-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jt8kwIiwcrsXbs8UnvbzoVdZp/Ek9oUaVX0IymwAnqpanDWrcL08EWsv3tXVRrSc Ck0LFqBFrQ7BVA5Lg4nrHw== 0001157523-05-009999.txt : 20051110 0001157523-05-009999.hdr.sgml : 20051110 20051110163138 ACCESSION NUMBER: 0001157523-05-009999 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051110 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051110 DATE AS OF CHANGE: 20051110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELL INC CENTRAL INDEX KEY: 0000826083 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 742487834 STATE OF INCORPORATION: DE FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17017 FILM NUMBER: 051194346 BUSINESS ADDRESS: STREET 1: ONE DELL WAY STREET 2: STED CITY: ROUND ROCK STATE: TX ZIP: 78682-2244 BUSINESS PHONE: 5127284737 MAIL ADDRESS: STREET 1: ONE DELL WAY CITY: ROUND ROCK STATE: TX ZIP: 78682 FORMER COMPANY: FORMER CONFORMED NAME: DELL COMPUTER CORP DATE OF NAME CHANGE: 19920703 8-K 1 a5017784.txt DELL INC. 8-K - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 -------- Date of Report (Date of earliest event reported): November 10, 2005 -------- Dell Inc. (Exact name of registrant as specified in its charter) Delaware 0-17017 74-2487834 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) One Dell Way, Round Rock, Texas 78682 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (512) 338-4400 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- Item 2.02 Results of Operations and Financial Condition. On November 10, 2005, Dell Inc. issued a press release announcing its financial results for its fiscal quarter ended October 28, 2005. A copy of the press release is furnished as Exhibit 99.1 to this report. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. The following exhibit is furnished as part of this report: Exhibit 99.1 -- Press Release issued by Dell Inc., dated November 10, 2005. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DELL INC. Date: November 10, 2005 By: /s/ JOAN S. HOOPER -------------------------- Joan S. Hooper Vice President, Corporate Finance and Chief Accounting Officer 3 EXHIBIT INDEX Exhibit No. Description of Exhibit --- ---------------------- 99.1 -- Press Release issued by Dell Inc., dated November 10, 2005. 4 EX-99.1 2 a5017784ex99.txt EXHIBIT 99.1 PRESS RELEASE EXHIBIT 99.1 Enterprise Product Sales and International Revenue Growth Highlight Dell's Third Quarter; Strong Revenue Increases Reported for Storage, Servers and Enhanced Services ROUND ROCK, Texas--(BUSINESS WIRE)--Nov. 10, 2005--Dell Inc. (NASDAQ:DELL): Continued successful application of Dell's unique direct business model and solid sales increases in enterprise products and services led the company to record revenue and units in fiscal third quarter 2006. Dell had record shipments of 9.2 million units worldwide in the quarter. The quarter was led by a 36 percent increase in revenue from enhanced services to $1.2 billion, a 35 percent increase from storage and a 16 percent increase from servers. Sales outside of the United States rose 20 percent from the same period a year ago and accounted for 40 percent of Dell's worldwide revenue in the quarter. Asia Pacific and Japan had particularly strong revenue growth of 20 percent year-over-year, led by rapid expansion in China with unit growth of 46 percent. Company revenue for the period ended Oct. 28 was $13.9 billion, a company record and up 11 percent year-over-year. Dell's earnings per share was 39 cents on a non-GAAP basis, up 18 percent from a year ago. Reported GAAP third-quarter earnings was 25 cents per share, reflecting a previously announced one-time charge of $442 million. The charge consisted of the cost of servicing certain OptiPlex systems that include a vendor part that failed to perform to Dell's specifications, workforce realignment, product rationalizations and excess facilities. Third Quarter Year to Date (in millions, FY'06 FY'05 Change FY'06 FY'05 Change except share -------- -------- -------- -------- -------- -------- data) Revenue $13,911 $12,502 11% $40,725 $35,748 14% Non-GAAP Operating Income(a) $ 1,196 $ 1,095 9% $ 3,543 $ 3,067 16% GAAP