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: September 30,1995 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 216,015,620
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Class Outstanding as of September 30, 1995
-2-
EMC CORPORATION
Page No.
Part I - Financial Information
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations
for the Three and Nine Months Ended
September 30, 1995 and October 1, 1994 4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1995
and October 1, 1994 5
Notes to Interim Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 -14
Part II - Other Information 15
Signatures 16
Exhibit Index 17
-3-
EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
Sept. 30, Dec. 31,
ASSETS 1995 1994
Current assets:
Cash and cash equivalents $208,997 $240,506
Trade and notes receivable less
allowance for doubtful accounts
of $7,244 and $6,272, respectively 527,209 361,191
Inventories 350,189 251,096
Deferred income taxes 42,551 40,754
Other assets 10,912 8,258
Total current assets 1,139,858 901,805
Long-term investments 149,548 175,631
Notes receivable, net 32,338 38,945
Property, plant and equipment, net 199,070 173,016
Deferred income taxes 5,268 4,473
Other assets, net 45,780 23,630
Total assets $1,571,862 $1,317,500
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $718 $9,502
Accounts payable 87,218 122,264
Accrued expenses 110,794 106,107
Income taxes payable 101,145 55,521
Deferred revenue 8,250 8,070
Total current liabilities 308,125 301,464
Deferred revenue 7,827 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 oblig. 17,140 16,972
Total liabilities 562,690 589,859
Stockholders' equity:
Series Preferred Stock, par value $.01;
authorized 25,000,000 shares --- ---
Common Stock, par value $.01; authorized
500,000,000 shares; issued 218,662,073
and 201,738,042, in 1995 and 1994,
respectively 2,187 2,017
Additional paid-in capital 333,006 281,625
Deferred compensation (1,846) (2,607)
Retained earnings 672,420 443,713
Cumulative translation adjustment 4,643 3,716
Treasury stock, at cost, 2,646,453
and 2,627,467 shares, respectively (1,238) (823)
Total stockholders' equity 1,009,172 727,641
Total liabilities and
stockholders' equity $1,571,862 $1,317,500
The accompanying notes are an integral part of the
consolidated financial statements.
-4-
EMC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
Revenues:
Net sales $423,393 $363,748 $1,257,643 $921,608
Service and rental 9,323 7,834 30,938 25,148
432,716 371,582 1,288,581 946,756
Costs and expenses:
Cost of sales and service 222,603 176,333 641,423 447,123
Research and development 38,566 32,407 117,138 81,000
Selling, general and
administrative 75,289 63,940 219,415 175,269
Operating income 96,258 98,902 310,605 243,364
Investment income 4,803 5,619 16,770 15,549
Interest expense (3,066) (3,652) (9,598) (11,247)
Other income/(expense), net (167) (1,832) 732 (1,950)
Income before taxes 97,828 99,037 318,509 245,716
Income tax provision 26,903 29,642 89,802 72,912
Net income $70,925 $69,395 $228,707 $172,804
Net income per weighted
average share, primary $0.31 $0.32 $1.01 $0.82
Net income per weighted
average share, fully diluted $0.31 $0.30 $1.00 $0.76
Weighted average number of
common shares outstanding,
primary 234,730 218,331 230,228 216,558
Weighted average number of
common shares outstanding,
fully diluted 234,730 234,216 234,389 233,753
The accompanying notes are an integral part of the
consolidated financial statements.
-5-
EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
For the Nine Months Ended
Sept. 30, Oct. 1,
1995 1994
Cash flows from operating activities:
Net income $228,707 $172,804
Adjustments to reconcile net income to net
cash provided/(used) by operating activities:
Depreciation and amortization 38,924 22,556
Deferred income taxes (2,592) (13,989)
Minority interest in consolidated
subsidiaries --- 852
Changes in assets and liabilities:
Trade and notes receivable (159,326) (143,469)
Inventories (98,708) (121,188)
Other assets (28,721) (12,253)
Accounts payable (35,120) 70,902
Accrued expenses 4,815 32,888
Income taxes payable 45,624 22,959
Deferred revenue 5,729 (92)
Net cash provided/(used)
by operating activities (668) 31,970
Cash flows from investing activities:
Additions to property, plant and equipment (61,560) (71,358)
Net loss on disposal of property and equipment 449 70
Proceeds from sales of property and equipment --- 445
Net maturity/(purchase) of
long-term investments 26,083 (117,586)
Net cash used by investing activities (35,028) (188,429)
Cash flows from financing activities:
Issuance of common stock 12,776 10,391
Purchase of treasury stock (415) (149)
Issuance of 4 1/4% convertible subordinated
notes due 2001, net of issuance costs --- 29,350
Payment of long-term and short-term obligations (9,161) (1,159)
Issuance of long-term and short-term obligations 545 2,988
Net cash provided by financing activities 3,745 41,421
Effect of exchange rate changes on cash 442 1,990
Net decrease in cash and cash equivalents (31,951) (115,038)
Cash and cash equivalents at beginning of period 240,506 345,300
Cash and cash equivalents at end of period $208,997 $232,252
Non-Cash Activity - Conversions of Debentures 39,536 13,436
The accompanying notes are an integral part of the
consolidated financial statements.
-6-
EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Company
EMC Corporation ("EMC" or the "Company") designs, manufactures,
markets and supports high performance storage products and provides
related services for mainframe and midrange computer systems
manufactured primarily by International Business Machines Corporation
("IBM"). The Company also designs, manufactures, markets and supports
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 September 30,
1995 and October 1, 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.
2. Inventory
Sept. 30, 1995 Dec. 31, 1994
Inventories consist of:
Purchased parts $ 10,802,000 $ 8,946,000
Work-in-process 167,379,000 133,116,000
Finished goods 172,008,000 109,034,000
$350,189,000 $251,096,000
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.
-7-
EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
4. Net Income Per Share
Net income per share was computed on the basis of weighted
average common and dilutive common equivalent shares
outstanding. Weighted average shares outstanding and
earnings used in primary per share computations for the
three and nine months ended September 30, 1995 and October
1, 1994, and used in fully diluted per share computations
for the third quarter of 1995, reflect the dilutive effects
of the 4 1/4% convertible subordinated notes due 2001 (the
"Notes") and outstanding stock options. Weighted average
shares outstanding and earnings used in fully diluted per
share computations for the nine months ended September 30,
1995 and the three and nine months ended October 1, 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.
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.
A trial is set for March 1996.
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 Event
In October 1995, the Company announced an agreement to
acquire McDATA Corporation, a leader in data network
switching solutions, in a stock transaction which is
currently valued at approximately $235,000,000. The Company
intends to account for the transaction as a pooling of
interests.
-8-
EMC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - Third Quarter of 1995 compared to
Third Quarter of 1994
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Revenues
Revenues for the quarter ended September 30, 1995 were
$432,716,000 compared to $371,582,000 for the third quarter
of 1994, an increase of $61,134,000 or 16%. While the
Company expects total revenue to continue to increase in the
fourth quarter of 1995 as compared to the comparable
period in 1994, such increase may not, on a percentage
basis, continue at the level experienced in the third
quarter of 1995.
The increase in revenues was due to continued demand
for the Company's series of Integrated Cached Disk Array
("ICDA") based products, which include the Symmetrix series
of products for the mainframe market, the Symmetrix 3000
series of products for the open systems storage market, the
Centriplex series of products for the open systems storage
market and the Harmonix series of products for the midrange
market. Revenues from the Symmetrix series of products in
the mainframe market increased by $6,512,000, or 2%, to
$342,688,000 in the third quarter of 1995 from $336,176,000
in the third quarter of 1994. Revenues from the Company's
products in the open systems storage market increased
$53,199,000, or 979%, to $58,635,000 in the third quarter of
1995, from $5,436,000 in the third quarter of 1994.
Revenues from the Harmonix series of IBM compatible disk
products for the midrange market decreased by $12,024,000,
or 44%, to $15,015,000 in the third quarter of 1995 from
$27,039,000 in the third quarter of 1994.
Revenues on sales and service into the markets of North and
South America increased by $51,104,000, or 22%, to
$279,698,000 in the third quarter of 1995 from $228,594,000
in the third quarter of 1994. This increase was primarily
due to growth in unit sales of the Symmetrix series of
products in the IBM mainframe storage market and unit sales
of the Company's products in the open systems storage
market.
Revenues on sales and service into the markets of Europe,
Africa and the Middle East increased by $7,863,000, or 7%,
to $126,401,000 in the third quarter of 1995 from
$118,538,000 in the third quarter of 1994, due primarily to
growth in unit sales of the Symmetrix series of products
in the IBM mainframe storage market.
