-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FBfu5CYfddv4eIdhOT3vyAM0MY+3U2+MDiBD4OtZT8crKB9p6hG4Tlf3dEVI/RWc g05X3P7IdUVMg3ABDXJVOA== 0000927016-96-000202.txt : 19960513 0000927016-96-000202.hdr.sgml : 19960513 ACCESSION NUMBER: 0000927016-96-000202 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMC CORP CENTRAL INDEX KEY: 0000790070 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 042680009 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09853 FILM NUMBER: 96559466 BUSINESS ADDRESS: STREET 1: 171 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748-9103 BUSINESS PHONE: 5084351000 MAIL ADDRESS: STREET 1: 171 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748-9103 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarter Ended: March 30, 1996 Commission File Number 1-9853 --------------- ------ EMC CORPORATION -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2680009 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) organization or incorporation) 171 South Street Hopkinton, Massachusetts 01748-9103 - -------------------------------------------------------------------------------- (Address of principal executive offices, including zip code) (508) 435-1000 -------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ________ - Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock, par value $.01 per share 230,747,504 - ------------------------------------------------------------------------------- Class Outstanding as of March 30, 1996 -2- EMC CORPORATION Page No. Part I - Financial Information Consolidated Balance Sheets March 30, 1996 and December 30, 1995.............. 3 Consolidated Statements of Operations for the Three Months Ended March 30, 1996 and April 1, 1995.................. 4 Consolidated Statements of Cash Flows for the Three Months Ended March 30, 1996 and April 1, 1995................................. 5 Notes to Interim Consolidated Financial Statements.. 6 - 8 Management's Discussion and Analysis of Financial Condition and Results of Operations..... 9 - 12 Part II - Other Information................................ 13 Signatures................................................. 14 Exhibit Index.............................................. 15 -3- EMC CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in thousands except share amounts)
March 30, December 30, ASSETS 1996 1995 ----------- ------------- Current assets: Cash and cash equivalents $ 478,759 $ 379,628 Trade and notes receivable less allowance for doubtful accounts of $7,415 and $7,062, respectively 507,876 550,473 Inventories 316,995 330,160 Deferred income taxes 35,284 44,061 Other assets 19,234 14,633 ---------- ---------- Total current assets 1,358,148 1,318,955 Long-term investments 127,382 125,276 Notes receivable, net 25,110 26,497 Property, plant and equipment, net 234,244 218,901 Deferred income taxes 9,082 9,200 Intangible assets, net 59,799 20,078 Other assets, net 38,695 26,822 ---------- ---------- Total assets $1,852,460 $1,745,729 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term obligations $ 5,833 $ 915 Accounts payable 126,060 111,721 Accrued expenses 107,665 130,596 Income taxes payable 106,546 107,717 Deferred revenue 9,995 8,411 ---------- ---------- Total current liabilities 356,099 359,360 Deferred revenue 2,089 223 Long-term obligations: 4 1/4% convertible subordinated notes due 2001 229,598 229,598 Notes payable and capital lease obligations 44,136 16,247 ---------- ---------- Total liabilities 631,922 605,428 ---------- ---------- Stockholders' equity: Series Preferred Stock, par value $.01; authorized 25,000,000 shares --- --- Common Stock, par value $.01; authorized 500,000,000 shares; issued 233,527,568 and 232,517,845, in 1996 and 1995, respectively 2,337 2,325 Additional paid-in capital 350,028 350,989 Deferred compensation (1,813) (2,140) Retained earnings 871,144 786,599 Cumulative translation adjustment 2,811 3,766 Treasury stock, at cost, 2,780,064 and 2,646,453 shares, respectively (3,969) (1,238) ---------- ---------- Total stockholders' equity 1,220,538 1,140,301 ---------- ---------- Total liabilities and stockholders' equity $1,852,460 $1,745,729 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. -4- EMC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands except per share amounts) (unaudited)
For the Three Months Ended ---------------------------- March 30, April 1, -------------- ------------ 1996 1995 -------------- ------------ Revenues: Net sales $509,184 $437,958 Service and rental 12,303 10,158 -------- -------- 521,487 448,116 Costs and expenses: Cost of sales and service 293,164 218,108 Research and development 35,318 39,940 Selling, general and administrative 81,763 71,791 -------- -------- Operating income 111,242 118,277 Investment income 6,325 6,560 Interest expense (3,059) (3,509) Other income / (expense), net 207 556 -------- -------- Income before taxes 114,715 121,884 Income tax provision 30,170 36,435 -------- -------- Net income $ 84,545 $ 85,449 ======== ======== Net income per weighted average share, primary $0.35 $0.37 ======== ======== Net income per weighted average share, fully diluted $0.35 $0.35 ======== ========
Weighted average number of common shares outstanding, primary 248,539 235,080 Weighted average number of common shares outstanding, fully diluted 248,879 247,423 The accompanying notes are an integral part of the consolidated financial statements. -5- EMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited)
