SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended: April 1, 1995 Commission File Number 1-9853
EMC CORPORATION
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2680009
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
organization or incorporation)
171 South Street
Hopkinton, Massachusetts 01748-9103
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(Address of principal executive offices, including zip code)
(508) 435-1000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO ________
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, par value $.01 per share 213,268,346
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Class Outstanding as of April 1, 1995
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EMC CORPORATION
Page No.
Part I - Financial Information
Consolidated Balance Sheets
April 1, 1995 and December 31, 1994 3
Consolidated Statements of Operations
for the Three Months Ended
April 1, 1995 and April 2, 1994 4
Consolidated Statements of Cash Flows
for the Three Months Ended April 1, 1995
and April 2, 1994 5
Notes to Interim Consolidated Financial Statements 6 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
Part II - Other Information 13
Signatures 14
Exhibit Index 15
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EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
April 1, December 31,
ASSETS 1995 1994
Current assets:
Cash and cash equivalents $237,281 $240,506
Trade and notes receivable less allowance for doubtful
accounts of $6,112 and $6,272, respectively 365,554 361,191
Inventories 290,812 251,096
Deferred income taxes 40,754 40,754
Other assets 11,302 8,258
Total current assets 945,703 901,805
Long-term investments, at cost 156,923 175,631
Notes receivable 37,126 38,945
Property, plant and equipment, net 187,674 173,016
Deferred income taxes 4,473 4,473
Other assets, net 34,223 23,630
Total assets $1,366,122 $1,317,500
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $830 $9,502
Accounts payable 78,508 122,264
Accrued expenses 95,460 106,107
Income taxes payable 84,740 55,521
Deferred revenue 9,238 8,070
Total current liabilities 268,776 301,464
Deferred revenue 3,263 2,289
Long-term obligations:
4 1/4% Convertible Subordinated Notes due 2001 229,598 229,598
6 1/4% Convertible Subordinated Debentures due 2002 -- 39,536
Notes payable and capital lease obligations 17,216 16,972
Total liabilities 518,853 589,859
Stockholders' equity:
Series Preferred Stock, par value $.01;
authorized 25,000,000 shares --- ---
Common Stock, par value $.01; authorized 330,000,000
shares; issued 215,911,355 and 201,738,042, in
1995 and 1994 respectively 2,159 2,017
Additional paid-in capital 323,205 281,625
Deferred compensation (2,348) (2,607)
Retained earnings 521,694 443,713
Cumulative translation adjustment 3,720 3,716
Treasury stock, at cost, 2,643,009 and 2,627,467
shares, respectively (1,161) (823)
Total stockholders' equity 847,269 727,641
Total liabilities and stockholders' equity $1,366,122 $1,317,500
The accompanying notes are an integral part of the consolidated financial
statements.
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EMC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
(unaudited)
For the Three Months Ended
April 1, April 2,
1995 1994
Revenues:
Net sales $410,777 $257,720
Service and rental 9,821 9,338
420,598 267,058
Costs and expenses:
Cost of sales and service 205,366 124,407
Research and development 37,438 22,348
Selling, general and
administrative 70,712 51,604
Operating income 107,082 68,699
Investment income 6,325 4,979
Interest expense (3,488) (3,802)
Other income / (expense), net 692 (608)
Income before taxes 110,611 69,268
Income tax provision 32,630 20,428
Net income $77,981 $48,840
Net income per weighted average
share, primary $0.36 $0.23
Net income per weighted average
share, fully diluted $0.34 $0.22
Weighted average number of
common shares outstanding,
primary 221,513 214,242
Weighted average number of
common shares outstanding,
fully diluted 233,855 233,730
The accompanying notes are an integral part of the consolidated financial
statements.
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EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
For the Three Months Ended
April 1, April 2,
1995 1994
Cash flows from operating activities:
Net income $77,981 $48,840
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,151 7,034
Deferred income taxes --- (2,062)
Net loss on disposal of property and equipment --- 146
Changes in assets and liabilities:
Trade and notes receivable (2,501) (46,137)
Inventories (39,720) (26,570)
Other assets (15,090) (15,137)
Accounts payable (43,843) 17,341
Accrued expenses (10,498) 2,420
Income taxes payable 29,219 5,579
Deferred revenue 2,118 (59)
Net cash provided/(used) by operating activities 9,817 (8,605)
Cash flows from investing activities:
Additions to property and equipment (25,387) (22,193)
Net (purchase)/maturity of long-term investments 18,708 (117,638)
Net cash used by investing activities (6,679) (139,831)
Cash flows from financing activities:
Issuance of common stock 2,107 3,828
Issuance of 4 1/4% convertible subordinated notes
due 2001, net of issuance cost --- 29,350
Payment of long-term and short-term obligations (8,675) (312)
Issuance of long-term and short-term obligations 247 1,352
Net cash (used)/provided by financing activities (6,321) 34,218
Effect of exchange rate changes on cash (42) 518
Net decrease in cash and cash equivalents (3,183) (114,218)
Cash and cash equivalents at beginning of period 240,506 345,300
Cash and cash equivalents at end of period $237,281 $231,600
Non-Cash Activity - Conversion of Debentures 39,536 353
The accompanying notes are an integral part of the consolidated financial
statements.
