Dell 2001 Annual Report Download

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DELL INC (4331)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 05/01/2002
Filed Period 02/01/2002

Table of contents

  • Page 1
    DELL INC (4331) 10-K Annual report pursuant to section 13 and 15(d) Filed on 05/01/2002 Filed Period 02/01/2002

  • Page 2
    ... Fiscal Year Ended February 1, 2002 Commission 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) 807 Las Cimas Parkway, Building 2, Austin, Texas 78746 (Address, including Zip...

  • Page 3
    ... STATEMENT OF STOCKHOLDERS' EQUITY (in millions) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PART III PART IV DELL COMPUTER CORPORATION VALUATION AND QUALIFYING ACCOUNTS SIGNATURES EX-10.9 Amendment No. 2 to 401(k) Plan EX-21 Subsidiaries of the Company EX-23 Consent of PricewaterhouseCoopers LLP

  • Page 4
    ... the Company's Business and Prospects." PART I ITEM 1 - BUSINESS General Dell Computer Corporation (the "Company") is the world's leading computer systems company and a premier provider of computing products and services. In fiscal year 2002 the Company's revenue was $31.2 billion. The Company was...

  • Page 5
    ..., customer service and technical personnel, dedicated to the Company's large corporate and institutional customers. The Company also establishes direct relationships with small-to-medium businesses and individuals through account representatives, telephone sales representatives or Internet contact...

  • Page 6
    ... are located in or around Austin, Texas; Nashville, Tennessee; Eldorado do Sul, Brazil; Limerick, Ireland; Penang, Malaysia; and Xiamen, China. See "Item 2 - Properties." For financial information about the results of the Company's operating segments for each of the last three fiscal years, see...

  • Page 7
    ... third quarter of fiscal year 2002, is designed for first-time Dell computer buyers or for customers who are purchasing a second desktop computer for their home or small business. According to IDC, the Company ranked number one in worldwide and U.S. desktop shipments in calendar year 2001. Software...

  • Page 8
    ... Services The Company offers computer system leasing, as well as a variety of other customer financing programs, for its business and consumer customers in the United States through Dell Financial Services L.P. ("DFS"), a joint venture between the Company and Tyco International. In fiscal year 2002...

  • Page 9
    ...at competitive prices, while offering knowledgeable sales assistance, post-sale support and a variety of service offerings. Manufacturing The Company operates manufacturing facilities in and around Austin, Texas; Eldorado do Sul, Brazil; Nashville, Tennessee; Limerick, Ireland; Penang, Malaysia; and...

  • Page 10
    ... partnerships allow the Company to use its direct model and build-to-order manufacturing process to deliver, on a timely and cost-effective basis, those emerging technologies that are most relevant to its customers. During fiscal year 2002, the Company incurred $452 million in research, development...

  • Page 11
    ... that can be expected for any period, and there can be no assurance that the backlog at any point in time will translate into sales in any subsequent period, as unfilled orders can generally be canceled at will by the customer. At the end of fiscal year 2002, 2001, and 2000, backlog was not material...

  • Page 12
    ... alter their cost structure or business model, or take other actions that affect the Company's current competitive advantage. International Activities Sales outside the United States accounted for approximately 35% of the Company's revenues in fiscal year 2002. The Company's future growth rates and...

  • Page 13
    ... in foreign currency exchange rates and interest rates. In addition, the Company utilizes equity instrument contracts to execute repurchases of its common stock under its Board-authorized share repurchase program. Some of these instruments and contracts may involve elements of market and credit risk...

  • Page 14
    ... private equity financing, to access the public capital markets, to effect a sale or merger, or to achieve commercial success with its products or services. The Company currently anticipates that it will make minimal additional investments in fiscal 2003 and will focus on managing its current...

  • Page 15
    ... Company as of April 30, 2002. Name Age Title Michael S. Dell 37 Chairman of the Board and Chief Executive Officer Kevin B. Rollins 49 President and Chief Operating Officer William J. Amelio 44 Senior Vice President, Asia-Pacific/Japan Paul D. Bell 41 Senior Vice President, Europe, Middle East...

  • Page 16
    ... in Austin, Texas, Nashville, Tennessee and Eldorado do Sul, Brazil. 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 Unit...

  • Page 17
    ...,000 square feet of owned office buildings and 1.2 million square feet of leased office space. These buildings, comprising the Company's Round Rock Campus, house the Company's sales, marketing and support staff for the Americas region. The Company leases 570 acres of land in Austin, Texas referred...

  • Page 18
    ... quarter of fiscal year 2002. PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information The Company's common stock is traded on The Nasdaq National Market under the symbol DELL. Information regarding the market prices of the Company's common stock...