For the Three Months Ended -------------------------- March 30, April 1, 1996 1995 -------- -------- Cash flows from operating activities: Net income $ 84,545 $ 85,449 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,414 12,500 Deferred income taxes 8,895 -- Net loss on disposal of property and equipment 76 -- Changes in assets and liabilities: Trade and notes receivable 44,025 (5,588) Inventories 13,181 (39,646) Other assets (18,966) (14,241) Accounts payable 14,348 (45,758) Accrued expenses (24,953) (12,372) Income taxes payable (1,171) 32,231 Deferred revenue 3,450 2,118 -------- -------- Net cash provided by operating activities 139,844 14,693 -------- -------- Cash flows from investing activities: Additions to property and equipment (29,739) (25,597) Purchase of patents (5,000) -- Proceeds from disposal of property and equipment 681 -- Net (purchase)/maturity of long-term investments (2,106) 18,708 -------- -------- Net cash used by investing activities (36,164) (6,889) -------- -------- Cash flows from financing activities: Issuance of common stock 6,942 2,107 Repurchase of shares for treasury (10,295) -- Payment of long-term and short-term obligations (193) (11,646) Issuance of long-term and short-term obligations -- 247 -------- -------- Net cash used by financing activities (3,546) (9,292) -------- -------- Effect of exchange rate changes on cash (1,003) (42) Net increase/(decrease) in cash and cash equivalents 100,134 (1,488) Cash and cash equivalents at beginning of period 379,628 249,830 -------- -------- Cash and cash equivalents at end of period $478,759 $248,300 ======== ======== Non-cash activity - conversion of debentures -- $ 39,536 - patents acquired by notes and other payables $ 35,000 --
The accompanying notes are an integral part of the consolidated financial statements. -6- EMC CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation --------------------- Company - ------- EMC Corporation and its subsidiaries ("EMC" or the "Company") design, manufacture, market and support a wide range of storage-related hardware, software and service products for the mainframe, open systems and network computer storage markets worldwide. These products are sold as storage solutions for customers utilizing a variety of computer system platforms, including, but not limited to, International Business Machines Corporation ("IBM") and IBM-compatible mainframe, Unisys Corporation, Compagnie des Machines Bull S.A., Hewlett-Packard Company, NCR Corporation and other open systems platforms. Accounting - ---------- The accompanying consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles. These statements include the accounts of EMC and its subsidiaries. Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements have been condensed or omitted. The interim consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair statement of the results for the interim periods ended March 30, 1996 and April 1, 1995. Certain prior year amounts have been reclassified to conform with the 1996 presentation. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the entire fiscal year. It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements for the year ended December 30, 1995, which are contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 1996.
2. Inventory --------- March 30, 1996 December 30, 1995 -------------- ----------------- Inventories consist of: Purchased parts $ 9,731,000 $ 22,870,000 Work-in-process 152,430,000 150,216,000 Finished goods 154,834,000 157,074,000 ------------ ------------ $316,995,000 $330,160,000 ============ ============
-7- EMC CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 3. Convertible Subordinated Debentures ----------------------------------- In March 1992, the Company issued $60,000,000 of 6 1/4% convertible subordinated debentures due 2002 (the "Debentures") of which $39,535,000 was converted during 1995 and $1,000 was redeemed on April 1, 1995 in accordance with the Company's notification to holders of its intent to redeem Debentures not yet converted on or prior to that date. The Debentures were generally convertible at any time prior to maturity into shares of Common Stock of the Company at a conversion price of $3.063 per share, subject to adjustment in certain events. Interest was paid semiannually. 4. Net Income Per Share -------------------- Net income per share was computed on the basis of weighted average common and dilutive common equivalent shares outstanding. Primary weighted average shares outstanding and earnings used in per share computations for the first quarters of 1996 and 1995 reflect the dilutive effects of the 4 1/4% convertible subordinated notes due 2001 (the "Notes") and outstanding stock options. Fully diluted weighted average shares outstanding and earnings used in per share computations for the first quarter of 1995 reflect the dilutive effects of the Debentures, in addition to the dilutive effect of the Notes and outstanding stock options. 5. Litigation ---------- On June 10, 1993, Storage Technology Corporation ("STK") filed suit against EMC in the United States District Court for the District of Colorado alleging that EMC was infringing three patents. On September 23, 1994, EMC filed suit against STK in the United States District Court for the District of Delaware alleging that STK was infringing one EMC patent. On April 16, 1996, EMC and STK announced that the above patent litigation had been settled. The settlement included a cross-licensing agreement limited to patents covering DASD (direct-access storage devices) and solid-state disk technologies. All claims and counterclaims in the above lawsuits have been dismissed as a result of this agreement. The Company is a party to other litigation which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on the Company's business or financial condition. -8- EMC CORPORATION 6. Acquisition of Patents ---------------------- In February 1996 the Company acquired a patent portfolio valued at $40 million which has been included in intangible assets, net of accumulated amortization of approximately $1 million, at March 30, 1996 and will be amortized over five years. The Company has paid $5 million to date and the remainder will be paid in annual installments over five years. 7. Repurchase of Treasury Shares ----------------------------- In January 1996 the Company's Board of Directors authorized the repurchase of up to 15 million shares of the Company's common stock over a five-year period. The repurchased shares will be used primarily to issue shares under the Company's stock option and stock purchase plans. As of March 30, 1996, the Company had repurchased 500,000 shares of its common stock at an average price of $20.44 per share, of which approximately 130,000 shares remain in treasury. 