(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended:
February 2, 2007
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from
to
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Delaware | 74-2487834 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o |
Approximate aggregate market value of the registrants
common stock held by non-affiliates as of August 3, 2007,
based upon the closing price reported for such date on The
NASDAQ Stock Market
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$54.0 billion | |||
Number of shares of common stock outstanding as of
October 19, 2007
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2,235,866,516 |
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| We simplify information technology for customers. Making quality personal computers, servers, storage, and services affordable is Dells legacy. We are focused on making information technology affordable for millions of customers around the world. As a result of our direct relationships with customers, or customer intimacy, we are best positioned to simplify how customers implement and maintain information technology and deliver hardware, services, and software solutions tailored for their businesses and homes. |
| We offer customers choice. Customers can purchase systems and services from Dell via telephone, kiosks, and our website, www.dell.com, where they may review, configure, and price systems within our entire product line; order systems online; and track orders from manufacturing through shipping. Customers may offer suggestions for current and future Dell products and services through an interactive portion of our website called Dell IdeaStorm. Commercial customers also can interact with dedicated account teams. We have recently launched a retail initiative and plan to expand that initiative by adding new distribution channels to reach additional consumers and small businesses through retail partners and value-added resellers globally. |
| Customers can purchase custom-built products and custom-tailored services. Historically our flexible, build-to-order manufacturing process enabled us to turn over inventory every five days on average, thereby reducing inventory levels, and rapidly bring the latest technology to our customers. The market and our competition has evolved, and we are now exploring the utilization of original design manufacturers and new distribution strategies to better meet customer needs and reduce product cycle times. Our goal is to introduce the latest relevant technology more quickly and to rapidly pass on component cost savings to a broader set of our customers worldwide. |
| We are committed to being environmentally responsible in all areas of our business. We have built environmental consideration into every stage of the Dell product life cycle from developing and designing energy-efficient products, to reducing the footprint of our manufacturing and operations, to customer use and product recovery. |
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| Desktop PCs Our customers can select from five lines of desktop computer systems. The OptiPlextm line is designed to help business, government, and institutional customers manage their total cost of ownership by offering stability, security, and managed product transitions. The Dimensiontm line is designed for small businesses and home users requiring the latest features for their productivity and entertainment needs. The XPStm and Alienware lines are targeted at customers who require the highest performance gaming or entertainment experience available. In July 2007, we introduced the Vostrotm line, which is designed to provide technology and services to suit the specific needs of small businesses. |
Dell Precisiontm and Alienware MJ-12® workstations are intended for professional users who demand exceptional performance from hardware platforms optimized and certified to run sophisticated applications, such as three-dimensional computer-aided design, digital content creation, geographic information systems, computer animation, software development, computer-aided engineering, game development, and financial analysis. |
| Servers and Networking Our standards-based PowerEdgetm line of servers is designed to offer customers affordable performance, reliability, and scalability. Options include high performance rack, blade, and tower servers for enterprise customers and aggressively priced tower servers for small organizations, networks, and remote offices. |
Our PowerConnecttm switches connect computers and servers in small-to-medium-sized networks. PowerConnecttm products offer customers enterprise-class features and reliability at a low cost. |
| Storage We offer a comprehensive portfolio of advanced storage solutions, including storage area networks, network-attached storage, direct-attached storage, disk and tape backup systems, and removable disk backup. With our advanced storage solutions for mainstream buyers, we offer customers functionality and value while reducing complexity in the enterprise. Our storage systems are easy to deploy, manage, and maintain. The flexibility and scalability offered by Dell | EMC and Dell PowerVaulttm storage systems helps organizations optimize storage for diverse environments with varied requirements. |
| Mobility The XPStm and Alienware lines of notebook computers are targeted at customers who require the highest performance gaming or entertainment experience available. In Fiscal 2007, we introduced the XPS M2010, an innovative mobile platform featuring a 20-inch high definition display that received awards for its unique design. The Latitudetm line is designed to help business, government, and institutional customers manage their total cost of ownership through managed product lifecycles and the latest offerings in performance, security, and communications. The Inspirontm line is targeted at |
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consumers desiring the latest technology in a range of form factors to meet different usage needs. The new Vostrotm line, introduced in July 2007, is designed to customize technology, services, and expertise to suit the specific needs of small businesses. |
| Software and Peripherals We offer Dell-branded printers and displays and a multitude of competitively priced third-party peripheral products, including software titles, printers, televisions, notebook accessories, networking and wireless products, digital cameras, power adapters, scanners, and other products. |
- | Software. We sell a wide range of third-party software products, including operating systems, business and office applications, anti-virus and related security software, entertainment software, and products in various other categories. | |
- | Printers. We offer a wide array of Dell-branded printers, ranging from ink-jet all-in-one printers for consumers to large multifunction devices for corporate workgroups. Our printer product line is focused on making printing easier to buy, own, and use. All of our printers feature the Dell Ink and Toner Management Systemtm, which simplifies the purchasing process for supplies by displaying ink or toner levels on the status window during every print job and proactively prompting users to order replacement cartridges directly from Dell. | |
- | Displays. We offer a broad line of branded and non-branded display products, including flat panel monitors and projectors. In Fiscal 2007, we continued our leadership position in the flat panel monitor category with the introductions of new Dell 22-, 24-, 27-, and 30-inch wide screens. The Dell projector line was expanded with the introductions of the 1200MP, 1800MP, and 2400MP projectors. We are no longer developing Dell-branded TVs and will continue to sell our current models through the end of Fiscal 2008. We have, however, introduced several third-party LCD TV offerings this year. |
| Enhanced Services Leveraging our experience and expertise in lowering the cost of hardware, providing industry leading value, and simplifying the ability of customers to acquire and maintain systems, our global services business offers a full range of flexible, tailored solutions that help customers lower the cost of their services environment and maximize system performance, efficiency, and return on investment. |
- | Infrastructure Consulting Services. We provide a customer-focused approach to designing and implementing non-proprietary standards-based infrastructures to enhance performance, scalability, and efficiency while helping to minimize expenses and disruption to business operations. | |
- | Deployment Services. Our deployment services can simplify and accelerate the deployment and utilization of new systems in customers information technology environments. We offer scalable processes and technology to get our systems up and running quickly. | |
- | Asset Recovery and Recycling Services. We offer capabilities for secure and environmentally safe recovery and disposal of owned and leased information technology equipment. Various options, including resale, recycling, donation, redeployment, employee purchase, and lease return, help customers retain value while avoiding regulatory fines and storage costs. | |
- | Training Services. We help customers develop the skills that increase productivity with a comprehensive and flexible suite of training services. Courses include hardware and software training as well as PC skills and professional development classes available through instructor-led, virtual, or self-directed online courses. The courses are designed for all skill levels and range from personal finance to business productivity to IT certification. | |
- | Enterprise Support Services. We help customers obtain maximum performance and availability from their server and storage systems. We operate Global Command Centers in the U.S., Ireland, China, Japan, and Malaysia to provide rapid, around-the-clock support for critical enterprise systems. Our enterprise support services include warranty services and provide proactive maintenance to help prevent problems as well as rapid response and resolution of problems when they do occur. |
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- | Client Support Services. Our suite of scalable support services is designed for IT professionals and end-users whose needs range from basic phone support to rapid response and resolution of complex problems. We offer flexible levels of support that help keep desktop and notebook PCs up and running so customers remain productive. | |
- | Managed Lifecycle Services. We offer a full suite of services for companies who need to outsource all or part of their IT management. From planning to deployment to ongoing technical support, we can deliver the services our customers need when they need them. Our Managed Lifecycle Services are modular in nature so that customers can customize a plan based on their current and future needs. We can manage a portion of their IT tasks or provide an end-to-end solution. |
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ITEM 1A | RISK FACTORS |
| Declining general economic, business, or industry conditions may cause reduced net revenue. We are a global company with customers in virtually every business and industry. If the economic climate in the U.S. or abroad deteriorates, customers or potential customers could reduce or delay their technology investments, which could decrease our net revenue and profitability. |
| Failure to maintain a cost advantage may result in reduced market share, revenue, and profitability. Our success has historically been based on our ability to profitably offer products at a lower price than our competitors. However, we compete with many companies globally in all aspects of our business. Our |
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profitability is also affected by our ability to negotiate favorable pricing with our vendors, including vendor rebates, marketing funds, and other vendor funding. Because these supplier negotiations are continuous and reflect the ongoing competitive environment, the variability in timing and amount of incremental vendor discounts and rebates can affect our profitability. We cannot guarantee that we will be able to maintain our cost advantage if our competitors improve their cost structure or business model, if we are not able to negotiate favorable pricing or rebate arrangements with our vendors, or if our competitors take other actions that affect our current competitive advantage. An inability to maintain our cost advantage or determine alternative means to deliver value to our customers may adversely affect our market share, revenue, and profitability. |
| Our ability to generate substantial non-U.S. net revenue faces many additional risks and uncertainties. Sales outside the U.S. accounted for approximately 44% of our consolidated net revenue in Fiscal 2007. Our future growth rates and success are dependent on continued growth in international markets. Our international operations face many risks and uncertainties, including varied local economic and labor conditions, political instability, and unexpected changes in the regulatory environment, trade protection measures, tax laws (including U.S. taxes on foreign operations), copyright levies, and foreign currency exchange rates. Any of these factors could adversely affect our operations and profitability. |
| Our profitability may be affected by our product, customer, and geographic sales mix and by seasonal sales trends. Our profit margins vary among products, customers, and geographies. In addition, our business is subject to certain seasonal sales trends. For example, sales to government customers (particularly the U.S. federal government) are typically stronger in our third fiscal quarter, sales in EMEA are often weaker in our third fiscal quarter, and consumer sales are typically strongest during our fourth fiscal quarter. As a result of these factors, our overall profitability for any particular period will be affected by the mix of products, customers, and geographies reflected in our sales for that period, as well as by seasonality trends. |
| Infrastructure failures could harm our business. We depend on our information technology and manufacturing infrastructure to achieve our business objectives. If a problem, such as a computer virus, intentional disruption by a third party, natural disaster, manufacturing failure, or telephone system failure impairs our infrastructure, we may be unable to book or process orders, manufacture, and ship in a timely manner or otherwise carry on our business. An infrastructure disruption could cause us to lose customers and revenue and could require us to incur significant expense to eliminate these problems and address related security concerns. The harm to our business could be even greater if it occurs during a period of disproportionately heavy demand. |
| Our failure to effectively manage a product transition could reduce the demand for our products and the profitability of our operations. Continuing improvements in technology mean frequent new product introductions, short product life cycles, and improvement in product performance characteristics. Product transitions present execution challenges and risks for any company. If we are unable to effectively manage a product transition, our business and results of operations could be unfavorably affected. |
| Disruptions in component availability could unfavorably affect our performance. Our direct business model, as well as our manufacturing and supply chain efficiencies, give us the ability to operate with reduced levels of component and finished goods inventories. Our financial success is partly due to our supply chain management practices, including our ability to achieve rapid inventory turns. Because we maintain minimal levels of component inventory, a disruption in component availability could harm our financial performance and our ability to satisfy customer needs. |
| Our reliance on suppliers creates risks and uncertainties. Our manufacturing process requires a high volume of quality components from third-party suppliers. Defective parts received from these suppliers could reduce product reliability and harm the reputation of our products. Reliance on suppliers subjects us to possible industry shortages of components and reduced control over delivery schedules (which can harm our manufacturing efficiencies), as well as increases in component costs (which can harm our profitability). |
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| We could experience manufacturing interruptions, delays, or inefficiencies if we are unable to timely and reliably procure components from single-source or limited-source suppliers. We maintain several single-source or limited-source supplier relationships, either because multiple sources are not available or the relationship is advantageous due to performance, quality, support, delivery, capacity, or price considerations. If the supply of a critical single- or limited-source material or component is delayed or curtailed, we may not be able to ship the related product in desired quantities and in a timely manner. Even where multiple sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could harm operating results. |
| Our business is increasingly dependent on our ability to access the capital markets. We will increasingly rely upon access to the capital markets to fund financing for our customers and to provide sources of liquidity in the U.S. for general corporate purposes, including funding DFS growth. If we are unable to access the capital markets, we may not be able to fully fund customer financing opportunities or planned share repurchases without repatriation of foreign cash balances. See Part II Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity, Capital Commitments, and Contractual Cash Obligations Liquidity. Although we believe that we will be able to maintain sufficient access to the capital markets, adverse changes in the economy, deterioration in our business performance, or changes in our credit ratings could limit our access to these markets. |
| We face risks relating to our ineffective internal controls. As a result of our review of issues identified during the recently completed independent Audit Committee investigation into certain accounting and financial reporting matters, as well as our internal review, management has identified several deficiencies in our control environment that constitute material weaknesses and, consequently, has concluded that our internal control over financial reporting was not effective at February 2, 2007. In addition, management has concluded, based primarily on the identification of the material weaknesses, that our disclosure controls and procedures were not effective at February 2, 2007. See Part II Item 9A Controls and Procedures. If we are unable to successfully remediate these material weaknesses in a timely manner, investors may lose confidence in our reported financial information, which could lead to a decline in our stock price, limit our ability to access the capital markets in the future, and require us to incur additional costs to improve our internal control systems and procedures. |
| Litigation and governmental investigations or proceedings arising out of or related to our recent accounting and financial reporting investigation could result in substantial costs. We could incur substantial costs to defend and resolve litigation or governmental investigations or proceedings arising out of or related to the recently completed Audit Committee investigation into certain accounting and financial reporting matters. See Part II Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations Audit Committee Independent Investigation and Restatement. In addition, we could be exposed to enforcement or other actions with respect to these matters by the SECs Division of Enforcement or the U.S. Department of Justice. For a description of pending litigation and governmental proceedings and investigations see Part I Item 3 Legal Proceedings Investigations and Related Litigation. |
| The acquisition of other companies may present new risks. We recently began to pursue a targeted acquisition strategy designed to augment areas of our business. These acquisitions may involve significant new risks and uncertainties, including distraction of management attention away from our current business operations, insufficient new revenue to offset expenses, inadequate return of capital, integration challenges, new regulatory requirements, and unidentified issues not discovered in our due diligence process. No assurance can be given that such acquisitions will be successful and will not adversely affect our profitability or operations. |
| Failure to properly manage the distribution of our products and services may result in reduced revenue and profitability. We use a variety of distribution methods to sell our products and services, including directly to customers and through retail partners and third-party value-added resellers. Our inability to properly manage and balance these various distribution methods could harm our operating results. |
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| Failure to effectively hedge our exposure to fluctuations in foreign currency exchange rates and interest rates could unfavorably affect our performance. We utilize derivative instruments to hedge our exposure to fluctuations in foreign currency exchange rates and interest rates. Some of these instruments and contracts may involve elements of market and credit risk in excess of the amounts recognized in our financial statements. Further, revenue from our international operations may decrease if we do not effectively hedge our exposure to currency fluctuations. |
| Our continued business success may depend on obtaining licenses to intellectual property developed by others on commercially reasonable and competitive terms. If we or our suppliers are unable to obtain desirable technology licenses, we may be prevented from marketing products, could be forced to market products without desirable features, or could incur substantial costs to redesign products, defend legal actions, or pay damages. While our suppliers may be contractually obligated to indemnify us against such expenses, those suppliers could be unable to meet their obligations. Also, our operating costs could increase because of copyright levies or similar fees by rights holders and collection agencies in European and other countries. For a description of potential claims related to copyright levies, see Part I Item 3 Legal Proceedings Copyright Levies. |
| Our success depends on our ability to attract, retain, and motivate our key employees. We rely on key personnel to support anticipated continued rapid international growth and increasingly complex product and service offerings. There can be no assurance that we will be able to attract, retain, and motivate the key professional, technical, marketing, and staff resources we need, particularly in light of the reduction in the total number of equity shares granted to employees as part of their total compensation packages. New regulations and other factors could make it harder or more expensive for us to grant equity-based awards to employees in the future, putting us at a competitive disadvantage or forcing us to increase cash compensation. |
| Loss of government contracts could harm our business. Government contracts are subject to future funding that may affect the extension or termination of programs and are subject to the right of the government to terminate for convenience or non-appropriation. In addition, if we violate legal or regulatory requirements, the government could suspend or disbar us as a contractor, which would unfavorably affect our net revenue and profitability. |
| The expiration of tax holidays or favorable tax rate structures could result in an increase of our effective tax rate in the future. Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays that expire in whole or in part during Fiscal 2010 through Fiscal 2019. Many of these holidays may be extended when certain conditions are met. If they are not extended, then our effective tax rate could increase in the future. See Note 4 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data. |
| Current environmental laws, or laws enacted in the future, may harm our business. Our operations are subject to environmental regulation in all of the areas in which we conduct business. Our product design and procurement operations must comply with new and future requirements relating to the materials composition of our electronics products, including restrictions on lead, cadmium, and other substances. On July 1, 2006, the European Union adopted the Restriction of Hazardous Substances Directive. The labeling provisions of similar legislation in China became effective on March 1, 2007. If we fail to comply with the rules and regulations regarding the use and sale of such regulated substances, we could be subject to liability. Beginning in August 2005, we became subject to the European Union Waste Electrical and Electronic Equipment Directive as enacted by individual member states of the European Union (WEEE Legislation). The WEEE Legislation makes producers of electrical goods, including computers and printers, responsible for collection, recycling, treatment, and disposal of recovered products. While we do not expect that the impact of these environmental laws and other similar legislation adopted in the U.S. and other countries will have a substantial unfavorable impact on our business, the costs and timing of costs under environmental laws are difficult to predict. |
| Armed hostilities, terrorism, natural disasters, or public health issues could harm our business. Armed hostilities, terrorism, natural disasters, or public health issues, whether in the U.S. or abroad, could |
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cause damage or disruption to us, our suppliers or customers, or could create political or economic instability, any of which could harm our business. These events could cause a decrease in demand for our products, could make it difficult or impossible for us to deliver products or for our suppliers to deliver components, and could create delay and inefficiencies in our supply chain. |
ITEM 1B | UNRESOLVED STAFF COMMENTS |
ITEM 2 | PROPERTIES |
Description | Principal Locations | Owned (square feet) | Leased (square feet) | ||||||
Headquarters
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Round Rock, Texas | 2.1 million | | ||||||
Business
Centers(a)
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Canada Edmonton and Ottawa El Salvador San Salvador Oklahoma Oklahoma City Panama Panama City Tennessee Nashville Texas Austin and Round Rock |
1.3 million | 1.4 million | ||||||
Manufacturing and Distribution |
Brazil El Dorado do Sul Florida Miami (Alienware) North Carolina Winston-Salem Ohio West Chester Tennessee Lebanon and Nashville Texas Austin |
2.5 million | 1.0 million | ||||||
Design Centers
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Texas Austin and Round Rock | 800,000 | | ||||||
Description | Principal Locations | Owned (square feet) | Leased (square feet) | ||||||
Headquarters | Bracknell, England | 100,000 | 50,000 | ||||||
Business Centers(a) |
England Bracknell France Montpellier Ireland Dublin and Limerick Morocco Casablanca Slovakia Bratislava |
400,000 | 1.5 million | ||||||
Manufacturing and Distribution | Ireland Limerick and Athlone (Alienware) | 400,000 | | ||||||
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Description | Principal Locations | Owned (square feet) | Leased (square feet) | ||||||
Headquarters | Singapore | | 100,000 | ||||||
Business
Centers(a)
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China Dalian and Xiamen
India Bangalore, Gurgaon, Hyderabad and Mohali
Japan Kawasaki
Malaysia Penang Philippines Pasay |
200,000 | 3.1 million | ||||||
Manufacturing and Distribution
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China Xiamen Malaysia Penang |
1.0 million | | ||||||
Design Centers
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China Shanghai India Bangalore Singapore Taiwan Taipei |
| 150,000 | ||||||
(a) | Business center locations include facilities with capacity greater than 1,000 people. Operations within these centers include sales, technical support, administrative, and support functions. Locations of smaller business centers are not listed; however, the smaller centers are included in the square footage. |
ITEM 3 | LEGAL PROCEEDINGS |
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ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
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ITEM 5 |
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
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| Employee Stock Purchase Plan We maintain an Employee Stock Purchase Plan that is available to substantially all our employees worldwide. In 1994, stockholders approved additional shares for issuance under our Employee Stock Purchase Plan. We recently discovered that the issuance of these additional shares was never registered. Consequently, we have inadvertently issued approximately 54 million unregistered shares under this plan since 1996. |
| Retirement Plans We maintain a 401(k) retirement savings plan that is available to substantially all of our U.S. employees and a separate retirement plan that is available to our employees in Canada. Both of those plans contain a Dell Stock Fund, and both plans allow participants to allocate some or all of their account balances to interests in the Dell Stock Fund. The Dell common stock held in the Dell Stock Funds is not purchased from Dell; rather, the plan trustees accumulate the plan contributions that are directed to the Dell Stock Funds and purchase for the Dell Stock Funds shares of Dell common stock in open market transactions. Nevertheless, because we sponsor the plans, we are required to register certain transactions in the plans related to shares of Dell common stock. We recently discovered that we may be deemed to have been required to file a Form S-8 in July 2003 to register additional share transactions in the 401(k) Plan, and we should have filed a Form S-8 to register share transactions in the Canada retirement plan in 1999. Consequently, we may be deemed to have inadvertently failed to register transactions in the two plans relating to up to approximately 37 million shares. |
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Total |
Approximate |
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Number of |
Dollar Value |
|||||||||||||||
Shares |
of Shares that |
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Repurchased |
May Yet Be |
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as Part of |
Repurchased |
|||||||||||||||
Total Number |
Average |
Publicly |
Under the |
|||||||||||||
of Shares |
Price Paid |
Announced |
Announced |
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Period | Repurchased | per Share | Plan | Plan(b) | ||||||||||||
(in millions) | ||||||||||||||||
Repurchases from November 4, 2006 through December 1,
2006
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| N/A | | $ | 1,415 | |||||||||||
Repurchases from December 2, 2006 through December 29,
2006
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870 | (a) | $ | 25.72 | | $ | 1,415 | |||||||||
Repurchases from December 30, 2006 through February 2,
2007
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| N/A | | $ | 1,415 | |||||||||||
Total
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870 | $ | 25.72 | | ||||||||||||
(a) | These shares were not purchased pursuant to our share repurchase program, but were withheld from employees upon the exercise of stock options or the vesting of restricted stock in order to pay the exercise price and required tax withholding. | |
(b) | Our share repurchase program was announced on February 20, 1996, and the program authorizes us to purchase shares at an aggregate cost not to exceed $30.0 billion. |
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End of Fiscal Year | ||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2007 | |||||||||||||||||||
Dell
