Dell 1997 Annual Report Download

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DELL INC (4331)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 04/14/1998
Filed Period 02/01/1998

Table of contents

  • Page 1
    DELL INC (4331) 10-K Annual report pursuant to section 13 and 15(d) Filed on 04/14/1998 Filed Period 02/01/1998

  • Page 2
    ... BUSINESS GENERAL Dell Computer Corporation (the "Company") designs, develops, manufactures, markets, services and supports a wide range of computer systems, including desktops, notebooks, workstations and network servers, and also markets software, peripherals and service and support programs. With...

  • Page 3
    ... Japan, Australia and New Zealand, and is based in Hong Kong (for areas other than Japan) and Kawasaki, Japan (for Japan). The Company's corporate headquarters are located in Round Rock, Texas, and its manufacturing facilities are located in Austin, Texas; Limerick, Ireland; and Penang, Malaysia...

  • Page 4
    ... its product offerings with a number of specialized services, including custom hardware and software integration, leasing and asset management and network installation and support. The Company offers next-business-day delivery, as well as an extended training and support program on many of its...

  • Page 5
    ... specialized computer training programs, a repair parts assistance program and other customized programs to provide access to the Company's technical support team. Customized product delivery and service programs are available on a worldwide basis. See "Item 1 -- Business -- Service and Support...

  • Page 6
    ..." money back guarantee for any end-user customer buying a system directly from the Company. The Company provides all of its customers with access to a toll-free hardware support line that is accessible 24 hours a day, 7 days a week. The technical specialists staffing this line maintain close contact...

  • Page 7
    ...from the Company's customers obtained through its direct relationships and service and support programs. The Company conducts a voluntary vendor certification program, under which qualified vendors commit to meet defined quality specifications. All of the Company's manufacturing facilities have been...

  • Page 8
    ... the initial sales contacts, through the manufacturing process 7 9 to post-sale service and support. The system assists the Company in tracking key information about many of its customers. The Company is able to target marketing activities specifically to particular types of customers using...

  • Page 9
    ...and profitability. - Competition -- The computer industry is highly competitive. Some of the Company's competitors have stronger brand-recognition, greater financial, marketing, manufacturing and technological resources, broader product lines and larger installed customer bases than does the Company...

  • Page 10
    ...of office space. These buildings, comprising the Company's Round Rock campus, house the Company's sales, marketing and support staff for the Americas region, as well as the Company's executive headquarters and administrative support functions. The Company also leases 570 acres of land in Austin, 120...

  • Page 11
    ... lease expiration dates ranging from 1998 to 2013), (b) a Company owned 300,000-square-foot manufacturing and warehousing facility in Limerick, Ireland and (c) a Company owned 238,000-square-foot combination office and manufacturing facility in Penang, Malaysia (located on land leased until the year...

  • Page 12
    ... per common share for fiscal 1997. See Note 2 of Notes to Consolidated Financial Statements. 12 14 ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's objective is to maximize stockholder value by executing a strategy that focuses...

  • Page 13
    ..., the Company continued to drive revenue growth through its Internet Web site located at www.dell.com. By fiscal year-end, revenue generated through this venue exceeded $4 million a day. Management believes that the Internet will continue to be a significant sales and service medium for the Company...

  • Page 14
    ... years 1998 and Company has grown operating income by 84% in fiscal 1998 This reflects the Company's ability to manage operating growth in gross margin to deliver strong operating Cash and marketable securities...Working capital...Days of sales in accounts receivable...Days of supply in inventory...

  • Page 15
    ... the next twelve months. 16 18 MARKET RISK The Company is exposed to a variety of risks, including foreign currency fluctuations and changes in the market value of its investments. In the normal course of business, the Company employs established policies and procedures to manage its exposure...

  • Page 16
    ...> 21 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Dell Computer Corporation In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Dell Computer Corporation and its...

  • Page 17
    ... above. PRICE WATERHOUSE LLP Austin, Texas February 16, 1998 20 22 DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN MILLIONS) ASSETS FEBRUARY 1, 1998 ----------Current assets: Cash...Marketable securities...Accounts receivable, net...Inventories...Other...Total...

  • Page 18
    ... part of these consolidated financial statements. 22 24 DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (IN MILLIONS) FISCAL YEAR ENDED FEBRUARY 1, FEBRUARY 2, JANUARY 28, 1998 1997 1996 Cash flows from operating activities: Net income...Adjustments to reconcile net income...

  • Page 19
    ...of computer systems, including desktops, notebooks and enterprise systems (includes servers and workstations), and also markets software, peripherals and service and support programs. The Company markets its computer products and services under the Dell(R) brand name directly to its customers. These...

  • Page 20
    ... of stockholders' equity. Revenue Recognition -- Sales revenue is recognized at the date of shipment to customers. Provision is made for an estimate of product returns and doubtful accounts and is based on historical experience. Revenue from separately priced service and extended warranty programs...

  • Page 21
    ... or in connection with the employee stock purchase plan. For stock options that have been issued at discounted prices, the Company accrues for compensation expense over the vesting period for the difference between the exercise price and fair market value on the measurement date. Income Taxes -- The...

  • Page 22
    ... payable and accrued and other liabilities are reflected in the financial statements at fair value because of the short-term maturity of these instruments. 27 29 MARKETABLE SECURITIES The following table summarizes by major security type the fair value of the Company's holdings of marketable...

  • Page 23
    ... venture, Dell Financial Services L.P. ("DFS"), to provide leasing and asset management services to the Company's customers. The Company has a 70% interest in DFS; however, as the Company does not exercise control over DFS, it accounts for the investment under the equity method. Dell Credit Company...

  • Page 24
    ... effect on earnings per common share for fiscal 1998 or fiscal 1997. NOTE 8 -- BENEFIT PLANS Incentive and Employee Stock Purchase Plans -- The Dell Computer Corporation Incentive Plan (the "Incentive Plan"), which is administered by the Compensation Committee of the Board of Directors, provides for...

  • Page 25
    ... of the Internal Revenue Code and permits substantially all employees to purchase shares of common stock. Participating employees may purchase common stock through payroll deductions at the end of each participation period at a purchase price equal to 85% of the lower of the fair market value of the...

  • Page 26
    ... 5 years 6 months 6.20% 57.36% 0% Had the Company accounted for its stock option and stock purchase plans by recording compensation expense based on the fair value at the grant date on a straight line basis over the vesting period, stock-based compensation costs would have reduced pretax income by...

  • Page 27
    ... amounts recognized in the financial statements. The counterparties to financial instruments consist of a number of major financial institutions. In addition to limiting the amount of agreements and contracts it enters into with any one party, the Company monitors its positions with and the credit...

  • Page 28
    ... to unaffiliated customers...Transfers between geographic areas...Total sales...Operating income (loss)...Corporate expenses...Total operating income...Identifiable assets...General corporate assets...Total assets... FISCAL YEAR 1997 ASIA PACIFIC AMERICAS EUROPE AND JAPAN ELIMINATIONS CONSOLIDATED...

  • Page 29
    ...31/32 Net revenues...Gross margin...Income before extraordinary loss...Net income...Income before extraordinary loss per common share(a): Basic...Diluted...Weighted average shares outstanding(a): Basic...Diluted...Stock sales prices per share(a): High...Low... 37 39 FISCAL YEAR 1997 4TH 3RD...

  • Page 30
    ...Company filed a registration statement with the U.S. Securities and Exchange Commission related to $500 million of debt securities. Presently, no securities under this registration are issued or outstanding. 38 40 PART III ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT BOARD OF...

  • Page 31
    ... as International Advisor to Goldman Sachs Europe Limited. From March 1986 to November 1989, Mr. Luft was Chief Executive Officer of Nixdorf Computer AG, a manufacturer of computer systems in Paderborn, Germany, where he also held various other executive positions for more than 17 years in marketing...

  • Page 32
    ... Company's OptiPlex and Dimension lines of desktop computer systems and the Company's WorkStation 400 line. For over 18 years prior to joining the Company, Mr. Everett was employed by Intel Corporation, where he began in a field sales office and advanced into sales and marketing management. He was...

  • Page 33
    ...for the Company a worldwide server business. Prior to joining the Company, Mr. Lambert held various officer positions with Compaq Computer Corporation, last serving as Vice President of North American Marketing. Prior to joining Compaq in 1994, Mr. Lambert served four years as general manager of the...

  • Page 34
    ... educational market segments, as well as Canada, Mexico and South America. Prior to joining the Company, Mr. Parra held various sales and general management positions with GRiD systems Corporation, including regional sales director and vice president and general manager of the PC strategic business...

  • Page 35
    ... number of shares of the Company's common stock upon election to the Board of Directors and an annual option award covering a specified number of shares for each year of service. The Company's Incentive Plan, which was approved by the stockholders in June 1994 and which specified the compensation...

  • Page 36
    ... current non-employee directors will receive, effective as of the date of the upcoming annual meeting of stockholders (which is scheduled for July 17, 1998), an annual option award covering a number of shares equal to $650,000 divided by the fair market value of the common stock on the date of grant...

  • Page 37
    ... an option to purchase 1,722 shares at an exercise price of $37.04. Mr. Mandl's compensation reflects the new non-employee director compensation arrangements approved by the Board of Directors in November 1997. (b) (c) (d) COMPENSATION OF EXECUTIVE OFFICERS General -- The compensation paid to the...

  • Page 38
    ... Company within two years after his employment with the Company is terminated. 48 50 The total number and value of the shares of restricted stock held by the Named Executive Officers as of the end of fiscal 1998 are as follows, with the values based on the closing sales price of the Company...

  • Page 39
    ...and certain other persons who provide consulting or advisory services to the Company. Pursuant to an amendment to the Incentive Plan that was approved by the stockholders at last year's annual meeting, the number of shares of the Company's common stock that may be issued pursuant to awards under the...

