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_____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 1, 1994
Commission File No 1-9853
EMC CORPORATION
Massachusetts No. 04-2680009
State of Incorporation I.R.S. Employer
Identification Number
171 South Street, Hopkinton, Massachusetts 01748
Telephone: (508) 435-1000
_____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended: Commission File Number 1-9853
January 1, 1994
EMC CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2680009
(State or other jurisdiction (I.R.S. Employer Identification
of organization or incorporation) Number)
171 South Street
Hopkinton, Massachusetts 01748
(Address of principal executive offices, including zip code)
(508) 435-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: Name of Each Exchange on
Which Registered:
Common Stock, $.01 par value New York Stock Exchange
6 1/4% Convertible Subordinated New York Stock Exchange
Debentures due 2002
4 1/4% Convertible Subordinated New York Stock Exchange
Notes due 2001
Securities registered pursuant to Section 12(g) of the Act:
None
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
1.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by
nonaffiliates of the registrant was $3,547,255,313 as of March
15, 1994.
The number of shares of Common Stock, $.01 par value,
outstanding as of March 15, 1994 was 189,183,150.
DOCUMENTS INCORPORATED BY REFERENCE
The information required in response to Part III of Form
10-K is hereby incorporated by reference to the specified
portions of the registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 11, 1994.
2.
ITEM 1. BUSINESS
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 develops its
products by integrating technologically advanced industry
standard components and devices with Company designed
proprietary controller technology to produce storage
products that enhance the performance, reliability,
availability and functionality of computer systems.
The Company's principal products are based on
Integrated Cached Disk Array ("ICDA") technology which
combines high-speed semiconductor cache memory with an array
of industry standard disk drives. ICDA-based products
represented approximately 91% of the Company's combined
revenues in 1993 and 74% in 1992. These products include
the Symmetrix series of high speed ICDA-based storage
systems for the IBM and IBM-compatible mainframe computer
market. In November 1992, the Symmetrix product line was
expanded to include the Model 5500 which features storage
capacities of up to 360 gigabytes ("GB's"), hardware and
channel redundancy, full system battery backup,
nondisruptive component upgrade and replacement, and remote
diagnostic features. The Company also markets the Harmonix
series of high speed ICDA-based storage systems for the IBM
AS/400 midrange computer market. Additionally, the Company
provides solid-state disk ("SSD") devices, main memory
products and tape back-up systems.
The customers for these products are located worldwide
and represent a cross section of industries and government
agencies that range in size from Fortune 500 companies to
small businesses. The Company markets its products in North
and South America, Europe and the Asia Pacific region
through its direct sales force, distributors and original
equipment manufacturers ("OEMs"). All products sold
directly to end-users are maintained and serviced by the
Company or third party providers. Products sold through
distributors or OEMs are normally maintained by the
reseller.
EMC, a Massachusetts corporation incorporated in 1979,
has its corporate headquarters located at 171 South Street,
Hopkinton, Massachusetts.
3.
Company Strategy
The Company's objective is to be the leading provider
of high performance, high reliability storage systems to
selected mainframe and midrange computer markets. The
Company has recently announced its intention to expand its
storage products into the client/server market as well.
Over the past decade the technological advances made in
central processing units ("CPUs") have far exceeded
advances made in the area of data storage systems. These
CPU advances have created an input/output bottleneck which
limits the performance of computer systems running
applications requiring frequent access to data. The
Company's products have been designed to significantly
reduce this performance bottleneck. The major elements of
the Company's strategy are set forth below.
Innovative Architectural Design
The Company has developed a common architecture, called
MOSAIC:2000, on which its principal products are based.
This architectural framework is based upon a modular design
and industry standard interfaces that allow for new
technologies to be incorporated more rapidly than with
traditional architectures and enhances portability to non-
IBM environments. This facilitates upgrades and
enhancements that can not only extend the useful life of the
Company's storage systems, but also extend the useful life
of the customer's CPU.
Proprietary Software Technology
The Company's products achieve high performance levels
due in part to proprietary software and microcode controller
technology. This proprietary controller technology,
combined with large amounts of high speed cache memory and
arrays of industry standard disk drives, creates storage
devices that provide computer systems with enhanced
performance, reliability and functionality. The Company
believes that by dedicating significant resources to the
further development of this proprietary controller
technology, it should be able to maintain the performance
leadership it has established.
Multi-Channel Distribution Focus
The Company's strategy is to continue to expand in
four distinct product markets: the IBM and IBM-
compatible mainframe market, the IBM AS/400 midrange
market, the client/server market and the OEM market. To
access these markets the Company has adopted a multi-
channel distribution approach. The Company utilizes a
direct salesforce in the U.S., Canada and Europe, and
plans to develop a direct salesforce in Japan. The
Company also utilizes third party distributors and OEMs.
4.
Mainframe Market
The mainframe storage market is a multibillion dollar
market which the Company has penetrated with its ICDA-based
products. The Company believes that it is currently the
leading manufacturer of storage systems that allow users to
bridge the gap between the speed at which the CPU can
process data and the traditional storage device's ability to
provide the data to the CPU.
Product sales to the mainframe storage market
represented approximately 85% of EMC's 1993 product revenue
and 70% of 1992 product revenue. In September 1990, EMC
introduced the Symmetrix series of ICDA-based products for
IBM and IBM compatible mainframe computers. Symmetrix was
the first commercially available disk storage system for the
IBM mainframe marketplace that utilized arrays of smaller,
industry standard 51/4" disk drives as an alternative to
the larger more expensive disk drives that traditionally had
been used with mainframe computers. By combining these
smaller disk drives with an integrated control unit, large
amounts of cache memory and battery backup, Symmetrix
provides the user with what the Company believes to be the
highest performing disk storage product available in the
marketplace today. As a result of this integrated design,
Symmetrix also occupies a smaller footprint and has lower
operating costs than data storage systems based on
conventional technology.
Since the introduction of the first Symmetrix model,
the Model 4400 with a maximum capacity of 24 GB's, EMC has
added additional models that are both smaller (the Model
4200 with a capacity of up to 8 GB's) and larger (the Model
4800 with a capacity of up to 90 GB's) than the original.
In November 1992, EMC introduced a new series of Symmetrix
products called the Model 5500 (with a capacity of up to 360
GB's). The Model 5500 has many built-in redundancy features
allowing for continuous operation of the disk storage
system. This is particularly attractive to users whose data
storage requirements are dependent upon high performance and
continuously available data for mission critical
applications. Each Model 5500 contains EMC's Auto Call
feature, which automatically generates a diagnostic phone
call from the unit to EMC's 24 hour Remote Support Facility
if the unit detects a possible problem. The Company has
continually enhanced the Symmetrix family of products with
additional features and improved performance through a
combination of hardware and microcode enhancements. The
announcements in September 1993 included the Model 4208-2S
which increased the capacity of the Symmetrix Model 4200
from 8 GB's to 15 GB's by using 31/2" disk technology. The
wide range of Symmetrix models allows EMC to broaden its
marketing efforts to address the storage needs of virtually
all sizes of IBM mainframe computer users.
EMC also designs and manufactures plug compatible main
memory products for IBM air cooled model 9121 mainframe
computers and provides plug-in storage modules for IBM 3990-
3 cache control units.
5.
Midrange Market
The Company believes that there is a large portion of
the IBM AS/400 midrange storage market that has not been
penetrated by the Company's ICDA-based products.
Midrange revenues grew modestly during 1993, with
product sales to the midrange storage market representing
approximately 15% of EMC's product revenue in 1993, as
compared to 28% in 1992. In 1992, the Company introduced
the first ICDA-based storage systems for the IBM AS/400
midrange computer market. This series of products, called
Harmonix, uses both 51/4" and 31/2" disk drives integrated
with cache memory to provide high performance, high capacity
storage solutions for the AS/400 user. During 1993, the
Company expanded the Harmonix product line to allow the
Company to reach new users by including models featuring
high capacity at a lower cost as well as other models
emphasizing high availability.
EMC also offers the Champion line of 8 millimeter
("mm") based Intelligent Cached Tape Subsystems, which
provides AS/400 users with high capacity, high performance
and unattended backup. These products feature an advanced
controller design and cache buffer combined with the ability
to interleave data to up to four 8mm tape transports
simultaneously, greatly improving the speed of the backup
operations. In August 1993, EMC acquired Magna Computer
Corporation ("Magna"), a manufacturer of tape backup systems
for the AS/400 marketplace. This acquisition augmented the
Champion line of tape products by adding 4 mm and additional
8 mm and reel to reel tape products to the Company's product
portfolio.
The Company also provides main memory upgrades for
selected AS/400 CPU models.
OEM Market
The MOSAIC:2000 framework and the inherent flexibility
of its open system make EMC's products well suited to be
sold by strategic OEMs in partnership with the Company.
Since January 15, 1992, EMC has had an OEM agreement
with Unisys for the sale of Unisys compatible Symmetrix
products. This agreement, which currently extends to
December 31, 1996, requires Unisys to meet certain minimum
purchase requirements and provides Unisys with exclusive
worldwide marketing rights to these products. During 1993,
Unisys purchased over $39 million of such products under
this agreement, which accounted for 5% of the Company's 1993
combined revenues.
On February 11, 1993, the Company entered into a three-
year OEM agreement with Bull. Pursuant to the agreement,
EMC granted Bull exclusive worldwide marketing rights, with
the exception of Japan, to EMC's Symmetrix 4800 series of
ICDA-based storage products for Bull mainframe computers,
provided that Bull purchases all of its requirements for
high speed cached disk array storage devices from EMC and
meets certain minimum purchase requirements. During 1993,
Bull purchased approximately $22 million of such products,
which accounted for 3% of the Company's 1993 combined
revenues.
6.
Client/Server Market
In May 1993, the Company formed a Client/Server
Division to develop storage products for the growing
client/server market. The Company believes that this market
requires sophisticated data management technology to allow
for sharing of information while maintaining data integrity
and reliability. The Company's efforts are currently
focused on hiring engineering and marketing personnel and
developing a marketing strategy and business plan for this
marketplace. Meaningful contributions to the Company's
revenue from this business unit are not expected until at
least 1995.
Epoch Systems
In August 1993, the Company completed the acquisition
of Epoch Systems, Inc. ("Epoch"). Epoch is a leading
supplier of client/server data management software for
certain Unix-based systems. It is the Company's intent to
expand Epoch's software product line to be compatible with
multiple hardware and software platforms. The Company
currently plans to incorporate various Epoch software
products into its development of products for the
client/server market. Epoch utilizes a variety of
distribution channels to sell its software products,
including telemarketing, value added resellers, OEMs and
system integrators.
Copernique, S.A.
In January 1994, the Company acquired the majority
interest in Copernique S.A. ("Copernique") formerly held by
Cap Gemini Sogeti S.A. Copernique, located near Paris,
France, specializes in high-performance data management
hardware and software systems. The Company believes that
this acquisition will enable the Company to extend its
offerings in the field of distributed Information Technology
systems and to strengthen its European presence.
Marketing and Customers
EMC markets its products through multiple distribution
channels, including its direct sales force, selected
distributors and OEMs. The Company has a direct sales
presence throughout North America and Europe, and uses
distributors as its primary distribution channel in the Asia
Pacific region, the Middle East, Africa and South America.
Over the past two years, the Company has expanded its North
American and European sales and marketing organizations
significantly and currently is expanding its sales and
marketing organizations in the Asia Pacific region. In this
regard, in January 1994, the Company and its existing
Japanese distributor jointly formed a company in Japan, in
which the Company holds a majority interest. Through this
entity, the Company will acquire a direct salesforce in
Japan, which it then plans to further expand. During 1993,
the Company derived 65% of its product revenue from
shipments into North and South America, 30% from shipments
7.
into Europe, the Middle East and Africa, and 5% from
shipments into the Asia Pacific region. EMC's marketing and
sales personnel are organized into mainframe and midrange
customer groups to ensure that the necessary expertise is
available to understand the customer's requirements and
properly apply the Company's product solutions. In
addition, the Company has dedicated personnel to support the
needs of its distributors and OEM customers, both
domestically and internationally.
Operations
EMC's products utilize the Company's engineering
designs, with industry standard and semi-custom components
and subsystems. The majority of EMC's products are
manufactured and tested at the Company's facilities in
Hopkinton, Massachusetts and Cork, Ireland. Products
manufactured by subcontractors in the
U.S. and Europe are assembled in accordance with production
standards and quality controls established by EMC. The
Company discontinued board assembly at its Canovanas, Puerto
Rico facility in February 1994 and such assembly is now
being performed by existing subcontractors. The Company
believes its present level of manufacturing capacity will be
sufficient to accommodate its requirements.
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 51/4" and 31/2" disk devices, which the
Company purchases from a small number of qualified
suppliers, and 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
during 1993, because of high industry demand, the Company
experienced delays in deliveries of high density DRAMs and
disk drives needed to satisfy orders for ICDA products. If
such shortages were to intensify, the Company could lose
some time-sensitive customer orders.