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$ | 100 | $ | 89 | $ | 125 | $ | 153 | $ | 109 | $ | 88 | ||||||||||||
S&P 500 Index
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100 | 76 | 101 | 104 | 113 | 129 | ||||||||||||||||||
Dow Jones Computer Index
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100 | 69 | 96 | 101 | 115 | 131 |
ITEM 6 | SELECTED FINANCIAL DATA |
| The restated selected financial data for the annual periods described above; |
| The annual financial data for the year ended February 2, 2007; |
| Restated quarterly selected financial data for those years being restated; and |
| Schedules presenting details of the nature and impact of the restatement adjustments. Additional information regarding these adjustments can be found in Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data. The adjustments that relate to fiscal years prior to Fiscal 2003 are reflected in beginning retained earnings |
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for Fiscal 2003. The cumulative impact of these adjusting entries increased retained earnings by $59 million, net of tax, at the beginning of Fiscal 2003. |
Fiscal Year Ended | ||||||||||||||||||||||||||||||||||||
February 2, |
February 3, |
January 28, |
January 30, |
January 31, |
||||||||||||||||||||||||||||||||
2007 | 2006(c) | 2005(d) | 2004 | 2003(e) | ||||||||||||||||||||||||||||||||
As |
As |
As |
As |
As |
As |
As |
As |
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Reported | Restated | Reported | Restated | Reported | Restated | Reported | Restated | |||||||||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||||||||||
Results of Operations:
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Net revenue
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$ | 57,420 | $ | 55,908 | $ | 55,788 | $ | 49,205 | $ | 49,121 | $ | 41,444 | $ | 41,327 | $ | 35,404 | $ | 35,262 | ||||||||||||||||||
Gross margin
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$ | 9,516 | $ | 9,950 | $ | 9,891 | $ | 9,015 | $ | 9,018 | $ | 7,552 | $ | 7,563 | $ | 6,349 | $ | 6,438 | ||||||||||||||||||
Operating income
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$ | 3,070 | $ | 4,347 | $ | 4,382 | $ | 4,254 | $ | 4,206 | $ | 3,544 | $ | 3,525 | $ | 2,844 | $ | 2,738 | ||||||||||||||||||
Income before income taxes
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$ | 3,345 | $ | 4,574 | $ | 4,608 | $ | 4,445 | $ | 4,403 | $ | 3,724 | $ | 3,711 | $ | 3,027 | $ | 2,907 | ||||||||||||||||||
Net income
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$ | 2,583 | $ | 3,572 | $ | 3,602 | $ | 3,043 | $ | 3,018 | $ | 2,645 | $ | 2,625 | $ | 2,122 | $ | 2,031 | ||||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||||||||||
Basic
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$ | 1.15 | $ | 1.49 | $ | 1.50 | $ | 1.21 | $ | 1.20 | $ | 1.03 | $ | 1.02 | $ | 0.82 | $ | 0.79 | ||||||||||||||||||
Diluted
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$ | 1.14 | $ | 1.46 | $ | 1.47 | $ | 1.18 | $ | 1.18 | $ | 1.01 | $ | 1.00 | $ | 0.80 | $ | 0.77 | ||||||||||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||||||||||||||
Basic
|
2,255 | 2,403 | 2,403 | 2,509 | 2,509 | 2,565 | 2,565 | 2,584 | 2,584 | |||||||||||||||||||||||||||
Diluted
|
2,271 | 2,449 | 2,449 | 2,568 | 2,568 | 2,619 | 2,619 | 2,644 | 2,644 | |||||||||||||||||||||||||||
Cash Flow & Balance Sheet Data:
|
||||||||||||||||||||||||||||||||||||
Net cash provided by operating
activities(f) |
$ | 3,969 | $ | 4,839 | $ | 4,751 | $ | 5,310 | $ | 5,821 | $ | 3,670 | $ | 4,064 | $ | 3,538 | $ | 3,908 | ||||||||||||||||||
Cash, cash equivalents and investments
|
$ | 12,445 | $ | 11,749 | $ | 11,756 | $ | 14,101 | $ | 14,101 | $ | 11,922 | $ | 11,921 | $ | 9,905 | $ | 9,910 | ||||||||||||||||||
Total assets
|
$ | 25,635 | $ | 23,109 | $ | 23,252 | $ | 23,215 | $ | 23,318 | $ | 19,311 | $ | 19,340 | $ | 15,470 | $ | 15,540 | ||||||||||||||||||
Short-term
borrowings(a)
|
$ | 188 | $ | | $ | 65 | $ | | $ | 74 | $ | | $ | 157 | $ | | $ | 129 | ||||||||||||||||||
Long-term
debt(b)
|
$ | 569 | $ | 504 | $ | 625 | $ | 505 | $ | 662 | $ | 505 | $ | 645 | $ | 506 | $ | 581 | ||||||||||||||||||
Total stockholders equity
|
$ | 4,328 | $ | 4,129 | $ | 4,047 | $ | 6,485 | $ | 6,412 | $ | 6,280 | $ | 6,238 | $ | 4,873 | $ | 4,846 |
(a) | The restated amounts for short-term borrowings reflect (1) a correction in classification from accounts payable regarding a vendor financing arrangement during Fiscal 2002 until termination in the first quarter of Fiscal 2006, and (2) a correction in classification from other current liabilities for the short-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. |
21
(b) | The restated amounts for long-term debt reflect (1) adjustments to record changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements for all periods restated and (2) a correction in classification from both other current liabilities and other non-current liabilities related to the long-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(c) | Results for Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general and administrative expenses) related to the cost of servicing or replacing certain OptiPlextm systems that include a vendor part that failed to perform to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter. The related tax effect of these items was $96 million. Fiscal 2006 also includes an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter. | |
(d) | Results for Fiscal 2005 include an income tax charge of $280 million related to the repatriation of earnings under the American Jobs Creation Act of 2004 recorded in the fourth quarter. | |
(e) | The adjustments relating to fiscal years prior to Fiscal 2003 are reflected in beginning retained earnings. The cumulative impact of these adjusting entries increased beginning retained earnings by $59 million, net of tax. | |
(f) | The cash flows have been revised to reflect a closer approximation of the weighted-average exchange rates during the reporting periods. For most periods, this revision reduced the previously reported effect of exchange rate changes on cash and cash equivalents with an offsetting change in effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies and changes in operating working capital included in cash flows from operating activities. |
February 3, |
January 28, |
January 30, |
January 31, |
|||||||||||||
2006 | 2005 | 2004 | 2003 | |||||||||||||
(in millions) | ||||||||||||||||
Retained earnings as reported | $ | 12,746 | $ | 9,174 | $ | 6,131 | $ | 3,486 | ||||||||
Cumulative restatement adjustments
|
(47 | ) | (77 | ) | (52 | ) | (32 | )(a) | ||||||||
Retained earnings as restated
|
$ | 12,699 | $ | 9,097 | $ | 6,079 | $ | 3,454 | ||||||||
(a) | Includes a $59 million increase in beginning retained earnings at January 31, 2003 for the pre- Fiscal 2003 cumulative impact of the adjustments. |
February 3, |
January 28, |
January 30, |
January 31, |
|||||||||||||
2006 | 2005 | 2004 | 2003 | |||||||||||||
(in millions) | ||||||||||||||||
Retained earnings as restated:
|
||||||||||||||||
Beginning retained earnings as reported
|
$ | 9,174 | $ | 6,131 | $ | 3,486 | $ | 1,364 | ||||||||
Cumulative adjustments to beginning retained earnings
|
(77 | ) | (52 | ) | (32 | ) | 59 | |||||||||
Beginning retained earnings as restated
|
9,097 | 6,079 | 3,454 | 1,423 | ||||||||||||
Net income as reported
|
3,572 | 3,043 | 2,645 | 2,122 | ||||||||||||
Net income restatement adjustments
|
30 | (25 | ) | (20 | ) | (91 | ) | |||||||||
Net income as restated
|
3,602 | 3,018 | 2,625 | 2,031 | ||||||||||||
Retained earnings as restated
|
$ | 12,699 | $ | 9,097 | $ | 6,079 | $ | 3,454 | ||||||||
22
February 3, |
January 28, |
January 30, |
January 31, |
|||||||||||||
2006 | 2005 | 2004 | 2003 | |||||||||||||
(in millions) | ||||||||||||||||
Beginning retained earnings as reported
|
$ | 9,174 | $ | 6,131 | $ | 3,486 | $ | 1,364 | ||||||||
Revenue Recognition:
|
||||||||||||||||
Software
|
(21 | ) | (9 | ) | (7 | ) | (2 | ) | ||||||||
Other
|
(216 | ) | (217 | ) | (102 | ) | (64 | ) | ||||||||
Revenue Recognition
|
(237 | ) | (226 | ) | (109 | ) | (66 | ) | ||||||||
Warranty Liabilities
|
202 | 223 | 129 | 31 | ||||||||||||
Restructuring Reserves
|
(18 | ) | (18 | ) | (14 | ) | 80 | |||||||||
Other
|
(45 | ) | (35 | ) | (49 | ) | 32 | |||||||||
(Provision) benefit for income taxes
|
21 | 4 | 11 | (18 | ) | |||||||||||
Cumulative adjustments to beginning retained earnings
|
(77 | ) | (52 | ) | (32 | ) | 59 | |||||||||
Beginning retained earnings as restated
|
$ | 9,097 | $ | 6,079 | $ | 3,454 | $ | 1,423 | ||||||||
23
Fiscal 2006 | ||||||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||||||
Revenue |
Other |
Provision |
||||||||||||||||||||||||||||||
recognition |
reserves |
for |
||||||||||||||||||||||||||||||
As |
Software |
Warranty |
Restruc- |
and |
income |
As |
||||||||||||||||||||||||||
Reported | sales | Other | liabilities | turing | accruals | tax(a) | Restated | |||||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||||||
Net revenue | $ | 55,908 | $ | (248 | ) | $ | 130 | $ | | $ | | $ | (2 | ) | $ | | $ | 55,788 | ||||||||||||||
Cost of net revenue
|
45,958 | (244 | ) | 124 | 52 | | 7 | | 45,897 | |||||||||||||||||||||||
Gross margin
|
9,950 | (4 | ) | 6 | (52 | ) | | (9 | ) | | 9,891 | |||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general, and administrative
|
5,140 | | 1 | | | (90 | ) | | 5,051 | |||||||||||||||||||||||
Research, development, and engineering
|
463 | | | (1 | ) | | (4 | ) | | 458 | ||||||||||||||||||||||
Total operating expenses
|
5,603 | | 1 | (1 | ) | | (94 | ) | | 5,509 | ||||||||||||||||||||||
Operating income
|
4,347 | (4 | ) | 5 | (51 | ) | | 85 | | 4,382 | ||||||||||||||||||||||
Investment and other income, net
|
227 | | 11 | (4 | ) | | (8 | ) | | 226 | ||||||||||||||||||||||
Income before income taxes
|
4,574 | (4 | ) | 16 | (55 | ) | | 77 | | 4,608 | ||||||||||||||||||||||
Income tax provision
|
1,002 | 4 | 1,006 | |||||||||||||||||||||||||||||
Net income
|
$ | 3,572 | $ | 3,602 | ||||||||||||||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||||||
Basic
|
$ | 1.49 | $ | 1.50 | ||||||||||||||||||||||||||||
Diluted
|
$ | 1.46 | $ | 1.47 | ||||||||||||||||||||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||||||||||||||
Basic
|
2,403 | 2,403 | ||||||||||||||||||||||||||||||
Diluted
|
2,449 | 2,449 |
(a) | Primarily represents the aggregate tax impact of the adjustments. |
24
First Quarter | Second Quarter(c) | |||||||||||||||||||||||
April 29, 2005 | July 29, 2005 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2006
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations: | ||||||||||||||||||||||||
Net revenue
|
$ | 13,386 | $ | (86 | ) | $ | 13,300 | $ | 13,428 | $ | (46 | ) | $ | 13,382 | ||||||||||
Gross margin
|
$ | 2,491 | $ | (39 | ) | $ | 2,452 | $ | 2,499 | $ | (68 | ) | $ | 2,431 | ||||||||||
Operating income
|
$ | 1,174 | $ | (37 | ) | $ | 1,137 | $ | 1,173 | $ | (60 | ) | $ | 1,113 | ||||||||||
Income before income taxes
|
$ | 1,233 | $ | (45 | ) | $ | 1,188 | $ | 1,234 | $ | (47 | ) | $ | 1,187 | ||||||||||
Net income
|
$ | 934 | $ | (26 | ) | $ | 908 | $ | 1,020 | $ | (38 | ) | $ | 982 | ||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.38 | $ | (0.01 | ) | $ | 0.37 | $ | 0.42 | $ | (0.01 | ) | $ | 0.41 | ||||||||||
Diluted
|
$ | 0.37 | $ | (0.01 | ) | $ | 0.36 | $ | 0.41 | $ | (0.01 | ) | $ | 0.40 | ||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,456 | | 2,456 | 2,418 | | 2,418 | ||||||||||||||||||
Diluted
|
2,515 | | 2,515 | 2,478 | | 2,478 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(d)
|
$ | 1,190 | $ | 84 | $ | 1,274 | $ | 919 | $ | (58 | ) | $ | 861 | |||||||||||
Cash, cash equivalents and investments
|
$ | 13,374 | $ | 4 | $ | 13,378 | $ | 12,624 | $ | 6 | $ | 12,630 | ||||||||||||
Total assets
|
$ | 22,687 | $ | 82 | $ | 22,769 | $ | 22,611 | $ | 107 | $ | 22,718 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 81 | $ | 81 | $ | | $ | 77 | $ | 77 | ||||||||||||
Long-term
debt(b)
|
$ | 504 | $ | 140 | $ | 644 | $ | 504 | $ | 135 | $ | 639 | ||||||||||||
Total stockholders equity
|
$ | 5,624 | $ | (100 | ) | $ | 5,524 | $ | 5,509 | $ | (144 | ) | $ | 5,365 |
Third Quarter(c) | Fourth Quarter | |||||||||||||||||||||||
October 28, 2005 | February 3, 2006 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2006
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations:
|
||||||||||||||||||||||||
Net revenue
|
$ | 13,911 | $ | (31 | ) | $ | 13,880 | $ | 15,183 | $ | 43 | $ | 15,226 | |||||||||||
Gross margin
|
$ | 2,251 | $ | 14 | $ | 2,265 | $ | 2,709 | $ | 34 | $ | 2,743 | ||||||||||||
Operating income
|
$ | 754 | $ | 38 | $ | 792 | $ | 1,246 | $ | 94 | $ | 1,340 | ||||||||||||
Income before income taxes
|
$ | 804 | $ | 39 | $ | 843 | $ | 1,303 | $ | 87 | $ | 1,390 | ||||||||||||
Net income
|
$ | 606 | $ | 29 | $ | 635 | $ | 1,012 | $ | 65 | $ | 1,077 | ||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.25 | $ | 0.02 | $ | 0.27 | $ | 0.43 | $ | 0.03 | $ | 0.46 | ||||||||||||
Diluted
|
$ | 0.25 | $ | 0.01 | $ | 0.26 | $ | 0.43 | $ | 0.02 | $ | 0.45 | ||||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,395 | | 2,395 | 2,350 | | 2,350 | ||||||||||||||||||
Diluted
|
2,435 | | 2,435 | 2,375 | | 2,375 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(d)
|
$ | 1,148 | $ | (42 | ) | $ | 1,106 | $ | 1,582 | $ | (72 | ) | $ | 1,510 | ||||||||||
Cash, cash equivalents and investments
|
$ | 12,233 | $ | 4 | $ | 12,237 | $ | 11,749 | $ | 7 | $ | 11,756 | ||||||||||||
Total assets
|
$ | 22,874 | $ | 163 | $ | 23,037 | $ | 23,109 | $ | 143 | $ | 23,252 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 74 | $ | 74 | $ | | $ | 65 | $ | 65 | ||||||||||||
Long-term
debt(b)
|
$ | 504 | $ | 113 | $ | 617 | $ | 504 | $ | 121 | $ | 625 | ||||||||||||
Total stockholders equity
|
$ | 4,821 | $ | (113 | ) | $ | 4,708 | $ | 4,129 | $ | (82 | ) | $ | 4,047 |
25
(a) | The restated amounts for short-term borrowings reflect (1) a correction in classification from accounts payable for vendor financing for the periods from the end of Fiscal 2002 until termination in the first quarter of Fiscal 2006, and (2) a correction in classification from other current liabilities for the short-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(b) | The restated amounts for long-term debt reflect (1) adjustments to record changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements for all periods restated and (2) a correction in classification from both other current liabilities and other non-current liabilities related to the long-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(c) | Results for the third quarter of Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general and administrative expenses) related to the cost of servicing or replacing certain OptiPlexTM systems that include a vendor part that failed to perform to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter. The related tax effect of these items was $96 million. The second quarter of Fiscal 2006 includes an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter. | |
(d) | The cash flows have been revised to reflect a closer approximation of the weighted-average exchange rates during the reporting periods. For most periods, this revision reduced the previously reported effect of exchange rate changes on cash and cash equivalents with an offsetting change in effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies and changes in operating working capital included in cash flows from operating activities. |
First |
Second |
Third |
Fourth |
Fiscal |
||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
April 29, |
July 29, |
October 28, |
February 3, |
February 3, |
||||||||||||||||
Fiscal 2006 (As
Restated)
|
2005 | 2005 | 2005 | 2006 | 2006 | |||||||||||||||
(in millions) | ||||||||||||||||||||
Net income as reported
|
$ | 934 | $ | 1,020 | $ | 606 | $ | 1,012 | $ | 3,572 | ||||||||||
Revenue recognition:
|
||||||||||||||||||||
Software sales
|
(3 | ) | (3 | ) | 3 | (1 | ) | (4 | ) | |||||||||||
Other revenue recognition
|
(20 | ) | (3 | ) | 9 | 30 | 16 | |||||||||||||
Revenue recognition
|
(23 | ) | (6 | ) | 12 | 29 | 12 | |||||||||||||
Warranty liabilities
|
(14 | ) | (52 | ) | (14 | ) | 25 | (55 | ) | |||||||||||
Restructuring reserves
|
| | | | | |||||||||||||||
Other reserves and accruals
|
(8 | ) | 11 | 41 | 33 | 77 | ||||||||||||||
(Provision) benefit for income taxes
|
19 | 9 | (10 | ) | (22 | ) | (4 | ) | ||||||||||||
Net impact of adjustments
|
(26 | ) | (38 | ) | 29 | 65 | 30 | |||||||||||||
Net income as restated
|
$ | 908 | $ | 982 | $ | 635 | $ | 1,077 | $ | 3,602 | ||||||||||
26
Fiscal 2005 | ||||||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||||||
Revenue |
Other |
Provision |
||||||||||||||||||||||||||||||
recognition |
reserves |
for |
||||||||||||||||||||||||||||||
As |
Software |
Warranty |
Restruc- |
and |
income |
As |
||||||||||||||||||||||||||
Reported | sales | Other | liabilities | turing | accruals | tax(a) | Restated | |||||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||||||
Net revenue
|
$ | 49,205 | $ | (105 | ) | $ | 21 | $ | | $ | | $ | | $ | | $ | 49,121 | |||||||||||||||
Cost of net revenue
|
40,190 | (93 | ) | 21 | 21 | | (36 | ) | | 40,103 | ||||||||||||||||||||||
Gross margin
|
9,015 | (12 | ) | | (21 | ) | | 36 | | 9,018 | ||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general, and administrative
|
4,298 | | | | | 54 | | 4,352 | ||||||||||||||||||||||||
Research, development, and engineering
|
463 | | | | | (3 | ) | | 460 | |||||||||||||||||||||||
Total operating expenses
|
4,761 | | | | | 51 | | 4,812 | ||||||||||||||||||||||||
Operating income
|
4,254 | (12 | ) | | (21 | ) | | (15 | ) | | 4,206 | |||||||||||||||||||||
Investment and other income, net
|
191 | | 1 | | | 5 | | 197 | ||||||||||||||||||||||||
Income before income taxes
|
4,445 | (12 | ) | 1 | (21 | ) | | (10 | ) | | 4,403 | |||||||||||||||||||||
Income tax provision
|
1,402 | (17 | ) | 1,385 | ||||||||||||||||||||||||||||
Net income
|
$ | 3,043 | $ | 3,018 | ||||||||||||||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||||||
Basic
|
$ | 1.21 | $ | 1.20 | ||||||||||||||||||||||||||||
Diluted
|
$ | 1.18 | $ | 1.18 | ||||||||||||||||||||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||||||||||||||
Basic
|
2,509 | 2,509 | ||||||||||||||||||||||||||||||
Diluted
|
2,568 | 2,568 |
(a) | Primarily represents the aggregate tax impact of the adjustments. |
27
First Quarter | Second Quarter | |||||||||||||||||||||||
April 30, 2004 | July 30, 2004 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2005
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations:
|
||||||||||||||||||||||||
Net revenue
|
$ | 11,540 | $ | 44 | $ | 11,584 | $ | 11,706 | $ | (56 | ) | $ | 11,650 | |||||||||||
Gross margin
|
$ | 2,073 | $ | (14 | ) | $ | 2,059 | $ | 2,134 | $ | 59 | $ | 2,193 | |||||||||||
Operating income
|
$ | 966 | $ | (34 | ) | $ | 932 | $ | 1,006 | $ | 59 | $ | 1,065 | |||||||||||
Income before income taxes
|
$ | 1,015 | $ | (15 | ) | $ | 1,000 | $ | 1,052 | $ | 54 | $ | 1,106 | |||||||||||
Net income
|
$ | 731 | $ | (10 | ) | $ | 721 | $ | 799 | $ | 41 | $ | 840 | |||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.29 | $ | (0.01 | ) | $ | 0.28 | $ | 0.32 | $ | 0.01 | $ | 0.33 | |||||||||||
Diluted
|
$ | 0.28 | $ | | $ | 0.28 | $ | 0.31 | $ | 0.02 | $ | 0.33 | ||||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,539 | | 2,539 | 2,518 | | 2,518 | ||||||||||||||||||
Diluted
|
2,593 | | 2,593 | 2,574 | | 2,574 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(d)
|
$ | 1,002 | $ | 135 | $ | 1,137 | $ | 703 | $ | 62 | $ | 765 | ||||||||||||
Cash, cash equivalents and investments
|
$ | 11,886 | $ | | $ | 11,886 | $ | 11,810 | $ | | $ | 11,810 | ||||||||||||
Total assets
|
$ | 19,709 | $ | 10 | $ | 19,719 | $ | 19,932 | $ | 17 | $ | 19,949 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 101 | $ | 101 | $ | | $ | 80 | $ | 80 | ||||||||||||
Long-term
debt(b)
|
$ | 505 | $ | 126 | $ | 631 | $ | 505 | $ | 133 | $ | 638 | ||||||||||||
Total stockholders equity
|
$ | 6,105 | $ | (61 | ) | $ | 6,044 | $ | 6,207 | $ | (20 | ) | $ | 6,187 |
Third Quarter | Fourth Quarter(c) | |||||||||||||||||||||||
October 29, 2004 | January 28, 2005 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2005
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations:
|
||||||||||||||||||||||||
Net revenue
|
$ | 12,502 | $ | 11 | $ | 12,513 | $ | 13,457 | $ | (83 | ) | $ | 13,374 | |||||||||||
Gross margin
|
$ | 2,313 | $ | (11 | ) | $ | 2,302 | $ | 2,495 | $ | (31 | ) | $ | 2,464 | ||||||||||
Operating income
|
$ | 1,095 | $ | (20 | ) | $ | 1,075 | $ | 1,187 | $ | (53 | ) | $ | 1,134 | ||||||||||
Income before income taxes
|
$ | 1,143 | $ | (21 | ) | $ | 1,122 | $ | 1,235 | $ | (60 | ) | $ | 1,175 | ||||||||||
Net income
|
$ | 846 | $ | (14 | ) | $ | 832 | $ | 667 | $ | (42 | ) | $ | 625 | ||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.34 | $ | (0.01 | ) | $ | 0.33 | $ | 0.27 | $ | (0.02 | ) | $ | 0.25 | ||||||||||
Diluted
|
$ | 0.33 | $ | | $ | 0.33 | $ | 0.26 | $ | (0.02 | ) | $ | 0.24 | |||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,493 | | 2,493 | 2,485 | | 2,485 | ||||||||||||||||||
Diluted
|
2,546 | | 2,546 | 2,553 | | 2,553 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(d)
|
$ | 1,787 | $ | 83 | $ | 1,870 | $ | 1,818 | $ | 231 | $ | 2,049 | ||||||||||||
Cash, cash equivalents and investments
|
$ | 12,436 | $ | | $ | 12,436 | $ | 14,101 | $ | | $ | 14,101 | ||||||||||||
Total assets
|
$ | 21,054 | $ | 73 | $ | 21,127 | $ | 23,215 | $ | 103 | $ | 23,318 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 79 | $ | 79 | $ | | $ | 74 | $ | 74 | ||||||||||||
Long-term
debt(b)
|
$ | 505 | $ | 154 | $ | 659 | $ | 505 | $ | 157 | $ | 662 | ||||||||||||
Total stockholders equity
|
$ | 5,880 | $ | (35 | ) | $ | 5,845 | $ | 6,485 | $ | (73 | ) | $ | 6,412 |
28
(a) | The restated amounts for short-term borrowings reflect (1) a correction in classification from accounts payable for vendor financing for the periods from the end of Fiscal 2002 until termination in the first quarter of Fiscal 2006, and (2) a correction in classification from other current liabilities for the short-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(b) | The restated amounts for long-term debt reflect (1) adjustments to record changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements for all periods restated and (2) a correction in classification from both other current liabilities and other non-current liabilities related to the long-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(c) | Results include an income tax charge of $280 million related to the repatriation of earnings under the American Jobs Creation Act of 2004 recorded in the fourth quarter. | |
(d) | The cash flows have been revised to reflect a closer approximation of the weighted-average exchange rates during the reporting periods. For most periods, this revision reduced the previously reported effect of exchange rate changes on cash and cash equivalents with an offsetting change in effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies and changes in operating working capital included in cash flows from operating activities. |
First |
Second |
Third |
Fourth |
Fiscal |
||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
April 30, |
July 30, |
October 29, |
January 28, |
January 28, |
||||||||||||||||
Fiscal 2005 (As
Restated)
|
2004 | 2004 | 2004 | 2005 | 2005 | |||||||||||||||
(in millions) | ||||||||||||||||||||
Net income as reported
|
$ | 731 | $ | 799 | $ | 846 | $ | 667 | $ | 3,043 | ||||||||||
Revenue recognition:
|
||||||||||||||||||||
Software sales
|
(2 | ) | (2 | ) | (3 | ) | (5 | ) | (12 | ) | ||||||||||
Other revenue recognition
|
11 | (2 | ) | 6 | (14 | ) | 1 | |||||||||||||
Revenue recognition
|
9 | (4 | ) | 3 | (19 | ) | (11 | ) | ||||||||||||
Warranty liabilities
|
1 | 24 | (21 | ) | (25 | ) | (21 | ) | ||||||||||||
Restructuring reserves
|
| | | | | |||||||||||||||
Other reserves and
accruals(a)
|
(25 | ) | 34 | (3 | ) | (16 | ) | (10 | ) | |||||||||||
(Provision) benefit for income taxes
|
5 | (13 | ) | 7 | 18 | 17 | ||||||||||||||
Net impact of adjustments
|
(10 | ) | 41 | (14 | ) | (42 | ) | (25 | ) | |||||||||||
Net income as restated
|
$ | 721 | $ | 840 | $ | 832 | $ | 625 | $ | 3,018 | ||||||||||
(a) | Reflects an adjustment of an amount of vendor funding recognized in the first quarter of Fiscal 2005 but earned in the second quarter of Fiscal 2005. |
29
Fiscal 2004 | ||||||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||||||
Revenue |
Other |
Provision |
||||||||||||||||||||||||||||||
recognition |
reserves |
for |
||||||||||||||||||||||||||||||
As |
Software |
Warranty |
Restruc- |
and |
income |
As |
||||||||||||||||||||||||||
Reported | sales | Other(a) | liabilities | turing | accruals | tax(b) | Restated | |||||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||||||
Net revenue
|
$ | 41,444 | $ | 4 | $ | (121 | ) | $ | | $ | | $ | | $ | | $ | 41,327 | |||||||||||||||
Cost of net revenue
|
33,892 | 6 | (6 | ) | (94 | ) | | (34 | ) | | 33,764 | |||||||||||||||||||||
Gross margin
|
7,552 | (2 | ) | (115 | ) | 94 | | 34 | | 7,563 | ||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general, and administrative
|
3,544 | | (1 | ) | | 4 | 57 | | 3,604 | |||||||||||||||||||||||
Research, development, and engineering
|
464 | | | | | (30 | ) | | 434 | |||||||||||||||||||||||
Total operating expenses
|
4,008 | | (1 | ) | | 4 | 27 | | 4,038 | |||||||||||||||||||||||
Operating income
|
3,544 | (2 | ) | (114 | ) | 94 | (4 | ) | 7 | | 3,525 | |||||||||||||||||||||
Investment and other income, net
|
180 | | (1 | ) | | | 7 | | 186 | |||||||||||||||||||||||
Income before income taxes
|
3,724 | (2 | ) | (115 | ) | 94 | (4 | ) | 14 | | 3,711 | |||||||||||||||||||||
Income tax provision
|
1,079 | 7 | 1,086 | |||||||||||||||||||||||||||||
Net income
|
$ | 2,645 | $ | 2,625 | ||||||||||||||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||||||
Basic
|
$ | 1.03 | $ | 1.02 | ||||||||||||||||||||||||||||
Diluted
|
$ | 1.01 | $ | 1.00 | ||||||||||||||||||||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||||||||||||||
Basic
|
2,565 | 2,565 | ||||||||||||||||||||||||||||||
Diluted
|
2,619 | 2,619 |
(a) | Primarily includes adjustments to the deferral and amortization of revenue from extended warranty and enhanced service level agreements, and adjustments to the period end in-transit revenue deferrals. See Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for additional detail. | |
(b) | Primarily represents the aggregate tax impact of the adjustments. |
30
First Quarter | Second Quarter | |||||||||||||||||||||||
May 2, 2003 | August 1, 2003 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2004
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations:
|
||||||||||||||||||||||||
Net revenue
|
$ | 9,532 | $ | (11 | ) | $ | 9,521 | $ | 9,778 | $ | (98 | ) | $ | 9,680 | ||||||||||
Gross margin
|
$ | 1,748 | $ | 9 | $ | 1,757 | $ | 1,778 | $ | (69 | ) | $ | 1,709 | |||||||||||
Operating income
|
$ | 811 | $ | 18 | $ | 829 | $ | 840 | $ | (92 | ) | $ | 748 | |||||||||||
Income before income taxes
|
$ | 854 | $ | 20 | $ | 874 | $ | 887 | $ | (87 | ) | $ | 800 | |||||||||||
Net income
|
$ | 598 | $ | 11 | $ | 609 | $ | 621 | $ | (63 | ) | $ | 558 | |||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.23 | $ | 0.01 | $ | 0.24 | $ | 0.24 | $ | (0.02 | ) | $ | 0.22 | |||||||||||
Diluted
|
$ | 0.23 | $ | | $ | 0.23 | $ | 0.24 | $ | (0.03 | ) | $ | 0.21 | |||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,572 | | 2,572 | 2,567 | | 2,567 | ||||||||||||||||||
Diluted
|
2,614 | | 2,614 | 2,624 | | 2,624 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(c)
|
$ | 812 | $ | 117 | $ | 929 | $ | 740 | $ | 134 | $ | 874 | ||||||||||||
Cash, cash equivalents and investments
|
$ | 10,332 | $ | (2 | ) | $ | 10,330 | $ | 10,618 | $ | (1 | ) | $ | 10,617 | ||||||||||
Total assets
|
$ | 15,712 | $ | 70 | $ | 15,782 | $ | 16,540 | $ | 53 | $ | 16,593 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 134 | $ | 134 | $ | | $ | 81 | $ | 81 | ||||||||||||
Long-term
debt(b)
|
$ | 506 | $ | 81 | $ | 587 | $ | 506 | $ | 42 | $ | 548 | ||||||||||||
Total stockholders equity
|
$ | 5,076 | $ | (19 | ) | $ | 5,057 | $ | 5,506 | $ | (85 | ) | $ | 5,421 |
Third Quarter | Fourth Quarter | |||||||||||||||||||||||
October 31, 2003 | January 30, 2004 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2004
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations:
|
||||||||||||||||||||||||
Net revenue
|
$ | 10,622 | $ | 7 | $ | 10,629 | $ | 11,512 | $ | (15 | ) | $ | 11,497 | |||||||||||
Gross margin
|
$ | 1,935 | $ | 23 | $ | 1,958 | $ | 2,091 | $ | 48 | $ | 2,139 | ||||||||||||
Operating income
|
$ | 912 | $ | 5 | $ | 917 | $ | 981 | $ | 50 | $ | 1,031 | ||||||||||||
Income before income taxes
|
$ | 953 | $ | 7 | $ | 960 | $ | 1,030 | $ | 47 | $ | 1,077 | ||||||||||||
Net income
|
$ | 677 | $ | 2 | $ | 679 | $ | 749 | $ | 30 | $ | 779 | ||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.26 | $ | | $ | 0.26 | $ | 0.29 | $ | 0.01 | $ | 0.30 | ||||||||||||
Diluted
|
$ | 0.26 | $ | | $ | 0.26 | $ | 0.29 | $ | 0.01 | $ | 0.30 | ||||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,563 | | 2,563 | 2,557 | | 2,557 | ||||||||||||||||||
Diluted
|
2,623 | | 2,623 | 2,616 | | 2,616 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(c)
|
$ | 1,060 | $ | (119 | ) | $ | 941 | $ | 1,058 | $ | 262 | $ | 1,320 | |||||||||||
Cash, cash equivalents and investments
|
$ | 11,032 | $ | (2 | ) | $ | 11,030 | $ | 11,922 | $ | (1 | ) | $ | 11,921 | ||||||||||
Total assets
|
$ | 18,125 | $ | 14 | $ | 18,139 | $ | 19,311 | $ | 29 | $ | 19,340 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 176 | $ | 176 | $ | | $ | 157 | $ | 157 | ||||||||||||
Long-term
debt(b)
|
$ | 506 | $ | 132 | $ | 638 | $ | 505 | $ | 140 | $ | 645 | ||||||||||||
Total stockholders equity
|
$ | 5,878 | $ | (78 | ) | $ | 5,800 | $ | 6,280 | $ | (42 | ) | $ | 6,238 |
31
(a) | The restated amounts for short-term borrowings reflect (1) a correction in classification from accounts payable for vendor financing for the periods from the end of Fiscal 2002 until termination in the first quarter of Fiscal 2006, and (2) a correction in classification from other current liabilities for the short-term portion for outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(b) | The restated amounts for long-term debt reflect (1) adjustments to record changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements for all periods restated and (2) a correction in classification from both other current liabilities and other non-current liabilities related to the long-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(c) | The cash flows have been revised to reflect a closer approximation of the weighted-average exchange rates during the reporting periods. For most periods, this revision reduced the previously reported effect of exchange rate changes on cash and cash equivalents with an offsetting change in effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies and changes in operating working capital included in cash flows from operating activities. |
First |
Second |
Third |
Fourth |
Fiscal |
||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
May 2, |
August 1, |
October 31, |
January 30, |
January 30, |
||||||||||||||||
Fiscal 2004 (As
Restated)
|
2003 | 2003 | 2003 | 2004 | 2004 | |||||||||||||||
(in millions) | ||||||||||||||||||||
Net income as reported
|
$ | 598 | $ | 621 | $ | 677 | $ | 749 | $ | 2,645 | ||||||||||
Revenue recognition:
|
||||||||||||||||||||
Software sales
|
| (1 | ) | 2 | (3 | ) | (2 | ) | ||||||||||||
Other revenue
recognition(a)
|
(31 | ) | (58 | ) | (6 | ) | (20 | ) | (115 | ) | ||||||||||
Revenue recognition
|
(31 | ) | (59 | ) | (4 | ) | (23 | ) | (117 | ) | ||||||||||
Warranty liabilities
|
11 | 5 | 35 | 43 | 94 | |||||||||||||||
Restructuring reserves
|
(3 | ) | (2 | ) | 1 | | (4 | ) | ||||||||||||
Other reserves and accruals
|
43 | (31 | ) | (24 | ) | 26 | 14 | |||||||||||||
(Provision) benefit for income taxes
|
(9 | ) | 24 | (6 | ) | (16 | ) | (7 | ) | |||||||||||
Net impact of adjustments
|
11 | (63 | ) | 2 | 30 | (20 | ) | |||||||||||||
Net income as restated
|
$ | 609 | $ | 558 | $ | 679 | $ | 779 | $ | 2,625 | ||||||||||
