e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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(Mark One) |
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended April 29, 2005 |
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or |
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
from to . |
Commission File Number: 0-17017
Dell Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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74-2487834 |
(State or other jurisdiction
of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
One Dell Way
Round Rock, Texas 78682
(Address of Principal Executive Offices) (Zip Code)
(512) 338-4400
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes
þ No
As of the close of business on May 31, 2005,
2,421,082,061 shares of common stock, par value
$.01 per share, were outstanding.
INDEX
1
PART I FINANCIAL INFORMATION
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ITEM 1. |
Financial Statements |
DELL INC.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions; unaudited)
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April 29, | |
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January 28, | |
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2005 | |
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2005 | |
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ASSETS |
Current assets:
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Cash and cash equivalents
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$ |
5,874 |
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$ |
4,747 |
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Short-term investments
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3,967 |
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5,060 |
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Accounts receivable, net
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4,289 |
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4,414 |
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Inventories
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483 |
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459 |
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Other
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2,439 |
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2,217 |
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Total current assets
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17,052 |
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16,897 |
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Property, plant and equipment, net
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1,741 |
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1,691 |
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Investments
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3,574 |
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4,319 |
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Other non-current assets
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320 |
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308 |
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Total assets
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$ |
22,687 |
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$ |
23,215 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
Current liabilities:
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Accounts payable
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$ |
9,057 |
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$ |
8,895 |
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Accrued and other
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5,332 |
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5,241 |
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Total current liabilities
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14,389 |
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14,136 |
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Long-term debt
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504 |
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505 |
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Other non-current liabilities
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2,170 |
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2,089 |
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Total liabilities
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17,063 |
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16,730 |
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Stockholders equity:
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Preferred stock and capital in excess of $.01 par value;
shares issued and outstanding: none
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Common stock and capital in excess of $.01 par value;
shares authorized: 7,000; shares issued: 2,776 and 2,769,
respectively
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8,400 |
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8,195 |
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Treasury stock, at cost: 334 and 284 shares, respectively
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(12,758 |
) |
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(10,758 |
) |
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Retained earnings
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10,108 |
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9,174 |
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Other comprehensive loss
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(84 |
) |
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(82 |
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Other
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(42 |
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(44 |
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Total stockholders equity
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5,624 |
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6,485 |
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Total liabilities and stockholders equity
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$ |
22,687 |
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$ |
23,215 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
DELL INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts; unaudited)
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Three Months Ended | |
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April 29, | |
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April 30, | |
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2005 | |
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2004 | |
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Revenue
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$ |
13,386 |
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$ |
11,540 |
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Cost of revenue
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10,895 |
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9,467 |
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Gross margin
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2,491 |
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2,073 |
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Operating expenses:
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Selling, general and administrative
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1,207 |
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991 |
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Research, development and engineering
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110 |
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116 |
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Total operating expenses
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1,317 |
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1,107 |
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Operating income
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1,174 |
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966 |
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Investment and other income, net
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59 |
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49 |
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Income before income taxes
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1,233 |
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1,015 |
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Income tax provision
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299 |
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284 |
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Net income
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$ |
934 |
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$ |
731 |
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Earnings per common share:
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Basic
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$ |
0.38 |
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$ |
0.29 |
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Diluted
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$ |
0.37 |
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$ |
0.28 |
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Weighted average shares outstanding:
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Basic
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2,456 |
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2,539 |
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Diluted
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2,515 |
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2,593 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
DELL INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions; unaudited)
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Three Months Ended | |
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April 29, | |
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April 30, | |
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2005 | |
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2004 | |
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Cash flows from operating activities:
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Net income
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$ |
934 |
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$ |
731 |
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation and amortization
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91 |
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82 |
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Tax benefits from employee stock plans
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32 |
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25 |
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Effects of exchange rate changes on monetary assets and
liabilities denominated in foreign currencies
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(80 |
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(114 |
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Other
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18 |
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2 |
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Changes in:
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Operating working capital
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103 |
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81 |
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Non-current assets and liabilities
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92 |
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195 |
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Net cash provided by operating activities
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1,190 |
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1,002 |
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Cash flows from investing activities:
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Investments:
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Purchases
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(869 |
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(3,505 |
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Maturities and sales
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2,726 |
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3,264 |
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Capital expenditures
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(143 |
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(82 |
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Net cash provided by (used in) investing activities
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1,714 |
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(323 |
) |
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Cash flows from financing activities:
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Repurchase of common stock
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(2,000 |
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(1,131 |
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Issuance of common stock under employee plans and other
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161 |
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114 |
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Net cash used in financing activities
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(1,839 |
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(1,017 |
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Effect of exchange rate changes on cash and cash equivalents
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62 |
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96 |
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Net increase (decrease) in cash and cash equivalents
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1,127 |
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(242 |
) |
Cash and cash equivalents at beginning of period
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4,747 |
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4,317 |
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Cash and cash equivalents at end of period
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$ |
5,874 |
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$ |
4,075 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
DELL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 1 |
BASIS OF PRESENTATION |
The accompanying unaudited condensed consolidated financial
statements of Dell Inc. (Dell) should be read in
conjunction with the consolidated financial statements and notes
thereto filed with the U.S. Securities and Exchange
Commission (SEC) in Dells Annual Report on
Form 10-K for the fiscal year ended January 28, 2005.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America
(GAAP). In the opinion of management, the
accompanying unaudited condensed consolidated financial
statements reflect all adjustments of a normal recurring nature
considered necessary to present fairly the financial position of
Dell and its consolidated subsidiaries as of April 29, 2005
and January 28, 2005; and the results of its operations and
its cash flows for the three month periods ended April 29,
2005 and April 30, 2004.