Operating Income $ 754 $ 1,095 (31%) $ 3,101 $ 3,067 1% Non-GAAP Net Income(a)(b) $ 944 $ 846 12% $ 2,813 $ 2,376 18% GAAP Net Income $ 606 $ 846 (28%) $ 2,560 $ 2,376 8% Non-GAAP EPS(a)(b) $ 0.39 $ 0.33 18% $ 1.14 $ 0.92 24% GAAP EPS $ 0.25 $ 0.33 (24%) $ 1.03 $ 0.92 12% (a) Non-GAAP results for the three- and nine-month periods ended October 28, 2005 exclude certain charges. See Itemized Reconciliation between Net Income on a GAAP and non-GAAP basis for the period ended October 28, 2005 table below. (b) Non-GAAP results for the nine-month period ended October 28, 2005 also exclude the impact of an $85 million ($0.03 per share) tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recorded in the second quarter of fiscal year 2006. "Our operating performance was again exceptional by any comparable measure," Kevin Rollins, Dell's chief executive officer, said. "However, we hold ourselves to higher standards." As such, Mr. Rollins said, Dell has made recent moves that further streamline several parts of its business. "We're always looking for better ways to improve the efficiencies of our business," he said. "Customers in every major market of the world are significantly and increasingly choosing to do business directly with Dell, so we are able to make these changes from a position of strength. The changes will reduce complexity and cost, improve customer value and satisfaction, and encourage strong profitable growth in all products, segments and regions." Cash flow from operations for the quarter was $1.1 billion and $3.3 billion year-to-date. Dell ended the quarter with $12.3 billion in cash and investments. Dell spent $1.4 billion to repurchase 41 million shares during the third quarter and year-to-date has repurchased almost 140 million shares. The company expects fourth quarter revenue of $14.6 to $15.0 billion and earnings per share of $0.40 to $0.42. The company plans to repurchase at least $1.7 billion in stock during the fourth quarter. Product and Service Performance Dell continued to hold the No. 1 worldwide share position for computer shipments. Globally, the company had a 21 percent increase in server shipments year-over-year. Dell's server offerings were enhanced during the quarter with the addition of multi-core Intel Xeon technology in the single-, dual- and four-socket server and workstation product lines, delivering up to 51 percent greater performance while maintaining a common system image for both single- and multi-core systems. Revenue for storage products, up 35 percent year-over-year, grew at a rate of more than three times that of the industry. Demand for server and storage products also helped drive revenue growth for Dell's enhanced services of 36 percent year-over-year. Dell continues to make investments in its service operations and expand its offerings to continue improving support for all customers. In a recent survey of IT executives by CIO Magazine, Dell was rated No. 1 among leading vendors for providing "impeccable customer service." With the increasing flexibility of wireless Internet access, more customers are moving from desktop platforms to wireless notebook computers. Sales of Dell's mobility products in the quarter continued to reflect the shift as shipments increased 38 percent year-over-year. Software and peripherals revenue grew 25 percent year-over-year, driven by imaging and displays. Dell's laser shipments doubled year-over-year, led by growth in color laser printer shipments. Shipments of replacement ink and toner cartridges also nearly doubled year-over-year. Regional Performance Dell's global growth continued in all regions in the third quarter. Revenue in Europe, Middle East and Africa (EMEA) was up 25 percent year-over-year outside the United Kingdom and 19 percent for the entire region. The U.K. experienced less revenue growth because of slower spending in its public sector. The region had growth across all product categories and a 72 percent year-over-year revenue increase in enhanced services. Mobility product shipments increased 48 percent year-over-year. Germany had revenue growth of 25 percent and France had revenue growth of 26 percent. Asia