UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 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): May
17, 2011
________
Dell Inc.
(Exact
name of registrant as specified in its charter)
Delaware |
0-17017 |
74-2487834 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
One Dell Way, Round Rock, Texas 78682 |
(Address of principal executive offices) (Zip Code) |
Registrant’s telephone number, including area code: (800) 289-3355
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 May 17, 2011, Dell Inc. (“Dell”) issued a press release announcing its financial results for its fiscal quarter ended April 29, 2011. A copy of the press release is furnished as Exhibit 99.1 to this report.
To supplement Dell’s condensed consolidated financial statements presented on the basis of accounting principles generally accepted in the United States of America (“GAAP”) which are furnished in Exhibit 99.1 to this report, Dell has presented information about non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively, the “non-GAAP financial measures”), which are not measurements of financial performance under GAAP. A reconciliation of each historical non-GAAP financial measure to the most comparable GAAP financial measure for Dell’s fiscal quarter ended April 29, 2011 and certain prior fiscal periods is included in the tables set forth under the heading “Reconciliation of Non-GAAP Financial Measures” in Exhibit 99.1. In addition, a discussion of Dell management’s reasons for including these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, and the manner in which Dell management compensates for those limitations is included under “Use of Non-GAAP Financial Measures” in Exhibit 99.1. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net income, operating income, gross margin, operating expenses, and earnings per share prepared in accordance with GAAP.
In accordance with General Instruction B.2 to Form 8-K, the information contained in this current report, including Exhibit 99.1 attached hereto, is being “furnished” with the Securities and Exchange Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under such section. Furthermore, such information shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless specifically identified as being incorporated therein by reference.
Item 9.01 — Financial Statements and Exhibits.
Dell herewith furnishes the following document as an exhibit to this report:
(d) Exhibits
Exhibit
Number |
Description |
|
99.1 | Press Release Issued by Dell Inc., dated May 17, 2011 |
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: | May 17, 2011 | By: |
/s/ Janet B. Wright |
Janet B. Wright |
|||
Vice President and Assistant Secretary |
|||
(Duly Authorized Officer) |
EXHIBIT INDEX
Exhibit Number |
Description |
|
99.1 |
Press Release Issued by Dell Inc., dated May 17, 2011 |
Exhibit 99.1
Dell Reports Record EPS on Strength of Enterprise Solutions and Services
ROUND ROCK, Texas--(BUSINESS WIRE)--May 17, 2011--Dell’s strategy to deliver efficient and flexible information technology solutions that are open, capable and affordable continues to yield solid financial results. In the company’s fiscal first quarter revenue improved and profit increased substantially on the strength of its commercial enterprise business.
In the past two years, Dell has made strategic acquisitions to address customers’ needs for next-generation computing solutions, intelligent data management, services, security and cloud offerings. Additionally, the company has announced plans to invest $1 billion this fiscal year to deliver new solutions, build cloud capabilities and add significant numbers of new engineering, development and solutions-based sales resources in the U.S. and globally to support its enterprise solutions and services focus. Key investments include the launch of vStart for faster provisioning of virtual machines, the build out of data centers to provide customers access to public and private cloud technologies, and new solution centers where customers can test their applications.
The strong first quarter results also reflect Dell’s improved profitability in end-user-computing, particularly Dell’s client desktop and laptop offerings. This improved performance is the result of a higher-value product portfolio, good cost management, better sales execution and a significantly improved supply chain.
Results
Fiscal-Year 2012 First Quarter Highlights |
|||||||||
(in millions) |
FY12 |
FY11 |
Change |
||||||
Revenue | $15,017 | $14,874 | 1% | ||||||
Operating Income (GAAP) | $1,212 | $519 | 134% | ||||||
Net Income (GAAP) | $945 | $341 | 177% | ||||||
EPS (GAAP) | $0.49 | $0.17 | 188% | ||||||
Operating Income (non-GAAP) | $1,376 | $824 | 67% | ||||||
Net Income (non-GAAP) | $1,050 | $584 | 80% | ||||||
EPS (non-GAAP) | $0.55 | $0.30 | 83% |
Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes costs related primarily to the amortization of purchased intangibles, severance and facility-action costs, certain settlement costs and acquisition-related charges. All comparisons in this press release are year over year unless otherwise noted.
