EMC 2004 Annual Report Download - page 29

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Table of Contents
We have a credit line of $50.0 in the United States. At December 31, 2004, we had no borrowings outstanding on the line of credit. The 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. In
the event the covenants are not met, the lender may require us to provide collateral to secure the outstanding balance. At December 31, 2004, we were in
compliance with the covenants.
We derive revenues from both selling and leasing activity. We customarily sell the notes receivable resulting from our leasing activity. Generally, we do
not retain any recourse on the sale of these notes. If recourse is retained, we assess and provide for any estimated exposure.
Based on our current operating and capital expenditure forecasts, we believe that the combination of funds currently available, funds to be generated from
operations and our available lines of credit will be adequate to finance our ongoing operations for at least the next twelve months.
In February 2005, we acquired all of the outstanding capital stock of Smarts for approximately $260.0 in cash, subject to certain post-closing adjustments.
Smarts' software products automatically locate root cause problems, calculate their impacts across technology domains, and present the logical action plan
required to keep business services up and running. While we expect our revenues to be positively impacted by the acquisition, we do not expect it to have a
material impact on our revenues or expenses in 2005.
To date, inflation has not had a material impact on our financial results.
Off-Balance Sheet Arrangements, Contractual Obligations, Contingent Liabilities and Commitments
Contractual Obligations
We have various contractual obligations impacting our liquidity. The following represents our contractual obligations as of December 31, 2004:
Payments Due by Period
Less than 3-5 More than
Total 1 Year 1-3 years* years ** 5 Years
Operating leases $ 486.1 $ 149.8 $ 161.6 $ 86.9 $ 87.8
Long-term convertible debt 128.5 – 128.5 – –
Other long-term obligations, including notes payable and current portion of long-term obligations 110.1 0.2 55.8 10.6 43.5
Purchase orders 1,067.0 1,024.3 42.7 – –
Total $ 1,791.7 $ 1,174.3 $ 388.6 $ 97.5 $ 131.3
* Includes payments from January 1, 2006 through December 31, 2007.
** Includes payments from January 1, 2008 through December 31, 2009.
Our operating leases are primarily for office space around the world. We believe leasing such space is more cost-effective than purchasing real estate. The
long-term convertible debt pertains to debt assumed in our acquisition of Documentum. The other long-term obligations, including notes payable and the
current portion of long-term obligations, consist primarily of $70.8 of post-retirement benefit obligations and $30.9 of long term lease obligations for excess
facilities. The purchase orders are for manufacturing and non-manufacturing related goods and services. While the purchase orders are generally cancelable
without penalty, certain vendor agreements provide for percentage-based cancellation fees or minimum restocking charges based on the nature of the product
or service. 26