EMC 2007 Annual Report Download - page 37

rate by an additional 9.9 percentage points. Our income tax rate was increased by 10.9 percentage points resulting from repatriating approximately $3,000
under the American Jobs Creation Act of 2004 (the "AJCA"). The net effect of tax credits, state taxes, non-deductible permanent differences and changes in
valuation allowances collectively had a negative impact on the rate of 3.7 percentage points, driven principally by non-deductible permanent differences.
Minority Interest in VMware, net of taxes
As a result of VMware's IPO in the third quarter of 2007, VMware is no longer a wholly-owned subsidiary of EMC. For the year ended December 31,
2007, we recognized minority interest expense of $15.5. On December 31, 2007, the minority interest was approximately 15%.
Financial Condition
Cash provided by operating activities was $3,126.6 in 2007, $2,140.4 in 2006 and $2,216.3 in 2005. Cash received from customers was $13,333.5,
$11,167.2 and $9,732.8 in 2007, 2006 and 2005, respectively. The annual increases were attributable to higher sales volume and greater cash proceeds from
the sale of maintenance contracts. Cash paid to suppliers and employees was $10,182.6, $8,666.6 and $7,539.9 in 2007, 2006 and 2005, respectively. The
annual increases were partially attributable to higher headcount. Total headcount was approximately 37,700, 31,100 and 26,500 at December 31, 2007, 2006
and 2005, respectively. The headcount increases were due to general growth of the business, as well as acquisition activity in 2007, 2006 and 2005. Inventory
increased from $834.8 at December 31, 2006 to $877.2 at December 31, 2007. The increase was primarily attributable to higher inventory levels for new
products to support the overall growth of the business. Cash received from dividends and interest was $254.1, $258.6 and $249.2 in 2007, 2006 and 2005,
respectively. Cash paid for interest was $76.0, $26.8 and $9.1 in 2007, 2006 and 2005, respectively. The annual increases were primarily attributable to
interest payments made on the Notes. In 2007, 2006 and 2005, we paid $202.3, $592.1 and $216.7, respectively, in income taxes. These payments are
comprised of estimated taxes for the current year, extension payments for the prior year and refunds or payments associated with income tax filings and tax
audits. Despite higher pre-tax income, cash paid for income taxes decreased from 2006 to 2007, principally due to increased deductions for stock-based
compensation, increased Federal R&D credits arising from a change in law and increased utilization of acquired net operating losses. The increase from 2005
to 2006 was principally due to a combination of higher pre-tax income, the repatriation of funds under the AJCA and a reduction in the amount of net
operating losses and tax credits available to reduce our taxable income.
Cash used for investing activities was $1,162.9, $2,296.7 and $611.7 in 2007, 2006 and 2005, respectively. Cash paid for business acquisitions, net of
cash acquired was $692.0, $2,618.4 and $683.7, in 2007, 2006 and 2005, respectively. Capital additions were $699.0, $718.1 and $601.1 in 2007, 2006 and
2005, respectively. The increase in capital spending in 2006 when compared to 2005 was attributable to various IT initiatives to further integrate our
acquisitions to enable us to more effectively service our growing customer base and to support the overall growth of the business. Capitalized software
development costs were $232.0, $192.9 and $167.1 in 2007, 2006 and 2005, respectively. The annual increases in software development costs were due to
increased development efforts across all of our segments. Net sales (purchases) and maturities of investments were $322.4, $1,253.6 and $868.4 in 2007, 2006
and 2005, respectively. This activity varies from year to year based upon our cash collections, cash requirements and maturity dates of our investments.
During 2007, we received $150.0 in net proceeds from the sale to Cisco of 6.0 million shares of VMware's Class A common stock held by us.
Cash provided (used) for financing activities was $679.5, ($392.0) and ($743.6) in 2007, 2006 and 2005, respectively. Our Board of Directors has
currently authorized the repurchase of 250 million shares of our common stock. In 2007, we repurchased 89.4 million shares of our common stock at a total
cost of $1,453.7. Of the 250 million shares authorized for repurchase, we have cumulatively repurchased 199.2 million shares at a total cost of $2,660.8,
leaving a remaining balance of 50.8 million shares authorized for future repurchases. Additionally, in 2006, the Board also authorized a one-time repurchase
of shares in conjunction with our issuance of the Notes of which 75.0 million shares were repurchased using $945.8 of the net proceeds from the Notes. In
total we spent $1,453.7, $3,655.4 and $1,003.4 on repurchases in 2007, 2006 and 2005, respectively. We plan to spend approximately $550.0 on common
stock repurchases during the first quarter of 2008; however, the number of shares purchased and timing of our purchases will be dependent upon a number of
factors, including the price of our stock, market conditions, our cash position and alternative demands for our cash resources. Proceeds from the sale of
VMware's Class A common stock in its IPO and to Intel were $1,253.5. We generated $782.4, $257.8 and $263.3 in 2007, 2006 and 2005, respectively, from
the exercise of stock options. Proceeds from short and long-term obligations were $19.8, $5,654.0 and $0.2 in 2007, 2006 and 2005, respectively. In
September 2006, we borrowed $2,200.0 under a six-month unsecured credit facility to finance the acquisition of RSA. In November 2006, we also closed the
sale of the 2011 Notes and the 2013 Notes for an aggregate amount of $3,450.0. Total payments of short and long-term obligations were $17.2, $2,331.6 and
$3.7 in 2007, 2006 and 2005, respectively. In 2006, we repaid $2,200.0
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