(a) | Primarily includes adjustments to the deferral and amortization of revenue from extended warranty and enhanced service level agreements, and adjustments to the period end in-transit revenue deferrals. See Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for additional detail. |
32
Fiscal 2003 | ||||||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||||||
Revenue |
Other |
Provision |
||||||||||||||||||||||||||||||
recognition |
reserves |
for |
||||||||||||||||||||||||||||||
As |
Software |
Warranty |
Restruc- |
and |
income |
As |
||||||||||||||||||||||||||
Reported | sales | Other(b) | liabilities | turing | accruals(a) | tax(c) | Restated | |||||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||||||
Net revenue
|
$ | 35,404 | $ | (78 | ) | $ | (64 | ) | $ | | $ | | $ | | $ | | $ | 35,262 | ||||||||||||||
Cost of net revenue
|
29,055 | (73 | ) | (26 | ) | (98 | ) | 22 | (56 | ) | | 28,824 | ||||||||||||||||||||
Gross margin
|
6,349 | (5 | ) | (38 | ) | 98 | (22 | ) | 56 | | 6,438 | |||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general, and administrative
|
3,050 | | (5 | ) | | 72 | 128 | | 3,245 | |||||||||||||||||||||||
Research, development, and engineering
|
455 | | | | | | | 455 | ||||||||||||||||||||||||
Total operating expenses
|
3,505 | | (5 | ) | | 72 | 128 | | 3,700 | |||||||||||||||||||||||
Operating income
|
2,844 | (5 | ) | (33 | ) | 98 | (94 | ) | (72 | ) | | 2,738 | ||||||||||||||||||||
Investment and other income, net
|
183 | | (5 | ) | | | (9 | ) | | 169 | ||||||||||||||||||||||
Income before income taxes
|
3,027 | (5 | ) | (38 | ) | 98 | (94 | ) | (81 | ) | | 2,907 | ||||||||||||||||||||
Income tax provision
|
905 | (29 | ) | 876 | ||||||||||||||||||||||||||||
Net income
|
$ | 2,122 | $ | 2,031 | ||||||||||||||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||||||
Basic
|
$ | 0.82 | $ | 0.79 | ||||||||||||||||||||||||||||
Diluted
|
$ | 0.80 | $ | 0.77 | ||||||||||||||||||||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||||||||||||||
Basic
|
2,584 | 2,584 | ||||||||||||||||||||||||||||||
Diluted
|
2,644 | 2,644 |
(a) | Primarily includes adjustments in the recognition of the benefit of certain vendor funding arrangements, and adjustments to the lease accruals for certain Dell facilities. See Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for additional details. | |
(b) | Other revenue recognition primarily includes adjustments to the recognition of deferred warranty revenue associated with the sale of extended warranties and enhanced service level agreements. See Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for additional details. | |
(c) | Primarily represents the aggregate tax impact of the adjustments. |
33
First Quarter | Second Quarter | |||||||||||||||||||||||
May 3, 2002 | August 2, 2002 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2003
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations:
|
||||||||||||||||||||||||
Net revenue
|
$ | 8,066 | $ | 17 | $ | 8,083 | $ | 8,459 | $ | (49 | ) | $ | 8,410 | |||||||||||
Gross margin
|
$ | 1,391 | $ | (1 | ) | $ | 1,390 | $ | 1,515 | $ | 41 | $ | 1,556 | |||||||||||
Operating income
|
$ | 590 | $ | (73 | ) | $ | 517 | $ | 677 | $ | 9 | $ | 686 | |||||||||||
Income before income taxes
|
$ | 638 | $ | (77 | ) | $ | 561 | $ | 726 | $ | | $ | 726 | |||||||||||
Net income
|
$ | 457 | $ | (56 | ) | $ | 401 | $ | 501 | $ | | $ | 501 | |||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.18 | $ | (0.03 | ) | $ | 0.15 | $ | 0.19 | $ | | $ | 0.19 | |||||||||||
Diluted
|
$ | 0.17 | $ | (0.02 | ) | $ | 0.15 | $ | 0.19 | $ | | $ | 0.19 | |||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,595 | | 2,595 | 2,586 | | 2,586 | ||||||||||||||||||
Diluted
|
2,672 | | 2,672 | 2,649 | | 2,649 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(d)
|
$ | 579 | $ | (1 | ) | $ | 578 | $ | 868 | $ | 130 | $ | 998 | |||||||||||
Cash, cash equivalents and investments
|
$ | 8,194 | $ | 1 | $ | 8,195 | $ | 8,633 | $ | 1 | $ | 8,634 | ||||||||||||
Total assets
|
$ | 13,316 | $ | 46 | $ | 13,362 | $ | 14,062 | $ | 55 | $ | 14,117 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 162 | $ | 162 | $ | | $ | 161 | $ | 161 | ||||||||||||
Long-term
debt(b)
|
$ | 520 | $ | 21 | $ | 541 | $ | 516 | $ | 48 | $ | 564 | ||||||||||||
Total stockholders
equity(c)
|
$ | 4,521 | $ | 5 | $ | 4,526 | $ | 4,566 | $ | 10 | $ | 4,576 |
Third Quarter | Fourth Quarter | |||||||||||||||||||||||
November 1, 2002 | January 31, 2003 | |||||||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Fiscal
2003
|
Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
(in millions, expect per share data) | ||||||||||||||||||||||||
Results of Operations:
|
||||||||||||||||||||||||
Net revenue
|
$ | 9,144 | $ | 40 | $ | 9,184 | $ | 9,735 | $ | (150 | ) | $ | 9,585 | |||||||||||
Gross margin
|
$ | 1,662 | $ | 60 | $ | 1,722 | $ | 1,781 | $ | (11 | ) | $ | 1,770 | |||||||||||
Operating income
|
$ | 758 | $ | (4 | ) | $ | 754 | $ | 819 | $ | (38 | ) | $ | 781 | ||||||||||
Income before income taxes
|
$ | 802 | $ | (12 | ) | $ | 790 | $ | 861 | $ | (31 | ) | $ | 830 | ||||||||||
Net income
|
$ | 561 | $ | (11 | ) | $ | 550 | $ | 603 | $ | (24 | ) | $ | 579 | ||||||||||
Earnings per common share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.22 | $ | (0.01 | ) | $ | 0.21 | $ | 0.23 | $ | (0.01 | ) | $ | 0.22 | ||||||||||
Diluted
|
$ | 0.21 | $ | | $ | 0.21 | $ | 0.23 | $ | (0.01 | ) | $ | 0.22 | |||||||||||
Number of weighted-average shares outstanding:
|
||||||||||||||||||||||||
Basic
|
2,582 | | 2,582 | 2,576 | | 2,576 | ||||||||||||||||||
Diluted
|
2,634 | | 2,634 | 2,621 | | 2,621 | ||||||||||||||||||
Cash Flow and Balance Sheet Data:
|
||||||||||||||||||||||||
Net cash provided by operating
activities(d)
|
$ | 954 | $ | 126 | $ | 1,080 | $ | 1,137 | $ | 115 | $ | 1,252 | ||||||||||||
Cash, cash equivalents and investments
|
$ | 9,059 | $ | 1 | $ | 9,060 | $ | 9,905 | $ | 5 | $ | 9,910 | ||||||||||||
Total assets
|
$ | 14,712 | $ | 22 | $ | 14,734 | $ | 15,470 | $ | 70 | $ | 15,540 | ||||||||||||
Short-term
borrowings(a)
|
$ | | $ | 101 | $ | 101 | $ | | $ | 129 | $ | 129 | ||||||||||||
Long-term
debt(b)
|
$ | 514 | $ | 64 | $ | 578 | $ | 506 | $ | 75 | $ | 581 | ||||||||||||
Total stockholders
equity(c)
|
$ | 4,648 | $ | 3 | $ | 4,651 | $ | 4,873 | $ | (27 | ) | $ | 4,846 |
(a) | The restated amounts for short-term borrowings reflect (1) a correction in classification from accounts payable for vendor financing for the periods from the end of Fiscal 2002 until termination in the first quarter of Fiscal 2006, and (2) a correction in |
34
classification from other current liabilities for the short-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | ||
(b) | The restated amounts for long-term debt reflect (1) adjustments to record changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements for all periods restated and (2) a correction in classification from other current liabilities of the long-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004 through Fiscal 2007. | |
(c) | The adjustments relating to fiscal years prior to Fiscal 2003 are reflected in beginning retained earnings. The cumulative impact of these adjusting entries increased beginning retained earnings by $59 million, net of tax. | |
(d) | The cash flows have been revised to reflect a closer approximation of the weighted-average exchange rates during the reporting periods. For most periods, this revision reduced the previously reported effect of exchange rate changes on cash and cash equivalents with an offsetting change in effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies and changes in operating working capital included in cash flows from operating activities. |
First |
Second |
Third |
Fourth |
Fiscal |
||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
May 3, |
August 2, |
November 1, |
January 30, |
January 30, |
||||||||||||||||
Fiscal 2003 (As
Restated)
|
2002 | 2002 | 2002 | 2003 | 2003 | |||||||||||||||
(in millions) | ||||||||||||||||||||
Net income as reported
|
$ | 457 | $ | 501 | $ | 561 | $ | 603 | $ | 2,122 | ||||||||||
Revenue recognition:
|
||||||||||||||||||||
Software sales
|
1 | (1 | ) | (1 | ) | (4 | ) | (5 | ) | |||||||||||
Other revenue
recognition(a)
|
12 | 20 | 15 | (85 | ) | (38 | ) | |||||||||||||
Revenue recognition
|
13 | 19 | 14 | (89 | ) | (43 | ) | |||||||||||||
Warranty liabilities
|
10 | 13 | 21 | 54 | 98 | |||||||||||||||
Restructuring reserves
|
(37 | ) | (12 | ) | (17 | ) | (28 | ) | (94 | ) | ||||||||||
Other reserves and
accruals(b)
|
(63 | ) | (19 | ) | (30 | ) | 31 | (81 | ) | |||||||||||
(Provision) benefit for income taxes
|
21 | (1 | ) | 1 | 8 | 29 | ||||||||||||||
Net impact of adjustments
|
(56 | ) | | (11 | ) | (24 | ) | (91 | ) | |||||||||||
Net income as restated
|
$ | 401 | $ | 501 | $ | 550 | $ | 579 | $ | 2,031 | ||||||||||
(a) | Other revenue recognition primarily includes adjustments to the recognition of deferred warranty revenue associated with the sale of extended warranties and enhanced service level agreements. See Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for additional details. | |
(b) | Other reserves and accruals primarily include adjustments in the recognition of the benefit of certain vendor funding arrangements, and adjustments to the lease accruals for certain Dell facilities. See Note 2 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for additional details. |
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ITEM 7 | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
36
37
38
Share position | | According to IDC, we shipped an industry record of 39.1 million units for calendar year 2006, resulting in a worldwide PC share position of 17.1%. However, we lost share in the U.S. Consumer segment, which slowed our overall growth in unit shipments, revenue, and profitability. This was mainly due to intense competitive pressure, particularly in the lower priced desktops and notebooks where competitors offered aggressively priced products with better product recognition and more relevant feature sets. | ||
Net revenue
|
| Fiscal 2007 revenue increased 3% year-over-year to $57.4 billion, with unit shipments up 2% year-over-year, as compared to Fiscal 2006 revenue which increased 14% year-over-year to $55.8 billion on unit growth of 19% over Fiscal 2005 revenue of $49.1 billion. | ||
Operating income
|
| Operating income was $3.1 billion for Fiscal 2007, or 5.4% of revenue, compared to $4.4 billion or 7.9% of revenue in Fiscal 2006 and $4.2 billion or 8.6% of revenue in Fiscal 2005. | ||
Net income
|
| Net income was $2.6 billion for Fiscal 2007, or 4.5% of revenue, compared to $3.6 billion or 6.5% of revenue in Fiscal 2006 and $3.0 billion or 6.1% of revenue in Fiscal 2005. | ||
Earnings per share
|
| Earnings per share decreased 23% to $1.14 for Fiscal 2007, compared to $1.47 for Fiscal 2006 and $1.18 for Fiscal 2005. |
Fiscal Year Ended | ||||||||||||||||||||||||
February 2, 2007(a) | February 3, 2006(b) | January 28, 2005(c) | ||||||||||||||||||||||
% of |
% of |
% of |
||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||
(in millions, except per share amounts and percentages) | ||||||||||||||||||||||||
Net revenue
|
$ | 57,420 | 100.0 | % | $ | 55,788 | 100.0 | % | $ | 49,121 | 100.0 | % | ||||||||||||
Gross margin
|
$ | 9,516 | 16.6 | % | $ | 9,891 | 17.7 | % | $ | 9,018 | 18.4 | % | ||||||||||||
Operating expenses
|
$ | 6,446 | 11.2 | % | $ | 5,509 | 9.8 | % | $ | 4,812 | 9.8 | % | ||||||||||||
Operating income
|
$ | 3,070 | 5.4 | % | $ | 4,382 | 7.9 | % | $ | 4,206 | 8.6 | % | ||||||||||||
Income tax provision
|
$ | 762 | 1.3 | % | $ | 1,006 | 1.8 | % | $ | 1,385 | 2.8 | % | ||||||||||||
Net income
|
$ | 2,583 | 4.5 | % | $ | 3,602 | 6.5 | % | $ | 3,018 | 6.1 | % | ||||||||||||
Earnings per share diluted
|
$ | 1.14 | N/A | $ | 1.47 | N/A | $ | 1.18 | N/A |
(a) | Results for Fiscal 2007 include stock-based compensation expense of $368 million, or $258 million ($0.11 per share) net of tax, due to the implementation of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (SFAS 123(R)). We implemented SFAS 123(R) using the modified prospective method effective February 4, 2006. For additional information, see Note 6 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data. | |
(b) | Results for Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general, and administrative expenses) related to the cost of servicing or replacing certain OptiPlextm systems that include a vendor part that failed to perform to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter. The related tax effect of these items was $96 million. Fiscal 2006 also includes an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter. | |
(c) | Results for Fiscal 2005 include an income tax charge of $280 million related to the repatriation of earnings under the American Jobs Creation Act of 2004 recorded in the fourth quarter. |
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40
Fiscal Year Ended | ||||||||||||||||||||||||
February 2, 2007 | February 3, 2006 | January 28, 2005 | ||||||||||||||||||||||
% of |
% of |
% of |
||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
Net revenue
|
||||||||||||||||||||||||
Americas:
|
||||||||||||||||||||||||
Business
|
$ | 29,311 | 51.1 | % | $ | 28,365 | 50.8 | % | $ | 25,289 | 51.5 | % | ||||||||||||
U.S. Consumer
|
7,069 | 12.3 | % | 7,960 | 14.3 | % | 7,614 | 15.5 | % | |||||||||||||||
Americas
|
36,380 | 63.4 | % | 36,325 | 65.1 | % | 32,903 | 67.0 | % | |||||||||||||||
EMEA
|
13,682 | 23.8 | % | 12,887 | 23.1 | % | 10,753 | 21.9 | % | |||||||||||||||
APJ
|
7,358 | 12.8 | % | 6,576 | 11.8 | % | 5,465 | 11.1 | % | |||||||||||||||
Net revenue
|
$ | 57,420 | 100.0 | % | $ | 55,788 | 100.0 | % | $ | 49,121 | 100.0 | % | ||||||||||||
| Americas Americas revenues remained flat year-over-year as units decreased 4% in Fiscal 2007, compared to revenue and unit growth of 10% and 13%, respectively, in Fiscal 2006. Americas Business represented the majority of our absolute dollar revenue growth in both Fiscal 2007 and Fiscal 2006. This was offset by a decline in the U.S. Consumer business during Fiscal 2007 and slowed growth during Fiscal 2006. Revenue from the sale of mobility products led the segments growth in both Fiscal 2007 and Fiscal 2006, and grew by single digits in both Americas Business and U.S. Consumer in Fiscal 2007. However, this growth was offset by the continuing trend of declines in desktop PC sales as wireless capabilities, falling prices, and a growing need for mobility have increased demand for notebooks. |
- | Business Americas Business grew revenue by 3% on flat unit growth in Fiscal 2007, compared to 12% revenue growth on 15% unit growth in Fiscal 2006. The slow down of revenue growth was due to desktop weakness. Americas International, which includes countries in North America and Latin America other than the U.S., drove the majority of the increase in revenue in the Americas; however, this growth was offset by overall weakness in demand for U.S. Business, with our Public business contributing to declines year-over-year. Americas International produced revenue growth of 19% year-over-year for Fiscal 2007 as compared to 30% revenue growth year-over-year in Fiscal 2006. | |
- | U.S. Consumer U.S. Consumer revenue and unit volume decreased 11% and 14% in Fiscal 2007, respectively, compared to revenue growth of 5% on unit growth of 9% in Fiscal 2006. U.S. Consumer revenue growth slowed as compared to Fiscal 2006 primarily due to a 25% decline in both desktop revenue and unit volume. This segments average selling price in Fiscal 2007 increased 3% year-over-year, which principally resulted from our pricing strategy, compared to a 4% year-over-year decline from a year ago. We continue to see a shift to mobility products in U.S. Consumer and our other segments as notebooks become more affordable. Our U.S. Consumer business continues to face a competitive pricing environment. Consequently, we experienced growth significantly slower than the U.S. sales growth. Revenue from the sale of mobility products increased 1% in Fiscal 2007 on unit growth of 3%, as compared to 27% revenue growth on 55% unit growth in Fiscal 2006. This environment has led the U.S. Consumer business to update its business model and enter into a limited number of retail distribution arrangements to complement and extend the existing direct business. |
| EMEA EMEA produced positive results with 6% revenue growth on 7% unit growth in Fiscal 2007, compared to 20% revenue growth on 28% unit growth in Fiscal 2006. In Fiscal 2007, the segments performance was largely attributed to mobility products, where year-over-year unit volumes and revenue grew 29% and 15%, respectively, compared to 49% and 23% in Fiscal 2006, respectively. This sustained growth occurred primarily in France and Germany in Fiscal 2007, with Germany leading the regions progress. United Kingdom experienced weak demand in the consumer business, resulting in a 2% year-over-year decline in revenue for Fiscal 2007, as compared to year-over-year growth of 12% in Fiscal |
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2006. With the exception of desktop PCs, all product categories in this region experienced growth for Fiscal 2007 with mobility, storage, and enhanced services revenues posting strong gains. This continues the general trend from Fiscal 2006 where EMEAs revenue growth was strongest in mobility, enhanced services, and software and peripherals. |
| Asia Pacific-Japan APJ continued to build a substantial presence, with 12% revenue growth on 20% unit growth in Fiscal 2007 and 20% revenue growth on 30% unit growth in Fiscal 2006. The region was led by 26% year-over-year revenue growth in China during Fiscal 2007 and a 13% revenue growth in Japan during Fiscal 2006. Fiscal 2007s improved performance was partially offset by Japans results, which saw revenue decline 5% year-over-year. In Fiscal 2007, India, South Korea, Singapore, and Malaysia produced significant year-over-year revenue growth at a higher rate than the overall region. All product categories in this region experienced revenue growth during Fiscal 2007 and Fiscal 2006. Mobility revenue grew 12% on unit growth of 31% during Fiscal 2007 compared to 24% revenue growth on 48% unit growth during Fiscal 2006. Also driving this growth were increases in enhanced services, software and peripherals, and storage, which approximates the growth trends from Fiscal 2006. |
Fiscal Year Ended | ||||||||||||||||||||||||
February 2, 2007 | February 3, 2006 | January 28, 2005 | ||||||||||||||||||||||
% of |
% of |
% of |
||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||
(in millions, except percentage) | ||||||||||||||||||||||||
Net revenue:
|
||||||||||||||||||||||||
Desktop PCs
|
$ | 19,815 | 34 | % | $ | 21,568 | 39 | % | $ | 21,141 | 43 | % | ||||||||||||
Mobility
|
15,480 | 27 | % | 14,372 | 25 | % | 12,001 | 25 | % | |||||||||||||||
Software and peripherals
|
9,001 | 16 | % | 8,329 | 15 | % | 6,626 | 13 | % | |||||||||||||||
Servers and networking
|
5,805 | 10 | % | 5,449 | 10 | % | 4,880 | 10 | % | |||||||||||||||
Enhanced services
|
5,063 | 9 | % | 4,207 | 8 | % | 3,121 | 6 | % | |||||||||||||||
Storage
|
2,256 | 4 | % | 1,863 | 3 | % | 1,352 | 3 | % | |||||||||||||||
Net revenue
|
$ | 57,420 | 100 | % | $ | 55,788 | 100 | % | $ | 49,121 | 100 | % | ||||||||||||
| Desktop PCs In Fiscal 2007, revenue from desktop PCs (which includes desktop computer systems and workstations) decreased 8% year-over-year on unit decline of 5%, compared to a 2% revenue increase on unit growth of 10% year-over-year in Fiscal 2006. Desktop PCs in the Americas declined |
42
year-over-year during both Fiscal 2007 and Fiscal 2006 which was offset by single-digit growth in the APJ region during the same period. Desktop PCs, as compared to mobility products, led Fiscal 2007 in volume; however, business and consumer demand continues to shift toward mobility products. Desktop PC average selling price decreased 3% from Fiscal 2006 to Fiscal 2007 and decreased 7% from Fiscal 2005 to Fiscal 2006. In Fiscal 2007, we launched Quad-core processors on our XPS 710 Extreme desktop as well as on Dell Precisiontm workstations. In addition, we introduced our 64-bit dual core Dimensiontm and Optiplextm systems featuring AMD processors. In Fiscal 2008, we introduced Vostrotm desktops specifically designed to meet the needs of small business customers. We will likely see rising user demand for mobility products in the foreseeable future that will contribute to a slowing demand for desktop PCs. |
| Mobility In Fiscal 2007, revenue from mobility products (which includes notebook computers, mobile workstations, and Dell-branded MP3 players) grew by 8% year-over-year, on unit growth of 18%, compared to a 20% revenue increase on unit growth of 43% year-over-year in Fiscal 2006. The impact of this declining growth was particularly acute in the U.S. and led to a loss of share as compared to the same period last year. The slow growth resulted from both our product feature set and related value offering, particularly in the consumer business, as well as our inability to reach certain customer sets. Our EMEA region led the growth in our mobility product category with 15% and 23% increases in Fiscal 2007 and Fiscal 2006, respectively. During the year, we introduced Dell Latitudetm and Dell Inspirontm notebooks featuring AMD processors and in Fiscal 2008, we introduced Vostrotm notebooks, specifically designed to meet the needs of small business customers. As notebooks become more affordable and wireless products become standardized, demand for our mobility products continues to be strong, producing robust year-over-year revenue and unit growth. We are likely to see sustained growth in our mobility products in the foreseeable future due to the continued industry-wide migration from desktop PCs to mobility products. |
| Software and Peripherals In Fiscal 2007 revenue from software and peripherals (S&P) (which includes Dell-branded printers, monitors not sold with systems, plasma and LCD televisions, projectors, and a multitude of competitively priced third-party printers, televisions, software, digital cameras, and other products) increased 8% year-over-year, compared to a 26% increase in Fiscal 2006. The overall improvement in Fiscal 2007 S&P revenue was led by the APJ region with growth of 38% while U.S. consumer sales declined 8%. This increase was primarily attributable to a 12% year-over-year increase in software revenue that was offset by declines in our imaging product revenue. We experienced strong performance in Fiscal 2006 where software, imaging, and other hardware accessories produced double-digit growth. |
| Servers and Networking In Fiscal 2007, servers and networking revenue grew 7% on unit growth of 6% year-over-year, compared to a 12% revenue increase in Fiscal 2006 on 20% unit growth year-over-year. Servers and networking remains a strategic focus area. We competitively price our server products to facilitate additional sales of storage products and higher margin enhanced services. During the year we introduced our new ninth generation (9G) PowerEdge servers with Intels latest Xeon 5100 series processors, and we began shipping two new PowerEdge servers featuring AMD Opterontm processors, providing our customers with an additional choice for high-performance two-socket and four-socket systems. We also launched the industrys first standards-based Quad-Core processors for two-socket blade, rack, and tower servers. These additions contributed to the 6% year-over-year revenue increase in Fiscal 2007 in the Americas Business segment and in Fiscal 2006 we experienced close to 30% unit growth in our APJ region. We now provide the broadest selection of industry-standard servers in our history. |
| Enhanced Services In Fiscal 2007, revenue from enhanced services (which includes the sale and servicing of our extended product warranties) increased 20% year-over-year compared to a 35% increase in Fiscal 2006. As a result of expanding our services offerings and capabilities globally, we experienced a 26% and 58% year-over-year growth in revenues outside the Americas during Fiscal 2007 and Fiscal 2006, respectively. This growth increased our deferred revenue by $514 million in Fiscal 2007, a 14% increase, and $803 million in Fiscal 2006, a 27% increase, to approximately $4.2 billion and |
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$3.7 billion, respectively. We introduced our new Platinum Plus offering during Fiscal 2007, which contributed to an increase in our premium service contracts. |
| Storage In Fiscal 2007, storage revenue sustained double-digit growth with a 21% year-over-year increase as compared to a 38% year-over-year increase in Fiscal 2006. The Americas led the revenue growth in Fiscal 2007 and Fiscal 2006 with year-over-year increases of 21% and 40%, respectively. In Fiscal 2008, we expect to continue to expand both our PowerVault and Dell | EMC solutions that will utilize new technologies intended to drive both additional increases in performance and customer value. In Fiscal 2007, we also announced a five-year extension to our partnership with EMC. These portfolio enhancements continue to deliver lower cost solutions for our customers. |
Fiscal Year Ended | ||||||||||||||||||||||||
February 2, 2007 | February 3, 2006 | January 28, 2005 | ||||||||||||||||||||||
% of |
% of |
% of |
||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
Net revenue
|
$ | 57,420 | 100.0 | % | $ | 55,788 | 100.0 | % | $ | 49,121 | 100.0 | % | ||||||||||||
Gross margin
|
$ | 9,516 | 16.6 | % | $ | 9,891 | 17.7 | % | $ | 9,018 | 18.4 | % |
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Fiscal Year Ended | ||||||||||||||||||||||||
February 2, 2007 | February 3, 2006 | January 28, 2005 | ||||||||||||||||||||||
% of |
% of |
% of |
||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
As |
As |
As |
As |
|||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Selling, general, and administrative
|
$ | 5,948 | 10.3 | % | $ | 5,051 | 9.0 | % | $ | 4,352 | 8.9 | % | ||||||||||||
Research, development, and engineering
|
498 | 0.9 | % | 458 | 0.8 | % | 460 | 0.9 | % | |||||||||||||||
Operating expenses
|
$ | 6,446 | 11.2 | % | $ | 5,509 | 9.8 | % | $ | 4,812 | 9.8 | % | ||||||||||||
| Selling, General, and Administrative During Fiscal 2007, selling, general, and administrative expenses increased 18% to $5.9 billion, compared to $5.1 billion for Fiscal 2006. The increase in Fiscal 2007 as compared to Fiscal 2006 was primarily attributed to increased compensation costs and outside consulting services. This increase was largely due to increased stock-based compensation expense due to the adoption of SFAS 123(R) ($272 million), and costs related to the Audit Committee investigation and related restatement ($100 million). In addition, during Fiscal 2007, we made incremental customer experience investments of $150 million to improve customer satisfaction, repurchase preferences, as well as technical support. As a result, we increased our headcount through direct hiring and replacing of temporary staff with regular employees. During Fiscal 2006, selling, general, and administrative expenses as a percentage of revenue increased compared to Fiscal 2005. The increase over Fiscal 2005 primarily related to increased advertising costs, headcount growth, as well as charges of $83 million related to workforce realignment costs ($50 million), costs of operating leases on office space no longer utilized ($4 million) and a write-off of goodwill ($29 million). |
| Research, Development, and Engineering During Fiscal 2007, research, development, and engineering expenses increased slightly in absolute dollars, but remained consistent with Fiscal 2006 and 2005 as percentage of net revenue. We continue to fund research, development, and engineering activities to meet the demand for swift product cycles. As a result, Fiscal 2007 research, development, and engineering expenses increased in absolute dollars due to increased staffing levels, product development costs, and stock-based compensation expense resulting from the adoption of SFAS 123(R). Fiscal 2006 as compared to Fiscal 2005 experienced a slight decrease in the percentage of net revenue primarily attributed to our revenue growth. We manage our research, development, and engineering spending by targeting those innovations and products most valuable to our customers, and by relying upon the capabilities of our strategic partners. We will continue to invest in research, development, and engineering activities to support our growth and to provide for new, competitive products. We obtained 1,759 worldwide patents and have applied for 1,824 additional worldwide patents at February 2, 2007. |
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Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) |
||||||||||||
Investment and other income, net:
|
||||||||||||
Investment income, primarily interest
|
$ | 368 | $ | 308 | $ | 226 | ||||||
Gains (losses) on investments, net
|
(5 | ) | (2 | ) | 6 | |||||||
Interest expense
|
(45 | ) | (29 | ) | (15 | ) | ||||||
CIT minority interest
|
(23 | ) | (27 | ) | (17 | ) | ||||||
Foreign exchange
|
(37 | ) | 3 | 16 | ||||||||
Gain on sale of building
|
36 | | | |||||||||
Other
|
(19 | ) | (27 | ) | (19 | ) | ||||||
Investment and other income, net
|
$ | 275 | $ | 226 | $ | 197 | ||||||
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February 2, |
February 3, |
|||||||
2007 | 2006 | |||||||
As |
||||||||
Restated | ||||||||
(in millions) | ||||||||
Cash, cash equivalents, and investments:
|
||||||||
Cash and cash equivalents
|
$ | 9,546 | $ | 7,054 | ||||
Debt securities
|
2,784 | 4,606 | ||||||
Equity and other securities
|
115 | 96 | ||||||
Cash, cash equivalents and investments
|
$ | 12,445 | $ | 11,756 | ||||
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Net cash flow provided by (used in):
|
||||||||||||
Operating activities
|
$ | 3,969 | $ | 4,751 | $ | 5,821 | ||||||
Investing activities
|
1,003 | 4,149 | (1,678 | ) | ||||||||
Financing activities
|
(2,551 | ) | (6,252 | ) | (3,129 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents
|
71 | (73 | ) | 46 | ||||||||
Net increase in cash and cash equivalents
|
$ | 2,492 | $ | 2,575 | $ | 1,060 | ||||||
| Operating Activities Cash flows from operating activities during Fiscal 2007, 2006, and 2005 resulted primarily from net income, which represents our principal source of cash. In Fiscal 2007, the decrease in operating cash flows was primarily led by a decrease in net income slightly offset by changes in working capital. In Fiscal 2006, the decrease in cash provided by operating activities versus Fiscal 2005 is primarily due to changes in operating working capital accounts and slightly offset by an increase in net income. |
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February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
Days of sales
outstanding(a)(d)
|
31 | 29 | 27 | |||||||||
Days of supply in
inventory(b)
|
5 | 5 | 4 | |||||||||
Days in accounts
payable(c)
|
(78 | ) | (77 | ) | (73 | ) | ||||||
Cash conversion cycle
|
(42 | ) | (43 | ) | (42 | ) | ||||||
(a) | Days of sales outstanding (DSO) is based on the ending net trade receivables and most recent quarterly revenue for each period. DSO includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified in other current assets. At February 2, 2007, February 3, 2006, and January 28, 2005, DSO and days of customer shipments not yet recognized were 28 and 3 days, 26 and 3 days, and 24 and 3 days, respectively. | |
(b) | Days of supply in inventory is based on ending inventory and most recent quarterly cost of sales for each period. |
(c) | Days in accounts payable is based on ending accounts payable and most recent quarterly cost of sales for each period. |
(d) | Financing receivables have been separately classified on the balance sheet beginning February 3, 2006. As a result, days of sales outstanding has been recalculated for January 28, 2005 to reflect the change in classification of certain items previously included in accounts receivable to financing receivables. |
