual obligations | — | — | — | — | |||||||||||
Total | $ | 8 | $ | 22 | $ | (14 | ) | $ | 16 |
Case | Court | Filing Date | |
1. | IBEW Local No. 129 Benefit Fund v. Tucci, Civ. No. 1584-3130-BLS1 | Mass. Superior Court, Suffolk County | 10/15/2015 |
2. | Barrett v. Tucci, Civ. No. 15-6023-A | Mass. Superior Court, Middlesex County | 10/16/2015 |
3. | Graulich v. Tucci, Civ. No. 1584-3169-BLS1 | Mass. Superior Court, Suffolk County | 10/19/2015 |
4. | Vassallo v. EMC Corp., Civ. No. 1584-3173-BLS1 | Mass. Superior Court, Suffolk County | 10/19/2015 |
5. | City of Miami Police Relief & Pension Fund v. Tucci, Civ. No. 1584-3174-BLS1 | Mass. Superior Court, Suffolk County | 10/19/2015 |
6. | Lasker v. EMC Corp., Civ. No. 1584-3214-BLS1 | Mass. Superior Court, Suffolk County | 10/23/2015 |
7. | Walsh v. EMC Corp., Civ. No. 15-13654 | U.S. District Court, District of Massachusetts | 10/27/2015 |
8. | Local Union No. 373 U.A. Pension Plan v. EMC Corp., Civ. No. 1584-3253-BLS1 | Mass. Superior Court, Suffolk County | 10/28/2015 |
9. | City of Lakeland Emps.’ Pension & Ret. Fund v. Tucci, Civ. No. 1584-3269-BLS1 | Mass. Superior Court, Suffolk County | 10/28/2015 |
10. | Ma v. Tucci, Civ. No. 1584-3281-BLS1 | Mass. Superior Court, Suffolk County | 10/29/2015 |
11. | Stull v. EMC Corp., Civ. No. 15-13692 | U.S. District Court, District of Massachusetts | 10/30/2015 |
12. | Jacobs v. EMC Corp., Civ. No. 15-6318-H | Mass. Superior Court, Middlesex County | 11/12/2015 |
13. | Ford v. VMware, Inc., C.A. No. 11714-VCL | Delaware Chancery Court | 11/17/2015 |
14. | Pancake v. EMC Corp., Civ. No. 16-10040 | U.S. District Court, District of Massachusetts | 1/11/2016 |
15. | Booth Family Trust v. EMC Corp., Civ. No. 16-10114 | U.S. District Court, District of Massachusetts | 1/26/2016 |
EMC Information Infrastructure | |||||||||||||||||||||||
Information Storage | Enterprise Content Division | RSA Information Security | EMC Information Infrastructure | Pivotal | EMC Information Infrastructure plus Pivotal | ||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
March 31, 2016 | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Product revenues | $ | 1,960 | $ | 29 | $ | 95 | $ | 2,084 | $ | 27 | $ | 2,111 | |||||||||||
Services revenues | 1,487 | 105 | 133 | 1,725 | 56 | 1,781 | |||||||||||||||||
Total consolidated revenues | 3,447 | 134 | 228 | 3,809 | 83 | 3,892 | |||||||||||||||||
Gross profit | $ | 1,711 | $ | 91 | $ | 151 | $ | 1,953 | $ | 34 | $ | 1,987 | |||||||||||
Gross profit percentage | 49.6 | % | 68.0 | % | 66.4 | % | 51.3 | % | 41.2 | % | 51.1 | % | |||||||||||
Research and development | 378 | 34 | 412 | ||||||||||||||||||||
Selling, general and administrative | 1,084 | 58 | 1,142 | ||||||||||||||||||||
Restructuring and acquisition-related charges | — | — | — | ||||||||||||||||||||
Total operating expenses | 1,462 | 92 | 1,554 | ||||||||||||||||||||
Operating income (expense) | $ | 491 | $ | (58 | ) | $ | 433 |
EMC Information Infrastructure plus Pivotal | VMware Virtual Infrastructure | Corp Reconciling Items | Consolidated | ||||||||||||
Three Months Ended | |||||||||||||||
March 31, 2016 | |||||||||||||||
Revenues: | |||||||||||||||
Product revenues | $ | 2,111 | $ | 571 | $ | — | $ | 2,682 | |||||||
Services revenues | 1,781 | 1,012 | — | 2,793 | |||||||||||
Total consolidated revenues | 3,892 | 1,583 | — | 5,475 | |||||||||||
Gross profit | $ | 1,987 | $ | 1,373 | $ | (100 | ) | $ | 3,260 | ||||||
Gross profit percentage | 51.1 | % | 86.7 | % | — | % | 59.5 | % | |||||||
Research and development | 412 | 283 | 119 | 814 | |||||||||||
Selling, general and administrative | 1,142 | 644 | 201 | 1,987 | |||||||||||
Restructuring and acquisition-related charges | — | — | 49 | 49 | |||||||||||
Total operating expenses | 1,554 | 927 | 369 | 2,850 | |||||||||||
Operating income (expense) | 433 | 446 | (469 | ) | 410 | ||||||||||
Non-operating income (expense), net | (15 | ) | 9 | (18 | ) | (24 | ) | ||||||||
Income tax provision (benefit) | 75 | 128 | (114 | ) | 89 | ||||||||||
Net income | 343 | 327 | (373 | ) | 297 | ||||||||||
Net income attributable to the non-controlling interests | 1 | (68 | ) | 38 | (29 | ) | |||||||||
Net income attributable to EMC Corporation | $ | 344 | $ | 259 | $ | (335 | ) | $ | 268 |
EMC Information Infrastructure | |||||||||||||||||||||||
Information Storage | Enterprise Content Division | RSA Information Security | EMC Information Infrastructure | Pivotal | EMC Information Infrastructure plus Pivotal | ||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
March 31, 2015 | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Product revenues | $ | 2,179 | $ | 27 | $ | 100 | $ | 2,306 | $ | 16 | $ | 2,322 | |||||||||||
Services revenues | 1,484 | 111 | 148 | 1,743 | 38 | 1,781 | |||||||||||||||||
Total consolidated revenues | 3,663 | 138 | 248 | 4,049 | 54 | 4,103 | |||||||||||||||||
Gross profit | $ | 1,850 | $ | 90 | $ | 165 | $ | 2,105 | $ | 22 | $ | 2,127 | |||||||||||
Gross profit percentage | 50.5 | % | 65.2 | % | 66.6 | % | 52.0 | % | 40.3 | % | 51.9 | % | |||||||||||
Research and development | 424 | 27 | 451 | ||||||||||||||||||||
Selling, general and administrative | 1,169 | 49 | 1,218 | ||||||||||||||||||||
Restructuring and acquisition-related charges | — | — | — | ||||||||||||||||||||
Total operating expenses | 1,593 | 76 | 1,669 | ||||||||||||||||||||
Operating income (expense) | $ | 512 | $ | (54 | ) | $ | 458 |
EMC Information Infrastructure plus Pivotal | VMware Virtual Infrastructure | Corp Reconciling Items | Consolidated | ||||||||||||
Three Months Ended | |||||||||||||||
March 31, 2015 | |||||||||||||||
Revenues: | |||||||||||||||
Product revenues | $ | 2,322 | $ | 583 | $ | — | $ | 2,905 | |||||||
Services revenues | 1,781 | 927 | — | 2,708 | |||||||||||
Total consolidated revenues | 4,103 | 1,510 | — | 5,613 | |||||||||||
Gross profit | $ | 2,127 | $ | 1,311 | $ | (99 | ) | $ | 3,339 | ||||||
Gross profit percentage | 51.9 | % | 86.8 | % | — | % | 59.5 | % | |||||||
Research and development | 451 | 247 | 90 | 788 | |||||||||||
Selling, general and administrative | 1,218 | 604 | 215 | 2,037 | |||||||||||
Restructuring and acquisition-related charges | — | — | 135 | 135 | |||||||||||
Total operating expenses | 1,669 | 851 | 440 | 2,960 | |||||||||||
Operating income (expense) | 458 | 460 | (539 | ) | 379 | ||||||||||
Non-operating income (expense), net | (14 | ) | 8 | — | (6 | ) | |||||||||
Income tax provision (benefit) | 126 | 89 | (133 | ) | 82 | ||||||||||
Net income | 318 | 379 | (406 | ) | 291 | ||||||||||
Net income attributable to the non-controlling interests | — | (74 | ) | 35 | (39 | ) | |||||||||
Net income attributable to EMC Corporation | $ | 318 | $ | 305 | $ | (371 | ) | $ | 252 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
United States | $ | 2,897 | $ | 3,013 | |||
Europe, Middle East and Africa | 1,537 | 1,559 | |||||
Asia Pacific and Japan | 740 | 729 | |||||
Latin America, Mexico and Canada | 301 | 312 | |||||
Total | $ | 5,475 | $ | 5,613 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements and should also be read in conjunction with the risk factors set forth in Item 1A of Part II. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof. |
For the Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Information Storage | $ | 3,447 | $ | 3,663 | $ | (216 | ) | (6 | )% | |||||
Enterprise Content Division | 134 | 138 | (4 | ) | (3 | )% | ||||||||
RSA Information Security | 228 | 248 | (20 | ) | (8 | )% | ||||||||
Pivotal | 83 | 54 | 29 | 56 | % | |||||||||
VMware Virtual Infrastructure | 1,583 | 1,510 | 73 | 5 | % | |||||||||
Total consolidated revenues | $ | 5,475 | $ | 5,613 | $ | (138 | ) | (2 | )% |
For the Three Months Ended | |||||||||||
March 31, 2016 | March 31, 2015 | % Change | |||||||||
United States | $ | 2,897 | $ | 3,013 | (4 | )% | |||||
Europe, Middle East and Africa | 1,537 | 1,559 | (1 | )% | |||||||
Asia Pacific and Japan | 740 | 729 | 2 | % | |||||||
Latin America, Mexico and Canada | 301 | 312 | (4 | )% | |||||||
Total revenues | $ | 5,475 | $ | 5,613 | (2 | )% |
For the Three Months Ended | |||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | ||||||||||||
Cost of revenue: | |||||||||||||||
Information Storage | $ | 1,736 | $ | 1,813 | $ | (77 | ) | (4 | )% | ||||||
Enterprise Content Division | 43 | 48 | (5 | ) | (11 | )% | |||||||||
RSA Information Security | 77 | 83 | (6 | ) | (7 | )% | |||||||||
Pivotal | 49 | 32 | 17 | 54 | % | ||||||||||
VMware Virtual Infrastructure | 210 | 199 | 11 | 5 | % | ||||||||||
Corporate reconciling items | 100 | 99 | 1 | — | % | ||||||||||
Total cost of revenue | 2,215 | 2,274 | (59 | ) | (3 | )% | |||||||||
Gross margins: | |||||||||||||||
Information Storage | 1,711 | 1,850 | (139 | ) | (8 | )% | |||||||||
Enterprise Content Division | 91 | 90 | 1 | 1 | % | ||||||||||
RSA Information Security | 151 | 165 | (14 | ) | (8 | )% | |||||||||
Pivotal | 34 | 22 | 12 | 59 | % | ||||||||||
VMware Virtual Infrastructure | 1,373 | 1,311 | 62 | 5 | % | ||||||||||
Corporate reconciling items | (100 | ) | (99 | ) | (1 | ) | — | % | |||||||
Total gross margin | 3,260 | 3,339 | (79 | ) | (2 | )% | |||||||||
Operating expenses: | |||||||||||||||
Research and development(1) | 814 | 788 | 26 | 3 | % | ||||||||||
Selling, general and administrative(2) | 1,987 | 2,037 | (50 | ) | (2 | )% | |||||||||
Restructuring and acquisition-related charges | 49 | 135 | (86 | ) | (64 | )% | |||||||||
Total operating expenses | 2,850 | 2,960 | (110 | ) | (4 | )% | |||||||||
Operating income | 410 | 379 | 31 | 8 | % | ||||||||||
Investment income, interest expense and other expenses, net | (24 | ) | (6 | ) | (18 | ) | 322 | % | |||||||
Income before provision for income taxes | 386 | 373 | 13 | 3 | % | ||||||||||
Income tax provision | 89 | 82 | 7 | 8 | % | ||||||||||
Net income | 297 | 291 | 6 | 2 | % | ||||||||||
Less: Net income attributable to the non-controlling interest in VMware, Inc. | (29 | ) | (39 | ) | 10 | (26 | )% | ||||||||
Net income attributable to EMC Corporation | $ | 268 | $ | 252 | $ | 16 | 6 | % |
(1) | Amount includes corporate reconciling items of $119 million and $90 million for the three months ended March 31, 2016 and 2015, respectively. |
(2) | Amount includes corporate reconciling items of $201 million and $215 million for the three months ended March 31, 2016 and 2015, respectively. |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Research and development | $ | 814 | $ | 788 | $ | 26 | 3 | % | ||||||
Percentage of revenue | 15 | % | 14 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Research and development | $ | 378 | $ | 424 | $ | (46 | ) | (11 | )% | |||||
Percentage of revenue | 10 | % | 10 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Research and development | $ | 34 | $ | 27 | $ | 7 | 26 | % | ||||||
Percentage of revenue | 41 | % | 50 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Research and development | $ | 283 | $ | 247 | $ | 36 | 15 | % | ||||||
Percentage of revenue | 18 | % | 16 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Corporate reconciling items | $ | 119 | $ | 90 | $ | 29 | 32 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Selling, general and administrative | $ | 1,987 | $ | 2,037 | $ | (50 | ) | (2 | )% | |||||
Percentage of revenue | 36 | % | 36 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Selling, general and administrative | $ | 1,084 | $ | 1,169 | $ | (85 | ) | (7 | )% | |||||
Percentage of revenue | 29 | % | 29 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Selling, general and administrative | $ | 58 | $ | 49 | $ | 9 | 17 | % | ||||||
Percentage of revenue | 70 | % | 92 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Selling, general and administrative | $ | 644 | $ | 604 | $ | 40 | 7 | % | ||||||
Percentage of revenue | 41 | % | 40 | % |
Three Months Ended | ||||||||||||||
March 31, 2016 | March 31, 2015 | $ Change | % Change | |||||||||||
Corporate reconciling items | $ | 201 | $ | 215 | $ | (14 | ) | (7 | )% |