  • Page 19
    ... and Exchange Commission's Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"). The cumulative effect of the change on retained earnings as of the beginning of fiscal 2001 resulted in a charge to fiscal 2001 income of $59 million (net of income taxes of...

  • Page 20
    ... storage and networking products), notebook computers and desktop computer systems, and also offers software, peripherals and service and support programs. The Company is generally managed on a geographic basis. The three geographic regions are the Americas, Europe and Asia Pacific-Japan. Within the...

  • Page 21
    ... During fiscal 2002, the Company continued to execute the profitable market share growth strategy it began in the fourth quarter of fiscal 2001, as net unit shipments increased significantly compared to the industry, and the Company widened its lead as the world's No. 1 supplier of personal computer...

  • Page 22
    ... 2001 compared to industry growth of 16% in calendar year 2000. The Company continues to profitably grow market share while simultaneously growing net unit shipments significantly in excess of the overall industry growth rate, and during fiscal 2002, became the No. 1 worldwide personal computer...

  • Page 23
    ... and 2000 to the No. 2 share position in calendar 2001 (No. 1 in the fourth quarter). In Europe the Company attained the No. 2 overall market share position by the end of the year as net unit shipments increased across all product lines. Net revenue for fiscal 2002 was relatively flat as compared to...

  • Page 24
    ...$194 million charge represents purchased in-process research and development. During fiscal 2000 and early 2001, the Company heavily invested in personnel and other support costs as the Company experienced significant growth and anticipated additional future net unit shipments and revenue growth. As...

  • Page 25
    ... and public equity securities portfolio and declining interest rates. The fiscal 2002 loss on investments includes a $260 million charge in the second quarter for other-than-temporary declines in fair value of its venture investments due to ongoing market conditions. During fiscal 2002, the Company...

  • Page 26
    ... Company's stock exceeds the option strike price on the day the employee exercises an option, that reduce the Company's taxes payable, and that under generally accepted accounting principles are recorded directly to stockholders' equity accounts rather than to earnings. The Company ended fiscal 2002...

  • Page 27
    ... the Company's employee stock plans. As of the end of fiscal year 2002, the Company had cumulatively repurchased 940 million shares over a six-year period out of its authorized 1 billion share repurchase program, for an aggregate cost of $9.8 billion. During fiscal year 2002, the Company repurchased...

  • Page 28
    ... option to renew for two successive years, subject to certain conditions. The leases expire between fiscal 2004 and 2008. The Company may, at its option, purchase the Properties during or at the end of the lease term for 100% of the then outstanding amounts expended by the lessor to build, construct...

  • Page 29
    ... and $20 million during fiscal 2002, 2001 and 2000, respectively), and it includes those fees in net revenue. In accordance with the partnership agreement between the Company and Tyco, losses generated by DFS are allocated to Tyco. Net income in DFS is allocated 70% to the Company and 30% to Tyco...

  • Page 30
    ...price paths. Forecasted transactions, firm commitments, receivables and accounts payable denominated in foreign currencies were excluded from the model. The VAR model is a risk estimation tool, and as such, is not intended to represent actual losses in fair value that will be incurred by the Company...

  • Page 31
    ... to continue. At February 1, 2002, the fair value of investments in equity securities of privately and publicly held technology companies was $335 million. These investments were made in order to enhance and extend the Company's direct business model and core business initiatives. Because these...

  • Page 32
    .... SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, its provisions are to be...

  • Page 33
    ... Page Financial Statements: Report of Independent Accountants Consolidated Statement of Financial Position at February 1, 2002 and February 2, 2001 Consolidated Statement of Income for each of the three fiscal years ended February 1, 2002 Consolidated Statement of Cash Flows for each of the three...

  • Page 34
    ... position of Dell Computer Corporation and its subsidiaries at February 1, 2002 and February 2, 2001, and the results of their operations and their cash flows for each of the three fiscal years in the period ended February 1, 2002, in conformity with accounting principles generally accepted in...

  • Page 35
    Table of Contents DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (in millions) February 1, February 2, 2002 2001 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Other Total current assets Property, plant and ...

  • Page 36
    ...of Contents DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF INCOME (in millions, except per share amounts) Fiscal Year Ended February 1, 2002 February 2, 2001 January 28, 2000 Net revenue Cost of revenue Gross margin Operating expenses: Selling, general and administrative Research, development...

  • Page 37
    ...) Fiscal Year Ended February 1, 2002 February 2, 2001 January 28, 2000 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Tax benefits of employee stock plans Special charges (Gains)/losses...