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EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Company
EMC Corporation and its subsidiaries ("EMC" or the "Company") design,
manufacture, market and support high performance storage products and provide
related services for mainframe and midrange computer systems manufactured
primarily by International Business Machines Corporation ("IBM"), Unisys
Corporation ("Unisys") and Compagnie des Machines Bull S.A. ("Bull"). The
Company has recently added a family of products aimed at the open systems
storage marketplace.
Accounting
The accompanying consolidated financial statements are unaudited and have been
prepared in accordance with generally accepted accounting principles. These
statements include the accounts of EMC and its subsidiaries. Certain
information and footnote disclosures normally included in the Company's annual
consolidated financial statements have been condensed or omitted. The interim
consolidated financial statements, in the opinion of management, reflect all
adjustments (consisting only of normal recurring accruals) necessary for a
fair statement of the results for the interim periods ended April 1, 1995 and
April 2, 1994.
The results of operations for the interim periods are not necessarily indicative
of the results of operations to be expected for the entire fiscal year. It is
suggested that these interim consolidated financial statements be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1994, which are contained in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 29, 1995.
Acquisition
In February 1995, the Company acquired Icon International, Inc. ("Icon"),
accounted for under the purchase method. The Company intends to incorporate
certain technology of Icon into its development of products for the open systems
storage marketplace. The resulting goodwill from this transaction of
$6,715,000 is included in other assets non-current at April 1, 1995, net of
$224,000 of amortization, and is being amortized over five years. Proforma
presentations have not been included as this acquisition was not material to
the results of operations of the Company.
2. Inventory
April 1, 1995 December 31, 1994
Inventories consist of:
Purchased parts $ 14,284,000 $ 8,946,000
Work-in-process 142,905,000 133,116,000
Finished goods 133,623,000 109,034,000
$290,812,000 $251,096,000
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EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3. Convertible Subordinated Debentures
In March 1992, the Company issued $60,000,000 of 6 1/4% convertible
subordinated debentures due 2002 (the "Debentures"). The Debentures were
generally convertible at the option of the holder at any time prior to maturity
into shares of Common Stock of the Company at a conversion price of $3.063 per
share, subject to adjustment in certain events. In February 1995, the Company
notified holders of the Debentures that the Company intended to redeem the
Debentures on April 1, 1995, unless the holders chose to convert on or prior
to such date. The Company redeemed $1,000 of the Debentures on April 1, 1995.
All other Debentures were converted on or prior to that date.
4. Net Income Per Share
Net income per share was computed on the basis of weighted average common and
dilutive common equivalent shares outstanding. Primary weighted average shares
outstanding and earnings used in per share computations for the first quarters
of 1995 and 1994 reflect the dilutive effects of the 4 1/4% convertible
subordinated notes due 2001 (the "Notes") and outstanding stock options. Fully
diluted weighted average shares outstanding and earnings used in per share
computations for the first quarters of 1995 and 1994 reflect the dilutive
effects of the Debentures, in addition to the dilutive effect of the Notes and
outstanding stock options.
5. Litigation
On June 10, 1993, Storage Technology Corporation ("STK") filed suit against EMC
in the United States District Court for the District of Colorado alleging that
EMC is infringing three patents. In the complaint, STK seeks injunctive relief,
unspecified damages, including treble damages, plus attorney's fees and costs.
On July 20, 1993, EMC answered the complaint, denied STK's allegations and
counterclaimed. In the counterclaims, EMC seeks unspecified damages, attorney's
fees, costs and interest. In a court hearing on October 12, 1994, STK's claims
on two of the three patents were dismissed with prejudice. Discovery on the
sole remaining patent in the matter is currently in process. The originally
scheduled trial date of October 24, 1994 has been postponed.
On September 23, 1994, EMC filed suit against STK in the United States District
Court for Delaware alleging that STK is infringing one EMC patent. In the
complaint, EMC seeks injunctive relief and unspecified damages, including treble
damages, plus attorney's fees and costs. On October 12, 1994, STK answered the
complaint, denied any infringement and counterclaimed. STK has subsequently
filed an additional counterclaim. EMC has denied STK's allegations. Discovery
on this case is currently in process. A trial is expected in late 1995.
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EMC CORPORATION
The Company is a party to other litigation which it considers routine and
incidental to its business. Management does not expect the results of any of
these actions to have a material adverse effect on the Company's business or
financial condition.
