EMC 2004 Annual Report Download - page 31

Table of Contents
infringe six EMC patents. We seek a permanent injunction as well as unspecified monetary damages for patent infringement. On February 16, 2005, summary
judgment motions were heard. The court's ruling on such motions is currently pending.
On October 27, 2004, a second complaint was filed by HP against us in the same court based on six of the seven patents asserted in the First HP Lawsuit
(the "Second HP Lawsuit"). The Second HP Lawsuit was filed shortly after the court had denied HP's motion for leave to amend its infringement contentions
in the First HP Lawsuit to add certain EMC products. In the Second HP Lawsuit, HP alleges patent infringement by the same EMC products that they
attempted to add to the First HP Lawsuit. On February 3, 2005, the court stayed the Second HP Lawsuit.
We are a party (either as plaintiff or defendant) to various other patent litigation matters, including certain matters which we assumed in connection with
our acquisitions of LEGATO and VMware.
We are a party to other litigation which we consider routine and incidental to our business.
Management does not expect the results of any of these actions to have a material adverse effect on our business, results of operations or financial
condition.
Pension and Post-Retirement Medical and Life Insurance Plans
We have a noncontributory defined benefit pension plan that was assumed as part of the Data General acquisition, which covers substantially all former
Data General employees located in the United States. Certain of the former Data General foreign subsidiaries also have foreign retirement plans covering
substantially all of their employees. All of these plans have been frozen resulting in employees no longer accruing pension benefits for future services. The
assets for these defined benefit plans are invested in common stocks and bonds. The market related value of the plans' assets is based upon the assets' fair
value. The expected long-term rate of return on assets for the year ended December 31, 2004 was 8.2%. This rate represents the average of the long-term rates
of return for all defined benefit plans (international and U.S.) weighted by the plans' assets as of December 31, 2004. The actual long-term rate of return for
the ten years ended December 31, 2004 was 9.5%. Based upon current market conditions, the expected long-term rate of return for 2005 will be 8.3%. A
25 basis point change in the expected long-term rate of return on the plans' assets would have approximately a $0.9 impact on the 2005 pension expense. As
of December 31, 2004, the pension plans had a $117.6 unrecognized actuarial loss that will be expensed over the average future working lifetime of active
participants. For the year ended December 31, 2004, the discount rate to determine the benefit obligation was 5.7%. This rate represents the average of the
discount rates for all defined benefit plans (international and U.S.) weighted by plan liabilities as of December 31, 2004. The discount rate reflects the rate at
which the pension benefits could be effectively settled. For the U.S. plan, this rate is based on Moody's AA Corporate Bond Index. For international plans, the
rate is based upon comparable high quality corporate bond yields. A 25 basis point change in the discount rate would have approximately a $0.7 impact on the
2005 pension expense for all plans (international and U.S.).
We also assumed a post-retirement benefit plan as part of the Data General acquisition that provides certain medical and life insurance benefits for retired
former Data General employees. The plan's assets are invested in common stocks and bonds. The market related value of the plan's assets is equal to the
assets' fair value. The expected long-term rate of return on the plan's assets for the year ended December 31, 2004 was 8.3%. The actual long-term rate of
return for the ten years ended December 31, 2004 was 9.5%. Based on current capital market conditions, the expected long-term rate of return for 2005 will
remain at 8.3%. A 25 basis point change in the expected long-term rate of return on the plan's assets has minimal impact on our benefit expense. As of
December 31, 2004, the plan had a $1.1 unrecognized actuarial gain that will be recognized over the anticipated remaining years of service for participants.
For the year ended December 31, 2004, the discount rate to determine the benefit obligation was 5.7%. The discount rate is based on Moody's AA Corporate
Bond Index. A 25 basis point change in the discount rate has a minimal impact on the expense.
28