Our cash conversion cycle decreased one day at February 2, 2007 from February 3, 2006. This decline was driven by a two-day increase in days of sales outstanding largely attributed to higher percentage of our revenue coming from outside the U.S., where payment terms are customarily longer and a higher percentage of revenue occurring at the end of the period. This decline was offset by a one-day increase in days in accounts payable largely attributed to an increase in the number of suppliers with extended payment terms as compared to Fiscal 2006. |
| Investing Activities Cash provided by investing activities during Fiscal 2007 was $1.0 billion, as compared to $4.1 billion provided in Fiscal 2006 and $1.7 billion used in Fiscal 2005. Cash generated or used in investing activities principally consists of net maturities and sales or purchases of investments, net of capital expenditures for property, plant, and equipment. In Fiscal 2007 compared to Fiscal 2006, we had a lower amount of proceeds from maturities and sales of investments, and this was partially offset by an increase in capital expenditures as we continued to focus on investing in our global infrastructure in order to support our rapid global growth. |
| Financing Activities Cash used in financing activities during Fiscal 2007 was $2.6 billion, as compared to $6.3 billion in Fiscal 2006 and $3.1 billion in Fiscal 2005. Financing activities primarily consist of the repurchase of our common stock, partially offset by proceeds from the issuance of common stock under employee stock plans and other items. In Fiscal 2007, the year-over-year decrease in cash used in financing activities is due primarily to the suspension of our share repurchase program in September 2006. During Fiscal 2007, we repurchased approximately 118 million shares at an aggregate cost of $3.0 billion compared to 204 million shares at an aggregate cost of $7.2 billion in Fiscal 2006 and 119 million shares at an aggregate cost of $4.2 billion in Fiscal 2005. In Fiscal 2006, the increase in share repurchases compared to Fiscal 2005 drove the year-over-year increase in cash used in financing activities. |
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Payments Due by Period | ||||||||||||||||||||
Fiscal |
Fiscal 2009- |
Fiscal 2011- |
||||||||||||||||||
Total | 2008 | 2010 | 2012 | Beyond | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Contractual cash obligations:
|
||||||||||||||||||||
Long-term debt, including current
portion(b)
|
$ | 502 | $ | 1 | $ | 204 | $ | | $ | 297 | ||||||||||
Operating leases
|
450 | 79 | 128 | 82 | 161 | |||||||||||||||
Advances under credit facilities
|
222 | 187 | 35 | | | |||||||||||||||
Purchase obligations
|
570 | 532 | 38 | | | |||||||||||||||
DFS purchase commitment
|
345 | | 345 | | | |||||||||||||||
Interest
|
590 | 73 | 129 | 43 | 345 | |||||||||||||||
Current portion of uncertain tax
positions(a)
|
22 | 22 | | | | |||||||||||||||
Contractual cash obligations
|
$ | 2,701 | $ | 894 | $ | 879 | $ | 125 | $ | 803 | ||||||||||
(a) | The current portion of uncertain tax positions does not include approximately $1.1 billion in additional liabilities associated with uncertain tax positions. We are unable to reliably estimate the expected payment dates for these additional liabilities. | |
(b) | Changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements are not included in the contractual cash obligations for debt as the debt is expected to be settled at par at its scheduled maturity date. |
52
53
| general economic, business, and industry conditions; |
| our ability to maintain a cost advantage over our competitors, |
| local economic and labor conditions, political instability, unexpected regulatory changes, trade protection measures, tax laws, copyright levies, and fluctuations in foreign currency exchange rates; |
| our ability to accurately predict product, customer, and geographic sales mix and seasonal sales trends; |
| information technology and manufacturing infrastructure failures; |
| our ability to effectively manage periodic product transitions; |
| our ability to successfully remediate identified internal control deficiencies; |
| our reliance on third-party suppliers for quality product components, including reliance on several single-source or limited-source suppliers; |
| our ability to access the capital markets; |
| litigation and governmental investigations or proceedings arising out of or related to accounting and financial reporting matters; |
54
| our acquisition of other companies may present new risks; |
| our ability to properly manage the distribution of our products and services; |
| effective hedging of our exposure to fluctuations in foreign currency exchange rates and interest rates; |
| obtaining licenses to intellectual property developed by others on commercially reasonable and competitive terms; |
| our ability to attract, retain, and motivate key personnel; |
| loss of government contracts; |
| expiration of tax holidays or favorable tax rate structures; |
| changing environmental laws; and |
| the effect of armed hostilities, terrorism, natural disasters; and public health issues. |
55
ITEM 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
56
ITEM 8 | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Page | ||||
Financial Statements:
|
||||
Report of Independent Registered Public Accounting Firm
|
58 | |||
Consolidated Statements of Financial Position at
February 2, 2007 and February 3, 2006 (Restated)
|
61 | |||
Consolidated Statements of Income for the fiscal years ended
February 2, 2007, February 3, 2006 (Restated), and
January 28, 2005 (Restated)
|
62 | |||
Consolidated Statements of Cash Flows for the fiscal years ended
February 2, 2007, February 3, 2006 (Restated), and
January 28, 2005 (Restated)
|
63 | |||
Consolidated Statements of Stockholders Equity for the
fiscal years ended February 2, 2007, February 3, 2006
(Restated), and January 28, 2005 (Restated)
|
64 | |||
Notes to Consolidated Financial Statements
|
65 | |||
Financial Statement Schedule:
|
||||
Schedule II Valuation and Qualifying Accounts
for the fiscal years ended February 2, 2007,
February 3, 2006, (Restated) and January 28, 2005
(Restated)
|
151 |
57
58
- | The Company did not maintain a tone and control consciousness that consistently emphasized strict adherence to accounting principles generally accepted in the United States of America. This control deficiency, in some instances, included inappropriate accounting decisions and entries that appear to have been largely motivated to achieve desired accounting results and management override of controls. In a number of instances, information critical to an effective review of transactions and accounting entries was not disclosed to internal and external auditors. | |
- | The Company did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience, and training in the application of accounting principles generally accepted in the United States of America commensurate with the Companys financial reporting requirements and business environment. |
- | Journal entries, both recurring and nonrecurring, were not always accompanied by sufficient supporting documentation and were not adequately reviewed and approved for validity, completeness and accuracy; | |
- | Account reconciliations over balance sheet accounts were not always properly and timely performed, and the reconciliations and their supporting documentation were not consistently reviewed for completeness, accuracy and timely resolution of reconciling items; and |
59
- | The Company did not design and maintain effective controls to ensure the completeness, accuracy and timeliness of the recording of accrued liabilities, reserves and operating expenses. |
60
February 2, |
February 3, |
|||||||
2007 | 2006 | |||||||
As |
||||||||
Restated | ||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 9,546 | $ | 7,054 | ||||
Short-term investments
|
752 | 2,016 | ||||||
Accounts receivable, net
|
4,622 | 4,082 | ||||||
Financing receivables, net
|
1,530 | 1,366 | ||||||
Inventories
|
660 | 588 | ||||||
Other
|
2,829 | 2,688 | ||||||
Total current assets
|
19,939 | 17,794 | ||||||
Property, plant, and equipment, net
|
2,409 | 1,993 | ||||||
Investments
|
2,147 | 2,686 | ||||||
Long-term financing receivables, net
|
323 | 325 | ||||||
Other non-current assets
|
817 | 454 | ||||||
Total assets
|
$ | 25,635 | $ | 23,252 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities:
|
||||||||
Short-term borrowings
|
$ | 188 | $ | 65 | ||||
Accounts payable
|
10,430 | 9,868 | ||||||
Accrued and other
|
7,173 | 6,240 | ||||||
Total current liabilities
|
17,791 | 16,173 | ||||||
Long-term debt
|
569 | 625 | ||||||
Other non-current liabilities
|
2,836 | 2,407 | ||||||
Total liabilities
|
21,196 | 19,205 | ||||||
Commitments and contingencies (Note 9)
|
||||||||
Redeemable common stock and capital in excess of $.01 par
value; 5 shares issued and outstanding (Note 5)
|
111 | | ||||||
Stockholders equity:
|
||||||||
Preferred stock and capital in excess of $.01 par value;
shares issued and outstanding: none
|
| | ||||||
Common stock and capital in excess of $.01 par value;
shares authorized: 7,000; shares issued: 3,307 and 2,818,
respectively; shares outstanding: 2,226 and 2,330, respectively
|
10,107 | 9,503 | ||||||
Treasury stock at cost: 606 and 488 shares, respectively
|
(21,033 | ) | (18,007 | ) | ||||
Retained earnings
|
15,282 | 12,699 | ||||||
Accumulated other comprehensive loss
|
(28 | ) | (101 | ) | ||||
Other
|
| (47 | ) | |||||
Total stockholders equity
|
4,328 | 4,047 | ||||||
Total liabilities and equity
|
$ | 25,635 | $ | 23,252 | ||||
61
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
Net revenue | $ | 57,420 | $ | 55,788 | $ | 49,121 | ||||||
Cost of net
revenue(1)
|
47,904 | 45,897 | 40,103 | |||||||||
Gross margin
|
9,516 | 9,891 | 9,018 | |||||||||
Operating expenses:
|
||||||||||||
Selling, general, and
administrative(1)
|
5,948 | 5,051 | 4,352 | |||||||||
Research, development, and
engineering(1)
|
498 | 458 | 460 | |||||||||
Total operating expenses
|
6,446 | 5,509 | 4,812 | |||||||||
Operating income
|
3,070 | 4,382 | 4,206 | |||||||||
Investment and other income, net
|
275 | 226 | 197 | |||||||||
Income before income taxes
|
3,345 | 4,608 | 4,403 | |||||||||
Income tax provision
|
762 | 1,006 | 1,385 | |||||||||
Net income
|
$ | 2,583 | $ | 3,602 | $ | 3,018 | ||||||
Earnings per common share:
|
||||||||||||
Basic
|
$ | 1.15 | $ | 1.50 | $ | 1.20 | ||||||
Diluted
|
$ | 1.14 | $ | 1.47 | $ | 1.18 | ||||||
Weighted-average shares outstanding:
|
||||||||||||
Basic
|
2,255 | 2,403 | 2,509 | |||||||||
Diluted
|
2,271 | 2,449 | 2,568 |
(1) | Cost of revenue and operating expenses for the fiscal year ended February 2, 2007 include stock-based compensation expense pursuant to Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. See Note 6 of Notes to Consolidated Financial Statements for additional information. |
62
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 2,583 | $ | 3,602 | $ | 3,018 | ||||||
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||||||
Depreciation and amortization
|
471 | 394 | 331 | |||||||||
Stock-based compensation
|
368 | 17 | 18 | |||||||||
Excess tax benefits from stock-based compensation
|
(80 | ) | | | ||||||||
Tax benefits from employee stock plans
|
| 224 | 249 | |||||||||
Effects of exchange rate changes on monetary assets and
liabilities denominated in foreign currencies
|
37 | (3 | ) | (16 | ) | |||||||
Other
|
61 | 157 | 61 | |||||||||
Changes in:
|
||||||||||||
Operating working capital
|
397 | (53 | ) | 1,772 | ||||||||
Non-current assets and liabilities
|
132 | 413 | 388 | |||||||||
Net cash provided by operating activities
|
3,969 | 4,751 | 5,821 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Investments:
|
||||||||||||
Purchases
|
(8,343 | ) | (6,796 | ) | (13,006 | ) | ||||||
Maturities and sales
|
10,320 | 11,692 | 11,843 | |||||||||
Capital expenditures
|
(896 | ) | (747 | ) | (515 | ) | ||||||
Acquisition of business, net of cash received
|
(118 | ) | | | ||||||||
Proceeds from sale of building
|
40 | | | |||||||||
Net cash provided by (used in) investing activities
|
1,003 | 4,149 | (1,678 | ) | ||||||||
Cash flows from financing activities:
|
||||||||||||
Repurchase of common stock
|
(3,026 | ) | (7,249 | ) | (4,219 | ) | ||||||
Issuance of common stock under benefit plans
|
314 | 1,051 | 1,112 | |||||||||
Excess tax benefits from stock-based compensation
|
80 | | | |||||||||
Issuance of commercial paper, net
|
100 | | | |||||||||
Other
|
(19 | ) | (54 | ) | (22 | ) | ||||||
Net cash used in financing activities
|
(2,551 | ) | (6,252 | ) | (3,129 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents
|
71 | (73 | ) | 46 | ||||||||
Net increase in cash and cash equivalents
|
2,492 | 2,575 | 1,060 | |||||||||
Cash and cash equivalents at beginning of year
|
7,054 | 4,479 | 3,419 | |||||||||
Cash and cash equivalents at end of year
|
$ | 9,546 | $ | 7,054 | $ | 4,479 | ||||||
63
Common Stock
and |
||||||||||||||||||||||||||||||||
Capital in Excess
of |
Accumulated |
|||||||||||||||||||||||||||||||
Par Value |
Other |
|||||||||||||||||||||||||||||||
Issued |
Treasury Stock |
Retained |
Comprehensive |
|||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Earnings | Loss | Other | Total | |||||||||||||||||||||||||
Balances at January 30, 2004 (Reported) | 2,721 | $ | 6,823 | 165 | $ | (6,539 | ) | $ | 6,131 | $ | (83 | ) | $ | (52 | ) | $ | 6,280 | |||||||||||||||
Cumulative impact of restatement
|
| | | | (52 | ) | 10 | | (42 | ) | ||||||||||||||||||||||
Balances at January 30, 2004 (Restated)
|
2,721 | 6,823 | 165 | (6,539 | ) | 6,079 | (73 | ) | (52 | ) | 6,238 | |||||||||||||||||||||
Net income
|
| | | | 3,018 | | | 3,018 | ||||||||||||||||||||||||
Change in net unrealized loss on investments, net of taxes of $16
|
| | | | | (52 | ) | | (52 | ) | ||||||||||||||||||||||
Foreign currency translation adjustments
|
| | | | | 1 | | 1 | ||||||||||||||||||||||||
Change in net unrealized loss on derivative instruments, net of
taxes of $21
|
| | | | | 46 | | 46 | ||||||||||||||||||||||||
Total comprehensive income
|
3,013 | |||||||||||||||||||||||||||||||
Stock issuances under employee plans, including tax benefits
|
48 | 1,372 | | | | | | 1,372 | ||||||||||||||||||||||||
Repurchases
|
| | 119 | (4,219 | ) | | | | (4,219 | ) | ||||||||||||||||||||||
Other
|
| | | | | | 8 | 8 | ||||||||||||||||||||||||
Balances at January 28, 2005 (Restated)
|
2,769 | 8,195 | 284 | (10,758 | ) | 9,097 | (78 | ) | (44 | ) | 6,412 | |||||||||||||||||||||
Net income
|
| | | | 3,602 | | | 3,602 | ||||||||||||||||||||||||
Change in net unrealized loss on investments, net of taxes of $1
|
| | | | | (24 | ) | | (24 | ) | ||||||||||||||||||||||
Foreign currency translation adjustments
|
| | | | | (8 | ) | | (8 | ) | ||||||||||||||||||||||
Change in net unrealized loss on derivative instruments, net of
taxes of $4
|
| | | | | 9 | | 9 | ||||||||||||||||||||||||
Total comprehensive income
|
3,579 | |||||||||||||||||||||||||||||||
Stock issuances under employee plans, including tax benefits
|
49 | 1,308 | | | | | | 1,308 | ||||||||||||||||||||||||
Repurchases
|
| | 204 | (7,249 | ) | | | | (7,249 | ) | ||||||||||||||||||||||
Other
|
| | | | | | (3 | ) | (3 | ) | ||||||||||||||||||||||
Balances at February 3, 2006 (Restated)
|
2,818 | 9,503 | 488 | (18,007 | ) | 12,699 | (101 | ) | (47 | ) | 4,047 | |||||||||||||||||||||
Net income
|
| | | | 2,583 | | | 2,583 | ||||||||||||||||||||||||
Change in net unrealized loss on investments, net of taxes of $12
|
| | | | | 31 | | 31 | ||||||||||||||||||||||||
Foreign currency translation adjustments
|
| | | | | (11 | ) | | (11 | ) | ||||||||||||||||||||||
Change in net unrealized gain on derivative instruments, net of
taxes of $11
|
| | | | | 30 | | 30 | ||||||||||||||||||||||||
Valuation of retained interests in securitized assets, net of
taxes of $7
|
| | | | | 23 | | 23 | ||||||||||||||||||||||||
Total comprehensive income
|
| | | | | | | 2,656 | ||||||||||||||||||||||||
Stock issuances under employee plans
|
14 | 196 | | | | | | 196 | ||||||||||||||||||||||||
Repurchases
|
| | 118 | (3,026 | ) | | | | (3,026 | ) | ||||||||||||||||||||||
Stock-based compensation expense under SFAS 123(R)
|
| 368 | | | | | | 368 | ||||||||||||||||||||||||
Tax benefit from employee stock plans
|
| 56 | | | | | | 56 | ||||||||||||||||||||||||
Other and shares issued to subsidiaries
|
475 | (16 | ) | | | | | 47 | 31 | |||||||||||||||||||||||
Balances at February 2, 2007
|
3,307 | $ | 10,107 | 606 | $ | (21,033 | ) | $ | 15,282 | $ | (28 | ) | $ | | $ | 4,328 | ||||||||||||||||
64
NOTE 1 | Description of Business and Summary of Significant Accounting Policies |
65
66
67
68
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions, except per share amounts) | ||||||||||||
Numerator:
|
||||||||||||
Net income
|
$ | 2,583 | $ | 3,602 | $ | 3,018 | ||||||
Denominator:
|
||||||||||||
Weighted-average shares outstanding:
|
||||||||||||
Basic
|
2,255 | 2,403 | 2,509 | |||||||||
Effect of dilutive options, restricted stock units, restricted
stock, and other
|
16 | 46 | 59 | |||||||||
Diluted
|
2,271 | 2,449 | 2,568 | |||||||||
Earnings per common share:
|
||||||||||||
Basic
|
$ | 1.15 | $ | 1.50 | $ | 1.20 | ||||||
Diluted
|
$ | 1.14 | $ | 1.47 | $ | 1.18 |
69
70
NOTE 2 | Audit Committee Independent Investigation and Restatement |
71
72
Fiscal 2006 | ||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||
Revenue |
Other |
Provision |
||||||||||||||||||||||||||
recognition |
reserves |
for |
||||||||||||||||||||||||||
As |
Software |
Warranty |
and |
income |
As |
|||||||||||||||||||||||
Reported | sales | Other | liabilities | accruals | tax(a) | Restated | ||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||
Net revenue
|
$ | 55,908 | $ | (248 | ) | $ | 130 | $ | | $ | (2 | ) | $ | | $ | 55,788 | ||||||||||||
Cost of net revenue
|
45,958 | (244 | ) | 124 | 52 | 7 | | 45,897 | ||||||||||||||||||||
Gross margin
|
9,950 | (4 | ) | 6 | (52 | ) | (9 | ) | | 9,891 | ||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Selling, general, and administrative
|
5,140 | | 1 | | (90 | ) | | 5,051 | ||||||||||||||||||||
Research, development, and engineering
|
463 | | | (1 | ) | (4 | ) | | 458 | |||||||||||||||||||
Total operating expenses
|
5,603 | | 1 | (1 | ) | (94 | ) | | 5,509 | |||||||||||||||||||
Operating income
|
4,347 | (4 | ) | 5 | (51 | ) | 85 | | 4,382 | |||||||||||||||||||
Investment and other income, net
|
227 | | 11 | (4 | ) | (8 | ) | | 226 | |||||||||||||||||||
Income before income taxes
|
4,574 | (4 | ) | 16 | (55 | ) | 77 | | 4,608 | |||||||||||||||||||
Income tax provision
|
1,002 | 4 | 1,006 | |||||||||||||||||||||||||
Net income
|
$ | 3,572 | $ | 3,602 | ||||||||||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||
Basic
|
$ | 1.49 | $ | 1.50 | ||||||||||||||||||||||||
Diluted
|
$ | 1.46 | $ | 1.47 | ||||||||||||||||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||||||||||
Basic
|
2,403 | 2,403 | ||||||||||||||||||||||||||
Diluted
|
2,449 | 2,449 |
(a) | Primarily represents the aggregate tax impact of the adjustments. |
73
Fiscal 2005 | ||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||
Revenue |
Other |
Provision |
||||||||||||||||||||||||||
recognition |
reserves |
for |
||||||||||||||||||||||||||
As |
Software |
Warranty |
and |
income |
As |
|||||||||||||||||||||||
Reported | sales | Other | liabilities | accruals | tax(a) | Restated | ||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||
Net revenue
|
$ | 49,205 | $ | (105 | ) | $ | 21 | $ | | $ | | $ | | $ | 49,121 | |||||||||||||
Cost of net revenue
|
40,190 | (93 | ) | 21 | 21 | (36 | ) | | 40,103 | |||||||||||||||||||
Gross margin
|
9,015 | (12 | ) | | (21 | ) | 36 | | 9,018 | |||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Selling, general, and administrative
|
4,298 | | | | 54 | | 4,352 | |||||||||||||||||||||
Research, development, and engineering
|
463 | | | | (3 | ) | | 460 | ||||||||||||||||||||
Total operating expenses
|
4,761 | | | | 51 | | 4,812 | |||||||||||||||||||||
Operating income
|
4,254 | (12 | ) | | (21 | ) | (15 | ) | | 4,206 | ||||||||||||||||||
Investment and other income, net
|
191 | | 1 | | 5 | | 197 | |||||||||||||||||||||
Income before income taxes
|
4,445 | (12 | ) | 1 | (21 | ) | (10 | ) | | 4,403 | ||||||||||||||||||
Income tax provision
|
1,402 | (17 | ) | 1,385 | ||||||||||||||||||||||||
Net income
|
$ | 3,043 | $ | 3,018 | ||||||||||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||
Basic
|
$ | 1.21 | $ | 1.20 | ||||||||||||||||||||||||
Diluted
|
$ | 1.18 | $ | 1.18 | ||||||||||||||||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||||||||||
Basic
|
2,509 | 2,509 | ||||||||||||||||||||||||||
Diluted
|
2,568 | 2,568 |
(a) | Primarily represents the aggregate tax impact of the adjustments |
74
| SAB 104 Deferrals Instances were identified where Dell prematurely recognized revenue prior to finalization of the terms of sale with the customer, or prior to title and/or risk of loss having been passed to the customer. Sometimes these situations involved warehousing arrangements. Additionally, there were situations where revenue was incorrectly deferred to later periods despite title and/or risk of loss having passed to the end customer. Under SAB 104, there were also cases where the in-transit deferral calculation for the period end was not appropriately calculated or was based on incorrect assumptions. |
| Deferred Warranty Revenue Pursuant to FASB Technical Bulletin No. 90-1, Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts, Dell defers and amortizes the revenue from the sale of extended warranties and enhanced service level agreements over the service period of the associated agreement. In some instances Dells accounting estimates of the agreement durations were not correct, resulting in revenue being recognized over a shorter time period than the actual contract durations. Additionally, an error was identified in the amount of deferred revenue recognized and amortized during the restatement period. |
| Customer Rebate Accruals Dells U.S. Consumer segment and small business group historically offered various forms of rebates to stimulate sales, including mail-in rebates. The rebate redemption liability is estimated at the time of sale based on historical redemption rates for the various types of promotions. Dell has determined that this liability was overstated due to a number of factors, including failure to update redemption rates when appropriate, additional amounts accrued for expected customer satisfaction costs, and unsupported incremental accruals recorded in addition to the calculated redemption liability estimate. |
| Japan Services Transactions In late January 2007, a Japanese systems integrator with whom Dells Japanese services division did business, filed for bankruptcy. The bankruptcy trustee publicly indicated that the systems integrator had engaged in fictitious transactions. Dell promptly commenced an internal investigation led by Dells Ethics Office to determine whether its Japanese business unit had engaged in any fictitious transactions with the systems integrator. Dell hired independent outside counsel who retained independent accountants to lead the investigation. The investigation determined that almost all of the transactions of the Japan services business involving the systems integrator likely were fabricated, as were certain additional smaller transactions involving two other Japanese systems integrators. The impact of the adjustments reduced net revenue and cost of revenue to eliminate the effect of the fictitious transactions. |
| Sales Reflected in Cost of Sales There were transactions identified involving the sale of certain computer component commodities and parts where the net proceeds were presented as a reduction of cost of sales rather than as revenue. |
75
| Employee Bonuses Certain employee bonuses were not accrued correctly, including the timing of the recording of the accrual for the employee bonuses. Additionally, in certain cases when excess accruals resulted from differences in the actual bonus payments, the excess accruals were not adjusted as appropriate. |
| Vendor Funding Arrangements In some instances vendor funding arrangements were not accounted for appropriately under EITF Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. Certain amounts received from vendors were recorded as a reduction in operating expenses instead of being correctly recorded as a reduction of cost of goods sold. Additionally, certain amounts received were retained on the balance sheet and released in future periods despite the earnings process having been complete in the earlier period. Finally, there were instances where the benefit of certain vendor funding was recorded prior to the completion of the earnings process. |
| Unsubstantiated Accruals and Inadequately Reconciled Accounts In some instances accrual and reserve accounts lacked justification or supporting documentation. In certain cases these accounts were used to accumulate excess amounts from other reserve and accrual accounts. However, these excess reserves were not released to the income statement in the appropriate reporting period or were released for other purposes. In some instances accounts had incorrect balances because they had not been properly reconciled or because reconciling items had not been adjusted timely. |
76
February 3, |
||||||||||||
2006 | ||||||||||||
As |
As |
|||||||||||
Reported | Adjustments | Restated | ||||||||||
(in millions) | ||||||||||||
ASSETS
|
||||||||||||
Current assets:
|
||||||||||||
Cash and cash equivalents
|
$ | 7,042 | $ | 12 | $ | 7,054 | ||||||
Short-term investments
|
2,016 | | 2,016 | |||||||||
Accounts receivable, net
|
4,089 | (7 | ) | 4,082 | ||||||||
Financing receivables, net
|
1,363 | 3 | 1,366 | |||||||||
Inventories
|
576 | 12 | 588 | |||||||||
Other
|
2,620 | 68 | 2,688 | |||||||||
Total current assets
|
17,706 | 88 | 17,794 | |||||||||
Property, plant, and equipment, net
|
2,005 | (12 | ) | 1,993 | ||||||||
Investments
|
2,691 | (5 | ) | 2,686 | ||||||||
Long-term financing receivables, net
|
325 | | 325 | |||||||||
Other non-current assets
|
382 | 72 | 454 | |||||||||
Total assets
|
$ | 23,109 | $ | 143 | $ | 23,252 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||
Current liabilities:
|
||||||||||||
Short-term borrowings
|
$ | | $ | 65 | $ | 65 | ||||||
Accounts payable
|
9,840 | 28 | 9,868 | |||||||||
Accrued and other
|
6,087 | 153 | 6,240 | |||||||||
Total current liabilities
|
15,927 | 246 | 16,173 | |||||||||
Long-term debt
|
504 | 121 | 625 | |||||||||
Other non-current liabilities
|
2,549 | (142 | ) | 2,407 | ||||||||
Total liabilities
|
18,980 | 225 | 19,205 | |||||||||
Redeemable common stock and capital in excess of par value
|
| | | |||||||||
Stockholders equity:
|
||||||||||||
Common stock and capital in excess of par
|
9,540 | (37 | ) | 9,503 | ||||||||
Treasury stock
|
(18,007 | ) | | (18,007 | ) | |||||||
Retained earnings
|
12,746 | (47 | ) | 12,699 | ||||||||
Accumulated other comprehensive loss
|
(103 | ) | 2 | (101 | ) | |||||||
Other
|
(47 | ) | | (47 | ) | |||||||
Total stockholders equity
|
4,129 | (82 | ) | 4,047 | ||||||||
Total liabilities and equity
|
$ | 23,109 | $ | 143 | $ | 23,252 | ||||||
77
Fiscal Year Ended | ||||||||||||||||
February 3, 2006 | January 28, 2005 | |||||||||||||||
As |
As |
As |
As |
|||||||||||||
Reported | Restated | Reported | Restated | |||||||||||||
(in millions) | ||||||||||||||||
Net cash provided by (used in):
|
||||||||||||||||
Net income
|
$ | 3,572 | $ | 3,602 | $ | 3,043 | $ | 3,018 | ||||||||
Non-cash adjustments
|
912 | 789 | 59 | 643 | ||||||||||||
Changes in working capital
|
(67 | ) | (53 | ) | 1,755 | 1,772 | ||||||||||
Changes in noncurrent assets and liabilities
|
422 | 413 | 453 | 388 | ||||||||||||
Operating activities
|
4,839 | 4,751 | 5,310 | 5,821 | ||||||||||||
Investing activities
|
3,878 | 4,149 | (2,317 | ) | (1,678 | ) | ||||||||||
Financing activities
|
(6,226 | ) | (6,252 | ) | (3,128 | ) | (3,129 | ) | ||||||||
Effect of exchange rate changes on cash and cash
equivalents(a)
|
(196 | ) | (73 | ) | 565 | 46 | ||||||||||
Net increase in cash and cash equivalents
|
2,295 | 2,575 | 430 | 1,060 | ||||||||||||
Cash and cash equivalents at beginning of year
|
4,747 | 4,479 | 4,317 | 3,419 | ||||||||||||
Cash and cash equivalents at end of year
|
$ | 7,042 | $ | 7,054 | $ | 4,747 | $ | 4,479 | ||||||||
(a) | The cash flows have been revised to reflect a closer approximation of the weighted-average exchange rates during the reporting periods. For most periods, this revision reduced the previously reported effect of exchange rate changes on cash and cash equivalents with an offsetting change in effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies and changes in operating working capital included in cash flows from operating activities. |
78
Fiscal Year Ended | ||||||||||||||||
February 3, 2006 | January 28, 2005 | |||||||||||||||
As |
As |
As |
As |
|||||||||||||
Reported | Restated | Reported | Restated | |||||||||||||
(in millions) | ||||||||||||||||
Comprehensive income:
|
||||||||||||||||
Net income
|
$ | 3,572 | $ | 3,602 | $ | 3,043 | $ | 3,018 | ||||||||
Unrealized gains on foreign currency hedging instruments
|
11 | 9 | 52 | 46 | ||||||||||||
Unrealized losses on marketable securities
|
(24 | ) | (24 | ) | (52 | ) | (52 | ) | ||||||||
Foreign currency translations adjustments
|
(8 | ) | (8 | ) | 1 | 1 | ||||||||||
Comprehensive income
|
$ | 3,551 | $ | 3,579 | $ | 3,044 | $ | 3,013 | ||||||||
February 3, |
January 28, |
January 30, |
January 31, |
|||||||||||||
2006 | 2005 | 2004 | 2003 | |||||||||||||
(in millions) | ||||||||||||||||
Beginning retained earnings as reported
|
$ | 9,174 | $ | 6,131 | $ | 3,486 | $ | 1,364 | ||||||||
Revenue Recognition:
|
||||||||||||||||
Software
|
(21 | ) | (9 | ) | (7 | ) | (2 | ) | ||||||||
Other
|
(216 | ) | (217 | ) | (102 | ) | (64 | ) | ||||||||
Revenue Recognition
|
(237 | ) | (226 | ) | (109 | ) | (66 | ) | ||||||||
Warranty Liabilities
|
202 | 223 | 129 | 31 | ||||||||||||
Restructuring Reserves
|
(18 | ) | (18 | ) | (14 | ) | 80 | |||||||||
Other
|
(45 | ) | (35 | ) | (49 | ) | 32 | |||||||||
(Provision) benefit for income taxes
|
21 | 4 | 11 | (18 | ) | |||||||||||
Cumulative adjustments to beginning retained earnings
|
(77 | ) | (52 | ) | (32 | ) | 59 | |||||||||
Beginning retained earnings as restated
|
$ | 9,097 | $ | 6,079 | $ | 3,454 | $ | 1,423 | ||||||||
NOTE 3 | Financial Instruments |
79
February 2, 2007 | February 3, 2006 | |||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||||
Value | Cost | Gain (Loss) | Value | Cost | Gain (Loss) | |||||||||||||||||||
As Restated | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Debt securities:
|
||||||||||||||||||||||||
U.S. government and agencies
|
$ | 1,424 | $ | 1,449 | $ | (25 | ) | $ | 2,501 | $ | 2,547 | $ | (46 | ) | ||||||||||
U.S. corporate
|
1,163 | 1,170 | (7 | ) | 1,638 | 1,657 | (19 | ) | ||||||||||||||||
International corporate
|
156 | 159 | (3 | ) | 352 | 359 | (7 | ) | ||||||||||||||||
State and municipal governments
|
41 | 41 | | 115 | 115 | | ||||||||||||||||||
Debt securities
|
2,784 | 2,819 | (35 | ) | 4,606 | 4,678 | (72 | ) | ||||||||||||||||
Equity and other securities
|
115 | 109 | 6 | 96 | 96 | | ||||||||||||||||||
Investments
|
$ | 2,899 | $ | 2,928 | $ | (29 | ) | $ | 4,702 | $ | 4,774 | $ | (72 | ) | ||||||||||
Short-term
|
$ | 752 | $ | 756 | $ | (4 | ) | $ | 2,016 | $ | 2,028 | $ | (12 | ) | ||||||||||
Long-term
|
2,147 | 2,172 | (25 | ) | 2,686 | 2,746 | (60 | ) | ||||||||||||||||
Investments
|
$ | 2,899 | $ | 2,928 | $ | (29 | ) | $ | 4,702 | $ | 4,774 | $ | (72 | ) | ||||||||||
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Gains
|
$ | 9 | $ | 13 | $ | 40 | ||||||
Losses
|
(14 | ) | (15 | ) | (34 | ) | ||||||
Net realized (loss) gain
|
$ | (5 | ) | $ | (2 | ) | $ | 6 | ||||
80
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Aggregate unrealized net loss at beginning of year
|
$ | (17 | ) | $ | (26 | ) | $ | (72 | ) | |||
Net (losses) gains reclassified to earnings
|
(260 | ) | 225 | (356 | ) | |||||||
Change in fair value of cash flow hedges
|
290 | (216 | ) | 402 | ||||||||
Aggregate unrealized net gain (loss) at end of year
|
$ | 13 | $ | (17 | ) | $ | (26 | ) | ||||
81
82
83
NOTE 4 | Income Taxes |
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Current:
|
||||||||||||
Domestic
|
$ | 846 | $ | 1,141 | $ | 881 | ||||||
Foreign
|
178 | 263 | 215 | |||||||||
Tax repatriation (benefit) charge
|
| (85 | ) | 280 | ||||||||
Deferred
|
(262 | ) | (313 | ) | 9 | |||||||
Provision for income taxes
