EMC 2003 Annual Report Download - page 53

EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
D. Convertible Debt
In April 2002, Documentum sold $125.0 million in senior convertible notes that mature on April 1, 2007 (the "Notes"), which we assumed in connection
with our acquisition of Documentum in December 2003. The Notes bear interest at a rate of 4.5% per annum. Holders of the Notes are entitled to convert the
Notes, at any time before the close of business on April 1, 2007, subject to our prior redemption or repurchase of the Notes, into shares of our Common Stock
at a conversion price of $13.80 per share. The Notes may be redeemed by us on or after April 5, 2005 at a price of 101.8% through April 1, 2006 and at a
price of 100.9% from April 2, 2006 through March 31, 2007. The Notes will effectively rank behind all other secured debt to the extent of the value of the
assets securing those debts. The Notes do not contain any restrictive financial covenants. The Notes have been recorded at their fair market value as of the
date of the acquisition of Documentum with a portion allocated to the conversion component. The fair market value of the debt component of $130.0 million
will be adjusted to the debt's face value of $125.0 million using the effective interest method through April 1, 2007. The fair market value of the conversion
component of $26.3 million has been allocated to additional paid-in capital.
E. Derivatives
At December 31, 2003, the fair value of our derivatives resulted in both an unrealized gain of $9.8 million classified in other current assets and an
unrealized loss of $7.3 million classified in accrued expenses. At December 31, 2002, the fair value of our derivatives resulted in unrealized losses of
$17.4 million classified in accrued expenses and an unrealized gain of $3.2 million classified in other current assets.
The following table summarizes activity in other comprehensive income (loss) related to derivatives held by us for 2003, 2002 and 2001 (table in
thousands):
2003 2002 2001
Unrealized gains (losses) on derivative instruments, beginning of year $ – $ 89 $ (4,105)
Add: increase (decrease) in fair value of derivatives (15,574) (10,630) 34,601
Less: gains (losses) reclassified into revenue or expenses (15,574) (10,541) 30,407
Unrealized gains on derivative instruments, end of year $ – $ – $ 89
F. Fair Value of Financial Instruments
Fair Value
The carrying amounts reflected in our consolidated balance sheets for cash and cash equivalents, accounts and notes receivable, current portion of long-
term debt and accounts and notes payable approximate fair value due to the short maturities of these instruments. The carrying amount reflected in our
consolidated balance sheet for long-term convertible debt approximates its fair value.
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EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
Investments
The following tables summarize the composition of our available for sale short and long-term investments at December 31, 2003 and 2002 (tables in
thousands):
December 31, 2003
Amortized
Cost Basis
Aggregate
Fair Value
U.S. government and agency obligations $2,303,298 $2,308,869
U.S. corporate debt securities 1,369,701 1,379,402
Asset and mortgage-backed securities 854,731 856,771
Bank loans 384,447 386,488
Foreign debt securities 105,663 106,629
Total $5,017,840 $5,038,159
December 31, 2002
Amortized
Cost Basis
Aggregate
Fair Value
U.S. government and agency obligations $2,125,537 $2,160,977
U.S. corporate debt securities 968,001 994,557
Asset and mortgage-backed securities 755,859 765,345
Foreign debt securities 76,088 78,154