Pacific and Japan had significant growth year-over-year in Dell's most strategic product categories. Revenue for enhanced services in the region increased 71 percent in the quarter. Mobility products revenue increased 26 percent year-over-year on the strength of 55 percent year-over-year growth in unit shipments. China, a key market for Dell in the region, had revenue growth of 29 percent on unit shipment growth of 46 percent year-over-year, led by the home and small business sector. Storage revenue was up 44 percent year-over-year in the Americas to lead enterprise growth. Servers and networking revenue increased 16 percent and enhanced services increased 23 percent year-over-year in the region. Growth in sales of servers, storage and mobility products helped to drive an overall revenue increase of 22 percent year-over-year for Americas International. Growth in the Americas was affected by a decline in the U.S. Consumer business. About Dell Dell Inc. (NASDAQ:DELL) is a trusted and diversified information-technology supplier and partner, and sells a comprehensive portfolio of products and services directly to customers worldwide. Dell, recognized by Fortune magazine as America's most admired company and No. 3 globally, designs, builds and delivers innovative, tailored systems that provide customers with exceptional value. Company revenue for the last four quarters was $54.2 billion. For more information about Dell and its products and services, visit www.dell.com. Special Note Statements in this press release that relate to future results and events (including statements about Dell's anticipated financial and operating performance) are forward-looking statements based on Dell's current expectations. Actual results in future periods could differ materially from those projected in these forward-looking statements because of a number of risks and uncertainties including: general economic, business and industry conditions; the level and intensity of competition in the technology industry and the pricing pressures that have resulted; local economic and labor conditions, political instability, unexpected regulatory changes, trade protection measures, tax laws and fluctuations in foreign currency exchange rates; the ability to accurately predict product, customer and geographic sales mix; the ability to timely and effectively manage periodic product transitions; reliance on third-party suppliers for product components, including dependence on several single-source supplier relationships; the ability to effectively manage operating costs; the failure to attract and retain qualified personnel; the level of demand for the products and services Dell offers; the ability to manage inventory levels to minimize excess inventory, declining inventory values and obsolescence; and the effect of armed hostilities, terrorism, natural disasters and public health issues on the economy generally, on the level of demand for Dell's products and services and on Dell's ability to manage its supply and delivery logistics in such an environment. Additional discussion of these and other factors affecting Dell's business and prospects is contained in Dell's periodic filings with the Securities and Exchange Commission. Use of Non-GAAP Financial Information This press release includes additional non-GAAP measures of gross margin, operating expenses, operating income, income before income taxes, income taxes, net income and earnings per share. These non-GAAP measures have been adjusted to exclude costs of servicing certain OptiPlex systems, workforce realignment, product rationalizations and excess facilities charges recorded in the third quarter of fiscal year 2006. These non-GAAP measures also exclude the income tax benefit related to the repatriation of earnings under the American Jobs Creation Act recorded in the second quarter of fiscal year 2006. These adjustments to Dell's GAAP results are made with the intent of providing both management and investors a more complete understanding of the underlying operational results and trends and Dell's marketplace performance. Management believes that these additional non-GAAP