EMC considers it crucial that there be a close working
relationship between its product development staff and its
marketing organization. The Company believes that its
success is in part tied to its ability to respond quickly to
the needs and problems of end-users in each of its markets.
As the marketing organization identifies these end-user
needs, the Company utilizes advanced computer-aided
engineering and design ("CAE/CAD") technology to expedite
the design and production of new products.
The Company has implemented a Total Quality Management
philosophy to ensure the quality of its designs,
manufacturing process and suppliers.
The Company's U.S. operation currently holds an ISO9001
Certificate of Registration from National Quality Assurance,
Ltd. This internationally recognized endorsement of ongoing
quality management represents the highest level of
certification available. The Company's Irish manufacturing
operation also holds ISO9002 certification. In the first
quarter of 1993, the Company's principal manufacturing
8.
operation in Hopkinton was awarded Class A MRP II status by
an independent evaluation organization.
Manufacturing Risks
The Company's products operate near the limits of
electronic and physical performance and are designed and
manufactured with relatively small performance margins. If
flaws in design or production occur, the Company could
experience a rate of failure in its products that would
result in substantial costs for the repair or replacement of
defective products and potential damage to the Company's
reputation. Continued improvement in manufacturing
capabilities, control of supplier quality and manufacturing
costs will be critical factors in the future growth of the
Company. The Company frequently revises and updates
manufacturing and test processes to address engineering and
component changes to its products and evaluates the
reallocation of manufacturing resources among its
facilities. The Company's failure to monitor, develop and
implement appropriate test and manufacturing processes for
its products, especially the Symmetrix and Harmonix series,
could have substantial adverse effects on the Company's
operation and ultimately on its financial results.
Competition
EMC competes primarily with IBM in the sale of storage
products in the IBM and IBM-compatible mainframe and
midrange marketplaces. The Company believes that it has a
number of competitive advantages over IBM, especially in the
areas of product performance, cost of ownership, and time-to-
market. While the Company believes that its ICDA technology
provides a significant technological advantage, it is likely
that competition in this area will increase significantly in
the future which could adversely affect the Company's
profitability. The Company also realizes that IBM has
certain competitive advantages including significantly
greater financial and technological resources, a larger
distribution capability, earlier access to customers and a
greater level of customer loyalty. Other important elements
of competition in the computer storage industry are product
reliability and quality, continuing technological
improvements, marketing and customer service, and product
design.
There are also a number of independent competitors in
each of EMC's markets. In the mainframe market those
competitors include Hitachi Data Systems, Inc., Amdahl
Corporation and Storage Technology Corporation ("STK"). In
the midrange market, competition has historically come from
smaller companies, as well as IBM and STK. EMC believes
that it has similar advantages over these midrange
competitors, but increased competition from these or future
entrants could adversely effect the Company's profitability.
Technological Factors
The computer data storage industry is characterized by
rapidly changing technology and user needs which require
ongoing technological development and introduction of new
products. Recognizing this fact, the Company has developed
a storage system architecture called MOSAIC:2000 to allow
9.
the Company to take advantage of technological developments.
By employing this architectural approach to product
development, EMC is able to quickly integrate new
technologies into its basic design. The Company works
closely with its suppliers to understand their technology
direction and to plan for the integration of this technology
into its product architecture. Both the Symmetrix series
and Harmonix series are products derived from the
MOSAIC:2000 architectures.
In 1993, sales of the Symmetrix series remained a
significant source of revenues for the Company and sales of
such products are expected to continue to be a significant
source of revenues. In April 1992, EMC released a new
series of midrange disk storage systems, the Harmonix
series, which have also become a significant source of
revenues for the Company. The Company expects competition
in the sales of ICDA-based products to increase and there
can be no assurance that the Symmetrix series and Harmonix
series of products will continue to achieve market
acceptance. Significant delays in the development of ICDA
technology for future products or product enhancements would
be to the advantage of the Company's competitors, many of
whom have significantly greater resources, and could
ultimately affect the Company's financial condition.
Furthermore, the continued development of ICDA technology
and its incorporation into the Company's future generations
of products cannot be assured even with significant
additional investments.
Product Development
EMC's ability to compete successfully in present and
future markets depends upon the timely development and
introduction of products offering price/performance or
capacity advantages and compatibility with the computer
systems for which they are designed. Achieving these goals
requires that the Company remain abreast of changing
technology and design products that operate within the
architecture of various computer systems and deliver
performance or capacity advantages not offered by the
original systems developer or by other storage competitors.
Moreover, the computer industry is subject to rapid
technological developments. Consequently, achieving such
goals may become more difficult, costly and time consuming
as a result of technological developments that cannot now be
foreseen. Research and development costs were $58,977,000,
$33,591,000 and $22,496,000 for the fiscal years ended
January 1, 1994, January 2, 1993 and December 28, 1991,
respectively.
Seasonality
The Company has from time to time experienced seasonal
revenue fluctuations in the third quarter of its fiscal year
which it believes are due primarily to business slowdowns
associated with European vacation periods.
Working Capital
It is typical for companies in the computer industry to
require significant amounts of working capital to finance
inventory and receivables. The Company believes that its
working capital requirements are in accordance with industry
practices. In 1993, the Company financed its working
capital requirements from internally generated funds and
existing cash and investments. This also includes the net
proceeds of $100,141,000 received from the sale in March
1993 of the Company's common stock and the net proceeds
received from the sale in December 1993 and January 1994 of
$229,600,000 of 41/4% Convertible Subordinated Notes due
2001 ($29,600,000 of which was sold upon exercise of the
underwriters' over-allotment option in January 1994).
10.
In 1993, the Company invested an additional $29,100,000 in
long term investments. As of February 1, 1994, the Company
had available for use its entire $15,000,000 credit line.
However, the Company may elect to borrow capital at any time
to fund new growth opportunities. As the Company's product
mix shifts to higher cost products with longer sales cycles,
the Company's need for working capital is expected to
increase.
Backlog
The Company manufactures its products on the basis of
its forecast of near-term demand and maintains inventory in
advance of receipt of firm orders from customers. Orders
are generally shipped by the Company shortly after receipt
of the order. Customers may reschedule orders with little
or no penalty. For these reasons, the Company's backlog at
any particular time is not indicative of future sales
levels.
Employees
As of February 28, 1994, EMC had approximately 2452
employees, including temporary employees. Continued growth
in the Company's business will require the hiring of
additional qualified personnel. Under current market
conditions, the Company does not expect to encounter any
difficulty in hiring such personnel. None of the Company's
employees is represented by a labor union, and the Company
has never suffered an interruption of business as a result
of a labor dispute. The Company considers its relations
with its employees to be good.
Dependence Upon Key Personnel
The Company's success is highly dependent upon senior
management and other key employees, the loss of whom could
adversely affect the Company. The Company also believes
that its future success will depend in large part upon its
ability to attract and retain additional key employees, of
which there can be no assurance.
Environment
The Company's manufacturing facilities are subject to
numerous laws and regulations designed to protect the
environment, particularly from wastes generated as a result
of assembling certain EMC products. The cost of compliance
with such regulations has not to date involved a significant
expense or had a material effect on the capital
expenditures, earnings or competitive position of the
Company.
11.
Patents
EMC has received seven U.S. patents and has numerous
applications pending in the U.S. and foreign patent offices
relating to the Symmetrix and Harmonix series of products.
The Company also has a number of other patent and patent
applications filed in the U.S. and foreign patent offices.
While the Company believes that the pending applications
relate to patentable devices or concepts, there can be no
assurance that any patents will issue or that any patent
issued can be successfully defended. In any case, the
Company believes that patents are of less significance in
its industry than such factors as innovative skills,
technological expertise and the management ability of its
personnel.
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.
Recent Developments
On February 11, 1994 the Board of Directors of the
Company voted to adopt the provisions of Section 50A of
Chapter 156B of the Massachusetts General Laws. Pursuant to
Section 50A, the Board of Directors is presently divided
into three classes, having staggered terms of three years
each after an initial transition period. Under Section 50A
and the by-laws of the Company, the Board of Directors may
determine the total number of directors and the number of
directors to be elected at any Annual Meeting of
Stockholders or Special Meeting in lieu thereof. The Board
of Directors has fixed at eight the total number of
directors and has fixed at two the number of directors to be
elected at the 1994 Annual Meeting. Of the current total of
eight directors, two Class I Directors have terms expiring
at the 1994 Annual Meeting, three Class II Directors have
terms expiring at the 1995 Annual Meeting and three Class
III Directors have terms expiring at the 1996 Annual
Meeting.
On March 15, 1994, the Company acquired certain assets
of Array Technology Corporation ("Array"), a wholly-owned
subsidiary of Tandem Computers Incorporated. Array, located
in Boulder, Colorado, specializes in the development and
manufacture of Redundant Arrays of Independent Disk (RAID)
storage solutions. The Company believes that this
acquisition will enhance the Company's ability to develop
additional advanced storage solutions for those customers
and markets that have a need for them.
12.
Financial Information About Foreign and Domestic Operations
and Export Sales
The Company is active in only one business segment:
designing, manufacturing and marketing high performance
storage products. Information by geographic area is
presented below with exports shown in their area of origin.
Sales and marketing operations outside the U.S. are
conducted through sales subsidiaries and branches located
principally in Europe and by direct sales from the parent
corporation or its Irish manufacturing subsidiary. The U.S.
market amounted to greater than 95% of the Company's sales,
income and identifiable assets in the North/South America
segment.
Intercompany transfers between geographic areas are
accounted for at prices which are designed to be
representative of unaffiliated party transactions.
(in thousands)
Europe,
North/ Middle- Consol-
South East, Asia Elimi- idated
America Africa Pacific nations Total
1993
Sales $526,771 $251,363 $ 4,487 $ --- $782,621
Transfers
between
areas 100,237 83,726 --- (183,963) ---
Total sales 627,008 335,089 4,487 (183,963) 782,621
Income
(loss) from
operations 107,512 70,324 (990) 3,582 180,428
Identifiable
assets at
year end 684,576 192,682 2,383 (49,995) 829,646
1992
Sales $263,465 $111,117 $11,124 $ --- $385,706
Transfers
between
areas 83,813 36,303 --- (120,116) ---
Total sales 347,278 147,420 11,124 (120,116) 385,706
Income from
operations 34,915 25,008 1,255 (12,603) 48,575
Identifiable
assets at
year end 252,308 98,232 4,309 (16,069) 338,780
1991
Sales $200,008 $51,411 $8,918 $ --- $260,337
Transfers
between
areas 35,946 15,036 --- (50,982) ---
Total sales 235,954 66,447 8,918 (50,982) 260,337
Income
(loss) from
operations 22,798 (6,406) (531) 4,517 20,378
Identifiable
assets at
year end 164,096 41,608 4,166 (4,367) 205,503
13.
ITEM 2. PROPERTIES
The Company's mainframe marketing, research and
development, customer service and manufacturing functions
are located in a 229,000 square foot complex at 171 South
Street in Hopkinton, Massachusetts. This building complex
consists of a building purchased in December 1986, and an
adjacent building constructed in 1988 and occupied in
January 1989. In October 1992, EMC purchased a 62,000
square foot facility and an additional 6 acres of land at
42 South Street in Hopkinton, Massachusetts. This facility
has been renovated by the Company and is in use as its
customer demonstration center and for midrange marketing,
research and development and manufacturing. In November
1993, the Company transferred certain of its corporate and
administrative functions to a leased 80,000 square foot
building at 35 Parkwood Drive in Hopkinton, Massachusetts.
Production currently is carried on in the Hopkinton
facility at 171 South Street, and a leased 87,000 square
foot facility in Cork, Ireland (of which 40,000 square feet
was added in 1993). The Company discontinued production at
its Canovanas, Puerto Rico facility in February 1994 and
plans to close the facility completely in March 1994.
The Company also leases space for its sales and
service offices worldwide.
ITEM 3. LEGAL PROCEEDINGS
On June 10, 1993, STK filed suit against EMC in the
United States District Court for the District of Colorado
(Case No. 93-S-1238) 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 and denied STK's allegations. In addition,
EMC counterclaimed against STK alleging that the patents in
suit are invalid and unenforceable. In the counterclaim,
EMC seeks unspecified damages, attorney's fees, costs and
interest. Discovery in the matter is currently in process.
A scheduling order has been entered and a trial date has
been set for October 1994.
The Company is involved in other litigation which it
considers routine and incidental to its business, and EMC's
management does not expect the results of any of these
actions to have a material adverse effect on EMC's business
or financial condition.