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April 29, | |
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January 28, | |
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2005 | |
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2005 | |
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(in millions) | |
Inventories:
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Production materials
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$ |
266 |
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$ |
228 |
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Work-in-process
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77 |
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58 |
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Finished goods
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140 |
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173 |
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$ |
483 |
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$ |
459 |
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NOTE 3 EARNINGS PER COMMON SHARE AND PRO
FORMA EFFECTS OF STOCK-BASED COMPENSATION
Earnings Per Common Share Basic earnings per
share is based on the weighted effect of all common shares
issued and outstanding, and is calculated by dividing net income
by the weighted average shares outstanding during the period.
Diluted earnings per share is calculated by dividing net income
by the weighted average number of common shares used in the
basic earnings per share calculation plus the number of common
shares that would be issued assuming exercise or conversion of
all potentially dilutive common shares outstanding.
Dell excludes equity instruments from the calculation of diluted
weighted average shares outstanding if the effect of including
such instruments is antidilutive to earnings per share.
Accordingly, certain employee stock options have been excluded
from the calculation of diluted weighted average shares totaling
72 million and 133 million shares for the first
quarter of fiscal 2006 and 2005, respectively.
5
DELL INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table sets forth the computation of basic and
diluted earnings per share for the three month periods ended
April 29, 2005 and April 30, 2004:
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Three Months Ended | |
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April 29, | |
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April 30, | |
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2005 | |
|
2004 | |
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(in millions, except | |
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per share amounts) | |
Numerator:
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Net income
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$ |
934 |
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$ |
731 |
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Denominator:
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Weighted average shares outstanding:
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|
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Basic
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2,456 |
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|
2,539 |
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Employee stock options and other
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59 |
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54 |
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Diluted
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2,515 |
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|
2,593 |
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Earnings per common share:
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Basic
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$ |
0.38 |
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$ |
0.29 |
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Diluted
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$ |
0.37 |
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$ |
0.28 |
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Pro Forma Effects of Stock-Based Compensation
Dell currently applies the recognition and measurement
principles of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations when accounting for
its stock-based compensation plans. Dell applies the disclosure
provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-based
Compensation, as amended by SFAS No. 148,
Accounting for Stock-based Compensation-Transition and
Disclosure, as if the fair-value method had been applied in
measuring compensation expense. Under APB Opinion No. 25,
when the exercise price of a fixed employee stock option equals
the market price of the underlying stock on the grant date, no
compensation expense is recognized. Under
SFAS No. 123, the value of each option is estimated on
the date of grant using the Black-Scholes option pricing model,
which was developed for use in estimating the value of freely
traded options.
6
DELL INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table sets forth the computation of basic and
diluted earnings per share for the three month periods ended
April 29, 2005 and April 30, 2004, and illustrates the
effect on net income and earnings per share as if Dell had
applied the fair value recognition provisions of
SFAS No. 123 to stock-based employee compensation. As
the relatively larger stock option awards granted in prior years
fully vest we expect that, over time, our stock-based
compensation expense will decline.