Revenues on sales and service into the markets in the Asia
Pacific region increased by $2,167,000, or 9%, to
$26,617,000 in the third quarter of 1995 from $24,450,000 in
the third quarter of 1994, due to growth in unit sales of
the Symmetrix series of products in the IBM mainframe
storage market and growth in service revenues.
-9-
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. 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 which could affect
quarterly revenues and earnings.
Cost of Sales and Service
As a percentage of revenues, cost of sales and service
increased to 51.4% in the third quarter of 1995 from 47.5%
in the third quarter of 1994. Demand for the Company's
products has continued, but competitive pricing pressures in
the mainframe storage market in the third quarter of 1995
were greater than usual and adversely affected the margin
percent for the quarter.
Research and Development
Research and development ("R&D") expenses were $38,566,000
and $32,407,000 in the third quarters of 1995 and 1994,
respectively, an increase of $6,159,000, or 19%. R&D
expenses were 8.9% and 8.7% of revenues in the third
quarters of 1995 and 1994, respectively. Dollar increases in
R&D spending reflect additional purchases of state-of-the-
art CAE/CAD design tools, the cost of additional technical
staff and costs to develop new products for the open systems
storage market. The Company expects to continue to spend
substantial amounts for R&D in the fourth quarter of 1995.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses were
$75,289,000 and $63,940,000 in the third quarters of 1995
and 1994, respectively, an increase of $11,349,000 or 18%.
SG&A expenses were 17.4% and 17.2% of revenues in the third
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 open systems storage
group, international direct selling offices and OEM
programs. SG&A expenses are expected to increase in dollar
terms in the fourth quarter of 1995.
-10-
EMC CORPORATION
Investment Income and Interest Expense
Investment income was $4,803,000 in the third quarter of
1995 compared with $5,619,000 in the same period a year ago.
Interest income was earned from investments in cash
equivalents and long-term investments and, to a lesser
extent, from sales-type leases of the Company's products.
Investment income decreased in the third quarter of 1995
primarily due to lower average cash and investment balances
in the third quarter of 1995 compared to the balances in the
same period in 1994.
Interest expense decreased in the third quarter of 1995 from
the third quarter of 1994, primarily due to conversions of
the Debentures in March 1995.
Provision for Income Taxes
The provision for income taxes was $26,903,000 and
$29,642,000 in the third quarters of 1995 and 1994,
respectively, which resulted in effective tax rates of 27.5%
and 29.9%, respectively. The effective tax rate in the third
quarter of 1995 decreased from the same period in 1994 as a
result of utilization of foreign net operating losses and the
realization of tax benefits associated with the Company's tax
strategies. The Company provides for income taxes based upon
its estimate of full year earnings on a country-by-country
basis.
Earnings Fluctuations
Due to (i) customers' tendencies to make purchase decisions
late in each fiscal quarter, (ii) the desire by customers to
evaluate new, more expensive products for longer periods of
time, (iii) the timing of product and technology
announcements by the Company and its competitors, and (iv)
fluctuating currency exchange rates, the Company's period to
period revenues and earnings can fluctuate significantly.
-11-
EMC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - First Nine Months of 1995 compared
to First Nine Months of 1994
- ------------------------------------------------------------
Revenues
Revenues for the nine months ended September 30, 1995 were
$1,288,581,000 compared to $946,756,000 for the first nine
months of 1994, an increase of $341,825,000 or 36%. 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 nine
months of 1995.
The increase in revenues was due to continued demand
for the Company's series of Integrated Cached Disk Array
("ICDA") based products, which include the Symmetrix series
of products in the mainframe market, the Symmetrix series of
products in the open systems storage market, the Centriplex
series of products in the open systems storage market and
the Harmonix series of products in the midrange market.
Revenues from the Symmetrix series of products in the
mainframe market increased by $269,824,000, or 33%, to
$1,083,453,000 in the first nine months of 1995 from
$813,629,000 in the first nine months of 1994. Revenues from
the Company's products in the open systems storage market
were $99,276,000 in the first nine months of 1995, an
increase of $82,725,000, or 500%, over the $16,551,000 for
the first nine months of 1994. Revenues from the Harmonix
series of IBM compatible disk products in the midrange
market decreased by $24,735,000, or 31%, to $55,848,000 in
the first nine months of 1995 from $80,583,000 in the first
nine months of 1994.