6. Subsequent Events
At the Annual Meeting held on May 10, 1995, the Company's stockholders elected
three Class II members to the Board of Directors for a three-year term, approved
an increase in the number of shares of authorized common stock of the Company
to 500,000,000 shares and the addition of 2,000,000 shares of common stock to
the Company's 1993 Stock Option Plan.
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EMC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - First Quarter of 1995 compared to First Quarter of 1994
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Revenues
Revenues for the quarter ended April 1, 1995 were $420,598,000 compared to
$267,058,000 for the first quarter of 1994, an increase of $153,540,000 or 57%.
While the Company expects revenue to continue to increase in all of its markets
throughout 1995 as compared to the respective periods in 1994, such increase
may not, on a percentage basis, continue at the levels experienced in the first
quarter of 1995.
The increase in revenues was due primarily to the continued strong demand for
the Company's series of Integrated Cached Disk Array ("ICDA") based products,
which include the Symmetrix, Harmonix and Centriplex series of products.
Revenues from the Symmetrix series of products in the IBM, Unisys and Bull
mainframe markets increased by $156,926,000, or 74%, to $368,863,000 in the
first quarter of 1995 from $211,937,000 in the first quarter of 1994. Revenues
from the Harmonix series of IBM compatible midrange disk products, decreased by
$7,980,000 or 25%, to $23,360,000 in the first quarter of 1995 from $31,340,000
in the first quarter of 1994. In the first quarter of 1995, the Company
generated approximately 97% of its product revenues from sales of ICDA-based
products versus approximately 94% in the same period a year ago. It is
expected that revenues from ICDA-based products, including products for the
mainframe and open systems storage markets, will remain the largest component of
the Company's revenues throughout 1995.
Revenues on sales into the markets of North and South America increased by
$71,492,000, or 41% to $247,274,000 in the first quarter of 1995 from
$175,782,000 in the first quarter of 1994. This increase was primarily due to
growth in unit sales of the Symmetrix 5000 series of products in the IBM
mainframe storage market.
Revenues on sales into the markets of Europe, Africa, and the Middle East
increased by $49,370,000, or 64%, to $126,500,000 in the first quarter of
1995 from $77,130,000 in the first quarter of 1994, due primarily to growth
in unit sales of the Symmetrix 5000 series of products in the IBM, Bull and
Unisys mainframe storage markets.
Revenues on sales into the markets in the Asia Pacific region increased by
$32,678,000, or 231%, to $46,824,000 in the first quarter of 1995 from
$14,146,000 in the first quarter of 1994, due to growth in unit sales of the
Symmetrix 5000 series of products in the IBM mainframe storage market.
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EMC CORPORATION
The Company purchases certain components and products from suppliers who the
Company believes are currently the only suppliers of those components or
products that meet the Company's requirements. Among the most important
components that the Company uses are high density memory components ("DRAMs")
and 5 1/4" and 3 1/2" disk drives, which the Company purchases from a small
number of qualified suppliers. In some instances, there is only a single source
for such components. A failure by any supplier of high density DRAMs or disk
drives to meet the Company's requirements for an extended period of time could
have a material adverse effect on the Company. From time to time, because of
high industry demand and/or the inability of certain vendors to consistently
meet on a timely basis the Company's component quality standards, the Company
experienced delays in deliveries of high density DRAMs and disk drives needed
to satisfy orders for ICDA products. The Company is currently working with
vendors to correct these problems and is also seeking alternative sources of
supply. If shortages and quality problems were to intensify, the Company
could lose some time-sensitive customer orders and this could affect quarterly
revenues and earnings.
Cost of Sales and Service
As a percentage of revenues, cost of sales and service increased to 48.8% in the
first quarter of 1995 from 46.6% in the first quarter of 1994, primarily due
to a change in the cost mix of products sold in the first quarter of 1995 as
compared to the first quarter of 1994. During the first quarter of 1995, the
Company experienced lower costs associated with the disk mirroring program,
as compared to the prior quarter, due to improved performance of the related
disks, and a change in marketing strategy.
Research and Development
Research and development ("R&D") expenses were $37,438,000 and $22,348,000 in
the first quarters of 1995 and 1994, respectively, an increase of $15,090,000,
or 68%. R&D expenses were 8.9% and 8.4% of revenues in the first quarters of
1995 and 1994, respectively. Dollar increases in R&D spending reflect additional
purchases of state-of-the-art CAE/CAD design tools and the cost of additional
technical staff. The Company expects to continue to spend substantial amounts
for R&D throughout 1995.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses were $70,712,000 and
$51,604,000 in the first quarters of 1995 and 1994, respectively, an increase
of $19,108,000 or 37%. SG&A expenses were 16.8% and 19.3% of revenues in the
first quarters of 1995 and 1994, respectively. The dollar increase is due
primarily to costs associated with additional sales and support personnel and
their related overhead costs, both domestically and internationally, in
connection with the Company's increased revenue levels and the Company's
initiative to expand its OEM and international distribution programs. SG&A
expenses are expected to increase throughout 1995 approximately in proportion
to growth in revenues.
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EMC CORPORATION
Investment Income and Interest Expense
Investment income was $6,325,000 in the first quarter of 1995 compared with
$4,979,000 in the same period a year ago. Interest income was earned from
investments in cash equivalents and long-term investments and, to a lesser
extent, from sales-type leases of the Company's products. Investment income
increased in 1995 primarily due to increased rates of interest in the first
quarter of 1995 over the same period in 1994.
Interest expense decreased slightly in the first quarter of 1995 from the first
quarter of 1994, primarily due to conversions of the Debentures.
Provision for Income Taxes
The provision for income taxes was $32,630,000 and $20,428,000 in the first
quarters of 1995 and 1994, respectively, which resulted in an effective tax
rate of 29.5% for both periods. The Company provides for income taxes based
upon its estimate of full year earnings on a country-by-country basis.
Earnings Fluctuations
Due to (i) customers' tendencies to make purchase decisions late in each fiscal
quarter, (ii) the desire by customers to evaluate new, more expensive products
for longer periods of time, (iii) the timing of product and technology
announcements by the Company and its competitors, and (iv) fluctuating currency
exchange rates, the Company's period to period revenues and earnings can
fluctuate significantly.
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EMC CORPORATION
FINANCIAL CONDITION
Cash and cash equivalents were $237,281,000 and $240,506,000 at April 1, 1995
and December 31, 1994. In the first three months of 1995, the Company's working
capital increased by $75,586,000 from $600,341,000 at December 31, 1994 to
$676,927,000 at April 1, 1995. In the first three months of 1994, the Company's
working capital decreased by $57,558,000, from $516,876,000 at January 1, 1994
to $459,318,000 at April 2, 1994.
At April 1, 1995, the Company had available for use its entire $65,000,000 of
credit lines. Based on its current operating and capital expenditure forecasts,
the Company believes funds currently available, funds generated from operations
and its available lines of credit will be adequate to finance its operations.
To date, inflation has not had a material impact on the Company's financial
results.
Cash Flows
In the first three months of 1995, cash and cash equivalents decreased by
$3,225,000. Cash provided by operating activities was $9,817,000 consisting
primarily of net income and increased taxes payable balances, offset by
increased inventory and other asset balances, and decreases in accounts payable
and accrued expense balances. Cash used by investing activities was $6,679,000
caused by additions to property, plant and equipment of $25,387,000, partially
offset by net maturities of long-term investments of $18,708,000. Cash used
by financing activities was $6,321,000 caused primarily by payments of long-
term and short-term obligations of $8,675,000, partially offset by net issuances
of common stock of $2,107,000, pursuant to stock option exercises.
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EMC CORPORATION
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
On June 10, 1993, Storage Technology Corporation ("STK") filed suit against EMC
in the United States District Court for the District of Colorado alleging that
EMC is infringing three patents. In the complaint, STK seeks injunctive relief,
unspecified damages, including treble damages, plus attorney's fees and costs.
On July 20, 1993, EMC answered the complaint, denied STK's allegations and
counterclaimed. In the counterclaims, EMC seeks unspecified damages, attorney's
fees, costs and interest. In a court hearing on October 12, 1994, STK's claims
on two of the three patents were dismissed with prejudice. Discovery on the
sole remaining patent in the matter is currently in process. The originally
scheduled trial date of October 24, 1994 has been postponed.
On September 23, 1994, EMC filed suit against STK in the United States District
Court for Delaware alleging that STK is infringing one EMC patent. In the
complaint, EMC seeks injunctive relief and unspecified damages, including
treble damages, plus attorney's fees and costs. On October 12, 1994, STK
answered the complaint, denied any infringement and counterclaimed. STK has
subsequently filed an additional counterclaim. EMC has denied STK's
allegations. Discovery on this case is currently in process. A trial is
expected in late 1995.
The Company is a party to other litigation which it considers routine and
incidental to its business. Management does not expect the results of any
of these actions to have a material adverse effect on the Company's business
or financial condition.
Item 5. Other Information
Subsequent Events. See Footnote 6 to Notes to Interim Consolidated Financial
Statements in Part I of this report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 EMC Corporation 1993 Stock Option Plan, as amended (filed herewith).
11.1 Computation of Primary and Fully Diluted Net Income Per Share
(filed herewith).
(b) Reports on Form 8-K
On March 3, 1995, the registrant filed a report (Date of Report:
February 9, 1995) on Form 8-K reporting, under Item 5, that it intended
to call for redemption on April 1, 1995, all of its outstanding 6 1/4%
convertible subordinated debentures due 2002, unless the holders chose to
convert on or prior to such date.