|
$ | 762 | $ | 1,006 | $ | 1,385 | ||||||
84
Fiscal Year Ended | ||||||||
February 2, |
February 3, |
|||||||
2007 | 2006 | |||||||
As |
||||||||
Restated | ||||||||
(in millions) | ||||||||
Deferred tax assets:
|
||||||||
Deferred revenue
|
$ | 440 | $ | 408 | ||||
Inventory and warranty provisions
|
128 | 169 | ||||||
Investment impairments and unrealized gains
|
| 21 | ||||||
Provisions for product returns and doubtful accounts
|
51 | 46 | ||||||
Capital loss
|
13 | 15 | ||||||
Leasing and financing
|
222 | 120 | ||||||
Credit carryforwards
|
22 | | ||||||
Stock-based and deferred compensation
|
145 | 32 | ||||||
Other
|
159 | 93 | ||||||
Deferred tax assets
|
1,180 | 904 | ||||||
Deferred tax liabilities:
|
||||||||
Property and equipment
|
(96 | ) | (108 | ) | ||||
Acquired intangibles
|
(16 | ) | | |||||
Other
|
(39 | ) | (33 | ) | ||||
Deferred tax liabilities
|
(151 | ) | (141 | ) | ||||
Valuation allowance
|
(28 | ) | (7 | ) | ||||
Net deferred tax asset
|
$ | 1,001 | $ | 756 | ||||
Current portion (included in other current assets)
|
$ | 445 | $ | 442 | ||||
Non-current portion (included in other non-current assets)
|
556 | 314 | ||||||
Net deferred tax asset
|
$ | 1,001 | $ | 756 | ||||
85
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
Effective tax rate:
|
||||||||||||
U.S. federal statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Foreign income taxed at different rates
|
(17.8 | ) | (13.9 | ) | (11.7 | ) | ||||||
Tax repatriation (benefit) charge
|
| (1.9 | ) | 6.4 | ||||||||
Foreign earnings subject to U.S. taxation
|
2.9 | 1.6 | 0.7 | |||||||||
Imputed intercompany charges
|
2.0 | 1.2 | | |||||||||
Other
|
0.7 | (0.2 | ) | 1.1 | ||||||||
Effective tax rate
|
22.8 | % | 21.8 | % | 31.5 | % | ||||||
NOTE 5 | Capitalization |
86
NOTE 6 | Benefit Plans |
| The Dell Computer Corporation 1989 Stock Option Plan (the 1989 Option Plan) |
| The Dell Computer Corporation Incentive Plan (the 1994 Incentive Plan) |
| The Dell Computer Corporation 1998 Broad-Based Stock Option Plan (the 1998 Broad-Based Plan), |
| The Dell Computer Corporation 2002 Long-Term Incentive Plan (the 2002 Incentive Plan) |
87
88
Weighted- |
||||||||||||||||||||
Weighted- |
Average |
|||||||||||||||||||
Number |
Average |
Remaining |
Aggregate |
|||||||||||||||||
of |
Exercise |
Contractual |
Intrinsic |
|||||||||||||||||
Options | Price | Term | Value | |||||||||||||||||
(in millions) | (per share) | (in years) | (in millions) | |||||||||||||||||
Options outstanding February 3, 2006
|
343 | $ | 31.86 | |||||||||||||||||
Granted
|
10 | 25.97 | ||||||||||||||||||
Exercised
|
(13 | ) | 14.09 | |||||||||||||||||
Forfeited
|
(4 | ) | 25.84 | |||||||||||||||||
Cancelled/expired
|
(22 | ) | 36.43 | |||||||||||||||||
Options outstanding February 2, 2007
|
314 | $ | 32.16 | |||||||||||||||||
Vested and expected to vest (net of estimated
forfeitures) February 2,
2007(a)
|
309 | $ | 32.26 | 5.2 | $ | 148 | ||||||||||||||
Exercisable February 2,
2007(a)
|
284 | $ | 32.74 | 5.1 | $ | 145 |
(a) | For options vested and expected to vest and options exercisable, the aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Dells closing stock price on February 2, 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had the holders exercised their options on February 2, 2007. The intrinsic value changes based on changes in the fair market value of Dells common stock. |
Fiscal Years Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
(in millions, except per option data) | ||||||||||||
Weighted-average grant date fair value of stock options granted
per option
|
$ | 6.90 | $ | 10.22 | $ | 10.72 | ||||||
Total fair value of options vested
|
$ | 415 | $ | 2,029 | $ | 1,028 | ||||||
Total intrinsic value of options
exercised(a)
|
$ | 171 | $ | 688 | $ | 697 |
(a) | The total intrinsic value of options exercised represents the total pre-tax intrinsic value (the difference between the stock price at exercise and the exercise price, multiplied by the number of options exercised) that was received by the option holders who exercised their options during Fiscal 2007. |
89
Weighted- |
||||||||
Number |
Average |
|||||||
of |
Grant Date |
|||||||
Shares | Fair Value | |||||||
(in millions) | (per share) | |||||||
Non-vested restricted stock February 3, 2006
|
2 | $ | 34.66 | |||||
Granted
|
21 | 28.36 | ||||||
Vested
|
(1 | ) | 28.84 | |||||
Forfeited
|
(5 | ) | 29.29 | |||||
Non-vested restricted stock February 2, 2007
|
17 | $ | 28.76 | |||||
Fiscal Years Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
(in millions, except per share data) | ||||||||||||
Weighted-average grant date fair value of restricted stock
awards granted
|
$ | 28.36 | $ | 39.70 | $ | 35.23 | ||||||
Total estimated fair value of restricted stock awards vested
|
$ | 16 | $ | | $ | |
Fiscal Year Ended | ||||
February 2, |
||||
2007 | ||||
(in millions) | ||||
Stock-based compensation expense:
|
||||
Cost of net revenue
|
$ | 59 | ||
Operating expenses
|
309 | |||
Stock-based compensation expense before taxes
|
368 | |||
Income tax benefit
|
(110 | ) | ||
Stock-based compensation expense, net of income taxes
|
$ | 258 | ||
90
Fiscal Year Ended | ||||||||
February 3, |
January 28, |
|||||||
2006 | 2005 | |||||||
As |
As |
|||||||
Restated | Restated | |||||||
(in millions, except per share data) | ||||||||
Net income
|
$ | 3,602 | $ | 3,018 | ||||
Deduct: Total share-based employee compensation determined under
fair value method for all awards, net of related tax effects
|
(1,094 | ) | (812 | ) | ||||
Net income pro forma
|
$ | 2,508 | $ | 2,206 | ||||
Earnings per common share:
|
||||||||
Basic as restated
|
$ | 1.50 | $ | 1.20 | ||||
Basic pro forma
|
$ | 1.04 | $ | 0.88 | ||||
|
||||||||
Diluted as restated
|
$ | 1.47 | $ | 1.18 | ||||
Diluted pro forma
|
$ | 1.02 | $ | 0.86 |
91
Fiscal Years Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
Expected term:
|
||||||||||||
Stock options
|
3.6 years | 3.8 years | 3.8 years | |||||||||
Employee stock purchase plan
|
3 months | 3 months | 6 months | |||||||||
Risk-free interest rate (U.S. Government Treasury Note)
|
4.8 | % | 3.9 | % | 2.9 | % | ||||||
Volatility
|
26 | % | 25 | % | 36 | % | ||||||
Dividends
|
0 | % | 0 | % | 0 | % |
NOTE 7 | Financial Services |
92
February 2, |
February 3, |
|||||||
2007 | 2006 | |||||||
As |
||||||||
Restated | ||||||||
(in millions) | ||||||||
Financing receivables, net:
|
||||||||
Customer receivables:
|
||||||||
Revolving loans, net
|
$ | 771 | $ | 1,025 | ||||
Leases and loans, net
|
627 | 302 | ||||||
Customer receivables, net
|
1,398 | 1,327 | ||||||
Residual interest
|
296 | 274 | ||||||
Retained interest
|
159 | 90 | ||||||
Financing receivables, net
|
$ | 1,853 | $ | 1,691 | ||||
Short-term
|
$ | 1,530 | $ | 1,366 | ||||
Long-term
|
323 | 325 | ||||||
Financing receivables, net
|
$ | 1,853 | $ | 1,691 | ||||
93
| Customer receivables are presented net of allowance for uncollectible accounts. The allowance is based on factors including historical trends and the composition and credit quality of the customer receivables. The composition and credit quality varies from investment grade commercial customers to subprime consumers. Customer receivables are charged to the allowance at the earlier of when an account is deemed to be uncollectible or when the account is 180 days delinquent. Recoveries on customer receivables previously charged off as uncollectible are adjusted to the allowance for uncollectible accounts. The following is a description of the components of financing receivables. |
- | Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. From time to time, account holders may have the opportunity to finance their Dell purchases with special programs during which, if the outstanding balance is paid in full, no interest is charged. These special programs generally range from 3 to 18 months and have an average original term of approximately 13 months. Revolving loans bear interest at a variable annual percentage rate that is tied to the prime rate. | |
- | Leases with business customers generally have fixed terms of two to three years. Future maturities of minimum lease payments at February 2, 2007 are as follows: 2008: $55 million; 2009: $36 million; 2010: $13 million; and 2011: $1 million. Fixed-term loans are also offered to qualified small businesses for the purchase of products sold by Dell. |
| Dell retains a residual interest in the leased equipment. The amount of the residual interest is established at the inception of the lease based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and future value-at-risk demand valuation methods. On a periodic basis, Dell assesses the carrying amount of its recorded residual values for impairment. Anticipated declines in specific future residual values that are considered to be other than temporary are recorded in current earnings. |
| Retained interests represent the residual beneficial interest Dell retains in certain pools of securitized finance receivables. Retained interests are stated at the present value of the estimated net beneficial cash flows after payment of all senior interests. In estimating the value of retained interests, Dell makes a variety of financial assumptions, including pool credit losses, payment rates, and discount rates. These assumptions are supported by both Dells historical experience and anticipated trends relative to the particular receivable pool. Dell reviews its investments in retained interests periodically for impairment, based on estimated fair value. Any resulting losses representing the excess of carrying value over estimated fair value that are other-than-temporary are recorded in earnings. However, unrealized gains are reflected in stockholders equity as part of accumulated other comprehensive income. In the first quarter of Fiscal 2008 Dell adopted SFAS 155 and, as a result, all gains and losses are recognized in income immediately and are no longer included in accumulated other comprehensive income. |
94
Fiscal Year Ended | ||||||||
February 2, |
February 3, |
|||||||
2007 | 2006 | |||||||
As |
||||||||
Restated | ||||||||
(in millions) | ||||||||
Retained interest:
|
||||||||
Retained interest at beginning of year
|
$ | 90 | $ | 24 | ||||
New sales
|
167 | 97 | ||||||
Distributions from conduits
|
(142 | ) | (37 | ) | ||||
Net accretion
|
17 | 4 | ||||||
Change in fair value for the period
|
27 | 2 | ||||||
Retained interest at end of year
|
$ | 159 | $ | 90 | ||||
Cash flows during the periods:
|
||||||||
Proceeds from new securitizations
|
$ | 607 | $ | 446 | ||||
Other cash flows received on retained interests
|
142 | 36 | ||||||
Servicing fees received
|
9 | | ||||||
Repurchases of ineligible contracts
|
(7 | ) | (4 | ) | ||||
Cash flows during the period
|
$ | 751 | $ | 478 | ||||
Average Key Assumptions | ||||||||||||||||
Weighted- |
||||||||||||||||
Average |
Weighted- |
Weighted- |
Weighted- |
|||||||||||||
Monthly |
Average |
Average |
Average |
|||||||||||||
Payment Rates | Credit Losses | Discount Rates | Life | |||||||||||||
(lifetime) | (annualized) | (months) | ||||||||||||||
Time of Sale Valuation of Retained Interest
|
8 | % | 9 | % | 15 | % | 12 | |||||||||
Valuation of Retained Interests
|
7 | % | 9 | % | 14 | % | 12 |
February 2, |
||||
2007 | ||||
(in millions) | ||||
Adverse Change of:
|
||||
Expected Prepayment Speed: 10%
|
$ | (2 | ) | |
Expected Prepayment Speed: 20%
|
$ | (4 | ) | |
Expected Credit Losses: 10%
|
$ | (7 | ) | |
Expected Credit Losses: 20%
|
$ | (14 | ) | |
Discount Rate: 10%
|
$ | (4 | ) | |
Discount Rate: 20%
|
$ | (8 | ) |
95
96
February 2, 2007 | February 3, 2006 | |||||||||||||||
Dollars | %(a) | Dollars | %(a) | |||||||||||||
As |
As |
|||||||||||||||
Restated | Restated | |||||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net credit losses of securitized finance receivables
|
$ | 30.9 | 4 | % | $ | 6.2 | 2 | % | ||||||||
Securitized finance receivables 60 days or more delinquent
|
$ | 33.2 | 3 | % | $ | 5.5 | 1 | % |
(a) | Net credit losses as a percent of the outstanding financing receivable balance. |
NOTE 8 | Warranty Liability and Related Deferred Revenue |
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Deferred revenue:
|
||||||||||||
Deferred revenue at beginning of year
|
$ | 3,707 | $ | 2,904 | $ | 2,053 | ||||||
Revenue deferred for new extended warranty and service contracts
sold(a)
|
3,135 | 2,830 | 2,135 | |||||||||
Revenue
recognized(a)
|
(2,621 | ) | (2,027 | ) | (1,284 | ) | ||||||
Deferred revenue at end of year
|
$ | 4,221 | $ | 3,707 | $ | 2,904 | ||||||
Current portion
|
$ | 2,032 | $ | 1,842 | $ | 1,473 | ||||||
Non-current portion
|
2,189 | 1,865 | 1,431 | |||||||||
Deferred revenue at end of year
|
$ | 4,221 | $ | 3,707 | $ | 2,904 | ||||||
97
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Warranty liability:
|
||||||||||||
Warranty liability at beginning of year
|
$ | 951 | $ | 722 | $ | 633 | ||||||
Costs accrued for new warranty contracts and changes in
estimates for pre-existing
warranties(b)
|
1,242 | 1,391 | 852 | |||||||||
Service obligations
honored(a)
|
(1,235 | ) | (1,162 | ) | (763 | ) | ||||||
Warranty liability at end of year
|
$ | 958 | $ | 951 | $ | 722 | ||||||
Current portion
|
$ | 768 | $ | 714 | $ | 463 | ||||||
Non-current portion
|
190 | 237 | 259 | |||||||||
Warranty liability at end of year
|
$ | 958 | $ | 951 | $ | 722 | ||||||
(a) | Prior period amounts have been changed to reflect the current year presentation of service obligations honored. There is no impact to the Consolidated Statements of Financial Position or Consolidated Statements of Income as a result of this change. | |
(b) | Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new warranty contracts. Dells warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations. |
NOTE 9 | Commitments and Contingencies |
98
| Investigations and Related Litigation In August 2005, the SEC initiated an inquiry into certain of Dells accounting and financial reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a formal order of investigation in October 2006. The SECs requests for information were joined by a similar request from the United States Attorney for the Southern District of New York (SDNY), who subpoenaed documents related to Dells financial reporting from and after Fiscal 2002. In August 2006, because of potential issues identified in the course of responding to the SECs requests for information, Dells Audit Committee, on the recommendation of management and in consultation with PricewaterhouseCoopers LLP, Dells independent registered public accounting firm, initiated an independent investigation, which was recently completed. For information regarding the Audit Committees investigation, the accounting errors and irregularities identified, and the restatement adjustments see Note 2 of Notes to Consolidated Financial Statements. Although the Audit Committee investigation has been completed, the investigations being conducted by the SEC and the SDNY are ongoing. Dell continues to cooperate with the SEC and the SDNY. |
| Copyright Levies Proceedings against the IT industry in Germany seek to impose levies on equipment, such as personal computers, multifunction devices, and printers that facilitate making private copies of copyrighted materials. The total levies due, if imposed, would be based on the number of |
99
products sold and the per-product amounts of the levies, which vary. Dell, along with other companies and various industry associations are opposing these levies and instead are advocating compensation to rights holders through digital rights management systems. |
| Lucent v. Dell In February 2003, Lucent Technologies, Inc. filed a lawsuit against Dell in the United States District Court for Delaware, and the lawsuit was subsequently transferred to the United States District Court for the Southern District of California. The lawsuit alleges that Dell infringed 12 patents owned by Lucent and seeks monetary damages and injunctive relief. In April 2003, Microsoft Corporation filed a declaratory judgment action against Lucent in the United States District Court for the Southern District of California, asserting that Microsoft products do not infringe patents held by Lucent, including 10 of the 12 patents at issue in the lawsuit involving Dell and Microsoft. These actions were consolidated for discovery purposes with a previous suit that Lucent filed against Gateway, Inc. In September 2005, the court granted a summary judgment of invalidity with respect to one of the Lucent patents asserted against Dell. In addition, in decisions made through May 2007, the court granted summary judgment of non-infringement with respect to five more of the Lucent patents asserted against Dell. The court has ordered invalidity briefing with regard to other patents at issue in view of the April 30, 2007, U.S. Supreme Court decision in KSR v. Teleflex. Fact and expert discovery has closed, and the three actions have been consolidated. Trial is scheduled to begin in February 2008. Dell is defending these claims vigorously. Separately, Dell has filed a lawsuit against Lucent in the United States District Court for the Eastern District of Texas, alleging that Lucent infringes two patents owned by Dell and seeking monetary damages and injunctive relief. That litigation is pending and discovery is proceeding. |
| Sales Tax Claims Several state and local taxing jurisdictions have asserted claims against Dell Catalog Sales L.P. (DCSLP), an indirect wholly-owned subsidiary of Dell, alleging that DCSLP had an obligation to collect tax on sales made into those jurisdictions because of its alleged nexus, or physical presence, in those jurisdictions. During the first and second quarter of Fiscal 2008, Dell settled suits filed by the State of Louisiana and the Secretary of the Louisiana Department of Revenue and Taxation in the 19th Judicial District Court of the State of Louisiana, and by two Louisiana parishes, Orleans Parish and Jefferson Parish, in the State of Louisiana 24th Judicial District Court. Dell also settled similar claims made by a number of other Louisiana parishes and by the State of Massachusetts. These settlement amounts did not have a material adverse effect on Dells financial condition, results of operations, or cash flows. While there are ongoing claims by certain other state and local taxing authorities, DCSLP disputes the allegation that it had nexus in any of these other jurisdictions during the periods in issue, and is defending the claims vigorously. Dell does not expect that the outcome of these other claims, individually or collectively, will have a material adverse effect on its financial condition, results of operations, or cash flows. |
100
| Income Tax Dell is currently under audit in various jurisdictions, including the United States. The tax periods open to examination by the major taxing jurisdictions to which Dell is subject include Fiscal 1999 through Fiscal 2007. Dell does not anticipate a significant change to the total amount of unrecognized benefits within the next 12 months. |
NOTE 10 | Segment Information |
101
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Net revenue
|
||||||||||||
Americas:
|
||||||||||||
Business
|
$ | 29,311 | $ | 28,365 | $ | 25,289 | ||||||
U.S. Consumer
|
7,069 | 7,960 | 7,614 | |||||||||
Americas
|
36,380 | 36,325 | 32,903 | |||||||||
EMEA
|
13,682 | 12,887 | 10,753 | |||||||||
APJ
|
7,358 | 6,576 | 5,465 | |||||||||
Net revenue
|
$ | 57,420 | $ | 55,788 | $ | 49,121 | ||||||
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Consolidated operating income
|
||||||||||||
Americas:
|
||||||||||||
Business
|
$ | 2,388 | $ | 2,956 | $ | 2,534 | ||||||
U.S. Consumer
|
135 | 452 | 414 | |||||||||
Americas
|
2,523 | 3,408 | 2,948 | |||||||||
EMEA
|
583 | 871 | 815 | |||||||||
APJ
|
332 | 524 | 443 | |||||||||
Consolidated segment operating income
|
3,438 | 4,803 | 4,206 | |||||||||
Stock-based compensation
expense(a)
|
(368 | ) | | | ||||||||
Other product
charges(b)
|
| (338 | ) | | ||||||||
Selling, general, and administrative
charges(c)
|
| (83 | ) | | ||||||||
Consolidated operating income
|
$ | 3,070 | $ | 4,382 | $ | 4,206 | ||||||
(a) | Stock compensation of $17 million and $18 million for Fiscal 2006 and Fiscal 2005, respectively, is included in the total consolidated segment operating income. | |
(b) | Other product charges include $307 million for estimated warranty costs of servicing or replacing certain OptiPlextm systems that include a vendor part that failed to perform to Dells specifications, as well as additional charges for product rationalizations and workforce realignment. | |
(c) | Charges relate to workforce realignment expenses, primarily for severance and related costs of $50 million, cost of operating leases on office space no longer utilized of $4 million, and a write-off of goodwill of $29 million. |
102
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Depreciation:
|
||||||||||||
Americas:
|
||||||||||||
Business
|
$ | 211 | $ | 156 | $ | 125 | ||||||
U.S. Consumer
|
62 | 53 | 50 | |||||||||
Americas
|
273 | 209 | 175 | |||||||||
EMEA
|
114 | 106 | 88 | |||||||||
APJ
|
84 | 79 | 68 | |||||||||
Depreciation and amortization expense
|
$ | 471 | $ | 394 | $ | 331 | ||||||
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Capital expenditures:
|
||||||||||||
Americas:
|
||||||||||||
Business
|
$ | 489 | $ | 408 | $ | 268 | ||||||
U.S. Consumer
|
141 | 140 | 113 | |||||||||
Americas
|
630 | 548 | 381 | |||||||||
EMEA
|
144 | 91 | 74 | |||||||||
APJ
|
122 | 108 | 60 | |||||||||
Capital expenditures
|
$ | 896 | $ | 747 | $ | 515 | ||||||
Fiscal Year Ended | ||||||||
February 2, |
February 3, |
|||||||
2007 | 2006 | |||||||
As |
||||||||
Restated | ||||||||
(in millions) | ||||||||
Assets:
|
||||||||
Corporate
|
$ | 16,694 | $ | 15,433 | ||||
Americas
|
4,981 | 4,410 | ||||||
EMEA
|
2,401 | 1,971 | ||||||
APJ
|
1,559 | 1,438 | ||||||
Assets
|
$ | 25,635 | $ | 23,252 | ||||
103
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Net revenue:
|
||||||||||||
United States
|
$ | 32,361 | $ | 32,949 | $ | 30,311 | ||||||
Foreign countries
|
25,059 | 22,839 | 18,810 | |||||||||
Net revenue
|
$ | 57,420 | $ | 55,788 | $ | 49,121 | ||||||
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Long-lived assets:
|
||||||||||||
United States
|
$ | 1,538 | $ | 1,440 | $ | 1,248 | ||||||
Foreign countries
|
871 | 553 | 420 | |||||||||
Long-lived assets
|
$ | 2,409 | $ | 1,993 | $ | 1,668 | ||||||
104
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Net revenue:
|
||||||||||||
Desktop PCs
|
$ | 19,815 | $ | 21,568 | $ | 21,141 | ||||||
Mobility
|
15,480 | 14,372 | 12,001 | |||||||||
Software and peripherals
|
9,001 | 8,329 | 6,626 | |||||||||
Servers and networking
|
5,805 | 5,449 | 4,880 | |||||||||
Enhanced services
|
5,063 | 4,207 | 3,121 | |||||||||
Storage
|
2,256 | 1,863 | 1,352 | |||||||||
Net revenue
|
$ | 57,420 | $ | 55,788 | $ | 49,121 | ||||||
105
NOTE 11 | Supplemental Consolidated Financial Information |
Fiscal Year Ended | ||||||||
February 2, |
February 3, |
|||||||
2007 | 2006 | |||||||
As |
||||||||
Restated | ||||||||
(in millions) | ||||||||
Supplemental Consolidated Statements of Financial Position
Information:
|
||||||||
Accounts receivable:
|
||||||||
Gross accounts receivable
|
$ | 4,748 | $ | 4,179 | ||||
Allowance for doubtful accounts
|
(126 | ) | (97 | ) | ||||
Accounts receivable
|
$ | 4,622 | $ | 4,082 | ||||
Inventories:
|
||||||||
Production materials
|
$ | 361 | $ | 325 | ||||
Work-in-process
|
61 | 43 | ||||||
Finished goods
|
238 | 220 | ||||||
Inventories
|
$ | 660 | $ | 588 | ||||
Property, plant, and equipment:
|
||||||||
Computer equipment
|
$ | 1,596 | $ | 1,275 | ||||
Land and buildings
|
1,480 | 1,372 | ||||||
Machinery and other equipment
|
973 | 910 | ||||||
Total property, plant, and equipment
|
4,049 | 3,557 | ||||||
Accumulated depreciation and amortization
|
(1,640 | ) | (1,564 | ) | ||||
Property, plant, and equipment
|
$ | 2,409 | $ | 1,993 | ||||
Accrued and other current liabilities:
|
||||||||
Deferred revenue
|
$ | 2,032 | $ | 1,842 | ||||
Warranty liability
|
768 | 714 | ||||||
Income taxes
|
1,141 | 877 | ||||||
Compensation
|
861 | 838 | ||||||
Other
|
2,371 | 1,969 | ||||||
Accrued and other current liabilities
|
$ | 7,173 | $ | 6,240 | ||||
Other non-current liabilities:
|
||||||||
Deferred revenue
|
$ | 2,189 | $ | 1,865 | ||||
Warranty liability
|
190 | 237 | ||||||
Other
|
457 | 305 | ||||||
Other non-current liabilities
|
$ | 2,836 | $ | 2,407 | ||||
106
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Supplemental Consolidated Statements of Income
Information:
|
||||||||||||
Investment and other income, net:
|
||||||||||||
Investment income, primarily interest
|
$ | 368 | $ | 308 | $ | 226 | ||||||
Gains (losses) on investments, net
|
(5 | ) | (2 | ) | 6 | |||||||
Interest expense
|
(45 | ) | (29 | ) | (15 | ) | ||||||
CIT minority interest
|
(23 | ) | (27 | ) | (17 | ) | ||||||
Foreign exchange
|
(37 | ) | 3 | 16 | ||||||||
Gain on sale of building
|
36 | | | |||||||||
Other
|
(19 | ) | (27 | ) | (19 | ) | ||||||
Investment and other income, net
|
$ | 275 | $ | 226 | $ | 197 | ||||||
Fiscal Year Ended | ||||||||||||
February 2, |
February 3, |
January 28, |
||||||||||
2007 | 2006 | 2005 | ||||||||||
As |
As |
|||||||||||
Restated | Restated | |||||||||||
(in millions) | ||||||||||||
Supplemental Consolidated Statements of Cash Flows
Information:
|
||||||||||||
Changes in operating working capital accounts:
|
||||||||||||
Accounts receivable, net
|
$ | (542 | ) | $ | (602 | ) | $ | (566 | ) | |||
Financing receivables, net
|
(165 | ) | (378 | ) | (275 | ) | ||||||
Inventories
|
(72 | ) | (72 | ) | (183 | ) | ||||||
Accounts payable
|
505 | 1,018 | 1,661 | |||||||||
Accrued and other liabilities
|
955 | 853 | 1,611 | |||||||||
Other, net
|
(284 | ) | (872 | ) | (476 | ) | ||||||
Changes in operating working capital accounts
|
$ | 397 | $ | (53 | ) | $ | 1,772 | |||||
Income taxes paid
|
$ | 652 | $ | 996 | $ | 575 | ||||||
Interest paid
|
$ | 57 | $ | 39 | $ | 31 |
107
NOTE 12 | Unaudited Quarterly Results and Stock Prices |
Fiscal Year 2007(a) | ||||||||||||||||||||
First |
Second |
Third |
Fourth |
|||||||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||||||
As |
As |
|||||||||||||||||||
Reported | Restated | |||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||
Net revenue
|
$ | 14,216 | $ | 14,320 | $ | 14,211 | $ | 14,419 | $ | 14,470 | ||||||||||
Gross margin
|
$ | 2,472 | $ | 2,508 | $ | 2,138 | $ | 2,391 | $ | 2,479 | ||||||||||
Net income
|
$ | 762 | $ | 776 | $ | 480 | $ | 601 | $ | 726 | ||||||||||
Earnings per common share:
|
||||||||||||||||||||
Basic
|
$ | 0.33 | $ | 0.34 | $ | 0.21 | $ | 0.27 | $ | 0.33 | ||||||||||
Diluted
|
$ | 0.33 | $ | 0.33 | $ | 0.21 | $ | 0.27 | $ | 0.32 | ||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||
Basic
|
2,297 | 2,297 | 2,264 | 2,229 | 2,230 | |||||||||||||||
Diluted
|
2,318 | 2,318 | 2,278 | 2,238 | 2,251 |
(a) | Results for Fiscal 2007 include stock-based compensation expense due to the implementation of SFAS 123(R). Dell implemented SFAS 123(R) using the modified prospective method effective February 4, 2006. See Note 6 of Notes to Consolidated Financial Statements for further discussion. |
Fiscal Year 2006 | ||||||||||||||||||||||||||||||||
First |
Second |
Third |
Fourth |
|||||||||||||||||||||||||||||
Quarter | Quarter(a) | Quarter(b) | Quarter | |||||||||||||||||||||||||||||
As |
As |
As |
As |
As |
As |
As |
As |
|||||||||||||||||||||||||
Reported | Restated | Reported | Restated | Reported | Restated | Reported | Restated | |||||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||||||
Net revenue
|
$ | 13,386 | $ | 13,300 | $ | 13,428 | $ | 13,382 | $ | 13,911 | $ | 13,880 | $ | 15,183 | $ | 15,226 | ||||||||||||||||
Gross margin
|
$ | 2,491 | $ | 2,452 | $ | 2,499 | $ | 2,431 | $ | 2,251 | $ | 2,265 | $ | 2,709 | $ | 2,743 | ||||||||||||||||
Net income
|
$ | 934 | $ | 908 | $ | 1,020 | $ | 982 | $ | 606 | $ | 635 | $ | 1,012 | $ | 1,077 | ||||||||||||||||
Earnings per common share:
|
||||||||||||||||||||||||||||||||
Basic
|
$ | 0.38 | $ | 0.37 | $ | 0.42 | $ | 0.41 | $ | 0.25 | $ | 0.27 | $ | 0.43 | $ | 0.46 | ||||||||||||||||
Diluted
|
$ | 0.37 | $ | 0.36 | $ | 0.41 | $ | 0.40 | $ | 0.25 | $ | 0.26 | $ | 0.43 | $ | 0.45 | ||||||||||||||||
Weighted-average shares outstanding:
|
||||||||||||||||||||||||||||||||
Basic
|
2,456 | 2,456 | 2,418 | 2,418 | 2,395 | 2,395 | 2,350 | 2,350 | ||||||||||||||||||||||||
Diluted
|
2,515 | 2,515 | 2,478 | 2,478 | 2,435 | 2,435 | 2,375 | 2,375 |
(a) | Results for the second quarter include the impact of an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004. | |
(b) | Results for the third quarter include charges of $421 million related to the cost of servicing certain OptiPlextm systems that include a vendor part that failed to perform to Dells specifications, workforce realignment, product rationalizations, excess facilities, and the write-off of goodwill. |
108
First |
||||
First Quarter of
Fiscal 2007 (As Restated)
|
Quarter | |||
(In millions, |
||||
except per |
||||
share data) | ||||
Net income as reported
|
$ | 762 | ||
Revenue recognition:
|
||||
Software sales
|
(2 | ) | ||
Other revenue recognition
|
(8 | ) | ||
Revenue recognition
|
(10 | ) | ||
Warranty liabilities
|
33 | |||
Other reserves and accruals
|
(3 | ) | ||
(Provision) benefit for income taxes
|
(6 | ) | ||
Net impact of adjustments
|
14 | |||
Net income as restated
|
$ | 776 | ||
First |
Second |
Third |
Fourth |
|||||||||||||
Fiscal 2006 (As
Restated)
|
Quarter | Quarter | Quarter | Quarter | ||||||||||||
(In millions, except per share data) | ||||||||||||||||
Net income as reported
|
$ | 934 | $ | 1,020 | $ | 606 | $ | 1,012 | ||||||||
Revenue recognition:
|
||||||||||||||||
Software sales
|
(3 | ) | (3 | ) | 3 | (1 | ) | |||||||||
Other revenue recognition
|
(20 | ) | (3 | ) | 9 | 30 | ||||||||||
Revenue recognition
|
(23 | ) | (6 | ) | 12 | 29 | ||||||||||
Warranty liabilities
|
(14 | ) | (52 | ) | (14 | ) | 25 | |||||||||
Other reserves and accruals
|
(8 | ) | 11 | 41 | 33 | |||||||||||
(Provision) benefit for income taxes
|
19 | 9 | (10 | ) | (22 | ) | ||||||||||
Net impact of adjustments
|
(26 | ) | (38 | ) | 29 | 65 | ||||||||||
Net income as restated
|
$ | 908 | $ | 982 | $ | 635 | $ | 1,077 | ||||||||
First |
Second |
Third |
Fourth |
|||||||||||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||||||||||||
Price Per Share | Price Per Share | Price Per Share | Price Per Share | |||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||
Fiscal 2007
|
$ | 32.00 | $ | 25.32 | $ | 26.43 | $ | 19.91 | $ | 24.62 | $ | 20.99 | $ | 27.62 | $ | 23.52 | ||||||||||||||||
Fiscal 2006
|
$ | 41.76 | $ | 34.83 | $ | 41.54 | $ | 34.96 | $ | 40.84 | $ | 31.06 | $ | 32.89 | $ | 29.00 |
109
NOTE 13 | Subsequent Events |
110
ITEM 9 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A | CONTROLS AND PROCEDURES |
111
| Control environment We did not maintain an effective control environment. Specifically: |
- | We did not maintain a tone and control consciousness that consistently emphasized strict adherence to GAAP. This control deficiency resulted in an environment in which accounting adjustments were viewed at times as an acceptable device to compensate for operational shortfalls, which in certain instances led to inappropriate accounting decisions and entries that appear to have been largely motivated to achieve desired accounting results and, in some instances, involved management override of controls. In a number of instances, information critical to an effective review of transactions and accounting entries was not disclosed to internal and external auditors. | |
- | We did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience, and training in the application of GAAP commensurate with our financial reporting requirements and business environment. |
The control environment, which is the responsibility of senior management, sets the tone of the organization, influences the control consciousness of its people, and is the foundation for all other components of internal control over financial reporting. The control environment material weaknesses described above contributed to the material weaknesses related to our period-end financial reporting process described below. |
| Period-end financial reporting process We did not maintain effective controls over the period-end reporting process, including controls with respect to the review, supervision, and monitoring of accounting operations. Specifically: |