Revenues on sales and service into the markets of North and
South America increased by $182,082,000, or 30%, to
$790,691,000 in the first nine months of 1995 from
$608,609,000 in the same period of 1994. This increase was
primarily due to growth in unit sales of the Symmetrix
series of products in the IBM mainframe storage market and
unit sales of the Company's products in the open systems
storage market.
Revenues on sales and service into the markets of Europe,
Africa and the Middle East increased by $112,972,000, or
40%, to $396,266,000 in the first nine months of 1995 from
$283,294,000 in the same period of 1994, due primarily to
growth in unit sales of the Symmetrix series of products
in the IBM mainframe storage market.
Revenues on sales and service into the markets in the Asia
Pacific region increased by $46,771,000, or 85%, to
$101,624,000 in the first nine months of 1995 from
$54,853,000 in the same period of 1994, primarily due to
growth in unit sales of the Symmetrix series of products in
the IBM mainframe storage market.
-12-
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. 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 which could affect
quarterly revenues and earnings.
Cost of Sales and Service
As a percentage of revenues, cost of sales and service
increased to 49.8% in the first nine months of 1995 from
47.2% in the first nine months of 1994. Demand for the
Company's products has continued, but competitive pricing
pressures in the mainframe storage market in the third
quarter of 1995 were greater than usual and adversely
affected the margin percent for the first nine months of 1995.
Research and Development
Research and development ("R&D") expenses were $117,138,000
and $81,000,000 in the first nine months of 1995 and 1994,
respectively, an increase of $36,138,000, or 45%. R&D
expenses were 9.1% and 8.6% of revenues in the first nine
months of 1995 and 1994, respectively. Dollar increases in
R&D spending reflect additional purchases of state-of-the-
art CAE/CAD design tools, the cost of additional technical
staff and costs to develop new products for the open systems
storage market. The Company expects to continue to spend
substantial amounts for R&D in the fourth quarter of 1995.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses were
$219,415,000 and $175,269,000 in the first nine months of
1995 and 1994, respectively, an increase of $44,146,000 or
25.2%. SG&A expenses were 17.0% and 18.5% of revenues in the
first nine months 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 open systems storage
group, international direct selling offices and OEM
programs. SG&A expenses are expected to increase in dollar
terms in the fourth quarter of 1995.
-13-
EMC CORPORATION
Investment Income and Interest Expense
Investment income was $16,770,000 in the first nine months
of 1995 compared with $15,549,000 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 the first nine months of 1995
due to investments made in the first quarter of 1995 at
which time interest rates were higher than interest rates
over the same period in 1994.
Interest expense decreased in the first nine months of 1995
from the first nine months of 1994, primarily due to
conversions of the Debentures in March 1995.
Provision for Income Taxes
The provision for income taxes was $89,802,000 and
$72,912,000 in the first nine months of 1995 and 1994,
respectively, which resulted in effective tax rates of 28.2%
and 29.7%, respectively. The effective tax rate in the
first nine months of 1995 decreased from the same period in
1994 as a result of utilization of foreign net operating
losses and the realization of tax benefits associated with
the Company's tax strategies. The Company provides for income
taxes based upon its estimate of full year earnings on a
country-by-country basis.
Earnings Fluctuations
Due to (i) customers' tendencies to make purchase decisions
late in each fiscal quarter, (ii) the desire by customers to
evaluate new, more expensive products for longer periods of
time, (iii) the timing of product and technology
announcements by the Company and its competitors, and (iv)
fluctuating currency exchange rates, the Company's period to
period revenues and earnings can fluctuate significantly.
-14-
EMC CORPORATION
FINANCIAL CONDITION
Cash and cash equivalents were $208,997,000 and $240,506,000
at September 30, 1995 and December 31, 1994. In the first
nine months of 1995, the Company's working capital increased
by $231,392,000 from $600,341,000 at December 31, 1994 to
$831,733,000 at September 30, 1995. In the first nine months
of 1994, the Company's working capital increased by
$34,977,000, from $516,876,000 at January 1, 1994 to
$551,853,000 at October 1, 1994, mainly due to increased
receivable and inventory balances.
