EMC 2010 Annual Report Download - page 35

Table of Contents
The reconciliation of the above free cash flow from GAAP to non-GAAP is as follows:
For the Three Months Ended For the Year Ended
December 31,
2010
December 31,
2009
December 31,
2010
December 31,
2009
Cash Flow from Operations $ 1,512.2 $ 1,008.7 $ 4,548.8 $ 3,334.4
Capital Expenditures (203.5) (134.0) (745.4) (411.6)
Capitalized Software Development Costs (90.5) (82.1) (363.0) (304.5)
Free Cash Flow $ 1,218.2 $ 792.6 $ 3,440.5 $ 2,618.3
Free cash flow represents a non-GAAP measure related to operating cash flows. In contrast, our GAAP measures of cash flow consist of three
components. These are cash flows provided by operating activities of $4,548.8 and $3,334.4 for the year ended December 31, 2010 and 2009, respectively,
cash used in investing activities of $6,476.0 and $3,095.5 for the year ended December 31, 2010 and 2009, respectively, net cash used in financing activities
of $243.8 for the year ended December 31, 2010 and net cash provided by financing activities of $211.9 for the year ended December 31, 2009.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above
do not include all items of income and expense that affect EMC's operations or cash flows. Further, these non-GAAP financial measures are not prepared in
accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may
confer on EMC. Management compensates for these limitations by also considering EMC's financial results as determined in accordance with GAAP.
Investments
The following table summarizes the composition of our investments at December 31, 2010:
Amortized
Cost
Unrealized
Gains
Unrealized
(Losses)
Aggregate
Fair Value
U.S. government and agency obligations $ 1,737.8 $ 11.3 $ (2.7) $ 1,746.4
U.S. corporate debt securities 1,239.3 13.6 (1.3) 1,251.6
High yield corporate debt securities 421.5 18.3 (1.9) 437.8
Asset-backed securities 34.7 0.2 — 34.9
Municipal obligations 1,095.3 3.8 (3.3) 1,095.9
Auction rate securities 156.0 — (9.9) 146.0
Foreign debt securities 653.3 6.9 (0.7) 659.4
Total $ 5,337.8 $ 54.1 $ (19.8) $ 5,372.1
Our investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair market values. At
December 31, 2010, with the exception of our auction rate securities, the vast majority of our investments were priced by third-party pricing vendors. These
pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use
other observable inputs. In the event observable inputs are not available, we assess other factors to determine the security's market value, including broker
quotes or model valuations. Each month, we perform independent price verifications of all of our holdings. In the event a price fails a pre-established
tolerance check, it is researched so that we can assess the cause of the variance to determine what we believe is the appropriate fair market value.
For all of our securities where the amortized cost basis was greater than the fair value at December 31, 2010, we have concluded that currently we
neither plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated recovery. In making the
determination as to whether the unrealized loss is other-than-temporary, we considered the length of time and extent the investment has been in an unrealized
loss position, the financial condition and near-term prospects of the issuers, the issuers' credit rating, third party guarantees and the time to maturity.
34