- | Journal entries, both recurring and nonrecurring, were not always accompanied by sufficient supporting documentation and were not always adequately reviewed and approved for validity, completeness, and accuracy; |
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- | Account reconciliations over balance sheet accounts were not always properly and timely performed, and the reconciliations and their supporting documentation were not consistently reviewed for completeness, accuracy, and timely resolution of reconciling items; and | |
- | We did not design and maintain effective controls to ensure the completeness, accuracy, and timeliness of the recording of accrued liabilities, reserves, and operating expenses, primarily related to our accrued warranty obligations, goods and services received but not invoiced, customer rebates, and nonproduction operating expenses. |
| Our new leadership team, together with other senior executives, is committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity. This commitment will be communicated to and reinforced with every Dell employee and to external stakeholders. This commitment is accompanied by a renewed management focus on decision-making and processes that are intended to achieve maximum shareholder value over the long-term and a decreased focus on short-term, quarter-by-quarter operating results. |
| As a result of the initiatives already underway to address the control deficiencies described above, we have effected personnel changes in our accounting and financial reporting functions. Consequently, many of the employees involved in the accounting processes in which errors and irregularities were made are no longer involved in the accounting or financial reporting functions. In addition, we have taken, or will take, appropriate remedial actions with respect to certain employees, including terminations, reassignments, reprimands, increased supervision, training, and imposition of financial penalties in the form of compensation adjustments. |
| We are in the process of reorganizing the Finance Department, segregating accounting and financial reporting responsibility from planning and forecasting responsibility, with a renewed commitment to accounting and financial reporting integrity. We have appointed a new Chief Accounting Officer and have strengthened that position, making it directly responsible for all accounting and financial reporting functions worldwide. In addition, we are implementing personnel resource plans, and training and retention programs, that are designed to ensure that we have sufficient personnel with knowledge, experience, and training in the application of GAAP commensurate with our financial reporting requirements. |
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| We will continue our efforts to establish or modify specific processes and controls to provide reasonable assurance with respect to the accuracy and integrity of accounting entries and the appropriate documentation, review, and approval of those entries. These efforts include: |
- | Centralization of the development, oversight, and monitoring of accounting policies and standardized processes in all critical accounting areas, including areas involving management judgment and discretion; | |
- | Implementation and clarification of specific accounting and finance policies, applicable worldwide, regarding the establishment, increase, and release of accrued liability and other balance sheet reserve accounts; | |
- | Creation of a revenue recognition accounting resource function to coordinate complex revenue recognition matters and to provide oversight and guidance on the design of controls and processes to enhance and standardize revenue recognition accounting procedures; | |
- | Improving the processes and procedures around the completion and review of quarterly management representation letters, in which our various business and finance leaders make full and complete representations concerning, and assume accountability for, the accuracy and integrity of their submitted financial results; | |
- | Extending the time between the end of a financial reporting period and the public release of financial and operating data with respect to that period, giving our accounting organization more time to appropriately process the close of the accounting records and analyze the reported results prior to public announcement; | |
- | Enhancing the development, communication, and monitoring of processes and controls to ensure that appropriate account reconciliations are performed, documented, and reviewed as part of standardized procedures; and | |
- | Increasing the focus by the internal audit function and the Chief Accounting Officer on the review and monitoring of key accounting processes, including journal entries and supporting documentation, revenue recognition processes, account reconciliations, and management representation letter controls and processes. |
| We will implement company-wide training (led by the Chief Accounting Officer and other finance executives with appropriate accounting expertise) to enhance awareness and understanding of standards and principles for accounting and financial reporting. This training will include: |
- | Development and communication of an accounting code of conduct that will serve as a set of guiding principles emphasizing our commitment to accounting and financial reporting integrity, as well as transparency and robust and complete communications with, and disclosures to, internal and external auditors; | |
- | Comprehensive programs for all finance personnel globally (with initial focus on personnel directly responsible for accounting and financial reporting) covering all fundamental accounting and financial reporting matters, including accounting policies, financial reporting requirements, income statement classification, revenue recognition, vendor funding, accounting for reserves and accrued liabilities, and account reconciliation and documentation requirements; and | |
- | Appropriate programs for other company personnel, including senior management, to emphasize the importance of accounting and financial reporting integrity. |
| We will invest in the design and implementation of additional and enhanced information technology systems and user applications commensurate with the complexity of our business and our financial reporting requirements. It is expected that these investments will improve the reliability of our financial reporting by reducing the need for manual processes, subjective assumptions, and management discretion; by reducing the opportunities for errors and omissions; and by decreasing our reliance on manual controls to detect and correct accounting and financial reporting inaccuracies. |
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| We will reemphasize and invigorate our communications to all Dell employees regarding the availability of our Ethics Hotline, through which employees at all levels can anonymously submit information or express concerns regarding accounting, financial reporting, or other irregularities they have become aware of or have observed. In addition, these communications will emphasize the existence and availability of other reporting avenues or forums for all employees, such as their management chain, their Human Resources representatives, the Ethics Office, the Ombudsmans Office, the Legal Department, and direct contact with the Chief Financial Officer or the Audit Committee. |
| Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes. |
| Controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override. |
| The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. |
| Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. |
| The design of a control system must reflect the fact that resources are constrained, and the benefits of controls must be considered relative to their costs. |
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Name
|
Age |
Committees
|
||||
Donald J. Carty
|
61 |
|
||||
Michael S. Dell
|
42 |
|
||||
William H. Gray, III
|
66 |
Audit, Governance and Nominating
|
||||
Sallie L. Krawcheck
|
42 |
Finance
|
||||
Alan (A.G.) Lafley
|
60 |
Finance, Leadership Development and Compensation
|
||||
Judy C. Lewent
|
58 |
Finance (Chair), Leadership Development and Compensation
|
||||
Thomas W. Luce, III
|
67 |
Audit (Chair)
|
||||
Klaus S. Luft
|
65 |
Leadership Development and Compensation
|
||||
Alex J. Mandl
|
63 |
Audit
|
||||
Michael A. Miles
|
68 |
Governance and Nominating, Leadership Development and
Compensation (Chair)
|
||||
Sam Nunn
|
69 |
Audit, Governance and Nominating (Chair),
Presiding Director
|
| Donald J. Carty Mr. Carty joined us as Vice Chairman and Chief Financial Officer in January 2007. In that role, he is responsible for all finance functions, including controller, corporate planning, tax, treasury operations, investor relations, corporate development, real estate, risk management, and internal audit. Mr. Carty has served as a member of our Board of Directors since 1992 and continues to serve in that capacity. Mr. Carty was the Chairman and Chief Executive Officer of AMR Corporation and American Airlines from 1998 until his retirement in 2003. Prior to that he served in a variety of executive positions with AMR Airline Group and American Airlines from 1978 to 1985 and from 1987 to 1999. Mr. Carty was President and Chief Executive Officer of CP Air in Canada from 1985 to 1987. After his retirement from AMR and American in 2003, Mr. Carty engaged in numerous business and private investment activities with a variety of companies. Mr. Carty is a graduate of Queens University in Kingston, Ontario and of the |
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| Michael S. Dell Mr. Dell currently serves as Chairman of the Board of Directors and Chief Executive Officer. He has held the title of Chairman of the Board since he founded the company in 1984. Mr. Dell served as Chief Executive Officer of Dell from 1984 until July 2004 and resumed that role in January 2007. He serves on the Foundation Board of the World Economic Forum, serves on the executive committee of the International Business Council, and is a member of the U.S. Business Council. He also serves on the U.S. Presidents Council of Advisors on Science and Technology and sits on the governing board of the Indian School of Business in Hyderabad, India. |
| William H. Gray, III Mr. Gray has been a director since November 2000. He is Chairman of the Amani Group (a consulting and advisory firm), a position he has held since August 2004. Mr. Gray was President and Chief Executive Officer of The College Fund/UNCF (educational assistance) from 1991 until he retired in June 2004. He was a member of the United States House of Representatives from 1979 to 1991. During his tenure, he was Chairman of the House Budget Committee, a member of the Appropriations Committee, Chairman of the House Democratic Caucus, and Majority Whip. He is an ordained Baptist Minister and last pastored at Bright Hope Baptist Church of Philadelphia from 1972 until 2007. Mr. Gray is also a director of J.P. Morgan Chase & Co., Prudential Financial Inc., Visteon Corporation, and Pfizer Inc. |
| Sallie L. Krawcheck Ms. Krawcheck has been a director since July 2006. She is the Chairman and Chief Executive Officer, Citi Global Wealth Management. Until March 2007, Ms. Krawcheck served as Chief Financial Officer and Head of Strategy for Citigroup Inc. She is also a member of the Citi Management, Operating and Business Heads Committees, as well as the Citi Foundation Board and the Citi Business Practices Committee. Ms. Krawcheck joined Citi in October 2002 as Chairman and Chief Executive Officer of Smith Barney. Prior to joining Citi, Ms. Krawcheck was Chairman and Chief Executive Officer of Sanford C. Bernstein & Company. She also served as an Executive Vice President of Bernsteins parent company, Alliance Capital Management, from 1999 to 2001. Ms. Krawcheck is a member of the Board of Directors of the University of North Carolina at Chapel Hill Foundations, Inc., the Board of Directors of Carnegie Hall, the Board of Overseers of Columbia Business School, and the Board of Trustees for the Economic Club of New York. |
| Alan (A.G.) Lafley Mr. Lafley has been a director since July 2006. He is the Chairman of the Board and Chief Executive Officer of The Procter & Gamble Company. Mr. Lafley joined Procter & Gamble in 1977, and has served in a variety of executive level positions since 1992. He was named President and Chief Executive in 2000 and Chairman of the Board in 2002. Mr. Lafley also serves on the Board of General Electric Company, and on the Board of the Cincinnati Center City Development Corporation. He is a Trustee of Hamilton College and is a member of the Business Roundtable and the Business Council. |
| Judy C. Lewent Ms. Lewent has been a director since May 2001. Until her retirement in September 2007, she served as the Executive Vice President, Chief Financial Officer of Merck & Co., Inc. She served as Chief Financial Officer of Merck starting in 1990 and also held various other financial and management positions since joining Merck in 1980. Ms. Lewent is also a director of Motorola, Inc. Ms. Lewent is a trustee of the Rockefeller Family Trust, a life member of the Massachusetts Institute of Technology Corporation, and a member of the American Academy of Arts and Sciences. |
| Thomas W. Luce, III Mr. Luce served as a director from November 1991 to September 2005 and rejoined the Board in September 2006. He currently serves as President, Chief Executive Officer, and Director of the National Math and Science Initiative Inc., a not-for-profit organization dedicated to expanding programs that have a proven impact on math and science. He served as United States Assistant Secretary of Education for Planning, Evaluation and Policy Development from July 1, 2005 until his resignation September 1, 2006. From 1997 until 2005, Mr. Luce was a partner of the business advisory firm Luce & Williams, Ltd. Before then, Mr. Luce was a founding partner and managing partner |
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of the law firm of Hughes & Luce, LLP from 1973 until his retirement from the firm in 1997, and was Of Counsel with that law firm until December 2003. |
| Klaus S. Luft Mr. Luft has been a director since March 1995. He is the founder and Chairman of the Supervisory Board of Artedona AG, a privately held mail order e-commerce company established in 1999 and headquartered in Munich, Germany. He is also owner and President of Munich-based MATCH Market Access Services GmbH & Co., KG. Since August 1990, Mr. Luft has served and continues to serve as Vice Chairman and International Advisor to Goldman Sachs Europe Limited. From March 1986 to November 1989, he was Chief Executive Officer of Nixdorf Computer AG, where he served for more than 17 years in a variety of executive positions in marketing, manufacturing, and finance. Mr. Luft is the Honorary Consul of the Republic of Estonia in the State of Bavaria. |
| Alex J. Mandl Mr. Mandl has been a director since November 1997. In June 2006, he became Executive Chairman of Gemalto, a company resulting from the merger of Axalto Holding N.V. and Gemplus International S.A. Before June 2006, Mr. Mandl was President and Chief Executive Officer and a member of the Board of Directors of Gemplus, positions he held since August 2002. He has served as Principal of ASM Investments, a company focusing on early stage funding in the technology sector since April 2001. From 1996 to March 2001, Mr. Mandl was Chairman and CEO of Teligent, Inc., which offered business customers an alternative to the Bell Companies for local, long distance and data communication services. Mr. Mandl was AT&Ts President and Chief Operating Officer from 1994 to 1996, and its Executive Vice President and Chief Financial Officer from 1991 to 1993. From 1988 to 1991, Mr. Mandl was Chairman of the Board and Chief Executive Officer of Sea-Land Services Inc. Mr. Mandl is also a board member of Hewitt Associates, Inc., Horizon Lines, Inc., and Willamette University. |
| Michael A. Miles Mr. Miles has been a director since February 1995. He is a special limited partner and a member of the Advisory Board of the investment firm Forstmann Little and Co. He is the former Chairman of the Board and Chief Executive Officer of Philip Morris Companies Inc., having served in those positions from September 1991 to July 1994. Prior to September 1991, Mr. Miles was Vice Chairman and a member of the board of directors of Philip Morris Companies Inc. Mr. Miles is also a director of Time Warner Inc., AMR Corporation, and Citadel Broadcasting Corp. and a trustee of Northwestern University. |
| Sam Nunn Mr. Nunn has been a director since December 1999. He is Co-Chairman and Chief Executive Officer of the Nuclear Threat Initiative (NTI), a charitable organization working to reduce the global threats from nuclear, biological, and chemical weapons. He was a Senior Partner at the law firm of King & Spalding, Atlanta, Georgia, from 1997 until 2003. From 1972 through 1996, he served as a United States Senator from Georgia. During his tenure as Senator, he served as Chairman of the Senate Armed Services Committee and the Permanent Subcommittee on Investigations. He also served on the Intelligence and Small Business Committees. Mr. Nunn also serves as a director of Chevron Corporation, The Coca-Cola Company, and General Electric Company. |
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Name
|
Age |
Title
|
||||
Michael S. Dell
|
42 |
Chairman of the Board and Chief Executive Officer
|
||||
Donald J. Carty
|
61 |
Vice Chairman and Chief Financial Officer
|
||||
Bradley R. Anderson
|
48 |
Senior Vice President, Business Product Group
|
||||
Paul D. Bell
|
47 |
Senior Vice President and President, Americas
|
||||
Michael R. Cannon
|
54 |
President, Global Operations
|
||||
Jeffrey W. Clarke
|
44 |
Senior Vice President, Business Product Group
|
||||
Andrew C. Esparza
|
49 |
Senior Vice President, Human Resources
|
||||
Stephen J. Felice
|
50 |
Senior Vice President and President, Asia Pacific-Japan
|
||||
Ronald G. Garriques
|
43 |
President, Global Consumer Group
|
||||
Mark Jarvis
|
44 |
Senior Vice President, Chief Marketing Officer
|
||||
David A. Marmonti
|
48 |
Senior Vice President and President, Europe, Middle East, and
Africa
|
||||
Stephen F. Schuckenbrock
|
47 |
Senior Vice President and President, Global Services and Chief
Information Officer
|
||||
Lawrence P. Tu
|
53 |
Senior Vice President, General Counsel and Secretary
|
| Bradley R. Anderson Mr. Anderson joined us in July 2005 and serves as Senior Vice President, Business Product Group. In this role, he is responsible for worldwide engineering, design, development, and marketing of our enterprise products, including servers, networking, and storage systems. Prior to joining Dell, Mr. Anderson was Senior Vice President and General Manager of the Industry Standard Servers business at Hewlett-Packard Company (HP), where he was responsible for HPs server solutions. Previously, he was Vice President of Server, Storage and Infrastructure for HP, where he led the team responsible for server, storage, peripheral, and infrastructure products. Before joining HP in 1996, Mr. Anderson held top management positions at Cray Research in executive staff, field marketing, sales, finance, and corporate marketing. Mr. Anderson earned a bachelor of science in Petroleum Engineering from Texas A&M University and a Master of Business Administration from Harvard University. He serves on the Texas A&M Look College of Engineering Advisory Council. |
| Paul D. Bell Mr. Bell has been with us since 1996 and has served as Senior Vice President and President, Americas since March 2007. In this role, Mr. Bell is responsible for all sales, and customer support operations across the Americas region (other than our consumer business). From February 2000 until March 2007, Mr. Bell served as Senior Vice President and President, Europe, Middle East, and Africa. Prior to this, Mr. Bell served as Senior Vice President, Home and Small Business. Prior to joining Dell in July 1996, Mr. Bell was a management consultant with Bain & Company for six years, including two years as a consultant on our account. Mr. Bell received bachelors degrees in Fine Arts and Business Administration from Pennsylvania State University and a Master of Business Administration degree from the Yale School of Organization and Management. |
| Michael R. Cannon Mr. Cannon joined us in February 2007 as President, Global Operations. In this role, he is responsible for our manufacturing, procurement, and supply chain activities worldwide. Prior to joining Dell, Mr. Cannon was President, Chief Executive Officer, and a director of Solectron Corporation from January 2003 to February 2007, and President, Chief Executive Officer, and a director of Maxtor Corporation (now a part of Seagate Technology) from July 1996 to January 2003. Mr. Cannon has also worked at IBMs Storage Systems Division. He began his career in engineering at The Boeing Company, where he held a management position with the Manufacturing Research and Development organization. Mr. Cannon studied mechanical engineering at Michigan State University and completed |
119
Harvard Business Schools Advanced Management Program. He currently serves on the board of Adobe Systems. |
| Jeffrey W. Clarke Mr. Clarke has served as Senior Vice President, Business Product Group since January 2003. In this role, he is responsible for worldwide engineering, design, development, and marketing of our business client products, including Dell OptiPlextm Desktops, Latitudetm Notebooks, Precisiontm Workstations, and Vostrotm desktops and notebooks. Mr. Clarke joined Dell in 1987 as a quality engineer and has served in a variety of engineering and management roles. In 1995 Mr. Clarke became the director of desktop development, and from November 2001 to January 2003 he served as Vice President and General Manager, Relationship Product Group. Mr. Clarke received a bachelors degree in Electrical Engineering from the University of Texas at San Antonio. |
| Andrew C. Esparza Mr. Esparza joined us in 1997 as a director of Human Resources in the Product Group. He was named Senior Vice President, Human Resources in March 2007 and was named an executive officer in September 2007. In this role, he is responsible for driving the strategy and supporting initiatives to attract, motivate, develop, and retain world-class talent in support of our business goals and objectives. He also has responsibility for corporate security on a worldwide basis. He currently sits on the board of directors for aDellante, our internal networking group responsible for the development of Hispanic employees within the company. Prior to joining Dell, he held human resource positions with NCR Corporation from 1985 until 1997 and Bechtel Power Corporation from 1981 until 1985. Mr. Esparza earned a bachelors degree in business administration with a concentration in human resource management from San Diego State University. |
| Stephen J. Felice Mr. Felice serves as Senior Vice President and President, Asia Pacific-Japan. He was named Senior Vice President in March 2007, after having served as Vice President, Asia Pacific-Japan since August 2005. Mr. Felice leads our operations throughout the APJ region, including sales and customer service centers in Penang, Malaysia, and Xiamen, China. Mr. Felice joined us in February 1999 and has held various executive roles in our sales and consulting services organizations. From February 2002 until July 2005, Mr. Felice was Vice President, Corporate Business Group, Dell Americas. Prior to joining Dell, Mr. Felice served as Chief Executive Officer and President of DecisionOne Corp. Mr. Felice also served as Vice President, Planning and Development, with Bell Atlantic Customer Services. He spent five years with Shell Oil in Houston. Mr. Felice holds a bachelors degree in business administration from the University of Iowa and a Master of Business Administration degree from the University of Houston. |
| Ronald G. Garriques Mr. Garriques joined us in February 2007 as President, Global Consumer Group. In this role he is responsible for all aspects of our consumer business, including sales, marketing, and product design. Before joining Dell, Mr. Garriques served in various leadership roles at Motorola from February 2001 to February 2007, where he was most recently Executive Vice President and President, responsible for the Mobile Devices division. He also was Senior Vice President and General Manager of the Europe, Middle East, and Africa region for the Personal Communications Services division, as well as Senior Vice President and General Manager of Worldwide Products Line Management for the Personal Communications Services division. Prior to joining Motorola, Mr. Garriques held management positions at AT&T Network Systems, Lucent Technologies, and Philips Consumer Communications. Mr. Garriques holds a masters degree in business administration from The Wharton School at the University of Pennsylvania, a masters degree in mechanical engineering from Stanford University, and a bachelors degree in mechanical engineering from Boston University. |
| Mark Jarvis Mr. Jarvis joined us in October 2007 as Senior Vice President, Chief Marketing Officer. In this role he is responsible for the companys global marketing effort, spanning consumer and commercial businesses, including global brand, online, and communications. From April 2007 until October 2007, Mr. Jarvis served as a consultant to Dell in the Chief Marketing Officer role. From 2003 until 2007, Mr. Jarvis served as a marketing consultant to numerous Bay Area startups. From 1989 until 2003, Mr. Jarvis held various roles at Oracle, last serving as Chief Marketing Officer. |
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| David A. Marmonti Mr. Marmonti serves as Senior Vice President and President, Europe, Middle East, and Africa, having been appointed to that position in March 2007. In this role he is responsible for all business operations across the EMEA region, including sales and customer call centers in the region. Mr. Marmonti joined us in 1998 and has held a variety of roles, including Vice President and General Manager of our Public Business Group; Vice President and General Manger of our Mid-Markets and Preferred Corporate Accounts segments; Vice President and General Manager of our EMEA Home and Small Business division; Vice President of Marketing & e-business for the U.S. Consumer segment; and Director and General Manger of the U.S. Asset Recovery Business. Prior to joining Dell, Mr. Marmonti spent 16 years at AT&T in a variety of senior roles, including executive positions in sales and marketing, serving corporate customers. Mr. Marmonti holds a bachelors degree in business administration and marketing from the University of Missouri at St. Louis. |
| Stephen F. Schuckenbrock Mr. Schuckenbrock joined us in January 2007 as Senior Vice President and President, Global Services. In September 2007, he assumed the additional role of Chief Information Officer. He is responsible for all aspects of our services business, with worldwide responsibility for Dell enterprise service offerings, and is also responsible for our global information systems and technology structure. Prior to joining us, Mr. Schuckenbrock served as Co-Chief Operating Officer and Executive Vice President of Global Sales and Services for Electronic Data Systems Corporation. Before joining EDS in 2003, he was Chief Operating Officer of The Feld Group, an information technology consulting organization. Mr. Schuckenbrock served as Global Chief Information Officer for PepsiCo from 1998 to 2000. Mr. Schuckenbrock earned a bachelors degree in business administration from Elon University. |
| Lawrence P. Tu Mr. Tu joined us as Senior Vice President, General Counsel and Secretary in July 2004, and is responsible for overseeing Dells global legal department and governmental affairs. Before joining Dell, Mr. Tu served as Executive Vice President and General Counsel at NBC Universal for three years. Prior to his position at NBC, he was a partner with the law firm of OMelveny & Myers LLP, where he focused on high technology, Internet, and media related transactions. He also served five years as managing partner of the firms Hong Kong office. Mr. Tus prior experience also includes serving as General Counsel Asia-Pacific for Goldman Sachs, attorney for the U.S. State Department, and law clerk for U.S. Supreme Court Justice Thurgood Marshall. Mr. Tu holds Juris Doctor and bachelor of arts degrees from Harvard University, as well as a masters degree from Oxford University, where he was a Rhodes Scholar. |
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| Audit Committee The Audit Committee assists the Board in fulfilling its responsibility to provide oversight with respect to our financial statements and reports and other disclosures provided to stockholders, the system of internal controls, the audit process, and legal and ethical compliance. Its primary duties include reviewing the scope and adequacy of our internal and financial controls; reviewing the scope and results of the audit plans of our independent and internal auditors; reviewing the objectivity, effectiveness, and resources of the internal audit function; appraising our financial reporting activities and the accounting standards and principles followed; and reviewing and approving ethics and compliance policies. The Audit Committee also selects, engages, compensates, and oversees our independent auditor and pre-approves all services to be performed by that firm. |
| Leadership Development and Compensation Committee The Leadership Development and Compensation Committee reviews and approves, on behalf of the Board, the amounts and types of compensation to be paid to our executive officers and the non-employee directors; reviews and approves, on behalf of the Board, all bonus and equity compensation to be paid to our other employees; and administers our stock-based compensation plans. The Leadership Development and Compensation Committee is comprised entirely of directors who satisfy the standards of independence established in our Corporate Governance Principles, as well as additional or supplemental independence standards applicable to compensation committee members established under applicable law and NASDAQ listing requirements. |
| Governance and Nominating Committee The Governance and Nominating Committee oversees all matters of corporate governance, including formulating and recommending to the full Board governance policies and processes and monitoring and safeguarding the independence of the Board, and selects, evaluates, and recommends to the full Board qualified candidates for election or appointment to the Board. This committee also recommends the structure and membership of the Board committees and administers an annual self-evaluation of Board performance. This committee is also responsible for monitoring, on behalf of the Board, our sustainability and corporate responsibility activities and initiatives. The Governance and Nominating Committee is comprised entirely of directors who satisfy the standards of independence established in our Corporate Governance Principles, as well as additional or supplemental independence standards applicable to nominating committee members established under applicable law and NASDAQ listing requirements. |
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| Finance Committee The Finance Committee oversees all areas of corporate finance, including capital structure, equity and debt financings, capital expenditures, merger and acquisition activity, cash management, banking activities and relationships, investments, foreign exchange activities, and share repurchase activities. A majority of the members of the Finance Committee is comprised of directors who satisfy the standards of independence established in our Corporate Governance Principles. |
ITEM 11 | EXECUTIVE COMPENSATION |
123
Fees Earned or |
Equity Awards(a) | |||||||||||||||
Name
|
Paid in Cash | Stock | Option | Total | ||||||||||||
Mr.
