EMC 2002 Annual Report Download - page 68

Download and view the complete annual report

Please find page 68 of the 2002 EMC annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The current year accrual includes amounts accrued for systems at the time of shipment, adjustments within the year for changes in estimated costs for
warranties on systems shipped in the year and changes in estimated costs for warranties on systems shipped in prior years. It is not practicable to determine
the amounts applicable to each of the components.
J. Income Taxes
EMC's provision (benefit) for income taxes consists of (table in thousands):
2002 2001 2000
Federal
Current $ (228,828) $ (36,440) $ 507,442
Deferred 27,958 (221,598) 46,237
(200,870) (258,038) 553,679
State
Current (3,564) 344 45,955
Deferred 7,830 (14,690) 3,691
4,266 (14,346) 49,646
Foreign
Current 11,144 194,209 70,377
Deferred 7,679 8,852 (14,579)
18,823 203,061 55,798
Total provision (benefit) for income taxes $ (177,781) $ (69,323) $ 659,123
The effective income tax rate is based upon the income (loss) for the year, the composition of the income (loss) in different countries, and adjustments,
if any, for the potential tax consequences, benefits or resolutions of tax audits. A reconciliation of EMC's income tax provision (benefit) to the statutory
federal tax rate is as follows:
2002 2001 2000
Statutory federal tax rate (35.0)% (35.0)% 35.0 %
State taxes (benefit), net of federal taxes (benefit) 1.8 (3.0) 2.1
International related tax items (12.9) 38.9 (10.5)
Reduction of deferred tax assets due to liquidation of subsidiaries 6.1 9.8 —
U.S. tax credits (4.2) (0.3) (0.2)
Valuation allowance (10.5) (4.4) —
Acquisition and merger contingencies (4.5) (17.5) —
Other (0.8) (0.5) 0.6
(60.0)% (12.0)% 27.0 %
In 2002, the income tax rate was favorably impacted by the resolution of international tax matters which aggregated $67.7 million. Such amount
included the favorable resolution of an international tax audit, partially offset by a provision for tax liabilities on other international matters. In 2001, as a
result of the favorable resolution of a merger-related contingency, EMC recognized a benefit of $133.2 million. The benefit was partially offset by providing
for the potential tax consequences resulting from audits in several jurisdictions.
64