For the Three Months Ended | |||||||||||
March 31, 2016 | March 31, 2015 | $ Change | |||||||||
Cash provided by operating activities | $ | 932 | $ | 1,080 | $ | (148 | ) | ||||
Cash provided by (used in) investing activities | 156 | (1,111 | ) | 1,267 | |||||||
Cash used in financing activities | (444 | ) | (1,821 | ) | 1,377 | ||||||
Effect of exchange rates on cash and cash equivalents | 31 | (103 | ) | 134 | |||||||
Net increase (decrease) in cash and cash equivalents | $ | 675 | $ | (1,955 | ) | $ | 2,630 |
For the Three Months Ended | |||||||||||
March 31, 2016 | March 31, 2015 | $ Change | |||||||||
Cash received from customers | $ | 6,878 | $ | 7,495 | $ | (617 | ) | ||||
Cash paid to suppliers and employees | (5,373 | ) | (5,584 | ) | 211 | ||||||
Income taxes paid | (591 | ) | (855 | ) | 264 |
For the Three Months Ended | |||||||||||
March 31, 2016 | March 31, 2015 | $ Change | |||||||||
Net sales, maturities and (purchases) of available-for-sale securities | $ | 491 | $ | (688 | ) | $ | 1,179 |
For the Three Months Ended | |||||||||||
March 31, 2016 | March 31, 2015 | $ Change | |||||||||
Repurchase of EMC and VMware common stock | $ | — | $ | (1,784 | ) | $ | 1,784 | ||||
Net payments on short-term obligations | (376 | ) | — | (376 | ) |
Declaration Date | Dividend Per Share | Record Date | Total Amount (in millions) | Payment Date | ||||||||
2016: | ||||||||||||
February 11, 2016 | $ | 0.115 | April 1, 2016 | $ | 229 | April 22, 2016 | ||||||
2015: | ||||||||||||
February 27, 2015 | $ | 0.115 | April 1, 2015 | $ | 229 | April 23, 2015 | ||||||
May 20, 2015 | $ | 0.115 | July 1, 2015 | $ | 226 | July 23, 2015 | ||||||
July 30, 2015 | $ | 0.115 | October 1, 2015 | $ | 229 | October 23, 2015 | ||||||
December 17, 2015 | $ | 0.115 | January 4, 2016 | $ | 230 | January 22, 2016 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Gross margin | $ | 3,360 | $ | 3,438 | |||
Gross margin percentage | 61.4 | % | 61.3 | % | |||
Operating income | 879 | 918 | |||||
Operating margin percentage | 16.0 | % | 16.4 | % | |||
Income tax provision | 203 | 215 | |||||
Net income attributable to EMC | 603 | 623 | |||||
Diluted earnings per share attributable to EMC | $ | 0.31 | $ | 0.31 |
For the Three Months Ended March 31, 2016 | |||||||||||||||||||||||
Gross margin | Operating income | Non-operating (income) expense | Income tax provision (benefit) | Net income attributable to EMC | Diluted Earnings per share attributable to EMC | ||||||||||||||||||
GAAP | $ | 3,260 | $ | 410 | $ | (24 | ) | $ | 89 | $ | 268 | $ | 0.14 | ||||||||||
Stock-based compensation expense | 41 | 304 | — | 69 | 212 | 0.11 | |||||||||||||||||
Intangible asset amortization | 59 | 90 | — | 25 | 60 | 0.03 | |||||||||||||||||
Restructuring charges | — | 48 | — | 14 | 26 | 0.01 | |||||||||||||||||
Acquisition and other related charges | — | 20 | — | 5 | 13 | 0.01 | |||||||||||||||||
Merger-related costs | — | 7 | — | 1 | 6 | — | |||||||||||||||||
Venezuela currency devaluation | — | — | 18 | — | 18 | 0.01 | |||||||||||||||||
Non-GAAP | $ | 3,360 | $ | 879 | $ | (6 | ) | $ | 203 | $ | 603 | $ | 0.31 |
For the Three Months Ended March 31, 2015 | |||||||||||||||||||||||
Gross margin | Operating income | Non-operating (income) expense | Income tax provision (benefit) | Net income attributable to EMC | Diluted Earnings per share attributable to EMC | ||||||||||||||||||
GAAP | $ | 3,339 | $ | 379 | $ | (6 | ) | $ | 82 | $ | 252 | $ | 0.13 | ||||||||||
Stock-based compensation expense | 37 | 244 | — | 55 | 170 | 0.09 | |||||||||||||||||
Intangible asset amortization | 62 | 101 | — | 30 | 66 | 0.03 | |||||||||||||||||
Restructuring charges | — | 133 | — | 33 | 96 | 0.04 | |||||||||||||||||
Acquisition and other related charges | — | 50 | — | 16 | 28 | 0.02 | |||||||||||||||||
R&D tax credit | — | — | — | (5 | ) | 5 | — | ||||||||||||||||
VMware litigation and other contingencies | — | 11 | — | 4 | 6 | — | |||||||||||||||||
Non-GAAP | $ | 3,438 | $ | 918 | $ | (6 | ) | $ | 215 | $ | 623 | $ | 0.31 |
For the Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Cash Flow from Operations | $ | 932 | $ | 1,080 | |||
Capital expenditures | (188 | ) | (197 | ) | |||
Capitalized software development costs | (156 | ) | (128 | ) | |||
Free Cash Flow | $ | 588 | $ | 755 |
Case | Court | Filing Date | |
1. | IBEW Local No. 129 Benefit Fund v. Tucci, Civ. No. 1584-3130-BLS1 | Mass. Superior Court, Suffolk County | 10/15/2015 |
2. | Barrett v. Tucci, Civ. No. 15-6023-A | Mass. Superior Court, Middlesex County | 10/16/2015 |
3. | Graulich v. Tucci, Civ. No. 1584-3169-BLS1 | Mass. Superior Court, Suffolk County | 10/19/2015 |
4. | Vassallo v. EMC Corp., Civ. No. 1584-3173-BLS1 | Mass. Superior Court, Suffolk County | 10/19/2015 |
5. | City of Miami Police Relief & Pension Fund v. Tucci, Civ. No. 1584-3174-BLS1 | Mass. Superior Court, Suffolk County | 10/19/2015 |
6. | Lasker v. EMC Corp., Civ. No. 1584-3214-BLS1 | Mass. Superior Court, Suffolk County | 10/23/2015 |
7. | Walsh v. EMC Corp., Civ. No. 15-13654 | U.S. District Court, District of Massachusetts | 10/27/2015 |
8. | Local Union No. 373 U.A. Pension Plan v. EMC Corp., Civ. No. 1584-3253-BLS1 | Mass. Superior Court, Suffolk County | 10/28/2015 |
9. | City of Lakeland Emps.’ Pension & Ret. Fund v. Tucci, Civ. No. 1584-3269-BLS1 | Mass. Superior Court, Suffolk County | 10/28/2015 |
10. | Ma v. Tucci, Civ. No. 1584-3281-BLS1 | Mass. Superior Court, Suffolk County | 10/29/2015 |
11. | Stull v. EMC Corp., Civ. No. 15-13692 | U.S. District Court, District of Massachusetts | 10/30/2015 |
12. | Jacobs v. EMC Corp., Civ. No. 15-6318-H | Mass. Superior Court, Middlesex County | 11/12/2015 |
13. | Ford v. VMware, Inc., C.A. No. 11714-VCL | Delaware Chancery Court | 11/17/2015 |
14. | Pancake v. EMC Corp., Civ. No. 16-10040 | U.S. District Court, District of Massachusetts | 1/11/2016 |
15. | Booth Family Trust v. EMC Corp., Civ. No. 16-10114 | U.S. District Court, District of Massachusetts | 1/26/2016 |
• | the difficulty in forecasting customer preferences or demand accurately; |
• | the inability to expand production capacity to meet demand for new products; |
• | the inability to successfully manage the interoperability and transition from older products; |
• | the impact of customers’ demand for new products on the products being replaced, thereby causing a decline in sales of existing products and an excessive, obsolete supply of inventory; |
• | delays in initial shipments of new products; and |
• | delays in sales caused by the desire of customers to evaluate new products for extended periods of time. |
• | successfully communicating and executing on our unique federation strategy; |
• | retaining and hiring the appropriate number of qualified employees; |
• | managing, protecting and enhancing, as appropriate, our infrastructure, including but not limited to, our information systems (and our ability to protect confidential information residing on such systems) and internal controls; |
• | accurately forecasting revenues; |
• | training our sales force to sell effectively, given the breadth of our offerings; |
• | successfully integrating new acquisitions; |
• | managing inventory levels, including minimizing excess and obsolete inventory, while maintaining sufficient inventory to meet customer demands; |
• | controlling expenses; |
• | managing our manufacturing capacity, real estate facilities and other assets; |
• | meeting our sustainability goals; and |
• | executing on our plans. |
• | fluctuations in demand, adoption rates, sales cycles (which have been increasing in length) and pricing levels for VMware’s products and services; |
• | changes in customers’ budgets for information technology purchases and in the timing of its purchasing decisions; |
• | the timing of recognizing revenues in any given quarter, which can be affected by a number of factors, including product announcements, beta programs and product promotions that can cause revenue recognition of certain orders to be deferred until future products to which customers are entitled become available; |
• | the timing of announcements or releases of new or upgraded products and services by VMware or by its competitors; |
• | the timing and size of business realignment plans and restructuring charges; |
• | VMware’s ability to maintain scalable internal systems for reporting, order processing, license fulfillment, product delivery, purchasing, billing and general accounting, among other functions; |
• | VMware’s ability to control costs, including its operating expenses; |
• | credit risks of VMware’s distributors, who account for a significant portion of product revenues and accounts receivable; |
• | VMware’s ability to process sales at the end of the quarter; |
• | seasonal factors such as the end of fiscal period budget expenditures by VMware’s customers and the timing of holiday and vacation periods; |
• | renewal rates and the amounts of the renewals for enterprise agreements, or EA’s, as original EA terms expire; |
• | the timing and amount of internally developed software development costs that may be capitalized; |
• | unplanned events that could affect market perception of the quality or cost-effectiveness of VMware’s products and solutions; and |
• | VMware’s ability to accurately predict the degree to which customers will elect to purchase its subscription-based offerings in place of licenses to its on-premises offerings. |
• | the relative dollar amount of our product and services offerings in relation to many of our customers’ budgets, resulting in long lead times for customers’ budgetary approval, which tends to be given late in a quarter; |
• | the tendency of customers to wait until late in a quarter to commit to purchase in the hope of obtaining more favorable pricing from one or more competitors seeking their business; |
• | the fourth-quarter influence of customers spending their remaining capital budget authorization prior to new budget constraints in the first nine months of the following year; and |
• | seasonal influences. |
• | we assemble our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers; |
• | we generally ship products shortly after receipt of the order; and |
• | customers may generally reschedule or cancel orders with little or no penalty. |
• | the announcement of acquisitions, new products, services or technological innovations by us or our competitors; |
• | quarterly variations in our operating results; |
• | changes in revenue or earnings estimates by the investment community; and |
• | speculation in the press or investment community. |
• | the trading price for VMware Class A common stock; |
• | actions taken or statements made by us, VMware, or others concerning our relationship with VMware; and |
• | factors impacting the performance of VMware, including those discussed in the risk factor above regarding the impact of VMware’s financial performance on our financial performance. |
• | changes in foreign currency exchange rates; |
• | changes in a specific country’s or region’s economic conditions; |
• | political or social unrest; |
• | trade restrictions; |
• | import or export licensing requirements; |
• | the overlap of different tax structures or changes in international tax laws; |
• | changes in regulatory requirements; |
• | difficulties in staffing and managing international operations; |
• | stringent privacy policies in some foreign countries; |
• | compliance with a variety of foreign laws and regulations; and |
• | longer payment cycles in certain countries. |
• | the effect of the acquisition on our financial and strategic position and reputation; |
• | the failure of an acquired business to further our strategic plans; |
• | the failure of the acquisition to result in expected benefits, which may include benefits relating to enhanced revenues, technology, human resources, cost savings, operating efficiencies and other synergies; |
• | the difficulty and cost of integrating the acquired business, including costs and delays in implementing common systems and procedures and costs and delays caused by communication difficulties or geographic distances between the two companies’ sites; |
• | the assumption of known or unknown liabilities of the acquired business, including litigation-related liability; |
• | the potential impairment of acquired assets; |
• | the lack of experience in new markets, products or technologies or the initial dependence on unfamiliar supply or distribution partners; |
• | the diversion of our management’s attention from other business concerns; |
• | the impairment of relationships with customers or suppliers of the acquired business or our customers or suppliers; |
• | the recoverability of benefits from goodwill and intangible assets and the potential impairment of these assets; |
• | the potential loss of key employees of the acquired company; and |
• | the potential incompatibility of business cultures. |
(a) | Exhibits |
Date: May 5, 2016 | EMC CORPORATION | ||
By: | /s/ Denis G. Cashman | ||
Denis G. Cashman | |||
Chief Financial Officer and Chief Accounting Officer | |||
(Principal Financial Officer) |
3.1 | Restated Articles of Organization of EMC Corporation. (1) | |
3.2 | Amended and Restated Bylaws of EMC Corporation. (1) | |
4.1 | Form of Stock Certificate. (2) | |
4.2 | Underwriting Agreement, dated as of June 3, 2013, by and among the Company, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named therein. (3) | |
4.3 | Indenture, dated as of June 6, 2013, by and between the Company and Wells Fargo Bank, National Association, as Trustee. (3) | |
31.1 | Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) | |
31.2 | Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith) | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith) | |
101.INS* | XBRL Instance Document. (filed herewith) | |
101.SCH* | XBRL Taxonomy Extension Schema. (filed herewith) | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase. (filed herewith) | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase. (filed herewith) | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase. (filed herewith) | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase. (filed herewith) |
* | Pursuant to Rule 406T of Regulation S-T, these interactive data files shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing. |
(1) | Incorporated by reference to EMC Corporation’s Quarterly Report on Form 10-Q filed May 3, 2013 (No. 1-9853). |
(2) | Incorporated by reference to EMC Corporation’s Annual Report on Form 10-K filed February 29, 2008 (No. 1-9853). |
(3) | Incorporated by reference to EMC Corporation’s Current Report on Form 8-K filed June 6, 2013 (No. 1-9853). |
1. | I have reviewed this Quarterly Report on Form 10-Q of EMC Corporation (“the Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. | The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. |
Date: May 5, 2016 | /s/ Joseph M. Tucci |
1. | I have reviewed this Quarterly Report on Form 10-Q of EMC Corporation (“the Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. | The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. |
Date: May 5, 2016 | /s/ Denis G. Cashman |
(1) | The Quarterly Report on Form 10-Q of EMC Corporation for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of EMC Corporation. |
(1) | The Quarterly Report on Form 10-Q of EMC Corporation for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of EMC Corporation. |
Document and Entity Information |
3 Months Ended |
---|---|
Mar. 31, 2016
shares
| |
Document-Document and Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 31, 2016 |
Document Fiscal Year Focus | 2016 |
Document Fiscal Period Focus | Q1 |
Trading Symbol | EMC |
Entity Registrant Name | EMC CORP |
Entity Central Index Key | 0000790070 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 1,953,196,703 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounts and notes receivable, allowance for doubtful accounts | $ 83 | $ 90 |
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 25,000,000 | 25,000,000 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 6,000,000,000 | 6,000,000,000 |
Common stock, issued (in shares) | 1,953,000,000 | 1,943,000,000 |
Common stock, outstanding (in shares) | 1,953,000,000 | 1,943,000,000 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||
Changes in unrealized gains (losses) - taxes (benefits) | $ 12 | $ 13 |
Reclassification adjustment for net losses (gains) realized in net income - benefits (taxes) | 0 | (6) |
Changes in market value of derivatives - taxes (benefits) | (1) | 3 |
Reclassification adjustment for net losses (gains) realized in net income - benefits (taxes) | $ 2 | $ 0 |
Basis of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation Company EMC Corporation (“EMC” or “the Company”) and its subsidiaries develop, deliver and support the information technology (“IT”) industry’s broadest range of information infrastructure and virtual infrastructure technologies, solutions and services. EMC manages the Company as part of a federation of businesses: EMC Information Infrastructure, VMware Virtual Infrastructure, Pivotal and Virtustream. EMC’s Information Infrastructure business provides a foundation for organizations to store, manage, protect, analyze and secure ever-increasing quantities of information, while at the same time improving business agility, lowering cost, and enhancing competitive advantage. EMC’s Information Infrastructure business comprises three segments – Information Storage, Enterprise Content Division and RSA Information Security. The results of Virtustream are currently reported within our Information Storage segment. EMC’s VMware Virtual Infrastructure business, which is represented by EMC’s majority equity stake in VMware, Inc. (“VMware”), is a leader in virtualization and cloud infrastructure solutions that enable businesses to help transform the way they build, deliver and consume IT resources in a manner that is based on their specific needs. VMware’s virtualization infrastructure solutions, which include a suite of products and services designed to deliver a software-defined data center, run on industry-standard desktop computers, servers and mobile devices and support a wide range of operating system and application environments, as well as networking and storage infrastructures. EMC’s Pivotal business (“Pivotal”) unites strategic technology, people and programs from EMC and VMware and has built a new platform comprised of next-generation data fabrics, application fabrics and a cloud independent platform-as-a-service (“PaaS”) to support Big and Fast Data applications. On top of this platform is the Company’s agile development services business. These capabilities are made available through Pivotal’s three primary offerings: Pivotal Cloud Foundry, the Pivotal Big Data Suite and Pivotal Labs. Proposed Transaction with Dell On October 12, 2015, EMC entered into an Agreement and Plan of Merger (the “Merger Agreement”) among EMC, Denali Holding Inc., a Delaware corporation (“Denali”), Dell Inc., a Delaware corporation (“Dell”), and Universal Acquisition Co., a Delaware corporation and direct wholly owned subsidiary of Denali (“Merger Sub”), pursuant to which, among other things and subject to the conditions set forth therein, Merger Sub will merge with and into EMC (the “Merger”), with EMC continuing as the surviving corporation and a wholly owned subsidiary of Denali. At the effective time of the Merger (“Effective Time”), each share of EMC common stock issued and outstanding will be canceled and converted into the right to receive (i) $24.05 in cash and (ii) a number of shares of common stock of Denali designated as Class V Common Stock, par value $0.01 per share (the “Class V Common Stock”), equal to the quotient obtained by dividing (A) 222,966,450 by (B) the aggregate number of shares of EMC common stock issued and outstanding immediately prior to the Effective Time. The aggregate number of shares of Class V Common Stock issued as Merger Consideration in the transaction is intended to represent 65% of EMC’s economic interest in the approximately 81% of the outstanding shares of VMware currently owned by EMC, reflecting approximately 53% of the total economic interest in the outstanding shares of VMware. Upon completion of the transaction, Denali will retain the remaining 28% of the total economic interest in the outstanding shares of VMware. Based on the estimated number of shares of EMC common stock outstanding at the closing of the transaction, EMC shareholders are expected to receive approximately 0.111 shares of Class V Common Stock for each share of EMC common stock. The Merger Agreement contains specified termination rights for both Denali and EMC, including that, in general, either party may terminate the agreement if the Merger is not consummated on or before December 16, 2016. If EMC terminates the Merger Agreement, EMC is required to pay Denali a termination fee of $2.5 billion. If Denali terminates the Merger Agreement, they are required to pay a termination fee of $4 billion under specified circumstances, and in certain instances, an alternative termination fee of $6 billion. The transaction is expected to close in mid-2016. The completion of the Merger is subject to certain conditions including EMC shareholder approval, the receipt of certain other regulatory approvals in various jurisdictions and the effectiveness of the registration statement on Form S-4 to be filed by Denali in connection with the registration of shares of Class V Common Stock issuable in connection with the Merger. The Merger Agreement contains representations and warranties customary for transactions of this nature. EMC has agreed to various customary covenants and agreements, including, among others, agreements to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger. In addition, without the consent of Denali, EMC may not take, authorize, agree or commit to do certain actions outside of the ordinary course of business, including acquiring businesses or incurring capital expenditures above specified thresholds, issuing additional debt facilities and repurchasing outstanding EMC common stock. Under the terms of the Merger Agreement, EMC is required to provide Denali with access to EMC’s cash to help fund the Merger consideration. At this time, EMC has not finalized its plan to access such cash and has not determined if there would be a need to repatriate cash to meet the requirements of the Merger. To date, EMC has asserted overseas cash as indefinitely reinvested; however if these overseas funds are required to be repatriated to the U.S. in accordance with the Merger Agreement, EMC may be required to accrue and pay U.S. taxes to repatriate these funds. Other than transaction expenses associated with the proposed Merger, the terms of the Merger Agreement did not impact EMC’s consolidated financial statements as of and for the three months ended March 31, 2016. General The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These consolidated financial statements include the accounts of EMC, its wholly owned subsidiaries, as well as VMware and Pivotal, companies majority-owned by EMC. All intercompany transactions have been eliminated. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Accordingly, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015 which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2016. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. The interim consolidated financial statements, in the opinion of management, reflect all adjustments necessary to fairly state the results as of and for the three-month periods ended March 31, 2016 and 2015. Net Income Per Share Basic net income per weighted average share has been computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per weighted average share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of stock options, restricted stock and restricted stock units. Additionally, for purposes of calculating diluted net income per weighted average share, net income is adjusted for the difference between VMware’s reported diluted and basic net income per weighted average share, if any, multiplied by the number of shares of VMware held by EMC. Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board (“FASB”) issued updated guidance related to stock-based compensation which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This standard is effective beginning January 1, 2017, with early application permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. In February 2016, the FASB issued a standard on leases which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires modified retrospective adoption and is effective beginning January 1, 2019, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. In May 2014, the FASB issued a standard on revenue recognition providing a single, comprehensive revenue recognition model for all contracts with customers. The revenue standard is based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard, as amended, is effective beginning January 1, 2018, with early adoption permitted but not earlier than the original effective date of January 1, 2017. The principles may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are currently evaluating the adoption method options and the impact of the new guidance on our consolidated financial statements. |