Carty(b)
|
$ | 20,000 | $ | 112,597 | $ | 122,728 | $ | 255,325 | ||||||||
Mr. Gray
|
37,500 | 75,100 | 122,728 | 235,328 | ||||||||||||
Ms. Krawcheck
|
75,000 | 26,336 | 27,161 | 128,497 | ||||||||||||
Mr. Lafley
|
75,000 | 26,336 | 27,161 | 128,497 | ||||||||||||
Ms. Lewent
|
15,000 | 112,597 | 210,298 | 337,895 | ||||||||||||
Mr. Luce
|
95,000 | 4,887 | 23,003 | 122,890 | ||||||||||||
Mr. Luft
|
| 112,597 | (c) | 138,343 | 250,940 | |||||||||||
Mr. Mandl
|
75,000 | 37,603 | 128,798 | 241,401 | ||||||||||||
Mr. Miles
|
90,000 | 37,603 | 135,450 | 263,053 | ||||||||||||
Mr. Nunn
|
15,000 | 112,597 | 141,519 | 269,116 |
(a) | Represents the dollar amount of equity compensation cost recognized for financial statement reporting purposes with respect to Fiscal 2007, computed in accordance with SFAS 123(R), excluding the impact of estimated forfeitures for service-based vesting conditions. See Note 6 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for a description of the assumptions used in that computation. The actual value realized by the director with respect to stock awards will depend on the market value of Dell common stock on the date the stock is sold, and the actual value realized by the director with respect to option awards will depend on the difference between the market value of Dell common stock on the date the option is exercised and the exercise price. | |
The following table sets forth the number of shares covered by awards made in Fiscal 2007. All of these awards, other than those made to Mr. Luce, were made on July 21, 2006, the date of the first Board meeting following last years annual meeting of stockholders. The awards to Mr. Luce were made on December 7, 2006, the date of the first Board meeting Mr. Luce attended after his reappointment to the Board in September 2006. |
Annual |
Annual |
Restricted |
New Director |
New Director |
||||||||||||||||
Restricted
Stock |
Stock Option |
Stock in Lieu |
Restricted |
Stock Option |
||||||||||||||||
Name
|
Award | Award | of Retainer | Stock Award | Award | |||||||||||||||
Mr. Carty
|
3,944 | 15,775 | 3,836 | | | |||||||||||||||
Mr. Gray
|
3,944 | 15,775 | 1,918 | | | |||||||||||||||
Ms. Krawcheck
|
3,944 | 15,775 | | 7,888 | 31,550 | |||||||||||||||
Mr. Lafley
|
3,944 | 15,775 | | 7,888 | 31,550 | |||||||||||||||
Ms. Lewent
|
3,944 | 15,775 | 3,836 | | | |||||||||||||||
Mr. Luce
|
| | | 5,850 | 23,399 | |||||||||||||||
Mr. Luft
|
3,944 | 15,775 | 3,836 | | | |||||||||||||||
Mr. Mandl
|
3,944 | 15,775 | | | | |||||||||||||||
Mr. Miles
|
3,944 | 15,775 | | | | |||||||||||||||
Mr. Nunn
|
3,944 | 15,775 | 3,836 | | |
The restricted stock included in the Annual Restricted Stock Award column and the New Director Restricted Stock Award column vests ratably over five years (20% per year), so long as the director remains a member of the Board. The portion that is unvested at the time the director ceases to be a member of the Board (other than by reason of death or permanent disability) is forfeited. All unvested restricted stock vests immediately upon death or permanent disability. The grant date fair value for these awards, computed in accordance with SFAS 123(R), was $77,105 for each of the Annual Restricted Stock Awards; $154,211 for each of the New Director Restricted Stock Awards granted to Ms. Krawcheck and Mr. Lafley; and $154,206 for the New Director Restricted Stock Award granted to Mr. Luce. | ||
The stock options included in the Annual Stock Option Award column and the New Director Stock Option Award column vest ratably over five years (20% per year), so long as the director remains a member of the Board. The portion that is unvested at the time the director ceases to be a member of the Board (other than by reason of death or permanent disability) terminates. All |
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unvested options vest immediately upon death or permanent disability. The options terminate ten years from the date of grant unless terminated earlier as follows: all options (vested and unvested) terminate immediately if the director resigns at the request or demand of the Board or is otherwise removed from the Board; if the director ceases to be a member of the Board by reason of death, permanent disability, or retirement after attaining the age of 72, vested options remain exercisable for one year; if the director resigns for any other reason, vested options remain exercisable for 90 days. The options are transferable to family members under specified conditions. The exercise price of the options is the fair market value of Dell common stock on the date of grant ($26.36 for the award to Mr. Luce on December 7, 2006, and $19.55 for the awards to the other non-employee directors on July 21, 2006). The grant date fair value for these awards, computed in accordance with SFAS 123(R), was $104,367 for each of the Annual Stock Option Awards; $208,735 for each of the New Director Stock Option Awards granted to Ms. Krawcheck and Mr. Lafley; and $174,884 for the New Director Stock Option Award granted to Mr. Luce. | ||
The restricted stock included in the Restricted Stock in Lieu of Retainer column was granted pursuant to the directors election to receive restricted stock in lieu of some or all of the $75,000 annual cash retainer. This stock was fully vested at grant, but may not be sold or transferred for six months following the grant. The number of shares was determined by dividing the foregone retainer amount by the fair market value of Dell common stock on the date of grant ($19.55). The grant date fair value for these awards, computed in accordance with SFAS 123(R), was equal to the amount of the foregone retainer ($37,500 in the case of Mr. Gray and $75,000 in the case of each other director who elected this option). | ||
The following table sets forth the number of shares of restricted stock and the number of shares underlying stock options held by each of the non-employee directors as of the end of Fiscal 2007: |
Name
|
Restricted Stock | Stock Options | ||||||
Mr. Carty
|
6,576 | 342,376 | ||||||
Mr. Gray
|
6,576 | 83,375 | ||||||
Ms. Krawcheck
|
11,832 | 47,325 | ||||||
Mr. Lafley
|
11,832 | 47,325 | ||||||
Ms. Lewent
|
6,576 | 157,669 | ||||||
Mr. Luce
|
5,850 | 37,208 | ||||||
Mr. Luft
|
6,576 | 165,091 | ||||||
Mr. Mandl
|
6,576 | 167,704 | ||||||
Mr. Miles
|
6,576 | 361,402 | ||||||
Mr. Nunn
|
6,576 | 182,549 |
The information for Mr. Carty reflects awards he received in his capacity as a director, prior to becoming an executive officer. For information regarding awards he received as an executive officer, see Compensation of Executive Officers below. | ||
(b) | These awards were made to Mr. Carty as a member of the Board prior to his becoming an executive officer. As an executive officer, he is no longer eligible for additional compensation for service on the Board. For a description of Mr. Cartys compensation as an executive officer, see Compensation of Executive Officers below. | |
(c) | To afford Mr. Luft, a resident of Germany, a comparable compensation benefit under local law, all awards designated as restricted stock awards were made in the form of restricted stock units with the same vesting and expiration provisions as the restricted stock. |
| Reviewing with management and approving the compensation philosophy and core objectives for executive officers; |
| Evaluating the performance of the Chairman and Chief Executive Officer in light of the current business environment and our strategic objectives; |
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| Reviewing with management and approving all forms of compensation to be provided to the executive officers, including establishing target opportunity levels, setting performance goals, and determining results; |
| Acting as administrator of our compensation plans, including granting awards to executive officers; and |
| Evaluating the need for, and provisions of, employment contracts or severance arrangements for the executive officers. |
| Globalization Focus on accelerating profitable revenue growth in developing areas of the world; |
| Product Leadership Design and innovate around non-proprietary standards-based technologies to offer customers what they want, when they want it, and at a level of value they consider to be unparalleled; |
| Customer Experience Focus on product quality and customer service to instill customer satisfaction, trust, and loyalty; and |
| Winning Culture Recruit and develop a diverse workforce globally and provide a positive work environment, including recognition based on merit, a focus on customer commitment, the highest standards of integrity and ethical behavior, and community leadership. |
| Providing compensation commensurate with the level of success achieved, ranging from above-average overall rewards for performance that exceeds that of our peers to below-average compensation for below-average performance; |
| Providing a total compensation opportunity that is competitive with similar high-tech and other large global general industry companies that we compete with for talent; |
| Managing fixed costs by combining a conservative approach to base salaries and benefits, with more aggressive performance-dependent short- and long-term incentives; |
| Recognizing and rewarding the achievement of corporate, regional/business unit, and individual performance goals; and |
| Heavily weighting the compensation package towards long-term, performance-dependent incentives to better align the interests of executives with shareholders. |
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127
128
Advanced Micro Devices, Inc. Apple Inc. Applied Materials Inc. Best Buy Co., Inc. CDW Corp. Cisco Systems Inc. Citigroup Inc. Computer Sciences Corp. Electronic Data Systems Corp. EMC Corp. General Electric Company Hewlett Packard Co. |
Home Depot Inc. Honeywell International Inc. Intel Corp. International Business Machines Corp. Johnson & Johnson Lexmark International Inc. Microsoft Corp. Oracle Corp. Procter & Gamble Co. Texas Instruments Inc. Wal Mart Stores Inc. |
Anheuser-Busch Companies Inc. Best Buy Co., Inc. Citigroup Inc. Coca-Cola Company ConocoPhillips Company Costco Wholesale Corporation |
D R Horton, Inc. Kroger Co. Oracle Corp. Pulte Homes Inc. The Travelers Companies Inc. Texas Instruments Inc. |
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Target Incentive
as a |
||||
Named Executive
Officer
|
% of Base Salary(a) | |||
Mr. Dell
|
200 | % | ||
Mr. Carty
|
| %(b) | ||
Mr. Bell
|
100 | % | ||
Mr. Felice
|
100 | % | ||
Mr. Rollins
|
300 | % | ||
Mr. Schneider
|
100 | % | ||
Mr. Parra
|
100 | % |
(a) | To qualify for tax deductibility under Section 162(m) of the Internal Revenue Code, the maximum payout was capped at 0.10% of consolidated net income for each executive, with the exception of Mr. Dell and Mr. Rollins, whose payouts were capped at 0.20% of consolidated net income. | |
(b) | Mr. Carty joined the company as an executive officer in January 2007 and was not eligible for an annual incentive bonus for Fiscal 2007. |
|
|||||||||||||||
Target Annual Incentive |
X |
Corporate Performance Modifier (0%-300%) |
X |
Regional/Business Unit Performance Modifier (50%-150%) |
X |
Individual Performance Modifier (0%-150%) |
|||||||||
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Threshold | Target | Maximum | ||||||||||
Revenue Growth
|
5.0 | % | 10.0 | % | 20.0 | % | ||||||
Operating Income Margin
|
7.0 | % | 7.8 | % | 8.6 | % |
| Performance of the executives regional/business unit; and |
| A subjective evaluation of each executives individual performance and contribution during the year. |
Fiscal 2007 |
||||
Strategic
Initiatives(a)
|
Fiscal 2007 Goal | Fiscal 2007 Results | ||
Customer Experience:
|
||||
Customer Satisfaction score
|
90% Positive | 75% Positive | ||
Online Customer Satisfaction score
|
90% Positive | <90% Positive | ||
Winning Culture:
|
||||
All Tell Dell Metrics
|
>75% Positive | 76% Positive | ||
Leadership Imperative Participation
|
100% | 88% | ||
Global
Growth(b)
|
(a) | The committee believes that the performance objectives established for each of these strategic initiatives represent meaningful improvements for the organization and, therefore, are reasonably difficult to attain. | |
(b) | Management believes, and the committee concurs, that the specific strategic initiatives and performance goals established for the Global Growth strategic priority during Fiscal 2007 represent confidential business information, the disclosure of which would result in meaningful competitive harm. |
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| Stock options |
| Restricted stock units (RSUs) |
| Performance-based restricted stock units (PBUs) |
| Long-term cash awards |
Target |
||||||||
Fiscal 2007 |
Award Mix | |||||||
Named Executive
Officer
|
Grant Value | Options | PBUs | |||||
Mr. Dell
|
(a) | | | |||||
Mr. Carty
|
(b) | | | |||||
Mr. Bell
|
$ | 4,500,000 | 40% | 60% | ||||
Mr. Felice
|
4,500,000 | 51% | 49% | |||||
Mr. Rollins
|
9,360,000 | 52% | 48% | |||||
Mr. Schneider
|
4,500,000 | 51% | 49% | |||||
Mr. Parra
|
4,500,000 | 51% | 49% |
(a) | As Dells founder and largest individual stockholder, Mr. Dell does not receive any long-term incentive compensation. | |
(b) | Mr. Carty joined the company as an executive officer in January 2007 and was not eligible for long-term awards as part of the annual grant for Fiscal 2007. He did receive stock option and RSU awards as part of his new hire compensation package. See Summary Compensation Table below. |
132
| Stock Options Stock options are designed to reward executive officers for the increase in Dells stock price over time. Options represent the high-risk and potential high-return component of our total long-term incentive program, as the realizable value of each option can fall to zero if the stock price is lower than the exercise price established on the date of grant. |
| RSUs Like stock options, RSUs are designed to reward executives for increases in our stock price over time. RSUs also provide a deferral of vesting and payout to help retain executive officers. RSUs are denominated in full shares of the companys common stock and, therefore, have a more stable value over time as the stock price goes up or down (as compared to options, which only have value if the stock price increases). |
| PBUs PBUs are designed to reward participants for the achievement of near-term financial objectives, while also providing a deferral of vesting and payout to help retain executive officers. Like RSUs, PBUs are denominated in full shares of the companys common stock and, therefore, have a more stable value over time as the stock price goes up or down. |
133
Threshold | Target | Maximum | ||||
Performance Goals:
|
||||||
Revenue (in billions)
|
$57.6 | $61.5 | $64.3 | |||
(Year-over-year revenue growth)
|
3% | 10% | 15% | |||
Minimum operating margin
|
6% | 6% | 6% | |||
Shares Earned
(Percent of Initial Shares Granted) |
0% | 100% | 120% |
| 2003 and 2006 Long-Term Cash Incentive Bonus Awards The Named Executive Officers, other than Mr. Dell, Mr. Carty, and Mr. Rollins, are eligible for payments under these previously approved programs. Because we did not achieve the threshold targets for corporate performance specified in the programs, no amounts were earned under either program for Fiscal 2007. Amounts earned under these programs for prior years will be paid in Fiscal 2008 or Fiscal 2009. |
| 2007 Long-Term Cash Incentive Awards In March 2006, the Leadership Development and Compensation Committee implemented the 2007 Long-Term Cash Award Program. All executive officers employed at that time other than Mr. Dell and Mr. Rollins were eligible for cash engagement awards under this program. As Dell has become recognized for our high-quality leaders, our executives have increasingly become targets for recruitment to key positions in other organizations. This program is intended to better balance our existing long-term compensation programs between cash and equity awards, and to enhance the overall holding power of our compensation package. |
Fiscal 2008 |
Fiscal 2009 |
Fiscal 2010 |
Fiscal 2011 |
|||||||||||||||||
Named Executive
Officer
|
Total Grant | Vesting | Vesting | Vesting | Vesting | |||||||||||||||
Mr. Bell
|
$ | 4,000,000 | $ | | $ | 1,200,000 | $ | 1,300,000 | $ | 1,500,000 | ||||||||||
Mr. Felice
|
5,000,000 | 800,000 | 1,000,000 | 1,400,000 | 1,800,000 | |||||||||||||||
Mr.
Schneider(a)
|
8,000,000 | | 2,666,667 | 2,666,667 | 2,666,666 | |||||||||||||||
Mr.
Parra(a)
|
4,000,000 | | 1,200,000 | 1,300,000 | 1,500,000 |
(a) | Both Mr. Schneider and Mr. Parra resigned from the company before the first vesting date and, therefore, forfeited these amounts. |
134
135
136
Non-Equity |
||||||||||||||||||||||||||||||||
Name and |
Fiscal |
Stock |
Option |
Incentive Plan |
All Other |
|||||||||||||||||||||||||||
Principal
Position
|
Year | Salary | Bonus | Awards(a) | Awards(a) | Compensation(b) | Compensation(c) | Total | ||||||||||||||||||||||||
Michael S. Dell
|
2007 | $ | 950,000 | | | $ | 2,485,008 | | $ | 1,060,881 | $ | 4,495,889 | ||||||||||||||||||||
Chairman and Chief
Executive Officer |
||||||||||||||||||||||||||||||||
Donald J.
Carty(d)
|
2007 | 51,154 | | $ | 133,655 | 146,320 | | 20,000 | 351,129 | |||||||||||||||||||||||
Vice Chairman and
Chief Financial Officer |
||||||||||||||||||||||||||||||||
Paul D. Bell
|
2007 | 594,231 | | | 2,815,494 | | 5,414,916 | 8,824,641 | ||||||||||||||||||||||||
Senior Vice President and
President, Americas |
||||||||||||||||||||||||||||||||
Stephen J. Felice
|
2007 | 491,346 | | 113,264 | 1,043,080 | | 5,559,474 | 7,207,164 | ||||||||||||||||||||||||
Senior Vice President and
President, Asia-Pacific/Japan |
||||||||||||||||||||||||||||||||
Kevin B. Rollins
|
2007 | 950,000 | | | 7,574,388 | | 23,950 | 8,548,338 | ||||||||||||||||||||||||
Former President and
Chief Executive Officer |
||||||||||||||||||||||||||||||||
James M. Schneider
|
2007 | 614,231 | | | 2,652,274 | | 8,025,211 | (e) | 11,291,716 | |||||||||||||||||||||||
Former Senior Vice President
and Chief Financial Officer |
||||||||||||||||||||||||||||||||
Rosendo G. Parra
|
2007 | 594,231 | | | 1,651,650 | | 4,018,205 | (e) | 6,264,086 | |||||||||||||||||||||||
Former Senior Vice
President, Americas |
(a) | Represents the dollar amount of equity compensation cost recognized for financial reporting purposes with respect to Fiscal 2007, computed in accordance with SFAS 123(R), excluding the impact of estimated forfeitures for service-based vesting conditions. See Note 6 of Notes to Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data for a description of the assumptions used in that computation. The actual value realized by the Named Executive Officer with respect to stock awards will depend on the market value of Dell common stock on the date the stock is sold, and with respect to option awards, will depend on the difference between the market value of Dell common stock on the date the option is exercised and the exercise price. The terms of these awards are described in footnote (g) to the Grants of Plan Based Awards table below. | |
(b) | Represents amounts earned under the Executive Annual Incentive Bonus Plan, the 2006 Long-Term Cash Incentive Bonus Program and the 2003 Long-Term Cash Incentive Bonus Program. Because we did not achieve the threshold targets for corporate performance specified in the plans, no amounts were earned under these plans in Fiscal 2007. | |
(c) | Includes cash engagement awards. See Compensation Discussion and Analysis Long-Term Incentives 2007 Long-Term Cash Incentive Awards. Payouts of these awards are contingent upon continued employment through the vesting and payout dates. |
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Mr. Dell | Mr. Carty | Mr. Bell | Mr. Felice | Mr. Rollins | Mr. Schneider | Mr. Parra | ||||||||||||||||||||||
Engagement awards
|
$ | | $ | | $ | 4,000,000 | $ | 5,000,000 | $ | | $ | 8,000,000 | $ | 4,000,000 | ||||||||||||||
401(k) matching contributions
|
8,800 | | 8,800 | 8,800 | 8,800 | 8,800 | 8,800 | |||||||||||||||||||||
Term life insurance
|
1,081 | | | 828 | 2,650 | 1,663 | 980 | |||||||||||||||||||||
Financial counseling/tax prep
|
| | 2,350 | 4,400 | 12,500 | 12,500 | | |||||||||||||||||||||
Annual physical exam
|
| | | | | 2,248 | 1,794 | |||||||||||||||||||||
Security
|
1,051,000 | | | | | | | |||||||||||||||||||||
Sales award trip
|
| | | | | | 6,631 | |||||||||||||||||||||
Director retainer
|
| 20,000 | | | | | | |||||||||||||||||||||
Expat expenses:
|
||||||||||||||||||||||||||||
Automobile expenses
|
| | 77,370 | 44,037 | | | | |||||||||||||||||||||
Housing and furnishings
|
| | 300,075 | 195,308 | | | | |||||||||||||||||||||
Other expenses
|
| | 40,216 | 50,633 | | | | |||||||||||||||||||||
Taxes
|
| | 104,893 | 115,000 | | | | |||||||||||||||||||||
Tax gross up
|
| | 150,340 | 140,468 | | | | |||||||||||||||||||||
UK National Insurance
|
| | 730,872 | | | | |
The amount shown for Mr. Dells security costs represents the amount of company-paid expenses relating to personal and residential security. This security is provided to Mr. Dell pursuant to a Board-authorized security program. The Board believes that Mr. Dells personal safety and security are of vital importance to the companys business and prospects and, therefore, that these costs are appropriate corporate business expenses. Nevertheless, because these costs can be viewed as conveying personal benefits to Mr. Dell, they are reported as perquisites in this column. In conjunction with our security operations, we also provide certain security services to members of Mr. Dells immediate family and at locations other than Mr. Dells principal residence. Mr. Dell fully reimburses the company for the incremental costs attributable to such services. | ||
(d) | Mr. Carty joined the company as Vice Chairman and Chief Financial Officer in January 2007, and is no longer eligible for any additional compensation for his Board service. Amounts in this table reflect his director compensation earned for Fiscal 2007. The amount shown in the Stock Awards column represents $112,597 for his director grants and $21,058 for his employee grants, and the amount under Option Awards represents $122,728 for his director grants and $23,592 for his employee grants. Mr. Cartys $20,000 director retainer fee for Fiscal 2007 is reflected under All Other Compensation. | |
(e) | Mr. Schneider and Mr. Parra both resigned from the company before the first vesting date and, therefore, forfeited their cash engagement awards. Mr. Schneider actually only received $25,211 and Mr. Parra actually received only $18,205 of All Other Compensation. |
All other |
||||||||||||||||||||||||||||||||||||||||||||
All Other |
Options |
|||||||||||||||||||||||||||||||||||||||||||
Stock |
Awards: |
|||||||||||||||||||||||||||||||||||||||||||
Awards: |
Number of |
Exercise or |
||||||||||||||||||||||||||||||||||||||||||
Estimated Future
Payouts Under Non- |
Estimated Future
Payouts Under |
Number of |
Securities |
Base Price |
||||||||||||||||||||||||||||||||||||||||
Grant |
equity Incentive Plan Awards(a) | Equity Incentive Plan Awards |
Shares of |
Underlying |
of Option |
Grant Date |
||||||||||||||||||||||||||||||||||||||
Name
|
Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Stock Units | Options | Awards(b) | Fair Value | |||||||||||||||||||||||||||||||||
Mr. Dell
|
3/9/06 | $ | 0 | $ | 1,900,000 | $ | 12,825,000 | |||||||||||||||||||||||||||||||||||||
Mr. Carty
|
7/21/06 | 15,775 | (c) | $ | 19.55 | $ | 104,367 | |||||||||||||||||||||||||||||||||||||
7/21/06 | 7,780 | (c) | 152,099 | |||||||||||||||||||||||||||||||||||||||||
1/2/07 | 190,000 | (d) | 25.27 | 1,414,984 | ||||||||||||||||||||||||||||||||||||||||
1/2/07 | 50,000 | (e) | 1,263,500 | |||||||||||||||||||||||||||||||||||||||||
Mr. Bell
|
3/9/06 | 0 | 550,000 | 3,712,500 | ||||||||||||||||||||||||||||||||||||||||
3/9/06 | 0 | 90,000 | (f) | 108,000 | 2,605,500 | |||||||||||||||||||||||||||||||||||||||
3/9/06 | 220,000 | (g) | 28.95 | 1,543,080 | ||||||||||||||||||||||||||||||||||||||||
Mr. Felice
|
3/9/06 | 0 | 425,000 | 2,868,705 | ||||||||||||||||||||||||||||||||||||||||
3/9/06 | 0 | 75,000 | (f) | 90,000 | 2,171,250 | |||||||||||||||||||||||||||||||||||||||
3/9/06 | 280,000 | (g) | 28.95 | 1,963,920 | ||||||||||||||||||||||||||||||||||||||||
Mr. Rollins
|
3/9/06 | 0 | 2,850,000 | 19,237,500 | ||||||||||||||||||||||||||||||||||||||||
3/9/06 | 0 | 150,000 | (f) | 180,000 | 4,342,500 | |||||||||||||||||||||||||||||||||||||||
3/9/06 | 600,000 | (g) | 28.95 | 4,208,400 | ||||||||||||||||||||||||||||||||||||||||
Mr. Schneider
|
3/9/06 | 0 | 570,000 | 3,847,500 | ||||||||||||||||||||||||||||||||||||||||
3/9/06 | 0 | 75,000 | (f) | 90,000 | 2,171,250 | |||||||||||||||||||||||||||||||||||||||
3/9/06 | 280,000 | (g) | 28.95 | 1,963,920 | ||||||||||||||||||||||||||||||||||||||||
Mr. Parra
|
3/9/06 | 0 | 550,000 | 3,712,500 | ||||||||||||||||||||||||||||||||||||||||
3/9/06 | 0 | 75,000 | (f) | 90,000 | 2,171,250 | |||||||||||||||||||||||||||||||||||||||
3/9/06 | 280,000 | (g) | 28.95 | 1,963,920 |
138
(a) | Because we did not achieve either revenue growth or operating income margin threshold goals, no annual incentive payouts were made for Fiscal 2007. See Compensation Discussion and Analysis Individual Compensation Components Annual Incentive Bonus. | |
(b) | The exercise price is calculated using the average of the high and low sales prices for Dell common stock on the date of grant. The closing sales price of Dell common stock on March 9, 2006 was $28.90, the closing price on July 21, 2006 was $19.91, and the closing price on December 29, 2006 (the last trading day prior to the January 2, 2007 grant date) was $25.09. | |
(c) | These awards were made to Mr. Carty in his capacity as a member of the Board of Directors prior to his becoming an executive officer. These awards are subject to the same vesting and expiration terms as the director awards described under Director Compensation During Fiscal 2007. The stock award includes 3,944 shares of restricted stock granted as an annual restricted stock award and 3,836 shares of restricted stock granted in lieu of Mr. Cartys $75,000 annual retainer. As an executive officer, he will no longer receive additional compensation for serving on the Board of Directors. | |
(d) | Mr. Cartys equity awards have the same expiration provisions as described in note (g), except that all unvested awards will continue to vest upon Mr. Cartys termination of employment so long as he remains a member of the Board of Directors. | |
(e) | Represents restricted stock that vests ratably over five years (20% per year) beginning on the first anniversary of the date of grant. All unvested restricted stock will be forfeited upon Mr. Cartys resignation or termination as a Dell employee and member of the Board of Directors. | |
(f) | Represents PBUs granted, assuming shares were earned at the target level. The actual number of shares earned was zero because the company failed to achieve the applicable performance targets. See Compensation Discussion and Analysis Long-Term Incentives PBUs. | |
(g) | Represents stock options with an exercise price equal to the fair market value of Dell common stock on the date of grant. These options vest and become exercisable ratably over five years (20% per year) beginning on the first anniversary of the date of grant. All unvested options expire upon the termination of employment for any reason other than death or permanent disability. All unvested options vest immediately upon death or permanent disability, and all options expire one year later. If employment is terminated for conduct detrimental to the company, all options (whether or not vested) expire immediately. If employment is terminated as a result of normal retirement, vested options expire the third year after such retirement. If employment is terminated for any other reason, all vested options expire 90 days after such termination. In any event, the options expire ten years from the date of grant unless otherwise expired as described above. All options are transferable to family members under specified circumstances. |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Equity Incentive
Plan |
||||||||||||||||||||||||||||||||
Awards | ||||||||||||||||||||||||||||||||
Market |
||||||||||||||||||||||||||||||||
Payout |
||||||||||||||||||||||||||||||||
Number of |
Value of |
|||||||||||||||||||||||||||||||
Unearned |
Unearned |
|||||||||||||||||||||||||||||||
Number
of |
Shares, |
Shares, |
||||||||||||||||||||||||||||||
Shares
or |
Market Value |
Units or |
Units or |
|||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options |
Units
of |
of Shares or |
Other |
Other |
||||||||||||||||||||||||||||
Option |
Option |
Stock
that |
Units of Stock |
Rights That |
Rights That |
|||||||||||||||||||||||||||
Exercise |
Expiration |
Have
Not |
that Have Not |
Have Not |
Have Not |
|||||||||||||||||||||||||||
Name
|
Exercisable | Unexercisable | Price | Date | Vested | Vested(a) | Vested | Vested(a) | ||||||||||||||||||||||||
Mr. Dell
|
4,800,000 | | $ | 28.90 | 7/17/08 | |||||||||||||||||||||||||||
805,595 | | 44.69 | 9/23/09 | |||||||||||||||||||||||||||||
900,000 | | 43.44 | 3/2/10 | |||||||||||||||||||||||||||||
145,555 | | 45.90 | 3/24/10 | |||||||||||||||||||||||||||||
350,000 | | 37.59 | 8/22/10 | |||||||||||||||||||||||||||||
500,000 | | 22.94 | 2/12/11 | |||||||||||||||||||||||||||||
307,285 | | 21.72 | 3/23/11 | |||||||||||||||||||||||||||||
500,000 | | 24.09 | 6/18/11 | |||||||||||||||||||||||||||||
400,000 | 100,000 | (b) | 27.64 | 3/7/12 | ||||||||||||||||||||||||||||
64,940 | | 21.39 | 3/22/12 | |||||||||||||||||||||||||||||
240,000 | 160,000 | (c) | 26.19 | 3/6/13 | ||||||||||||||||||||||||||||
400,000 | | 34.24 | 9/4/13 | |||||||||||||||||||||||||||||
400,000 | | 32.99 | 3/4/14 |
139
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Equity Incentive
Plan |
||||||||||||||||||||||||||||||||
Awards | ||||||||||||||||||||||||||||||||
Market |
||||||||||||||||||||||||||||||||
Payout |
||||||||||||||||||||||||||||||||
Number of |
Value of |
|||||||||||||||||||||||||||||||
Unearned |
Unearned |
|||||||||||||||||||||||||||||||
Number
of |
Shares, |
Shares, |
||||||||||||||||||||||||||||||
Shares
or |
Market Value |
Units or |
Units or |
|||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options |
Units
of |
of Shares or |
Other |
Other |
||||||||||||||||||||||||||||
Option |
Option |
Stock
that |
Units of Stock |
Rights That |
Rights That |
|||||||||||||||||||||||||||
Exercise |
Expiration |
Have
Not |
that Have Not |
Have Not |
Have Not |
|||||||||||||||||||||||||||
Name
|
Exercisable | Unexercisable | Price | Date | Vested | Vested(a) | Vested | Vested(a) | ||||||||||||||||||||||||
Mr. Carty
|
192,000 | (d) | | 9.26 | 7/18/07 | |||||||||||||||||||||||||||
22,492 | (d) | | 28.90 | 7/17/08 | ||||||||||||||||||||||||||||
16,284 | (d) | | 43.91 | 7/16/09 | ||||||||||||||||||||||||||||
16,298 | (d) | | 52.16 | 7/20/10 | ||||||||||||||||||||||||||||
24,080 | (d) | | 28.24 | 7/19/11 | ||||||||||||||||||||||||||||
28,420 | (d) | | 26.32 | 7/18/12 | ||||||||||||||||||||||||||||
11,996 | (d) | | 33.35 | 7/18/13 | ||||||||||||||||||||||||||||
7,492 | (d) | | 35.60 | 7/16/14 | ||||||||||||||||||||||||||||
7,539 | (d) | | 40.91 | 7/15/15 | ||||||||||||||||||||||||||||
15,775 | (d) | | 19.55 | 7/21/16 | ||||||||||||||||||||||||||||
| 190,000 | (e) | 25.27 | 1/2/17 | ||||||||||||||||||||||||||||
56,576 | (f) | $ | 1,330,668 | |||||||||||||||||||||||||||||
Mr. Bell
|
36,800 | | 9.26 | 7/18/07 | ||||||||||||||||||||||||||||
23,996 | | 16.67 | 3/5/08 | |||||||||||||||||||||||||||||
346,060 | | 28.90 | 7/17/08 | |||||||||||||||||||||||||||||
58,461 | | 30.43 | 3/26/09 | |||||||||||||||||||||||||||||
100,700 | | 44.69 | 9/23/09 | |||||||||||||||||||||||||||||
400,000 | | 43.44 | 3/2/10 | |||||||||||||||||||||||||||||
32,679 | | 45.90 | 3/24/10 | |||||||||||||||||||||||||||||
200,000 | | 37.59 | 8/22/10 | |||||||||||||||||||||||||||||
200,000 | | 22.94 | 2/12/11 | |||||||||||||||||||||||||||||
82,656 | | 21.72 | 3/23/11 | |||||||||||||||||||||||||||||
1,000,000 | | 24.09 | 6/18/11 | |||||||||||||||||||||||||||||
200,000 | | 22.10 | 9/6/11 | |||||||||||||||||||||||||||||
160,000 | 40,000 | (b) | 27.64 | 3/7/12 | ||||||||||||||||||||||||||||
160,000 | 40,000 | (g) | 25.45 | 9/5/12 | ||||||||||||||||||||||||||||
90,000 | 60,000 | (c) | 26.19 | 3/6/13 | ||||||||||||||||||||||||||||
150,000 | | 34.24 | 9/4/13 | |||||||||||||||||||||||||||||
150,000 | | 32.99 | 3/4/14 | |||||||||||||||||||||||||||||
150,000 | | 35.35 | 9/2/14 | |||||||||||||||||||||||||||||
200,000 | | 40.17 | 3/3/15 | |||||||||||||||||||||||||||||
| 220,000 | (h) | 28.95 | 3/9/16 | ||||||||||||||||||||||||||||
90,000 | (i) | 2,116,800 | ||||||||||||||||||||||||||||||
Mr. Felice
|
80,000 | | 41.13 | 2/22/09 | ||||||||||||||||||||||||||||
30,000 | | 41.00 | 8/12/09 | |||||||||||||||||||||||||||||
50,350 | | 44.69 | 9/23/09 | |||||||||||||||||||||||||||||
76,191 | | 45.94 | 3/3/10 | |||||||||||||||||||||||||||||
15,686 | | 45.90 | 3/24/10 | |||||||||||||||||||||||||||||
158,600 | | 37.59 | 8/22/10 | |||||||||||||||||||||||||||||
20,796 | | 22.94 | 2/12/11 | |||||||||||||||||||||||||||||
50,000 | | 24.09 | 6/18/11 | |||||||||||||||||||||||||||||
15,774 | | 22.10 | 9/6/11 | |||||||||||||||||||||||||||||
7,567 | 7,567 | (b) | 27.64 | 3/7/12 | ||||||||||||||||||||||||||||
43,144 | 21,572 | (g) | 25.45 | 9/5/12 | ||||||||||||||||||||||||||||
8,120 | 16,240 | (c) | 26.19 | 3/6/13 | ||||||||||||||||||||||||||||
72,280 | | 34.24 | 9/4/13 | |||||||||||||||||||||||||||||
32,515 | | 32.99 | 3/4/14 | |||||||||||||||||||||||||||||
29,705 | | 35.35 | 9/2/14 | |||||||||||||||||||||||||||||
56,635 | | 40.17 | 3/3/15 | |||||||||||||||||||||||||||||
75,000 | | 40.63 | 8/1/15 | |||||||||||||||||||||||||||||
| 280,000 | (h) | 28.95 | 3/9/16 | 75,000 | (i) | 1,764,000 | |||||||||||||||||||||||||
11,893 | (j) | $ | 279,723 |
140
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Equity Incentive
Plan |
||||||||||||||||||||||||||||||||
Awards | ||||||||||||||||||||||||||||||||
Market |
||||||||||||||||||||||||||||||||
Payout |
||||||||||||||||||||||||||||||||
Number of |
Value of |
|||||||||||||||||||||||||||||||
Unearned |
Unearned |
|||||||||||||||||||||||||||||||
Number
of |
Shares, |
Shares, |
||||||||||||||||||||||||||||||
Shares
or |
Market Value |
Units or |
Units or |
|||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options |
Units
of |
of Shares or |
Other |
Other |
||||||||||||||||||||||||||||
Option |
Option |
Stock
that |
Units of Stock |
Rights That |
Rights That |
|||||||||||||||||||||||||||
Exercise |
Expiration |
Have
Not |
that Have Not |
Have Not |
Have Not |
|||||||||||||||||||||||||||
Name
|
Exercisable | Unexercisable | Price | Date | Vested | Vested(a) | Vested | Vested(a) | ||||||||||||||||||||||||
Mr.