In the first nine months of 1995, cash and cash equivalents
decreased by $31,509,000. Cash used by operating activities
was $668,000 as a result of increased receivable and
inventory balances which offset increased net income and
taxes payable balances. The increase in receivables
resulted principally from customers making purchase
decisions late in the quarter and the Company's granting of
certain extended payment terms due to competitive pressures
in the marketplace generally. The increase in inventory is
primarily attributable to an increase in the number of units
in the field for trade-in, evaluation and other purposes
and an increase in production inventory of finished
units. Cash used by investing activities was $35,028,000
caused by additions to property, plant and equipment of
$61,560,000, offset by net maturities of long-term investments
of $26,083,000 and losses on disposals of property and equipment
of $449,000. Cash provided by financing activities was
$3,745,000 caused primarily by issuances of common stock
of $12,776,000, pursuant to stock option exercises and
stock purchase plan activity, partially offset by payments
of long-term obligations of $9,161,000.
In October 1995, the Company announced an agreement to
acquire McDATA Corporation, a leader in data network
switching solutions, in a stock transaction which is
currently valued at approximately $235,000,000. The Company
intends to account for the transaction as a pooling of
interests.
At September 30, 1995, the Company had available for use its
credit lines of $65,000,000. 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.
-15-
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.
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.
A trial is set for March 1996.
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 6. Exhibits and Reports on Form 8-K
(a)Exhibits
11.1 Computation of Primary and Fully Diluted
Net Income Per Share (filed herewith).
(b)Reports on Form 8-K
No reports on Form 8-K were filed by the Company for
the quarter ended September 30, 1995.
-16-
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: November 14, 1995 By: /s/ Colin G. Patteson
Colin G. Patteson
Vice President, Chief Financial Officer
and Treasurer (Principal Financial Officer)
By: /s/ William J. Teuber, Jr.
William J. Teuber, Jr.
Vice President and Controller
(Principal Accounting Officer)
-17-
EMC CORPORATION
EXHIBIT INDEX
Exhibit 11.1 Computation of Primary and Fully Diluted Net
Income Per Share
<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 Nine months ended
Sept.30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
Primary
Net income $70,925 $69,395 $228,707 $172,804
Add back interest expense
on convertible notes 2,440 2,440 7,320 7,292
Less tax effect on interest
expense on convertible
notes (976) (976) (2,928) (2,917)
Net income for purposes of
calculating primary net
income per share $72,389 $70,859 $233,099 $177,179
Weighted average shares
outstanding during
the period 215,531,575 195,075,782 209,982,246 192,189,894
Common equivalent
shares 19,198,208 23,255,484 20,245,579 24,367,834
Common and common equivalent
shares outstanding for
purpose of calculating
primary net income
per share 234,729,783 218,331,266 230,227,825 216,557,728
Primary net income
per share (1) $0.31 $0.32 $1.01 $0.82
Fully Diluted
Net income $70,925 $69,395 $228,707 $172,804
Add back interest expense
on convertible notes
and debentures 2,440 3,156 7,934 9,644
Less tax effect on interest
expense on convertible
notes and debentures (976) (1,263) (3,173) (3,859)
Net income for purpose of
calculating fully diluted
net income per share $72,389 $71,288 $233,468 $178,589
Common and common equivalent
shares outstanding for
purpose of calculating
primary net income
per share 234,729,783 218,331,266 230,227,825 216,557,728
Incremental shares to reflect
full dilution (1) -0- 15,884,597 4,161,578 17,195,237
Total shares for purpose
of calculating fully
diluted net income
per share 234,729,783 234,215,863 234,389,403 233,752,965
Fully diluted net income
per share (1) $0.31 $0.30 $1.00 $0.76
(1) See Footnote 4 in Notes to Interim Consolidated Financial Statements.
<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> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 208,997
<SECURITIES> 0
<RECEIVABLES> 534,453
<ALLOWANCES> 7,244
<INVENTORY> 350,189
<CURRENT-ASSETS> 1,139,858
<PP&E> 309,012
<DEPRECIATION> 109,942
<TOTAL-ASSETS> 1,571,862
<CURRENT-LIABILITIES> 308,125
<BONDS> 246,738
<COMMON> 2,187
0
0
<OTHER-SE> 1,006,985
<TOTAL-LIABILITY-AND-EQUITY> 1,571,862
<SALES> 1,288,581
<TOTAL-REVENUES> 1,288,581
<CGS> 641,423
<TOTAL-COSTS> 641,423
<OTHER-EXPENSES> 336,553
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,598
<INCOME-PRETAX> 318,509
<INCOME-TAX> 89,802
<INCOME-CONTINUING> 228,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 228,707
<EPS-PRIMARY> $1.01
<EPS-DILUTED> $1.00
</TABLE>