14.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Stockholders was held on November
17, 1993. The stockholders approved amendments to the
Company's Articles of Organization to increase the number of
shares of authorized common stock, $.01 par value, to
330,000,000 shares from the previous authorization of
150,000,000 shares and to authorize a new class of capital
stock consisting of 25,000,000 shares of series preferred
stock, $.01 par value. The results of the votes for each of
these proposals were as follows:
1. To amend the Articles of Organization to increase the
authorized common stock:
For: 78,244,601
Against: 3,954,529
Abstain: 186,232
Delivered But Not Voted -0-
2. To amend the Articles of Organization to authorize a
new class of capital stock consisting of series preferred
stock:
For: 61,759,842
Against: 11,012,647
Abstain: 289,621
Delivered But Not Voted 9,323,252
15.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
Name Age Position
Richard J. Egan 58 Chairman of the Board and Director
Michael C. Ruettgers 51 President, Chief Executive Officer
and Director
W. Paul Fitzgerald 53 Senior Vice President, Finance and
Administration, Chief Financial
Officer, Treasurer and Director
John R. Egan 36 Executive Vice President,
Sales and Marketing and Director
Frank M. Keaney 57 Senior Vice President,
North American Sales
Richard B. Plummer 48 Senior Vice President and General
Manager, Client/Server Systems Division
Harold P. Ano 45 Senior Vice President, Marketing
L. Daniel Butler 55 Senior Vice President, Customer Service
Michael L. Schoonover 45 Senior Vice President, Operations
Paul T. Dacier 36 Vice President and General Counsel
Michael R. Grilli 54 Vice President-Sales, Europe,
Middle East and Africa
Paul E. Noble, Jr. 38 Vice President and General Manager,
OEM Operations
Colin G. Patteson 45 Vice President and Controller
Michael G. Salter 57 Vice President and General Manager,
Asia Pacific
Richard J. Egan is a founder of the Company and has
served as a Director since the Company's inception in 1979.
He was elected Chairman of the Board of the Company in
January 1988. Prior to January 1988, he was also President
of EMC. From 1979 to January 1992, he was Chief Executive
Officer of the Company. He is also a director of Cognition
Corporation, a CAD/CAM software supplier.
Michael C. Ruettgers served as Executive Vice
President, Operations of EMC from July 1988 to October 1989,
when he became President. From September 1989 to January
1992, Mr. Ruettgers served as Chief Operating Officer of
EMC. In January 1992, he became Chief Executive Officer and
in May 1992, he was elected a Director of the Company.
Before joining EMC, he was Chief Operating Officer at
Technical Financial Services, Incorporated, a high
technology consulting company which he joined in February
1987. Prior to that, he was a Senior Vice President of
Keane, Inc., a software application consulting firm. He is
also a director of Keane, Inc. and Cross Comm, Inc., a
manufacturer of computer network products.
16.
W. Paul Fitzgerald has been a Director of the Company
since March 1991. Since January 1988, he has been Senior
Vice President, Finance and Administration and Chief
Financial Officer of EMC. In October 1991, Mr. Fitzgerald
was elected Treasurer of the Company. From January 1985 to
January 1988, he was Vice President, Finance of EMC.
John R. Egan became Executive Vice President, Sales and
Marketing of EMC in January 1992 and was elected a Director
in May 1992. Previously he held several executive positions
with the Company, including Executive Vice President,
International Sales and Executive Vice President, Marketing.
Frank M. Keaney was Vice President, North American
Sales of EMC from June 1989 to October 1989, when he became
Senior Vice President, North American Sales. Prior to June
1989, he was Vice President, Sales of Data General
Corporation, a computer manufacturer.
Richard B. Plummer joined EMC in March 1990 as Senior
Vice President of Engineering and became Senior Vice
President and General Manager, Client/Server Systems
Division in June 1993. Previously, he held a number of
executive positions with Apollo Computer Inc., a computer
manufacturer, and its successor, the Apollo Systems Division
of Hewlett-Packard Company.
Harold P. Ano joined EMC in April 1990 as Senior Vice
President of Marketing. Previously, he held several
executive positions with Wang Laboratories, Inc., a computer
manufacturer, most recently as Senior Vice President and
General Manager of the Wang Microsystems Division.
L. Daniel Butler joined EMC in August 1990 as Vice
President of Customer Service and became Senior Vice
President of Customer Service in February 1993. Prior to
joining EMC, Mr. Butler was the founder and President of
DMX, Inc., an electronic board assembling company, from
October 1989 to August 1990. From October 1987 to September
1989, he was Director of Logistics Planning at Data General
Corporation, a computer manufacturer.
Michael L. Schoonover joined EMC in April 1991 as Vice
President of Manufacturing Operations and in February 1993
he became Senior Vice President of Operations at EMC. From
September 1988 through March 1991, Mr. Schoonover was Vice
President of Operations at Westerbeke Corporation, a
manufacturer of marine power products.
Paul T. Dacier joined EMC in March 1990 as General
Counsel and became Vice President and General Counsel in
February 1993. Prior to joining EMC he was Senior Counsel,
Corporate Operations at Apollo Computer Inc., a computer
manufacturer, from January 1987 to January 1990.
17.
Michael R. Grilli has been Vice President-Sales,
Europe, Middle East and Africa since October 1993. From
January 1993 to September 1993, he was Vice President,
Europe and from October 1989 to December 1992, he was
Southern Area Manager for EMC. From 1982 to September 1989,
Mr. Grilli was a Regional Manager for Hitachi Data Systems
Inc., a computer manufacturer.
Paul E. Noble, Jr. has been Vice President and General
Manager of OEM Operations at the Company from June 1992 to
present. From June 1989 through May 1992 he was a Vice
President of Sales and from March 1987 to May 1989, he was
Vice President of Customer Service at EMC.
Colin G. Patteson joined EMC in January 1989 as
European Controller. In March 1991 he became Corporate
Controller and in February 1993 he became Vice President and
Controller.
Michael G. Salter joined EMC in October 1991 as Vice
President, International Operations. In July 1992 he became
Vice President of International Distribution and in January
1994 he became Vice President and General Manager, Asia
Pacific and President, EMC Japan K.K. Prior to joining EMC,
Mr. Salter was President of Technical Financial Services,
Incorporated, a high technology consulting company, from
1982 to September 1991.
____________
Richard J. Egan, Chairman of the Board and a Director, is the
husband of Maureen E. Egan, a Director of the Company. He also is
the brother-in-law of W. Paul Fitzgerald, the Company's Senior
Vice President, Finance and Administration, Chief Financial
Officer, Treasurer and Director. W. Paul Fitzgerald is the brother
of Maureen E. Egan. John R. Egan, Executive Vice President, Sales
and Marketing and a Director of the Company is the son of Richard
J. and Maureen E. Egan.
____________
The President and Treasurer are elected annually to
serve until the first meeting of the Board of Directors
following the next annual meeting of stockholders and until
their successors are elected and qualified. The other
executive officers are appointed to serve in such positions
and serve at the pleasure of the Board of Directors.
**************************************************************
EMC, Symmetrix, Harmonix, ICDA, Champion and MOSAIC:
2000 are trademarks of EMC Corporation. IBM and AS/400 are
registered trademarks of IBM Corporation.
18.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
EMC's common stock $.01 par value (the "Common Stock")
began trading on the over-the-counter market on April 4,
1986 under the NASDAQ symbol EMCS. On March 22, 1988, the
Company's stock began trading on the New York Stock Exchange
under the symbol EMC.
The following stock splits were effected in the form of
stock dividends in the following amounts and at the
following dates: three-for-two stock split effective
November 24, 1992, for stockholders of record on November 9,
1992, a two-for-one stock split effective June 8, 1993, for
stockholders of record on May 24, 1993, and a two-for-one
stock split effective December 10, 1993, for stockholders of
record on November 26, 1993.
The following table sets forth the range of high and
low prices on the New York Stock Exchange for the past two
years during the fiscal periods shown, adjusted to reflect
the effect of stock splits.
Fiscal 1993 High Low
First Quarter $ 7.19 $ 5.13
Second Quarter 11.31 5.81
Third Quarter 19.00 10.13
Fourth Quarter 19.50 14.75
Fiscal 1992 High Low
First Quarter $ 2.81 $ 1.94
Second Quarter 3.10 1.81
Third Quarter 3.50 2.53
Fourth Quarter 6.06 3.00
The Company has never paid cash dividends on its Common
Stock. While subject to periodic review, the current policy
of its Board of Directors is to retain all earnings to
provide funds for the continued growth of the Company.
19.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
FIVE YEAR SELECTED CONSOLIDATED FINANCIAL DATA
EMC Corporation
(amounts in thousands except per share amounts)
Summary of Operations
1993 1992 1991 1990 1989
Revenues $782,621 $385,706 $260,337 $189,734 $146,719
Operating
income (loss) 180,428 48,575 20,378 3,888 (28,102)
Net income
(loss) 127,122 29,508 11,409 3,527 (21,566)
Net income
(loss) per
weighted average
common share
(fully diluted) $0.60 $0.16 $0.07 $0.02 $(0.14)
Weighted average
common shares
(fully diluted) 217,225 190,548 166,220 158,523 151,725
Other Statistics
Working capital $516,876 $149,335 $ 77,033 $ 81,177 $ 76,885
Total assets 829,646 338,780 205,503 167,547 145,029
Long-term
obligations 274,029 76,093 16,165 16,814 15,959
Stockholders'
equity $419,094 $168,266 $135,009 $113,620 $101,993
In addition to common stock equivalents, fully diluted earnings
per share for 1993 reflect the dilutive effects of the Company's
4 1/4% Convertible Subordinated Notes due 2001.
Fully diluted earnings per share for 1993 and 1992 reflect the
dilutive effects of the Company's 6 1/4% Convertible Subordinated
Debentures due 2002.
Excludes current portion of long-term debt.
20.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table represents certain statement of
operations information stated as a percentage of revenues.
Fiscal year ended
January 1, January 2, December 28,
1994 1993 1991
Revenues:
Net sales 96.8% 94.7% 94.5%
Service and rental income 3.2 5.3 5.5
100.0 100.0 100.0
Cost and expenses:
Cost of sales and service 48.7 53.7 54.1
Research and development 7.5 8.7 8.6
Selling, general
and administrative 20.8 25.0 29.5
Operating income 23.0 12.6 7.8
Investment income and
interest (expense), net --- (0.3) 0.3
Other (expense),
income, net --- (1.1) (1.0)
Income before income taxes 23.0 11.2 7.1
Provision for income taxes 6.8 3.5 2.7
Net income 16.2% 7.7% 4.4%
Revenues
Revenues increased by $396,915,000, or 103% in 1993 from
1992 compared to an increase of $125,369,000, or 48%, in 1992
from 1991. Revenues from net sales increased by $392,495,000,
or 107%, in 1993 from 1992 levels, while revenues from service
and rental income increased by $4,420,000, or 22%, in 1993 from
1992.
In 1993, the Company continued to experience a significant
increase in the percentage of its revenues derived from the
sale of disk systems compared to the percentage derived from
the sale of its other products. This increase was due
primarily to the market acceptance and unit sales growth from
products featuring the Company's Integrated Cached Disk Array
("ICDA") technology, which includes the Symmetrix and Harmonix
series of products. Revenues from the Symmetrix series in the
IBM, Bull and Unisys mainframe markets increased to
$620,178,000 in 1993 from $235,720,000 in 1992, an increase of
$384,458,000 or 163%. Introduced in March 1992, the Harmonix
series generated revenues of $92,672,000 in 1993 and
$49,147,000 in 1992. In 1993, the Company generated
21.
ITEM 7 continued...
approximately 91% of its revenue from sales of ICDA-based
products, versus approximately 74% in 1992. It is expected
that revenues from ICDA-based products will continue to be a
significant component of the Company's revenues in 1994.
Revenues from memory products, including Solid State Disk
("SSD") devices, declined significantly in 1993. Competitive
pricing pressures and reduced unit sales of midrange memory
products contributed to the decline.
Sales to customers in the North and South American market
increased by $257,798,000, or 99%, in 1993 due primarily to
increased unit sales of the Symmetrix series in both the IBM
and Unisys mainframe storage markets. Revenues on shipments
from the North and South American segment were $526,771,000 and
$263,465,000 in 1993 and 1992, respectively.
Revenues from midrange products increased by $17,853,000
in 1993 over 1992. A decline in the sales of IBM AS/400
compatible memory products was offset by increased revenues
from the sales of Harmonix and other midrange tape and storage
products. Unit sales of the Harmonix series accounted for 85%
of the revenues from midrange disk storage systems into the
North and South American markets.
Sales to customers in the markets in Europe, the Middle
East and Africa increased by $118,272,000, or 110%, in 1993 due
primarily to a growth in unit sales of the Symmetrix series in
the IBM and Bull mainframe storage markets. Revenues on
shipments from this segment were $251,363,000 and $111,117,000
in 1993 and 1992, respectively.
