EMC 2005 Annual Report Download - page 34

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Table of Contents
portfolio are securities where the amortized cost basis exceeded the fair value by $40.0. Management regularly reviews the portfolio to evaluate whether any
impairments are other-than-temporary. Management considers the type of securities held, market conditions, the length of the impairment, magnitude of the
impairment and ability to hold the investment to maturity to make its evaluation. As of December 31, 2005, management did not consider any impairments to
be other-than-temporary.
We have a credit line of $50.0 in the United States. At December 31, 2005, 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, 2005, 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.
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, 2005:
Payments Due by Period
Total
Less than 1 year
1-3 years*
3-5 years**
More than
5 years
Operating leases $ 554.0 $ 162.7 $ 197.1 $ 102.6 $ 91.6
Long-term convertible debt 127.0 — 127.0 — —
Other long-term obligations, including notes payable and current portion of long-term obligations 109.0 0.6 60.6 6.9 40.9
Purchase orders 1,145.9 1,098.2 47.7 — —
Total $1,935.9 $ 1,261.5 $ 432.4 $ 109.5 $ 132.5
*Includes payments from January 1, 2007 through December 31, 2008.
**Includes payments from January 1, 2009 through December 31, 2010.
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 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.
Guarantees and Indemnification Obligations
EMC's subsidiaries have entered into arrangements with financial institutions for such institutions to provide guarantees for rent, taxes, insurance,
leases, performance bonds, bid bonds and customs duties aggregating $62.3 as of December 31, 2005. The guarantees vary in length of time. In connection
with these arrangements, we have agreed to guarantee substantially all of the guarantees provided by these financial institutions.
We enter into agreements in the ordinary course of business with, among others, customers, resellers, OEMs, systems integrators and distributors. Most
of these agreements require us to indemnify the other party against third party claims alleging that an EMC product infringes a patent and/or copyright. Most
of these agreements in which we license our trademarks to another party require us to indemnify the other party against third party claims alleging that an
EMC product infringes a trademark. Certain of these agreements require us to indemnify the other party against certain claims relating to property damage,
personal injury or the acts or omissions of EMC, its employees, agents or representatives. In addition, from time to time we have made certain guarantees
regarding the performance of our systems to our customers.
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