Strategic Highlights:
Business Units and Regions:
Quotes:
Michael Dell, chairman and chief executive officer: “We’re off to a solid start in our fiscal year 2012. Our substantial profit increase demonstrates that our strategy is working and our execution is improving.”
Brian Gladden, chief financial officer: “We continue to build momentum with our strategy to expand our enterprise solutions and services business, and it’s contributing to our strong financial results. We have built an $18 billion enterprise solutions and services business with exciting growth potential and our execution in the core client business continues to be very good. We are positioned to continue delivering value to our customers and investors.”
Company Outlook:
Dell expects mid-single digit revenue growth in its second quarter, which is slightly above its normal, sequential seasonal growth of 2-3 percent. The Public business is expected to benefit from stronger spending among state and local governments and education customers as they close out their fiscal year. The company also expects its Small and Medium Business and Consumer businesses will experience above average seasonality due to the timing of demand for Dell’s Sandy Bridge based offerings, a solid consumer back-to-school spending season and a refreshed portfolio of XPS products. Dell’s updated outlook for fiscal 2012 includes revenue growth of 5-9 percent and an increase in non-GAAP operating income growth to 12-18 percent.
About Dell
Dell Inc. (NASDAQ: DELL) listens to customers and delivers innovative technology and services that give them the power to do more. For more information, visit www.dell.com. As previously announced, the first quarter analyst call with Michael Dell, chairman and CEO; Brian Gladden, CFO; and Paul Bell, president, Large Enterprise and Public, will be webcast live today at 4 p.m. CDT and archived at www.dell.com/investor. To monitor highlighted facts from the analyst call, follow on the Dell Investor Relations Twitter account at: http://twitter.com/dellshares or hashtag #DellEarnings. To communicate directly with Dell, go to www.dell.com/dellshares.
Non-GAAP Financial Measures:
This press release includes information about non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively with non-GAAP operating expenses, the “non-GAAP financial measures”), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. In the following tables, Dell has provided a reconciliation of each historical non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading “Reconciliation of Non-GAAP Financial Measures” and has presented a detailed discussion of its reasons for including the non-GAAP financial measures and the limitations associated with those measures under the heading “Use of Non-GAAP Financial Measures.” Dell encourages investors to review the reconciliation and the non-GAAP discussion in conjunction with Dell’s presentation of these non-GAAP financial measures.
Special Note on Forward Looking Statements:
Statements in this press release that relate to future results and events (including statements about Dell’s future financial and operating performance, planned capital expenditures, storage growth opportunities, anticipated customer demand, including seasonal trends and commercial momentum, enterprise solutions strategies, component costs, cost controls, supply chain improvements, and new products, as well as the financial guidance with respect to revenue and non-GAAP operating income) are forward-looking statements and are based on Dell's current expectations. In some cases, you can identify these statements by such forward-looking words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “potential,” “should,” “will” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: intense competition; Dell’s cost-cutting measures; Dell’s ability to effectively manage the growth of its distribution capabilities and add to its product and services offerings; Dell’s ability to effectively manage periodic product and services transitions; weak global economic conditions and instability in financial markets; Dell’s ability to generate substantial non-U.S. net revenue; weak economic conditions and additional regulation affecting Dell’s financial services activities; Dell’s ability to achieve favorable pricing from its vendors; Dell’s ability to deliver consistent quality products and services; Dell’s reliance on third-party suppliers for product components, including reliance on several single-sourced or limited-sourced suppliers; successful implementation of Dell’s acquisition strategy; Dell’s product, customer, and geographic sales mix, and seasonal sales trends; access to the capital markets by Dell or its customers; loss of government contracts; the risk of temporary suspension or debarment from contracting with U.S. federal, state and local governments as a result of settlements of an SEC investigation by Dell and Dell’s Chairman and CEO; customer terminations of or pricing changes in services contracts, or Dell’s failure to perform as it anticipates at the time it enters into services contracts; Dell’s ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; information technology and manufacturing infrastructure disruptions or breaches of data security; Dell’s ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; counterparty default; unfavorable results of legal proceedings; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other compliance matters; Dell’s ability to attract, retain, and motivate key personnel; Dell’s ability to maintain strong internal controls; changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; and other risks and uncertainties discussed in Dell’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its fiscal year ended Jan. 28, 2011. In particular, Dell’s expectations with regard to revenue and non-GAAP operating income for the full fiscal year ending Feb. 3, 2012 assume, among other matters, that there is no significant decline in economic conditions generally or demand growth specifically, no significant change in product mix patterns, Dell’s ability to realize its pipeline opportunities, no supply chain disruptions, and no significant adverse component pricing or supply movements. Dell assumes no obligation to update its forward-looking statements.