8. Subsequent Events ----------------- At the Annual Meeting held on May 8, 1996, the Company's stockholders elected three Class III members to the Board of Directors for a three-year term, approved the addition of 1,000,000 shares of common stock to the Company's 1989 Employee Stock Purchase Plan and approved certain amendments to the Company's 1992 Stock Option Plan for Directors. -9- EMC CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - First Quarter of 1996 compared to First Quarter of 1995 - -------------------------------------------------------------------------------- Revenues - -------- Revenues for the quarter ended March 30, 1996 were $521,487,000 compared to $448,116,000 for the first quarter of 1995, an increase of $73,371,000 or 16%. Revenues from net sales increased by $71,226,000, or 16%, in the first quarter of 1996 from the first quarter of 1995, while revenue from service and rental income increased by $2,145,000, or 21% in the first quarter of 1996 as compared with the first quarter of 1995. While the Company expects revenue to continue to grow throughout 1996 as compared to the respective periods in 1995, such increases may not on a percentage basis, continue at the levels experienced in the first quarter of 1996. The increase in revenues was due primarily to the continued strong demand for the Company's series of Integrated Cached Disk Array ("ICDA") based products, which include the Symmetrix 5000 series of products for the mainframe market, the Symmetrix 3000 series of products and Centriplex series of products for the open systems market and the Harmonix series of IBM-compatible disk products for the AS/400 market. Revenues from the Symmetrix series of products in the mainframe markets decreased by $56,230,000, or 15%, to $309,155,000 in the first quarter of 1996 from $365,385,000 in the first quarter of 1995. Revenues from the midrange series of products decreased by $17,898,000, or 61%, to $11,326,000 in the first quarter of 1996 from $29,224,000 in the first quarter of 1995. These decreases, as well as continuing product pricing declines, were offset by increased revenues from the Company's products in the open systems storage market of $128,196,000, or 693%, to $146,707,000 in the first quarter of 1996 from $18,511,000 in the first quarter of 1995. Also, revenues from McDATA Corporation ("McDATA"), a wholly owned subsidiary of the Company, increased by $12,096,000, or 44%, to $39,296,000 in the first quarter of 1996 from $27,200,000 in the first quarter of 1995. Revenues on sales into the market of North America increased by $46,348,000, or 18%, to $307,622,000 in the first quarter of 1996 from $261,274,000 in the first quarter of 1995. This increase was due primarily to increased revenue levels from sales of the Symmetrix series of products in the open systems storage market. Revenues on sales into the markets of Europe, Africa and the Middle East increased by $25,653,000, or 18%, to $165,753,000 in the first quarter of 1996 from $140,100,000 in the first quarter of 1995, due primarily to increased revenue levels from sales of the Symmetrix series of products in the open systems storage market. -10- EMC CORPORATION Revenues on sales into the markets in the Asia Pacific region increased by $1,293,000, or 3%, to $48,117,000 in the first quarter of 1996 from $46,824,000 in the first quarter of 1995. Cost of Sales and Service - ------------------------- As a percentage of revenues, cost of sales and service increased to 56.2% in the first quarter of 1996 from 48.7% in the first quarter of 1995, primarily due to continuing price declines in the storage markets and to a lesser extent due to certain marketing concessions for overseas strategic account expansion and other factors. During the first quarter of 1996, the Company experienced lower costs associated with DRAMs and drive assemblies which partially offset the impact from declines in product pricing. The Company believes that pricing pressures are likely to continue. Research and Development - ------------------------ Research and development ("R&D") expenses were $35,318,000 and $39,940,000 in the first quarters of 1996 and 1995, respectively, a decrease of $4,622,000, or 11.6%. R&D expenses were 6.8% and 8.9% of revenues in the first quarters of 1996 and 1995, respectively. Dollar decreases in R&D spending reflect the continued consolidation of domestic development efforts and the capitalization of software development costs primarily related to specific stand-alone software products. The decrease was partially offset by the cost of additional technical staff and depreciation expenses associated with capital equipment acquired to facilitate development. The Company expects to continue to spend substantial amounts for R&D in 1996. Selling, General and Administrative - ----------------------------------- Selling, general and administrative ("SG&A") expenses were 81,763,000 and $71,791,000 in the first quarters of 1996 and 1995, respectively, an increase of $9,972,000 or 13.9%. SG&A expenses were 15.7% and 16.0% of revenues in the first quarters of 1996 and 1995, respectively. The dollar increase is due primarily to costs associated with additional sales and support personnel and their related overhead costs, both domestically and internationally, in connection with the Company's increased revenue levels and the Company's initiative to expand its open systems storage group, international direct selling offices and OEM programs. SG&A expenses are expected to increase in dollar terms during 1996. -11- EMC CORPORATION Investment Income and Interest Expense - -------------------------------------- Investment income was $6,325,000 in the first quarter of 1996 compared with $6,560,000 in the same period a year ago. Interest income was earned from investments in cash equivalents and long-term investments and, to a lesser extent, from sales-type leases of the Company's products. Investment income decreased in 1996 primarily due to decreased rates of interest in the first quarter of 1996 over the same period in 1995. Interest expense decreased slightly in the first quarter of 1996 from the first quarter of 1995, primarily due to conversion and redemption of the Debentures through April 1, 1995. Provision for Income Taxes - -------------------------- The provision for income taxes was $30,170,000 and $36,435,000 in the first quarters of 1996 and 1995, respectively, which resulted in an effective tax rate of 26.3% in the first quarter of 1996 and 29.9% in the first quarter of 1995. The decrease in the effective tax rate is mainly attributable to the realization of benefits associated with the implementation of the Company's tax strategies. The Company provides for income taxes based