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EMC CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EMC CORPORATION
Date: May 12, 1995 By: /s/ Colin G. Patteson
Colin G. Patteson
Vice President, Chief Financial
Officer and Treasurer (Principal
Financial and Accounting Officer)
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EMC CORPORATION
EXHIBIT INDEX
Exhibit 10.1 EMC Corporation 1993 Stock Option Plan, as amended
Exhibit 11.1 Computation of Primary and Fully Diluted Net Income Per Share
<PAGE>
Exhibit 10.1
EMC CORPORATION
1993 STOCK OPTION PLAN, as amended May 10, 1995
1. PURPOSE.
The purpose of the EMC Corporation 1993 Stock Option Plan is to enable EMC
Corporation to provide a special incentive to a limited number of key employees
of the Company and its Subsidiaries, if any, who are in a position to have a
significant effect upon the Company's business and earnings. In order to
accomplish this purpose, the Plan authorizes the grant to such key employees
of options to purchase Common Stock of the Company. Increased ownership of
Common Stock will provide such key employees with an additional incentive to
take into account the long-term interests of the Company.
2. DEFINITIONS.
As used herein, the following words or terms have the meanings set forth
below. The masculine gender is used throughout the Plan but is intended to
apply to members of both sexes.
2.1 "Board of Directors" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute.
2.3 "Committee" means the Committee (which, following registration of the
Common Stock under the Securities Exchange Act of 1934, shall consist of not
less than three members of the Board of Directors) appointed by the Board of
Directors to administer the Plan or the Board of Directors as a whole if no
appointment is made.
2.4 "Common Stock" means the Common Stock of the Company.
2.5 "Company" means EMC Corporation, a corporation established under
the laws of The Commonwealth of Massachusetts.
2.6 "Fair Market Value" in the case of a share of Common Stock on a
particular day, means the fair market value as determined from time to time by
the Board of Directors or, where appropriate, by the Committee, taking into
account all information which the Board of Directors, or the Committee,
considers relevant.
2.7 "Incentive Stock Option" means a stock option that satisfies the
requirements of Section 422 of the Code.
2.8 "Participant" means an individual holding a stock option or stock options
granted to him under the Plan.
2.9 "Plan" means the EMC Corporation 1993 Stock Option Plan set forth
herein.
2.10 "Subsidiary" or "Subsidiaries" means a corporation or corporations in
which the Company owns, directly or indirectly, stock possessing 50 percent or
more of the total combined voting power of all classes of stock.
2.11 "Ten Percent Stockholder" means any person who, at the time an option
is granted, owns or is deemed to own stock (as determined in accordance with
Sections 422 and 424 of the Code) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or its parent
or a subsidiary.
3. ADMINISTRATION.
3.1 The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum, and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee by a writing signed by a majority of the Committee members. Following
registration of the Common Stock under the Securities Exchange of 1934, all
members of the Committee shall be disinterested persons within the meaning of
Rule 16b-3 under that act.
3.2 Subject to the provisions set forth herein, the Committee shall have full
authority to determine the provisions of options to be granted under the Plan,
to interpret the terms of the Plan and of options granted under the Plan, to
adopt, amend and rescind rules and guidelines for the administration of the Plan
and for its own acts and proceedings and to decide all questions and settle all
controversies and disputes which may arise in connection with the Plan.
3.3 The decision of the Committee on any matter as to which the Committee
is given authority under subsection 3.2 shall be final and binding on all
persons concerned.
3.4 Nothing in the Plan shall be deemed to give any officer or employee, or
his legal representatives or assigns, any right to participate in the Plan,
except to such extent, if any, as the Committee may have determined or
approved pursuant to the provisions of the Plan.
4. SHARES SUBJECT TO THE PLAN.
4.1 The maximum number of shares of Common Stock that may be
delivered upon the exercise of options granted under the Plan shall be
8,000,000, subject to adjustment in accordance with the provisions of
Section 8.
4.2 If any option granted under the Plan terminates without having been
exercised in full (including an option which terminates by agreement between
the Company and the Participant), the number of shares of Common Stock as to
which such option has not been exercised prior to termination shall be available
for future grants within the limits set forth in subsection 4.1.
4.3 Shares of Common Stock delivered upon the exercise of options shall
consist of shares of authorized and unissued Common Stock, except that the
Board of Directors may from time to time in its discretion determine in any
case the shares to be so delivered shall consist of shares of authorized and
issued Common Stock reaquired by the Company and held in its Treasury. No
fractional shares of Common Stock shall be delivered upon the exercise of
an option.
5. ELIGIBILITY FOR OPTIONS.
Employees eligible to receive options under the Plan shall be those key
employees of the Company and its Subsidiaries, if any, who, in the opinion of
the Committee, are in a position to have a significant effect upon the Company's
business and earnings. Members of the Board of Directors of the Company or a
Subsidiary who are not employed as regular salaried officers or employees of
the Company or a Subsidiary may not participate in the Plan.