Consolidated statements of income, financial position and cash flows and other financial data follow.
Dell, EqualLogic and PowerVault, are trademarks 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 and percentages) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three Months Ended | % Growth Rates | |||||||||||||||||||
April 29, | January 28, | April 30, | ||||||||||||||||||
2011 | 2011 | 2010 | Sequential | Yr. to Yr. | ||||||||||||||||
Net revenue | ||||||||||||||||||||
Products | $ | 12,059 | $ | 12,751 | $ | 12,086 | (5 | %) | (0 | %) | ||||||||||
Services, including software related | 2,958 | 2,941 | 2,788 | 1 | % | 6 | % | |||||||||||||
Net revenue | 15,017 | 15,692 | 14,874 | (4 | %) | 1 | % | |||||||||||||
Cost of net revenue | ||||||||||||||||||||
Products | 9,436 | 10,337 | 10,385 | (9 | %) | (9 | %) | |||||||||||||
Services, including software related | 2,149 | 2,064 | 1,973 | 4 | % | 9 | % | |||||||||||||
Total cost of net revenue | 11,585 | 12,401 | 12,358 | (7 | %) | (6 | %) | |||||||||||||
Gross margin | 3,432 | 3,291 | 2,516 | 4 | % | 36 | % | |||||||||||||
Selling, general and administrative | 2,025 | 1,977 | 1,830 | 2 | % | 11 | % | |||||||||||||
Research, development and engineering | 195 | 169 | 167 | 15 | % | 17 | % | |||||||||||||
Total operating expenses | 2,220 | 2,146 | 1,997 | 3 | % | 11 | % | |||||||||||||
Operating income | 1,212 | 1,145 | 519 | 6 | % | 134 | % | |||||||||||||
Interest and other, net | (42 | ) | (18 | ) | (68 | ) | (140 | %) | 38 | % | ||||||||||
Income before income taxes | 1,170 | 1,127 | 451 | 4 | % | 159 | % | |||||||||||||
Income tax provision | 225 | 200 | 110 | 12 | % | 105 | % | |||||||||||||
Net income | $ | 945 | $ | 927 | $ | 341 | 2 | % | 177 | % | ||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 0.50 | $ | 0.48 | $ | 0.17 | 4 | % | 194 | % | ||||||||||
Diluted | $ | 0.49 | $ | 0.48 | $ | 0.17 | 2 | % | 188 | % | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 1,908 | 1,924 | 1,961 | (1 | %) | (3 | %) | |||||||||||||
Diluted | 1,923 | 1,938 | 1,973 | (1 | %) | (3 | %) | |||||||||||||
Percentage of Total Net Revenue: |
||||||||||||||||||||
Gross margin | 22.9 | % | 21.0 | % | 16.9 | % | ||||||||||||||
Selling, general and administrative | 13.5 | % | 12.6 | % | 12.3 | % | ||||||||||||||
Research and development | 1.3 | % | 1.1 | % | 1.1 | % | ||||||||||||||
Operating expenses | 14.8 | % | 13.7 | % | 13.4 | % | ||||||||||||||
Operating income | 8.1 | % | 7.3 | % | 3.5 | % | ||||||||||||||
Income before income taxes | 7.8 | % | 7.2 | % | 3.0 | % | ||||||||||||||
Net income | 6.3 | % | 5.9 | % | 2.3 | % | ||||||||||||||
Income tax rate | 19.2 | % | 17.8 | % | 24.4 | % | ||||||||||||||
Net Revenue by Product Category: |
||||||||||||||||||||