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Three Months Ended | |
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| |
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April 29, | |
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April 30, | |
|
|
2005 | |
|
2004 | |
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| |
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(in millions, except | |
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|
per share amounts) | |
Net income as reported
|
|
$ |
934 |
|
|
$ |
731 |
|
Deduct: Total stock-based employee compensation determined under
fair value method for all awards, net of related tax effects
|
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|
(213 |
) |
|
|
(202 |
) |
|
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Net income pro forma
|
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$ |
721 |
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$ |
529 |
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|
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|
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|
Earnings per common share:
|
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|
|
|
|
|
|
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|
Basic as reported
|
|
$ |
0.38 |
|
|
$ |
0.29 |
|
|
Basic pro forma
|
|
$ |
0.29 |
|
|
$ |
0.21 |
|
|
Diluted as reported
|
|
$ |
0.37 |
|
|
$ |
0.28 |
|
|
Diluted pro forma
|
|
$ |
0.29 |
|
|
$ |
0.21 |
|
|
|
NOTE 4 |
COMPREHENSIVE INCOME |
Dells comprehensive income is comprised of net income,
foreign currency translation adjustments, unrealized gains and
losses on derivative financial instruments related to foreign
currency hedging, and unrealized gains and losses on marketable
securities classified as available-for-sale. Comprehensive
income for the three month periods ended April 29, 2005 and
April 30, 2004, was as follows:
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Three Months Ended | |
|
|
| |
|
|
April 29, | |
|
April 30, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(in millions) | |
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
934 |
|
|
$ |
731 |
|
|
Unrealized gains on foreign currency hedging instruments, net of
taxes
|
|
|
8 |
|
|
|
114 |
|
|
Unrealized losses on marketable securities, net of taxes
|
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|
(11 |
) |
|
|
(33 |
) |
|
Foreign currency translations
|
|
|
1 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
Total comprehensive income, net of taxes
|
|
$ |
932 |
|
|
$ |
809 |
|
|
|
|
|
|
|
|
7
DELL INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 5 |
AGGREGATE DEFERRED REVENUE AND WARRANTY LIABILITY |
Dell records warranty liabilities at the time of sale for the
estimated costs that may be incurred under its basic limited
warranty. Revenue from extended warranty and service contracts,
for which Dell is obligated to perform, is recorded as deferred
revenue and subsequently recognized over the term of the
contract or when the service is completed. Changes in
Dells aggregate deferred revenue and warranty liability
are presented in the following table:
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|
Three Months Ended | |
|
|
| |
|
|
April 29, | |
|
April 30, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(in millions) | |
Aggregate deferred revenue and warranty liability at beginning
of period
|
|
$ |
3,594 |
|
|
$ |
2,694 |
|
Revenue deferred and costs accrued for new warranties
|
|
|
933 |
|
|
|
683 |
|
Service obligations honored
|
|
|
(339 |
) |
|
|
(275 |
) |
Amortization of deferred revenue
|
|
|
(427 |
) |
|
|
(288 |
) |
|
|
|
|
|
|
|
Aggregate deferred revenue and warranty liability at end of
period
|
|
$ |
3,761 |
|
|
$ |
2,814 |
|
|
|
|
|
|
|
|
|
|
NOTE 6 |
DELL FINANCIAL SERVICES |
Dell is currently a partner in Dell Financial Services L.P.
(DFS), a joint venture with CIT Group Inc.
(CIT). In general, DFS facilitates customer
financing transactions through either loan or lease financing.
Dell recognized revenue from the sale of products pursuant to
loan and lease financing transactions of $1.5 billion and
$1.3 billion during the three month periods ended
April 29, 2005 and April 30, 2004, respectively.
Dell currently owns a 70% equity interest in DFS. Dell began
consolidating DFSs financial results due to the adoption
of Financial Accounting Standards Board (FASB)
Interpretations No. 46R (FIN 46R). Based
on the guidance in FIN 46R, Dell concluded that DFS is a
variable interest entity and Dell is the primary beneficiary of
DFSs expected cash flows. CITs equity ownership in
the net assets of DFS was $13 million as of April 29,
2005 and January 28, 2005, which is recorded as minority
interest and included in other non-current liabilities on
Dells condensed consolidated statement of financial
position.
Dell has the option to purchase CITs 30% interest in DFS
in February 2008 for a purchase price ranging from
$100 million to $345 million, depending on DFSs
profitability. If Dell does not exercise this purchase option,
Dell is obligated to purchase CITs 30% interest upon the
occurrence of certain termination events, or expiration of the
joint venture on January 29, 2010 for a purchase price
ranging from $100 million to $345 million.
