(Mark One) | ||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended August 2, 2013 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 74-2487834 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer R | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Page | |||
Exhibits | |||
August 2, 2013 | February 1, 2013 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 11,185 | $ | 12,569 | |||
Short-term investments | 643 | 208 | |||||
Accounts receivable, net | 6,591 | 6,629 | |||||
Short-term financing receivables, net | 3,131 | 3,213 | |||||
Inventories, net | 1,468 | 1,382 | |||||
Other current assets | 3,848 | 3,967 | |||||
Total current assets | 26,866 | 27,968 | |||||
Property, plant, and equipment, net | 2,212 | 2,126 | |||||
Long-term investments | 2,048 | 2,565 | |||||
Long-term financing receivables, net | 1,469 | 1,349 | |||||
Goodwill | 9,253 | 9,304 | |||||
Purchased intangible assets, net | 2,990 | 3,374 | |||||
Other non-current assets | 1,033 | 854 | |||||
Total assets | $ | 45,871 | $ | 47,540 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 2,736 | $ | 3,843 | |||
Accounts payable | 12,051 | 11,579 | |||||
Accrued and other | 3,657 | 3,644 | |||||
Short-term deferred revenue | 4,312 | 4,373 | |||||
Total current liabilities | 22,756 | 23,439 | |||||
Long-term debt | 4,075 | 5,242 | |||||
Long-term deferred revenue | 4,003 | 3,971 | |||||
Other non-current liabilities | 4,256 | 4,187 | |||||
Total liabilities | 35,090 | 36,839 | |||||
Commitments and contingencies (Note 11) | |||||||
Stockholders’ equity: | |||||||
Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,958 and 3,413, respectively; shares outstanding: 1,758 and 1,738, respectively | 12,698 | 12,554 | |||||
Treasury stock at cost: 1,200 and 1,200 shares, respectively | (32,145 | ) | (32,145 | ) | |||
Retained earnings | 30,381 | 30,330 | |||||
Accumulated other comprehensive loss | (153 | ) | (59 | ) | |||
Total Dell stockholders’ equity | 10,781 | 10,680 | |||||
Noncontrolling interest | — | 21 | |||||
Total stockholders’ equity | 10,781 | 10,701 | |||||
Total liabilities and stockholders’ equity | $ | 45,871 | $ | 47,540 |
Three Months Ended | Six Months Ended | ||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | ||||||||||||
Net revenue: | |||||||||||||||
Products | $ | 11,326 | $ | 11,403 | $ | 22,228 | $ | 22,826 | |||||||
Services, including software related | 3,188 | 3,080 | 6,360 | 6,079 | |||||||||||
Total net revenue | 14,514 | 14,483 | 28,588 | 28,905 | |||||||||||
Cost of net revenue: | |||||||||||||||
Products | 9,767 | 9,280 | 19,011 | 18,610 | |||||||||||
Services, including software related | 2,058 | 2,065 | 4,141 | 4,090 | |||||||||||
Total cost of net revenue | 11,825 | 11,345 | 23,152 | 22,700 | |||||||||||
Gross margin | 2,689 | 3,138 | 5,436 | 6,205 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general, and administrative | 2,097 | 1,976 | 4,305 | 3,985 | |||||||||||
Research, development, and engineering | 320 | 261 | 633 | 495 | |||||||||||
Total operating expenses | 2,417 | 2,237 | 4,938 | 4,480 | |||||||||||
Operating income | 272 | 901 | 498 | 1,725 | |||||||||||
Interest and other, net | (53 | ) | (63 | ) | (121 | ) | (95 | ) | |||||||
Income before income taxes | 219 | 838 | 377 | 1,630 | |||||||||||
Income tax provision | 15 | 106 | 43 | 263 | |||||||||||
Net income | $ | 204 | $ | 732 | $ | 334 | $ | 1,367 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.12 | $ | 0.42 | $ | 0.19 | $ | 0.78 | |||||||
Diluted | $ | 0.12 | $ | 0.42 | $ | 0.19 | $ | 0.77 | |||||||
Cash dividends declared per common share | $ | 0.08 | $ | — | $ | 0.16 | $ | — | |||||||
Weighted-average shares outstanding: | |||||||||||||||
Basic | 1,757 | 1,747 | 1,752 | 1,753 | |||||||||||
Diluted | 1,764 | 1,753 | 1,763 | 1,764 |
Three Months Ended | Six Months Ended | ||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | ||||||||||||
Net income | $ | 204 | $ | 732 | $ | 334 | $ | 1,367 | |||||||
Other comprehensive income, net of tax | |||||||||||||||
Foreign currency translation adjustments | (70 | ) | (75 | ) | (101 | ) | (83 | ) | |||||||
Available-for-sale investments | |||||||||||||||
Change in unrealized gains (losses) | (5 | ) | 4 | (4 | ) | 4 | |||||||||
Reclassification adjustment for net (gains) losses included in net income | — | (4 | ) | — | (6 | ) | |||||||||
Net change | (5 | ) | — | (4 | ) | (2 | ) | ||||||||
Cash Flow Hedges | |||||||||||||||
Change in unrealized gains (losses) | 42 | 76 | 88 | 51 | |||||||||||
Reclassification adjustment for net (gains) losses included in net income | (43 | ) | (40 | ) | (77 | ) | (26 | ) | |||||||
Net change | (1 | ) | 36 | 11 | 25 | ||||||||||
Total other comprehensive income (loss), net of tax benefit (expense) of $0 and $2, respectively and $0 and $(7), respectively | (76 | ) | (39 | ) | (94 | ) | (60 | ) | |||||||
Comprehensive income, net of tax | $ | 128 | $ | 693 | $ | 240 | $ | 1,307 |
Six Months Ended | |||||||
August 2, 2013 | August 3, 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 334 | $ | 1,367 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 650 | 529 | |||||
Stock-based compensation expense | 138 | 192 | |||||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | 49 | 15 | |||||
Deferred income taxes | (265 | ) | (48 | ) | |||
Provision for doubtful accounts — including financing receivables | 104 | 121 | |||||
Other | 31 | 12 | |||||
Changes in assets and liabilities, net of effects from acquisitions: | |||||||
Accounts receivable | (205 | ) | (472 | ) | |||
Financing receivables | 19 | 11 | |||||
Inventories | (89 | ) | (190 | ) | |||
Other assets | 107 | (196 | ) | ||||
Accounts payable | 528 | (440 | ) | ||||
Deferred revenue | 94 | 122 | |||||
Accrued and other liabilities | 144 | (524 | ) | ||||
Change in cash from operating activities | 1,639 | 499 | |||||
Cash flows from investing activities: | |||||||
Investments: | |||||||
Purchases | (405 | ) | (1,190 | ) | |||
Maturities and sales | 489 | 2,440 | |||||
Capital expenditures | (322 | ) | (262 | ) | |||
Proceeds from the sale of facilities, land, and other assets | — | 34 | |||||
Collections on purchased financing receivables | 49 | 102 | |||||
Acquisitions of businesses, net of cash received | (264 | ) | (2,411 | ) | |||
Divestitures of businesses, net of cash transferred | 48 | — | |||||
Change in cash from investing activities | (405 | ) | (1,287 | ) | |||
Cash flows from financing activities: | |||||||
Repurchases of common stock | — | (724 | ) | ||||
Cash dividends paid | (283 | ) | — | ||||
Issuance of common stock under employee plans | 31 | 44 | |||||
Issuance (repayment) of commercial paper (maturity 90 days or less), net | — | 138 | |||||
Proceeds from debt | 878 | 1,151 | |||||
Repayments of debt | (3,143 | ) | (2,104 | ) | |||
Other | (1 | ) | 8 | ||||
Change in cash from financing activities | (2,518 | ) | (1,487 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (100 | ) | (58 | ) | |||
Change in cash and cash equivalents | (1,384 | ) | (2,333 | ) | |||
Cash and cash equivalents at beginning of the period | 12,569 | 13,852 | |||||
Cash and cash equivalents at end of the period | $ | 11,185 | $ | 11,519 |
• | End-User Computing ("EUC") |
• | Enterprise Solutions Group ("ESG") |
• | Dell Software Group |
• | Dell Services |
August 2, 2013 | February 1, 2013 | ||||||||||||||||||||||||||||||
Level 1(a) | Level 2 (a) | Level 3 | Total | Level 1 (a) | Level 2 (a) | Level 3 | Total | ||||||||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Cash equivalents: | |||||||||||||||||||||||||||||||
Money market funds | $ | 7,102 | $ | — | $ | — | $ | 7,102 | $ | 8,869 | $ | — | $ | — | $ | 8,869 | |||||||||||||||
Debt securities: | |||||||||||||||||||||||||||||||
Non- U.S. government and agencies | — | 79 | — | 79 | — | 96 | — | 96 | |||||||||||||||||||||||
Commercial paper | — | 5 | — | 5 | — | 6 | — | 6 | |||||||||||||||||||||||
U.S. corporate | — | 1,631 | — | 1,631 | — | 1,701 | — | 1,701 | |||||||||||||||||||||||
International corporate | — | 740 | — | 740 | — | 700 | — | 700 | |||||||||||||||||||||||
Equity and other securities | — | 127 | — | 127 | 1 | 112 | — | 113 | |||||||||||||||||||||||
Derivative instruments | — | 115 | — | 115 | — | 68 | — | 68 | |||||||||||||||||||||||
Total assets | $ | 7,102 | $ | 2,697 | $ | — | $ | 9,799 | $ | 8,870 | $ | 2,683 | $ | — | $ | 11,553 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Derivative instruments | $ | — | $ | 7 | $ | — | $ | 7 | $ | — | $ | 16 | $ | — | $ | 16 | |||||||||||||||
Total liabilities | $ | — | $ | 7 | $ | — | $ | 7 | $ | — | $ | 16 | $ | — | $ | 16 |
August 2, 2013 | February 1, 2013 | ||||||||||||||||||||||||||||||
Carrying Value | Cost | Unrealized Gain | Unrealized (Loss) | Carrying Value | Cost | Unrealized Gain | Unrealized (Loss) | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Investments: | |||||||||||||||||||||||||||||||
Non- U.S. government and agencies | $ | 38 | $ | 38 | $ | — | $ | — | $ | 13 | $ | 13 | $ | — | $ | — | |||||||||||||||
Commercial paper | 5 | 5 | — | — | 6 | 6 | — | — | |||||||||||||||||||||||
U.S. corporate | 390 | 389 | 1 | — | 113 | 112 | 1 | — | |||||||||||||||||||||||
International corporate | 210 | 209 | 1 | — | 76 | 76 | — | — | |||||||||||||||||||||||
Total short-term investments | 643 | 641 | 2 | — | 208 | 207 | 1 | — | |||||||||||||||||||||||
Non- U.S. government and agencies | 41 | 40 | 1 | — | 83 | 83 | — | — | |||||||||||||||||||||||
U.S. corporate | 1,241 | 1,237 | 5 | (1 | ) | 1,588 | 1,580 | 9 | (1 | ) | |||||||||||||||||||||
International corporate | 530 | 530 | 1 | (1 | ) | 624 | 620 | 4 | — | ||||||||||||||||||||||
Equity and other securities | 236 | 236 | — | — | 270 | 270 | — | — | |||||||||||||||||||||||
Total long-term investments | 2,048 | 2,043 | 7 | (2 | ) | 2,565 | 2,553 | 13 | (1 | ) | |||||||||||||||||||||
Total investments | $ | 2,691 | $ | 2,684 | $ | 9 | $ | (2 | ) | $ | 2,773 | $ | 2,760 | $ | 14 | $ | (1 | ) |
• | Revolving loans — Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. These private label credit financing programs are referred to as Dell Preferred Account (“DPA”) and Dell Business Credit (“DBC”). The DPA product is primarily offered to individual customers, and the DBC product is primarily offered to small and medium-sized commercial customers. Revolving loans in the U.S. bear interest at a variable annual percentage rate that is tied to the prime rate. Based on historical payment patterns, revolving loan transactions are typically repaid within 12 months on average. Revolving loans are included in short-term financing receivables. |
• | Fixed-term sales-type leases and loans — Dell enters into sales-type lease arrangements with customers who desire lease financing. Leases with business customers have fixed terms of generally two to four years. Future maturities of minimum lease payments at August 2, 2013, were as follows: Fiscal 2014 - $868 million; Fiscal 2015 - $937 million; Fiscal 2016 - $494 million; Fiscal 2017 - $122 million; Fiscal 2018 and beyond - $21 million. Dell also offers fixed-term loans to qualified small businesses, large commercial accounts, governmental organizations, educational entities, and certain individual consumer customers. These loans are repaid in equal payments including interest and have defined terms of generally three to four years. |
August 2, 2013 | February 1, 2013 | |||||||||||||||||||||||
Revolving | Fixed-term | Total | Revolving | Fixed-term | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Financing Receivables, net: | ||||||||||||||||||||||||
Customer receivables, gross | $ | 1,645 | $ | 2,733 | $ | 4,378 | $ | 1,834 | $ | 2,535 | $ | 4,369 | ||||||||||||
Allowances for losses | (148 | ) | (22 | ) | (170 | ) | (169 | ) | (23 | ) | (192 | ) | ||||||||||||
Customer receivables, net | 1,497 | 2,711 | 4,208 | 1,665 | 2,512 | 4,177 | ||||||||||||||||||
Residual interest | — | 392 | 392 | — | 385 | 385 | ||||||||||||||||||
Financing receivables, net | $ | 1,497 | $ | 3,103 | $ | 4,600 | $ | 1,665 | $ | 2,897 | $ | 4,562 | ||||||||||||
Short-term | $ | 1,497 | $ | 1,634 | $ | 3,131 | $ | 1,665 | $ | 1,548 | $ | 3,213 | ||||||||||||
Long-term | — | 1,469 | 1,469 | — | 1,349 | 1,349 | ||||||||||||||||||
Financing receivables, net | $ | 1,497 | $ | 3,103 | $ | 4,600 | $ | 1,665 | $ | 2,897 | $ | 4,562 |
Three Months Ended | ||||||||||||||||||||||||
August 2, 2013 | August 3, 2012 | |||||||||||||||||||||||
Revolving | Fixed- term | Total | Revolving | Fixed- term | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Allowance for financing receivable losses: | ||||||||||||||||||||||||
Balance at beginning of period | $ | 157 | $ | 22 | $ | 179 | $ | 169 | $ | 23 | $ | 192 | ||||||||||||
Principal charge-offs | (36 | ) | (12 | ) | (48 | ) | (42 | ) | (5 | ) | (47 | ) | ||||||||||||
Interest charge-offs | (7 | ) | — | (7 | ) | (8 | ) | — | (8 | ) | ||||||||||||||
Recoveries | 12 | 1 | 13 | 22 | 1 | 23 | ||||||||||||||||||
Provision charged to income statement | 22 | 11 | 33 | 27 | 2 | 29 | ||||||||||||||||||