Non-controlling Interests |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling Interests | Non-controlling Interests The non-controlling interests’ share of equity in VMware is reflected as a component of the non-controlling interests in the accompanying consolidated balance sheets and was $1,581 million and $1,481 million as of March 31, 2016 and December 31, 2015, respectively. At March 31, 2016, EMC held approximately 97% of the combined voting power of VMware’s outstanding common stock and approximately 81% of the economic interest in VMware. GE’s interest in Pivotal is in the form of a preferred equity instrument. Consequently, there is no net income attributable to the GE non-controlling interest related to Pivotal on the consolidated income statements. Additionally, due to the terms of the preferred instrument, GE’s non-controlling interest on the consolidated balance sheets is generally not impacted by Pivotal’s equity related activity. The preferred equity instrument is convertible into common shares at GE’s election at any time. The portion of the results of operations of Pivotal allocable to its other owners, along with the interest in the net assets of Pivotal attributable to those other owners are shown as a component of non-controlling interests on EMC’s consolidated balance sheets and as a reduction of net income attributable to EMC shareholders. The non-controlling interests’ share of equity in Pivotal is reflected as a component of the non-controlling interests in the accompanying consolidated balance sheets as $96 million and $98 million as of March 31, 2016 and December 31, 2015, respectively. At March 31, 2016, EMC consolidated held approximately 83% of the economic interest in Pivotal. The effect of changes in our ownership interest in VMware and Pivotal on our equity was as follows (table in millions):
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Debt |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Short-Term Debt On February 27, 2015, we entered into a credit agreement with the lenders named therein, Citibank, N.A., as Administrative Agent, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as Syndication Agents, and Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Bookrunners (the “Credit Agreement”). The Credit Agreement provides for a $2.5 billion unsecured revolving credit facility to be used for general corporate purposes that is scheduled to mature on February 27, 2020. At our option, subject to certain conditions, any loan under the Credit Agreement will bear interest at a rate equal to, either (i) the LIBOR Rate or (ii) the Base Rate (defined as the highest of (a) the Federal Funds rate plus 0.50%, (b) Citibank, N.A.’s “prime rate” as announced from time to time, or (c) one-month LIBOR plus 1.00%), plus, in each case the Applicable Margin, as defined in the Credit Agreement. The Credit Agreement contains customary representations and warranties, covenants and events of default. We may also, upon the agreement of the existing lenders and/or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $1.0 billion. In addition, we may request to extend the maturity date of the credit facility, subject to certain conditions, for additional one-year periods. As of March 31, 2016, we were in compliance with customary required covenants. At March 31, 2016, we had no funds borrowed and at December 31, 2015, we had $600 million outstanding under the credit facility. Amounts outstanding under the credit facility are presented in short-term debt in the consolidated balance sheets with the issuances and proceeds presented on a net basis in the consolidated statement of cash flows due to their short term nature. On March 23, 2015, we established a short-term debt financing program whereby we may issue short-term unsecured commercial paper notes (“Commercial Paper”). Amounts available under the program may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the notes outstanding at any time not to exceed $2.5 billion. The Commercial Paper will have maturities of up to 397 days from the date of issue. The net proceeds from the issuance of the Commercial Paper are expected to be used for general corporate purposes. As of March 31, 2016, we were in compliance with customary required covenants. At March 31, 2016, we had $925 million of Commercial Paper outstanding, with a weighted-average interest rate of 0.95% and maturities ranging from 13 days to 30 days at the time of issuance. At December 31, 2015, we had $699 million of Commercial Paper outstanding. Commercial Paper outstanding is presented in short-term debt in the consolidated balance sheets, and the issuances and proceeds of the Commercial Paper are presented on a net basis in the consolidated statement of cash flows due to their short term nature. At May 5, 2016, we had $1,285 million of Commercial Paper outstanding. Long-Term Debt During 2013, we issued $5.5 billion of Notes which pay a fixed rate of interest semi-annually in arrears. The proceeds from the Notes were used to satisfy the cash payment obligation of the $1,725 billion 1.75% convertible senior notes due 2013 as well as for general corporate purposes including stock repurchases, dividend payments, business acquisitions, working capital needs and other business opportunities. The Notes of each series are senior, unsecured obligations of EMC and are not convertible or exchangeable. Unless previously purchased and canceled, we will repay the Notes of each series at 100% of the principal amount, together with accrued and unpaid interest thereon, at maturity. However, EMC has the right to redeem any or all of the Notes at specified redemption prices. As of March 31, 2016, we were in compliance with all debt covenants, which are customary in nature. Our long-term debt as of March 31, 2016 was as follows (dollars in millions):
The unamortized discount on the Notes consists of $4 million, which will be fully amortized by June 1, 2023. The effective interest rate on the Notes was 2.55% for the three months ended March 31, 2016. |
Fair Value of Financial Assets and Liabilities |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Assets and Liabilities | Fair Value of Financial Assets and Liabilities Our fixed income and equity investments are classified as available for sale and recorded at their fair market values. We determine fair value using the following hierarchy:
Most of our fixed income securities are classified as Level 2, with the exception of some of our U.S. government and agency obligations and our investments in publicly traded equity securities, which are classified as Level 1, and all of our auction rate securities, which are classified as Level 3. In addition, our strategic investments held at cost are classified as Level 3. At March 31, 2016, the vast majority of our Level 2 securities were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities. In the event observable inputs are not available, we assess other factors to determine the security’s market value, including broker quotes or model valuations. Each month, we perform independent price verifications of all of our fixed income holdings. In the event a price fails a pre-established tolerance check, it is researched so that we can assess the cause of the variance to determine what we believe is the appropriate fair market value. In general, investments with remaining effective maturities of 12 months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than 12 months from the balance sheet date are classified as long-term investments. Our publicly traded equity securities are classified as long-term investments and our strategic investments held at cost are classified as other assets. As a result of the lack of liquidity for auction rate securities, we have classified these as long-term investments as of March 31, 2016 and December 31, 2015. At March 31, 2016 and December 31, 2015, all of our short- and long-term investments, excluding auction rate securities, were recognized at fair value, which was determined based upon observable inputs from our pricing vendors for identical or similar assets. At March 31, 2016 and December 31, 2015, auction rate securities were valued using a discounted cash flow model. The following tables summarize the composition of our short- and long-term investments at March 31, 2016 and December 31, 2015 (tables in millions):
We held approximately $2,302 million in foreign debt securities at March 31, 2016. These securities have an average credit rating of A+, and approximately 4% of these securities are deemed sovereign debt with an average credit rating of AA+. None of the securities deemed sovereign debt are from Argentina, Greece, Italy, Ireland, Portugal, Spain, Cyprus or Puerto Rico. The following tables represent our fair value hierarchy for our financial assets and liabilities measured at fair value as of March 31, 2016 and December 31, 2015 (tables in millions):