upon its estimate of full year earnings on a country-by-country basis. Earnings Fluctuations - --------------------- Due to (i) customers' tendencies to make purchase decisions late in each fiscal quarter, (ii) the desire by customers to evaluate new, more expensive products for longer periods of time, (iii) the timing of product and technology announcements by the Company and its competitors, (iv) fluctuating currency exchange rates, (v) competitive pricing pressures in the computer storage market and (vi) the relative and varying rates of product price and component cost declines, the Company's period to period revenues and earnings can fluctuate significantly. FINANCIAL CONDITION - ------------------- Cash and cash equivalents were $478,759,000 and $379,628,000 at March 30, 1996 and December 30, 1995, respectively. Cash, cash equivalents and long-term investments were $606,141,000 and $504,904,000 at March 30, 1996 and December 30, 1995, respectively. In the first three months of 1996, the Company's working capital increased by $42,454,000 from $959,595,000 at December 30, 1995 to $1,002,049,000 at March 30, 1996. -12- EMC CORPORATION In the first three months of 1996, cash and cash equivalents increased by $99,131,000. Cash provided by operating activities of $139,844,000 was primarily generated by net income and decreased accounts receivable and inventory. This was partially offset by a decrease in accrued expenses. The Company expects further improvements in days sales outstanding and inventory turnover ratios through the remainder of 1996. Cash used by investing activities was $36,164,000 caused principally by additions to property, plant and equipment. Cash used by financing activities was $3,546,000 principally due to repurchases of treasury stock, as discussed below, offset by proceeds from stock option exercises. In January 1996, the Company's Board of Directors authorized the repurchase of up to 15 million shares of the Company's common stock over a five-year period. The repurchased shares will be used primarily to issue shares under the Company's stock option and stock purchase plans. As of March 30, 1996, the Company had repurchased 500,000 shares of its common stock at an average price of $20.44 per share. At March 30, 1996, the Company had available for use its credit lines of $72,000,000. The Company may elect to borrow at any time from these credit lines. Based on its current operating and capital expenditure forecasts, the Company believes funds currently available, funds generated from operations and its available lines of credit will be adequate to finance its operations. To date, inflation has not had a material impact on the Company's financial results. -13- EMC CORPORATION PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- On June 10, 1993, Storage Technology Corporation ("STK") filed suit against EMC in the United States District Court for the District of Colorado alleging that EMC was infringing three patents. On September 23, 1994, EMC filed suit against STK in the United States District Court for the District of Delaware alleging that STK was infringing one EMC patent. On April 16, 1996, EMC and STK announced that the above patent litigation had been settled. The settlement included a cross-licensing agreement limited to patents covering DASD (direct-access storage devices) and solid-state disk technologies. All claims and counterclaims in the above lawsuits have been dismissed as a result of this agreement. The Company is a party to other litigation which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on the Company's business or financial condition. Item 5. Other Information ----------------- Subsequent Events. See Footnote 8 of Notes to Interim Consolidated Financial Statements in Part I of this report. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 10.1 EMC Corporation 1989 Employee Stock Purchase Plan, as amended (filed herewith) 10.2 1992 EMC Corporation Stock Option Plan for Directors, as amended (filed herewith) 11.1 Computation of Primary and Fully Diluted Net Income Per Share (filed herewith). (b) Reports on Form 8-K On February 8, 1996, the Company filed a report (Date of Report: January 27, 1996) on Form 8-K containing the combined results of operations from July 30, 1995 to January 27, 1996 for the Company and McDATA Corporation. -14- EMC CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EMC CORPORATION Date: May 10, 1996 By: /s/ Colin G. Patteson --------------------- Colin G. Patteson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) By: /s/ William J. Teuber, Jr. -------------------------- William J.Teuber, Jr. Vice President and Controller (Principal Accounting Officer) -15- EMC CORPORATION EXHIBIT INDEX Exhibit 10.1 EMC Corporation 1989 Employee Stock Purchase Plan, as amended Exhibit 10.2 1992 EMC Corporation Stock Option Plan for Directors, as amended Exhibit 11.1 Computation of Primary and Fully Diluted Net Income Per Share EX-10.1 2 1989 EMPLOYEE STOCK PURCHASE PLAN Exhibit 10.1 EMC CORPORATION 1989 EMPLOYEE STOCK PURCHASE PLAN, as amended May 8, 1996 Section 1. Purpose of Plan The EMC Corporation 1989 Employee Stock Purchase Plan (the "Plan") is intended to provide a method by which eligible employees of EMC Corporation and its subsidiaries (collectively, the "Company") may use voluntary, systematic payroll deductions to purchase the Company's common stock, $.01 par value, ("stock") and thereby acquire an interest in the future of the Company. For purposes of the Plan, a subsidiary is any corporation in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock unless the Board of Directors determines that employees of a particular subsidiary shall not be eligible. Section 2. Options to Purchase Stock Under the Plan as now amended, no more than 4,900,000 shares are available for purchase (subject to adjustment as provided in Section 16) pursuant to the exercise of options ("options") granted under the Plan to employees of the Company ("employees"). The stock to be delivered upon exercise of options under the Plan may be either shares of the Company's authorized but unissued stock, or shares of reacquired stock, as the Board of Directors of the Company (the "Board of Directors") shall determine. Section 3. Eligible Employees Except as otherwise provided in Section 20, each employee who has