DFS maintains credit facilities with CIT, which provide DFS with
a funding capacity of up to $1.0 billion. As of
April 29, 2005 and January 28, 2005, outstanding
advances under these facilities totaled $152 million and
$158 million, respectively, and are included in other
current and non-current liabilities on Dells condensed
consolidated statement of financial position. Dell is dependent
upon DFS to provide financing for a significant number of
customers who elect to finance Dell products, and DFS is
dependent upon CIT to access the capital markets to provide
funding for these transactions. If CIT were unable to access the
capital markets, Dell would be required to find additional
alternative sources of financing for its customers or
self-finance these activities.
During the fourth quarter of fiscal 2005, Dell began selling
certain loan and lease finance receivables to an unconsolidated
qualifying special purpose entity that is wholly owned by Dell.
The qualifying special purpose entity is a separate legal entity
with assets and liabilities separate from those of Dell. The
qualifying special purpose entity has entered into a financing
arrangement with a multiseller conduit that in turn issues
asset-backed debt securities to the capital markets. Transfers
of financing receivables are recorded in accordance with the
provisions of SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities. The sale of these loan and lease financing
receivables did not have a material impact on Dells
consolidated financial position, results of operations, or cash
flows for the first quarter of fiscal 2006.
8
DELL INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 7 |
SEGMENT INFORMATION |
Dell conducts operations worldwide and is managed in three
geographic segments: the Americas, Europe, and Asia
Pacific-Japan regions. The Americas region, which is based in
Round Rock, Texas, covers the U.S., Canada, and Latin America.
Within the Americas, Dell is further segmented into Business and
U.S. Consumer. The Americas Business segment includes sales
to corporate, government, healthcare, education, and small and
medium business customers, while the U.S. Consumer segment
includes sales primarily to individual consumers. The European
region, which is based in Bracknell, England, covers Europe, the
Middle East, and Africa. The Asia Pacific-Japan region covers
the Pacific Rim, including Australia and New Zealand, and is
based in Singapore.
The accounting policies of Dells reportable segments are
the same as those described in the summary of significant
accounting policies in its Annual Report on Form 10-K for
the fiscal year ended January 28, 2005. Dell allocates
resources to and evaluates the performance of its segments based
on operating income. Corporate expenses are included in
Dells measure of segment operating income for management
reporting purposes. The table below presents information about
Dells reportable segments for the three month periods
ended April 29, 2005 and April 30, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
| |
|
|
April 29, | |
|
April 30, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(in millions) | |
Net revenue:
|
|
|
|
|
|
|
|
|
|
Americas:
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
$ |
6,616 |
|
|
$ |
5,758 |
|
|
|
U.S. Consumer
|
|
|
1,945 |
|
|
|
1,738 |
|
|
|
|
|
|
|
|
|
|
|
Total Americas
|
|
|
8,561 |
|
|
|
7,496 |
|
|
Europe
|
|
|
3,171 |
|
|
|
2,653 |
|
|
Asia Pacific-Japan
|
|
|
1,654 |
|
|
|
1,391 |
|
|
|
|
|
|
|
|
Total net revenue
|
|
$ |
13,386 |
|
|
$ |
11,540 |
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
Americas:
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
$ |
660 |
|
|
$ |
565 |
|
|
|
U.S. Consumer
|
|
|
145 |
|
|
|
96 |
|
|
|
|
|
|
|
|
|
|
|
Total Americas
|
|
|
805 |
|
|
|
661 |
|
|
Europe
|
|
|
236 |
|
|
|
198 |
|
|
Asia Pacific-Japan
|
|
|
133 |
|
|
|
107 |
|
|
|
|
|
|
|
|
Total operating income
|
|
$ |
1,174 |
|
|
$ |
966 |
|
|
|
|
|
|
|
|
9
DELL INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 8 |
SUBSEQUENT EVENT |
On October 22, 2004, the American Jobs Creation Act of 2004
(the Act) was signed into law. Among other items,
the Act creates a temporary incentive for
U.S. multinationals to repatriate accumulated income earned
outside the U.S. at a tax rate of 5.25%, versus the
U.S. federal statutory rate of 35%. In the fourth quarter
of fiscal 2005 Dell determined that it would repatriate
$4.1 billion in foreign earnings. Accordingly, Dell
recognized a tax repatriation charge of $280 million in
accordance with SFAS No. 109, Accounting for Income
Taxes. This tax charge included an amount relating to a
drafting oversight that Congressional leaders expected to
correct in calendar year 2005. On May 10, 2005, the
Department of Treasury issued further guidance that addressed
the drafting oversight. Dell is evaluating the impact of this
regulatory guidance to determine the amount of the repatriation
charge reduction to be recognized in the second quarter of
fiscal 2006. The repatriation is required to be completed by the
end of fiscal 2006. The condensed consolidated statement of
income for the three month period ended April 29, 2005 does
not include any provision for income taxes on the cumulative
balance of Dells unremitted foreign earnings.