Servers and Networking | $ | 1,973 | $ | 2,090 | $ | 1,785 | (6 | %) | 11 | % | ||||||||||
Storage | 481 | 574 | 554 | (16 | %) | (13 | %) | |||||||||||||
Services | 1,984 | 1,943 | 1,891 | 2 | % | 5 | % | |||||||||||||
Software and Peripherals | 2,567 | 2,651 | 2,496 | (3 | %) | 3 | % | |||||||||||||
Mobility | 4,716 | 4,850 | 4,563 | (3 | %) | 3 | % | |||||||||||||
Desktop PCs | 3,296 | 3,584 | 3,585 | (8 | %) | (8 | %) | |||||||||||||
Consolidated net revenue | $ | 15,017 | $ | 15,692 | $ | 14,874 | (4 | %) | 1 | % | ||||||||||
Percentage of Total Net Revenue: |
||||||||||||||||||||
Servers and Networking | 13 | % | 13 | % | 12 | % | ||||||||||||||
Storage | 3 | % | 4 | % | 4 | % | ||||||||||||||
Services | 13 | % | 12 | % | 13 | % | ||||||||||||||
Software and Peripherals | 17 | % | 17 | % | 17 | % | ||||||||||||||
Mobility | 32 | % | 31 | % | 30 | % | ||||||||||||||
Desktop PCs | 22 | % | 23 | % | 24 | % | ||||||||||||||
Net Revenue by Global Segment: |
||||||||||||||||||||
Large Enterprise | $ | 4,477 | $ | 4,692 | $ | 4,246 | (5 | %) | 5 | % | ||||||||||
Public | 3,767 | 3,973 | 3,856 | (5 | %) | (2 | %) | |||||||||||||
Small and Medium Business | 3,768 | 3,749 | 3,524 | 0 | % | 7 | % | |||||||||||||
Consumer | 3,005 | 3,278 | 3,248 | (8 | %) | (7 | %) | |||||||||||||
Consolidated net revenue | $ | 15,017 | $ | 15,692 | $ | 14,874 | (4 | %) | 1 | % | ||||||||||
Percentage of Total Net Revenue: |
||||||||||||||||||||
Large Enterprise | 30 | % | 30 | % | 28 | % | ||||||||||||||
Public | 25 | % | 25 | % | 26 | % | ||||||||||||||
Small and Medium Business | 25 | % | 24 | % | 24 | % | ||||||||||||||
Consumer | 20 | % | 21 | % | 22 | % | ||||||||||||||
Consolidated Operating Income: |
||||||||||||||||||||
Large Enterprise | $ | 504 | $ | 502 | $ | 283 | ||||||||||||||
Public | 370 | 366 | 298 | |||||||||||||||||
Small and Medium Business | 463 | 450 | 313 | |||||||||||||||||
Consumer | 136 | 69 | 17 | |||||||||||||||||
Consolidated segment operating income | 1,473 | 1,387 | 911 | |||||||||||||||||
Severance and facility actions | (19 | ) | (17 | ) | (57 | ) | ||||||||||||||
Broad based long-term incentives | (97 | ) | (101 | ) | (87 | ) | ||||||||||||||
Amortization of intangible assets | (92 | ) | (85 | ) | (88 | ) | ||||||||||||||
Acquisition-related | (53 | ) | (39 | ) | (20 | ) | ||||||||||||||
Other(1) | - | - | (140 | ) | ||||||||||||||||
Consolidated operating income | $ | 1,212 | $ | 1,145 | $ | 519 | ||||||||||||||
Note: Percentage growth rates and ratios are calculated based on underlying data in thousands. |
(1) Other for the three months ended April 30, 2010 includes amounts for the $100 million settlement of the SEC investigation and a $40 million settlement for a securities litigation matter.