completed six months or more of continuous service in the employ of the Company shall be eligible to participate in the Plan. Section 4. Method of Participation The periods January 1 to June 30 and July 1 to December 31 of each year shall be option periods. Each person who will be an eligible employee on the first day of any option period may elect to participate in the Plan by executing and delivering, at least 15 days prior to such day, a payroll deduction authorization in accordance with Section 5. Such employee shall thereby become a participant ("participant") on the first day of such option period and shall remain a participant until his or her participation is terminated as provided in the Plan. Section 5. Payroll Deductions The payroll deduction authorization shall request withholding, at a rate of not less than 2% nor more than 10% from the participant's compensation (subject to a maximum of $2,500 per option period), by means of substantially equal payroll deductions over the option period. For purposes of the Plan, "compensation" shall mean all cash compensation paid to the participant by the Company. A participant may change the withholding rate of his or her payroll deduction authorization by written notice delivered to the Company at least 15 days prior to the first day of the option period as to which the change is to be effective. All amounts withheld in accordance with a participant's payroll deduction authorization shall be credited to a withholding account for such participant. Section 6. Grant of Options Each person who is a participant on the first day of an option period shall as of such day be granted an option for such period. Such option shall be for the number of shares of stock to be determined by dividing (a) the balance in the participant's withholding account on the last day of the option period by (b) the purchase price per share of the stock determined under Section 7, and eliminating any fractional share from the quotient. The Company shall reduce on a substantially proportionate basis the number of shares of stock receivable by each participant upon exercise of his or her option for an option period in the event that the number of shares then available under the Plan is otherwise insufficient. Section 7. Purchase Price The purchase price of stock issued pursuant to the exercise of an option shall be 85% of the fair market value of the stock at (a) the time of grant of the option or (b) the time at which the option is deemed exercised, whichever is less. Fair market value shall be determined in accordance with the applicable provisions of the Internal Revenue Code of 1986, as amended or restated from time to time (the "Code"), or regulations issued thereunder, or, in the absence of any such provisions or regulations, shall be deemed to be the last sale price at which the stock is traded on the day in question or the last prior date on which a trade occurred as reported in The Wall Street Journal; or, if The Wall ----------------------- -------- Street Journal is not published or does not list the stock, then in such other - -------------- appropriate newspaper of general circulation as the Board of Directors may prescribe; or, if the last price at which the stock traded is not generally reported, then the mean between the reported bid and asked prices at the close of the market on the day in question or the last prior date when such prices were reported. Section 8. Exercise of Options If an employee is a participant in the Plan on the last business day of an option period, he or she shall be deemed to have exercised the option granted to him or her for that period. Upon such exercise, the Company shall apply the balance of the participant's withholding account to the purchase of the number of whole shares of stock determined under Section 6, and as soon as practicable thereafter shall issue and deliver certificates for said shares to the participant and shall return to him or her the balance, if any, of his or her withholding account in excess of the total purchase price of the shares so issued. No fractional shares shall be issued hereunder. Notwithstanding anything herein to the contrary, the Company shall not be obligated to deliver any shares unless and until, in the opinion of the Company's counsel, all requirements of applicable federal and state laws and regulations (including any requirements as to legends) have been complied with, nor, if the outstanding stock is at the time listed on any securities exchange, unless and until the shares to be delivered have been listed (or authorized to be added to the list upon official notice of issuance) upon such exchange, nor unless or until all other legal matters in connection with the issuance and delivery of shares have been approved by the Company's counsel. Section 9. Interest No interest will be payable on withholding accounts. Section 10. Cancellation and Withdrawal A participant who holds an option under the Plan may at any time prior to exercise thereof under Section 8 cancel all (but not less than all) of his or her option by written notice delivered to the Company. Upon such cancellation, the balance in his or her withholding account shall be returned to him or her. A participant may terminate his or her payroll deduction authorization as of any date by written notice delivered to the Company and shall thereby cease to be a participant as of such date. Any participant who voluntarily terminates his or her payroll deduction authorization prior to the last business day of an option period shall be deemed to have cancelled his or her option. Section 11. Termination of Employment Except as otherwise provided in Section 12, upon the termination of a participant's employment with the Company for any reason whatsoever, he or she shall cease to be a participant, and any option held by him or her under the Plan shall be deemed cancelled, the balance of his or her withholding account shall be returned to him or her, and he or she shall have no further rights under the Plan. For purposes of this Section 11, a participant's employment will not be considered terminated in the case of sick leave or other bona fide leave of absence approved for purposes of this Plan by the Company or a subsidiary or in the case of a transfer to the employment of a subsidiary or to the employment of the Company. Section 12. Death or Retirement of Participant In the event a participant holds any option hereunder at the time his or her employment with the Company is terminated (1) by his or her retirement with the consent of the Company, and such retirement is within three months of the time such option becomes exercisable, or (2) by his or her death, whenever occurring, then such participant (or his or her legal representative), may, by a writing delivered to the Company on or before the date such option is exercisable, elect either (a) to cancel any such option and receive in cash the balance in his or her withholding account, or (b) to have the balance in his or her withholding account applied as of the last day of the option period to the exercise of his or her option pursuant to Section 8. In the event such participant (or his or her legal representative) does not file a written election as provided above, any outstanding option shall be treated as if an election had been filed pursuant to subparagraph 12(a) above. Section 13. Participant's Rights Not Transferable, etc. All participants granted options under the Plan shall have the same rights and privileges. Each participant's rights and privileges under any option granted under the Plan shall be exercisable during his or her lifetime only by him or her, and shall not be sold, pledged, assigned, or otherwise transferred in any manner whatsoever except by will or the laws of descent and distribution. In the event any participant violates the terms of this Section, any options held by him or her may be terminated by the Company and, upon return to the participant of the balance of his or her withholding account, all his or her rights under the Plan shall terminate. Section 14. Employment Rights Neither the adoption of the Plan nor any of the provisions of the Plan shall confer upon any participant any right to continued employment with the Company or a subsidiary or affect in any way the right of the Company to terminate the employment of such participant at any time. Section 15. Rights as a Shareholder A participant shall have the rights of a shareholder only as to stock actually acquired by him or her under the Plan. Section 16. Change in Capitalization In the event of a stock dividend, stock split or combination of shares, recapitalization, merger in which the Company is the surviving corporation or other change in the Company's capital stock, the number and kind of shares of stock or securities of the Company to be subject to the Plan and to options then outstanding or to be granted hereunder, the maximum number of shares or securities which may be delivered under the Plan, the option price and other relevant provisions shall be appropriately adjusted by the Board of Directors, whose determination shall be binding on all persons. In the event of a consolidation or merger in which the Company is not the surviving corporation or in the event of the sale or transfer of substantially all the Company's assets (other than by the grant of a mortgage or security interest), all outstanding options shall thereupon terminate, provided that prior to the effective date of any such merger, consolidation or sale of assets, the Board of Directors shall either (a) return the balance in all withholding accounts and cancel all outstanding options, or (b) accelerate the exercise date provided for in Section 8, or (c) if there is a surviving or acquiring corporation, arrange to have that corporation or an affiliate of that corporation grant to the participants replacement options having equivalent terms and conditions as determined by the Board of Directors. Section 17. Administration of Plan The Plan will be administered by the Board of Directors. The Board of Directors will have authority, not inconsistent with the express provisions of the Plan, to take all action necessary or appropriate hereunder, to interpret its provisions, and to decide all questions and resolve all disputes which may arise in connection therewith. Such determinations of the Board of Directors shall be conclusive and shall bind all parties. The Board may, in its discretion, delegate its powers with respect to the Plan to an Employee Benefit Plan Committee or any other committee (the "Committee"), in which event all references to the Board of Directors hereunder, including without limitation the references in Section 17, shall be deemed to refer to the Committee. A majority of the members of any such Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. Section 18. Amendment and Termination of Plan The Board of Directors may at any time or times amend the Plan or amend any outstanding option or options for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, provided that (except to the extent explicitly required or permitted herein) no such amendment will, without the approval of the shareholders of the Company, (a) increase the maximum number of shares available under the Plan, (b) reduce the option price of outstanding options or reduce the price at which options may be granted, (c) change the conditions for eligibility under the Plan, or (d) amend the provisions of this Section 18 of the Plan, and no such amendment will adversely affect the rights of any participant (without his or her consent) under any option theretofore granted. The Plan may be terminated at any time by the Board of Directors, but no such termination shall adversely affect the rights and privileges of holders of the outstanding options. Section 19. Approval of Shareholders The Plan shall be subject to the approval of the shareholders of the Company, which approval shall be secured within twelve months after the date the Plan is adopted by the Board of Directors. Notwithstanding any other provisions of the Plan, no option shall be exercised prior to the date of such approval. Section 20. Limitations on Eligibility Notwithstanding any other provision of the Plan, (a) An employee shall not be eligible to receive an option pursuant to the Plan if, immediately after the grant of such option to him or her, he or she would (in accordance with the provisions of Sections 423 and 425(d) of the Code) own or be deemed to own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the employer corporation or of its parent or subsidiary corporation, as defined in Section 425 of the Code. (b) No