10
|
|
ITEM 2. |
Managements Discussion and Analysis of Financial
Condition and Results of Operations |
Statements in this report that relate to future results and
events are forward-looking statements based on Dells
current expectations. Actual results in future periods could
differ materially from those projected in those forward-looking
statements because of a number of risks and uncertainties. For a
discussion of factors affecting Dells business and
prospects, see Item 1
Business Factors Affecting Dells Business and
Prospects in Dells Annual Report on Form 10-K
for the fiscal year ended January 28, 2005.
All percentage amounts and ratios were calculated using the
underlying data in thousands. Unless otherwise noted, all
references to industry share and total industry growth data are
for personal computers (including desktops, notebooks, and x86
servers), and are based on information provided by IDC Worldwide
PC Tracker, May 31, 2005. Share data is for the calendar
quarter, and all Dell growth rates are on a fiscal
year-over-year basis. Unless otherwise noted, all references to
time periods refer to Dell fiscal periods.
Executive Overview
Our Company
We are a leading global diversified technology provider focused
on providing custom solutions and the best customer experience
in the industry. Through our direct business model, we design,
develop, manufacture, market, sell, and support a broad range of
information technology systems and services that are uniquely
designed to satisfy specific customer requirements. Our direct
model begins and ends with our customers. We believe in entering
the market quickly with new and relevant technology to meet
changing customer needs, building each system to order,
providing expert services tailored to differing customer needs,
and maintaining low levels of inventory and capital investment.
The unique strengths of our direct model facilitate our
consistent delivery of profitability and strong performances
across our business segments.
Industry
Our operating environment remains competitive and challenging.
Recent economic reports indicate economic growth in both the
United States and worldwide may be recovering at a moderate
pace. During the first quarter of fiscal 2006 (three month
period ended April 29, 2005) we continued to grow faster
than the rest of the industry in all global regions and customer
and product categories. Throughout the last quarter, we
delivered strong operating results and strengthened our
financial position.
Quarterly Performance Highlights
|
|
|
Share position |
|
We expanded our share position in Worldwide PC
shipments to a company record of 18.5% and grew faster than the
overall market. |
|
Revenue |
|
Revenue increased 16% year-over-year to
$13.4 billion, with unit shipments up 20% year-over-year. |
|
Operating Income |
|
Operating income of $1,174 million, or 8.8%
percent of revenue, up from $966 million, or 8.4% percent
of revenue, in the first quarter of fiscal 2005. |
|
Earnings |
|
Earnings per share increased 32% to $0.37 per
share from $0.28 per share in the first quarter of fiscal
2005. |
|
Share Repurchases |
|
We spent $2.0 billion to
repurchase 50 million shares in the quarter. |
11
Future Outlook
Dell will continue to invest resources to support its worldwide
expansion efforts, while focusing on the faster-growing and more
profitable areas of the industry. We are building our
infrastructure and new businesses, by adding additional call
centers and increasing production capacity. We expect to fund
these investments with our strong operating cash flows. Over
time, we anticipate our international revenues will comprise an
increasing percentage of the consolidated total.
Results of Operations
The following table summarizes the results of Dells
operations for the three month periods ended April 29, 2005
and April 30, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
| |
|
|
April 29, 2005 | |
|
April 30, 2004 | |
|
% Change | |
|
|
| |
|
| |
|
| |
|
|
|
|
% of | |
|
|
|
% of | |
|
|
|
|
Dollars | |
|
Revenue | |
|
Dollars | |
|
Revenue | |
|
|
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
(in millions, except per share amounts and percentages) | |
Revenue
|
|
$ |
13,386 |
|
|
|
100.0 |
% |
|
$ |
11,540 |
|
|
|
100.0 |
% |
|
|
16 |
% |
Gross margin
|
|
|
2,491 |
|
|
|
18.6 |
% |
|
|
2,073 |
|
|
|
18.0 |
% |
|
|
20 |
% |
Operating expenses
|
|
|
1,317 |
|
|
|
9.8 |
% |
|
|
1,107 |
|
|
|
9.6 |
% |
|
|
19 |
% |
Operating income
|
|
|
1,174 |
|
|
|
8.8 |
% |
|
|
966 |
|
|
|
8.4 |
% |
|
|
22 |
% |
Net income
|
|
|
934 |
|
|
|
7.0 |
% |
|
|
731 |
|
|
|
6.3 |
% |
|
|
28 |
% |
Earnings per share diluted
|
|
|
0.37 |
|
|
|
N/A |
|
|
|
0.28 |
|
|
|
N/A |
|
|
|
32 |
% |
Consolidated Revenue
We grew revenue across all regions and product categories.