Our auction rate securities are predominantly rated investment grade and are primarily collateralized by student loans. The underlying loans of all but one of our auction rate securities, with a market value of $4 million, have partial guarantees by the U.S. government as part of the Federal Family Education Loan Program (“FFELP”) through the U.S. Department of Education. FFELP guarantees at least 95% of the loans which collateralize the auction rate securities. We believe the quality of the collateral underlying most of our auction rate securities will enable us to recover our principal balance. To determine the estimated fair value of our investment in auction rate securities, we use a discounted cash flow model using a five year time horizon. As of March 31, 2016, the coupon rates used ranged from 1% to 3% and the discount rate was 1%, which rate represents the rate at which similar FFELP backed securities with a five year time horizon outside of the auction rate securities market were trading at March 31, 2016. The assumptions used in preparing the discounted cash flow model include an incremental discount rate for the lack of liquidity in the market (“liquidity discount margin”) for an estimated period of time. The discount rate we selected was based on AA-rated banks as the majority of our portfolio is invested in student loans where EMC acts as a financier to these lenders. The liquidity discount margin represents an estimate of the additional return an investor would require for the lack of liquidity of these securities over an estimated five year holding period. The rate used for the discount margin was 1% at both March 31, 2016 and December 31, 2015 due to the narrowing of credit spreads on AA-rated banks during 2015 and into 2016. Significant changes in the unobservable inputs discussed above could result in a significantly lower or higher fair value measurement. Generally, an increase in the discount rate, liquidity discount margin or coupon rate results in a decrease in our fair value measurement and a decrease in the discount rate, liquidity discount margin or coupon rate results in an increase in our fair value measurement. During the three months ended March 31, 2016 and 2015, there were no material changes to the fair value of our auction rate securities. EMC has a 49% ownership percentage of LenovoEMC Limited, a joint venture with Lenovo that was formed in 2012. We account for our LenovoEMC joint venture using the fair value method of accounting. To determine the estimated fair value at inception of our investment, we used a discounted cash flow model using a three year time horizon, and utilized a discount rate of 6%, which represented the incremental borrowing rate for a market participant. The assumptions used in preparing the discounted cash flow model include an analysis of estimated Lenovo NAS revenue against a prescribed target as well as consideration of the purchase price put and call features included in the joint venture agreement. The put and call features create a floor and a cap on the fair value of the investment. As such, there is a limit to the impact on the fair value that would result from significant changes in the unobservable inputs. There were no material changes to the fair value of this joint venture during the three months ended March 31, 2016 or 2015. The carrying value of the strategic investments held at cost were accounted for under the cost method. As part of our quarterly impairment review, we perform a fair value calculation of our strategic investments held at cost using the most currently available information. To determine the estimated fair value of private strategic investments held at cost, we use a combination of several valuation techniques including discounted cash flow models, acquisition and trading comparables. In addition, we evaluate the impact of pre- and post-money valuations of recent financing events and the impact of those on our fully diluted ownership percentages, and we consider any available information regarding the issuer’s historical and forecasted performance as well as market comparables and conditions. The fair value of these investments is considered in our review for impairment if any events and changes in circumstances occur that might have a significant adverse effect on their value. Investment Losses Unrealized losses on investments at March 31, 2016 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in millions):
For all of our securities for which the amortized cost basis was greater than the fair value at March 31, 2016, we have concluded that currently we neither plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated recovery. In making the determination as to whether the unrealized loss is other-than-temporary, we considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating and the time to maturity. Contractual Maturities The contractual maturities of fixed income securities held at March 31, 2016 are as follows (table in millions):
Short-term investments on the consolidated balance sheet include $34 million in variable rate notes which have contractual maturities in 2016, and are not classified within investments due within one year above. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consist of (table in millions):
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Accounts and Notes Receivable and Allowance for Credit Losses |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Accounts and Notes Receivable and Allowance for Credit Losses | Accounts and Notes Receivable and Allowance for Credit Losses Accounts and notes receivable are recorded at cost. The portion of our notes receivable due in one year or less are included in accounts and notes receivable and the long-term portion is included in other assets, net on the consolidated balance sheets. Lease receivables arise from sales-type leases of products. We typically sell, without recourse, the contractual right to the lease payment stream and assets under lease to third parties. For certain customers, we retain the lease. The contractual amounts due under the leases we retained as of March 31, 2016 were as follows (table in millions):
Subsequent to March 31, 2016, we sold $19 million of these notes to third parties without recourse. We maintain an allowance for credit losses on our accounts and notes receivable. The allowance is based on the credit worthiness of our customers, including an assessment of the customer’s financial position, operating performance and their ability to meet their contractual obligation. We assess the credit scores for our customers each quarter. In addition, we consider our historical experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account. In the event we determine that a lease may not be paid, we include in our allowance an amount for the outstanding balance related to the lease receivable. As of March 31, 2016, amounts from lease receivables past due for more than 90 days were not significant. During the three months ended March 31, 2016 and 2015, there were no material changes to our allowance for credit losses related to lease receivables. Gross lease receivables totaled $116 million and $154 million as of March 31, 2016 and December 31, 2015, respectively, before the allowance. The components of these balances were individually evaluated for impairment and included in our allowance determination as necessary. |
Property, Plant and Equipment |
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Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment consist of (table in millions):
Property, plant and equipment at March 31, 2016 includes $52 million for facilities not yet placed in service that we are holding for future use. |
Accrued Expenses |
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Accrued Expenses | Accrued Expenses Accrued expenses consist of (table in millions):
Product Warranties Systems sales include a standard product warranty. At the time of the sale, we accrue for systems’ warranty costs. The initial systems’ warranty accrual is based upon our historical experience, expected future costs and specific identification of systems’ requirements. Upon sale or expiration of the initial warranty, we may sell additional maintenance contracts to our customers. Revenue from these additional maintenance contracts is included in deferred revenue and recognized ratably over the service period. The following represents the activity in our warranty accrual for the three months ended March 31, 2016 and 2015 (table in millions):
The provision includes amounts accrued for systems at the time of shipment, adjustments for changes in estimated costs for warranties on systems shipped in the period and changes in estimated costs for warranties on systems shipped in prior periods. It is not practicable to determine the amounts applicable to each of the components. |
Income Taxes |
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Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our effective income tax rates were 23.1% and 22.0% for the three months ended March 31, 2016 and 2015, respectively. Our effective income tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax audits or other tax contingencies. For the three months ended March 31, 2016, the effective income tax rate varied from the statutory income tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions and federal tax credit for increasing research activities. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States; substantially all of our income before provision for income taxes from foreign operations has been earned by our Irish subsidiaries. For the three months ended March 31, 2015, the effective income tax rate varied from the statutory income tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions. On December 18, 2015, the Consolidated Appropriations Act, 2016 was signed into law. Some of the provisions were retroactive to January 1, 2015 including a permanent extension of the U.S. federal tax credit for increasing research activities. Our effective income tax rate increased in the three months ended March 31, 2016 from the three months ended March 31, 2015 due primarily to higher state taxes. There were also differences in the mix of income attributable to foreign versus domestic jurisdictions, change in tax contingency reserves and discrete items, the net impact of which is immaterial. We are routinely under audit by the Internal Revenue Service (the “IRS”). We have concluded all U.S. federal income tax matters for years through 2008. In the third quarter of 2012, the IRS commenced a federal income tax audit for the tax years 2009 and 2010. The IRS completed their field audit for the tax years 2009 and 2010 and issued Revenue Agent Reports (“RARs”) in the first quarter of 2016. We disagree with certain proposed adjustments and have filed a formal protest to the IRS Appeals Division. In the first quarter of 2015, the IRS commenced a federal income tax audit for the tax year 2011, which is still ongoing. We also have income tax audits in process in numerous state, local and international jurisdictions. In our international jurisdictions that comprise a significant portion of our operations, the years that may be examined vary, with the earliest year being 2004. Based on the timing and outcome of examinations of EMC, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in our consolidated balance sheets. We anticipate that several of these audits may be finalized within the next twelve months. While we expect the amount of unrecognized tax benefits to change in the next twelve months, we do not expect the change to have a significant impact on our consolidated results of operations or financial position. |
Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders’ Equity The reconciliation from basic to diluted earnings per share for both the numerators and denominators is as follows (table in millions):
Restricted stock awards, restricted stock units and options to acquire shares of our common stock in the amount of 2 million and 1 million for the three months ended March 31, 2016 and 2015, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. The incremental dilution from VMware represents the impact of VMware’s dilutive securities on EMC’s consolidated diluted net income per share and is calculated by multiplying the difference between VMware’s basic and diluted earnings per share by the number of VMware shares owned by EMC. Repurchase of Common Stock We utilize both authorized and unissued shares (including repurchased shares) for all issuances under our equity plans. Our Board of Directors authorized the repurchase of 250 million shares of our common stock in December 2014. For the three months ended March 31, 2016, we did not repurchase any shares of our common stock. Of the 250 million shares authorized for repurchase, we have repurchased 27 million shares to-date at a total cost of $715 million, leaving a remaining balance of 223 million shares authorized for future repurchases. During April 2016, VMware’s Board of Directors authorized the repurchase of up to an aggregate of $1.2 billion of VMware’s Class A common stock through the end of 2016, which includes the amount remaining from VMware’s previous stock repurchase authorization announced on January 27, 2015, which was $835 million as of March 31, 2016. All shares repurchased under VMware’s stock repurchase programs are retired. For the three months ended March 31, 2016, VMware did not repurchase any shares of its Class A common stock as it is currently subject to a number of legal and regulatory constraints resulting from the Merger Agreement which impacts the timing and ability to execute repurchases of VMware’s shares. Cash Dividend on Common Stock EMC pays a quarterly dividend of $0.115 per share of common stock to EMC shareholders, subject to the approval of our Board of Directors. Our Board of Directors declared the following dividends during 2016 and 2015:
Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss), which is presented net of tax, for the three months ended March 31, 2016 and 2015 consist of the following (tables in millions):
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The amounts reclassified out of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015 are as follows (table in millions):
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Restructuring and Acquisition-Related Charges |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Acquisition-Related Charges | Restructuring and Acquisition-Related Charges For the three months ended March 31, 2016 and 2015, we incurred restructuring and acquisition-related charges of $49 million and $135 million, respectively. For the three months ended March 31, 2016, EMC incurred a $5 million credit related to our prior restructuring programs. For the three months ended March 31, 2016, VMware incurred $53 million of restructuring charges, primarily related to its current year restructuring program, and $1 million of charges in connection with acquisitions for financial, advisory, legal and accounting services. For the three months ended March 31, 2015, EMC incurred $111 million of restructuring charges, primarily related to our 2015 restructuring programs, and $1 million of charges in connection with acquisitions for financial, advisory, legal and accounting services. For the three months ended March 31, 2015, VMware incurred $22 million of restructuring charges, primarily related to its 2015 restructuring programs, and $1 million of charges in connection with acquisitions for financial, advisory, legal and accounting services. In the first quarter of 2016, EMC did not commence any new restructuring programs. In the first quarter of 2016, VMware approved a plan to streamline its operations, with plans to reinvest the associated savings in field, technical and support resources associated with growth products. As a result, approximately 800 positions at VMware were eliminated during the three months ended March 31, 2016. All actions relating to VMware’s plan are expected to be completed within a year of the start of the program. In the first quarter of 2015, EMC implemented restructuring programs to create further operational efficiencies which resulted in a workforce reduction of approximately 1,320 positions. The actions impacted positions around the globe covering our Information Storage, RSA Information Security and Enterprise Content Division segments. All of these actions were completed within a year of the start of the program. In the first quarter of 2015, VMware eliminated approximately 350 positions across all major functional groups and geographies to streamline its operations. All of these actions were completed within a year of the start of the program. For the three months ended March 31, 2016 and 2015, we recognized $5 million and $6 million, respectively, of lease termination costs for facilities vacated in the period in accordance with our plan as part of all of our restructuring programs and for costs associated with terminating other contractual obligations. These accruals are expected to be utilized by the end of 2018. The activity for the restructuring programs is presented below (tables in millions): Three Months Ended March 31, 2016:
Three Months Ended March 31, 2015:
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Litigation We are involved in a variety of claims, demands, suits, investigations and proceedings that arise from time to time relating to matters incidental to the ordinary course of our business, including actions with respect to contracts, intellectual property, product liability, employment, benefits and securities matters. As required by authoritative guidance, we have estimated the amount of probable losses that may result from all currently pending matters, and such amounts are reflected in our consolidated financial statements. These recorded amounts are not material to our consolidated financial position or results of operations and no additional material losses related to these pending matters are reasonably possible. While it is not possible to predict the outcome of these matters with certainty, we do not expect the results of any of these actions to have a material adverse effect on our business, results of operations or financial condition. Because litigation is inherently unpredictable, however, the actual amounts of loss may prove to be larger or smaller than the amounts reflected in our consolidated financial statements, and we could incur judgments or enter into settlements of claims that could adversely affect our operating results or cash flows in a particular period. Merger-Related Litigation As of May 5, 2016, fifteen putative shareholder class action lawsuits challenging the Merger have been filed, of which thirteen were filed purportedly on behalf of Company shareholders and two purportedly on behalf of VMware shareholders. The lawsuits name various combinations of the Company, its current and former directors, VMware, certain of VMware’s directors, Denali, Dell and Merger Sub, among others, as defendants. The fifteen lawsuits seek, among other things, injunctive relief enjoining the Merger, rescission of the Merger if consummated, an award of fees and costs and/or an award of monetary damages. The suits are captioned as follows:
Of the thirteen lawsuits filed purportedly on behalf of Company shareholders, nine were filed in Massachusetts state court, and four in the United States District Court for the District of Massachusetts. Eleven of the lawsuits initially advanced substantially the same allegations that the Merger Agreement was adopted in violation of the fiduciary duties of the Company’s directors. Certain of those lawsuits also alleged that the Company, Denali, Dell, Merger Sub, Silver Lake Partners, LLC, and/or MSD Partners, LLC aided and abetted the alleged breaches of fiduciary duty by the directors. On November 5, 2015, pursuant to a motion made by the Company and its directors, the nine lawsuits then pending in state court in Massachusetts were consolidated with and into the first-filed of those actions, IBEW Local No. 129 Benefit Fund v. Joseph M. Tucci, et al. That action, brought in the Business Litigation Session of the Suffolk County Superior Court, named as defendants the Company and each member of its Board of Directors (as constituted as of October 12, 2015), Denali, Dell and Merger Sub. The Company and its directors moved to dismiss the amended complaint in the IBEW matter pursuant to provisions of the Massachusetts Business Corporation Act, M.G.L. c. 156D, § 7.40 et seq., and Rules 12(b)(6) and 23.1 of the Massachusetts Rules of Civil Procedure, on the basis that the complaint asserts a derivative action on behalf of the Company and should be dismissed for failure to make the requisite pre-suit demand on the Company. On December 7, 2015 the Court granted this motion and on December 24, 2015 the court entered judgment dismissing each of the consolidated actions. On January 21, 2016, three of the plaintiffs served notice that they will appeal this judgment. On April 29, 2016, the appeal was docketed in the Massachusetts Appeals Court as case number 2016-P-0595. On May 2, 2016, the appellants filed an application for direct appellate review in the Massachusetts Supreme Judicial Court as Direct Appellate Review No. DAR-24347. On January 11, 2016, following the state court judgment and a motion by the Company and its directors to stay or dismiss the two lawsuits then pending in the United States District Court for the District of Massachusetts, the plaintiffs in those cases amended their complaints to eliminate the initial claims based on Massachusetts state law and substitute allegations that the preliminary proxy statement/prospectus dated December 14, 2015 omits and/or misrepresents material information and that such omissions and misrepresentations constitute violations of Section 14(a) of, and Rule 14a-9 under, the Securities Exchange Act of 1934. Two additional lawsuits have since been filed in the same court advancing substantially the same proxy-disclosure-based allegations. Of the two lawsuits filed purportedly on behalf of VMware shareholders, one was filed in Middlesex County Superior Court in Massachusetts, and the other in Delaware Chancery Court. Both generally allege that the Company, in its capacity as the majority shareholder of VMware, and individual defendants who are directors of the Company, VMware, or both, breached their fiduciary duties to minority shareholders of VMware in connection with the Merger. Both further allege that various combinations of defendants aided and abetted these alleged breaches of fiduciary duties. The Company, VMware, Denali, Dell, Merger Sub, and other defendants have served or filed motions to dismiss the operative complaints in both actions. The outcome of these lawsuits is uncertain, and additional lawsuits may be brought or additional claims advanced concerning the Merger. An adverse judgment for monetary damages could have an adverse effect on the Company’s operations. A preliminary injunction could delay or jeopardize the completion of the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the Merger. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information We manage the Company as a federation of businesses: EMC Information Infrastructure, VMware Virtual Infrastructure, Pivotal and Virtustream. EMC Information Infrastructure operates in three segments: Information Storage, Enterprise Content Division and RSA Information Security, while VMware Virtual Infrastructure and Pivotal each operate as single segments. The results of Virtustream are currently reported within our Information Storage segment. Our management measures are designed to assess performance of these reporting segments excluding certain items. As a result, the corporate reconciling items are used to capture the items excluded from the segment operating performance measures, including stock-based compensation expense, intangible asset amortization expense, restructuring charges and acquisition and other related charges. Additionally, in certain instances, infrequently occurring items are also excluded or included from the measures used by management in assessing segment performance. Research and development expenses, selling, general and administrative expenses and restructuring and acquisition-related charges associated with the EMC Information Infrastructure business are not allocated to the segments within the EMC Information Infrastructure business, as they are managed centrally at the EMC Information Infrastructure business level. EMC Information Infrastructure and Pivotal have not been allocated non-operating income (expense), net and income tax provision as these costs are managed centrally at the EMC corporate level. Accordingly, for the three segments within the EMC Information Infrastructure business, gross profit is the segment operating performance measure, while for Pivotal, operating income is the operating performance measure. The VMware Virtual Infrastructure within EMC amounts represent the revenues and expenses of VMware as reflected within EMC’s consolidated financial statements. Our segment information for the three months ended March 31, 2016 and 2015 is as follows (tables in millions, except percentages):
Our revenues are attributed to the geographic areas according to the location of the customers. Revenues by geographic area are included in the following table (table in millions):