Sales to customers in the markets in the Asia Pacific
region increased by $20,844,000, or 125%, during 1993, due
primarily to the growth in unit sales of the Symmetrix product
line. Revenues from midrange products in this market segment
remained relatively constant during 1993 with increased
Harmonix sales offsetting decreased unit sales of other
midrange disk storage systems and decreased sales of IBM AS/400
compatible memory products. Revenues on shipments from this
segment were $4,487,000 and $11,124,000 in 1993 and 1992,
respectively.
On January 15, 1992, EMC entered into a two-year OEM
agreement for the sale of the Company's mainframe products as
Unisys compatible products to Unisys. Revenues from product
sales under this agreement aggregated $39,529,000 in 1993 and
$43,486,000 in 1992. In September 1993, the Company and Unisys
extended the term of the original agreement for up to an
additional three years, through December 31, 1996.
In February 1993, the Company entered into a three-year
OEM agreement with Bull. Pursuant to this agreement, EMC
grants Bull the exclusive worldwide marketing rights, with the
exception of Japan, to EMC's Symmetrix 4800 series of ICDA-
based storage products for Bull mainframe computers, provided
that Bull purchases all of its requirements for high speed
cached disk array storage devices from EMC. Failure by Bull in
the future to purchase at least 45% of forecasted purchases at
22.
ITEM 7 continued...
designated times, on a cumulative basis, may result in loss of
exclusivity to Bull. Revenues from product sales under this
agreement were $22,298,000 in 1993.
Historically, the Company has competed with OEM
manufacturers and other independent suppliers on the basis of
product performance, quality and price. The Company expects
that there will be performance and pricing pressures with
respect to the sale of its products throughout 1994.
Cost of Sales and Service
As a percentage of revenue, cost of sales amounted to
48.7% in 1993, 53.7% in 1992, and 54.1% in 1991. The
improvement in the cost of sales percentage in 1993 versus 1992
and 1991 was due primarily to increased sales of the higher
margin Symmetrix products through the Company's direct sales
force, and, to a lesser extent, improved component reliability,
establishment of key vendor alliances, aggressive production
management and increased focus on Total Quality Management.
These improvements were partially offset by lower product
margins from the Company's OEM business, and pricing pressures
in the midrange business, especially sales through distribution
channels. Continuing margin pressure in Mainframe and Midrange
markets may require the Company to adapt and re-assess its cost
structure and marketing strategy.
Research and Development
Research and development ("R&D") expenses were
$58,977,000, $33,591,000, and $22,496,000 in 1993, 1992, and
1991, respectively. As a percentage of revenue, such expenses
were 7.5%, 8.7% and 8.6% in 1993, 1992, and 1991, respectively.
The Company is committed to utilizing state-of-the-art CAE/CAD
design tools to sustain its design and development efforts.
Increases in spending reflect the cost of such tools and the
cost of additional technical staff. The Company expects to
continue to spend substantial amounts for R&D in 1994.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses
increased by $66,200,000, or 69% in 1993, $19,567,000, or 26%,
in 1992 and $19,328,000, or 34%, in 1991. As a percentage of
revenues, SG&A expenses were 20.8%, 25.0% and 29.5% in 1993,
1992 and 1991, respectively.
The increases in all three years were due primarily to
costs associated with additional sales and support personnel,
and related overhead costs, both domestically and
internationally, required to support the increased revenue
levels and the expansion of the Company's OEM and international
distribution programs. Advertising and sales promotion costs
were approximately $9,555,000 in 1993, $4,964,000 in 1992 and
$3,857,000 in 1991. SG&A expenses are expected to increase in
dollar terms in 1994, in line with expected growth in revenues.
23.
ITEM 7 continued...
Investment Income and Interest Expense
Investment income increased to $7,988,000 in 1993 from
$3,830,000 in 1992 and $2,718,000 in 1991. Income was earned
from investments in cash equivalents and long-
term investments and from sales-type leases of the Company's
products. Investment income in 1993 increased due to higher
average cash balances caused primarily by the proceeds from the
offering of EMC common stock, $.01 par value (the "Common
Stock") in March 1993, the proceeds from the sale of the
Convertible Subordinated Notes (the "Notes") in December 1993,
and a full year's availability of funds from the issuance of
the Convertible Subordinated Debentures due 2002 (the
"Debentures") in March 1992. Investment income increased in
1992 due to higher average cash balances during the year
resulting primarily from the proceeds received from the
issuance of the Debentures. Lower interest rates throughout
1993 and 1992 partially offset the higher cash balances.
Interest expense increased to $6,043,000 in 1993 from
$4,865,000 in 1992 and $2,011,000 in 1991. The increase of
$1,178,000 in 1993 from 1992 levels was due
primarily to the provision for interest payments due on the
Debentures and to interest accrued in December for the Notes.
Other Expense, Net
Net other expense amounted to $2,717,000, $4,465,000 and
$2,578,000 in 1993, 1992 and 1991, respectively. Other expense
for 1993 related primarily to foreign currency transaction
losses of $1,838,000, losses on sales of fixed assets and
customer service equipment of $2,324,000, amortization of
technology license costs of $417,000 and $428,000 of other
expense, net of $2,290,000 of other income, primarily from
technology license fees. Other expense for 1992 related
primarily to a net loss from the disposal of customer service
equipment and other fixed assets of $2,324,000, the
amortization of technology license costs of $1,667,000, a
provision for litigation settlement of $1,057,000, and foreign
currency transaction costs of $1,093,000, net of other income
of $1,676,000 consisting primarily of technology license fees.
Other expense in 1991 consisted primarily of currency
transaction costs of $1,542,000 and amortization of technology
license costs of $1,566,000, net of other income of $530,000.
Provision for Taxes
The provision for income taxes was $52,534,000 in 1993,
$13,567,000 in 1992 and $7,098,000 in 1991, which resulted in
effective tax rates of 29%, 32% and 38% in 1993, 1992 and 1991,
respectively. The decrease in the effective tax rate in 1993
from 1992 is mainly attributable to an increase of tax benefits
from the Company's Irish operations. The decrease in the
effective tax rate in 1992 from 1991 is mainly attributable to
the utilization of foreign net operating loss carryforwards.
24.
ITEM 7 continued...
See Note B of the Notes to Consolidated Financial
Statements for detailed analysis of the Company's effective tax
rates for 1993, 1992 and 1991. Also see Note A for a
discussion of the impact of the adoption of Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes.
Financial Position
At the end of the fiscal years 1993, 1992 and 1991, cash
and cash equivalents totalled $345,300,000, $62,103,000 and
$22,406,000, respectively. The $283,197,000 increase in 1993
over 1992 is primarily attributable to $100,141,000 net
proceeds received in the March 1993 sale of 17,350,000 shares
of Common Stock, and $195,000,000 net proceeds received in the
December 1993 offering of $200,000,000 of the Notes.
Additionally, the Company invested $29,100,000 in long term
investments. The $39,697,000 increase in 1992 over 1991 is
primarily attributable to the net proceeds received from the
Debentures issued in March 1992, which were used to support the
introduction of new products based on ICDA technology,
including the Symmetrix Model 5500 and the Harmonix product
lines, to fund a $30,021,000 increase in property, plant and
equipment and an increase in long-term investments of
$12,594,000, and to support accounts receivable and inventory
growth related to the expansion of revenues. In 1993, working
capital increased by $367,541,000 from $149,335,000 to
$516,876,000. In 1992, working capital increased by
$72,302,000 from $77,033,000 to $149,335,000.
The Company maintains substantial inventory levels which
are required for extensive test cycles and customer evaluations
of high cost products. Inventory increased by $61,095,000 or
107% from 1992 to 1993, supporting revenue growth of 103%.
Inventory levels increased by $27,152,000, or 91%, from 1991 to
1992 supporting a 48% growth in revenues.
Net trade and notes receivable increased by $60,304,000,
or 62%, from 1992 to 1993 associated with a revenue increase of
103% during the same period.
As of February 1, 1994, the Company had available for use its
entire $15,000,000 credit line. Based on its current operating
and capital expenditure forecasts, the Company believes funds
generated from operations, its available line of credit, and the
net proceeds to the Company from the Common Stock Offering, the
Debentures and the Notes will be adequate to finance its
operations.
To date, inflation has not had a material impact on
the Company's financial results.
25.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and the Board of Directors of EMC
Corporation:
We have audited the accompanying consolidated balance
sheets of EMC Corporation as of January 1, 1994 and
January 2, 1993, and the related consolidated statements
of operations, stockholders' equity, and cash flows for
each of the three years in the period ended January 1,
1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to
express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of EMC Corporation as of
January 1, 1994 and January 2, 1993, and the consolidated
results of its operations and its cash flows for each of
the three years in the period ended January 1, 1994 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
February 1, 1994
26.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
January 1, January 2,
1994 1993
ASSETS
Current assets:
Cash and cash equivalents $ 345,300 $ 62,103
Trade and notes receivable less
allowance for doubtful accounts
of $5,262 and $2,915 in 1993
and 1992, respectively 157,225 96,921
Inventories 118,263 57,168
Deferred income taxes 24,199 10,588
Other assets 5,023 6,372
Total current assets 650,010 233,152
Long-term investments, at cost 50,392 21,292
Notes receivable, net 21,808 8,538
Property, plant and equipment, net 96,480 69,039
Deferred income taxes 2,761 ---
Other assets, net 8,195 6,759
Total assets $829,646 $338,780
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
obligations $ 1,262 $ 2,379
Accounts payable 44,179 27,648
Accrued expenses 59,755 30,676
Income taxes payable 20,892 17,372
Deferred Revenue 7,046 5,742
Total current liabilities 133,134 83,817
Deferred revenue 3,389 5,804
Deferred income taxes --- 4,800
Long-term obligations:
4 1/4% Convertible Subordinated
Notes due 2001 200,000 ---
6 1/4% Convertible Subordinated
Debentures due 2002 59,260 60,000
Notes payable 14,013 14,449
Capital lease obligations 756 1,644
Total liabilities 410,552 170,514
Commitments and contingencies (Notes H and J)
Stockholders' equity:
Series Preferred Stock, par value
$.01; authorized 25,000,000 shares --- ---
Common stock, par value $.01;
authorized 330,000,000 shares;
issued 189,936,120 and 166,505,268
shares in 1993 and 1992, respectively 1,899 1,665
Additional paid-in capital 226,668 105,873
Deferred compensation (3,552) (4,545)
Retained earnings 193,045 65,923
Cumulative translation adjustment 1,537 (147)
Treasury stock,at cost, 2,607,996 shares (503) (503)
Total stockholders' equity 419,094 168,266
Total liabilities and
stockholders' equity $829,646 $338,780
The accompanying notes are an integral part of the
consolidated financial statements.
27.
ITEM 8 continued...
EMC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
For the years ended
January 1, January 2, December 28,
1994 1993 1991
Revenues:
Net sales $757,793 $365,298 $245,893
Service and rental income 24,828 20,408 14,444
782,621 385,706 260,337
Costs and expenses:
Cost of sales and service 380,755 207,279 140,769
Research and development 58,977 33,591 22,496
Selling, general and
administrative 162,461 96,261 76,694
602,193 337,131 239,959
Operating income 180,428 48,575 20,378
Investment income 7,988 3,830 2,718
Interest expense (6,043) (4,865) (2,011)
Other expense, net (2,717) (4,465) (2,578)
Income before income taxes 179,656 43,075 18,507
Provision for income taxes 52,534 13,567 7,098
Net income $127,122 $ 29,508 $ 11,409
Net income per weighted average
common share (primary) $0.65 $0.17 $0.07
Net income per weighted average
common share (fully diluted) $0.60 $0.16 $0.07
The accompanying notes are an integral part of the
consolidated financial statements.
28.
ITEM 8 continued...
CONSOLIDATED STATEMENTS OF CASH FLOWS
EMC Corporation
(amounts in thousands)
For the years ended
January 1, January 2, December 28,
1994 1993 1991
Cash flows from operating activities:
Net income $127,122 $29,508 $11,409
Adjustments to reconcile net
income to net cash provided (used)
by operating activities:
Depreciation and amortization 21,741 18,289 10,136
Deferred income taxes (21,172) (10,492) (290)
(Gain) loss on disposal of
property and equipment 2,324 2,232 (47)
Changes in assets and liabilities:
Trade and notes receivable (73,252) (29,686) (28,699)
Inventories (60,937) (26,312) (3,645)
Other assets 4,381 (2,997) (7,076)
Accounts payable 16,500 13,709 1,930
Accrued expenses 28,893 11,588 7,057
Income taxes payable 3,520 10,356 2,721
Deferred revenue (1,100) 8,936 749
Total adjustments (79,102) (4,377) (17,164)
Net cash provided (used)
by operating activities 48,020 25,131 (5,755)
Cash flows from investing activities:
Additions to property and equipment (51,303) (30,021) (20,961)
Proceeds from sale of property and
equipment 574 1,280 2,578
Purchase of long-term investments (29,100) (12,594) (3,683)
Net cash used by investing
activities (79,829) (41,335) (22,066)
Cash flows from financing activities:
Sale of common stock, net of
issuance costs 112,451 4,765 10,943
Disqualifying dispositions of
stock options exercised 8,776 - 289
Purchase of treasury stock - - (17)
Issuance of 6 1/4% Convertible
Subordinated Debentures due 2002,
net of issuance costs - 58,208 -
Issuance of 4 1/4% Convertible
Subordinated Notes due 2001,
net of issuance costs 194,987 - -
Payment of long-term and short-term
obligations (2,430) (6,397) (2,687)
Issuance of long-term and short-term
obligations - 2,004 7,511
Net cash provided by financing
activities 313,784 58,580 16,039
Effect of exchange rate changes on cash 1,222 (2,679) (71)
Net increase (decrease) in cash and
cash equivalents 281,975 42,376 (11,782)
Cash and cash equivalents at
beginning of year 62,103 22,406 34,259
Cash and cash equivalents at
end of year 345,300 $62,103 $22,406
The accompanying notes are an integral part of the
consolidated financial statements.