Revenue reached $13.4 billion for the first quarter of
fiscal 2006, an increase of $1.8 billion or 16% from the
same quarter last year. We produced 21% year-over-year growth in
our international revenue. During the quarter, revenue outside
the U.S. comprised 42% of consolidated revenue compared to
40% for the same period last year.
Revenues by Segment
Dell conducts operations worldwide and is managed in three
geographic segments: the Americas, Europe, and Asia
Pacific-Japan regions. The Americas region covers the U.S.,
Canada, and Latin America. Within the Americas, Dell is further
divided into Business and U.S. Consumer. The Americas
Business segment includes sales to corporate, government,
healthcare, education, and small and medium business customers,
while the U.S. Consumer segment includes sales primarily to
individual consumers. The Europe region covers Europe, the
Middle East, and Africa (EMEA). The Asia
Pacific-Japan (APJ) region covers the Pacific Rim,
including Australia and New Zealand.
12
The following table summarizes Dells revenue by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
| |
|
|
April 29, 2005 | |
|
April 30, 2004 | |
|
|
| |
|
| |
|
|
|
|
% of | |
|
|
|
% of | |
|
|
Dollars | |
|
Revenue | |
|
Dollars | |
|
Revenue | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except percentages) | |
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
$ |
6,616 |
|
|
|
49% |
|
|
$ |
5,758 |
|
|
|
50% |
|
|
|
U.S. Consumer
|
|
|
1,945 |
|
|
|
15% |
|
|
|
1,738 |
|
|
|
15% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Americas
|
|
|
8,561 |
|
|
|
64% |
|
|
|
7,496 |
|
|
|
65% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
3,171 |
|
|
|
24% |
|
|
|
2,653 |
|
|
|
23% |
|
|
APJ
|
|
|
1,654 |
|
|
|
12% |
|
|
|
1,391 |
|
|
|
12% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$ |
13,386 |
|
|
|
100% |
|
|
$ |
11,540 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Americas revenue grew 14% from
a year ago. This increase is comprised of 15% growth in our
Americas Business segment and 12% growth in our
U.S. Consumer segment. Americas International produced
strong revenue growth of 32% compared to the prior year,
including 28% growth in Canada. Improved notebook demand led
U.S. Consumers revenue increase as consumer trends
continue to shift toward mobile computing. |
|
|
|
|
|
Business Strong performance and growth in
small and medium business, Americas International and in our
education business, drove the majority of the increase in
revenue year-over-year. Our federal business experienced weak
demand, resulting in a decline in revenue from a year ago. We
continue to focus on product expansion, resulting in higher
growth in our storage, server, printing and service product
categories. |
|
|
|
U.S. Consumer Consumer demand remains
challenging. We continued to take share in the market as demand
for mobility products remained strong contributing to our
U.S. Consumer revenue increase. Desktop revenues continued
to be a significant portion of the overall consumer business
during the first quarter fiscal 2006. We saw strong growth in
our printers and consumables, as we continued to focus on
growing these products. |
|
|
|
EMEA We delivered strong profitable growth
through disciplined execution and increased revenues 20%
year-over-year. Over half of the year-over-year revenue growth
came from the United Kingdom, France, Germany and the
Netherlands. Mobility and desktops led year-over-year revenue
growth in EMEA. In addition, our focus on enterprise performance
generated strong server and storage revenue growth. |
|
|
APJ Asia Pacific-Japan revenues increased 19%
from a year ago. Over half of the segments revenue growth
came from Japan and China. Australia and New Zealand produced
year-over-year growth at a higher rate than the overall region.