DELL INC. | |||||||||||||
Condensed Consolidated Statement of Financial Position and Related Financial Highlights | |||||||||||||
(in millions, except for "Ratios") | |||||||||||||
(unaudited) | |||||||||||||
April 29, | January 28, | April 30, | |||||||||||
2011 | 2011 | 2010 | |||||||||||
Assets: |
|||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 14,061 | $ | 13,913 | $ | 10,255 | |||||||
Short-term investments | 418 | 452 | 627 | ||||||||||
Accounts receivable, net | 6,196 | 6,493 | 5,880 | ||||||||||
Financing receivables, net | 3,205 | 3,643 | 3,221 | ||||||||||
Inventories, net | 1,276 | 1,301 | 1,182 | ||||||||||
Other current assets | 3,217 | 3,219 | 3,619 | ||||||||||
Total current assets | 28,373 | 29,021 | 24,784 | ||||||||||
Property, plant and equipment, net | 1,987 | 1,953 | 2,049 | ||||||||||
Investments | 762 | 704 | 714 | ||||||||||
Long-term financing receivables, net | 1,123 | 799 | 528 | ||||||||||
Goodwill | 5,406 | 4,365 | 4,181 | ||||||||||
Purchased intangible assets, net | 1,941 | 1,495 | 1,658 | ||||||||||
Other non-current assets | 196 | 262 | 327 | ||||||||||
Total assets | $ | 39,788 | $ | 38,599 | $ | 34,241 | |||||||
Liabilities and Equity: |
|||||||||||||
Current liabilities: | |||||||||||||
Short-term debt | $ | 816 | $ | 851 | $ | 1,079 | |||||||
Accounts payable | 10,442 | 11,293 | 11,402 | ||||||||||
Accrued and other | 3,590 | 4,181 | 3,549 | ||||||||||
Short-term deferred services revenue | 3,282 | 3,158 | 2,950 | ||||||||||
Total current liabilities | 18,130 | 19,483 | 18,980 | ||||||||||
Long-term debt | 6,794 | 5,146 | 3,582 | ||||||||||
Long-term deferred services revenue | 3,608 | 3,518 | 3,194 | ||||||||||
Other non-current liabilities | 2,886 | 2,686 | 2,607 | ||||||||||
Total liabilities | 31,418 | 30,833 | 28,363 | ||||||||||
Stockholders' equity | 8,370 | 7,766 | 5,878 | ||||||||||
Total liabilities and equity | $ | 39,788 | $ | 38,599 | $ | 34,241 | |||||||
Ratios: |
|||||||||||||
Days of sales outstanding (1) | 40 | 40 | 38 | ||||||||||
Days supply in inventory | 10 | 9 | 9 | ||||||||||
Days in accounts payable | (81 | ) | (82 | ) | (83 | ) | |||||||
Cash conversion cycle | (31 | ) | (33 | ) | (36 | ) | |||||||
Average total revenue/unit (approximate) | $ | 1,380 | $ | 1,360 | $ | 1,360 |
Note: Ratios are calculated based on underlying data in thousands.
(1) Days of sales outstanding (“DSO”) is based on the ending net trade receivables and most recent quarterly revenue for each period. DSO includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified in the other current assets. At April 29, 2011, January 28, 2011, and April 30, 2010, DSO and days of customer shipments not yet recognized were 37 and 3 days, 37 and 3 days, 35 and 3 days, respectively.
DELL INC. | |||||||||
Condensed Consolidated Statements of Cash Flows | |||||||||
(in millions, unaudited) | |||||||||
Three Months Ended | |||||||||
April 29, | April 30, | ||||||||
2011 | 2010 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 945 | $ | 341 | |||||
Adjustments to reconcile net income to net cash provided by | |||||||||
operating activities: | |||||||||
Depreciation and amortization | 216 | 247 | |||||||
Stock-based compensation | 99 | 76 | |||||||
Effects of exchange rate changes on monetary assets and | |||||||||
liabilities denominated in foreign currencies | - | 30 | |||||||
Deferred Income Taxes | (63 | ) | (31 | ) | |||||
Provision for doubtful accounts - including financing receivables | 47 | 122 | |||||||
Other | (5 | ) | - | ||||||
Changes in assets and liabilities, net of effects from acquisitions: | |||||||||
Accounts receivable | 471 | (119 | ) | ||||||
Financing receivables | 21 | (208 | ) | ||||||
Inventories | 38 | (132 | ) | ||||||
Other assets | 110 | 69 | |||||||
Accounts payable | (925 | ) | 22 | ||||||
Deferred services revenue | 191 | 72 | |||||||
Accrued and other liabilities | (680 | ) | (251 | ) | |||||
Change in cash from operating activities | 465 | 238 | |||||||
Cash flows from investing activities: | |||||||||
Investments: | |||||||||
Purchases |
(240 | ) | (350 | ) | |||||
Maturities and sales | 222 | 169 | |||||||
Capital expenditures | (137 | ) | (46 | ) | |||||
Proceeds from sale of facility and land | 12 | - | |||||||
Collections on purchased financing receivables | 67 | - | |||||||
Acquisition of business, net of cash received |
(1,473 | ) | (133 | ) | |||||
Change in cash from investing activities |
(1,549 | ) | (360 | ) | |||||
Cash flows from financing activities: | |||||||||
Repurchase of common stock | (450 | ) | (200 | ) | |||||
Issuance of common stock under employee plans | 10 | 7 | |||||||
Issuance (repayment) of commercial paper (maturity 90 days or less), net |
- | 234 | |||||||
Proceeds from debt | 1,930 | 268 | |||||||
Repayments of debt |
(323 | ) | (566 | ) | |||||
Other | 3 | 3 | |||||||
Change in cash from financing activities |
1,170 | (254 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents |
62 | (4 | ) | ||||||
Change in cash and cash equivalents |
148 | (380 | ) | ||||||
Cash and cash equivalents at beginning of period |
13,913 | 10,635 | |||||||
Cash and cash equivalents at end of period |
$ | 14,061 | $ | 10,255 | |||||
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
The tables on the following pages set forth, for the periods indicated, a reconciliation of non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively, the “non-GAAP financial measures”) to the most comparable GAAP financial measures. These non-GAAP financial measures may not be directly comparable to similarly titled measures reported by other companies. See “Use of Non-GAAP Financial Measures” following the tables for additional information regarding Dell’s reasons for including the non-GAAP financial measures and for material limitations with respect to the usefulness of these measures.