Rollins(m)
|
400,000 | (k) | | 9.26 | 7/18/07 | |||||||||||||||||||||||||||
1,200,000 | | 10.16 | 12/22/07 | |||||||||||||||||||||||||||||
353,584 | | 12.74 | 3/20/08 | |||||||||||||||||||||||||||||
259,540 | (l) | | 28.90 | 7/17/08 | ||||||||||||||||||||||||||||
201,577 | | 30.45 | 3/26/09 | |||||||||||||||||||||||||||||
116,365 | | 44.69 | 9/23/09 | |||||||||||||||||||||||||||||
174,545 | (l) | | 44.69 | 9/23/09 | ||||||||||||||||||||||||||||
750,000 | | 43.44 | 3/2/10 | |||||||||||||||||||||||||||||
94,727 | | 45.90 | 3/24/10 | |||||||||||||||||||||||||||||
500,000 | | 37.59 | 8/22/10 | |||||||||||||||||||||||||||||
350,000 | | 22.94 | 2/12/11 | |||||||||||||||||||||||||||||
213,442 | | 21.72 | 3/23/11 | |||||||||||||||||||||||||||||
3,800,000 | | 24.09 | 6/18/11 | |||||||||||||||||||||||||||||
1,200,000 | (l) | | 24.09 | 6/18/11 | ||||||||||||||||||||||||||||
400,000 | 100,000 | (b) | 27.64 | 3/7/12 | ||||||||||||||||||||||||||||
45,586 | | 21.39 | 3/22/12 | |||||||||||||||||||||||||||||
240,000 | 160,000 | (c) | 26.19 | 3/6/13 | ||||||||||||||||||||||||||||
400,000 | | 34.24 | 9/4/13 | |||||||||||||||||||||||||||||
400,000 | | 32.99 | 3/4/14 | |||||||||||||||||||||||||||||
800,000 | | 35.60 | 7/16/14 | |||||||||||||||||||||||||||||
650,000 | | 40.17 | 3/3/15 | |||||||||||||||||||||||||||||
| 600,000 | (h) | 28.95 | 3/9/16 | ||||||||||||||||||||||||||||
150,000 | (i) | $ | 3,528,000 | |||||||||||||||||||||||||||||
Mr. Schneider
|
121,600 | | 3.33 | 3/21/07 | ||||||||||||||||||||||||||||
179,940 | (l) | | 12.74 | 3/20/08 | ||||||||||||||||||||||||||||
55,376 | | 28.90 | 5/3/08 | |||||||||||||||||||||||||||||
33,870 | | 30.43 | 3/26/09 | |||||||||||||||||||||||||||||
78,320 | | 44.69 | 5/3/07 | |||||||||||||||||||||||||||||
400,000 | | 43.44 | 5/3/07 | |||||||||||||||||||||||||||||
16,339 | | 45.90 | 3/24/10 | |||||||||||||||||||||||||||||
200,000 | | 37.59 | 5/3/07 | |||||||||||||||||||||||||||||
20,000 | | 22.94 | 5/3/07 | |||||||||||||||||||||||||||||
140,000 | | 22.10 | 5/3/07 | |||||||||||||||||||||||||||||
40,000 | | 27.64 | 5/3/07 | |||||||||||||||||||||||||||||
80,000 | | 25.45 | 5/3/07 | |||||||||||||||||||||||||||||
100,000 | | 26.19 | 5/3/07 | |||||||||||||||||||||||||||||
150,000 | | 34.24 | 5/3/07 | |||||||||||||||||||||||||||||
150,000 | | 32.99 | 5/3/07 | |||||||||||||||||||||||||||||
150,000 | | 35.35 | 5/3/07 | |||||||||||||||||||||||||||||
200,000 | | 40.17 | 5/3/07 |
141
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Equity Incentive
Plan |
||||||||||||||||||||||||||||||||
Awards | ||||||||||||||||||||||||||||||||
Market |
||||||||||||||||||||||||||||||||
Payout |
||||||||||||||||||||||||||||||||
Number of |
Value of |
|||||||||||||||||||||||||||||||
Unearned |
Unearned |
|||||||||||||||||||||||||||||||
Number
of |
Shares, |
Shares, |
||||||||||||||||||||||||||||||
Shares
or |
Market Value |
Units or |
Units or |
|||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options |
Units
of |
of Shares or |
Other |
Other |
||||||||||||||||||||||||||||
Option |
Option |
Stock
that |
Units of Stock |
Rights That |
Rights That |
|||||||||||||||||||||||||||
Exercise |
Expiration |
Have
Not |
that Have Not |
Have Not |
Have Not |
|||||||||||||||||||||||||||
Name
|
Exercisable | Unexercisable | Price | Date | Vested | Vested(a) | Vested | Vested(a) | ||||||||||||||||||||||||
Mr.
Parra(n)
|
17,304 | (l) | | 28.90 | 7/17/08 | |||||||||||||||||||||||||||
89,510 | (l) | | 44.69 | 9/23/09 | ||||||||||||||||||||||||||||
350,000 | (l) | | 43.44 | 3/2/10 | ||||||||||||||||||||||||||||
32,679 | (l) | | 45.90 | 3/24/10 | ||||||||||||||||||||||||||||
200,000 | (l) | | 37.59 | 8/22/10 | ||||||||||||||||||||||||||||
40,000 | (l) | | 22.94 | 2/12/11 | ||||||||||||||||||||||||||||
200,000 | (l) | | 24.09 | 6/18/11 | ||||||||||||||||||||||||||||
80,000 | (l) | | 22.10 | 9/6/11 | ||||||||||||||||||||||||||||
80,000 | (l) | 40,000 | (b) | 27.64 | 3/7/12 | |||||||||||||||||||||||||||
120,000 | (l) | 40,000 | (g) | 25.45 | 9/5/12 | |||||||||||||||||||||||||||
30,000 | (l) | 60,000 | (c) | 26.19 | 3/6/13 | |||||||||||||||||||||||||||
150,000 | (l) | | 34.24 | 9/4/13 | ||||||||||||||||||||||||||||
150,000 | (l) | | 32.99 | 3/4/14 | ||||||||||||||||||||||||||||
150,000 | (l) | | 35.35 | 9/2/14 | ||||||||||||||||||||||||||||
200,000 | | 40.17 | 3/3/15 | |||||||||||||||||||||||||||||
| 280,000 | (h) | 28.95 | 3/9/16 | ||||||||||||||||||||||||||||
75,000 | (i) | 1,764,000 |
(a) | Value is based on the closing price of Dell common stock on February 2, 2007 ($23.52). | |
(b) | These options became exercisable on March 7, 2007. | |
(c) | Of these options, 50% became exercisable on March 6, 2007 and 50% become exercisable on March 6, 2008. | |
(d) | These awards were granted to Mr. Carty in his capacity as a member of the Board of Directors prior to his becoming an executive officer. | |
(e) | These options become exercisable ratably on January 2 of 2008 through 2012. | |
(f) | Represents unvested restricted stock. Of these shares, 6,576 shares were granted to Mr. Carty in his capacity as a member of the Board of Directors prior to his becoming an executive officer, and vest as follows: 1,165 shares vested on July 1, 2007; 374 shares vested on July 16, 2007; 375 shares will vest on July 16 of 2008 and 2009; 1,166 shares will vest on July 1 of 2008, 2009, and 2010; and 789 shares will vest on July 1, 2011. The remaining 50,000 shares were granted to Mr. Carty as an employee and will vest ratably on January 2 of 2008, 2009, 2010, 2011 and 2012. | |
(g) | Options became exercisable on September 5, 2007. | |
(h) | Of these options, 20% became exercisable on March 9, 2007 and the remainder become exercisable ratably on March 9 of 2008 through 2011. | |
(i) | Represents the target number of PBUs assuming shares are earned at the target level pursuant to established performance targets. The actual number of units earned was zero because the performance targets were not achieved. | |
(j) | Restricted stock vesting ratably on March 3 of 2009 through 2012. | |
(k) | These options were transferred without consideration to an irrevocable trust for the benefit of Mr. Rollins children. | |
(l) | These options were transferred without consideration to a limited partnership wholly owned by the executives family members, entities wholly owned by family members, or trusts for the benefit of family members. | |
(m) | Mr. Rollins employment terminated on May 4, 2007 and all unvested options expired on that date. The grants with expiration dates of 3/20/2008, 3/26/2009, 3/24/2010, 3/23/2011, and 3/22/2012, were unaffected by his termination. All other grants expired unexercised pursuant to the terms of the option agreements. Mr. Rollins was not able to exercise the options prior to expiration because we suspended option exercises once we were unable to file our Annual Report on Form 10-K for Fiscal 2007 on a timely basis. We agreed to pay cash for those expired options, as described in Compensation Discussion and Analysis. | |
(n) | Mr. Parras employment terminated on April 20, 2007 and all unvested options expired on that date. The grant with an expiration date of 3/24/2010 was unaffected by his termination. All other grants expired unexercised pursuant to the terms of the option agreements. Mr. Parra was not able to exercise the options prior to expiration because we suspended option exercises once we were unable to file our Annual Report on Form 10-K for Fiscal 2007 on a timely basis. We agreed to pay cash for those expired options, as described in Compensation Discussion and Analysis. |
142
Option Awards | Stock Awards | |||||||||||||||
Number of
Shares |
||||||||||||||||
Acquired on |
Value Realized
upon |
Number of
Shares |
Value Realized
on |
|||||||||||||
Name
|
Exercise | Exercise(a) | Acquired on Vesting | Vesting(b) | ||||||||||||
Mr. Dell
|
| | | | ||||||||||||
Mr.
Carty(c)
|
384,000 | $ | 7,634,995 | 2,585 | $ | 70,723 | ||||||||||
Mr. Bell
|
| | | | ||||||||||||
Mr. Felice
|
| | 7,556 | 196,415 | ||||||||||||
Mr.
Rollins(d)
|
1,120,000 | 25,826,752 | | | ||||||||||||
Mr. Schneider
|
| | | | ||||||||||||
Mr. Parra
|
| | | |
(a) | Computed using the fair market value of the stock on the date of exercise. | |
(b) | Computed using the fair market value of the stock on the date of vesting. | |
(c) | Represents the exercise of options granted to Mr. Carty in his capacity as a member of the Board of Directors prior to his becoming an executive officer. Mr. Carty paid cash to exercise these options and continues to hold the shares. | |
(d) | Mr. Rollins paid cash to exercise these options. |
143
Aggregate |
Aggregate |
|||||||||||||||||||
Executive |
Company |
Earnings in |
Withdrawals/ |
|||||||||||||||||
Contributions
in |
Contributions
in |
Last Fiscal |
Distributions
in |
Aggregate
Balance |
||||||||||||||||
Name
|
Last Fiscal Year | Last Fiscal Year | Year(a) | Last Fiscal Year | at Fiscal Year-End | |||||||||||||||
Mr. Dell
|
| | $ | 714,365 | | $ | 5,843,235 | |||||||||||||
Mr. Carty
|
| | 134,564 | | 985,723 | |||||||||||||||
Mr. Rollins
|
| | 5,858 | | 339,151 | |||||||||||||||
Mr. Parra
|
| | 23,993 | | 393,378 |
(a) | Not reported as compensation to the Named Executive Officers for tax purposes. |
Acceleration
Benefit on |
||||
Named Executive
Officer
|
Death or Permanent Disability(a) | |||
Mr. Dell
|
$ | | ||
Mr. Carty
|
1,393,294 | |||
Mr. Bell
|
2,116,800 | |||
Mr. Felice
|
2,043,723 | |||
Mr. Rollins
|
3,528,000 | |||
Mr. Schneider
|
| |||
Mr. Parra
|
1,764,000 |
(a) | Represents the sum of (1) the in-the-money value of unvested stock options that were subject to vesting acceleration in the event of death or permanent disability and (2) the value of unvested restricted stock, restricted stock units, and performance-based units that were subject to vesting acceleration in the event of death or permanent disability. All values were computed as of the end of Fiscal 2007 based on the closing price of Dell common stock on the last day of Fiscal 2007 ($23.52). |
ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
144
Number of
Securities |
||||||||||||
Remaining
Available for |
||||||||||||
Future Issuance
Under |
||||||||||||
Equity
Compensation |
||||||||||||
Number of
Securities to |
Weighted-Average
Exercise |
Plans
(excluding |
||||||||||
be Issued Upon
Exercise |
Price of
Outstanding |
securities
reflected in |
||||||||||
Plan
Category
|
of Outstanding Options | Options | first column) | |||||||||
Plans approved by stockholders
|
328,698,214 | $ | 32.03 | 281,961,451 | (a) | |||||||
Plans not approved by stockholders
|
4,963,167 | (b) | $ | 34.65 | 0 | (c) |
(a) | This number includes 10,611,746 shares that were available for issuance under the Employee Stock Purchase Plan and 271,349,705 shares that were available for issuance under the 2002 Long-Term Incentive Plan. Of the shares available under the 2002 plan, 173,040,042 shares were available to be issued in the form of restricted stock. All information is as of the end of Fiscal 2007. | |
(b) | This is the number of shares that were issuable pursuant to options granted under the Broad Based Stock Option Plan that were outstanding as of the end of Fiscal 2007. | |
(c) | The Broad Based Stock Option Plan was terminated in November 2002, and consequently, no shares are available for future awards. |
145
Total as a |
||||||||||||||||
Options |
Percentage of |
|||||||||||||||
Number of |
Exercisable |
Total |
Shares |
|||||||||||||
Shares |
Within 60 |
Beneficial |
Outstanding |
|||||||||||||
Beneficial
Owner
|
Owned | Days | Ownership | (if 1% or more)(a) | ||||||||||||
Michael S. Dell
|
217,739,415 | (b) | 9,993,375 | 227,732,790 | 10.14 | % | ||||||||||
One Dell Way
Round Rock, Texas 78682 |
||||||||||||||||
Southeastern Asset Management, Inc.
|
126,067,420 | | 126,067,420 | 5.5 | % | |||||||||||
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119 |
||||||||||||||||
Donald J. Carty
|
602,907 | 137,756 | 740,663 | | ||||||||||||
William H. Gray, III
|
12,380 | 70,755 | 83,135 | | ||||||||||||
Sallie L. Krawcheck
|
11,832 | 9,465 | 21,297 | | ||||||||||||
Alan (A.G.) Lafley
|
11,832 | 9,465 | 21,297 | | ||||||||||||
Judy C. Lewent
|
15,057 | 145,049 | 160,106 | | ||||||||||||
Thomas W. Luce, III
|
47,688 | (c) | 13,809 | 61,497 | | |||||||||||
Klaus S. Luft
|
8,481 | 152,435 | 160,916 | | ||||||||||||
Alex J. Mandl
|
11,088 | (d) | 155,084 | 166,172 | | |||||||||||
Michael A. Miles
|
562,003 | 149,894 | 711,897 | | ||||||||||||
Sam Nunn
|
15,371 | 169,929 | 185,300 | | ||||||||||||
Paul D. Bell
|
7,761 | 3,855,352 | 3,863,113 | | ||||||||||||
Stephen J. Felice
|
16,106 | 894,050 | 910,156 | | ||||||||||||
Kevin B.
Rollins(f)
|
1,259,658 | (e) | 908,916 | 2,168,574 | | |||||||||||
James M.
Schneider(f)
|
28,850 | 230,149 | 258,999 | | ||||||||||||
Rosendo G.
Parra(f)
|
19,802 | | 19,802 | | ||||||||||||
Directors and executive officers as a group (24 persons)
|
220,585,584 | 19,973,178 | 240,543,767 | 10.7 | % |
(a) | Other than the percentage reported for Southeastern Asset Management, Inc., the percentage is based on the number of shares outstanding (2,235,801,991) at the close of business on October 1, 2007. The percentage reported for Southeastern Asset Management, Inc. is based on their Form 13G filed with the Securities and Exchange Commission on February 12, 2007. | |
(b) | Includes 1,482,435 shares held is a trust for the benefit of his children of which Mr. Dell is the trustee. Does not include 26,449,112 shares held in a separate property trust for Mr. Dells spouse and 1,482,434 shares held in a trust for the benefit of his children of which his spouse is trustee. | |
(c) | Includes 39,778 shares held in a personal retirement plan. | |
(d) | Includes 400 shares held by Mr. Mandls spouse and 1,300 shares held in an IRA for Mr. Mandls spouse. | |
(e) | Includes 1,120,000 shares that have been pledged as collateral for a loan as of May 4, 2007. | |
(f) | The Number of Shares Owned reported for Mr. Rollins, Mr. Schneider, and Mr. Parra are as of the date of their retirement (May 4, 2007 for Mr. Rollins, January 31, 2007 for Mr. Schneider, and April 20, 2007 for Mr. Parra.) |
ITEM 13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
146
Executive
Officer
|
Reimbursement Amount | |||
Mr. Dell
|
$ | 1,861,356 | ||
Mr. Parra
|
206,423 | |||
Mr. Rollins
|
2,489,321 | |||
Mr. Schneider
|
199,294 |
Director
|
Status(a)
|
|
Mr. Carty
|
Not independent(b) | |
Mr. Dell
|
Not independent(c) | |
Mr. Gray
|
Independent | |
Ms. Krawcheck
|
Independent(d) | |
Mr. Lafley
|
Independent(e) | |
Ms. Lewent
|
Independent(f) | |
Mr. Luce
|
Independent(g) | |
Mr. Luft
|
Independent(h) | |
Mr. Mandl
|
Independent(i) | |
Mr. Miles
|
Independent | |
Mr. Nunn
|
Independent |
(a) | Unless otherwise noted, the Boards determination that a director is independent was made on the basis of the standards set forth in the Corporate Governance Principles, which is available on our website at www.dell.com/corporategovernance. | |
(b) | Mr. Carty is the Vice Chairman and Chief Financial Officer of Dell and, therefore, is not independent in accordance with the standards set forth in the Corporate Governance Principles. |
147
(c) | Mr. Dell is the Chairman of the Board and Chief Executive Officer of Dell and, therefore, is not independent in accordance with the standards set forth in the Corporate Governance Principles. | |
(d) | Ms. Krawcheck serves as Chairman and Chief Executive Officer of Citi Global Wealth Management, and during Fiscal 2007 served as Chief Financial Officer and Head of Strategy for Citigroup Inc. During Fiscal 2007, Dell was both a customer of and a supplier to Citigroup, and the Board considered those relationships in assessing Ms. Krawchecks independence. | |
(e) | Mr. Lafley serves as Chairman and Chief Executive Officer of The Procter & Gamble Co., and during Fiscal 2007, Dell was a supplier to Procter & Gamble. In addition, Mr. Lafley is a director of the United Negro College Fund, and Dell made contributions to the UNCF during Fiscal 2007. The Board considered those relationships in assessing Mr. Lafleys independence. | |
(f) | Until September 2007, Ms. Lewent served as Executive Vice President and Chief Financial Officer of Merck & Co., Inc. During Fiscal 2007, Dell was a supplier to Merck. The Board considered this relationship in assessing Ms. Lewents independence. | |
(g) | Mr. Luce serves as the President and Chief Executive Officer and a director of the National Math and Science Initiative, Inc. (NMSI), a not-for-profit organization dedicated to expanding programs that have a proven impact on math and science. The Michael and Susan Dell Foundation has pledged a contribution to NMSI in the amount of $5,000,000 over three years. It is estimated that this contribution will constitute approximately 3.5% of NMSIs known funding commitments. After considering all the surrounding facts and circumstances, the Board concluded that this relationship is not material and does not otherwise impair, or appear to impair, Mr. Luces ability to make independent judgments and, therefore, does not prevent Mr. Luce from being considered an independent director. In addition to the small size of the contribution in relation to NMSIs total expected funding, the Board considered the following facts: (a) NMSIs charitable purposes are squarely within the historical philanthropic focus of The Michael and Susan Dell Foundation and (b) Mr. Luce is not compensated by NMSI and, thus, derives no financial benefit from the contribution. | |
(h) | Mr. Luft serves as Vice Chairman and International Advisor to Goldman Sachs Europe Limited. During Fiscal 2007, Dell was a supplier to Goldman Sachs. The Board considered this relationship in assessing Mr. Lufts independence. | |
(i) | Mr. Mandl is Executive Chairman of Gemalto. During Fiscal 2007, Dell was a supplier to Gemalto. The Board considered this relationship in assessing Mr. Mandls independence. |
ITEM 14 | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Fee
Type
|
Fiscal 2007 | Fiscal 2006 | ||||||
Audit
Fees(a)
|
$ | 11.9 | $ | 8.7 | ||||
Audit Related
Fees(b)
|
0.6 | 0.8 | ||||||
Tax
Fees(c)
|
1.9 | 1.8 | ||||||
Total
|
$ | 14.4 | $ | 11.3 | ||||
(a) | This category includes fees incurred for professional services rendered in connection with the audit of the annual financial statements, for the audit of internal controls under Section 404 of the Sarbanes-Oxley Act, for the review of the quarterly financial statements, and for the statutory audits of international subsidiaries. Also includes fees incurred for professional services rendered in connection with the Audit Committee and SEC investigations. | |
(b) | This category includes fees incurred for professional services rendered in connection with assurance and other activities not explicitly related to the audit of our financial statements, including the audits of our employee benefit plans, contract compliance reviews, and accounting research. | |
(c) | This category includes fees incurred for domestic and international income tax compliance and tax audit assistance, corporate-wide tax planning, and executive tax consulting and return preparation. |
148
149
ITEM 15 | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
Page | ||||
Financial Statements:
|
||||
Report of Independent Registered Public Accounting Firm
|
58 | |||
Consolidated Statements of Financial Position at
February 2, 2007 and February 3, 2006 (Restated)
|
61 | |||
Consolidated Statements of Income for the fiscal years ended
February 2, 2007, February 3, 2006 (Restated) and
January 28, 2005 (Restated)
|
62 | |||
Consolidated Statements of Cash Flows for the fiscal years ended
February 2, 2007, February 3, 2006 (Restated) and
January 28, 2005 (Restated)
|
63 | |||
Consolidated Statements of Stockholders Equity for the
fiscal years ended February 2, 2007, February 3,
2006(Restated) and January 28, 2005 (Restated)
|
64 | |||
Notes to Consolidated Financial Statements
|
65 |
150
Balance
at |
Charged to |
Write-Offs |
Balance |
|||||||||||||||||
Beginning |
Bad Debt |
Charged
to |
at
End of |
|||||||||||||||||
Fiscal
Year
|
Description
|
of Period | Expense | Allowance | Period | |||||||||||||||
Trade Receivables:
|
||||||||||||||||||||
2007
|
Allowance for doubtful accounts | $ | 96 | $ | 107 | $ | 77 | $ | 126 | |||||||||||
2006
|
Allowance for doubtful accounts (as restated | ) | $ | 79 | $ | 101 | $ | 84 | $ | 96 | ||||||||||
2005
|
Allowance for doubtful accounts (as restated | ) | $ | 83 | $ | 62 | $ | 66 | $ | 79 | ||||||||||
Financing Receivables:
|
||||||||||||||||||||
2007
|
Allowance for doubtful accounts | $ | 22 | $ | 40 | $ | 23 | $ | 39 | |||||||||||
2006
|
Allowance for doubtful accounts (as restated | ) | $ | 1 | $ | 22 | $ | 1 | $ | 22 | ||||||||||
2005
|
Allowance for doubtful accounts (as restated | ) | $ | | $ | 1 | $ | | $ | 1 |
151
Exhibit |
||||||
No.
|
Description of
Exhibit
|
|||||
3 | .1 | | Restated Certificate of Incorporation, filed February 1, 2006 (incorporated by reference to Exhibit 3.3 of Dells Current Report on Form 8-K filed on February 2, 2006, Commission File No. 0-17017) | |||
3 | .2 | | Restated Bylaws, as amended and effective March 8, 2007 (incorporated by reference to Exhibit 3.1 of Dells Current Report on Form 8-K filed on March 13, 2007, Commission File No. 0-17017) | |||
4 | .1 | | Indenture, dated as of April 27, 1998, between Dell Computer Corporation and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of Dells Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | |||
4 | .2 | | Officers Certificate pursuant to Section 301 of the Indenture establishing the terms of Dells 6.55% Senior Notes Due 2008 (incorporated by reference to Exhibit 99.3 of Dells Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | |||
4 | .3 | | Officers Certificate pursuant to Section 301 of the Indenture establishing the terms of Dells 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.4 of Dells Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | |||
4 | .4 | | Form of Dells 6.55% Senior Notes Due 2008 (incorporated by reference to Exhibit 99.5 of Dells Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | |||
4 | .5 | | Form of Dells 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.6 of Dells Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | |||
10 | .1* | | Dell Computer Corporation 1989 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.4 of Dells Annual Report on Form 10-K for the fiscal year ended January 31, 1993, Commission File No. 0-17017) | |||
10 | .2* | | Amended and Restated Dell Computer Corporation 1994 Incentive Plan (incorporated by reference to Exhibit 99 of Dells Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49014) | |||
10 | .3* | | Amended and Restated Dell Computer Corporation 1998 Broad Based Stock Option Plan (incorporated by reference to Exhibit 99 of Dells Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49016) | |||
10 | .4* | | Dell Computer Corporation 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Dells Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2002, Commission File No. 0-17017) | |||
10 | .5* | | Amended and Restated Dell Inc. 401(k) Plan, adopted on December 19, 2003 (incorporated by reference to Exhibit 10.5 to Dells Annual Report on Form 10-K for the fiscal year ended January 30, 2004, Commission File No. 0-17017) | |||
10 | .6* | | Amendment No. 1 to Amended and Restated Dell Inc. 401(k) Plan, dated March 3, 2005 (incorporated by reference to Exhibit 10.6 of Dells Annual Report on Form 10-K for the fiscal year ended January 28, 2005, Commission File No. 0-17017) | |||
10 | .7* | | Amendment No. 2 to Amended and Restated Dell Inc. 401(k) Plan, dated November 29, 2005 (incorporated by reference to Exhibit 10.7 of Dells Annual Report on Form 10-K for the fiscal year ended February 3, 2006, Commission File No. 0-17017) | |||
10 | .8* | | Amendment No. 3 to Amended and Restated Dell Inc. 401(k) Plan, dated December 12, 2006 |
152
Exhibit |
||||||
No.
|
Description of
Exhibit
|
|||||
10 | .9* | | Amended and Restated Dell Computer Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.6 to Dells Annual Report on Form 10-K for the fiscal year ended January 30, 2004, Commission File No. 0-17017) | |||
10 | .10* | | Executive Incentive Bonus Plan, adopted July 18, 2003 (incorporated by reference to Exhibit 10.1 of Dells Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2003, Commission File No. 0-17017) | |||
10 | .11* | | Form of Indemnification Agreement between Dell and each Non-Employee Director of Dell (incorporated by reference to Exhibit 10.11 to Dells Annual Report on Form 10-K for the fiscal year ended January 31, 2003, Commission File No. 0-17017) | |||
10 | .12* | | Form of Nonstatutory Stock Option Agreement for employees under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dells Current Report on Form 8-K filed March 14, 2006, Commission File No. 0-17017) | |||
10 | .13* | | Form of Performance Based Stock Unit Agreement for employees under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dells Current Report on Form 8-K filed March 14, 2006, Commission File No. 0-17017) | |||
10 | .14* | | Form of Restricted Stock Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dells Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | |||
10 | .15* | | Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dells Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | |||
10 | .16* | | Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.3 of Dells Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | |||
10 | .17* | | Form of Nonstatutory Stock Option Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dells Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017) | |||
10 | .18* | | Form of Stock Unit Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dells Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017) | |||
21 | | | Subsidiaries of Dell | |||
23 | | | Consent of PricewaterhouseCoopers LLP | |||
31 | .1 | | Certification of Michael S. Dell, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
31 | .2 | | Certification of Donald J. Carty, Vice Chairman and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
32 | .1 | | Certifications of Michael S. Dell, Chairman and Chief Executive Officer, and Donald J. Carty, Vice Chairman and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Identifies Exhibit that consists of or includes a management contract or compensatory plan or arrangement. | |
| Filed herewith. | |
| Furnished herewith. |
153
By: |
/s/ MICHAEL
S. DELL
|
Name
|
Title
|
Date
|
||||
/s/ MICHAEL
S. DELL Michael S. Dell |
Chairman and Chief Executive Officer (principal executive officer) | October 30, 2007 | ||||
/s/ DONALD
J. CARTY Donald J. Carty |
Vice Chairman and Chief Financial Officer | October 30, 2007 | ||||
/s/ WILLIAM
H. GRAY, III William H. Gray, III |
Director | October 30, 2007 | ||||
/s/ SALLIE
L. KRAWCHECK Sallie L. Krawcheck |
Director | October 30, 2007 | ||||
/s/ ALAN
G. LAFLEY Alan G. Lafley |
Director | October 30, 2007 | ||||
/s/ JUDY
C. LEWENT Judy C. Lewent |
Director | October 30, 2007 | ||||
/s/ THOMAS
W. LUCE, III Thomas W. Luce, III |
Director | October 30, 2007 | ||||
/s/ KLAUS
S. LUFT Klaus S. Luft |
Director | October 30, 2007 | ||||
/s/ ALEX
J. MANDL Alex J. Mandl |
Director | October 26, 2007 | ||||
/s/ MICHAEL
A. MILES Michael A. Miles |
Director | October 30, 2007 |
154
Name
|
Title
|
Date
|
||||
/s/ SAMUEL
A. NUNN, JR. Samuel A. Nunn, Jr. |
Director | October 30, 2007 | ||||
/s/ THOMAS
W. SWEET Thomas W. Sweet |
Vice President, Corporate Finance (principal accounting officer) | October 30, 2007 |
155