29.
ITEM 8 continued...
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
EMC Corporation
(amounts in thousands except share amounts)
For the three years ended January 1, 1994
Common Stock Additional Deferred Cumulative Total
Par Paid-in Compen- Retained Translation Treasury Stock Stockholders'
Shares Value Capital sation Earnings Adjustment Shares Cost Equity
Balance, December 29, 1990 157,970,008 $1,579 $ 85,417 $ --- $25,006 $ 2,104 2,599,248 $(486) $113,620
Exercise of stock options 2,616,268 26 7,076 --- --- --- --- --- 7,102
Disqualifying disposition
of stock options exercised --- --- 289 --- --- --- --- --- 289
Issuance of common stock re-
lating to license agreement 2,250,000 23 3,818 --- --- --- --- --- 3,841
Purchase of stock for treasury --- --- --- --- --- --- 8,748 (17) (17)
Cumulative translation
adjustment --- --- --- --- --- (1,235) --- --- (1,235)
Net income --- --- --- --- 11,409 --- --- --- 11,409
Balance, December 28, 1991 162,836,276 1,628 96,600 --- 36,415 869 2,607,996 (503) 135,009
Exercise of stock options 3,668,992 37 4,304 --- --- --- --- --- 4,341
Issuance of stock options --- --- 4,969 (4,969) --- --- --- --- ---
Amortization of deferred
compensation --- --- --- 424 --- --- --- --- 424
Cumulative translation
adjustment --- --- --- --- --- (1,016) --- --- (1,016)
Net income --- --- --- --- 29,508 --- --- --- 29,508
Balance January 2, 1993 166,505,268 1,665 105,873 (4,545) 65,923 (147) 2,607,996 (503) 168,266
Exercise of stock options 5,839,240 58 11,424 --- --- --- --- --- 11,482
Disqualifying disposition
of stock options exercised --- --- 8,776 --- --- --- --- --- 8,776
Issuance of common stock re-
lating to stock offering 17,350,000 174 99,857 --- --- --- --- --- 100,031
Issuance of common stock re-
lating to bond conversions 241,612 2 738 --- --- --- --- --- 740
Amortization of deferred
compensation --- --- --- 993 --- --- --- --- 993
Cumulative translation
adjustment --- --- --- --- --- 1,684 --- --- 1,684
Net Income --- --- --- --- 127,122 --- --- --- 127,122
Balance January 1, 1994 189,936,120 $1,899 $226,668 $(3,552) $193,045 $1,537 2,607,996 $(503) $419,094
The accompanying notes are an integral part of the
consolidated financial statements.
30.
ITEM 8 continued...
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EMC Corporation
A. Summary of Significant Accounting Policies
Basis of Presentation
Certain prior year amounts in the financial statements
have been reclassified to conform with the 1992
presentation. The Company's fiscal year ends on the
Saturday closest to December 31. Fiscal 1992 was a 53
week year and fiscal 1993 and 1991 were 52 week years.
Principles of Consolidation
The consolidated financial statements include the
accounts of the Company and its subsidiaries. All
significant intercompany transactions and balances have
been eliminated.
In August 1993, EMC exchanged 9,443,996 shares of EMC
common stock, $.01 par value (the "Common Stock") for
all of the outstanding stock and stock options of Epoch
Systems, Inc. ("Epoch") and Magna Computer Corp.
("Magna"). These business combinations were accounted
for as poolings of interests. Accordingly, all
financial information has been restated as if the
transactions occurred at the beginning of the first
period presented. Epoch designs, manufactures, markets
and supports high performance client/server data
management software. Magna manufactures and markets
IBM compatible AS/400 tape products. Magna and Epoch
are now wholly owned subsidiaries of EMC.
The separate company results for 1993 before the
combinations were consummated were:
Eight Months Ended 8/30/93
Revenues Net Income/(loss)
EMC $410,369,000 $61,993,000
Epoch 16,429,000 (447,000)
Magna 4,994,000 (472,000)
Total $431,792,000 $61,074,000
31.
ITEM 8 continued...
Revenue Recognition
The Company generally recognizes revenue from sales when
products are shipped. Revenue from rentals is recorded
over the life of the lease. Revenue from sales-type
leases is recognized at the net present value of
expected future payments, and the resulting discount is
accreted to investment income over the collection
period. Revenue from service contracts is recognized
over the life of the contracts.
Foreign Currency Translation
The functional currency of operations in Europe is the
local currency. The assets and liabilities of these
operations are translated into U.S. dollars at the
exchange rates in effect at the balance sheet date and
income and expense items are translated at average
rates for the period. The Company's other foreign
operations are generally dependent on the U.S. dollar.
The assets and liabilities of these operations are
translated into U.S. dollars at exchange rates in
effect at the balance sheet date except for inventories
and property and equipment which are translated at
historical exchange rates. Income and expense items
are translated at average rates for the period except
for cost of sales and depreciation which are translated
at historical exchange rates.
Consolidated transaction losses included in other
expense, net amounted to $1,838,000 in 1993, $1,093,000
in 1992, and $1,542,000 in 1991. Accumulated net
translation adjustments of $1,537,000 and $(147,000)
are included in stockholders' equity at January 1, 1994
and January 2, 1993, respectively.
32.
ITEM 8 continued...
Cash and Cash Equivalents and Long-Term Investments
Cash and cash equivalents include $310,723,000 and
$31,482,000 of temporary cash investments at January
1, 1994 and January 2, 1993, respectively. Temporary
cash investments consist primarily of money market
funds and repurchase agreements stated at cost plus
accrued interest which approximates market. Short term
investments which have a maturity of ninety days or
less are considered cash equivalents.
Long-term investments at cost, consisting of
intermediate debt instruments, amounted to $50,392,000
in 1993 and $21,292,000 in 1992 with fair market values
of $50,042,000 and $21,373,000, respectively. The
Company intends to hold these investments to maturity.
Investment income consists principally of interest and
dividend income, including interest on notes receivable
from sales-type leases.
Statement of Cash Flows Supplemental Information
January 1, January 2, December 28,
1994 1993 1991
Cash paid during the years ended
For:
Income taxes $59,739,000 $13,474,000 $4,025,000
Interest 6,486,000 3,797,000 3,076,000
During the year ended January 1, 1994, the Company issued 241,612
shares of Common Stock upon the conversion of $740,000 of Debentures.
In 1991 the Company purchased from an unrelated corporation a
license for $3,000,000 cash, and 563,000 shares of Common Stock
valued at approximately $3,841,000. Amortization of the license
cost of approximately $6,841,000 was completed in 1993.
Inventories
Inventories are stated at the lower of cost (first in,
first out) or market.
33.
ITEM 8 continued...
Property, Plant and Equipment
Property, plant and equipment are recorded at cost.
Depreciation is computed on a straight-line basis over
the estimated useful lives of the assets, as follows:
Furniture and fixtures 7 years
Equipment 3-7 years
Vehicles 5 years
Improvements 5 years
Buildings 25-31 1/2 years
Customer service spare parts inventory is included in
equipment and depreciated over three years for assets
placed in service in 1992, and four years for assets
placed in service prior to 1992.
When assets are retired or disposed of, the cost and
accumulated depreciation thereon are removed from the
accounts and the related gains or losses are included
in operations.
Warranty and Research and Development
The Company accounts for warranty expense on an accrual
basis. Research and development costs are expensed as
incurred.
Income Taxes
In 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes", which requires recognition of deferred tax
liabilities and assets for the expected future tax
consequences of events that have been included in the
financial statements or tax returns. Under this
method, deferred tax liabilities and assets are
determined based on the difference between the
financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse
(see Note B).
Prior to 1992, the provision for income taxes was based
on income and expenses included in the accompanying
consolidated statements of operations. Differences
between taxes so computed and taxes payable under then
applicable statutes and regulations were classified as
deferred taxes arising from timing differences.
34.
ITEM 8 continued. . . .
Tax credits are generally recognized as reductions of
income tax provisions in the year in which the credits
arise. Since 1989, the Company has not provided for
the U.S. income tax liability on earnings of its
foreign subsidiaries as these earnings are considered
to be permanently reinvested. At January 1, 1994,
undistributed earnings of foreign subsidiaries
approximated $71,606,000. Taxes for the Company's
foreign subsidiaries are provided for at applicable
statutory rates. The Company is currently undergoing
an examination of its 1990 and 1991 tax returns by the
Internal Revenue Service.
Net Income Per Share
Net income per share was computed on the basis of
weighted average common and dilutive common equivalent
shares outstanding. Primary and fully diluted weighted
average shares outstanding and earnings for 1993
reflect the dilutive effects of the Notes. Fully
diluted weighted average shares outstanding and
earnings for 1993 and 1992 reflect the dilutive effects
of the Debentures. Net income for computation of fully
diluted earnings per share includes an add back of
$2,496,000 and $1,768,000 in 1993 and 1992,
respectively, representing interest expense, net of its
tax effect. Primary weighted average shares for net
income per share computations amounted to 196,486,160,
171,951,696 and 164,414,816 in 1993, 1992 and 1991,
respectively. Fully diluted weighted average shares
were 217,224,726, 190,547,980 and 166,220,132 in 1993,
1992 and 1991, respectively. These calculations of
weighted average shares have been restated to reflect
all stock splits to date (see Note I).
B. Income Taxes
Provision for income taxes consists of:
1993 1992 1991
Federal and State
Current $69,176,000 $16,791,000 $7,176,000
Deferred (21,830,000) (5,863,000) (407,000)
47,346,000 10,928,000 6,769,000
Foreign
Current 4,530,000 3,155,000 212,000
Deferred 658,000 (516,000) 117,000
5,188,000 2,639,000 329,000
Total provision for
Income taxes $52,534,000 $13,567,000 $7,098,000
35.
ITEM 8 continued...
Income (loss) before income taxes for foreign operations
amounted to approximately $49,392,000 in 1993,
$12,353,000 in 1992 and ($5,909,000) in 1991.
The components of the deferred tax provision are:
1993 1992 1991
Unrepatriated earnings $ (5,772,000) $ 926,000 $ 697,000
Sales-type leases (434,000) (129,000) (1,192,000)
Intercompany profit elimination 2,457,000 (1,831,000) 225,000
Accounts receivable related
items (7,972,000) (389,000) (142,000)
Inventory related items (5,973,000) (1,369,000) 93,000
Depreciation (377,000) (931,000) (162,000)
Deferred revenue (374,000) (2,317,000) ---
Warranty reserve (1,378,000) (262,000) (191,000)
Health Insurance reserve (868,000) (145,000) ---
Other (481,000) 68,000 382,000
$(21,172,000) $(6,379,000) $ (290,000)
A reconciliation of the Company's income tax provision
to the statutory federal tax rate is as follows:
1993 1992 1991
Statutory federal tax rate 35.0% 34.0% 34.0%
State taxes, net of federal tax benefits 3.1 3.9 3.8
Puerto Rico tax benefits (.9) (2.2) (6.3)
Ireland tax benefits (6.4) (.6) (3.4)
Net operating losses not benefited .6 2.0 14.5
Tax credits (1.3) (.6) (3.2)
Utilization of foreign net operating
loss carryforwards (.7) (5.4) ---
Other (.2) .4 (1.0)
29.2% 31.5% 38.4%
The Company's Puerto Rico operation enjoys a ten year exemption,
expiring in 1995, on up to 90% of EMC Caribe's income as
determined under Federal tax laws. EMC Caribe ceased manufacturing
operations in February, 1994. The Company's manufacturing facility
in Ireland enjoys a 10% tax rate on income from manufacturing
operations until the year 2000. The impact of these benefits on the
Company's earnings per share was $0.06 for the year ended January 1,
1994, $.01 for the year ended January 2, 1993 and $0.01 for the year
ended December 28, 1991.
36.
ITEM 8 continued...