Balance at end of period | $ | 148 | $ | 22 | $ | 170 | $ | 168 | $ | 21 | $ | 189 |
Six Months Ended | ||||||||||||||||||||||||
August 2, 2013 | August 3, 2012 | |||||||||||||||||||||||
Revolving | Fixed- term | Total | Revolving | Fixed- term | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Allowance for financing receivable losses: | ||||||||||||||||||||||||
Balance at beginning of period | $ | 169 | $ | 23 | $ | 192 | $ | 179 | $ | 23 | $ | 202 | ||||||||||||
Principal charge-offs | (80 | ) | (15 | ) | (95 | ) | (91 | ) | (7 | ) | (98 | ) | ||||||||||||
Interest charge-offs | (15 | ) | — | (15 | ) | (17 | ) | — | (17 | ) | ||||||||||||||
Recoveries | 25 | 2 | 27 | 34 | 2 | 36 | ||||||||||||||||||
Provision charged to income statement | 49 | 12 | 61 | 63 | 3 | 66 | ||||||||||||||||||
Balance at end of period | $ | 148 | $ | 22 | $ | 170 | $ | 168 | $ | 21 | $ | 189 |
August 2, 2013 | February 1, 2013 | |||||||||||||||||||||||||||||||
Current | Past Due 1 — 90 Days | Past Due > 90 Days | Total | Current | Past Due 1 — 90 Days | Past Due > 90 Days | Total | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Revolving — DPA | $ | 1,179 | $ | 138 | $ | 40 | $ | 1,357 | $ | 1,322 | $ | 163 | $ | 54 | $ | 1,539 | ||||||||||||||||
Revolving — DBC | 257 | 25 | 6 | 288 | 264 | 25 | 6 | 295 | ||||||||||||||||||||||||
Fixed-term — Consumer and Small Commercial | 317 | 15 | 1 | 333 | 310 | 16 | 1 | 327 | ||||||||||||||||||||||||
Fixed-term — Medium and Large Commercial | 2,245 | 150 | 5 | 2,400 | 2,015 | 172 | 21 | 2,208 | ||||||||||||||||||||||||
Total customer receivables, gross | $ | 3,998 | $ | 328 | $ | 52 | $ | 4,378 | $ | 3,911 | $ | 376 | $ | 82 | $ | 4,369 |
August 2, 2013 | February 1, 2013 | |||||||||||||||||||||||||||||||
Higher | Mid | Lower | Total | Higher | Mid | Lower | Total | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Revolving — DPA | $ | 180 | $ | 391 | $ | 786 | $ | 1,357 | $ | 201 | $ | 435 | $ | 903 | $ | 1,539 |
August 2, 2013 | February 1, 2013 | |||||||||||||||||||||||||||||||
Higher | Mid | Lower | Total | Higher | Mid | Lower | Total | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Revolving — DBC | $ | 94 | $ | 81 | $ | 113 | $ | 288 | $ | 99 | $ | 88 | $ | 108 | $ | 295 | ||||||||||||||||
Fixed-term — Consumer and Small Commercial | $ | 89 | $ | 124 | $ | 120 | $ | 333 | $ | 90 | $ | 117 | $ | 120 | $ | 327 |
August 2, 2013 | February 1, 2013 | ||||||||||||||||||||||||||||||
Investment | Non-Investment | Sub-Standard | Total | Investment | Non-Investment | Sub-Standard | Total | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Fixed-term — Medium and Large Commercial | $ | 1,437 | $ | 634 | $ | 329 | $ | 2,400 | $ | 1,355 | $ | 582 | $ | 271 | $ | 2,208 |
August 2, 2013 | February 1, 2013 | |||||||
(in millions) | ||||||||
Financing receivables held by consolidated VIEs, net: | ||||||||
Short-term, net | $ | 1,166 | $ | 1,089 | ||||
Long-term, net | 426 | 386 | ||||||
Financing receivables held by consolidated VIEs, net | $ | 1,592 | $ | 1,475 |
August 2, 2013 | February 1, 2013 | |||||||
(in millions) | ||||||||
Long-Term Debt | ||||||||
Senior Notes | ||||||||
$600 million issued on April 17, 2008, at 4.70% due April 2013 (“2013A Notes”) (a)(b) | $ | — | $ | 601 | ||||
$500 million issued on September 7, 2010, at 1.40% due September 2013 | 500 | 500 | ||||||
$500 million issued on April 1, 2009, at 5.625% due April 2014 (b) | 500 | 500 | ||||||
$300 million issued on March 28, 2011, with a floating rate due April 2014 (“2014B Notes”) | 300 | 300 | ||||||
$400 million issued on March 28, 2011, at 2.10% due April 2014 | 400 | 400 | ||||||
$700 million issued on September 7, 2010, at 2.30% due September 2015 (b) | 701 | 702 | ||||||
$400 million issued on March 28, 2011, at 3.10% due April 2016 (b) | 402 | 402 | ||||||
$500 million issued on April 17, 2008, at 5.65% due April 2018 (b) | 500 | 502 | ||||||
$600 million issued on June 10, 2009, at 5.875% due June 2019 (b) | 601 | 604 | ||||||
$400 million issued on March 28, 2011, at 4.625% due April 2021 | 399 | 398 | ||||||
$400 million issued on April 17, 2008, at 6.50% due April 2038 | 400 | 400 | ||||||
$300 million issued on September 7, 2010, at 5.40% due September 2040 | 300 | 300 | ||||||
Senior Debentures | ||||||||
$300 million issued on April 3, 1998, at 7.10% due April 2028 ("Senior Debentures") (a) | 376 | 379 | ||||||
Other | ||||||||
Long-term structured financing debt | 943 | 872 | ||||||
Less: current portion of long-term debt | (2,247 | ) | (1,618 | ) | ||||
Total long-term debt | 4,075 | 5,242 | ||||||
Short-Term Debt | ||||||||
Commercial paper | 32 | 1,807 | ||||||
Short-term structured financing debt | 455 | 416 | ||||||
Current portion of long-term debt | 2,247 | 1,618 | ||||||
Other | 2 | 2 | ||||||
Total short-term debt | 2,736 | 3,843 | ||||||
Total debt | $ | 6,811 | $ | 9,085 |
August 2, 2013 | February 1, 2013 | |||||||
(in millions) | ||||||||
Foreign Exchange Contracts | ||||||||
Designated as cash flow hedging instruments | $ | 2,885 | $ | 2,847 | ||||
Non-designated as hedging instruments | 972 | 512 | ||||||
Total | $ | 3,857 | $ | 3,359 | ||||
Interest Rate Contracts | ||||||||
Designated as fair value hedging instruments | $ | 700 | $ | 800 | ||||
Designated as cash flow hedging instruments | 787 | 1,320 | ||||||
Non-designated as hedging instruments | 139 | 127 | ||||||
Total | $ | 1,626 | $ | 2,247 |
Derivatives in Cash Flow Hedging Relationships | Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives (Effective Portion) | Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
(in millions) | ||||||||||||||||
For the three months ended August 2, 2013 | ||||||||||||||||
Total net revenue | $ | 36 | ||||||||||||||
Foreign exchange contracts | $ | 41 | Total cost of net revenue | 9 | ||||||||||||
Interest rate contracts | 1 | Interest and other, net | (1 | ) | Interest and other, net | $ | (1 | ) | ||||||||
Total | $ | 42 | $ | 44 | $ | (1 | ) | |||||||||
For the three months ended August 3, 2012 | ||||||||||||||||
Total net revenue | $ | 36 | ||||||||||||||
Foreign exchange contracts | $ | 79 | Total cost of net revenue | 4 | ||||||||||||
Interest rate contracts | (3 | ) | Interest and other, net | — | Interest and other, net | $ | — | |||||||||
Total | $ | 76 | $ | 40 | $ | — | ||||||||||
For the six months ended August 2, 2013 | ||||||||||||||||
Total net revenue | $ | 65 | ||||||||||||||
Foreign exchange contracts | $ | 87 | Total cost of net revenue | 11 | ||||||||||||
Interest rate contracts | 1 | Interest and other, net | — | Interest and other, net | $ | 1 | ||||||||||
Total | $ | 88 | $ | 76 | $ | 1 | ||||||||||
For the six months ended August 3, 2012 | ||||||||||||||||
Total net revenue | $ | 33 | ||||||||||||||
Foreign exchange contracts | $ | 54 | Total cost of net revenue | (7 | ) | |||||||||||
Interest rate contracts | (3 | ) | Interest and other, net | — | Interest and other, net | $ | — | |||||||||
Total | $ | 51 | $ | 26 | $ | — |
August 2, 2013 | ||||||||||||||||||||
Other Current Assets | Other Non- Current Assets | Other Current Liabilities | Other Non-Current Liabilities | Total Fair Value | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Derivatives Designated as Hedging Instruments | ||||||||||||||||||||
Foreign exchange contracts in an asset position | $ | 94 | $ | — | $ | 6 | $ | — | $ | 100 | ||||||||||
Foreign exchange contracts in a liability position | (51 | ) | — | (4 | ) | — | (55 | ) | ||||||||||||
Interest rate contracts in an asset position | — | 6 | — | — | 6 | |||||||||||||||
Interest rate contracts in a liability position | — | — | — | (1 | ) | (1 | ) | |||||||||||||
Net asset (liability) | 43 | 6 | 2 | (1 | ) | 50 | ||||||||||||||
Derivatives not Designated as Hedging Instruments | ||||||||||||||||||||
Foreign exchange contracts in an asset position | 172 | — | 9 | — | 181 | |||||||||||||||
Foreign exchange contracts in a liability position | (106 | ) | — | (17 | ) | — | (123 | ) | ||||||||||||
Net asset (liability) | 66 | — | (8 | ) | — | 58 | ||||||||||||||
Total derivatives at fair value | $ | 109 | $ | 6 | $ | (6 | ) | $ | (1 | ) | $ | 108 | ||||||||
February 1, 2013 | ||||||||||||||||||||
Other Current Assets | Other Non- Current Assets | Other Current Liabilities | Other Non-Current Liabilities | Total Fair Value | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Derivatives Designated as Hedging Instruments | ||||||||||||||||||||
Foreign exchange contracts in an asset position | $ | 86 | $ | — | $ | 9 | $ | — | $ | 95 | ||||||||||
Foreign exchange contracts in a liability position | (40 | ) | — | (3 | ) | — | (43 | ) | ||||||||||||
Interest rate contracts in an asset position | — | 12 | — | — | 12 | |||||||||||||||
Interest rate contracts in a liability position | — | — | — | (6 | ) | (6 | ) | |||||||||||||
Net asset (liability) | 46 | 12 | 6 | (6 | ) | 58 | ||||||||||||||
Derivatives not Designated as Hedging Instruments | ||||||||||||||||||||
Foreign exchange contracts in an asset position | 118 | — | 16 | — | 134 | |||||||||||||||
Foreign exchange contracts in a liability position | (108 | ) | — | (32 | ) | — | (140 | ) | ||||||||||||
Net asset (liability) | 10 | — | (16 | ) | — | (6 | ) | |||||||||||||
Total derivatives at fair value | $ | 56 | $ | 12 | $ | (10 | ) | $ | (6 | ) | $ | 52 |
August 2, 2013 | ||||||||||||||||||||||||
Description | Gross Amounts of Recognized Assets/ (Liabilities) | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position | Gross Amounts not Offset in the Statement of Financial Position | Net Amount | |||||||||||||||||||
Financial Instruments | Cash Collateral Received or Pledged | |||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Foreign Exchange Contracts | ||||||||||||||||||||||||
Financial assets | $ | 281 | $ | (172 | ) | $ | 109 | $ | — | $ | — | $ | 109 | |||||||||||
Financial liabilities | (178 | ) | 172 | (6 | ) | — | — | (6 | ) | |||||||||||||||
Total Foreign Exchange Contracts | 103 | |||||||||||||||||||||||
Interest Rate Contracts | ||||||||||||||||||||||||
Financial assets | 6 | — | 6 | — | — | 6 | ||||||||||||||||||
Financial liabilities | (1 | ) | — | (1 | ) | — | — | (1 | ) | |||||||||||||||
Total Interest Rate Contracts | 5 | |||||||||||||||||||||||
Total Derivative Instruments | $ | 108 | $ | — | $ | 108 | $ | — | $ | — | $ | 108 | ||||||||||||
February 1, 2013 | ||||||||||||||||||||||||
Description | Gross Amounts of Recognized Assets/ (Liabilities) | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position | Gross Amounts not Offset in the Statement of Financial Position | Net Amount | |||||||||||||||||||
Financial Instruments | Cash Collateral Received or Pledged | |||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Foreign Exchange Contracts | ||||||||||||||||||||||||
Financial assets | $ | 229 | $ | (173 | ) | $ | 56 | $ | — | $ | — | $ | 56 | |||||||||||
Financial liabilities | (183 | ) | 173 | (10 | ) | — | — | (10 | ) | |||||||||||||||
Total Foreign Exchange Contracts | 46 | |||||||||||||||||||||||
Interest Rate Contracts | ||||||||||||||||||||||||
Financial assets | 12 | — | 12 | — | — | 12 | ||||||||||||||||||
Financial liabilities | (6 | ) | — | (6 | ) | — | — | (6 | ) | |||||||||||||||
Total Interest Rate Contracts | 6 | |||||||||||||||||||||||
Total Derivative Instruments | $ | 52 | $ | — | $ | 52 | $ | — | $ | — | $ | 52 |
End-User Computing | Enterprise Solutions Group | Dell Software Group | Dell Services | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Balance at February 1, 2013 | $ | 1,499 | $ | 2,244 | $ | 890 | $ | 4,671 | $ | 9,304 | ||||||||||
Goodwill acquired during the period | 17 | — | 38 | — | 55 | |||||||||||||||
Adjustments | (4 | ) | (5 | ) | (85 | ) | (12 | ) | (106 | ) | ||||||||||
Balance at August 2, 2013 | $ | 1,512 | $ | 2,239 | $ | 843 | $ | 4,659 | $ | 9,253 |
August 2, 2013 | February 1, 2013 | |||||||||||||||||||||||
Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Customer relationships | $ | 2,181 | $ | (861 | ) | $ | 1,320 | $ | 2,184 | $ | (721 | ) | $ | 1,463 | ||||||||||
Technology | 2,511 | (1,047 | ) | 1,464 | 2,513 | (827 | ) | 1,686 | ||||||||||||||||
Non-compete agreements | 75 | (60 | ) | 15 | 75 | (54 | ) | 21 | ||||||||||||||||
Trade names | 158 | (71 | ) | 87 | 159 | (59 | ) | 100 | ||||||||||||||||
Amortizable intangible assets | 4,925 | (2,039 | ) | 2,886 | 4,931 | (1,661 | ) | 3,270 | ||||||||||||||||
In-process research and development | 78 | — | 78 | 78 | — | 78 | ||||||||||||||||||
Indefinite lived intangible assets | 26 | — | 26 | 26 | — | 26 | ||||||||||||||||||
Total intangible assets | $ | 5,029 | $ | (2,039 | ) | $ | 2,990 | $ | 5,035 | $ | (1,661 | ) | $ | 3,374 |
Fiscal Years | (in millions) | ||
2014 (remaining six months) | $ | 380 | |
2015 | 681 | ||
2016 | 614 | ||
2017 | 517 | ||
2018 | 372 | ||
Thereafter | 322 | ||
Total | $ | 2,886 |
Three Months Ended | Six Months Ended | |||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | |||||||||||||
(in millions) | ||||||||||||||||
Warranty liability: | ||||||||||||||||