No country other than the United States accounted for 10% or more of revenues during the three months ended March 31, 2016 or 2015. Long-lived assets, excluding financial instruments, deferred tax assets, goodwill and intangible assets, in the United States were $4,566 million at March 31, 2016 and $4,584 million at December 31, 2015. Internationally, long-lived assets, excluding financial instruments, deferred tax assets, goodwill and intangible assets, were $1,037 million at March 31, 2016 and $1,053 million at December 31, 2015. No country other than the United States accounted for 10% or more of total long-lived assets, excluding financial instruments and deferred tax assets, at March 31, 2016 or December 31, 2015. |
Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Company | Company EMC Corporation (“EMC” or “the Company”) and its subsidiaries develop, deliver and support the information technology (“IT”) industry’s broadest range of information infrastructure and virtual infrastructure technologies, solutions and services. EMC manages the Company as part of a federation of businesses: EMC Information Infrastructure, VMware Virtual Infrastructure, Pivotal and Virtustream. EMC’s Information Infrastructure business provides a foundation for organizations to store, manage, protect, analyze and secure ever-increasing quantities of information, while at the same time improving business agility, lowering cost, and enhancing competitive advantage. EMC’s Information Infrastructure business comprises three segments – Information Storage, Enterprise Content Division and RSA Information Security. The results of Virtustream are currently reported within our Information Storage segment. EMC’s VMware Virtual Infrastructure business, which is represented by EMC’s majority equity stake in VMware, Inc. (“VMware”), is a leader in virtualization and cloud infrastructure solutions that enable businesses to help transform the way they build, deliver and consume IT resources in a manner that is based on their specific needs. VMware’s virtualization infrastructure solutions, which include a suite of products and services designed to deliver a software-defined data center, run on industry-standard desktop computers, servers and mobile devices and support a wide range of operating system and application environments, as well as networking and storage infrastructures. EMC’s Pivotal business (“Pivotal”) unites strategic technology, people and programs from EMC and VMware and has built a new platform comprised of next-generation data fabrics, application fabrics and a cloud independent platform-as-a-service (“PaaS”) to support Big and Fast Data applications. On top of this platform is the Company’s agile development services business. These capabilities are made available through Pivotal’s three primary offerings: Pivotal Cloud Foundry, the Pivotal Big Data Suite and Pivotal Labs. Proposed Transaction with Dell On October 12, 2015, EMC entered into an Agreement and Plan of Merger (the “Merger Agreement”) among EMC, Denali Holding Inc., a Delaware corporation (“Denali”), Dell Inc., a Delaware corporation (“Dell”), and Universal Acquisition Co., a Delaware corporation and direct wholly owned subsidiary of Denali (“Merger Sub”), pursuant to which, among other things and subject to the conditions set forth therein, Merger Sub will merge with and into EMC (the “Merger”), with EMC continuing as the surviving corporation and a wholly owned subsidiary of Denali. At the effective time of the Merger (“Effective Time”), each share of EMC common stock issued and outstanding will be canceled and converted into the right to receive (i) $24.05 in cash and (ii) a number of shares of common stock of Denali designated as Class V Common Stock, par value $0.01 per share (the “Class V Common Stock”), equal to the quotient obtained by dividing (A) 222,966,450 by (B) the aggregate number of shares of EMC common stock issued and outstanding immediately prior to the Effective Time. The aggregate number of shares of Class V Common Stock issued as Merger Consideration in the transaction is intended to represent 65% of EMC’s economic interest in the approximately 81% of the outstanding shares of VMware currently owned by EMC, reflecting approximately 53% of the total economic interest in the outstanding shares of VMware. Upon completion of the transaction, Denali will retain the remaining 28% of the total economic interest in the outstanding shares of VMware. Based on the estimated number of shares of EMC common stock outstanding at the closing of the transaction, EMC shareholders are expected to receive approximately 0.111 shares of Class V Common Stock for each share of EMC common stock. The Merger Agreement contains specified termination rights for both Denali and EMC, including that, in general, either party may terminate the agreement if the Merger is not consummated on or before December 16, 2016. If EMC terminates the Merger Agreement, EMC is required to pay Denali a termination fee of $2.5 billion. If Denali terminates the Merger Agreement, they are required to pay a termination fee of $4 billion under specified circumstances, and in certain instances, an alternative termination fee of $6 billion. The transaction is expected to close in mid-2016. The completion of the Merger is subject to certain conditions including EMC shareholder approval, the receipt of certain other regulatory approvals in various jurisdictions and the effectiveness of the registration statement on Form S-4 to be filed by Denali in connection with the registration of shares of Class V Common Stock issuable in connection with the Merger. The Merger Agreement contains representations and warranties customary for transactions of this nature. EMC has agreed to various customary covenants and agreements, including, among others, agreements to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger. In addition, without the consent of Denali, EMC may not take, authorize, agree or commit to do certain actions outside of the ordinary course of business, including acquiring businesses or incurring capital expenditures above specified thresholds, issuing additional debt facilities and repurchasing outstanding EMC common stock. Under the terms of the Merger Agreement, EMC is required to provide Denali with access to EMC’s cash to help fund the Merger consideration. At this time, EMC has not finalized its plan to access such cash and has not determined if there would be a need to repatriate cash to meet the requirements of the Merger. To date, EMC has asserted overseas cash as indefinitely reinvested; however if these overseas funds are required to be repatriated to the U.S. in accordance with the Merger Agreement, EMC may be required to accrue and pay U.S. taxes to repatriate these funds. Other than transaction expenses associated with the proposed Merger, the terms of the Merger Agreement did not impact EMC’s consolidated financial statements as of and for the three months ended March 31, 2016. |
General | General The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These consolidated financial statements include the accounts of EMC, its wholly owned subsidiaries, as well as VMware and Pivotal, companies majority-owned by EMC. All intercompany transactions have been eliminated. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Accordingly, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015 which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2016. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. The interim consolidated financial statements, in the opinion of management, reflect all adjustments necessary to fairly state the results as of and for the three-month periods ended March 31, 2016 and 2015. |
Net Income Per Share | Net Income Per Share Basic net income per weighted average share has been computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per weighted average share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of stock options, restricted stock and restricted stock units. Additionally, for purposes of calculating diluted net income per weighted average share, net income is adjusted for the difference between VMware’s reported diluted and basic net income per weighted average share, if any, multiplied by the number of shares of VMware held by EMC. |
Non-controlling Interests (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of Changes in Ownership Interest in VMware on Equity | :
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | Our long-term debt as of March 31, 2016 was as follows (dollars in millions):
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Fair Value of Financial Assets and Liabilities (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Composition of Investments |
The following tables summarize the composition of our short- and long-term investments at March 31, 2016 and December 31, 2015 (tables in millions):
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Fair Value Hierarchy For Financial Assets And Liabilities Measured At Fair Value | The following tables represent our fair value hierarchy for our financial assets and liabilities measured at fair value as of March 31, 2016 and December 31, 2015 (tables in millions):
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Unrealized Losses on Investments by Investment Category and Length of Time in Continuous Unrealized Loss Position | Unrealized losses on investments at March 31, 2016 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in millions):
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Contractual Maturities of Investments | The contractual maturities of fixed income securities held at March 31, 2016 are as follows (table in millions):
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Inventories (Tables) |
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Components of Inventories | Inventories consist of (table in millions):
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Accounts and Notes Receivable and Allowance for Credit Losses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Contractual Amounts Due Under Leases | The contractual amounts due under the leases we retained as of March 31, 2016 were as follows (table in millions):
|
Property, Plant and Equipment (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Property, Plant and Equipment | Property, plant and equipment consist of (table in millions):
|
Accrued Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accrued Expenses | Accrued expenses consist of (table in millions):
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Activity in Warranty Accrual for Product Warranty | The following represents the activity in our warranty accrual for the three months ended March 31, 2016 and 2015 (table in millions):
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Shareholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation from Basic to Diluted Earnings Per Share | The reconciliation from basic to diluted earnings per share for both the numerators and denominators is as follows (table in millions):
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Dividends Declared |
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Accumulated Other Comprehensive Loss | Changes in accumulated other comprehensive income (loss), which is presented net of tax, for the three months ended March 31, 2016 and 2015 consist of the following (tables in millions):
__________________
__________________
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Reclassification Out Of Accumulated Other Comprehensive Income | The amounts reclassified out of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015 are as follows (table in millions):
|
Restructuring and Acquisition-Related Charges (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity for the Restructuring Programs | The activity for the restructuring programs is presented below (tables in millions): Three Months Ended March 31, 2016:
Three Months Ended March 31, 2015:
|
Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Our segment information for the three months ended March 31, 2016 and 2015 is as follows (tables in millions, except percentages):
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Revenues By Geographic Area | Our revenues are attributed to the geographic areas according to the location of the customers. Revenues by geographic area are included in the following table (table in millions):
|
Basis of Presentation Merger (Details) - USD ($) $ / shares in Units, $ in Billions |
Mar. 31, 2016 |
Dec. 31, 2015 |
Oct. 12, 2015 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Common stock, par value (in usd per share) | $ 0.01 | $ 0.01 | |
Denali | |||
Business Acquisition [Line Items] | |||
Resulting Percent of VMware which represents Merger consideration | 53.00% | ||
Economic interest of VMware Parent will retain | 28.00% | ||
Percent of EMC's interest in VMware which represents Merger consideration | 65.00% | ||
Business Acquisition, Share Price | $ 24.05 | ||
Common stock, par value (in usd per share) | $ 0.01 | ||
Investment Owned, Balance, Shares | 222,966,450 | ||
Tracker Stock Fractional Share | 0.111 | ||
Termination Fee Paid by EMC to Denali | $ 2.5 | ||
Termination Fee Paid by Denali to EMC | 4.0 | ||
Alternative Termination Fee Paid by Denali to EMC | $ 6.0 | ||
VMware | |||
Business Acquisition [Line Items] | |||
Noncontrolling Interest, Ownership Percentage by Parent | 81.00% |
Non-controlling Interests - Additional Information (Details) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Noncontrolling Interest [Line Items] | ||
Non-controlling interest | $ 1,677 | $ 1,579 |
VMware | ||
Noncontrolling Interest [Line Items] | ||
Non-controlling interest | $ 1,581 | 1,481 |
Voting power of VMware's outstanding common stock | 97.00% | |
Noncontrolling Interest, Ownership Percentage by Parent | 81.00% | |
Pivotal | ||
Noncontrolling Interest [Line Items] | ||
Non-controlling interest | $ 96 | $ 98 |
Noncontrolling Interest, Ownership Percentage by Parent | 83.00% |
Non-controlling Interests - Effect of Changes in Ownership Interest in VMware on Equity (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Noncontrolling Interest [Line Items] | ||
Net income attributable to EMC Corporation | $ 268 | $ 252 |
Transfers (to) from the non-controlling interests: | ||
Net transfers (to) from non-controlling interest | 29 | (415) |
VMware | ||
Noncontrolling Interest [Line Items] | ||
Net income attributable to EMC Corporation | 268 | 252 |
Transfers (to) from the non-controlling interests: | ||
Increase in EMC Corporation’s additional paid-in-capital for VMware and Pivotal equity issuances | 21 | 30 |
Decrease in EMC Corporation’s additional paid-in-capital for VMware’s and Pivotal’s other equity activity | (57) | (331) |
Net transfers (to) from non-controlling interest | (36) | (301) |
Change from net income attributable to EMC Corporation and transfers from the non-controlling interest in VMware, Inc. | $ 232 | $ (49) |
Debt - Key Components of Long-term Debt (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Debt Instrument [Line Items] | ||
Carrying Value | $ 5,477,000,000 | $ 5,475,000,000 |
Long-term Notes $2.5B | ||
Debt Instrument [Line Items] | ||
Debt, face amount | $ 2,500,000,000 | |
Stated interest rate | 1.875% | |
Issued at Discount to Par | 99.943% | |
Carrying Value | $ 2,499,000,000 | |
Long-term Notes $2.0B | ||
Debt Instrument [Line Items] | ||
Debt, face amount | $ 2,000,000,000 | |
Stated interest rate | 2.65% | |
Issued at Discount to Par | 99.76% | |
Carrying Value | $ 1,997,000,000 | |
Long-term Notes $1.0B | ||
Debt Instrument [Line Items] | ||
Debt, face amount | $ 1,000,000,000 | |
Stated interest rate | 3.375% | |
Issued at Discount to Par | 99.925% | |
Carrying Value | $ 1,000,000,000 | |
Long-term Notes $5.5B | ||
Debt Instrument [Line Items] | ||
Carrying Value | 5,496,000,000 | |
Debt Issuance Cost | $ (19,000,000) |
Debt - Additional Information (Detail) - USD ($) |
3 Months Ended | 60 Months Ended | |||||
---|---|---|---|---|---|---|---|
Mar. 31, 2016 |
Feb. 27, 2020 |
May. 05, 2016 |
Dec. 31, 2015 |
Mar. 23, 2015 |
Feb. 27, 2015 |
Jun. 30, 2013 |
|
Line of Credit Facility, Maximum Borrowing Capacity | $ 2,500,000,000 | ||||||
line of credit available increase to credit facility | $ 1,000,000,000 | ||||||
Line of Credit, Current | $ 0 | $ 600,000,000 | |||||
Convertible Senior Notes 2013 | |||||||
Senior Notes | $ 1,725,000,000,000 | ||||||
Stated interest rate | 1.75% | ||||||
Long-term Debt | |||||||
Unamortized discount | $ 4,000,000 | ||||||
Effective interest rate | 2.55% | ||||||
Long-term Debt | |||||||
Long term debt, aggregate principal | $ 5,500,000,000 | ||||||
Commercial Paper | |||||||
Commercial Paper Maximum Borrowing Amount | $ 2,500,000,000 | ||||||
Short-term Debt, Terms | The Commercial Paper will have maturities of up to 397 days from the date of issue | ||||||
Commercial Paper | $ 925,000,000 | $ 699,000,000 | |||||
Short-term Debt, Weighted Average Interest Rate | 0.95% | ||||||
Minimum | Commercial Paper | |||||||
Short-term Debt, Terms | 13 | ||||||
Maximum | Commercial Paper | |||||||
Short-term Debt, Terms | 30 | ||||||
Scenario, Forecast | |||||||
Line of Credit Facility, Expiration Date | Feb. 27, 2020 | ||||||
Line of Credit Facility, Description | At our option, subject to certain conditions, any loan under the Credit Agreement will bear interest at a rate equal to, either (i) the LIBOR Rate or (ii) the Base Rate (defined as the highest of (a) the Federal Funds rate plus 0.50%, (b) Citibank, N.A.’s “prime rate” as announced from time to time, or (c) one-month LIBOR plus 1.00%), plus, in each case the Applicable Margin, as defined in the Credit Agreement | ||||||
Subsequent Event | Commercial Paper | |||||||
Commercial Paper | $ 1,285,000,000 |
Fair Value of Financial Assets and Liabilities - Contractual Maturities of Investments (Detail) - Fixed income securities - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Amortized Cost Basis | ||
Due within one year | $ 2,542 | |
Due after 1 year through 5 years | 4,496 | |
Due after 5 years through 10 years | 332 | |
Due after 10 years | 244 | |
Amortized Cost | 7,614 | $ 8,123 |
Aggregate Fair Value | ||
Due within one year | 2,543 | |
Due after 1 year through 5 years | 4,509 | |
Due after 5 years through 10 years | 330 | |
Due after 10 years | 242 | |
Aggregate Fair Value | $ 7,624 | $ 8,076 |
Inventories - Components of Inventories (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Work-in-process | $ 590 | $ 592 |
Finished goods | 643 | 653 |
Inventory, Net, Total | $ 1,233 | $ 1,245 |
Accounts and Notes Receivable and Allowance for Credit Losses - Contractual Amounts Due under Leases (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Receivables [Abstract] | ||
Due within one year | $ 50 | |
Due within two years | 37 | |
Due within three years | 26 | |
Thereafter | 3 | |
Total | 116 | $ 154 |
Less: Amounts representing interest | 7 | |
Present value | 109 | |
Current portion (included in accounts and notes receivable) | 46 | |
Long-term portion (included in other assets, net) | $ 63 |
Accounts and Notes Receivable and Allowance for Credit Losses - Additional Information (Detail) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
May. 05, 2016 |
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||
Accounts Receivable, Additional Narrative Disclosure | no material changes | no material changes | ||
Gross lease receivables | $ 116 | $ 154 | ||
Subsequent Event | ||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||
Sales of leases to third parties without recourse | $ 19 |
Accrued Expenses - Components of Accrued Expenses (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
---|---|---|---|---|
Payables and Accruals [Abstract] | ||||
Salaries and benefits | $ 957 | $ 1,189 | ||
Product warranties | 151 | 172 | $ 188 | $ 207 |
Dividends payable (see Note 10) | 239 | 234 | ||
Partner rebates | 181 | 221 | ||
Restructuring, current (See Note 11) | 250 | 333 | ||
Derivatives | 85 | 82 | ||
Other | 859 | 892 | ||
Accrued Liabilities, Current, Total | $ 2,722 | $ 3,123 |
Accrued Expenses - Activity in Warranty Accrual for Product Warranty (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance, beginning of the period | $ 172 | $ 207 |
Provision | 25 | 33 |
Amounts charged against the accrual | (46) | (52) |
Balance, end of the period | $ 151 | $ 188 |
Income Taxes - Additional Information (Detail) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Effective income tax rates | 23.10% | 22.00% |
Shareholders' Equity - Reconciliation from Basic To Diluted Earnings Per Share for both Numerators and Denominators (Detail) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Numerator: | ||
Net income attributable to EMC Corporation | $ 268 | $ 252 |
Incremental dilution from VMware | 0 | (1) |
Net income – dilution attributable to EMC Corporation | $ 268 | $ 251 |
Denominator: | ||
Weighted average shares, basic | 1,949 | 1,974 |
Weighted common stock equivalents | 16 | 22 |
Weighted average shares, diluted | 1,965 | 1,996 |
Shareholders' Equity - Dividends Declared (Details) - USD ($) $ / shares in Units, $ in Millions |
Feb. 11, 2016 |
Dec. 17, 2015 |
Jul. 30, 2015 |
May. 20, 2015 |
Feb. 27, 2015 |
Mar. 31, 2016 |
---|---|---|---|---|---|---|
Dividend Per Share (in usd per share) | $ 0.115 | $ 0.115 | $ 0.115 | $ 0.115 | $ 0.115 | $ 0.115 |
Dividends, Common Stock, Cash | $ 229 | $ 230 | $ 229 | $ 226 | $ 229 |
Shareholders' Equity - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 16 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Mar. 31, 2016 |
Apr. 30, 2016 |
Dec. 01, 2014 |
|
Common stock excluded from calculation of diluted earnings per share | 2 | 1 | |||
Repurchases of Common Stock, shares authorized to repurchase | 250 | ||||
Total Repurchases of Common Stock, cost | $ 715 | ||||
Total Repurchases of Common Stock, shares | 27 | ||||
Shares authorized for future repurchases | 223 | 223 | |||
Payments for Repurchase of Common Stock | $ 0 | $ 1,346 | |||
VMware | |||||
Payments for Repurchase of Common Stock | 0 | $ 438 | |||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 835 | $ 835 | |||
Subsequent Event | VMware | |||||
Stock Repurchase Program, Authorized Amount | $ 1,200 |
Segment Information - Additional Information (Detail) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016
USD ($)
Country
segment
|
Mar. 31, 2015
Country
|
Dec. 31, 2015
USD ($)
|
|
United States | |||
Segment Reporting Information [Line Items] | |||
Long-lived assets, excluding financial instruments, deferred tax assets, goodwill and intangible assets | $ | $ 4,566 | $ 4,584 | |
International | |||
Segment Reporting Information [Line Items] | |||
Long-lived assets, excluding financial instruments, deferred tax assets, goodwill and intangible assets | $ | $ 1,037 | $ 1,053 | |
Geographic Concentration | Sales Revenue, Segment | |||
Segment Reporting Information [Line Items] | |||
Number of countries other than the US that accounted for 10% or more | Country | 0 | 0 | |
Geographic Concentration | Long-lived Assets, Total | |||
Segment Reporting Information [Line Items] | |||
Number of countries other than the US that accounted for 10% or more | Country | 0 | 0 | |
EMC Information Infrastructure | |||
Segment Reporting Information [Line Items] | |||
Number of operating segments | segment | 3 |
Segment Information - Revenues By Geographic Area (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | $ 5,475 | $ 5,613 |
United States | ||
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | 2,897 | 3,013 |
Europe, Middle East and Africa | ||
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | 1,537 | 1,559 |
Asia Pacific and Japan | ||
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | 740 | 729 |
Latin America, Mexico and Canada | ||
Segment Reporting Information [Line Items] | ||
Total consolidated revenues | $ 301 | $ 312 |
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