measures provide a basis for which meaningful year-over-year operating performance comparisons can be made. The presentation of this additional information is not meant to be a substitute for financial statements prepared in accordance with generally accepted accounting principles in the United States. See Itemized Reconciliation between Net Income on a GAAP and non-GAAP basis for the period ended October 28, 2005 table below. Consolidated statements of income, financial position and cash flows follow. Dell is a trademark of Dell Inc. Dell disclaims any proprietary interest in the marks and names of others. DELL INC. Condensed Consolidated Statement of Income and Related Financial Highlights (in millions, except per share data) (unaudited) Three Months Ended -------------------------- % Growth Rates Oct. 28, July 29, Oct. 29, --------------------- 2005 2005 2004 Sequential Yr. to Yr. -------- -------- -------- ---------- ---------- Net revenue $13,911 $13,428 $12,502 4% 11% Cost of revenue 11,322 10,929 10,189 4% 11% Other product charges(a) 338 -- -- -------- -------- -------- Gross margin 2,251 2,499 2,313 (10%) (3%) Selling, general and administrative(a) 1,391 1,204 1,101 16% 26% Research, development and engineering 106 122 117 (13%) (9%) -------- -------- -------- Total operating expenses 1,497 1,326 1,218 13% 23% -------- -------- -------- Operating income 754 1,173 1,095 (36%) (31%) Investment and other income, net 50 61 48 (18%) 4% -------- -------- -------- Income before income taxes 804 1,234 1,143 (35%) (30%) Income tax provision(a) 198 214 297 (8%) (34%) -------- -------- -------- Net income(a) $606 $1,020 $846 (41%) (28%) ======== ======== ======== Earnings per common share: Basic $0.25 $0.42 $0.34 ======== ======== ======== Diluted $0.25 $0.41 $0.33 ======== ======== ======== Weighted average shares outstanding: Basic 2,395 2,418 2,493 Diluted 2,435 2,478 2,546 Percentage of Total Net Revenue: - ------------------- Gross margin 16.2% 18.6% 18.5% Selling, general and administrative 10.0% 9.0% 8.8% Research, development and engineering 0.8% 0.9% 0.9% Operating expenses 10.8% 9.9% 9.7% Operating income 5.4% 8.7% 8.8% Income before income taxes 5.8% 9.2% 9.1% Net income 4.4% 7.6% 6.8% Income tax rate 24.6% 17.4% 26.0% Net Revenue by Geographic Region (in billions): - --------------------- Americas $9.2 $8.9 $8.6 4% 8% Europe 3.1 2.9 2.6 6% 19% Asia Pacific -- Japan 1.6 1.6 1.3 (3%) 20% Percentage of Total Net Revenue: - ------------------- Americas 66% 66% 68% Europe 22% 22% 21% Asia Pacific -- Japan 12% 12% 11% Net Revenue by Product Category (in billions): - -------------------- Desktop PCs $5.1 $5.1 $5.2 2% (2%) Mobility 3.6 3.4 3.1 4% 14% Servers and Networking 1.4 1.3 1.2 4% 16% Storage 0.5 0.4 0.3 11% 35% Enhanced Services 1.2 1.2 1.0 7% 36% Software and Peripherals 2.1 2.0 1.7 4% 25% Percentage of Total Net Revenue: - ------------------- Desktop PCs 37% 37% 42% Mobility 26% 26% 25% Servers and Networking 10% 10% 9% Storage 3% 3% 3% Enhanced Services 9% 9% 7% Software and Peripherals 15% 15% 14% Note: Percentage growth rates and ratios are calculated based on underlying data in thousands. (a) See Itemized Reconciliation for further discussion. DELL INC. Condensed Consolidated Statement of Income and Related Financial Highlights (in millions, except per share data) (unaudited) Nine Months Ended ----------------- % Growth Rates Oct. 28, Oct. 29, -------------- 2005 2004 Yr. to Yr. -------- -------- -------------- Net revenue $40,725 $35,748 14% Cost of revenue 33,146 29,228 13% Other product charges(a) 338 -- -------- -------- Gross margin 7,241 6,520 11% Selling, general and administrative(a) 3,802 3,100 23% Research, development and engineering 338 353 (4%) -------- -------- Total operating expenses 4,140 3,453 20% -------- -------- Operating income 3,101 3,067 1% Investment and other income, net 170 143 19% -------- -------- Income before income taxes 3,271 3,210 2% Income tax provision(a) 711 834 (15%) -------- -------- Net income(a) $2,560 $2,376 8% ======== ======== Earnings per common share: Basic $1.06 $0.94 ======== ======== Diluted $1.03 $0.92 ======== ======== Weighted average