EMC 2003 Annual Report Download - page 61

December 31,
2003
December 31,
2002
Health care cost trend rate assumed for next year 11.5% 9.0%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5.0% 5.0%
Year that the rate reaches the ultimate trend rate 2013 2010
The effects of a one percent change in the assumed health care cost trend rates are as follows (table in thousands):
1% increase 1% decrease
Effect on total service and interest cost components for 2003 $ 3 $ (3)
Effect on year-end post retirement obligation 54 (48)
The weighted average asset allocations are as follows:
December 31,
2003
December 31,
2002
Equity securities 75% 70%
Debt securities 25 29
Other – 1
Total 100% 100%
The target allocation of the assets in the plan as of December 31, 2003 consisted of equity securities of 72%, debt securities of 27% and other
investments of 1%.
The plan assets are managed by outside investment managers. Our investment strategy with respect to the plan is to maximize returns while preserving
principal.
The benefit payments are expected to be $0.6 million in 2004. Payments for future years have not been determined.
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EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
M. Commitments and Contingencies
Operating Lease Commitments
We lease office and warehouse facilities and equipment under various operating leases. Rent expense was $203.3 million, $211.2 million and
$266.5 million in 2003, 2002 and 2001, respectively. Our commitments under our operating leases, including facilities to be sublet (see Note C), are as
follows (table in thousands):
2004 $ 176,045
2005 122,244
2006 83,132
2007 57,033
2008 44,825
Thereafter 105,833
Total minimum lease payments $ 589,112
Lines of Credit
We have available for use credit lines of $50.0 million in the United States and $50.0 million in Brazil. As of December 31, 2003, we had $1.2 million
outstanding on our line of credit in Brazil and there were no borrowings outstanding on our line of credit in the United States. The U.S. credit line bears
interest at the bank's base rate and requires us, upon utilization of the credit line, to meet certain financial covenants with respect to limitations on losses. The
Brazilian credit line bears interest at the rate quoted by the lender (18.8% at December 31, 2003) and requires us to meet certain financial covenants with
respect to limitations on losses and maintaining minimum levels of cash and investments. In the event the covenants are not met, the lender may require us to
provide collateral to secure the outstanding balance. At December 31, 2003, we were in compliance with the covenants. The Brazilian credit line is
denominated in local currency and as such, bears an interest rate commensurate with local currency short-term interest rates.
Guarantees and Indemnification Obligations
EMC's subsidiaries have entered into arrangements with financial institutions to provide guarantees for rent, taxes, insurance, leases, performance bonds,
bid bonds and customs duties aggregating $32.7 million as of December 31, 2003. The guarantees vary in length of time. In connection with these
arrangements, we have agreed to guarantee substantially all of the guarantees provided by these financial institutions. We have also agreed to guarantee our
Brazilian subsidiary's $50.0 million line of credit.
We enter into agreements in the ordinary course of business with, among others, customers, resellers, OEMs, systems integrators and distributors. Most
of these agreements require us to indemnify the other party against third party claims alleging that an EMC product infringes a patent or copyright. Certain of
these agreements require us to indemnify the other party against certain claims relating to property damage, personal injury or the acts or omissions of EMC,