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DELL INC (4331)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 04/27/1999
Filed Period 01/29/1999

Table of contents

  • Page 1
    DELL INC (4331) 10-K Annual report pursuant to section 13 and 15(d) Filed on 04/27/1999 Filed Period 01/29/1999

  • Page 2
    ... FILE NUMBER: 0-17017 DELL COMPUTER CORPORATION (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 74-2487834 (I.R.S. Employer Identification No.) ONE DELL WAY, ROUND ROCK, TEXAS 78682-2244 (Address, including Zip Code...

  • Page 3
    ..., as well as telephone and Internet purchasing; build-to-order computer systems; telephone and on-line technical support and next-day, on-site product service. The Company sells its products and services to large corporate, government, medical and education customers, small-to-medium businesses and...

  • Page 4
    ... America, Europe and Asia-Pacific and Japan regions. The Company's corporate headquarters are located in Round Rock, Texas, and its manufacturing facilities are located in Austin, Texas; Limerick, Ireland; Penang, Malaysia; and Xiamen, China. See "Item 2 -- Properties." For financial information...

  • Page 5
    ... integration, leasing and asset management, and network installation and support. The Company offers next-business-day delivery, as well as an extended training and 4 6 support program on many of its software offerings. The Company's direct relationships with customers and its extensive on...

  • Page 6
    ... technical support representatives) dedicated to specific governmental markets. The Company holds a U.S. General Services Administration Schedule contract, through which it sells to U.S. federal governmental agencies. Transactional Customers The Company has established a significant base of business...

  • Page 7
    ... market and customer requirements. The following is a description of the warranties, service and support generally available to the Company's customers. Standard Programs Most of the Company's systems include a basic three year limited warranty, which includes one year of parts and labor coverage...

  • Page 8
    ...as specialized network cards, video and graphic boards, modems, tape drives or hard drives; or software related, such as customer proprietary software applications or drivers) can be satisfied at the time the customer's systems are manufactured. This is in addition to the Company's ReadyWare program...

  • Page 9
    ... the initial sales contact, through the manufacturing process to post-sale service and support. The systems assist the Company in tracking key information about its customers. Using its database to assess purchasing trends, advertising effectiveness and customer and product groupings, the Company...

  • Page 10
    ... advancement, which is a significant driver of customer demand, is largely beyond the control of the Company. Inventory management/supplies The Company's direct business model gives it the ability to operate with reduced levels of component and finished goods inventories, and the Company's financial

  • Page 11
    ... or pay damages. Year 2000 The Company's Year 2000 program is discussed in "Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Year 2000." TRADEMARKS AND SERVICE MARKS Several U.S. trademarks and service marks appear in this Report. Dell, the Dell logo...

  • Page 12
    ... Young University and a member of the CEO Forum on Education and Technology. Paul D. Bell -- Mr. Bell joined the Company in June 1996 and serves as Senior Vice President, Americas Home and Small Business Group, where he is responsible for all sales, marketing, customer service and technical support...

  • Page 13
    ...'s 18-year career at AT&T also included various managerial positions in sales, marketing, services, network operations, information management, field service operations, human resources and finance. Mr. Legere earned a bachelor's degree in Business Administration from the University of Massachusetts...

  • Page 14
    ... and International Group. In that position, Mr. Parra is responsible for the Company's operations in the federal, state and local government and educational customer groups, Latin America, Mexico and Canada, and is responsible for the Company's customer service operations, with the exception of Dell...

  • Page 15
    ... 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, on which is located a 300,000-square-foot facility...

  • Page 16
    ...: Net revenue...Gross margin...Operating income...Income before extraordinary loss...Net income...Income before extraordinary loss per common share(a)(b): Basic...Diluted...Number of weighted average shares outstanding(a): Basic...Diluted...Balance Sheet Data: Working capital...Total assets...Long...

  • Page 17
    ... year 1997. This was primarily due to aggressive pricing strategies in desktop computer systems, partially offset by increased unit sales in higher-end enterprise systems and higher-platform notebook computers. 20 22 The Company experienced growth in net revenue in all geographic segments...

  • Page 18
    ... in Limerick, Ireland and Xiamen, China. Gross Margin The increase in gross margin as a percentage of consolidated net revenue in fiscal year 1999 over fiscal year 1998 was primarily attributable to component cost declines. These component cost declines were generally passed through to customers...