6. GRANT OF OPTIONS.
6.1 From time to time while the Plan is in effect the Committee may, in its
absolute discretion, select from among the persons eligible to receive options
(including persons to whom options were previously granted) those persons to
whom options are to be granted.
6.2 The Committee shall, in its absolute discretion, determine the number of
shares of Common Stock to be subject to each option granted under the Plan.
6.3 No Incentive Stock Option may be granted under the Plan after May 12,
2003, but options theretofore granted may extend beyond that date.
7. PROVISIONS OF OPTIONS.
7.1 Incentive Stock Options or Other Options. Options granted under the
Plan may be either Incentive Stock Options or options which do not qualify as
Incentive Stock Options, as the Committee shall determine at the time of each
grant of options hereunder.
7.2 Stock Option Certificates or Agreements. Options granted under the Plan
shall be evidenced by certificates or agreements in such form as the Committee
shall from time to time approve. Such certificates or agreements shall comply
with the terms and conditions of the Plan and may contain such other provisions
not inconsistent with the terms and conditions of the Plan as the Committee
shall deem advisable. In the case of options intended to qualify as Incentive
Stock Options, the certificates or agreements shall contain such provisions
relating to exercise and other matters as are required of incentive stock
options under the Code.
7.3 Terms and Conditions. All options granted under the Plan shall be
subject to the following terms and conditions to the extent applicable and to
such other terms and conditions not inconsistent therewith as the Committee
shall determine:
7.3.1 Exercise Price. The exercise price per share of Common Stock with
respect to each option shall be as determined by the Committee but in the case
of an Incentive Stock Option not less than 100% (110% in the case of an
Incentive Stock Option granted to a Ten Percent Stockholder) of the Fair
Market Value per share at the time the option is granted. In the case of an
option which does not qualify as an Incentive Stock Option, the exercise price
per share of Common Stock shall be not less than par value.
7.3.2 Value of Shares of Common Stock Subject to Incentive Stock Options.
Each eligible employee may be granted Incentive Stock Options only to the
extent that, in the aggregate under this Plan and all incentive stock option
plans of the Company and any related corporation, such Incentive Stock Options
do not become exercisable for the first time by such employee during any
calendar year in a manner which would entitle the employee to purchase more
than $100,000 in fair market value (determined at the time the Incentive Stock
Options were granted) of Common Stock in that year. Any options granted to
an employee in excess of such amount will be granted as Non-Qualified Options.
7.3.3 Period of Options. An option shall be exercisable during such period
of time as the Committee may specify (subject to subsection 7.4 below), but
in the case of an Incentive Stock Option not after the expiration of ten years
(five years in the case of an Incentive Stock Option granted to a Ten Percent
Stockholder) from the date the option is granted.
7.3.4 Exercise of Options.
7.3.4.1 Each option shall be made exercisable at such time or
times as the Committee shall determine. In the case of an option made
exercisable in installments, the Committee may later determine to
accelerate the time at which one or more of such installments may be
exercised.
7.3.4.2 Any exercise of an option shall be in writing signed by
the proper person and delivered or mailed to the General Counsel of the
Company, accompanied by an option exercise notice and payment in full
for the number of shares in respect to which the option is exercised.
7.3.4.3 In the event an option is exercised by the executor or
administrator of a deceased Participant, or by the person or persons to
whom the option has been transferred by the Participant's will or the
applicable laws of descent and distribution, the Company shall be under
no obligation to deliver stock thereunder until the Company is satisfied
that the person or persons exercising the option is or are the duly
appointed executor or administrator of the deceased Participant or the
person or persons to whom the option has been transferred by the
Participant's will or by the applicable laws of descent and distribution.
7.3.4.4 The Committee may at the time of grant condition the
exercise of an option upon agreement by the Participant to subject the
Common Stock to any restrictions on transfer or repurchase rights in
effect on the date of exercise, upon representations of continued
employment and upon other terms not inconsistent with this Plan. Any
such conditions shall be set forth in the option certificate or other
document evidencing the option.
7.3.4.5 In the case of an option that is not an Incentive Stock
Option, the Committee shall have the right to require that the individual
exercising the option to remit to the Company an amount sufficient to
satisfy any federal, state, or local withholding tax requirements (or
makes other arrangements satisfactory to the Company with regard to
such taxes) prior to the delivery of any Common Stock pursuant to the
exercise of the option. In the case of an Incentive Stock Option, if at the
time the Incentive Stock Option is exercised the Committee determines
that under applicable law and regulations the Company could be liable
for the withholding of any federal or state tax with respect to a
disposition of the Common Stock received upon exercise, the Committee
may require as a condition of exercise that the individual exercising the
Incentive Stock Option agree (i) to inform the Company promptly of any
disposition (within the meaning of Section 422 (a) (1) of the Code and
the regulations thereunder) of Common Stock received upon exercise,
and (ii) to give such security as the Committee deems adequate to meet
the potential liability of the Company for the withholding of tax, and to
augment such security from time to time in any amount reasonably
deemed necessary by the Committee to preserve the adequacy of such
security.
7.3.4.6 In the case of an option that is exercised by an individual
that is subject to taxation in a foreign jurisdiction, the Committee shall
have the right to require the individual exercising the option to remit to
the Company an amount sufficient to satisfy any federal or withholding
requirement of that foreign jurisdiction (or make other arrangements
satisfactory to the Company with regard to such taxes prior to the
delivery of any Common Stock pursuant to the exercise of the option).
7.3.5 Payment for and Delivery of Stock. The shares of stock purchased on
any exercise of an option granted hereunder shall be paid for in full in cash
or, if permitted by the terms of the option, in shares of unrestricted Common
Stock at the time of such exercise or, if so permitted, a combination of such
cash and Common Stock. A Participant shall not have the rights of a
stockholder with respect to awards under the Plan except as to stock actually
issued to him.
7.3.6 Listing of Stock, Withholding and Other Legal Requirements.
The Company shall not be obligated to deliver any stock until all federal and
state laws and regulations which the Company may deem applicable have been
complied with, nor, in the event the outstanding Common Stock is at the time
listed upon any stock exchange, until the stock to be delivered has been listed
or authorized to be added to the list upon official notice of issuance to such
exchange. In addition, if the shares of stock subject to any option have not
been registered in accordance with the Securities Act of 1933, as amended, the
Company may require the person or persons who wishes or wish to exercise such
option to make such representation or agreement with respect to the sale of
stock acquired on exercise of the option as will be sufficient, in the opinion
of the Company's counsel, to avoid violation of said Act, and may also require
that the certificates evidencing said stock bear an appropriate restrictive
legend.
7.3.7 Non-transferability of Options. No option may be transferred by
the Participant otherwise than by will or by the laws of descent and
distribution, and during the Participant's lifetime the option may be exercised
only by him.
7.3.8 Death. If a Participant dies at a time when he is entitled to
exercise an Incentive Stock Option, then at any time or times within three
years after his death such Incentive Stock Option may be exercised, as to all
or any of the shares which the Participant was entitled to purchase thereunder
immediately prior to his death, by his executor or administrator or the person
or persons to whom the Incentive Stock Option is transferred by will or the
applicable laws of descent and distribution, and except as so exercised such
Incentive Stock Option shall expire at the end of such three-year period. In
no event, however, may any Incentive Stock Option granted under the Plan be
exercised after the expiration of ten years (five years in the case of an
Incentive Stock Option granted to a Ten Percent Stockholder) from the date
the Incentive Stock Option was granted.
7.3.9 Termination of Employment. If the employment of a Participant
terminates for any reason other than his death, all options held by the
Participant shall thereupon expire on the date of termination unless the option
by its terms, or the Committee by resolution, shall allow the Participant to
exercise any or all of the options held by him after termination. In the case
of an Incentive Stock Option, the Incentive Stock Option shall in any event
expire at the end of three months after such termination of employment, or
after the expiration of ten years (five years in the case of an Incentive Stock
Option granted to a Ten Percent Stockholder) from the date the Incentive Stock
Option was granted, whichever occurs first. If the Committee so decides, an
option may provide that a leave of absence granted by the Company or Subsidiary
is not a termination of employment for the purpose of this subsection 7.3.9, and
in the absence of such a provision the Committee may in any particular case
determine that such a leave of absence is not a termination of employment for
such purpose. The Committee shall also determine all other matters relating to
continuous employment.
7.4 Authority of the Committee. The Committee shall have the authority,
either generally or in particular instances, to waive compliance by a
Participant with any obligation to be performed by him under an option and to
waive any condition or provision of an option, except that the Committee may
not (i) increase the total number of shares covered by any Incentive Stock
Option (except in accordance with Section 8), (ii) reduce the option price
per share of any Incentive Stock Option (except in accordance with Section 8)
or (iii) extend the term of any Incentive Stock Option to more than ten years,
subject, however, to the provisions of Section 10.