DELL INC. | ||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||||
(in millions, except per share data and percentages) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three Months Ended | % Growth Rates | |||||||||||||||||||
April 29, | January 28, | April 30, | ||||||||||||||||||
2011 | 2011 | 2010 | Sequential | Yr. to Yr. | ||||||||||||||||
GAAP gross margin | $ | 3,432 | $ | 3,291 | $ | 2,516 | 4 | % | 36 | % | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Amortization of intangibles | 71 | 69 | 68 | |||||||||||||||||
Severance and facility actions | 5 | 6 | 29 | |||||||||||||||||
Acquisition-related | 3 | 2 | 1 | |||||||||||||||||
Non-GAAP gross margin | $ | 3,511 | $ | 3,368 | $ | 2,614 | 4 | % | 34 | % | ||||||||||
GAAP operating expenses | $ | 2,220 | $ | 2,146 | $ | 1,997 | 3 | % | 11 | % | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Amortization of intangibles | (21 | ) | (16 | ) | (20 | ) | ||||||||||||||
Severance and facility actions | (14 | ) | (11 | ) | (28 | ) | ||||||||||||||
Acquisition-related | (50 | ) | (37 | ) | (19 | ) | ||||||||||||||
Other(1) | - | - | (140 | ) | ||||||||||||||||
Non-GAAP operating expenses | $ | 2,135 | $ | 2,082 | $ | 1,790 | 3 | % | 19 | % | ||||||||||
GAAP operating income | $ | 1,212 | $ | 1,145 | $ | 519 | 6 | % | 134 | % | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Amortization of intangibles | 92 | 85 | 88 | |||||||||||||||||
Severance and facility actions | 19 | 17 | 57 | |||||||||||||||||
Acquisition-related | 53 | 39 | 20 | |||||||||||||||||
Other(1) | - | - | 140 | |||||||||||||||||
Non-GAAP operating income | $ | 1,376 | $ | 1,286 | $ | 824 | 7 | % | 67 | % | ||||||||||
GAAP net income | $ | 945 | $ | 927 | $ | 341 | 2 | % | 177 | % | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Amortization of intangibles | 92 | 85 | 88 | |||||||||||||||||
Severance and facility actions | 19 | 17 | 57 | |||||||||||||||||
Acquisition-related | 53 | 39 | 20 | |||||||||||||||||
Other(1) | - | - | 140 | |||||||||||||||||
Aggregate adjustment for income taxes | (59 | ) | (50 | ) | (62 | ) | ||||||||||||||
Non-GAAP net Income | $ | 1,050 | $ | 1,018 | $ | 584 | 3 | % | 80 | % | ||||||||||
GAAP earnings per share - diluted | $ | 0.49 | $ | 0.48 | $ | 0.17 | 2 | % | 188 | % | ||||||||||
Non-GAAP adjustments per share - diluted | 0.06 | 0.05 | 0.13 | |||||||||||||||||
Non-GAAP earnings per share - diluted | $ | 0.55 | $ | 0.53 | $ | 0.30 | 4 | % | 83 | % | ||||||||||
GAAP Diluted WAS | 1,923 | 1,938 | 1,973 | |||||||||||||||||
Percentage of Total Net Revenue: |
||||||||||||||||||||
GAAP gross margin | 22.9 | % | 21.0 | % | 16.9 | % | ||||||||||||||
Non-GAAP adjustment | 0.5 | % | 0.5 | % | 0.7 | % | ||||||||||||||
Non-GAAP gross margin | 23.4 | % | 21.5 | % | 17.6 | % | ||||||||||||||
GAAP operating expenses | 14.8 | % | 13.7 | % | 13.4 | % | ||||||||||||||
Non-GAAP adjustment | (0.6 | %) | (0.4 | %) | (1.4 | %) | ||||||||||||||
Non-GAAP operating expenses | 14.2 | % | 13.3 | % | 12.0 | % | ||||||||||||||
GAAP operating income | 8.1 | % | 7.3 | % | 3.5 | % | ||||||||||||||
Non-GAAP adjustment | 1.1 | % | 0.9 | % | 2.0 | % | ||||||||||||||
Non-GAAP operating income | 9.2 | % | 8.2 | % | 5.5 | % | ||||||||||||||
GAAP net income | 6.3 | % | 5.9 | % | 2.3 | % | ||||||||||||||
Non-GAAP adjustment | 0.7 | % | 0.6 | % | 1.6 | % | ||||||||||||||
Non-GAAP net income | 7.0 | % | 6.5 | % | 3.9 | % | ||||||||||||||
Note: Percentage growth rates and ratios are calculated based on underlying data in thousands. |
(1) Other for the three months ended April 30, 2010 includes amounts for the $100 million settlement of the SEC investigation and a $40 million settlement for a securities litigation matter.