  • Page 38
    ... 2, 2001 Net income Change in unrealized gain on investments, net of taxes Foreign currency translation adjustments Net unrealized gain on derivative instruments, net of taxes Total comprehensive income for fiscal 2002 Stock issuances under employee plans, including tax benefits Purchases and...

  • Page 39
    ... also markets software, peripherals and service and support programs. The Company markets and sells its computer products and services under the DellTM brand name directly to its various customer groups. These customer groups include large corporate, government, healthcare and education accounts, as...

  • Page 40
    .... The Company accounts for treasury stock under the cost method. Revenue Recognition - Net revenue includes sales of hardware, software and peripherals, and services (including extended warranty contracts and other services). Product revenue is recognized when both title and risk of loss transfer to...

  • Page 41
    ...to market value at the date of grant or in connection with the employee stock purchase plan. See Note 6 for the pro forma disclosure of the effect on net income and earnings per common share as if the fair value based method had been applied in measuring compensation expense. Income Taxes - Deferred...

  • Page 42
    ... effect on the Company's financial condition or results of operations. Reclassifications - Certain prior year amounts have been reclassified to conform to the fiscal 2002 presentation. NOTE 2 - Special Charges During the second quarter of fiscal 2002, the Company undertook a program to reduce its...

  • Page 43
    ... declines in fair value of certain venture investments. This charge was recorded in investment and other income (loss), net. During the fourth quarter of fiscal 2001, the Company undertook a separate program to reduce its workforce and to exit certain facilities during fiscal 2002. Total charges...

  • Page 44
    ... February 1, 2002 February 2, 2001 (in millions) January 28, 2000 Gains Losses Net gains (losses) $ 185 (462) (277) $ 473 (166) 307 $ 81 (1) 80 $ $ $ The fiscal 2002 loss on investments includes a $260 million charge in the second quarter for other-than-temporary declines in fair value of...

  • Page 45
    ... instruments at fair value. At February 1, 2002, the Company held purchased option contracts with a notional amount of $2 billion, a net asset value of $83 million and a net unrealized deferred gain of $11 million, net of taxes. At February 1, 2002, the Company held forward contracts with a notional...

  • Page 46
    ...of the Company's net deferred tax asset are as follows: Fiscal Year Ended February 1, 2002 February 2, 2001 (in millions) January 28, 2000 Deferred tax assets: Deferred service contract income Inventory and warranty provisions Provisions for product returns and doubtful accounts Loss carryforwards...

  • Page 47
    ... the Company's employee stock plans. As of the end of fiscal year 2002, the Company had cumulatively repurchased 940 million shares over a six-year period out of its authorized 1 billion share repurchase program, for an aggregate cost of $9.8 billion. During fiscal year 2002, the Company repurchased...

  • Page 48
    ... of the Option Plans, the right to purchase shares pursuant to existing stock option agreements typically vest pro-rata at each option anniversary date over a five-year period. The options are generally issued at fair market value and must be exercised within ten years from the date of grant. 45

  • Page 49
    ... 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 50
    ... average fair value of options and purchase rights under the employee stock purchase plan was determined based on the Black-Scholes model, utilizing the following assumptions: Fiscal Year Ended February 1, 2002 February 2, 2001 January 28, 2000 Expected term: Stock options 5 years 5 years 5 years...

  • Page 51
    ... for investments exists for the Company. The Company markets and sells its products and services to large corporate, government, healthcare and education customers, small-to-medium businesses and individuals. Its receivables from such parties are well diversified. The Company purchases a number of...

  • Page 52
    ... and $20 million during fiscal 2002, 2001 and 2000, respectively), and includes those fees in net revenue. In accordance with the partnership agreement between the Company and Tyco, losses generated by DFS are allocated to Tyco. Net income in DFS is allocated 70% to the Company and 30% to Tyco...

  • Page 53
    ...$ 280 522 802 $ 306 455 761 $ $ Fiscal Year Ended February 1, 2002 February 2, 2001 (In millions) January 28, 2000 Supplemental Consolidated Statement of Income Information: Research, development and engineering expenses: Research and development expenses Engineering expenses $ 321 131 452...

  • Page 54
    ... in the Middle East and Africa. The Asia Pacific-Japan region covers the Pacific Rim, including Japan, Australia and New Zealand, and is based in Singapore. During fiscal 2002, as a result of continued growth in consumer sales in the United States, the Company changed its management structure...

  • Page 55
    ... sales to commercial, government and educational customers. Financial data for prior periods has been restated to reflect current presentation. Fiscal Year Ended February 1, 2002 February 2, 2001 (in millions) January 28, 2000 Net revenue Americas: Business U.S. Consumer Total Americas Europe...

