EMC 2011 Annual Report Download - page 33

Table of Contents
jurisdictions is lower than our income tax rate in the United States; substantially all of our income before provision for income taxes from foreign operations
has been earned by our Irish subsidiaries. We do not believe that any recent or currently expected developments in non-U.S. tax jurisdictions are reasonably
likely to have a material impact on our effective rate. Our effective tax rate may be adversely affected by earnings being lower than anticipated in countries
where we have lower statutory tax rates and higher than anticipated in countries where we have higher statutory tax rates.
In 2011, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 14.4 percentage points compared to our statutory
federal tax rate of 35.0%. The net effect of tax credits, state taxes, non-deductible permanent differences, resolution of income tax audits and reversal of
reserves associated with the expiration of statutes of limitations and other items collectively decreased the rate by 0.9 percentage points.
In 2010, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 12.2 percentage points compared to our statutory
federal tax rate of 35.0%. In 2010, we effected a plan to reorganize our international operations by transferring certain assets of Isilon, Archer Technologies
and Bus-Tech entities into a single EMC international holding company. As a result of this reorganization, we incurred an income tax charge which negatively
impacted our effective tax rate by 3.2 percentage points. In 2010, we also had a reduction in our valuation allowance which arose from the utilization of a
certain subsidiary's foreign net operating loss carryforwards resulting in a benefit to our effective tax rate of 0.6 percentage points. The net effect of tax
credits, state taxes, non-deductible permanent differences, resolution of income tax audits and elimination of reserves associated with the expiration of statutes
of limitations and other items collectively decreased the rate by 0.9 percentage points.
In 2009, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 17.5 percentage points compared to our statutory
federal tax rate of 35.0%. The resolution of income tax audits and reversal of reserves associated with the expiration of statutes of limitations for which we
believe we had certain tax exposure favorably reduced our effective tax rate by an additional 4.5 percentage points. In 2009, we effected a plan to reorganize
our international operations by transferring certain assets of our RSA and Data Domain entities and legacy foreign corporations owned directly by EMC into a
single EMC international holding company. As a result of this reorganization, we incurred income taxes which negatively impacted our effective tax rate by
4.4 percentage points. The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances and other items
collectively increased the rate by 1.0 percentage point, driven principally by non-deductible permanent differences.
The effective tax rate decreased from 2010 to 2011 by 4.8%, from 24.5% to 19.7%. This decrease was principally attributable to a higher amount of
income earned in foreign jurisdictions during 2011, which was largely due to how certain expenses are allocated to our world-wide subsidiaries. Additionally,
the decrease was attributable to the reorganization of our international operations during 2010, and the favorable resolution of income tax audits during 2011,
which was partially offset by a decrease in our U.S. tax credits and an increase in other differences. The effective tax rate increased from 2009 to 2010 by
6.1%, from 18.4% to 24.5%. This increase was principally attributable to a lower amount of income earned in foreign jurisdictions during 2010 and the
favorable resolution of income tax audits in 2009, which was partially offset by reductions in our non-deductible permanent differences and the reorganization
of our international operations.
Non-controlling Interest in VMware, Inc.
The net income attributable to the non-controlling interest in VMware was $147.5, $69.7 and $33.7 in 2011, 2010 and 2009, respectively. The increases
were due to increases in VMware's net income and increases in the weighted average percentage ownership by the non-controlling interest in VMware.
VMware's reported net income was $723.9, $357.4 and $197.1 in 2011, 2010 and 2009, respectively. The weighted-average non-controlling interest in
VMware was approximately 20.4%, 19.5% and 17.0% in 2011, 2010 and 2009, respectively. In the first quarter of 2010, we announced a stock purchase
program of VMware's Class A common stock to maintain an approximately 80% majority ownership in VMware over the long term. As of December 31,
2011, we have purchased approximately 10.6 million shares for $799.2.
Financial Condition
Cash provided by operating activities was $5,668.8, $4,548.8 and $3,334.4 for 2011, 2010 and 2009, respectively. Cash received from customers was
$21,144.7, $17,585.4 and $14,647.7 in 2011, 2010 and 2009, respectively. The increase in cash received from customers from 2009 to 2010 and from 2010 to
2011 was attributable to an increase in sales volume and higher cash proceeds from the sale of multi-year maintenance contracts, which are typically billed
and paid in advance of services being rendered. Cash paid to suppliers and employees was $15,218.7, $12,830.7 and $11,032.9 in 2011, 2010 and 2009,
respectively. The increase in cash paid to suppliers and employees from 2009 to 2010 and from 2010 to 2011 was primarily due to a general growth in the
business to support the increased revenue base. Income taxes paid was $323.1, $232.1 and $316.5 in 2011, 2010 and 2009, respectively. 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.
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