EMC 2011 Annual Report Download - page 37

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Table of Contents
The reconciliation of the above free cash flow from GAAP to non-GAAP is as follows:
For the Three Months Ended For the Year Ended
December 31,
2011
December 31,
2010
December 31,
2011
December 31,
2010
Cash Flow from Operations $ 2,184.2 $ 1,512.2 $ 5,668.8 $ 4,548.8
Capital Expenditures (200.2) (203.5) (801.4) (745.4)
Capitalized Software Development Costs (100.3) (90.5) (442.3) (363.0)
Free Cash Flow $ 1,883.8 $ 1,218.2 $ 4,425.1 $ 3,440.5
Free cash flow represents a non-GAAP measure related to operating cash flows. In contrast, our GAAP measures of cash flow consist of three
components. These are cash flows provided by operating activities of $5,668.8 and $4,548.8 for the years ended December 31, 2011 and 2010, respectively,
cash used in investing activities of $3,543.5 and $6,476.0 for the years ended December 31, 2011 and 2010, respectively, and net cash used in financing
activities of $1,718.5 and $243.8 for the years ended December 31, 2011 and 2010, respectively.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above
do not include all items of income and expense that affect EMC's operations or cash flows. Further, these non-GAAP financial measures are not prepared in
accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may
confer on EMC. Management compensates for these limitations by also considering EMC's financial results as determined in accordance with GAAP.
Investments
The following table summarizes the composition of our investments at December 31, 2011:
Amortized
Cost
Unrealized
Gains
Unrealized
(Losses)
Aggregate
Fair Value
U.S. government and agency obligations $ 2,474.0 $ 12.4 $ (1.5) $ 2,485.0
U.S. corporate debt securities 1,400.4 10.0 (2.6) 1,407.8
High yield corporate debt securities 442.7 12.5 (7.7) 447.5
Asset-backed securities 29.1 0.1 — 29.1
Municipal obligations 814.7 2.0 (0.6) 816.1
Auction rate securities 82.9 — (8.3) 74.6
Foreign debt securities 984.7 5.2 (2.8) 987.1
Total fixed income securities 6,228.5 42.1 (23.5) 6,247.1
Publicly traded equity securities 58.2 6.8 — 65.0
Total $ 6,286.7 $ 49.0 $ (23.5) $ 6,312.1
Our fixed income and equity investments are classified as available for sale and recorded at their fair market values. At December 31, 2011, with the
exception of our auction rate securities, the vast majority of our investments were priced by third-party pricing vendors. These pricing vendors utilize the most
recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like
market transactions involving identical or comparable securities. In the event observable inputs are not available, we assess other factors to determine the
security's market value, including broker quotes or model valuations. Each month, we perform independent price verifications of all of our fixed income
holdings. In the event a price fails a pre-established tolerance check, it is researched so that we can assess the cause of the variance to determine what we
believe is the appropriate fair market value.
For all of our securities where the amortized cost basis was greater than the fair value at December 31, 2011, we have concluded that currently we
neither plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated recovery. In making the
determination as to whether the unrealized loss is other-than-temporary, we considered the length of time and extent the investment has been in an unrealized
loss position, the financial condition and near-term prospects of the issuers, the issuers' credit rating, third party guarantees and the time to maturity.
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