8. CHANGES IN STOCK.
In the event of a stock dividend, stock split or other change in corporate
structure or capitalization affecting the Common Stock that becomes effective
after the adoption of the Plan by the Board of Directors, the Committee shall
make appropriate adjustments in (i) the number and kind of shares of stock on
which options may thereafter be granted hereunder, (ii) the number and kind
of shares of stock remaining subject to each option outstanding at the time
of such change and (iii) the option price. The Committee's determination shall
be binding on all persons concerned. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger
or consolidation (other than a merger or consolidation in which the Company
survives but in which a majority of its outstanding shares are converted into
securities of another corporation or are exchanged for other consideration),
any option granted hereunder shall pertain and apply to the securities which a
holder of the number of shares of stock of the Company then subject to the
option would have been entitled to receive, but a dissolution or liquidation
of the Company or a merger or consolidation in which the Company is not the
surviving corporation or in which a majority of its outstanding shares are so
converted or exchanged shall cause every option hereunder to terminate;
provided that if any such dissolution, liquidation, merger or consolidation
is contemplated, the Company shall either arrange for any corporation
succeeding to the business and assets of the Company to issue to the
Participants replacement options (which, in the case of Incentive Stock
Options, satisfy, in the determination of the Committee, the requirements of
Section 424 of the Code) on such corporation's stock which will to the extent
possible preserve the value of the outstanding options or shall make the
outstanding options fully exercisable at least 20 days before the effective
date of any such dissolution, liquidation, merger or consolidation. The
existence of the Plan shall not prevent any such change or other transaction
and no Participant thereunder shall have any right except as herein expressly
set forth.
9. EMPLOYMENT RIGHTS.
Neither the adoption of the Plan nor any grant of options confers upon any
employee of the Company or a Subsidiary any right to continued employment with
the Company or a Subsidiary, as the case may be, nor does it interfere in any
way with the right of the Company or a Subsidiary to terminate the employment
of any of its employees at any time.
10. DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION.
The Committee may at any time discontinue granting options under the Plan
and, with the consent of the Participant, may at any time cancel an existing
option in whole or in part and grant another option to the Participant for such
number of shares as the Committee specifies. The Board of Directors may at any
time or times amend the Plan for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which
may at the time be permitted by law or may at any time terminate the Plan as
to any further grants of options, provided that no such amendment shall
without the approval of the stockholders of the Company (a) increase the
maximum number of shares available under the Plan, (b) change the group of
employees eligible to receive options under the Plan, (c) reduce the exercise
price of outstanding incentive options or reduce the price at which incentive
options may be granted, (d) extend the time within which options may be
granted, (e) alter the Plan in such a way that incentive options granted or
to be granted hereunder would not be considered incentive stock options
under Section 422 of the Code, or (f) amend the provisions of this Section
10, and no such amendment shall adversely affect the rights of any employee
(without his consent) under any option previously granted.
11. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by the
stockholders of the Company at the Annual Meeting on May 12, 1993.
<PAGE>
EMC CORPORATION
Exhibit 11.1 Computation of Primary and Fully Diluted Net Income Per Share
(Amounts in thousands except share and per share data)
Three Months Ended
April 1, April 2,
1995 1994
Primary
Net income $77,981 $48,840
Add back interest expense
on convertible notes 2,440 2,412
Less tax effect on interest
expense on convertible notes (976) (965)
Net income for purposes of calculating
primary net income per share $79,445 $50,287
Weighted average shares
outstanding during the period 200,478,499 188,470,638
Common equivalent shares 21,034,178 25,771,555
Common and common equivalent shares
outstanding for purpose of calculating
primary net income per share 221,512,677 214,242,193
Primary net income per share (Note 4) $0.36 $0.23
Fully Diluted
Net income $77,981 $48,840
Add back interest expense on
convertible notes and debentures 3,055 3,332
Less tax effect on interest expense
on convertible notes and debentures (1,222) (1,333)
Net income for purpose of calculating
fully diluted net income per share $79,814 $50,839
Common and common equivalent shares
outstanding for purpose of calculating
primary net income per share 221,512,677 214,242,193
Incremental shares to reflect full dilution,
primarily from convertible subordinated
debentures 12,342,764 19,487,994
Total shares for purpose of calculating
fully diluted net income per share 233,855,441 233,730,187
Fully diluted net income per share (Note 4) $0.34 $0.22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from EMC
Corporation financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-01-1995
<CASH> 237,281
<SECURITIES> 0
<RECEIVABLES> 371,666
<ALLOWANCES> 6,112
<INVENTORY> 290,812
<CURRENT-ASSETS> 945,703
<PP&E> 278,468
<DEPRECIATION> 90,794
<TOTAL-ASSETS> 1,366,122
<CURRENT-LIABILITIES> 268,776
<BONDS> 246,814
<COMMON> 2,159
0
0
<OTHER-SE> 845,110
<TOTAL-LIABILITY-AND-EQUITY> 1,366,122
<SALES> 420,598
<TOTAL-REVENUES> 420,598
<CGS> 205,366
<TOTAL-COSTS> 205,366
<OTHER-EXPENSES> 180,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,488
<INCOME-PRETAX> 110,611
<INCOME-TAX> 32,630
<INCOME-CONTINUING> 77,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,981
<EPS-PRIMARY> $0.36
<EPS-DILUTED> $0.34
</TABLE>
