EMC 2003 Annual Report Download - page 34

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Average High Low
2003 $ 6.7 $7.7 $6.0
2002 7.3 8.2 5.5
The average value represents an average of the quarter-end values. The high and low valuations represent the highest and lowest values of the quarterly
amounts.
Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of temporary cash investments, short and long-term
investments and trade and notes receivable. We place our temporary cash investments and short and long-term investments primarily in investment grade
instruments and limit the amount of investment in any one issuer. During 2003, we purchased bank loans with credit ratings below investment grade. The
bank loans have a senior position to other debt and have floating-rate coupons, which significantly reduces interest rate risk. As of December 31, 2003, bank
loans represent 6% of our temporary cash and cash equivalents and short and long-term investments. We believe this investment strategy more effectively
manages our exposure to interest rate risk and diversifies our investment portfolio across different risk factors.
We employ a variance/covariance model to calculate value-at-risk for changes in credit conditions for our bank loan portfolios. This model assumes that
the relationships among market rates and prices that have been observed over the last year are valid for estimating risk over the next trading day. This model
measures the potential loss in fair value that could arise from changes in market conditions, using a 95% confidence level and assuming a one-day holding
period. The value-at-risk on the bank-loan portfolios was $0.4 million as of December 31, 2003. The average, high and low value-at-risk amount for 2003
were as follows (in millions):
Average High Low
2003 $ 0.4 $0.4 $0.3
The credit risk associated with accounts and notes receivables is low due to the large number of customers and their broad dispersion over many different
industries and geographic areas. We establish allowance for the estimated uncollectible portion of our accounts and notes receivable. The allowance was
$39.5 million and $50.6 million at December 31, 2003 and 2002, respectively. We customarily sell the notes receivable we derive from our leasing activity.
Generally, we do not retain any recourse on the sale of these notes.
48
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EMC CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Statement of Management Responsibility 50
Report of Independent Auditors 51
Consolidated Balance Sheets at December 31, 2003 and 2002 52
Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001 53
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001 54
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001 55
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2003, 2002 and 2001 56
Notes to Consolidated Financial Statements 57
Schedule:
Schedule II–Valuation and Qualifying Accounts S-1
Note: All other financial statement schedules are omitted because they are not applicable or the required information is included in the consolidated
financial statements or notes thereto.
49
STATEMENT OF MANAGEMENT RESPONSIBILITY