employee shall be granted an option under this Plan that would permit his or her rights to purchase shares of stock under this Plan of the Company to accrue at a rate which exceeds $25,000 in fair market value of such stock (determined at the time the option is granted) for each calendar year during which any such option granted to such employee is outstanding at any time, as provided in Sections 423 and 425 of the Code. (c) No employee shall be granted an option under this Plan that would permit him or her to withhold more than $2,500 in each option period or $5,000 per calendar year. EX-10.2 3 1992 STOCK OPTION PLAN FOR DIRECTORS Exhibit 10.2 EMC CORPORATION 1992 EMC CORPORATION STOCK OPTION PLAN FOR DIRECTORS, as amended May 8, 1996 1. PURPOSE The purpose of this 1992 Stock Option Plan for Directors (the ''Plan'') is to advance the interests of EMC Corporation (the ''Company'') by enhancing the ability of the Company to attract and retain directors who are in a position to make significant contributions to the success of the Company and to reward directors for such contributions through ownership of shares of the Company's Common Stock (the ''Stock''). 2. ADMINISTRATION The Plan shall be administered by the Executive Compensation and Stock Option Committee (the ''Committee'') of the Board of Directors (the ''Board'') of the Company. The Committee shall have authority, not inconsistent with the express provisions of the Plan (a) to grant options in accordance with the Plan to such directors as are eligible to receive options; (b) to prescribe the form or forms of instruments evidencing options and any other instruments required under the Plan and to change such forms from time to time; (c) to adopt, amend and rescind rules and regulations for the administration of the Plan; and (d) to interpret the Plan and decide any questions and settle all controversies and disputes that may arise in connection with the Plan. Such determinations of the Committee shall be conclusive and shall bind all parties. Subject to Section 7, the Committee shall also have the authority, both generally and in particular instances, to waive compliance by a director with any obligation to be performed by him or her under an option and to waive any condition or provision of an option. 3. EFFECTIVE DATE AND TERM OF PLAN The Plan shall become effective on the date on which the Plan is approved by the stockholders of the Company. No option shall be granted under the Plan after the completion of ten years from the date on which the Plan was adopted by the Board, but options granted may extend beyond that date. 4. SHARES SUBJECT TO THE PLAN (a) Number of Shares. Subject to adjustment as provided in Section 4(c), the aggregate number of shares of Stock that may be delivered upon the exercise of options granted under the Plan shall be 1,800,000. If any option granted under the Plan terminates without having been exercised in full, the number of shares of Stock as to which such option was not exercised shall be available for future grants within the limits set forth in this Section 4(a). (b) Shares to be Delivered. Shares delivered under the Plan shall be authorized but unissued Stock or, if the Board so decides in its sole discretion, previously issued Stock acquired by the Company and held in treasury. No fractional shares of Stock shall be delivered under the Plan. (c) Changes in Stock. In the event of a stock dividend, stock split or other change in corporate structure or capitalization affecting the Stock, the number and kind of shares of stock or securities of the Company to be subject to options then outstanding or to be granted under the Plan, and the option price, and other relevant provisions shall be appropriately adjusted by the Committee, whose determination shall be binding on all persons. 5. ELIGIBILITY FOR OPTIONS Directors eligible to receive options under the Plan (''Eligible Directors'') shall be those directors who (i) are not employees of the Company; and (ii) are not holders of more than 5% of the outstanding shares of the Stock or persons in control of such holders. 6. TERMS AND CONDITIONS OF OPTIONS (a) Formula Options. Eligible Directors who are directors on the date of stockholder approval of the Plan shall be awarded options to purchase up to 40,000 shares of Stock. Following stockholder approval of the plan, each newly elected Eligible Director shall be awarded options to purchase up to 40,000 shares of Stock on the date of his or her first election. (b) Discretionary Options. In addition to the formula options provided for above, the Committee may award options to purchase shares of Stock to Eligible Directors on such terms as it may determine not inconsistent with this Plan. (c) Exercise Price. The exercise price of each option shall be not less than 50% of the fair market value per share of the Stock at the time of the grant. For this purpose ''fair market value'' shall mean the last sales price of the Stock as reported on the New York Stock Exchange on the date of the grant (based on The Wall Street Journal report of composite transactions) or, if the Stock is no longer listed on such Exchange, it shall have the same meaning as it does in the provisions of the Internal Revenue Code of 1986 (the ''Code'') and the regulations thereunder applicable to incentive options. (d) Duration of Options. The latest date on which an option may be exercised (the ''Final Exercise Date'') shall be the date which is ten years from the date the option was granted. (e) Exercise of Options. (1) Each formula option shall become exercisable in increments of 331/3% of the shares covered thereby on each of the first through third anniversaries of the grant. Each discretionary option shall become exercisable at such time or times as the Committee shall determine. (2) Any exercise of an option shall be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (a) an option exercise notice and any other documents required by the Committee; and (b) payment in full for the number of shares for which the option is exercised. (3) If any option is exercised by the executor or administrator of a deceased director, or by the person or persons to whom the option has been transferred by the director's will or the applicable laws of descent and distribution, the Company shall be under no obligation to deliver Stock pursuant to such exercise until the Company is satisfied as to the authority of the person or persons exercising the option. (4) The Company shall have the right to settle any option, and to terminate the rights of the holder thereof, by paying to the option holder the difference between the fair market value of the Stock at the time of settlement and the purchase price. (f) Payment for and Delivery of Stock. Stock purchased under the Plan shall be paid for as follows: (i) in cash or by certified check, bank draft or money order payable to the order of the Company; (ii) through the delivery of shares of Stock having a fair market value on the last business day preceding the date of exercise equal to the purchase price; or (iii) by a combination of cash and Stock as provided in clauses (i) and (ii) above. An option holder shall not have the rights of a stockholder with regard to awards under the Plan except as to Stock actually received by him or her under the Plan. The Company shall not be obligated to deliver any shares of Stock (a) until, in the opinion of the Company's counsel, all applicable Federal and state laws and regulations have been complied with; and (b) if the outstanding Stock is at the time listed on any stock exchange, until the shares to be delivered have been listed or authorized to be listed on such exchange upon official notice of issuance; and (c) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the option, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act and may require that the certificates evidencing such Stock bear an appropriate legend restricting transfer. (g) Nontransferability of Options. So long as nontransferability is required to cause the award of an option to be exempt under Rule 16b-3 under the Securities Exchange Act of 1934, as amended, no option may be transferred other than by will or by the laws of descent and distribution, and during a director's lifetime an option may be exercised only by him or her. (h) Death. If a director dies at the time he or she is entitled to exercise an option, then the portion formerly exercisable by the director may be exercised by the director's executor or administrator, or by the person to whom the option is transferred under the applicable laws of descent and distribution, within three years of the death of the director, subject to earlier termination of an option pursuant to Section 6(c). (i) Other Termination of Status of Director. All previously unexercised options terminate and are forfeited automatically upon the termination of the director's service with the Company, unless the Committee or the Board of Directors specifies otherwise. (j) Mergers, etc. In the event of a dissolution, liquidation, consolidation or merger in which the Company is not the surviving corporation, or which results in the acquisition of substantially all of the Company's stock by a single person or entity or by a group of persons and entities acting in concert all outstanding options will thereupon terminate, provided at least twenty days prior to the effective date of any such dissolution, liquidation, consolidation or merger, the Committee may either (i) make all outstanding options immediately exercisable or (ii) arrange to have the surviving corporation grant replacement options for the option holders. 7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION Neither adoption of the Plan nor the grant of options to a director shall affect the Company's right to grant to such director or any director options that are not subject to the Plan, to issue to such directors Stock as a bonus or otherwise, or to adopt other plans or arrangements under which Stock may be issued to directors. The Committee may at any time discontinue granting options under the Plan. The Committee may at any time, or times, amend the Plan for the purpose of satisfying any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of options, provided that (except to the extent expressly required or permitted herein above) no such amendment shall, without the approval of the stockholders of the Company, (a) increase the maximum number of shares available under the Plan; (b) increase the number of options to be granted to Eligible Directors; (c) amend the definition of Eligible Directors so as to enlarge the group of directors eligible to receive options under the Plan; (d) reduce the price at which options may be granted other than as permitted in the Plan; or (e) amend the provisions of this Section 7. EX-11.1 4 COMPUTATION OF PRIMARY & FULLY DILUTED NET INCOME EMC CORPORATION Exhibit 11.1 Computation of Primary and Fully Diluted Net Income Per Share (Amounts in thousands except share and per share data)
Three Months Ended ---------------------------- March 30, April 1, 1996 1995 ------------- ------------- PRIMARY - ------- Net income $ 84,545 $ 85,449 Add back interest expense on convertible notes 2,440 2,440 Less tax effect on interest expense on convertible notes (976) (976) ------------ ------------ Net income for purposes of calculating primary net income per share $ 86,009 $ 86,913 ============ ============ Weighted average shares outstanding during the period 230,488,964 214,045,611 Common equivalent shares 18,050,105 21,034,178 ------------ ------------ Common and common equivalent shares outstanding for purpose of calculating primary net income per share 248,539,069 235,079,789 ============ ============ Primary net income per share (Note 4) $0.35 $0.37 FULLY DILUTED - ------------- Net income $ 84,545 $ 85,449 Add back interest expense on convertible notes and debentures 2,440 3,055 Less tax effect on interest expense on convertible notes and debentures (976) (1,222) ------------ ------------ Net income for purpose of calculating fully diluted net income per share $ 86,009 $ 87,282 ============ ============ Common and common equivalent shares outstanding for purpose of calculating primary net income per share 248,539,069 235,079,789 Incremental shares to reflect full dilution, primarily from convertible subordinated debentures in 1995 340,230 12,342,764 ------------ ------------ Total shares for purpose of calculating fully diluted net income per share 248,879,299 247,422,553 ============ ============ Fully diluted net income per share (Note 4) $0.35 $0.35
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