  • Page 19
    ...: FISCAL YEAR ENDED JANUARY 29, FEBRUARY 1, FEBRUARY 2, 1999 1998 1997 DOLLARS IN MILLIONS) $3,181 $1,844 $1,352 2,644 1,215 1,089 36 36 37 6 7 13 54 51 54 12) (8) (4 Cash and marketable securities...Working capital...Days of sales in accounts receivable...Days of supply in inventory...Days in...

  • Page 20
    ... issues related to information systems and business processes, and assessed the effect on the Company's results of operations and financial position. Also, the Company introduced www.euro.dell.com to provide the latest information on the Company's Euro initiatives, as well as to provide basic tools...

  • Page 21
    ... distributed with Company computer systems, it does not and cannot guarantee the Year 2000 status of any software or peripherals provided by third parties. Costs The Company currently does not expect that the total costs of its Year 2000 readiness program will be material to its financial condition...

  • Page 22
    ...financial position of Dell Computer Corporation and its subsidiaries at January 29, 1999 and February 1, 1998, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 29, 1999, in conformity with generally accepted accounting principles...

  • Page 23
    ... LLP Austin, Texas February 16, 1999 29 31 DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN MILLIONS) ASSETS JANUARY 29, 1999 ----------Current assets: Cash...Marketable securities...Accounts receivable, net...Inventories...Other...Total current assets...

  • Page 24
    ......Tax benefits of employee stock plans...Other...Changes in: Operating working capital...Non-current assets and liabilities...Net cash provided by operating activities...Cash flows from investing activities: Marketable securities: Purchases...Maturities and sales...Capital expenditures...Net cash...

  • Page 25
    ... segments being the Americas, Europe and Asia-Pacific and Japan regions. The Company markets and sells its computer products and services under the Dell(R) brand name directly to its various customer groups. These customer groups include large corporate, government, medical and education accounts...

  • Page 26
    ... under its initial warranty and other post-sales support programs. Advertising Costs -- Advertising costs are charged to expense as incurred. Advertising expenses for fiscal years 1999, 1998 and 1997 were $199 million, $137 million and $87 million, respectively. Stock-Based Compensation -- The...

  • Page 27
    ... Related Information," in the fiscal year ended January 29, 1999. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," replacing the "industry segment" approach with the "management" approach. The management approach designates the internal organization...

  • Page 28
    ..., long-term debt and related interest rate derivative instruments has been estimated based upon market quotes from brokers. The fair value of foreign currency forward contracts has been estimated using market quoted rates of foreign currencies at the applicable balance sheet date. The estimated fair...

  • Page 29
    ...106 $133 Deferred service contract revenue...Inventory and warranty provisions...Provisions for product returns and doubtful accounts...Other...Net deferred tax asset... The effective tax rate differed from statutory U.S. federal income tax rate as follows: FISCAL YEAR ENDED JANUARY 29, FEBRUARY...

  • Page 30
    ... of financial position. The equity instruments did not have a material effect on diluted earnings per common share for fiscal years 1999 and 1998. NOTE 7 -- BENEFIT PLANS Incentive and Employee Stock Purchase Plans -- The Dell Computer Corporation Incentive Plan (the "Incentive Plan"), which...

  • Page 31
    ... 1997, respectively. The Company also has an employee stock purchase plan that qualifies under Section 423 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...

  • Page 32
    ..., utilizing the following assumptions: FISCAL YEAR ENDED JANUARY 29, 1999 FEBRUARY 1, 1998 FEBRUARY 2, 1997 Expected term: Stock options...Employee stock purchase plan...Interest rate...Volatility...Dividends...5 years 6 months 5.42% 52.12% 0% 5 years 6 months 6.28% 54.92% 0% 5 years 6 months 6.40...

  • Page 33
    ... in Round Rock, Texas, covers the U.S., Canada and Latin America. The European segment, which is based in Bracknell, England, covers the European countries and also some countries in the Middle East and Africa. The Asia-Pacific/Japan segment covers the Pacific Rim, including Japan, Australia and New...

  • Page 34
    ... customers...Transfers between geographic segments...Total net revenue...Operating income (loss)...Corporate expenses...Total operating income...Depreciation and amortization... FISCAL YEAR 1997 -------------------------------------------------------------ASIA PACIFIC AMERICAS EUROPE AND JAPAN...