USE OF NON-GAAP FINANCIAL MEASURES
Dell uses non-GAAP financial measures to supplement the financial information presented on a GAAP basis. Dell believes that excluding certain items from Dell’s GAAP results allows Dell’s management to better understand Dell’s consolidated financial performance from period to period and in relationship to the operating results of Dell’s segments, as management does not believe that the excluded items are reflective of Dell's underlying operating performance. Dell also believes that excluding certain items from Dell’s GAAP results allows Dell’s management to better project Dell’s future consolidated financial performance because Dell’s forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, Dell believes these non-GAAP financial measures will provide investors with useful information to help them evaluate Dell's operating results by facilitating an enhanced understanding of Dell's operating performance, and enabling them to make more meaningful period to period comparisons. Non-GAAP operating income growth as projected for Fiscal 2012, which is a forward looking non-GAAP financial measure, excludes the following items, some of which Dell cannot forecast with certainty or accuracy due to their inherently indefinite and contingent nature, thereby preventing Dell from reconciling its projections to GAAP: acquisition-related charges, amortization of purchased intangible assets related to acquisitions, and severance and facility action costs. The historical non-GAAP financial measures, as defined by Dell, represent the comparable GAAP measures adjusted to exclude these same items as well as amounts for the settlement of the SEC investigation, and the settlement of a securities litigation matter, which were both incurred during the first quarter of Fiscal 2011. Dell provides more detail below regarding each of these items and our reasons for excluding them. In future fiscal periods, Dell expects that it may again exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in Dell’s non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent, or unusual.
The non-GAAP financial measures for the periods indicated in the tables above reflect adjustments related to the following items:
There are limitations to the use of non-GAAP financial measures. Dell's non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in Dell’s industry, may calculate the non-GAAP financial measures differently than Dell does, limiting the usefulness of those measures for comparative purposes. In addition, items such as amortization of purchased intangible assets represent the loss in value of intangible assets over time. The expense associated with this loss in value is not included in the non-GAAP financial measures and such measures, therefore, do not reflect the full economic effect of such loss. Further, items such as severance and facility action costs and acquisition expenses that are excluded from the non-GAAP financial measures can have a material impact on earnings. Dell’s management compensates for the foregoing limitations by relying on Dell’s GAAP results and using non-GAAP financial measures supplementally or for projections when comparable GAAP measures are not available. The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as substitutes for gross margin, operating expenses, operating income, net income, and earnings per share prepared in accordance with GAAP and should be read only in conjunction with financial information presented on a GAAP basis. Dell provides detailed reconciliations of each historical non-GAAP financial measure to its most directly comparable GAAP measure within the financial information included with this press release and in other written materials that include such non-GAAP historical financial measures, and Dell encourages investors to review the reconciliations in conjunction with the presentation of any historical non-GAAP financial measures.
CONTACT:
Dell
Media: 512-728-4100
David Frink,
512-728-2678
david_frink@dell.com
or
Jess Blackburn,
512-728-8295
jess_blackburn@dell.com
or
Investor
Relations:
Robert Williams, 512-728-7570
robert_williams@dell.com
or
Frank
Molina, 512-723-5116
frank_molina@dell.com