The Company's adoption of FAS 109 in 1992 did not have a material
effect on earnings. The Company increased its domestic deferred
tax asset in 1993 as a result of U.S. legislation enacted during
1993 increasing the federal corporate tax rate from 34% to 35%.
The components of the current and non-current deferred tax assets
and liabilities as of January 1, 1994 and January 2, 1993
were as follows:
Current Deferred Tax Assets 1993 1992
Sales Reserve $ 9,644,000 $ 2,259,000
Warranty Reserve 2,527,000 1,149,000
Inventory Reserve 8,625,000 1,909,000
Deferred Intercompany Profit 671,000 3,128,000
Other Reserves 2,805,000 1,200,000
Other Assets 1,722,000 943,000
Puerto Rico Tollgate Tax (854,000) ---
Domestic NOL Carryforward 4,928,000 ---
Foreign NOL Carryforward 4,355,000 8,227,000
Research and Development Credit
Carryforward 1,151,000 ---
Valuation Reserve (11,375,000) (8,227,000)
Total Current Deferred Tax Assets $24,199,000 $10,588,000
Non-Current Deferred Tax Assets/(Liabilities)
Deferred Revenue 1,787,000 2,317,000
Other Reserves 524,000 150,000
Other Liabilities 450,000 (241,000)
Puerto Rico Tollgate Tax --- (6,626,000)
Property Plant & Equipment --- (400,000)
Total Non-Current Deferred Tax
Assets/(Liabilities) $2,761,000 $(4,800,000)
37.
ITEM 8 continued...
The Company's valuation reserve has increased as a result of
the inclusion of the current deferred tax assets of Epoch
and Magna which were acquired during 1993.
The Company has net operating loss carryforwards as of
January 1, 1994 which are summarized as follows:
Carryforward period/
Approximate value Years during which losses
Country in U.S. dollars will expire
Belgium $ 1,018,000 Indefinite
France 1,012,000 5 years/1996
Italy 2,775,000 5 years/1995 - 1997
United Kingdom 6,122,000 Indefinite
United States 12,438,000 15 Years/2001- 2008
The U.S. losses relate to pre-acquisition losses of Epoch and Magna.
38.
ITEM 8 continued...
C. Inventories
Inventories consist of:
January 1, January 2,
1994 1993
Purchased parts $17,319,000 $ 7,711,000
Work-in-process 46,348,000 22,726,000
Finished goods 54,596,000 26,731,000
$118,263,000 $57,168,000
D. Notes Receivable
Notes receivable primarily from sales-type leases of
equipment, are stated net of discounts amounting to
approximately $4,753,000 and $2,484,000 and net of
allowance for doubtful accounts of $491,000 and $249,000
at January 1, 1994 and January 2, 1993, respectively.
Implicit interest rates range from 8% to 15%.
The payment schedule for such notes at January 1, 1994
is as follows:
Fiscal year Notes Receivable
1994 $15,278,000
1995 10,625,000
1996 8,715,000
1997 3,681,000
1998 1,388,000
Thereafter ---
Face value 39,687,000
Less amounts representing
interest 4,753,000
Present value 34,934,000
Less allowance for doubtful
accounts 491,000
34,443,000
Less current portion 12,635,000
Long-term portion $21,808,000
39.
ITEM 8 continued...
E. Property, Plant and Equipment
Property, plant and equipment consist of:
January 1, January 2,
1994 1993
Furniture and fixtures $ 4,278,000 $ 4,910,000
Equipment 102,670,000 70,909,000
Vehicles 923,000 1,661,000
Buildings and improvements 29,864,000 27,567,000
Land 1,870,000 1,870,000
Construction in progress 4,891,000 761,000
144,496,000 107,678,000
Accumulated depreciation
and amortization (48,016,000) (38,639,000)
$96,480,000 $69,039,000
F. Accrued Expenses
Accrued expenses consist of:
January 1, January 2,
1994 1993
Salaries and benefits $23,350,000 $11,555,000
Warranty 16,112,000 3,693,000
Other 20,293,000 15,428,000
$59,755,000 $30,676,000
G. Employee Compensation Plans
In 1983, the Company initiated a profit-sharing plan
(the "1983 Plan") for employees, whose eligibility to
participate is based on certain service requirements.
Contributions are made at the discretion of the Board
of Directors.
40.
ITEM 8 continued...
No profit-sharing contributions were made in 1993 or
1991. During December 1992 the Company made a profit-
sharing contribution to active employees who were
employed by the Company on or before January 1, 1992,
whose compensation was less than $60,000 for 1992 and
who did not participate in any bonus or incentive
program. The amount of the contribution was $248,000.
In July 1985, the Company supplemented the 1983 Plan
with a deferred compensation program for certain
employees. Under the program, which is qualified under
Section 401(k) of federal tax laws, the Company has
provided a matching contribution, as described below.
Effective January 1, 1993, the Company introduced a new
matching formula for the 1983 Plan. The Company
intends, at the end of each calendar quarter, to make a
contribution that matches 100% of the employee's
contribution up to a maximum of 2% of the employee's
quarterly compensation. Additionally, provided that
certain quarterly profit goals are attained, the
Company in succeeding quarters, will provide an
additional matching contribution of 1% of the
employee's quarterly compensation up to a maximum
quarterly matching contribution not to exceed 5% of
compensation. However, the Company's matching
contribution per participant has a quarterly limit of
$500. The Company's contribution amounted to
approximately $1,463,000 in 1993.
During 1992 and 1991, the Company made a contribution at
the end of each calendar quarter that matched 100% of
the employee's contribution up to a maximum of 2% of
the employee's quarterly compensation. Additionally,
provided that certain quarterly profit goals were
attained, the Company, in succeeding quarters, provided
an additional matching contribution of 1/2% of the
employee's quarterly compensation up to a maximum
quarterly matching contribution not to exceed 3 1/2% of
compensation. The Company's matching contribution per
participant had a quarterly limit of $500. The
Company's contribution amounted to approximately
$889,000 in 1992 and $600,000 in 1991.
In 1988, Epoch and in 1991, Magna, which are both wholly-
owned subsidiaries of the Company, instituted Retirement
Savings Plans under Section 401(k) of the Internal Revenue
Code. Eligible employees may elect to contribute to their
respective plans a percentage of their compensation up to the
maximum amount allowable by the Internal Revenue Code.
The Company does not offer a postretirement or
postemployment benefit plan.
41.
ITEM 8 continued...
H. Lease Commitments and Long-Term Obligations
Lease Commitments
The Company had $4,153,000 and $4,629,000 of equipment
leased under capital leases with accumulated
amortization of $1,975,000 and $1,428,000 at January 1,
1994 and January 2, 1993, respectively.
The Company leases office and warehouse facilities under
various operating leases. Facilities rent expense
amounted to $6,050,000, $4,404,000, $3,852,000 in 1993,
1992 and 1991, respectively. The Company's commitments
under its capital and operating leases are as follows:
Capital Operating
Fiscal Year Leases Leases
1994 $1,043,000 $7,409,000
1995 628,000 5,546,000
1996 92,000 3,603,000
1997 30,000 1,717,000
1998 --- 916,000
Thereafter --- 921,000
Total minimum lease payments 1,793,000 $20,112,000
Less amounts representing
interest 126,000
Present value of net minimum
lease payments 1,667,000
Less current portion 911,000
Long-term portion $ 756,000
Long-Term Obligations
Convertible Subordinated Notes
In December 1993, the Company issued $200,000,000 of
4 1/4% convertible subordinated notes due 2001 (the
"Notes"). The Notes are generally convertible into
shares of Common Stock of the Company at a conversion
price of $19.84 per share, subject to adjustment in
certain events. Interest is payable semiannually and
the Notes are redeemable at the option of the Company
at set redemption prices, plus accrued interest,
commencing January 1, 1997. Redemption prices range
from 100.61% to 102.43% of principal. In January 1994,
the Company issued approximately an additional
$30,000,000 in Notes in accordance with overallotment
provisions of the offering.
42.
ITEM 8 continued...
Convertible Subordinated Debentures
In March 1992, the Company issued $60,000,000 of 6 1/4%
convertible subordinated debentures due 2002 (the
"Debentures"), of which $740,000 has been converted as
of January 1, 1994. The Debentures are generally
convertible 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. Interest is payable semiannually and the
Debentures are redeemable at the option of the Company
at set redemption prices from April 1, 1995, which
range from 100.63% to 104.38% of principal.
In 1989, the Company obtained a $14,000,000 long-term
mortgage with an unrelated party at an interest rate of
10.5%. Borrowings under this mortgage are
collateralized by the Company's facility at 171 South
Street, Hopkinton, Massachusetts. The mortgage is
payable in monthly installments, calculated on a 30
year amortization schedule, with a lump sum payment of
approximately $12,835,000 due on April 1, 1999.
Payments remaining on notes are as follows:
Fiscal Year Amount Payable
1994 $1,537,000
1995 1,537,000
1996 1,537,000
1997 1,537,000
1998 1,537,000
Thereafter 13,296,000
Total minimum payments 20,981,000
Less amounts representing
interest 7,188,000
Present value of net payments 13,793,000
Less current portion 320,000
Long-term portion $13,473,000
The Company has one line of credit, which provides a
maximum of $15,000,000, at the bank's prime rate. At
January 1, 1994 and January 2, 1993, there were no borrowings
outstanding against the line. The Company must maintain
certain minimum financial ratios including a minimum level
of working capital and tangible net worth.
Another line provided a maximum of $1,000,000, payable on
demand, and collateralized by Company assets, which was
discontinued during 1993. At January 2, 1993, $645,000 was
outstanding against this line with interest accruing at 8.5%.
43.
ITEM 8 continued...
In January 1989, EMC purchased its premises in Ireland from
the Industrial Development Authority (IDA). The purchase
price of $1,180,000 was partially financed by an IDA grant
of $531,000. EMC Ireland paid a deposit of $65,000 and signed
a $584,000 note, payable over 5 years in semi-annual installments.
This debt was fully paid at January 1, 1994. In addition to
the $531,000 discussed above, the IDA granted the Company an
additional $259,000 for improvements to the premises. The
total grants of $790,000 are included in long-term obligations
and are amortized over a period of 25 years. The total
remaining unamortized grants at January 1, 1994 are $571,000,
of which $31,000 is current and $540,000 is long-term.
I. Common Stock, Preferred Stock and Stock Options
Common Stock
At the Stockholder meetings of the Company in 1993 and
1992, the stockholders approved amendments to the
Company's Articles of Organization to increase the
number of shares of authorized Common Stock, to
330,000,000 shares.
The following stock splits were effected in the form of
stock dividends in the following amounts and at the
following dates: a three-for-two stock split effective
November 24, 1992, for stockholders of record on
November 9, 1992, a two-for-one stock split effective
June 8, 1993, for stockholders of record on May 24,
1993, and a two-for-one stock split effective December
10, 1993, for stockholders of record on November 26,
1993.
All share and per share data have been restated to
reflect these splits.
Preferred Stock
At the Special Meeting of Stockholders of the Company
on November 17, 1993, the stockholders approved an
amendment to the Company's Articles of Organization to
authorize a new class of capital stock consisting of
25,000,000 shares of Series Preferred Stock, $.01 par
value, which may be issued from time to time in one or
more series, with such terms as the Board of Directors
may determine, without further action by the
stockholders of the Company, except as may be required
by applicable law or stock exchange rules.
Stock Options
The Board of Directors and stockholders adopted the EMC
Corporation 1993 Stock Option Plan (the "1993 Plan") to
provide qualified incentive stock options and
nonqualified stock options to key employees. A total
of 6,000,000 shares of Common Stock have been reserved
for issuance under this Plan.
44.
ITEM 8 continued...
Under the terms of the 1993 Plan the exercise price of
incentive stock options issued must be equal to at
least the fair market value of the Common Stock at the
date of grant. In the event that nonqualified stock
options are granted, the exercise price may be less
than the fair market value at the time of grant but not
less than par value which is $.01 per share. In
general, options become exercisable in equal annual
installments over the first five years after the date
of grant. As of January 1, 1994 there were no options
exercisable. During 1993, 852,000 options were granted
at an exercise price of $17.625, and no options were
canceled or exercised under the 1993 Plan. Shares
available for future options as of January 1, 1994
amounted to 5,148,000.
The Board of Directors and stockholders adopted the
1985 Stock Option Plan (the "1985 Plan") to provide
qualified incentive stock options and nonqualified
stock options to key employees. At the Annual Meeting
of the Company on May 13, 1992, the stockholders
approved an amendment to the 1985 Plan to increase the
number of shares available for grant to 36,000,000 from
27,000,000.
Under the terms of the 1985 Plan the exercise price of
incentive stock options issued must be equal to at
least the fair market value of the Common Stock at the
date of grant. In the event that nonqualified stock
options are granted, the exercise price may be less
than the fair market value at the time of grant but no
less than par value which is $.01 per share. In
general, options become exercisable in equal annual
installments over the first five years after the date
of grant. As of January 1, 1994 and January 2, 1993,
options exercisable approximated 3,648,000 and
4,436,000, respectively. There were no shares available
for future options as of January 1, 1994. Activity
under the 1985 Plan for the three years ended January
1, 1994 is as follows:
45.
ITEM 8 continued
Number of Exercise
Shares Price
Balance at 12/29/90 13,905,312 $.06 - 2.17
Granted in 1991 5,748,752 .06 - 1.98
Canceled in 1991 (2,387,880) .58 - 1.98
Exercised in 1991 (2,033,672) .06 - 1.56
Balance at 12/28/91 15,232,512 .06 - 2.17
Granted in 1992 8,595,600 1.42 - 3.71
Canceled in 1992 (948,900) .58 - 3.71
Exercised in 1992 (2,838,072) .58 - 1.98
Balance at 1/2/93 20,041,140 .06 - 3.71
Granted in 1993 3,537,200 6.47-17.63
Canceled in 1993 (331,000) .58 -12.44
Exercised in 1993 (5,448,069) .06 - 3.71
Balance at 1/1/94 17,799,271 $.06 -17.63
On July 17, 1992, certain executive officers of the
Company were granted non-qualified options to purchase
an aggregate of 3,900,000 shares of common stock under
the Company's 1985 Stock Option Plan at per share prices
ranging from $1.43 to $2.43. These prices represent 50%
to 85% of the per share fair market value at the date of
grant. The discount from fair market value has been
recorded as deferred compensation and is being charged
to earnings over the five year vesting period of the
options.
Generally, when shares acquired pursuant to the exercise
of incentive stock options are sold within one year of
exercise or within two years from the date of grant, the
Company derives a tax deduction measured by the amount
that the market value exceeds the option price at the
date the options are exercised.
On January 31, 1989, the Board of Directors adopted the 1989
Employee Stock Purchase Plan (the "1989 Plan") which was
approved and adopted by the shareholders of the Company on
May 10, 1989. Under the 1989 Plan, eligible employees of the
Company are given the option to purchase shares of common
stock at 85% of fair market value by means of payroll
deductions. At the Annual Meeting of the Company on May 12,
1993 the stockholders approved an amendment to the 1989 Plan
to increase the number of shares available from 2,700,000 to
3,900,000. Options are granted twice yearly, on January 1
and July 1, and are exercisable on the succeeding June 30 or
December 31. The purchase price for shares is the lower of
85% of the fair market value of the stock at the time of
grant or 85% of said value at the time of exercise. In 1993,
190,492 shares were exercised at $5.05 per share and 152,679
shares were exercised at $9.19 per share. In 1992, 292,088
shares were exercised at $1.47 per share, 290,436 shares were
exercised at $1.79 per share and 248,396 shares were
exercised at $2.55 per share. In 1991, 235,164 shares were
exercised at $.80 per share and 347,436 shares were exercised
at $1.13 per share.
46.
ITEM 8 continued...
At the Annual Meeting of the Company on May 12, 1992, the
stockholders adopted the 1992 EMC Corporation Stock Option
Plan for Directors (the "Directors Plan").
A total of 1,800,000 shares of Common Stock have been
reserved for issuance under the Directors Plan which is
administered by the Executive Stock Option and Compensation
Committee (the "Committee") of the Board of Directors. The
exercise price for each option granted under the Directors
Plan will be at a price per share determined by the Committee
at the time the option is granted, which price shall not be
less than 50% of the fair market value per share of Common
Stock on the date of grant. Options will be exercisable in
increments of 20% for the shares covered thereby on each of
the first through fifth anniversaries of the grant.
On May 12, 1993, a director was granted options to purchase
160,000 shares of Common Stock at a per share price of $8.25,
which represents 100% of the per share fair market value at
the date of grant. On May 12, 1992, a director was granted
options to purchase 240,000 shares of Common Stock at a per
share price of $1.26, which represents 50% of the per share
fair market value at the date of grant. The discount from
fair market value has been recorded as deferred compensation
and is being amortized to earnings over the five year vesting
period of the options. In 1993, options to purchase 48,000
shares were exercised at $1.26 per share. All stock option
plans and the employee stock purchase plan are administered
by the Compensation Committee.
J. 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 and denied
STK's allegations. In addition, EMC counterclaimed
against STK alleging that the patents in suit are
invalid and unenforceable. In the counterclaim, EMC
seeks unspecified damages, attorney's fees, costs and
interest. Discovery in the matter is currently in
process. A scheduling order has been entered and a
trial date has been set for October 1994.
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.
47.
ITEM 8 continued...
K. Off-Balance-Sheet Risk and Concentrations of Credit Risk
Off-Balance-Sheet Risk
The Company enters into forward exchange contracts to
hedge foreign currency transactions on a continuing
basis for periods consistent with its committed
exposures. The Company does not engage in currency
speculation. The Company's foreign exchange contracts
do not subject the Company to risk due to exchange rate
movements because gains and losses on these contracts
offset losses and gains on the assets, liabilities and
transactions being hedged. The maximum amount of
foreign currency contracts outstanding during 1993 and
1992 was $53,390,000 and $31,072,000, respectively. At
January 1, 1994 and January 2, 1993, the Company had
$50,354,000 and $19,243,000 of foreign exchange
contracts outstanding, respectively.
Concentrations of Credit Risk
Financial instruments which potentially subject the
Company to concentrations of credit risk consist
principally of temporary cash investments, long-term
investments and trade and notes receivables. The
Company places its temporary cash investments and long-
term investments with high credit quality financial
institutions and limits the amount of investment with
any one financial institution.
The credit risk associated with trade receivables is
minimal due to the large number of customers and their
broad dispersion over many different industries and
geographic areas. During 1993, no single customer
accounted for greater than 10% of the Company's
revenues. During 1992, one customer accounted for 13%
of the Company's revenues.
L. Segment Information
The Company is active in only one business segment:
designing, manufacturing and marketing high performance
storage products. Information by geographic area is
presented below with revenue derived from exports shown
in their area of origin. Sales and marketing
operations outside the United States are primarily
conducted through sales subsidiaries and branches
located principally in Europe and by direct sales from
the parent corporation or its Irish manufacturing
subsidiary. The United States market amounted to
greater than 95% of the Company's sales, income and
identifiable assets in the North/South America segment.
48.
ITEM 8 continued...
Intercompany transfers between geographic areas are accounted
for at prices which are designed to be representative of
unaffiliated party transactions.
(in thousands)
Europe,
North/ Middle- Consol-
South East, Asia Elimi- idated
America Africa Pacific nations Total
1993
Sales $526,771 $251,363 $4,487 $ --- $782,621
Transfers
between
areas 100,237 83,726 --- (183,963) ---
Total sales 627,008 335,089 4,487 (183,963) 782,621
Income
(loss) from
operations 107,512 70,324 (990) 3,582 180,428
Identifiable
assets at
year end 684,576 192,682 2,383 (49,995) 829,646
1992
Sales $263,465 $111,117 $11,124 $ --- $385,706
Transfers
between
areas 83,813 36,303 --- (120,116) ---
Total sales 347,278 147,420 11,124 (120,116) 385,706
Income from
operations 34,915 25,008 1,255 (12,603) 48,575
Identifiable
assets at
year end 252,308 98,232 4,309 (16,069) 338,780
1991
Sales $200,008 $51,411 $8,918 $ --- $260,337
Transfers
between
areas 35,946 15,036 --- (50,982) ---
Total sales 235,954 66,447 8,918 (50,982) 260,337
Income
(loss) from
operations 22,798 (6,406) (531) 4,517 20,378
Identifiable
assets at
year end 164,096 41,608 4,166 (4,367) 205,503
49.
ITEM 8 continued...
M. Selected Quarterly Financial Data (unaudited)
(amounts in thousands except share amounts)
Fiscal Year 1993 Q1 1993 Q2 1993 Q3 1993 Q4 1993
Net Sales $138,773 $179,542 $215,747 $248,559
Gross Profit 66,480 88,996 113,723 132,667
Net Income 14,913 26,888 38,487 46,834
Net income per share,
(fully diluted) $0.08 $0.13 $0.18 $0.21
Fiscal Year 1992 Q1 1992 Q2 1992 Q3 1992 Q4 1992
Net Sales $74,556 $90,208 $103,105 $117,837
Gross Profit 34,741 40,432 47,251 56,003
Net Income 5,277 6,443 7,351 10,437
Net income per share,
(fully diluted) $0.03 $0.04 $0.04 $0.06
Earnings per share data has been adjusted to reflect all
prior stock splits and pooling of interests.
N. Subsequent Events
In January 1994, the Company acquired the majority
interest in Copernique S.A. ("Copernique") formerly held
by Cap Gemini Sogeti S.A. Copernique, located near
Paris, France, specializes in high-performance data
management hardware and software systems. The Company
believes that this acquisition will enable the Company
to extend its offerings in the field of distributed
Information Technology systems and to strengthen its
European presence.
In January 1994, the Company jointly formed a company in
Japan with its existing Japanese distributor, in which
the Company holds a majority interest. Through this
entity, the Company will acquire a direct salesforce in
Japan, which it then plans to further expand.
50.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
51.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company will furnish to the Securities and Exchange
Commission a definitive Proxy Statement (the "Proxy
Statement") not later than 120 days after the close of the
fiscal year ended January 1, 1994. The information required
by this item is incorporated herein by reference to the
Proxy Statement. Also see "Executive Officers of the
Registrant" in Part I of this form.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated
herein by reference to the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item is incorporated
herein by reference to the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated
herein by reference to the Proxy Statement.
52.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a)
1. Financial Statements
The financial statements listed in the accompanying
Index to Consolidated Financial Statements and Schedules
on page 58 are filed as part of this report.
2. Schedules
The schedules listed in the accompanying Index to
Consolidated Financial Statements and Schedules on page
59 are filed as part of this report.
3. Exhibits
See Index to Exhibits pages 60 through 62 of this
report.
The exhibits are filed with or incorporated by
reference in this report.
(b) On November 19, 1993, the registrant filed a report
(Date of Report: November 19, 1993) on Form 8-K reporting,
under Item 5, the increase in authorized common stock,
authorization of a new class of preferred stock, the intent
to proceed with the previously announced stock split and the
intention to file a registration statement for an offering
of convertible subordinated notes. In this report, the
registrant also filed the following consolidated financial
statements giving effect to the acquisition of Magna
Computer Corporation and Epoch Systems, Inc. accounted for
as poolings of interests:
i. Consolidated Balance Sheets as of January 2, 1993 and
December 28, 1991;
ii. Consolidated Statements of Income for the Three
Years in the period ended January 2, 1993;
iii.Consolidated Statements of Stockholders' Equity for
the Three Years in the period ended January 2, 1993;
iv. Consolidated Statements of Cash Flows for the Three
Years in the period ended January 2, 1993;
v. Notes to Consolidated Financial Statements; and
vi. Report of Independent Accountants.
53.
On December 29, 1993, the registrant filed a report (Date of
Report: December 29, 1993) on Form 8-K filing, under Item 7,
the following Exhibits related to the offering in December
1993 of the 4 1/4% Convertible Subordinated Notes due 2001:
i. Underwriting Agreement dated December 10, 1993 by
and between EMC Corporation, Smith Barney Shearson Inc.,
Alex Brown & Sons Incorporated and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
ii. Indenture dated as of December 17, 1993 between
EMC Corporation and State Street Bank and Trust
Company, as Trustee.
54.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, EMC Corporation has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 23, 1994.
EMC CORPORATION
By: Richard J. Egan
Richard J. Egan
Chairman of the Board
55.
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities on the date indicated as of March 23, 1994.
Signature Title
Richard J. Egan Chairman of the Board
Richard J. Egan (Principal Executive Officer)
and Director
Michael C. Ruettgers President and Chief Executive
Michael C. Ruettgers Officer and Director
W. Paul Fitzgerald Senior Vice President,
W. Paul Fitzgerald Finance and Administration,
Chief Financial Officer
(Principal Financial Officer),
Treasurer and Director
John R. Egan Executive Vice President
John R. Egan Sales and Marketing and Director
Colin G. Patteson Vice President and Controller
Colin G. Patteson (Principal Accounting Officer)
Michael J. Cronin Director
Michael J. Cronin
John F. Cunningham Director
John F. Cunningham
Maureen E. Egan Director
Maureen E. Egan
Joseph F. Oliveri Director
Joseph F. Oliveri
56.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and the Board of Directors
of EMC Corporation:
In connection with our audits of the consolidated financial
statements of EMC Corporation as of January 1, 1994 and January 2,
1993 and for each of the three years in the period ended January 1,
1994, which financial statements and reports are included herein,
we have also audited the related financial statement schedules
listed in Item 14 herein.