  • Page 35
    ... is based on the location of the customers. Net revenue and long-lived assets from no single foreign country was material to the Company's consolidated net revenues and long-lived assets for fiscal years 1999, 1998 and 1997. The following is net revenues by product groups: FISCAL YEAR ENDED JANUARY...

  • Page 36
    ... expense...Investment and other income, net... SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION Changes in operating working capital accounts: Accounts receivable, net...Inventories...Accounts payable...Accrued and other liabilities...Other, net... $(598) (41) 743 255 8 ----$ 367...

  • Page 37
    ......Gross margin...Net income...Earnings per common share(a)(b): Basic...Diluted...Number of weighted average shares outstanding(b): Basic...Diluted...Stock sales prices per share(b): High...Low... FISCAL YEAR 1999 4TH 3RD 2ND 1ST QUARTER QUARTER QUARTER QUARTER IN MILLIONS, EXCEPT PER SHARE DATA...

  • Page 38
    ... Statements... 32 33 34 FINANCIAL STATEMENT SCHEDULES The following financial statement schedule is filed as a part of this Report under "Schedule II" immediately preceding the signature page: Schedule II -- Valuation and Qualifying Accounts for the three fiscal years ended January 29, 1999. All...

  • Page 39
    ...fiscal year ended January 28, 1996, Commission File No. 0-17017) Third Amendment to Dell Computer Corporation Incentive Plan, dated as of July 18, 1997 (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 3, 1997, Commission File...

  • Page 40
    ... Current Report on Form 8-K reporting a change in the fiscal year end of the Company under "Item 8 -- Change in Fiscal Year." No financial statements were included in such filing. 52 54 SCHEDULE II DELL COMPUTER CORPORATION VALUATION AND QUALIFYING ACCOUNTS FISCAL YEAR -----1999...1998...1997...

  • Page 41
    ... this Report related to fiscal year 1999. 55 57 EXHIBIT INDEX The following exhibits are filed as a part of this Report, with each exhibit that consists of or includes a management contract or compensatory plan or arrangement being identified with an "*": EXHIBIT NO. ------3.1 DESCRIPTION OF...

  • Page 42
    ...30, 1995) Indenture, dated as of April 27, 1998, between Dell Computer Corporation and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) Officers' Certificate pursuant to...

  • Page 43
    ... by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17071) 59 DESCRIPTION OF EXHIBIT Second Amendment to Dell Computer Corporation Incentive Plan, dated as of November 29, 1995 (incorporated by...

  • Page 44
    ... of Section 162(m) of the Code and Section 1.162-27(e)(3) of the Regulations. (d) "Company" shall mean Dell Computer Corporation, a Delaware corporation. (e) "Consolidated Net Income" shall mean, for any Fiscal Quarter or Fiscal Year, the net income before extraordinary items reported in the Company...

  • Page 45
    ... Executive's rights to payment under the Plan shall be limited to those of a general creditor of the Company. 11. Adoption, Amendment, Suspension and Termination of the Plan. (a) Subject to the approval of the Plan by the holders of a majority of the Company common stock represented and voting on...

  • Page 46
    ... be governed by and determined in accordance with the laws of the State of Delaware, other than the choice of law rules thereof. * * * * * The foregoing Executive Incentive Bonus Plan was duly approved and adopted by the Board of Directors of Dell Computer Corporation, a Delaware corporation (the...

  • Page 47
    ... Delaware Ireland Texas Quebec Delaware Texas Ireland Delaware Texas Texas Texas Finland Dell Direct Sales L.P...Dell Distribution (EMEA) Limited...Dell Eastern Europe Corporation...Dell Export Sales Corporation...Dell Financial Services L.P...Dell Foundation, Inc...Dell Funding Corporation...Dell...

  • Page 48

  • Page 49
    ... 333-58039) of 1999 appearing on to the incorporation by reference in the Registration S-8 (Nos. 33-24621, 33-54577, 33-31812, 33-63273, 333-66415 Dell Computer Corporation of our report dated February 16, page 29 of this Form 10-K. PRICEWATERHOUSECOOPERS LLP Austin, Texas April 27, 1999

  • Page 50
    ... SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELL COMPUTER CORPORATION FINANCIAL STATEMENTS AS OF AND FOR THE FISCAL YEAR ENDED JANUARY 29, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR