EMC 2011 Annual Report Download - page 35

Table of Contents
At December 31, 2011, our total cash, cash equivalents, and short-term and long-term investments were $10,843.1. This balance includes
approximately $4,512.3 held by VMware, of which $2,072.2 is held overseas, and $1,517.0 held by EMC in overseas entities. If these overseas funds are
needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes to repatriate these funds. However, our intent is to permanently
reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.
Use of Non-GAAP Financial Measures and Reconciliations to GAAP Results
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). EMC
uses certain non-GAAP financial measures, which exclude stock-based compensation, amortization of intangible assets, restructuring and acquisition-related
charges, infrequently occurring gains, losses and charges, and special tax items to measure its gross margin, operating margin, net income and diluted earnings
per share for purposes of managing our business. EMC also assesses its financial performance by measuring its free cash flow which is also a non-GAAP
financial measure. Free cash flow is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized
software development costs. These non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of EMC's financial
performance or liquidity prepared in accordance with GAAP. EMC's non-GAAP financial measures may be defined differently from time to time and may be
defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP
financial measures.
EMC's management uses the non-GAAP financial measures to gain an understanding of EMC's comparative operating performance (when comparing
such results with previous periods or forecasts) and future prospects and excludes these items from its internal financial statements for purposes of its internal
budgets and each reporting segment's financial goals. These non-GAAP financial measures are used by EMC's management in their financial and operating
decision-making because management believes they reflect EMC's ongoing business in a manner that allows meaningful period-to-period comparisons.
EMC's management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating
EMC's current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent
manner EMC's current financial results with EMC's past financial results.
Our non-GAAP operating results for the three months and year ended December 31, 2011 and 2010 were as follows:
For the Three Months Ended For the Year Ended
December 31,
2011
December 31,
2010
December 31,
2011
December 31,
2010
Gross margin $ 3,595.8 $ 3,028.4 $ 12,516.1 $ 10,271.4
Gross margin percentage 64.5% 61.9% 62.6% 60.4%
Operating income 1,467.8 1,243.0 4,784.0 3,738.0
Operating income percentage 26.3% 25.4% 23.9% 22.0%
Income tax provision 253.4 249.8 949.3 824.0
Net income attributable to EMC 1,065.2 920.1 3,380.5 2,715.3
Diluted earnings per share attributable to EMC $ 0.49 $ 0.42 $ 1.51 $ 1.26
The improvements in the non-GAAP gross margin and non-GAAP gross margin percentage were attributable to higher sales volume, a change in mix
attributable to higher margin products and improved cost control. The improvements in the non-GAAP operating income and non-GAAP operating income
percentage were primarily attributable to an improved gross margin percentage.
34