Warranty liability at beginning of period | $ | 760 | $ | 862 | $ | 762 | $ | 888 | ||||||||
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties(a)(b) | 256 | 250 | 498 | 533 | ||||||||||||
Service obligations honored | (250 | ) | (272 | ) | (494 | ) | (581 | ) | ||||||||
Warranty liability at end of period | $ | 766 | $ | 840 | $ | 766 | $ | 840 | ||||||||
Current portion | $ | 490 | $ | 538 | $ | 490 | $ | 538 | ||||||||
Non-current portion | 276 | 302 | 276 | 302 | ||||||||||||
Warranty liability at end of period | $ | 766 | $ | 840 | $ | 766 | $ | 840 | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
August 2, 2013 | August 3, 2012(c) | August 2, 2013(c) | August 3, 2012(c) | |||||||||||||
(in millions) | ||||||||||||||||
Deferred extended warranty revenue: | ||||||||||||||||
Deferred extended warranty revenue at beginning of period | $ | 6,982 | $ | 7,044 | $ | 7,048 | $ | 7,002 | ||||||||
Revenue deferred for new extended warranties(b) | 1,035 | 1,027 | 1,994 | 2,033 | ||||||||||||
Revenue recognized | (1,013 | ) | (974 | ) | (2,038 | ) | (1,938 | ) | ||||||||
Deferred extended warranty revenue at end of period | $ | 7,004 | $ | 7,097 | $ | 7,004 | $ | 7,097 | ||||||||
Current portion | $ | 3,336 | $ | 3,344 | $ | 3,336 | $ | 3,344 | ||||||||
Non-current portion | 3,668 | 3,753 | 3,668 | 3,753 | ||||||||||||
Deferred extended warranty revenue at end of period | $ | 7,004 | $ | 7,097 | $ | 7,004 | $ | 7,097 |
(a) | Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new standard warranty contracts. Dell's warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations. |
(b) | Includes the impact of foreign currency exchange rate fluctuations. |
(c) | Prior period amounts have been revised to conform to the current period presentation. |
August 2, 2013 | February 1, 2013 | |||||||
(in millions) | ||||||||
Inventories, net: | ||||||||
Production materials | $ | 618 | $ | 593 | ||||
Work-in-process | 348 | 283 | ||||||
Finished goods | 502 | 506 | ||||||
Total | $ | 1,468 | $ | 1,382 | ||||
August 2, 2013 | February 1, 2013 (a) | |||||||
(in millions) | ||||||||
Deferred revenue: | ||||||||
Deferred extended warranty revenue | $ | 7,004 | $ | 7,048 | ||||
Other deferred services revenue | 437 | 497 | ||||||
Total deferred services revenue | 7,441 | 7,545 | ||||||
Deferred revenue - Dell software | 685 | 607 | ||||||
Other deferred revenue | 189 | 192 | ||||||
Total deferred revenue | $ | 8,315 | $ | 8,344 | ||||
Short-term portion | $ | 4,312 | $ | 4,373 | ||||
Long-term portion | 4,003 | 3,971 | ||||||
Total deferred revenue | $ | 8,315 | $ | 8,344 |
Foreign Currency Translation Adjustments | Available-for-Sale Investments | Cash Flow Hedges | Accumulated Other Comprehensive Loss | |||||||||||||
(in millions) | ||||||||||||||||
Balances at February 1, 2013 | $ | (68 | ) | $ | 8 | $ | 1 | $ | (59 | ) | ||||||
Other comprehensive income (loss) before reclassifications | (101 | ) | (4 | ) | 88 | (17 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive loss | — | — | (77 | ) | (77 | ) | ||||||||||
Total change for the period | (101 | ) | (4 | ) | 11 | (94 | ) | |||||||||
Balances at August 2, 2013 | $ | (169 | ) | $ | 4 | $ | 12 | $ | (153 | ) |
Three Months Ended | Six Months Ended | |||||||
(in millions) | ||||||||
Total Reclassifications, net of tax: | ||||||||
Net revenue | $ | 36 | $ | 65 | ||||
Cost of net revenue | 9 | 11 | ||||||
Interest and other, net | (2 | ) | 1 | |||||
Total | $ | 43 | $ | 77 |
Three Months Ended | Six Months Ended | |||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 204 | $ | 732 | $ | 334 | $ | 1,367 | ||||||||
Denominator: | ||||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 1,757 | 1,747 | 1,752 | 1,753 | ||||||||||||
Effect of dilutive options, restricted stock units, restricted stock, and other | 7 | 6 | 11 | 11 | ||||||||||||
Diluted | 1,764 | 1,753 | 1,763 | 1,764 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.12 | $ | 0.42 | $ | 0.19 | $ | 0.78 | ||||||||
Diluted | $ | 0.12 | $ | 0.42 | $ | 0.19 | $ | 0.77 |
• | End-User Computing ("EUC") |
• | Enterprise Solutions Group ("ESG") |
• | Dell Software Group |
Three Months Ended | ||||||||||||||||||||
August 2, 2013 | ||||||||||||||||||||
End-User Computing | Enterprise Solutions Group | Dell Software Group | Dell Services | Total Segments | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||
External revenue | $ | 8,899 | $ | 3,173 | $ | 310 | $ | 2,132 | $ | 14,514 | ||||||||||
Internal revenue (a) | 240 | 151 | — | 4 | 395 | |||||||||||||||
Total segment revenue | $ | 9,139 | $ | 3,324 | $ | 310 | $ | 2,136 | $ | 14,909 | ||||||||||
Segment operating income (loss) | $ | 205 | $ | 137 | $ | (62 | ) | $ | 339 | $ | 619 | |||||||||
August 3, 2012 | ||||||||||||||||||||
End-User Computing | Enterprise Solutions Group | Dell Software Group | Dell Services | Total Segments | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||
External revenue | $ | 9,353 | $ | 2,941 | $ | 95 | $ | 2,094 | $ | 14,483 | ||||||||||
Internal revenue (a) | 218 | 145 | — | 3 | 366 | |||||||||||||||
Total segment revenue | $ | 9,571 | $ | 3,086 | $ | 95 | $ | 2,097 | $ | 14,849 | ||||||||||
Segment operating income (loss) | $ | 696 | $ | 151 | $ | (11 | ) | $ | 336 | $ | 1,172 | |||||||||
Six Months Ended | ||||||||||||||||||||
August 2, 2013 | ||||||||||||||||||||
End-User Computing | Enterprise Solutions Group | Dell Software Group | Dell Services | Total Segments | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||
External revenue | $ | 17,613 | $ | 6,132 | $ | 605 | $ | 4,238 | $ | 28,588 | ||||||||||
Internal revenue (a) | 446 | 285 | — | 7 | 738 | |||||||||||||||
Total segment revenue | $ | 18,059 | $ | 6,417 | $ | 605 | $ | 4,245 | $ | 29,326 | ||||||||||
Segment operating income (loss) | $ | 429 | $ | 273 | $ | (147 | ) | $ | 709 | $ | 1,264 | |||||||||
August 3, 2012 | ||||||||||||||||||||
End-User Computing | Enterprise Solutions Group | Dell Software Group | Dell Services | Total Segments | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||
External revenue | $ | 18,985 | $ | 5,622 | $ | 133 | $ | 4,165 | $ | 28,905 | ||||||||||
Internal revenue (a) | 418 | 280 | — | 5 | 703 | |||||||||||||||
Total segment revenue | $ | 19,403 | $ | 5,902 | $ | 133 | $ | 4,170 | $ | 29,608 | ||||||||||
Segment operating income (loss) | $ | 1,335 | $ | 230 | $ | (17 | ) | $ | 674 | $ | 2,222 |
(a) | Internal revenues primarily consist of origination fees related to the sale of extended warranty services within EUC and ESG. The pricing for these transactions is based on the value related to extended warranty services created by each of the segments. |
Three Months Ended | Six Months Ended | |||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | |||||||||||||
(in millions) | ||||||||||||||||
Consolidated Net Revenue: | ||||||||||||||||
Total segment revenue | $ | 14,909 | $ | 14,849 | $ | 29,326 | $ | 29,608 | ||||||||
Less internal revenue | (395 | ) | (366 | ) | (738 | ) | (703 | ) | ||||||||
Total consolidated net revenue | $ | 14,514 | $ | 14,483 | $ | 28,588 | $ | 28,905 | ||||||||
Consolidated Operating Income: | ||||||||||||||||
Segment operating income | $ | 619 | $ | 1,172 | $ | 1,264 | $ | 2,222 | ||||||||
Unallocated corporate expenses (a) | (17 | ) | (49 | ) | (72 | ) | (89 | ) | ||||||||
Amortization of intangible assets | (196 | ) | (150 | ) | (392 | ) | (260 | ) | ||||||||
Severance and facility actions and acquisition-related costs (b) | (87 | ) | (72 | ) | (167 | ) | (148 | ) | ||||||||
Other (c) | (47 | ) | — | (135 | ) | — | ||||||||||
Total consolidated operating income | $ | 272 | $ | 901 | $ | 498 | $ | 1,725 |
(a) | Unallocated corporate expenses include broad based long-term incentives, certain short-term incentive compensation expenses, and other corporate items that are not allocated to Dell's segments. |
(b) | Acquisition-related costs consist primarily of retention payments, integration costs, and consulting fees. |
(c) | Other includes expenses associated with Dell's proposed merger. These expenses consist of professional fees incurred by Dell as well as the reimbursement of transaction-related expenses incurred by certain participants approved by a Special Committee of the Board of Directors. Expenses associated with Dell's proposed merger also include special performance-based retention cash awards granted to certain key employees in the first quarter of Fiscal 2014 that will be payable in March 2014. These awards are expensed ratably over the performance period. |
Three Months Ended | Six Months Ended | |||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | |||||||||||||
(in millions) | ||||||||||||||||
Net Revenue: | ||||||||||||||||
End-User Computing: | ||||||||||||||||
Desktops and thin client | $ | 3,550 | $ | 3,504 | $ | 6,823 | $ | 6,839 | ||||||||
Mobility | 3,569 | 3,946 | 7,187 | 8,274 | ||||||||||||
Third-party software and peripherals | 2,020 | 2,121 | 4,049 | 4,290 | ||||||||||||
Total EUC revenue | 9,139 | 9,571 | 18,059 | 19,403 | ||||||||||||
Enterprise Solutions Group: | ||||||||||||||||
Servers, peripherals, and networking | 2,892 | 2,622 | 5,561 | 4,965 | ||||||||||||
Storage | 432 | 464 | 856 | 937 | ||||||||||||
Total ESG revenue | 3,324 | 3,086 | 6,417 | 5,902 | ||||||||||||
Dell Software Group(a): | ||||||||||||||||
Total Dell Software Group revenue | 310 | 95 | 605 | 133 | ||||||||||||
Dell Services: | ||||||||||||||||
Support and deployment | 1,223 | 1,192 | 2,425 | 2,368 | ||||||||||||
Infrastructure, cloud, and security | 601 | 574 | 1,213 | 1,124 | ||||||||||||
Applications and business process | 312 | 331 | 607 | 678 | ||||||||||||
Total Dell Services revenue | 2,136 | 2,097 | 4,245 | 4,170 | ||||||||||||
Total segment revenue | 14,909 | 14,849 | 29,326 | 29,608 | ||||||||||||
Less internal revenue | (395 | ) | (366 | ) | (738 | ) | (703 | ) | ||||||||
Total consolidated net revenue | $ | 14,514 | $ | 14,483 | $ | 28,588 | $ | 28,905 |
(a) | Includes the results of Dell's Fiscal 2013 software acquisitions from their respective acquisition dates. |
• | End-User Computing ("EUC") — EUC includes desktop PCs, thin client products, notebooks, tablets, third-party software, and EUC-related peripherals. |
• | Enterprise Solutions Group ("ESG") — ESG includes servers, networking, storage, and ESG-related peripherals. |
• | Dell Software Group — The Dell Software Group includes systems management, security, and information management software offerings. |
• | Dell Services — Dell Services includes a broad range of IT and business services, including support and deployment services, infrastructure, cloud, and security services, and applications and business process services. |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | |||||||||||||||||||||||||||||||
Dollars | % of Revenue | % Change | Dollars | % of Revenue | Dollars | % of Revenue | % Change | Dollars | % of Revenue | |||||||||||||||||||||||||
(in millions, except per share amounts and percentages) | ||||||||||||||||||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||||||||||||
Product | $ | 11,326 | 78.0 | % | (1 | )% | $ | 11,403 | 78.7 | % | $ | 22,228 | 77.8 | % | (3 | )% | $ | 22,826 | 79.0 | % | ||||||||||||||
Services, including software related | 3,188 | 22.0 | % | 4 | % | 3,080 | 21.3 | % | 6,360 | 22.2 | % | 5 | % | 6,079 | 21.0 | % | ||||||||||||||||||
Total net revenue | $ | 14,514 | 100.0 | % | — | % | $ | 14,483 | 100.0 | % | $ | 28,588 | 100.0 | % | (1 | )% | $ | 28,905 | 100.0 | % | ||||||||||||||
Gross margin: | ||||||||||||||||||||||||||||||||||
Product | $ | 1,559 | 13.8 | % | (27 | )% | $ | 2,123 | 18.6 | % | $ | 3,217 | 14.5 | % | (24 | )% | $ | 4,216 | 18.5 | % | ||||||||||||||
Services, including software related | 1,130 | 35.5 | % | 11 | % | 1,015 | 32.9 | % | 2,219 | 34.9 | % | 12 | % | 1,989 | 32.7 | % | ||||||||||||||||||
Total gross margin | $ | 2,689 | 18.5 | % | (14 | )% | $ | 3,138 | 21.6 | % | $ | 5,436 | 19.0 | % | (12 | )% | $ | 6,205 | 21.5 | % | ||||||||||||||
Operating expenses | $ | 2,417 | 16.6 | % | 8 | % | $ | 2,237 | 15.4 | % | $ | 4,938 | 17.3 | % | 10 | % | $ | 4,480 | 15.5 | % | ||||||||||||||
Operating income | $ | 272 | 1.9 | % | (70 | )% | $ | 901 | 6.2 | % | $ | 498 | 1.7 | % | (71 | )% | $ | 1,725 | 6.0 | % | ||||||||||||||
Net income | $ | 204 | 1.4 | % | (72 | )% | $ | 732 | 5.1 | % | $ | 334 | 1.2 | % | (76 | )% | $ | 1,367 | 4.7 | % | ||||||||||||||
Earnings per share - diluted | $ | 0.12 | N/A | (71 | )% | $ | 0.42 | N/A | $ | 0.19 | N/A | (75 | )% | $ | 0.77 | N/A | ||||||||||||||||||
Other Financial Information(a) | ||||||||||||||||||||||||||||||||||
Non-GAAP gross margin | $ | 2,839 | 19.6 | % | (13 | )% | $ | 3,270 | 22.6 | % | $ | 5,738 | 20.1 | % | (11 | )% | $ | 6,437 | 22.3 | % | ||||||||||||||
Non-GAAP operating expenses | $ | 2,237 | 15.4 | % | 4 | % | $ | 2,147 | 14.8 | % | $ | 4,546 | 15.9 | % | 6 | % | $ | 4,304 | 14.9 | % | ||||||||||||||
Non-GAAP operating income | $ | 602 | 4.1 | % | (46 | )% | $ | 1,123 | 7.8 | % | $ | 1,192 | 4.2 | % | (44 | )% | $ | 2,133 | 7.4 | % | ||||||||||||||
