EMC 2011 Annual Report Download - page 38

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Table of Contents
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, 2011:
Payments Due By Period
Total Less than 1 year 1-3 years* 3-4 years**
More than
4 years
Operating leases $1,501.0 $ 254.9 $ 514.7 $ 90.0 $ 641.4
Notes converted and payable 1,699.8 1,699.8 — — —
Convertible debt 1,724.5 1,724.5 — — —
Product warranty obligations 254.6 — — — —
Other long-term obligations, including notes payable and current portion of long-term
obligations and post retirement obligations 287.9 136.2 1.3 0.6 1.3
Purchase orders 2,349.8 2,341.0 8.8 — —
Uncertain tax positions 196.8 — — — —
Total $8,014.4 $ 6,156.4 $ 524.8 $ 90.6 $ 642.7
*Includes payments from January 1, 2013 through December 31, 2015.
**Includes payments from January 1, 2016 through December 31, 2016.
As of December 31, 2011, we had $254.6 of product warranty obligations, $148.5 of long-term post retirement obligations, $2,349.8 of purchase orders
and $196.8 of liabilities for uncertain tax positions. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to these
obligations. The purchase orders are for manufacturing and non-manufacturing related goods and services. While the purchase orders are generally
cancellable without penalty, certain vendor agreements provide for percentage-based cancellation fees or minimum restocking charges based on the nature of
the product or service. Our operating leases are primarily for office space around the world. We believe leasing such space in most cases is more cost-
effective than purchasing real estate.
The 2011 Notes have been fully converted, were settled in January 2012 and are included here and in the consolidated balance sheets as of
December 31, 2011 under "Notes Converted and Payable". The convertible debt pertains to the 2013 Notes. The holders of the 2013 Notes may convert their
Notes at their option on any day prior to the close of business on the scheduled trading day immediately preceding September 1, 2013 only under the
following circumstances: (1) during the five business-day period after any five consecutive trading-day period (the "measurement period") in which the price
per Note for each day of that measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate
on each such day; (2) during any calendar quarter, if the last reported sale price of our common stock for 20 or more trading days in a period of 30 consecutive
trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last
trading day of the immediately preceding calendar quarter; or (3) upon the occurrence of certain events specified in the Notes. Additionally, the 2013 Notes
will become convertible during the last three months prior to their maturity.
Based upon the closing price of our common stock for the prescribed measurement period during the three months ended December 31, 2011, the
contingent conversion threshold on the 2013 Notes was exceeded. As a result, the 2013 Notes are convertible at the option of the holder through March 31,
2012. Accordingly, since the terms of the Notes require the principal to be settled in cash, we reclassified from equity the portion of the Notes attributable to
the conversion feature which had not yet been accreted to its face value and the Notes have been classified as a current liability. For the holders to be able to
continue to convert the 2013 Notes, our closing stock price must exceed $20.90 for 20 out of the last 30 trading days of each future quarter. If this threshold is
not met, the 2013 Notes will be reclassified to long-term debt.
We have no other off-balance sheet arrangements.
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 $115.0 as of December 31, 2011. The guarantees vary in length of time. In connection
with these arrangements, we have agreed to guarantee substantially all of the
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