EMC 2002 Annual Report Download - page 26

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Table of Contents
working capital in 2002 compared to 2001. The 2002 reduction in working capital was primarily driven by a reduction in cash generated from collecting
accounts and notes receivable due to lower revenue levels in 2002 compared to 2001. Partially offsetting this reduction were increases in deferred revenue
attributable to increased sales of software maintenance contracts. The decline in 2001 compared to 2000 was primarily attributable to the $507.7 loss incurred
in the year. Offsetting the loss was an overall improvement in cash generated from working capital associated with substantial reductions in accounts and
notes receivable and inventories.
Cash used for investing activities was $1,576.4, $1,513.6 and $1,842.4 in 2002, 2001 and 2000, respectively. Capital additions were $391.1, $889.3 and
$858.4 in 2002, 2001 and 2000, respectively. The decrease in capital additions in 2002 compared to 2001 resulted from measures we took to reduce costs,
which were initiated in the second half of 2001. Capitalized software development costs were $126.7, $120.7 and $102.8 in 2002, 2001 and 2000,
respectively. Net purchases and maturities of investments, consisting of debt securities, were $1,011.6, $409.4 and $647.9 in 2002, 2001 and 2000,
respectively. We expect our capital additions for 2003 to be approximately the same to slightly down compared with the $391.1 spent in 2002.
Cash used for financing activities was $311.2 in 2002 compared to cash provided by financing activities of $33.4 and $611.7 in 2001 and 2000,
respectively. In 2002, we repurchased 49.5 million shares of our common stock, par value $.01 per share ("Common Stock"), at a cost of $363.9. As of
December 31, 2002, we had repurchased 50.6 million shares of the 300.0 million shares of Common Stock authorized for repurchase by our Board of
Directors. From time to time, we enter into Rule 10b-5-1 plans to facilitate our share repurchases. In 2000, we generated $376.6 from the issuance of common
stock in the initial public offering of McDATA Corporation ("McDATA"). In 2001, we distributed our ownership interest in McDATA. As a result of the
distribution, McDATA's net assets are no longer consolidated with our assets, which resulted in a $142.0 reduction in cash. The majority of the remaining
cash generated in 2002, 2001 and 2000 was from the exercise of stock options. In 2000, $665.4 of convertible debt was converted into our Common Stock.
We have available for use credit lines of $50.0 in the United States and $50.0 in Brazil. The Brazilian line of credit has been established to help manage
currency volatility between the local currency and the U.S. dollar. The Brazilian line requires us to borrow in Brazilian currency. As of December 31, 2002,
we had $11.0 outstanding on our line of credit in Brazil and none outstanding on our line of credit in the United States. The Brazilian line of credit 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. As of December 31, 2002, we were in compliance with the
covenants.
We lend certain fixed income securities to generate investment income. During 2002, we entered into various agreements to loan fixed income
securities generally on an overnight basis. Under these securities lending agreements, the value of the collateral is equal to 102% of the fair market value of
the loaned securities. The collateral is generally cash, U.S. government-backed securities or letters of credit. At December 31, 2002, there were no outstanding
securities lending transactions.
Based on our current operating and capital expenditure forecasts, we believe that the combination of funds currently available, funds generated from
operations and our available lines of credit will be adequate to finance our ongoing operations for the next twelve months.
To date, inflation has not had a material impact on our financial results.
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