Non-GAAP net income | $ | 433 | 3.0 | % | (51 | )% | $ | 875 | 6.0 | % | $ | 805 | 2.8 | % | (51 | )% | $ | 1,636 | 5.7 | % | ||||||||||||||
Non-GAAP earnings per share - diluted | $ | 0.25 | N/A | (50 | )% | $ | 0.50 | N/A | $ | 0.46 | N/A | (51 | )% | $ | 0.93 | N/A |
(a) | Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” below for more information and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. |
• | Product Revenue — Product revenue decreased 1% and 3% during the second quarter and first six months of Fiscal 2014, respectively. Overall, these declines were driven by decreases in revenue from our EUC segment, which were partially offset by increases in revenue from ESG and to a lesser extent, increases in revenue from the Dell Software Group, due to our Fiscal 2013 software acquisitions. |
• | Services Revenue, including software related — Services revenue, including software related, includes revenue from Dell Services, third-party software revenue, and support services related to Dell-owned software offerings. Revenue attributable to these services increased 4% and 5% during the second quarter and first six months of Fiscal 2014, respectively, driven by support services from Dell-owned software offerings, due to our Fiscal 2013 software acquisitions. Software related services, including third-party offerings, represented 34% of services revenue for both the second quarter and first six months of Fiscal 2014, respectively, compared to 32% of services revenue for both the second quarter and first six months of Fiscal 2013, respectively. Services revenue, excluding software related, increased 1% and 2%, respectively, during the second quarter and first six months of Fiscal 2014. |
• | Products — During the second quarter and first six months of Fiscal 2014, product gross margins decreased in absolute dollars and in gross margin percentage. Product gross margin percentage decreased from 18.6% to 13.8% for the second quarter of Fiscal 2014 and from 18.5% to 14.5% for the first six months of Fiscal 2014. These significant declines in product gross margins were primarily attributable to our EUC operating segment, where we continue to adjust our pricing strategy in a competitive environment to improve our share position in this business. |
• | Services, including software related — During the second quarter and first six months of Fiscal 2014, our gross margin for services, including software related, increased in absolute dollars and in gross margin percentage. Our gross margin percentage for services, including software related, increased from 32.9% to 35.5% for the second quarter of Fiscal 2014 and from 32.7% to 34.9% for the first six months of Fiscal 2014. This increase was driven by higher gross margin percentages from services attributable to the Dell Software Group, which includes the results of our Fiscal 2013 software acquisitions. |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | |||||||||||||||||||||||||||||||
Dollars | % of Revenue | % Change | Dollars | % of Revenue | Dollars | % of Revenue | % Change | Dollars | % of Revenue | |||||||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||
Selling, general, and administrative | $ | 2,097 | 14.4 | % | 6 | % | $ | 1,976 | 13.6 | % | $ | 4,305 | 15.1 | % | 8 | % | $ | 3,985 | 13.8 | % | ||||||||||||||
Research, development, and engineering | 320 | 2.2 | % | 23 | % | 261 | 1.8 | % | 633 | 2.2 | % | 28 | % | 495 | 1.7 | % | ||||||||||||||||||
Total operating expenses | $ | 2,417 | 16.6 | % | 8 | % | $ | 2,237 | 15.4 | % | $ | 4,938 | 17.3 | % | 10 | % | $ | 4,480 | 15.5 | % | ||||||||||||||
Other Financial Information | ||||||||||||||||||||||||||||||||||
Non-GAAP operating expenses (a) | $ | 2,237 | 15.4 | % | 4 | % | $ | 2,147 | 14.8 | % | $ | 4,546 | 15.9 | % | 6 | % | $ | 4,304 | 14.9 | % |
• | Selling, General, and Administrative — During the second quarter and first six months of Fiscal 2014, selling, general, and administrative ("SG&A") expenses increased 6% and 8%, respectively, driven by an increase in compensation-related expenses during the period, as well as costs associated with our proposed merger. Compensation-related expenses, excluding severance and special performance-based retention cash awards granted in the first quarter of Fiscal 2014, increased 5% and 6% during the second quarter and first six months of Fiscal 2014, respectively, primarily due to our Fiscal 2013 acquisitions. |
• | Research, Development, and Engineering — Research, development, and engineering ("RD&E") expenses were 2.2% of net revenue for both the second quarter and first six months of Fiscal 2014. In comparison, RD&E expenses as a percentage of net revenue were 1.8% and 1.7% for the second quarter and first six months of Fiscal 2013, respectively. The increase in the current periods was driven by investments in our software capabilities, as we continue to believe that software will play an increasingly important role in our strategy to become a leading provider of scalable end-to-end technology solutions. |
• | Operating Income — During the second quarter and first six months of Fiscal 2014, operating income decreased in dollars and as a percentage of revenue. During the second quarter of Fiscal 2014, operating income dollars and percentage declined 70% and 430 basis points, respectively, on a GAAP basis, and 46% and 370 basis points, respectively, on a non-GAAP basis. During the first six months of Fiscal 2014, operating income dollars and percentage declined 71% and 430 basis points, respectively, on a GAAP basis, and 44% and 320 basis points, respectively, on a non-GAAP basis. The decreases in non-GAAP operating income percentages were driven by declines in product gross margin percentage, primarily attributable to EUC. The effects of these declines were slightly offset by improved gross margin percentages for services, including software related. In addition, operating expenses as a percentage of revenue increased during the second quarter and first six months of Fiscal 2014. Operating income on a GAAP basis for the second quarter and first six months of Fiscal 2014 includes increases in amortization of intangibles as well as the Merger-Related Costs. |
• | Net Income — During the second quarter and first six months of Fiscal 2014, net income decreased in dollars and as a percentage of revenue. During the second quarter of Fiscal 2014, net income decreased 72% to $204 million on a GAAP basis and 51% to $433 million on a non-GAAP basis. During the first six months of Fiscal 2014, net income decreased 76% to $334 million on a GAAP basis and 51% to $805 million on a non-GAAP basis. Net income on a GAAP and non-GAAP basis was impacted by decreases in operating income, though the effects on net income on a GAAP basis were partially offset by a lower effective tax rate. |
• | Severance and Facility Actions and Acquisition-related Costs - Severance and facility action costs are primarily related to facilities charges, including accelerated depreciation and severance and benefits for employees terminated pursuant to cost |
• | Amortization of Intangible Assets - Amortization of purchased intangible assets consists primarily of amortization of customer relationships, acquired technology, non-compete covenants, and trade names purchased in connection with business acquisitions. We incur charges related to the amortization of these intangibles, and those charges are included in our Condensed Consolidated Financial Statements. Amortization charges for purchased intangible assets are significantly impacted by the timing and magnitude of our acquisitions. Accordingly, these charges may vary in amount from period to period. We exclude these charges for purposes of calculating the non-GAAP financial measures presented below to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance. |
• | Other Items - We also adjust our GAAP financial results for the Merger-Related Costs, which consist of transaction expenses associated with the proposed merger as well as expenses associated with special performance-based retention cash awards granted to certain key employees in the first quarter of Fiscal 2014. Transaction expenses include professional fees incurred by us in connection with the proposed merger as well as the reimbursement of transaction-related expenses incurred by certain participants approved by a Special Committee of the Board of Directors. We are excluding these expenses for the purpose of calculating the non-GAAP financial measures presented below because we believe these items are outside our ordinary course of business and do not contribute to a meaningful evaluation of our current operating performance or comparisons to our past operating performance. |
• | Aggregate Adjustment for Income Taxes - The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments mentioned above. The tax effects are determined based on the tax jurisdictions where the above items were incurred. |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
August 2, 2013 | % Change | August 3, 2012 | August 2, 2013 | % Change | August 3, 2012 | |||||||||||||||||
(in millions, except per share amounts and percentages) | ||||||||||||||||||||||
GAAP gross margin | $ | 2,689 | (14 | )% | $ | 3,138 | $ | 5,436 | (12 | )% | $ | 6,205 | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||
Amortization of intangibles | 141 | 109 | 281 | 197 | ||||||||||||||||||
Severance and facility actions and acquisition-related costs | 8 | 23 | 18 | 35 | ||||||||||||||||||
Other | 1 | — | 3 | — | ||||||||||||||||||
Non-GAAP gross margin | $ | 2,839 | (13 | )% | $ | 3,270 | $ | 5,738 | (11 | )% | $ | 6,437 | ||||||||||
GAAP operating expenses | $ | 2,417 | 8 | % | $ | 2,237 | $ | 4,938 | 10 | % | $ | 4,480 | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||
Amortization of intangibles | (55 | ) | (41) | (111 | ) | (63) | ||||||||||||||||
Severance and facility actions and acquisition-related costs | (79 | ) | (49) | (149 | ) | (113) | ||||||||||||||||
Other | (46 | ) | — | (132 | ) | — | ||||||||||||||||
Non-GAAP operating expenses | $ | 2,237 | 4 | % | $ | 2,147 | $ | 4,546 | 6 | % | $ | 4,304 | ||||||||||
GAAP operating income | $ | 272 | (70 | )% | $ | 901 | $ | 498 | (71 | )% | $ | 1,725 | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||
Amortization of intangibles | 196 | 150 | 392 | 260 | ||||||||||||||||||
Severance and facility actions and acquisition-related costs | 87 | 72 | 167 | 148 | ||||||||||||||||||
Other | 47 | — | 135 | — | ||||||||||||||||||
Non-GAAP operating income | $ | 602 | (46 | )% | $ | 1,123 | $ | 1,192 | (44 | )% | $ | 2,133 | ||||||||||
GAAP net income | $ | 204 | (72 | )% | $ | 732 | $ | 334 | (76 | )% | $ | 1,367 | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||
Amortization of intangibles | 196 | 150 | 392 | 260 | ||||||||||||||||||
Severance and facility actions and acquisition-related costs | 87 | 72 | 167 | 148 | ||||||||||||||||||
Other | 47 | — | 135 | — | ||||||||||||||||||
Aggregate adjustment for income taxes | (101 | ) | (79) | (223 | ) | (139) | ||||||||||||||||
Non-GAAP net income | $ | 433 | (51 | )% | $ | 875 | $ | 805 | (51 | )% | $ | 1,636 | ||||||||||
GAAP earnings per share - diluted | $ | 0.12 | (71 | )% | $ | 0.42 | $ | 0.19 | (75 | )% | $ | 0.77 | ||||||||||
Non-GAAP adjustments per share - diluted | 0.13 | 0.08 | 0.27 | 0.16 | ||||||||||||||||||
Non-GAAP earnings per share - diluted | $ | 0.25 | (50 | )% | $ | 0.50 | $ | 0.46 | (51 | )% | $ | 0.93 |
Three Months Ended | Six Months Ended | ||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | ||||||||
Percentage of Total Net Revenue | |||||||||||
GAAP gross margin | 18.5 | % | 21.6 | % | 19.0 | % | 21.5 | % | |||
Non-GAAP adjustments | 1.1 | % | 1.0 | % | 1.1 | % | 0.8 | % | |||
Non-GAAP gross margin | 19.6 | % | 22.6 | % | 20.1 | % | 22.3 | % | |||
GAAP operating expenses | 16.6 | % | 15.4 | % | 17.3 | % | 15.5 | % | |||
Non-GAAP adjustments | (1.2 | )% | (0.6 | )% | (1.4 | )% | (0.6 | )% | |||
Non-GAAP operating expenses | 15.4 | % | 14.8 | % | 15.9 | % | 14.9 | % | |||
GAAP operating income | 1.9 | % | 6.2 | % | 1.7 | % | 6.0 | % | |||
Non-GAAP adjustments | 2.2 | % | 1.6 | % | 2.5 | % | 1.4 | % | |||
Non-GAAP operating income | 4.1 | % | 7.8 | % | 4.2 | % | 7.4 | % | |||
GAAP net income | 1.4 | % | 5.1 | % | 1.2 | % | 4.7 | % | |||
Non-GAAP adjustments | 1.6 | % | 0.9 | % | 1.6 | % | 1.0 | % | |||
Non-GAAP net income | 3.0 | % | 6.0 | % | 2.8 | % | 5.7 | % |
• | End-User Computing (“EUC”) |
• | Enterprise Solutions Group (“ESG”) |
• | Dell Software Group |
• | Dell Services |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
August 2, 2013 | % Change | August 3, 2012 | August 2, 2013 | % Change | August 3, 2012 | |||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||||
Desktops and thin client | $ | 3,550 | 1 | % | $ | 3,504 | $ | 6,823 | — | % | $ | 6,839 | ||||||||||
Mobility | 3,569 | (10 | )% | 3,946 | 7,187 | (13 | )% | 8,274 | ||||||||||||||
Third-party software and peripherals | 2,020 | (5 | )% | 2,121 | 4,049 | (6 | )% | 4,290 | ||||||||||||||
Total EUC revenue | $ | 9,139 | (5 | )% | $ | 9,571 | $ | 18,059 | (7 | )% | $ | 19,403 | ||||||||||
Operating Income: | ||||||||||||||||||||||
EUC operating income | $ | 205 | (71 | )% | $ | 696 | $ | 429 | (68 | )% | $ | 1,335 | ||||||||||
% of segment revenue | 2.2 | % | 7.3 | % | 2.4 | % | 6.9 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
August 2, 2013 | % Change | August 3, 2012 | August 2, 2013 | % Change | August 3, 2012 | |||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||||
Servers, peripherals, and networking | $ | 2,892 | 10 | % | $ | 2,622 | $ | 5,561 | 12 | % | $ | 4,965 | ||||||||||
Storage | 432 | (7 | )% | 464 | 856 | (9 | )% | 937 | ||||||||||||||
Total ESG revenue | $ | 3,324 | 8 | % | $ | 3,086 | $ | 6,417 | 9 | % | $ | 5,902 | ||||||||||
Operating Income: | ||||||||||||||||||||||
ESG operating income | $ | 137 | (9 | )% | $ | 151 | $ | 273 | 19 | % | $ | 230 | ||||||||||
% of segment revenue | 4.1 | % | 4.9 | % | 4.3 | % | 3.9 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||
August 2, 2013 | % Change | August 3, 2012 | August 2, 2013 | % Change | August 3, 2012 | |||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||
Dell Software Group revenue | $ | 310 | NM | $ | 95 | $ | 605 | NM | $ | 133 | ||||||||||
Operating Income: | ||||||||||||||||||||
Dell Software Group operating income (loss) | $ | (62 | ) | NM | $ | (11 | ) | $ | (147 | ) | NM | $ | (17 | ) | ||||||
% of segment revenue | (20.1 | )% | (12.0 | )% | (24.3 | )% | (12.8 | )% |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
August 2, 2013 | % Change | August 3, 2012 | August 2, 2013 | % Change | August 3, 2012 | |||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||
Net Revenue: | ||||||||||||||||||||||
Support and Deployment | $ | 1,223 | 3 | % | $ | 1,192 | $ | 2,425 | 2 | % | $ | 2,368 | ||||||||||
Infrastructure, cloud, and security services | 601 | 5 | % | 574 | 1,213 | 8 | % | 1,124 | ||||||||||||||
Applications and business process services | 312 | (6 | )% | 331 | 607 | (10 | )% | 678 | ||||||||||||||
Total Dell Services revenue | $ | 2,136 | 2 | % | $ | 2,097 | $ | 4,245 | 2 | % | $ | 4,170 | ||||||||||
Operating Income: | ||||||||||||||||||||||
Dell Services operating income | $ | 339 | 1 | % | $ | 336 | $ | 709 | 5 | % | $ | 674 | ||||||||||
% of segment revenue | 15.9 | % | 16.0 | % | 16.7 | % | 16.2 | % |
Three Months Ended | Six Months Ended | |||||||||||||||
August 2, 2013 | August 3, 2012 | August 2, 2013 | August 3, 2012 | |||||||||||||
(in millions) | ||||||||||||||||
Interest and other, net: | ||||||||||||||||
Investment income, primarily interest | $ | 20 | $ | 27 | $ | 39 | $ | 56 | ||||||||
Gains (losses) on investments, net | (2 | ) | 10 | (1 | ) | 16 | ||||||||||
Interest expense | (58 | ) | (71 | ) | (121 | ) | (140 | ) | ||||||||
Foreign exchange | (30 | ) | (25 | ) | (49 | ) | (15 | ) | ||||||||
Other | 17 | (4 | ) | 11 | (12 | ) | ||||||||||
Interest and other, net | $ | (53 | ) | $ | (63 | ) | $ | (121 | ) | $ | (95 | ) |
August 2, 2013 | February 1, 2013 | |||||||
(in millions) | ||||||||
Cash, cash equivalents, and investments: | ||||||||
Cash and cash equivalents | $ | 11,185 | $ | 12,569 | ||||
Investments | 2,691 | 2,773 | ||||||
Cash, cash equivalents, and investments | 13,876 | 15,342 | ||||||
Unsecured revolving credit facilities | 2,000 | 3,000 | ||||||
Total cash, cash equivalents, investments, and available borrowings | $ | 15,876 | $ | 18,342 |
August 2, 2013 | February 1, 2013 | |||||||
(in millions) | ||||||||
Outstanding Debt: | ||||||||
Senior notes and debentures | $ | 5,379 | $ | 5,988 | ||||
Structured financing debt | 1,398 | 1,288 | ||||||
Commercial paper | 32 | 1,807 | ||||||
Other | 2 | 2 | ||||||
Total debt | $ | 6,811 | $ | 9,085 |
Six Months Ended | ||||||||
August 2, 2013 | August 3, 2012 | |||||||
(in millions) | ||||||||
Net change in cash from: | ||||||||
Operating activities | $ | 1,639 | $ | 499 | ||||
Investing activities | (405 | ) | (1,287 | ) | ||||
Financing activities | (2,518 | ) | (1,487 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (100 | ) | (58 | ) | ||||
Change in cash and cash equivalents | $ | (1,384 | ) | $ | (2,333 | ) |
Three Months Ended | ||||||
August 2, 2013 | August 3, 2012 | |||||
Days of sales outstanding(a) | 45 | 46 | ||||
Days of supply in inventory(b) | 11 | 13 | ||||
Days in accounts payable(c) | (92 | ) | (89 | ) | ||
Cash conversion cycle | (36 | ) | (30 | ) |
(a) | Days of sales outstanding (“DSO”) calculates the average collection period of our receivables. DSO is based on the ending net trade receivables and the most recent quarterly revenue for each period. DSO also includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified in other current assets. DSO is calculated by adding accounts receivable, net of allowance for doubtful accounts, and customer shipments in transit and dividing that sum by average net revenue per day for the current quarter (90 days). At August 2, 2013, and August 3, 2012, DSO and days of customer shipments not yet recognized were 41 and 4 days, and 42 and 4 days, respectively. |
(b) | Days of supply in inventory (“DSI”) measures the average number of days from procurement to sale of our product. DSI is based on ending inventory and most recent quarterly cost of sales for each period. DSI is calculated by dividing inventory by average cost of goods sold per day for the current quarter (90 days). |
(c) | Days in accounts payable (“DPO”) calculates the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable and most recent quarterly cost of sales for each period. DPO is calculated by dividing accounts payable by average cost of goods sold per day for the current quarter (90 days). |
DELL INC. | ||
By: | /s/ YVONNE MCGILL | |
Yvonne Mcgill | ||
Vice President, Corporate Finance and | ||
Chief Accounting Officer | ||
(On behalf of registrant and as principal accounting officer) |
Exhibit No. | Description of Exhibit | |||||||
2.1 | Amendment No. 1 to the Agreement and Plan of Merger, by and among Dell Inc. (“Dell”), Denali Holding Inc., Denali Intermediate Inc. and Denali Acquiror Inc., dated as of August 2, 2013 (incorporated by reference to Exhibit 2.1 of Dell's Current Report on Form 8-K filed August 2, 2013, Commission File No. 0-17017) | |||||||
12.1† | Computation of ratio of earnings to fixed charges | |||||||
31.1† | Certification of Michael S. Dell, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
31.2† | Certification of Brian T. Gladden, Senior Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
32.1†† | Certifications of Michael S. Dell, Chairman and Chief Executive Officer, and Brian T. Gladden, Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
101 | .INS† | — | XBRL Instance Document | |||||
101 | .SCH† | — | XBRL Taxonomy Extension Schema Document | |||||
101 | .CAL† | — | XBRL Taxonomy Extension Calculation Linkbase Document | |||||
101 | .DEF† | — | XBRL Taxonomy Extension Definition Linkbase Document | |||||
101 | .LAB† | — | XBRL Taxonomy Extension Label Linkbase Document | |||||
101 | .PRE† | — | XBRL Taxonomy Extension Presentation Linkbase Document | |||||
† | Filed with this report. | |||||||
†† | Furnished with this report. |
Six Months Ended | Fiscal Year Ended | |||||||||||||||||||||||
August 2, 2013 | February 1, 2013 | February 3, 2012 | January 28, 2011 | January 29, 2010 | January 30, 2009 | |||||||||||||||||||
(in millions, except ratios) | ||||||||||||||||||||||||
Earnings | ||||||||||||||||||||||||
Pre-tax income from continuing operations | $ | 377 | $ | 2,841 | $ | 4,240 | $ | 3,350 | $ | 2,024 | $ | 3,324 | ||||||||||||
Add: Fixed Charges adjusted for capitalized interest | 150 | 316 | 315 | 228 | 191 | 132 | ||||||||||||||||||
Total | $ | 527 | $ | 3,157 | $ | 4,555 | $ | 3,578 | $ | 2,215 | $ | 3,456 | ||||||||||||
Fixed Charges(a) | ||||||||||||||||||||||||
Interest Expense | $ | 121 | $ | 270 | $ | 279 | $ | 199 | $ | 160 | $ | 93 | ||||||||||||
Estimate of interest in rent expense | 29 | 46 | 36 | 29 | 31 | 39 | ||||||||||||||||||
Total | $ | 150 | $ | 316 | $ | 315 | $ | 228 | $ | 191 | $ | 132 | ||||||||||||
Ratio of Earnings to Fixed Charges | 4 | 10 | 14 | 16 | 12 | 26 |
(a) | Fixed charges included in the calculation of this ratio consist of: (i) interest expensed, plus (ii) interest capitalized (when applicable), plus (iii) a reasonable estimation of the interest factor included in rental expense. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Dell Inc.; |
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(s) 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(s) 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. |
August 28, 2013 | /s/ MICHAEL S. DELL | |
Michael S. Dell | ||
Chairman and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Dell Inc.; |
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(s) 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(s) 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. |
August 28, 2013 | /s/ BRIAN T. GLADDEN | |
Brian T. Gladden | ||
Senior Vice President and Chief Financial Officer |
Date: | August 28, 2013 | /s/ MICHAEL S. DELL | |
Michael S. Dell | |||
Chairman and Chief Executive Officer |
Date: | August 28, 2013 | /s/ BRIAN T. GLADDEN | |
Brian T. Gladden | |||
Senior Vice President and Chief Financial Officer |
Accumulated Other Comprehensive Loss (Notes)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 02, 2013
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Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated other comprehensive loss is presented in the Condensed Consolidated Statements of Financial Position and is comprised of amounts related to foreign currency translation adjustments, changes in the fair value of Dell's available-for-sale investments, and amounts related to Dell's cash flow hedges. The following table presents changes in accumulated other comprehensive loss, net of tax, by the following components:
Amounts related to available-for-sale investments are reclassified to net income when gains and losses are realized. See Notes 2 and 3 to the Condensed Consolidated Financial Statements for more information on Dell's investments. Amounts related to Dell's cash flow hedges are reclassified to net income during the same period in which the items being hedged are recognized in earnings. In addition, any hedge ineffectiveness related to cash flow hedges is recognized currently in net income. See Note 6 to the Condensed Consolidated Financial Statements for more information on Dell's derivative instruments. The following table presents reclassifications out of accumulated other comprehensive loss, net of tax, which consists entirely of gains and losses related to cash flow hedges, to net income for the three and six months ended August 2, 2013:
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Condensed Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified |
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Aug. 02, 2013
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Aug. 03, 2012
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Aug. 02, 2013
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Net revenue: | ||||
Products | $ 11,326 | $ 11,403 | $ 22,228 | $ 22,826 |
Services, including software related | 3,188 | 3,080 | 6,360 | 6,079 |
Total net revenue | 14,514 | 14,483 | 28,588 | 28,905 |
Cost of net revenue: | ||||
Products | 9,767 | 9,280 | 19,011 | 18,610 |
Services, including software related | 2,058 | 2,065 | 4,141 | 4,090 |
Total cost of net revenue | 11,825 | 11,345 | 23,152 | 22,700 |
Gross margin | 2,689 | 3,138 | 5,436 | 6,205 |
Operating expenses: | ||||
Selling, general, and administrative | 2,097 | 1,976 | 4,305 | 3,985 |
Research, development, and engineering | 320 | 261 | 633 | 495 |
Total operating expenses | 2,417 | 2,237 | 4,938 | 4,480 |
Operating income | 272 | 901 | 498 | 1,725 |
Interest and other, net | (53) | (63) | (121) | (95) |
Income before income taxes | 219 | 838 | 377 | 1,630 |
Income tax provision | 15 | 106 | 43 | 263 |
Net income | $ 204 | $ 732 | $ 334 | $ 1,367 |
Earnings per share: | ||||
Basic | $ 0.12 | $ 0.42 | $ 0.19 | $ 0.78 |
Diluted | $ 0.12 | $ 0.42 | $ 0.19 | $ 0.77 |
Cash dividends declared per common share | $ 0.08 | $ 0 | $ 0.16 | $ 0 |
Weighted-average shares outstanding: | ||||
Basic | 1,757 | 1,747 | 1,752 | 1,753 |
Diluted | 1,764 | 1,753 | 1,763 | 1,764 |
Investments (Notes)
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Aug. 02, 2013
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | NOTE 3 — INVESTMENTS The following table summarizes, by major security type, the carrying value and amortized cost of Dell's investments. All debt security investments with remaining maturities in excess of one year and substantially all equity and other securities are recorded as long-term investments in the Condensed Consolidated Statements of Financial Position.
Dell's investments in debt securities are classified as available-for-sale securities, which are carried at fair value. Equity and other securities primarily relate to investments held in Dell's Deferred Compensation Plan, which are classified as trading securities and carried at fair value, and investments accounted for under the cost and equity methods. The fair value of Dell's portfolio can be affected by interest rate movements, credit risk, and liquidity risks. Dell's investments in debt securities have contractual maturities of three years or less. Investments accounted for under the cost and equity methods included in equity and other securities in the table above were $109 million and $157 million as of August 2, 2013, and February 1, 2013, respectively. This decline was due to the sale of certain investments that Dell acquired in connection with its acquisition of Quest Software, Inc. during the third quarter of Fiscal 2013. |
Investments (Tables)
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Aug. 02, 2013
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments |
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Commitments and Contingencies (Notes)
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6 Months Ended |
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Aug. 02, 2013
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 11 — COMMITMENTS AND CONTINGENCIES Legal Matters — Dell is involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time in the ordinary course of its business, including those identified below, consisting of matters involving consumer, antitrust, tax, intellectual property, and other issues on a global basis. Dell accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. Dell reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and Dell's views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in Dell's accrued liabilities would be recorded in the period in which such determination is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made. The following is a discussion of Dell's significant legal matters and other proceedings: Pending Merger Litigation - Prior to and shortly following the announcement on February 5, 2013 of the execution of the original merger agreement, described in Note 1 of the Notes to the Condensed Consolidated Financial Statements, twenty-five lawsuits challenging the proposed acquisition of Dell Inc. were filed, of which twenty-one were filed in the Delaware Court of Chancery and four were filed in the District Court of Travis County in Texas. The Delaware actions have been consolidated as In re Dell, Inc. Shareholder Litigation (C.A. No. 8329-CS), and the complaint in one of the actions, City of Roseville Employees Retirement System v. Dell, Inc. et al., was designated as the operative complaint (the “Delaware litigation”). Three of the Texas lawsuits were voluntarily dismissed, without prejudice, and the remaining action, Nelson v. Dell Inc. et al. (Cause No. D-1-GN-13-000220), was stayed by the Texas court on April 4, 2013. The Delaware litigation is a putative class action filed on behalf of the stockholders of Dell Inc. other than the defendants and their affiliates. The operative complaint, which names as defendants Dell Inc., its directors, Silver Lake Partners, L.P., Silver Lake Technology Investors III, L.P., Silver Lake Partners III, L.P., Silver Lake Partners IV, L.P., the MSDC Investor, Parent, Intermediate and Merger Sub, alleges that the Dell directors breached their fiduciary duties in connection with their approval of the merger agreement and that the entity defendants aided and abetted those breaches. The complaint seeks, among other relief, declaratory and injunctive relief enjoining the merger, and compensatory damages in an unspecified amount. The stayed Texas action makes similar allegations on behalf of the same putative class. On June 19, 2013, the Delaware Court of Chancery denied plaintiffs' motion in the Delaware litigation for expedited discovery in support of a motion for a preliminary injunction to enjoin the consummation of the merger. On May 30, 2013, a putative class action was filed in the United States District Court for the Southern District of Texas, captioned John Michael Van Buiten et al. v. Dell Inc. et al. (Docket No. 13-cv-01585). The action names as defendants Dell Inc., its directors, Silver Lake Partners L.P., and the Parent Parties, and asserts disclosure claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 as well as state common law claims for breach of fiduciary duties and aiding and abetting breach of fiduciary duties. The complaint seeks, among other remedies, injunctive relief enjoining the merger. On August 1, 2013, a group of investment vehicles controlled by Carl Icahn (the “Icahn plaintiffs”) filed a lawsuit in the Delaware Court of Chancery captioned High River Ltd. Partnership et al. v. Dell Inc. et al. (C.A. No. 8762-CS). The action names as defendants Dell Inc. and its directors. The complaint alleges, among other claims, that the directors breached their fiduciary duties in connection with the adjournment of and record date for the special meeting concerning the proposed merger and the scheduling of Dell Inc.'s 2013 annual meeting of stockholders. The complaint seeks declaratory and injunctive relief preventing any change in the record date for the special meeting and requiring that the annual meeting and special meeting be held on the same date. On August 1, 2013, the Icahn plaintiffs filed a motion for expedited proceedings, which they amended on August 4, 2013. The Icahn plaintiffs also filed on August 13, 2013 a claim under Section 211 of the Delaware General Corporation Law (“DGCL”) asking the Delaware Court of Chancery to set a date for the 2013 annual meeting of stockholders. The motion for expedited proceedings and the Section 211 claim were heard in the Delaware Court of Chancery on August 16, 2013. The Delaware Court of Chancery denied the Icahn plaintiffs' motion for expedited proceedings relating to any alleged breach of fiduciary claims and the parties subsequently agreed to an order setting the annual meeting date to October 17, 2013. On August 9, 2013, the plaintiffs in the Delaware litigation filed an amended complaint repeating the claims alleged in their original complaint, adding many of the same allegations asserted by the Icahn plaintiffs, and asserting a claim that Dell Inc.'s directors breached their fiduciary duties by amending the original merger agreement to modify the unaffiliated vote condition, changing the record date for the stockholders meeting to vote on the proposal to adopt the amended merger agreement, and not scheduling an annual stockholders meeting within thirteen months of Dell Inc.'s last annual meeting, and a claim that Dell Inc. has violated Section 211 of the DGCL by not holding the annual stockholders meeting by August 13, 2013. The complaint seeks, in addition to the relief sought in the original Delaware litigation complaint, declaratory and injunctive relief directing Dell Inc. to hold an annual meeting in conjunction with the vote on the proposal to adopt the amended merger agreement and enjoining the modification of the unaffiliated vote condition. The plaintiffs in the Delaware litigation also filed a motion for expedited proceedings, asserting that the motion should be granted for the same reasons identified by the Icahn plaintiffs. The outcome of these lawsuits is uncertain. An adverse judgment for monetary damages could have an adverse effect on the operations and liquidity of Dell Inc. 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. The defendants believe that the claims that have been asserted against them in the lawsuits are without merit. Copyright Levies - Dell's obligation to collect and remit copyright levies in certain European Union (“EU”) countries may be affected by the resolution of legal proceedings pending in Germany against various companies, including Dell's German subsidiary, and elsewhere in the EU against other companies in Dell's industry. The plaintiffs in those proceedings, some of which are described below, generally seek to impose or modify the levies with respect to sales of such equipment as multifunction devices, phones, personal computers, and printers, alleging that such products enable the copying of copyrighted materials. Some of the proceedings also challenge whether the levy schemes in those countries comply with EU law. Certain EU member countries that do not yet impose levies on digital devices are expected to implement legislation to enable them to extend existing levy schemes, while some other EU member countries are expected to limit the scope of levy schemes and their applicability in the digital hardware environment. Dell, other companies, and various industry associations have opposed the extension of levies to the digital environment and have advocated alternative models of compensation to rights holders. Dell continues to collect levies in certain EU countries where it has determined that based on local laws it is probable that Dell has a payment obligation. The amount of levies is generally based on the number of products sold and the per-product amounts of the levies, which vary. In all other matters, Dell does not believe there is a probable and estimable claim. Accordingly, Dell has not accrued any liability nor collected any levies. On December 29, 2005, Zentralstelle Für private Überspielungrechte (“ZPÜ”), a joint association of various German collecting societies, instituted arbitration proceedings against Dell's German subsidiary before the Board of Arbitration at the German Patent and Trademark Office in Munich, and subsequently filed a lawsuit in the German Regional Court in Munich on February 21, 2008, seeking levies to be paid on each personal computer sold by Dell in Germany through the end of calendar year 2007. On December 23, 2009, ZPÜ and the German industry association, BCH, reached a settlement regarding audio-video copyright levy litigation (with levies ranging from €3.15 to €13.65 per unit). Dell joined this settlement on February 23, 2010, and has paid the amounts due under the settlement. However, because the settlement agreement expired on December 31, 2010, the amount of levies payable after calendar year 2010, as well as Dell's ability to recover such amounts through increased prices, remains uncertain. German courts are also considering a lawsuit originally filed in July 2004 by VG Wort, a German collecting society representing certain copyright holders, against Hewlett-Packard Company in the Stuttgart Civil Court seeking levies on printers, and a lawsuit originally filed in September 2003 by the same plaintiff against Fujitsu Siemens Computer GmbH in Munich Civil Court in Munich, Germany seeking levies on personal computers. In each case, the civil and appellate courts held that the subject classes of equipment were subject to levies. In July 2011, the German Federal Supreme Court, to which the lower court holdings have been appealed, referred each case to the Court of Justice of the European Union (the "ECJ"), submitting a number of legal questions on the interpretation of the European Copyright Directive which the German Federal Supreme Court deems necessary for its decision. In June 2013, the ECJ issued a ruling remitting the case back to the German Federal Supreme Court. Dell has not accrued any liability in either matter, as Dell does not believe there is a probable and estimable claim. Proceedings seeking to impose or modify copyright levies for sales of digital devices also have been instituted in courts in Spain and in other EU member states. Even in countries where Dell is not a party to such proceedings, decisions in those cases could impact Dell's business and the amount of copyright levies Dell may be required to collect. The ultimate resolution of these proceedings and the associated financial impact to Dell, if any, including the number of units potentially affected, the amount of levies imposed, and the ability of Dell to recover such amounts, remain uncertain at this time. Should the courts determine there is liability for previous units shipped beyond the amount of levies Dell has collected or accrued, Dell would be liable for such incremental amounts. Recovery of any such amounts from others by Dell would be possible only on future collections related to future shipments. Convolve Inc. v Dell Inc. - Convolve, Inc. sued Dell, Western Digital Corporation (“Western Digital”), Hitachi Global Storage Technologies, Inc., and Hitachi Ltd. (collectively “Hitachi”) on June 18, 2008 in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that the defendants infringed United States Patent No. 4,916,635 (entitled “Shaping Command Inputs to Minimize Unwanted Dynamics”) and United States Patent No. 6,314,473 (entitled “System for Removing Selected Unwanted Frequencies in Accordance with Altered Settings in a User Interface of a Data Storage Device”). Western Digital and Hitachi are hard drive suppliers of Dell. The plaintiff sought damages for each product with an allegedly infringing hard drive sold by Dell, plus exemplary damages for allegedly willful infringement. On July 26, 2011, a jury found that the patents had been infringed and awarded the plaintiff an amount of damages that is not material to Dell. The jury decision is subject to final approval and entry by the judge. Other Litigation - The various legal proceedings in which Dell is involved include commercial litigation and a variety of patent suits. In some of these cases, Dell is the sole defendant. More often, particularly in the patent suits, Dell is one of a number of defendants in the electronics and technology industries. Dell is actively defending a number of patent infringement suits, and several pending claims are in various stages of evaluation. While the number of patent cases has grown over time, Dell does not currently anticipate that any of these matters will have a material adverse effect on Dell's business, financial condition, results of operations, or cash flows. As of August 2, 2013, Dell does not believe there is a reasonable possibility that a material loss exceeding the amounts already accrued for these or other proceedings or matters has been incurred. However, since the ultimate resolution of any such proceedings and matters is inherently unpredictable, Dell's business, financial condition, results of operations, or cash flows could be materially affected in any particular period by unfavorable outcomes in one or more of these proceedings or matters. Whether the outcome of any claim, suit, assessment, investigation, or legal proceeding, individually or collectively, could have a material adverse effect on Dell's business, financial condition, results of operations, or cash flows will depend on a number of variables, including the nature, timing, and amount of any associated expenses, amounts paid in settlement, damages, or other remedies or consequences. Indemnifications — In the ordinary course of business, Dell enters into contractual arrangements under which Dell may agree to indemnify the third party to such arrangements from any losses incurred relating to the services it performs on behalf of Dell or for losses arising from certain events as defined in the particular contract, such as litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments related to these indemnifications have been immaterial. |
Supplemental Financial Information (Details) (USD $)
In Millions, unless otherwise specified |
Aug. 02, 2013
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May 03, 2013
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Feb. 01, 2013
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Aug. 03, 2012
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May 04, 2012
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Feb. 03, 2012
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Inventories, net: | ||||||
Production materials | $ 618 | $ 593 | ||||
Work-in-process | 348 | 283 | ||||
Finished goods | 502 | 506 | ||||
Total | 1,468 | 1,382 | ||||
Deferred revenue: | ||||||
Deferred extended warranty revenue | 7,004 | 6,982 | 7,048 | 7,097 | 7,044 | 7,002 |
Deferred revenue | 8,315 | 8,344 | ||||
Short-term deferred revenue | 4,312 | 4,373 | ||||
Long-term deferred revenue | 4,003 | 3,971 | ||||
Other deferred services revenue
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Deferred revenue: | ||||||
Deferred revenue | 437 | 497 | ||||
Total deferred services revenue
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Deferred revenue: | ||||||
Deferred revenue | 7,441 | 7,545 | ||||
Deferred revenue - Dell software
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Deferred revenue: | ||||||
Deferred revenue | 685 | 607 | ||||
Other deferred revenue
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Deferred revenue: | ||||||
Deferred revenue | $ 189 | $ 192 |
Investments (Details Textual) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | |
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Aug. 02, 2013
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Feb. 01, 2013
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Schedule of Available-for-sale Securities | ||
Debt securities contractual maturity period | 3 years | |
Cost-method Investments, Aggregate Carrying Amount | $ 109 | $ 157 |
Derivative Instruments and Hedging Activities (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 02, 2013
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Derivative Instruments and Hedges, Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional Amounts of Outstanding Derivative Instruments |
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Effect of Derivative Instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income |
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Fair Value of Derivative Instruments in the Condensed Consolidated Statements of Financial Position |
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Offsetting Assets and Liabilities |
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Borrowings (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 02, 2013
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings |
____________________ (a) Includes the impact of interest rate swap terminations. (b) Includes hedge accounting adjustments. |
Borrowings (Details Textual) (USD $)
|
Aug. 02, 2013
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Feb. 01, 2013
|
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Debt | ||
Short-term Secured Debt and Long-term Secured Debt, Current and Non-Current | $ 1,400,000,000 | |
Long-term structured financing debt | 943,000,000 | 872,000,000 |
Secured Debt, Current | 547,000,000 | |
Commercial paper | 32,000,000 | 1,807,000,000 |
Line of Credit Facility, Maximum Borrowing Capacity | 2,000,000,000 | |
Line of Credit Facility, Amount Outstanding | 0 | |
Secured Debt
|
||
Debt | ||
Short-term Debt, Weighted Average Interest Rate | 1.10% | 1.00% |
Commercial paper
|
||
Debt | ||
Short-term Debt, Weighted Average Interest Rate | 0.61% | 0.38% |
Senior Notes and Debentures
|
||
Debt | ||
Carrying Value of Senior Notes and Debentures | 5,400,000,000 | 6,000,000,000 |
Estimated Fair Value of Senior Notes and Debentures | $ 5,200,000,000 | $ 5,900,000,000 |
Proposed Merger and Basis of Presentation (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
0 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Feb. 02, 2007
|
Feb. 05, 2013
Merger consideration
|
Feb. 05, 2013
Merger consideration- amended
|
Feb. 05, 2013
Merger consideration- special cash dividend
|
Feb. 05, 2013
Merger agreement restrictions: dividends
|
Feb. 05, 2013
Merger agreement restrictions: commercial paper program
|
Feb. 05, 2013
Merger agreement restrictions: revolving credit facilities
|
Feb. 05, 2013
Merger agreement restrictions: structured financing debt facilities
|
Feb. 05, 2013
Merger agreement restrictions: additional indebtedness
|
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Pending Merger, per share amount | $ 13.65 | $ 13.75 | $ 0.13 | $ 0.08 | |||||
Pending Merger, amount | $ 1,800 | $ 2,000 | $ 1,500 | $ 25 | |||||
Shares issued to subsidiary not considered outstanding | 475 |
Derivative Instruments and Hedging Activities, Fair Value (Details 2) (USD $)
In Millions, unless otherwise specified |
Aug. 02, 2013
|
Feb. 01, 2013
|
---|---|---|
Derivatives, Fair Value | ||
Net asset (liability) | $ 108 | $ 52 |
Other Current Assets
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 109 | 56 |
Other Non-Current Assets
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 6 | 12 |
Other Current Liabilities
|
||
Derivatives, Fair Value | ||
Net asset (liability) | (6) | (10) |
Other Non-Current Liabilities
|
||
Derivatives, Fair Value | ||
Net asset (liability) | (1) | (6) |
Foreign exchange contracts
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 281 | 229 |
Derivative liabilities, hedging instruments | (178) | (183) |
Interest rate contracts
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 6 | 12 |
Derivative liabilities, hedging instruments | (1) | (6) |
Designated as Hedging Instrument
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 50 | 58 |
Designated as Hedging Instrument | Other Current Assets
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 43 | 46 |
Designated as Hedging Instrument | Other Non-Current Assets
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 6 | 12 |
Designated as Hedging Instrument | Other Current Liabilities
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 2 | 6 |
Designated as Hedging Instrument | Other Non-Current Liabilities
|
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Derivatives, Fair Value | ||
Net asset (liability) | (1) | (6) |
Designated as Hedging Instrument | Foreign exchange contracts
|
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Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 100 | 95 |
Derivative liabilities, hedging instruments | (55) | (43) |
Designated as Hedging Instrument | Foreign exchange contracts | Other Current Assets
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 94 | 86 |
Derivative liabilities, hedging instruments | (51) | (40) |
Designated as Hedging Instrument | Foreign exchange contracts | Other Non-Current Assets
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 0 | 0 |
Derivative liabilities, hedging instruments | 0 | 0 |
Designated as Hedging Instrument | Foreign exchange contracts | Other Current Liabilities
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 6 | 9 |
Derivative liabilities, hedging instruments | (4) | (3) |
Designated as Hedging Instrument | Foreign exchange contracts | Other Non-Current Liabilities
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 0 | 0 |
Derivative liabilities, hedging instruments | 0 | 0 |
Designated as Hedging Instrument | Interest rate contracts
|
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Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 6 | 12 |
Derivative liabilities, hedging instruments | (1) | (6) |
Designated as Hedging Instrument | Interest rate contracts | Other Current Assets
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 0 | 0 |
Derivative liabilities, hedging instruments | 0 | 0 |
Designated as Hedging Instrument | Interest rate contracts | Other Non-Current Assets
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 6 | 12 |
Derivative liabilities, hedging instruments | 0 | 0 |
Designated as Hedging Instrument | Interest rate contracts | Other Current Liabilities
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 0 | 0 |
Derivative liabilities, hedging instruments | 0 | 0 |
Designated as Hedging Instrument | Interest rate contracts | Other Non-Current Liabilities
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 0 | 0 |
Derivative liabilities, hedging instruments | (1) | (6) |
Not Designated as Hedging Instrument
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 58 | (6) |
Not Designated as Hedging Instrument | Other Current Assets
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 66 | 10 |
Not Designated as Hedging Instrument | Other Non-Current Assets
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 0 | 0 |
Not Designated as Hedging Instrument | Other Current Liabilities
|
||
Derivatives, Fair Value | ||
Net asset (liability) | (8) | (16) |
Not Designated as Hedging Instrument | Other Non-Current Liabilities
|
||
Derivatives, Fair Value | ||
Net asset (liability) | 0 | 0 |
Not Designated as Hedging Instrument | Foreign exchange contracts
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 181 | 134 |
Derivative liabilities, hedging instruments | (123) | (140) |
Not Designated as Hedging Instrument | Foreign exchange contracts | Other Current Assets
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 172 | 118 |
Derivative liabilities, hedging instruments | (106) | (108) |
Not Designated as Hedging Instrument | Foreign exchange contracts | Other Non-Current Assets
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 0 | 0 |
Derivative liabilities, hedging instruments | 0 | 0 |
Not Designated as Hedging Instrument | Foreign exchange contracts | Other Current Liabilities
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 9 | 16 |
Derivative liabilities, hedging instruments | (17) | (32) |
Not Designated as Hedging Instrument | Foreign exchange contracts | Other Non-Current Liabilities
|
||
Derivatives, Fair Value | ||
Derivative assets, hedging instruments | 0 | 0 |
Derivative liabilities, hedging instruments | $ 0 | $ 0 |
Accumulated Other Comprehensive Loss (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 02, 2013
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Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Accumulated Other Comprehensive Loss, net of tax |
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Reclassification out of Accumulated Other Comprehensive Loss |
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Segment Information (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 02, 2013
|
Aug. 03, 2012
|
Aug. 02, 2013
|
Aug. 03, 2012
|
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Net Revenue: | ||||
Revenues | $ 14,514 | $ 14,483 | $ 28,588 | $ 28,905 |
Operating income | 272 | 901 | 498 | 1,725 |
Internal revenue
|
||||
Net Revenue: | ||||
Revenues | 395 | 366 | 738 | 703 |
Segments
|
||||
Net Revenue: | ||||
Revenues | 14,909 | 14,849 | 29,326 | 29,608 |
Operating income | 619 | 1,172 | 1,264 | 2,222 |
End-User Computing
|
||||
Net Revenue: | ||||
Revenues | 8,899 | 9,353 | 17,613 | 18,985 |
End-User Computing | Internal revenue
|
||||
Net Revenue: | ||||
Revenues | 240 | 218 | 446 | 418 |
End-User Computing | Segments
|
||||
Net Revenue: | ||||
Revenues | 9,139 | 9,571 | 18,059 | 19,403 |
Operating income | 205 | 696 | 429 | 1,335 |
Enterprise Solutions Group
|
||||
Net Revenue: | ||||
Revenues | 3,173 | 2,941 | 6,132 | 5,622 |
Enterprise Solutions Group | Internal revenue
|
||||
Net Revenue: | ||||
Revenues | 151 | 145 | 285 | 280 |
Enterprise Solutions Group | Segments
|
||||
Net Revenue: | ||||
Revenues | 3,324 | 3,086 | 6,417 | 5,902 |
Operating income | 137 | 151 | 273 | 230 |
Dell Software Group
|
||||
Net Revenue: | ||||
Revenues | 310 | 95 | 605 | 133 |
Dell Software Group | Internal revenue
|
||||
Net Revenue: | ||||
Revenues | 0 | 0 | 0 | 0 |
Dell Software Group | Segments
|
||||
Net Revenue: | ||||
Revenues | 310 | 95 | 605 | 133 |
Operating income | (62) | (11) | (147) | (17) |
Dell Services
|
||||
Net Revenue: | ||||
Revenues | 2,132 | 2,094 | 4,238 | 4,165 |
Dell Services | Internal revenue
|
||||
Net Revenue: | ||||
Revenues | 4 | 3 | 7 | 5 |
Dell Services | Segments
|
||||
Net Revenue: | ||||
Revenues | 2,136 | 2,097 | 4,245 | 4,170 |
Operating income | $ 339 | $ 336 | $ 709 | $ 674 |
Earnings Per Share (Details Textual)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 02, 2013
|
Aug. 03, 2012
|
Aug. 02, 2013
|
Aug. 03, 2012
|
|
Earnings Per Share [Abstract] | ||||
Stock-based incentive awards, shares excluded from calculation of diluted earnings per share | 86 | 135 | 85 | 121 |
Financial Services, Financing Receivables Held by Consolidated VIEs, Net (Details 4) (USD $)
In Millions, unless otherwise specified |
Aug. 02, 2013
|
Feb. 01, 2013
|
---|---|---|
Financing receivables held by consolidated VIEs, net: | ||
Short-term, net | $ 1,166 | $ 1,089 |
Long-term, net | 426 | 386 |
Financing receivables held by consolidated VIEs, net | $ 1,592 | $ 1,475 |
Financial Services (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Allowance For Financing Receivables Losses |
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Financing Receivables Aging |
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Customer Receivable by Credit Quality Indicator |
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Customer Receivables Included In Consolidated Vies Net |
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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Aug. 02, 2013
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Aug. 03, 2012
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Aug. 02, 2013
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Aug. 03, 2012
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Total other comprehensive income (loss), tax benefit (expense) | ||||
Total other comprehensive income (loss), tax benefit (expense) | $ 0 | $ 2 | $ 0 | $ (7) |
Proposed Merger and Basis of Presentation (Notes)
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Aug. 02, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
Basis of Presentation | NOTE 1 — PROPOSED MERGER AND BASIS OF PRESENTATION Proposed Merger On February 5, 2013, Dell Inc. (“Dell”) announced that it had signed a definitive agreement and plan of merger (the “merger agreement”) pursuant to which it would be acquired by Denali Holding Inc. (“Parent”), a Delaware corporation owned by Michael S. Dell, the Chairman, Chief Executive Officer and founder of Dell, and investment funds affiliated with Silver Lake Partners, a global private equity firm. Following completion of the transaction, Mr. Dell would continue to lead Dell as Chairman and Chief Executive Officer and maintain a significant equity investment in Dell by contributing his Dell shares to Parent and making a cash investment in Parent. Shares of common stock held by the Parent and its subsidiaries, shares held by Mr. Dell and certain of Mr. Dell's related parties (together with Mr. Dell, the “MD Investors”), and by Dell or any wholly-owned subsidiary of Dell will not be entitled to receive the merger consideration. Subject to the satisfaction or permitted waiver of closing conditions set forth in the merger agreement, the merger is expected to be consummated before the end of the third quarter of the fiscal year ending January 31, 2014. The parties to the original merger agreement amended the merger agreement on August 2, 2013 in order, among other changes, to increase the per share merger consideration from $13.65 per share of Dell's common stock to $13.75 per share, provide for Dell to pay a special cash dividend of $0.13 per share to stockholders of record as of a date to be determined prior to the effective time of the merger and ensure that the $0.08 per share regular quarterly dividend for the third quarter of Dell's current fiscal year is paid to holders of record as of a date prior to the closing of the merger. In addition, the amendment revises the condition to the closing of the merger (the “unaffiliated vote condition”) that previously required the affirmative vote (in person or by proxy) in favor of the proposal to adopt the merger agreement by the holders of a majority of the outstanding shares of common stock owned, directly or indirectly, by the “unaffiliated stockholders” referred to below. As revised, the unaffiliated vote condition requires the affirmative vote in favor of the proposal to adopt the merger agreement of the holders of at least a majority of the outstanding shares of common stock owned, directly or indirectly, by the unaffiliated stockholders that are present in person or by proxy at the meeting and are voted for or against the proposal. The unaffiliated stockholders are Dell's stockholders other than Parent, Denali Intermediate Inc. (“Intermediate”) and Denali Acquiror Inc. (“Merger Sub”) (collectively the “Parent Parties”), Mr. Dell and certain of his related family trusts, any other officers and directors of Dell or any other person having any equity interest in, or any right to acquire any equity interest in, Merger Sub or any person of which Merger Sub is a direct or indirect subsidiary. In addition to the unaffiliated vote condition, adoption of the amended merger agreement will continue to require the affirmative vote (in person or by proxy) of the holders of a majority of the outstanding shares of common stock under applicable Delaware law. The amendment also reduces the termination fee payable by Dell upon termination of the merger agreement in certain specified circumstances. On August 2, 2013, at the reconvened special meeting of Dell stockholders held to vote on adoption of the merger agreement, Dell adjourned the special meeting, which was initially convened on July 18, 2013, and then adjourned to July 24, 2013 and further adjourned to August 2, 2013, to permit the solicitation of additional votes in favor of the proposal to adopt the amended merger agreement, and to provide its stockholders additional time to consider the amendment to the original merger agreement, including the increased merger consideration, the $0.13 per share special cash dividend and the revised unaffiliated vote condition as well as to review a supplement to Dell's definitive proxy statement dated May 30, 2013. The special meeting will be reconvened on September 12, 2013. The new record date for stockholders entitled to vote at the special meeting is August 13, 2013. Consummation of the merger is subject to certain customary conditions in addition to stockholder approval. The merger agreement does not contain a financing condition. The merger agreement places limitations on Dell's ability to engage in certain types of transactions without Parent's consent during the period between the signing of the merger agreement and the effective time of the merger. During this period, Dell may not repurchase shares of its common stock or, except as permitted under the amended merger agreement (which provides for Dell to pay a special cash dividend of $0.13 per share), declare dividends in excess of the quarterly rate of $0.08 per share authorized under its current dividend policy. In addition, with limited exceptions, Dell may not incur additional debt other than up to $1.8 billion under its existing commercial paper program, $2.0 billion under its revolving credit facilities, $1.5 billion under its structured financing debt facilities, and up to $25 million of additional indebtedness. Further, other than in transactions in the ordinary course of business or within specified dollar limits and certain other limited exceptions, Dell generally may not acquire other businesses, make investments in other persons, or sell, lease, or encumber its material assets. Parent has obtained equity and debt financing commitments for the transactions contemplated by the merger agreement, the aggregate proceeds of which, together with the proceeds of a rollover investment of Dell shares in Parent by the MD Investors, an investment in subordinated securities and the available cash of Dell, will be sufficient for Parent to pay the aggregate merger consideration and all related fees and expenses. The commitment of financial institutions to provide debt financing for the transaction is subject to a number of customary conditions, including the execution and delivery by the borrowers and the guarantors of definitive documentation consistent with the debt commitment letter. Pursuant to the terms of a “go-shop” provision in the merger agreement, during the period which began on the date of the merger agreement and expired after March 22, 2013, Dell and its subsidiaries and their respective representatives had the right to initiate, solicit and encourage any alternative acquisition proposals from third parties, provide nonpublic information to such third parties and participate in discussions and negotiations with such third parties regarding alternative acquisition proposals. The 45-day go-shop period elicited two alternative acquisition proposals. One proposal was submitted by a group led by entities affiliated with Blackstone Management Partners and the other by entities affiliated with Carl Icahn. On April 19, 2013, Blackstone Management Partners withdrew from the process and decided not to submit a definitive acquisition proposal. Under the terms and conditions set forth in the merger agreement, before the company stockholders approve the adoption of the merger agreement, the Board of Directors may change its recommendation, including in order to approve, and may authorize Dell to enter into, an alternative acquisition proposal if the Special Committee of the Board of Directors that recommended approval of the merger has determined in good faith, after consultation with outside counsel and its financial advisors, that such alternative acquisition proposal would be more favorable to Dell's stockholders, taking into account all of the terms and conditions of such proposal (including, among other things, the financing, likelihood and timing of its consummation and any adjustments to the merger agreement). The merger agreement contains certain termination rights for Dell and Parent. Among such rights, and subject to certain limitations, either Dell or Parent may terminate the merger agreement if the merger is not completed by November 5, 2013. Other than expenses associated with the proposed merger, which include transaction costs as well as special performance-based retention cash awards granted to certain key employees in the first quarter of Fiscal 2014 (the "Merger-Related Costs"), the terms of the merger agreement did not impact Dell's Condensed Consolidated Financial Statements as of and for the three months or six months ended August 2, 2013. Basis of Presentation The accompanying Condensed Consolidated Financial Statements of Dell Inc. (individually and together with its consolidated subsidiaries, "Dell") should be read in conjunction with the Consolidated Financial Statements and accompanying Notes filed with the U.S. Securities and Exchange Commission ("SEC") in Dell's Annual Report on Form 10-K, as amended, for the fiscal year ended February 1, 2013 ("Fiscal 2013"). The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Dell and its consolidated subsidiaries at August 2, 2013, the results of its operations and corresponding comprehensive income for the three and six months ended August 2, 2013, and August 3, 2012, and its cash flows for the six months ended August 2, 2013, and August 3, 2012. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in Dell's Condensed Consolidated Financial Statements and the accompanying Notes. Actual results could differ materially from those estimates. The results of operations and corresponding comprehensive income for the three and six months ended August 2, 2013, and August 3, 2012, and the cash flows for the six months ended August 2, 2013, and August 3, 2012, are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period. Dell's fiscal year is the 52 or 53 week period ending on the Friday nearest January 31. The fiscal year ending January 31, 2014 ("Fiscal 2014"), will be a 52 week period. During the first quarter of Fiscal 2014, Dell completed the reorganization or its reportable segments from the customer-centric segments it maintained through Fiscal 2013 to reportable segments based on the following product and services business units:
Dell has recast prior period amounts to be consistent with the reorganized segment structure. The change in Dell's segments did not impact Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share. See Note 14 of the Notes to the Condensed Consolidated Financial Statements for more information on Dell's reportable segments. During the first quarter of Fiscal 2014, Dell retired 475 million shares that were issued to a wholly-owned subsidiary during Fiscal 2007. While legally issued, these shares were not considered outstanding as of February 1, 2013. Reclassifications — Dell has revised the presentation of certain prior period amounts reported within cash flows from operating activities presented in the Condensed Consolidated Statements of Cash Flows. This revision had no impact to the total change in cash from operating activities. Recently Issued Accounting Pronouncements Disclosures about Offsetting Assets and Liabilities — In January 2013, the Financial Accounting Standards Board (the "FASB") issued amended guidance that enhanced disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions. This new guidance requires the disclosure of the gross amounts subject to rights of offset, amounts offset in accordance with the accounting standards followed, and the related net exposure. This new guidance became effective for Dell during the first quarter of Fiscal 2014. Other than requiring additional disclosures, this new guidance did not impact Dell's Condensed Consolidated Financial Statements. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for more information on disclosures about offsetting assets and liabilities. Comprehensive Income — In February 2013, the FASB issued new guidance on reporting reclassifications out of accumulated other comprehensive income. This new guidance became effective for Dell during the first quarter of Fiscal 2014. Other than requiring additional disclosures, this new guidance did not impact Dell's Condensed Consolidated Financial Statements. See Note 10 of the Notes to the Condensed Consolidated Financial Statements for more information on Dell's reclassifications out of accumulated other comprehensive loss. |
Financial Services (Notes)
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Services | NOTE 4 — FINANCIAL SERVICES Dell Financial Services Dell offers or arranges various financing options and services for its business and consumer customers in the U.S., Canada and Europe through Dell Financial Services (“DFS”). DFS's key activities include the origination, collection, and servicing of customer receivables primarily related to the purchase of Dell products and services. DFS results are allocated to Dell's segments based on the product or services business unit to which the origination relates. Dell's financing receivables are aggregated into the following categories:
The following table summarizes the components of Dell's financing receivables segregated by portfolio segment as of August 2, 2013, and February 1, 2013:
The following table summarizes the changes in the allowance for financing receivable losses for the respective periods:
The following table summarizes the aging of Dell's customer financing receivables, gross, including accrued interest, as of August 2, 2013, and February 1, 2013, segregated by class:
DFS Acquisitions In Fiscal 2012, Dell entered into a definitive agreement to acquire CIT Vendor Finance's Dell-related financing assets portfolio and sales and servicing functions in Europe. The acquisition of these assets will enable global expansion of Dell's direct finance model. Dell completed the first portfolio purchase of this acquisition at the end of the second quarter of Fiscal 2014 for $215 million. The purchased portfolio included $182 million in gross contractual payments under fixed-term leases and loans with a fair value at purchase of approximately $174 million. As part of the same purchase, Dell acquired a liquidating portfolio of operating leases. The gross amount of the equipment associated with these operating leases was approximately $41 million and is included in property, plant, and equipment in the Condensed Consolidated Statements of Financial Position. Dell expects to complete the remainder of this transaction during the second half of Fiscal 2014. Credit Quality The following tables summarize customer receivables, gross, including accrued interest by credit quality indicator segregated by class, as of August 2, 2013, and February 1, 2013. The categories shown in the tables below segregate customer receivables based on the relative degrees of credit risk. The credit quality categories cannot be compared between the different classes as loss experience in each class varies substantially. The credit quality indicators for DPA revolving accounts are primarily as of each quarter-end date, and all others are generally updated on a periodic basis. For DPA revolving receivables shown in the table below, Dell makes credit decisions based on proprietary scorecards, which include the customer's credit history, payment history, credit usage, and other credit agency-related elements. The higher quality category includes prime accounts generally of a higher credit quality that are comparable to U.S. customer FICO scores of 720 or above. The mid-category represents the mid-tier accounts that are comparable to U.S. customer FICO scores from 660 to 719. The lower category is generally sub-prime and represents lower credit quality accounts that are comparable to U.S customer FICO scores below 660.
For the receivables shown in the table below, an internal grading system is utilized that assigns a credit level score based on a number of considerations, including liquidity, operating performance, and industry outlook. The higher category includes receivables that are generally within Dell's top credit quality levels, which typically have the lowest loss experience. The middle category generally falls within the mid-tier credit levels, and the lower category generally falls within Dell's bottom credit levels, which experience higher loss rates. The grading criteria and classifications are different between the fixed-term and revolving products as the loss performance varies between these product and customer sets. Therefore, the credit levels are not comparable between the consumer and small commercial fixed-term class and the DBC revolving class.
For the receivables in the table below, an internal grading system is also utilized that assigns a credit level score based on liquidity, operating performance, and industry outlook. Dell's internal credit level scoring has been aggregated to their most comparable external commercial rating agency equivalents. Investment grade generally represents the highest credit quality accounts, non-investment grade represents middle quality accounts, and sub-standard represents the lowest quality accounts.
Asset Securitizations and Sales Dell transfers certain U.S. customer financing receivables to Special Purpose Entities (“SPEs”) that meet the definition of a Variable Interest Entity ("VIE") and are consolidated into Dell's Condensed Consolidated Financial Statements. These SPEs are bankruptcy remote legal entities with separate assets and liabilities. The purpose of the SPEs is to facilitate the funding of customer receivables in the capital markets. These SPEs have entered into financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. Dell's risk of loss related to securitized receivables is limited to the amount by which Dell's right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and other fees and expenses related to the asset-backed securities. Dell provides credit enhancement to the securitization in the form of over-collateralization. Customer receivables funded via securitization through SPEs were $323 million and $379 million during the three months ended August 2, 2013, and August 3, 2012, respectively, and $857 million and $915 million for the six months ended August 2, 2013, and August 3, 2012, respectively. The following table shows financing receivables held by the consolidated VIEs:
Dell's securitization programs are generally effective for 6 to 12 months and are subject to a periodic renewal process. These programs contain standard structural features related to the performance of the securitized receivables. The structural features include defined credit losses, delinquencies, average credit scores, and excess collections above or below specified levels. In the event one or more of these criteria are not met and Dell is unable to restructure the program, no further funding of receivables will be permitted and the timing of Dell's expected cash flows from over-collateralization will be delayed. At August 2, 2013, these criteria were met. Dell sells selected fixed-term financing receivables to unrelated third parties on a periodic basis, primarily to manage certain concentrations of customer credit exposure. For the three months ended August 2, 2013, and August 3, 2012, the amount of the receivables sold was $9 million and $227 million, respectively. For the six months ended August 2, 2013, and August 3, 2012, the amount of the receivables sold was $62 million and $298 million, respectively. Structured Financing Debt The structured financing debt related to the fixed-term lease and loan programs and the revolving loan securitization program was $1.4 billion and $1.3 billion as of August 2, 2013, and February 1, 2013, respectively. The debt is collateralized solely by the financing receivables in the programs. The debt has a variable interest rate and an average duration of 12 to 36 months based on the terms of the underlying financing receivables. As of August 2, 2013, the total debt capacity related to the securitization programs was $1.5 billion. Dell's securitization programs are structured to operate near their debt capacity. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information regarding the structured financing debt. Dell enters into interest rate swap agreements to effectively convert a portion of the structured financing debt from a floating rate to a fixed rate. The interest rate swaps qualify for hedge accounting treatment as cash flow hedges. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps. |
Fair Value Measurements (Notes)
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | NOTE 2 — FAIR VALUE MEASUREMENTS The following table presents Dell's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of August 2, 2013, and February 1, 2013:
____________________ (a) Dell did not transfer any securities between levels during the six months ended August 2, 2013 or during the fiscal year ended February 1, 2013. The following section describes the valuation methodologies Dell uses to measure financial instruments at fair value: Cash Equivalents — The majority of Dell's cash equivalents in the above table consist of money market funds with original maturities of 90 days or less and valued at fair value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. Dell reviews security pricing and assesses liquidity on a quarterly basis. Debt Securities — The majority of Dell's debt securities consist of various fixed income securities such as U.S. corporate, international corporate, and non-U.S. government and agencies. Valuation is based on pricing models whereby all significant inputs, including benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers, and other market related data, are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset. Inputs are documented in accordance with the fair value measurements hierarchy. Dell reviews security pricing and assesses liquidity on a quarterly basis. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for additional information about investments. Equity and Other Securities — The majority of Dell's investments in equity and other securities that are measured at fair value on a recurring basis consist of various mutual funds held in Dell's Deferred Compensation Plan. The valuation of these securities is based on pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The valuation for the Level 1 position is based on quoted prices in active markets. Derivative Instruments — Dell's derivative financial instruments consist primarily of foreign currency forward and purchased option contracts and interest rate swaps. The fair value of the portfolio is determined using valuation models based on market observable inputs, including interest rate curves, forward and spot prices for currencies, and implied volatilities. Credit risk is factored into the fair value calculation of Dell's derivative instrument portfolio. For interest rate derivative instruments, credit risk is determined at the contract level with the use of credit default spreads of either Dell, when in a net liability position, or the relevant counterparty, when in a net asset position. For foreign exchange derivative instruments, credit risk is determined in a similar manner, except that the credit default spread is applied based on the net position of each counterparty with the use of the appropriate credit default spreads. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for a description of Dell's derivative financial instrument activities. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis — Certain assets are measured at fair value on a nonrecurring basis and therefore are not included in the recurring fair value table above. These assets consist primarily of investments accounted for under the cost and equity methods and non-financial assets such as goodwill and intangible assets. Goodwill, intangible assets, and investments accounted for under the cost method are measured at fair value initially and subsequently when there is an indicator of impairment and the impairment is recognized. See Notes 3 and 7 of the Notes to the Condensed Consolidated Financial Statements for additional information about investments and goodwill and intangible assets. |
Goodwill and Intangible Assets (Tables)
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Earnings Per Share (Tables)
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Earnings Per Share |
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Goodwill and Intangible Assets (Details Textual) (USD $)
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Amortization of intangible assets | $ 196 | $ 150 | $ 392 | $ 260 |