Growth was primarily driven by demand increases in mobility,
enhanced services, and software and peripherals. |
13
Revenues by Product and Services Categories
Beginning this quarter we are providing new supplemental revenue
reporting by product and services categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
| |
|
|
April 29, 2005 | |
|
April 30, 2004 | |
|
|
| |
|
| |
|
|
|
|
% of | |
|
|
|
% of | |
|
|
Dollars | |
|
Revenue | |
|
Dollars | |
|
Revenue | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in billions, except percentages) | |
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Desktop PCs
|
|
$ |
5.3 |
|
|
|
40% |
|
|
$ |
5.0 |
|
|
|
44% |
|
|
Mobility
|
|
|
3.3 |
|
|
|
24% |
|
|
|
2.7 |
|
|
|
23% |
|
|
Software and Peripherals
|
|
|
2.0 |
|
|
|
15% |
|
|
|
1.5 |
|
|
|
13% |
|
|
Servers and Networking
|
|
|
1.3 |
|
|
|
10% |
|
|
|
1.2 |
|
|
|
10% |
|
|
Enhanced Services
|
|
|
1.1 |
|
|
|
8% |
|
|
|
.8 |
|
|
|
7% |
|
|
Storage
|
|
|
.4 |
|
|
|
3% |
|
|
|
.3 |
|
|
|
3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$ |
13.4 |
|
|
|
100% |
|
|
$ |
11.5 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Desktop PCs Desktop PC revenue, consisting of
OptiPlextm
and
Dimensiontm
desktop computer systems, and Dells
Precisiontm
desktop workstations, grew 6% on unit growth of 14%
year-over-year. While desktop sales continue to grow, business
and consumer demand is increasingly shifting toward mobility
products. |
|
|
Mobility Revenue from mobility products,
consisting of Dell
Latitudetm
and
Inspirontm
notebooks, Dell
Precisiontm
mobile workstations, Dell
DJtm,
and Dell
Aximtm,
grew by 22% on unit growth of 38% year-over-year. As notebooks
become more affordable and wireless products become
standardized, demand for our mobility products continues to
accelerate. |
|
|
Software and Peripherals Software and
peripherals revenue, consisting of Dell-branded printers,
monitors (not sold with systems), plasma and LCD televisions and
projectors, and a multitude of competitively priced third-party
printers, software, digital cameras, projectors, power adapters
and scanners, grew 29% year-over-year. Through focused sales
efforts and competitively priced products, we generated
increased demand across all S&P products, including our
newer TV and printer products. Our Dell-branded printer units
grew more than 75% from a year ago, with over 1.4 million
units shipped during the quarter. |
|
|
Servers and Networking Servers and networking
revenue, consisting of our standards-based
PowerEdgetm
line of network hardware and
PowerConnecttm
networking solutions, grew 12% on unit growth of 25%
year-over-year. We have aggressively priced our server products
as they facilitate sales of storage products and higher margin
enhanced services. Servers and networking remain a strategic
focus area. |
|
|
Enhanced Services Enhanced Services consists
of a wide range of services including professional consulting,
custom hardware and software integration, extended warranties,
leasing and asset management, network installation and support
as well as onsite services. Enhanced Services revenue increased
30% year-over-year, including nearly 50% growth outside the
Americas segment. |
|
|
Storage Storage revenue, consisting of
Dell C EMC and Dell
PowerVaulttm
storage devices increased 49% year-over-year. We realized
substantial growth in both the Americas and EMEA where revenue
grew 47% and 62%, respectively. We announced a high performance
Dell C EMC network attached storage gateway and we began
shipping the AX100i with iSCSI during the first quarter of
fiscal 2006. |
14
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
| |
|
|
April 29, 2005 | |
|
April 30, 2004 | |
|
|
| |
|
| |
|
|
|
|
% of | |
|
|
|
% of | |
|
|
Dollars | |
|
Revenue | |
|
Dollars | |
|
Revenue | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except percentages) | |
Revenue
|
|
$ |
13,386 |
|
|
|
100.0 |
% |
|
$ |
11,540 |
|
|
|
100.0 |
% |
Gross margin
|
|
|
2,491 |
|
|
|
18.6 |
% |
|
|
2,073 |
|
|
|
18.0 |
% |
Despite a competitive pricing environment, Dells gross
margin as a percentage of revenue increased to 18.6% during the
first quarter of fiscal 2006, compared to 18.0% during the first
quarter of fiscal 2005. Our year-over-year improvement in gross
margin is due to favorable pricing on certain commodity
components, higher revenue to leverage fixed production costs
and a favorable shift in product mix.