shares outstanding: Basic 2,423 2,517 Diluted 2,476 2,572 Percentage of Total Net Revenue: - -------------------------------- Gross margin 17.8% 18.2% Selling, general and administrative 9.4% 8.7% Research, development and engineering 0.8% 1.0% Operating expenses 10.2% 9.7% Operating income 7.6% 8.6% Income before income taxes 8.0% 9.0% Net income 6.3% 6.6% Income tax rate 21.7% 26.0% Net Revenue by Geographic Region (in billions): - -------------------------------- Americas $26.6 $24.0 11% Europe 9.2 7.7 20% Asia Pacific -- Japan 4.9 4.0 21% Percentage of Total Net Revenue: - -------------------------------- Americas 65% 67% Europe 23% 22% Asia Pacific -- Japan 12% 11% Net Revenue by Product Category (in billions): - ------------------------------- Desktop PCs $15.5 $15.2 2% Mobility 10.3 8.7 18% Servers and Networking 4.0 3.6 12% Storage 1.3 0.9 36% Enhanced Services 3.5 2.6 36% Software and Peripherals 6.1 4.7 29% Percentage of Total Net Revenue: - -------------------------------- Desktop PCs 38% 43% Mobility 25% 24% Servers and Networking 10% 10% Storage 3% 3% Enhanced Services 9% 7% Software and Peripherals 15% 13% Note: Percentage growth rates and ratios are calculated based on underlying data in thousands. (a) See Itemized Reconciliation for further discussion. DELL INC. Non-GAAP Condensed Consolidated Statement of Income and Related Financial Highlights (in millions, except per share data) (unaudited) Three Months Ended -------------------------- % Growth Rates Oct. 28, July 29, Oct. 29, --------------------- 2005(a) 2005(b) 2004 Sequential Yr. to Yr. -------- -------- -------- ---------- ---------- Net revenue $13,911 $13,428 $12,502 4% 11% Non-GAAP cost of revenue 11,322 10,929 10,189 4% 11% -------- -------- -------- Non-GAAP gross margin 2,589 2,499 2,313 4% 12% Non-GAAP selling, general and administrative 1,287 1,204 1,101 7% 17% Research, development and engineering 106 122 117 (13%) (9%) -------- -------- -------- Non-GAAP operating expenses 1,393 1,326 1,218 5% 14% -------- -------- -------- Non-GAAP operating income 1,196 1,173 1,095 2% 9% Investment and other income, net 50 61 48 (18%) 4% -------- -------- -------- Non-GAAP income before income taxes 1,246 1,234 1,143 1% 9% Non-GAAP income tax provision 302 299 297 1% 2% -------- -------- -------- Non-GAAP net income $944 $935 $846 1% 12% ======== ======== ======== Non-GAAP earnings per common share: Basic $0.39 $0.39 $0.34 ======== ======== ======== Diluted $0.39 $0.38 $0.33 ======== ======== ======== Weighted average shares outstanding: Basic 2,395 2,418 2,493 Diluted 2,435 2,478 2,546 Non-GAAP Percentage of Total Net Revenue: - ---------------------- Gross margin 18.6% 18.6% 18.5% Selling, general and administrative 9.2% 9.0% 8.8% Research, development and engineering 0.8% 0.9% 0.9% Operating expenses 10.0% 9.9% 9.7% Operating income 8.6% 8.7% 8.8% Income before income taxes 9.0% 9.2% 9.1% Net income 6.8% 7.0% 6.8% Income tax rate 24.2% 24.2% 26.0% Net Revenue by Geographic Region (in billions): - ------------------ Americas $9.2 $8.9 $8.6 4% 8% Europe 3.1 2.9 2.6 6% 19% Asia Pacific -- Japan 1.6 1.6 1.3 (3%) 20% Percentage of Total Net Revenue: - ------------------- Americas 66% 66% 68% Europe 22% 22% 21% Asia Pacific -- Japan 12% 12% 11% Net Revenue by Product Category (in billions): - ------------------------ Desktop PCs $5.1 $5.1 $5.2 2% (2%) Mobility 3.6 3.4 3.1 4% 14% Servers and Networking 1.4 1.3 1.2 4% 16% Storage 0.5 0.4 0.3 11% 35% Enhanced Services 1.2 1.2 1.0 7% 36% Software and Peripherals 2.1 2.0 1.7 4% 25% Percentage of Total Net Revenue: - ------------------- Desktop PCs 37% 37% 42% Mobility 26% 26% 25% Servers and Networking 10% 10% 9% Storage 3% 3% 3% Enhanced Services 9% 9% 7% Software and Peripherals 15% 15% 14% Note: Percentage growth rates and ratios are calculated based on underlying data in thousands. (a) All Non-GAAP amounts have been adjusted to exclude other product charges and certain non-recurring charges included in selling, general and administrative expenses. See Itemized Reconciliation. (b) Non-GAAP income tax provision, net income and related ratios have been adjusted to exclude an income