  • Page 56
    ... to the Company's consolidated net revenues and long-lived assets for fiscal 2002, 2001, and 2000. The following is net revenue by product groups: Fiscal Year Ended February 1, 2002 February 2, 2001 (In millions) January 28, 2000 Desktop computer systems Notebook computers Enterprise systems...

  • Page 57
    ... each quarter of fiscal 2002 and 2001. Fiscal Year Ended 2002 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter (in millions, except per share data) Net revenue Gross margin Net income Earnings per common share (a): Basic Diluted Weighted average shares outstanding: Basic Diluted Stock sales prices...

  • Page 58
    ... under "Item 1 - Business - Executive Officers of the Company," is incorporated by reference from the Company's definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates. PART IV ITEM 14...

  • Page 59
    ...) 10.1* - Dell Computer Corporation 1989 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1993, Commission File No. 0-17017) 10.2* - Dell Computer Corporation 1993 Stock Option Plan...

  • Page 60
    ... Computer Corporation 401(k) Plan, dated January 1, 2001. 10.10* - Employment Agreement, dated December 10, 1999, between the Company and James T. Vanderslice (incorporated by reference to Exhibit 10.16 to the Company's Report on Form 10-K for the fiscal year ended January 28, 2000, Commission File...

  • Page 61
    ... SCHEDULE II DELL COMPUTER CORPORATION VALUATION AND QUALIFYING ACCOUNTS Fiscal Year Description Balance at Beginning of Period Charged to Bad Debt Expense (in millions) Write-Offs Charged to Allowance Balance at End of Period 2002 2001 2000 Allowance for doubtful accounts Allowance...

  • Page 62
    ...the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. DELL COMPUTER CORPORATION By: /s/ MICHAEL S. DELL Michael S. Dell Chairman of the Board and Chief Executive Officer Date: April 30, 2002 Pursuant...

  • Page 63
    James M. Schneider 59

  • Page 64
    ...) 10.1* - Dell Computer Corporation 1989 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1993, Commission File No. 0-17017) 10.2* - Dell Computer Corporation 1993 Stock Option Plan...

  • Page 65
    ... Computer Corporation 401(k) Plan, dated January 1, 2001. 10.10* - Employment Agreement, dated December 10, 1999, between the Company and James T. Vanderslice (incorporated by reference to Exhibit 10.16 to the Company's Report on Form 10-K for the fiscal year ended January 28, 2000, Commission File...

  • Page 66

  • Page 67
    ...the 1st day of January, 2001 by DELL COMPUTER CORPORATION, a Texas corporation, (the "Company"); WHEREAS, the Company has heretofore adopted and maintains the Dell Computer Corporation 401(k) Plan (the "Plan") for the benefit of eligible employees of the Company and its participating affiliates; and...

  • Page 68
    ... read as follows: "(b) The terms of the loan shall (i) require level amortization with payments not less frequently than quarterly, (ii) require that the loan be repaid (a) over an amortization period of one to five years for the period from the Effective Date through December 31, 2000, and (b) over...

  • Page 69
    ... WITNESS WHEREOF, the Company has caused this Amendment to be executed this 11thday of December, 2001, to be effective as of the day and year first written above. DELL COMPUTER CORPORATION By: /s/ Kathleen Angel Its: Director of Global Benefits ATTEST: Janet B. Wright Its: Corporate Counsel 3

  • Page 70

  • Page 71
    ...Computer Holdings L.P. Dell Computer India Corporation Dell Computer Services de Mexico de C.V. Dell Direct Sales Corporation Dell Direct Sales L.P. Dell Eastern Europe Corporation Dell Export Sales Corporation Dell Funding Corporation Dell Gen. P. Corp Dell International Incorporated Dell Marketing...

  • Page 72
    ... Services International Limited Dell Products Dell Products (Europe) B.V. Dell Products (Asia) B.V. Dell Products II Dell Research Oy Dell Computer A.B. ASIA-PACIFIC/JAPAN Dell Asia Pacific Sdn. Dell Asia Pacific Sdn. Philippines Representative Office Dell Asia Pacific Sdn. India Liaison Office Dell...

  • Page 73
    ... English as "Dell Computer Corporation". Computer India Private Limited Computer Limited Computer PTY. Limited Products (Asia) B.V., Taiwan Branch Computer Corporation, Taiwan Representative Office China China China China China China China China China China Thailand Singapore Hong Kong Korea Japan...

  • Page 74

  • Page 75
    ... Registration Statements on Form S-8 (Nos. 33-24621, 33-54577, 33-31812, 33-63273, 33-4583, 333-66415, 333-58039, 333-49014, 333-49016, 333-69724 and 333-69726) of Dell Computer Corporation of our report dated February 14, 2002, relating to the financial statements and financial statement schedule...