  • Page 40
    ...executive officers) may elect, on an annual basis, to receive stock options in lieu of all or a portion of the annual bonus that they would otherwise receive. The exercise price of the options is 80% of the fair market value of the Company's common stock on the date of issuance. The number of shares...

  • Page 41
    ... 423 of the Internal Revenue Code and permits substantially all employees to purchase shares of the Company's common stock. Participating employees may purchase common stock at the end of each participation period at a purchase price equal to 85% of the lower of the fair market value of the common...

  • Page 42
    ... fiscal 1998 did not exceed 5% of that firm's revenues for its last full fiscal year. PART IV ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS The following financial statements are filed as a part of this Report under law firm services Company gross

  • Page 43
    ... years ended February 1, 1998...Consolidated Statement of Stockholders' Equity for the three fiscal years ended February 1, 1998...Notes to Consolidated Financial Statements... FINANCIAL STATEMENT SCHEDULES The following financial statement schedule is filed as a part of this Report under "Schedule...

  • Page 44
    ... the fiscal year ended January 31, 1993, Commission File No. 0-17017) Dell Computer Corporation 1993 Stock Option Plan (incorporated by reference to Exhibit 10.36 to the Company's Registration Statement on Form S-4, Registration No. 33-69680) Dell Computer Corporation Incentive Plan (incorporated by...

  • Page 45
    ... contract or compensatory plan or arrangement. Filed herewith. REPORTS ON FORM 8-K The Company did not file any Current Reports on Form 8-K during the fourth quarter of the fiscal year ended February 1, 1998. 57 59 SCHEDULE II DELL COMPUTER CORPORATION VALUATION AND QUALIFYING ACCOUNTS...

  • Page 46
    ... (principal accounting officer) April 14, 1998 April 14, 1998 59 61 INDEX TO EXHIBITS EXHIBIT NO. ------3.1 DESCRIPTION OF EXHIBIT Certificate of Incorporation, dated October 21, 1987 and filed October 22, 1987 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on...

  • Page 47
    ... the fiscal year ended January 31, 1993, Commission File No. 0-17017) Dell Computer Corporation 1993 Stock Option Plan (incorporated by reference to Exhibit 10.36 to the Company's Registration Statement on Form S-4, Registration No. 33-69680) Dell Computer Corporation Incentive Plan (incorporated by...

  • Page 48
    ... Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 2, 1997, Commission File No. 0-17017) -- Fifth Amendment to Dell Computer Corporation Incentive Plan, dated as of November 21, 1997 63 DESCRIPTION OF EXHIBIT Dell Computer Corporation Deferred Compensation Plan...

  • Page 49
    ... such Service Year by (2) the Fair Market Value of the Stock on the Date of Grant (such number being referred to herein as the "Annual Award"). As 2 used herein, a "Service Year" is the approximately annual period commencing at an annual meeting of the Corporation's stockholders and ending...

  • Page 50
    ... that is automatically awarded to a Non-employee Director pursuant to Paragraph 5.2 shall be subject to the following terms (in addition to the terms specified in Paragraph 5.2): (a) The exercise price per share shall be the Fair Market Value of the Stock on the Date of Grant. (b) The Option shall...

  • Page 51
    specified in Section 3 above. DELL COMPUTER CORPORATION By: MICHAEL S. DELL Michael S. Dell Chairman and Chief Executive Officer

  • Page 52
    1 EXHIBIT 12 DELL COMPUTER CORPORATION Computation of Ratio of Earnings to Fixed Charges Fiscal Year Ended February 1, February 2, January 28, January 29, January 30, January 31, 1998 1997 1996 1995 1994 1993 dollars in millions) Income (loss) before income taxes and extraordinary loss ...

  • Page 53
    ... Direct Sales L.P. Distribution (EMEA) Limited Eastern Europe Corporation Export Sales Corporation JURISDICTION India/Malaysia Malaysia Delaware Texas Brazil South Africa Finland Sweden Denmark Norway Hong Kong Singapore Netherlands Thailand Korea Ontario, Canada Japan United Kingdom Mexico...

  • Page 54
    ... Computer (China) Co. Ltd. Dell Computer de Chile Corp. Dell Computer de Colombia Corp. Dell Computer (Italia) S.p.A. Dell Computer Services de Mexico de C.V. Dell DFS Corporation Dell Financial Services L.P. Dell Credit Company L.L.C. Xiamen Delaware Delaware Italy Mexico Delaware Texas...

  • Page 55
    ...incorporation by reference Statements on Form S-3 (No. 333-47861) and Form S-8 33-31812 and 33-63273) of Dell Computer Corporation February 16, 1998 appearing on page 20 of this Form PRICE WATERHOUSE LLP in the Registration (Nos. 33-24621, 33-54577, of our report dated 10-K. Austin, Texas April 14...

  • Page 56
    ... SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELL COMPUTER CORPORATION FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED FEBRUARY 1, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000