In our opinion, the financial statement schedules referred
to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND
Boston, Massachusetts
February 1, 1994
57.
EMC CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
COVERED BY REPORTS OF CERTIFIED PUBLIC ACCOUNTANTS
Form 10-K
Consolidated Balance Sheets at
January 1, 1994 and January 2, 1993 p. 27
Consolidated Statements of Operations
for the years ended January 1, 1994,
January 2, 1993 and December 28, 1991 p. 28
Consolidated Statements of Cash Flows for
the years ended January 1, 1994,
January 2, 1993 and December 28, 1991 p. 29
Consolidated Statements of Stockholders'
Equity for the years ended January 1, 1994,
January 2, 1993 and December 28, 1991 p. 30
Notes to Consolidated Financial Statements p.p. 31 - 50
Report of Independent Accountants p.p. 26 and 57
58.
Form 10-K
Schedules:
Schedule V - Property Page S-1
Plant and Equipment
Schedule VI - Accumulated Page S-2
Depreciation - Property,
Plant and Equipment
Schedule VIII - Valuation Page S-3
and Qualifying Accounts
Schedule IX - Short Page S-4
Term Borrowings
Schedule X - Supplementary Page S-5
Income Statement Information
Report of Independent
Accountants on Financial
Statement Schedules
Note: All other financial statement schedules are omitted
because they are not applicable or the required information is
included in the financial statements or notes thereto.
59.
The exhibits listed below are filed with or incorporated by
reference in this report.
3.1 Articles of Organization of EMC Corporation
3.2 Articles of Amendment filed February 26, 1986
3.3 Articles of Amendment filed April 2, 1986
3.4 Articles of Amendment filed May 13, 1987
3.5 Articles of Amendment filed June 19, 1992
3.6 Articles of Amendment filed May 12, 1993
3.7 Articles of Amendment filed November 12, 1993
3.8 By-laws of EMC Corporation, as amended on October 16, 1992
4.1 Form of Stock Certificate
4.2 Indenture, dated as of March 25, 1992 between EMC Corporation
and State Street Bank and Trust Company, Trustee
4.3 Indenture, dated as of December 17, 1993 between EMC
Corporation and State Street Bank and Trust Company, Trustee
4.4 Form of 6 1/4% Convertible Subordinated Debenture Due 2002
4.5 Form of 4 1/4% Convertible Subordinated Note Due 2001
10.1 EMC Corporation 1985 Stock Option Plan, as amended
10.2 EMC Corporation 1989 Employee Stock Purchase Plan, as amended
10.3 EMC Corporation 1992 Stock Option Plan for Directors
10.4 EMC Corporation 1993 Stock Option Plan
10.5 EMC Corporation Profit-Sharing Plan
10.6 Mortgage Agreement with and Note Payable to John Hancock
Mutual Life Insurance Company
10.7 Loan and Credit Agreement dated December 10, 1991
between EMC Corporation and Shawmut Bank, N.A.
10.8 Agreement between EMC Corporation and Unisys
Corporation dated January 15, 1992
60.
10.9 Amendment No. 1 to Agreement between EMC Corporation
and Unisys Corporation dated March 10, 1992
11.1 Computation of net income (loss) per share (filed herewith)
22.1 Subsidiaries of Registrant (filed herewith)
23.1 Consent of Independent Accountants (filed herewith)
61.
Incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 33-3656)
Incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 33-17218).
Incorporated herein from Annual Report on Form 10-K of
EMC Corporation filed February 12, 1993.
Incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 33-67224).
Incorporated herein from Current Report on Form 8-K of
EMC Corporation filed November 19, 1993.
Incorporated herein from Annual Report on Form 10-K of
EMC Corporation filed March 31, 1988.
Incorporated herein by reference to the Company's
Registration Statement on Form S-3 (No. 33-46075).
Incorporated herein from Current Report on Form 8-K of
EMC Corporation filed December 29, 1993.
Incorporated herein by reference to the Company's
Registration Statement on Form S-3 (No. 33-71916).
Incorporated herein from Annual Report on Form 10-K of
EMC Corporation filed February 28, 1992.
Incorporated herein by reference to the Company's
Registration Statement on Form S-8 (No. 33-54860).
Incorporated herein by reference to the Company's
Registration Statement on Form S-8 (No. 33-71598).
62.
EMC CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Balance at Balance at
Beginning Additions Other End of
of Period at Cost Retirements Changes Period
Year Ended 12/28/91
Furniture &
Fixtures $ 4,087,000 $ 165,000 $ (77,000) $ -0- $ 4,175,000
Equipment 36,609,000 18,322,000 (2,414,000) -0- 52,517,000
Vehicles 1,169,000 428,000 (246,000) -0- 1,351,000
Buildings &
Improvements 23,074,000 1,405,000 (149,000) -0- 24,330,000
Land 1,520,000 -0- -0- -0- 1,520,000
Construction
in Progress 121,000 -0- -0- (45,000) 76,000
$66,580,000 $20,320,000 $(2,886,000) $(45,000) $83,969,000
Year Ended 1/2/93
Furniture &
Fixtures $ 4,175,000 $ 776,000 $ (41,000) $ -0- $ 4,910,000
Equipment 52,517,000 24,052,000 (5,660,000) -0- 70,909,000
Vehicles 1,351,000 639,000 (329,000) -0- 1,661,000
Buildings &
Improvements 24,330,000 3,258,000 (21,000) -0- 27,567,000
Land 1,520,000 350,000 -0- -0- 1,870,000
Construction
in Progress 76,000 685,000 -0- -0- 761,000
$83,969,000 $29,760,000 $(6,051,000) $ -0- $107,678,000
Note: The 1991 balance of equipment is restated to include
balance and activity of equipment leased to others, which
is included in equipment in 1992.
Note: Information for the year ended January 1, 1994 is omitted
because the net property plant and equipment of the
Company accounted for less than 25% of total assets at
January 1, 1994 and January 2, 1993.
S-1
63.
EMC CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION -
PROPERTY, PLANT AND EQUIPMENT
Balance at Balance at
Beginning Other End of
of Period Additions Retirements Changes Period
Year Ended 12/28/91
Furniture &
Fixtures $ 1,801,000 $ 530,000 $ (163,000) $ -0- $ 2,168,000
Equipment 12,626,000 5,781,000 (699,000) -0- 17,708,000
Vehicles 487,000 265,000 (235,000) -0- 517,000
Buildings &
Improvements 2,921,000 1,936,000 (32,000) -0- 4,825,000
Land -0- -0- -0- -0- -0-
Construction
in Progress -0- -0- -0- -0- -0-
$17,835,000 $8,512,000 $(1,129,000) $ -0- $25,218,000
Year Ended 1/2/93
Furniture &
Fixtures $ 2,168,000 $ 481,000 $ (23,000) $ -0- $ 2,626,000
Equipment 17,708,000 13,980,000 (2,548,000) -0- 29,140,000
Vehicles 517,000 261,000 (143,000) -0- 635,000
Buildings &
Improvements 4,825,000 1,454,000 (41,000) -0- 6,238,000
Land -0- -0- -0- -0- -0-
Construction
in Progress -0- -0- -0- -0- -0-
$25,218,000 $16,176,000 $(2,755,000) $ -0- $38,639,000
S-2
EMC CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION -
PROPERTY, PLANT AND EQUIPMENT
(continued)
Depreciation is computed on a straight line basis over the estimated
useful lives of the assets as follows:
Furniture 7 years
Equipment 3-7 years
Vehicles 5 years
Improvements 5 years
Buildings 25 - 31 1/2 years
Note: The 1991 balance of equipment is restated to include the
balance and activity of equipment leased to others, which
is included in equipment in 1992.
Note: Information for the year ended January 1, 1994 is omitted
because the net property plant and equipment of the
Company accounted for less than 25% of total assets at
January 1, 1994 and January 2, 1993.
S-2
65.
EMC CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deduc- End of
Description of Period Expenses Accounts tions Period
Year ended
January 1,1994
Allowance for
doubtful
accounts $2,915,000 $2,699,000 $-0- $(352,000) $5,262,000
Year ended
January 2,1993
Allowance for
doubtful
accounts $2,892,000 $488,000 $-0- $(465,000) $2,915,000
Year ended
December 28,1991
Allowance for
doubtful
accounts $1,047,000 $2,152,000 $-0- $(307,000) $2,892,000
S-3
66.
EMC CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT TERM BORROWINGS
Average Weighted
Interest Maximum Amount Average
Balance Rate Outstanding Outstanding Interest
at End at End During During Rate for
of Year of Year Year Year (a) Year (a)
Year ended
January 1, 1994
Line of Credit
- - Bank
EMC Corporation $ 0 N/A $ 0 $ 0 N/A
Magna 0 N/A 545,000 131,000 8.4%
Year ended
January 2, 1993
Line of Credit
- - Bank
EMC Corporation $ 0 N/A $5,000,000 $ 26,954 6.5%
Magna 645,000 8.5% 695,000 515,000 8.0%
Year ended
December 28, 1991
Line of Credit
- - Bank
EMC Corporation $5,000,000 6.5% $5,000,000 $103,763 7.1%
Magna 470,000 9.0% 470,000 333,000 9.6%
(a)The average amount outstanding and weighted average interest rate
during the year are based on the average daily balances outstanding.
S-4
67.
EMC CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
1991 1992 1993
Advertising Costs $3,857,000 $4,964,000 $9,555,000
S-5
68.
EMC CORPORATION
EXHIBIT 11.1 Computation of Primary and Fully Diluted Net Income Per Share
1993 1992 1991
PRIMARY
Net income (in thousands) $127,122 $29,508 $11,409
Add back interest expense
on convertible notes 373 --- ---
Less tax effect on interest
expense on convertible notes (149) --- ---
Net income for purpose of
calculating primary net
income per share $127,346 $29,508 $11,409
Weighted average shares
outstanding during the period 180,204,169 162,308,044 159,184,880
Common equivalent shares 16,281,991 9,643,652 5,229,936
Common and common equivalent
shares outstanding for purpose
of calculating primary net
income per share 196,486,160 171,951,696 164,414,816
Primary net income per share $0.65 $0.17 $0.07
FULLY DILUTED
Net income (in thousands) $127,122 $29,508 $11,409
Add back interest expense on
convertible debt and notes 4,097 2,853 ---
Less tax effect on interest
expense on convertible debt
and notes (1,601) (1,085) ---
Net income for purpose of
calculating fully diluted
net income per share $129,618 $31,276 $11,409
Common and common equivalent
shares outstanding for purpose
of calculating primary net
income per share 196,486,160 171,951,696 164,414,816
Incremental shares to reflect
full dilution 20,738,566 18,596,284 1,805,316
Total shares for purpose of
calculating fully diluted net
income per share 217,224,726 190,547,980 166,220,132
Fully diluted net income per
share (Note A in footnotes) $0.60 $0.16 $0.07
Note: Prior year earnings per share and weighted average shares have been
restated to reflect the December 1993 2 for 1 stock split, the June 1993
2 for 1 stock split and the November 1992 3 for 2 stock split.
69.
EXHIBIT 22.1 - SUBSIDIARIES OF REGISTRANT
The following is a list of the Corporation's consolidated subsidiaries
as of March 15, 1994. The Corporation owns, directly or indirectly,
100% of the voting securities of each subsidiary, unless noted otherwise.
STATE OR
JURISDICTION OF
NAME ORGANIZATION
Copernique, S.A. France
EMC Caribe, Inc. Delaware
EMC Computer Storage Systems (Israel) Ltd. Israel
EMC Computer Systems AG Switzerland
EMC Computer Systems France Sarl France
EMC Computer Systems (H.K.) Limited Hong Kong
EMC Computer Systems Italy SPA Italy
EMC Computer Systems (Japan) K.K. Japan
EMC Computer Systems (U.K.) Limited United Kingdom
EMC (Benelux) B.V. Holland
EMC Computer-Systems Deutschland GMBH Germany
EMC Computer-Systems Svenska AB Sweden
EMC International Holdings, Inc. Delaware
EMC Securities Corporation Massachusetts
EMC System Peripherals Canada, Inc. Canada
Epoch Systems, Inc. Delaware
Magna Computer Corporation Delaware
Majority owned by EMC (Benelux) B.V., the remainder owned by
Compagnie des Machines Bull, S.A., and not including certain
directors' qualifying shares.
Majority owned by EMC Corporation, the remainder owned by
CLC Corporation.
70.
EXHIBIT 23.1 - CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
Registration Statements of EMC Corporation on Form S-8 (File
Nos. 33-71262 and 33-71598) of our reports dated February 1,
1994, on our audits of the consolidated financial statements
and financial statement schedules of EMC Corporation as of
January 1, 1994 and January 2, 1993 and for the years ended
January 1, 1994, January 2, 1993 and December 28, 1991 which
reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND
Boston, Massachusetts
March 21, 1994