tax benefit of $85 million. See Itemized Reconciliation. DELL INC. Non-GAAP Condensed Consolidated Statement of Income and Related Financial Highlights (in millions, except per share data) (unaudited) Nine Months Ended ----------------- % Growth Rates Oct. 28, Oct. 29, -------------- 2005(a) 2004(b) Yr. to Yr. -------- -------- -------------- Net revenue $40,725 $35,748 14% Non-GAAP cost of revenue 33,146 29,228 13% -------- -------- Non-GAAP gross margin 7,579 6,520 16% Non-GAAP selling, general and administrative 3,698 3,100 19% Research, development and engineering 338 353 (4%) -------- -------- Non-GAAP operating expenses 4,036 3,453 17% -------- -------- Non-GAAP operating income 3,543 3,067 16% Investment and other income, net 170 143 19% -------- -------- Non-GAAP income before income taxes 3,713 3,210 16% Non-GAAP income tax provision 900 834 8% -------- -------- Non-GAAP net income $2,813 $2,376 18% ======== ======== Non-GAAP earnings per common share: Basic $1.16 $0.94 ======== ======== Diluted $1.14 $0.92 ======== ======== Weighted average shares outstanding: Basic 2,423 2,517 Diluted 2,476 2,572 Non-GAAP Percentage of Total Net Revenue: - ---------------------- Gross margin 18.6% 18.2% Selling, general and administrative 9.1% 8.7% Research, development and engineering 0.8% 1.0% Operating expenses 9.9% 9.7% Operating income 8.7% 8.6% Income before income taxes 9.1% 9.0% Net income 6.9% 6.6% Income tax rate 24.2% 26.0% Net Revenue by Geographic Region (in billions): - -------------------------------- Americas $26.6 $24.0 11% Europe 9.2 7.7 20% Asia Pacific -- Japan 4.9 4.0 21% Percentage of Total Net Revenue: - -------------------------------- Americas 65% 67% Europe 23% 22% Asia Pacific -- Japan 12% 11% Net Revenue by Product Category (in billions): - ------------------------------- Desktop PCs $15.5 $15.2 2% Mobility 10.3 8.7 18% Servers and Networking 4.0 3.6 12% Storage 1.3 0.9 36% Enhanced Services 3.5 2.6 36% Software and Peripherals 6.1 4.7 29% Percentage of Total Net Revenue: - -------------------------------- Desktop PCs 38% 43% Mobility 25% 24% Servers and Networking 10% 10% Storage 3% 3% Enhanced Services 9% 7% Software and Peripherals 15% 13% Note: Percentage growth rates and ratios are calculated based on underlying data in thousands. (a) All Non-GAAP amounts have been adjusted to exclude other product charges and certain non-recurring charges included in selling, general and administrative expenses. See Itemized Reconciliation. (b) Non-GAAP income tax provision, net income and related ratios have been adjusted to exclude an income tax benefit of $85 million. See Itemized Reconciliation. DELL INC. Itemized Reconciliation between Net Income on a GAAP and Non-GAAP basis (in millions) (unaudited) Three Months Three Months Nine Months Ended Ended Ended Oct. 28, July 29, Oct. 28, 2005 2005 2005 ------------ ------------ ----------- GAAP net income $606 $1,020 $2,560 Other product charges(a) 338 -- 338 Selling, general and administrative charges(b) 104 -- 104 ------------ ------------ ----------- Total non-GAAP adjustments to net income 442 -- 442 Income tax effect on reconciling items 104 -- 104 American Jobs Creation Act tax adjustment(c) -- 85 85 ------------ ------------ ----------- Non-GAAP net income $944 $935 $2,813 ============ ============ =========== (a) Other product charges relate to costs of servicing certain OptiPlex systems that include a vendor part that failed to perform to Dell's specifications of $307 million, product rationalizations, and workforce realignment charges. (b) Charges relate to workforce realignment expenses, primarily for severance and related costs of $50 million, cost of operating leases on office space no longer utilized of $25 million, and a write-off of goodwill of $29 million. (c) Non-GAAP results for the three month period ended July 29, 2005 and the nine month period ended October 28, 2005 exclude the impact of an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recorded in the second quarter of fiscal year 2006. DELL INC. Condensed Consolidated Statement of Financial Position and Related Financial Highlights (in millions, except for "Ratios" and "Other information") (unaudited) Oct. 28, July 29, Oct. 29, 2005 2005 2004 -------- -------- -------- Assets: - ------- Current assets: Cash and cash equivalents $6,841 $6,337 $4,525 Short-term investments 2,440 2,709 2,969 Accounts receivable, net 4,860 4,443 4,167 Inventories 582 570 415 Other 2,841 2,739 2,124 -------- -------- -------- Total current assets 17,564 16,798 14,200 Property, plant and equipment, net 1,895 1,843 1,627 Investments 2,994 3,625 4,942 Other non-current assets 421 345 285 -------- -------- -------- Total assets $22,874 $22,611 $21,054 ======== ======== ======== Liabilities and Stockholders' Equity: - ------------------------------------- Current liabilities: Accounts payable $9,376 $9,196 $8,067 Accrued and other 5,871 5,172 4,707 -------- -------- -------- Total current liabilities 15,247 14,368 12,774 Long-term debt 504 504 505 Other non-current liabilities 2,302 2,230 1,895 -------- -------- -------- Total liabilities 18,053 17,102 15,174 Stockholders' equity 4,821 5,509 5,880 -------- -------- -------- Total liabilities and stockholders' equity $22,874 $22,611 $21,054 ======== ======== ======== Ratios: - ------- Days supply in inventory(b) 5 5 4 Days of sales outstanding(a) 34 33 33 Days in accounts payable(b) 75 76 71 -------- -------- -------- Cash conversion cycle (36) (38) (34) Other Information: - ------------------ Headcount (approximate) 63,700 61,400 53,000 Average total revenue/unit (approximate) $1,520 $1,480 $1,570 Note: Ratios are calculated based on underlying data in thousands. (a) Days of sales outstanding includes the effect of product costs related to in-transit customer shipments that are classified in other current assets. For the periods ended October 28, 2005, July 29, 2005, and October 29, 2004, days of sales outstanding included days of sales in accounts receivable and days of in-transit customer shipments of 31 and 3 days; 30 and 3 days; and 30 and 3 days respectively. (b) Days supply in inventory and days in accounts payable have been calculated excluding the charges on the Itemized Reconciliation for the period ended October 28, 2005. Days supply in inventory calculated including the charges in cost of revenue is 4 days and days in accounts payable including the charges is 72 days. DELL INC. Condensed Consolidated Statement of Cash Flows (in millions) (unaudited) Three Months Nine Months Ended Ended ------------------------ October 28, 2005 ------------------------ Cash flows from operating activities: Net income $606 $2,560 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 98 286 Tax benefits from employee stock plans 30 153 Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies 9 24 Other 44 104 Changes in: Operating working capital 247 (200) Non-current assets and liabilities 114 330 ------------ ----------- Net cash provided by operating activities 1,148 3,257 Cash flows from investing activities: Investments: Purchases (1,749) (4,762) Maturities and sales 2,623 8,693 Capital expenditures (160) (507) ------------ ----------- Net cash provided by investing activities 714 3,424 Cash flows from financing activities: Repurchase of common stock (1,450) (5,250) Issuance of common stock under employee plans and other 146 773 ------------ ----------- Net cash used in financing activities (1,304) (4,477) Effect of exchange rate changes on cash and cash equivalents (54) (110) ------------ ----------- Net increase in cash and cash equivalents 504 2,094 Cash and cash equivalents at beginning of period 6,337 4,747 ------------ ----------- Cash and cash equivalents at end of period $6,841 $6,841 ============ =========== Additional supplemental information is available on our website at http://www.dell.com/downloads/global/corporate/conferences/ q3fy06_earnings_pres.pdf (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) CONTACT: Dell Inc., Round Rock Media Contacts: Jess Blackburn, 512-725-0187 jess_blackburn@dell.com or David Frink, 512-728-2678 david_frink@dell.com or Investor Contacts: Lynn A. Tyson, 512-723-1130 lynn_tyson@dell.com or Robert Williams, 512-728-7570 robert_williams@dell.com -----END PRIVACY-ENHANCED MESSAGE-----