During the first quarter of fiscal 2006, we utilized component
cost declines to achieve profitable growth as the cost
environment improved. We expect the component cost environment
to continue to be favorable during the second quarter of fiscal
2006 and will continue to adjust our pricing as necessary in
response to future competitive and economic conditions. The
strength of our direct-to-customer business model, as well as
our strong liquidity position, position us to pursue share gains
in any business climate.
As part of our focus on improving margins, we remain committed
to reducing costs in three primary areas: manufacturing costs,
warranty costs, and structural or design costs. Cost savings
initiatives include providing certain customer technical support
and back-office functions from cost-effective locations as well
as driving more efficient processes and tools globally. We
routinely pass cost reductions to our customers to improve
customer value and increase share.
Operating Expenses
The following table summarizes Dells operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
| |
|
|
April 29, 2005 | |
|
April 30, 2004 | |
|
|
| |
|
| |
|
|
|
|
% of | |
|
|
|
% of | |
|
|
Dollars | |
|
Revenue | |
|
Dollars | |
|
Revenue | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except percentages) | |
Selling, general and administrative
|
|
$ |
1,207 |
|
|
|
9.0% |
|
|
$ |
991 |
|
|
|
8.6% |
|
Research, development and engineering
|
|
|
110 |
|
|
|
0.8% |
|
|
|
116 |
|
|
|
1.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$ |
1,317 |
|
|
|
9.8% |
|
|
$ |
1,107 |
|
|
|
9.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative During
the three month period ended April 29, 2005, selling,
general and administrative expenses increased 22%, to
$1.2 billion compared to $991 million in the same
quarter of fiscal 2005. We plan to continue investing in people,
systems and infrastructure to support global expansion, as well
as, increased marketing communications costs to stimulate
customer sales.
Research, development and engineering During
the quarter, research, development and engineering expenses
decreased slightly from the prior year. We continue to
efficiently manage our R&D spending by targeting those
innovations and products most valuable to our customers, and by
relying upon the capabilities of our strategic partners. We have
obtained 1,160 U.S. patents and have applied for 767
additional U.S. patents as of April 29, 2005.
15
Investment and Other Income, net
Investment and other income, net, primarily includes interest
income and expense, gains and losses from the sale of
investments, foreign exchange transaction gains and losses, and
CITs 30% share of DFSs net income. Investment and
other income, net, increased from $49 million for the three
month period ended April 30, 2004 to $59 million for
the three month period ended April 29, 2005. This increase
is primarily due to an increase in investment income earned on
higher average balances of cash and investments, as well as
higher interest rates during the three month periods of fiscal
2006 compared to fiscal 2005.
Income Taxes
Differences between the effective tax rate and the
U.S. federal statutory rate of 35.0% principally result
from our geographical distribution of taxable income and
differences between the book and tax treatment of certain items.
Our effective tax rate was 24.25% for the first quarter of
fiscal 2006, compared to 28% for the same quarter in the prior
fiscal year. The decline in our effective tax rate is due to a
higher portion of operating profits being generated in lower
foreign tax jurisdictions during the first quarter of fiscal
2006, as compared to a year ago.
Dells fiscal 2005 effective tax rate included a tax
repatriation charge of $280 million pursuant to a favorable
tax incentive provided by the American Jobs Creation Act signed
into law on October 22, 2004. This tax charge included an
amount relating to a drafting oversight that Congressional
leaders indicated would be corrected during calendar year 2005.
On May 10, 2005, the Department of Treasury issued further
guidance that addressed the drafting oversight. We are
evaluating the impact of this regulatory guidance to determine
the amount of the repatriation charge reduction to be recognized
in the second quarter of fiscal 2006. The repatriation is
required to be completed by the end of fiscal 2006.
Liquidity and Capital Commitments
Liquidity
We ended the first quarter of fiscal 2006 with
$13.4 billion in cash, cash equivalents, and investments, a
year-over-year increase of $1.5 billion from April 30,
2004. We invest a large portion of our available cash in highly
liquid and highly rated government, agency, and corporate debt
securities of varying maturities at the date of acquisition. Our
investment policy is to manage our investment portfolio to
preserve principal and liquidity while maximizing the return
through the full investment of available funds. The following
table summarizes the results of Dells statement of cash
flows for the three month periods ended April 29, 2005 and
April 30, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
| |
|
|
April 29, | |
|
April 30, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(in millions) | |
Net cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$ |
1,190 |
|
|
$ |
1,002 |
|
|
Investing activities
|
|
|
1,714 |
|
|
|
(323 |
) |
|
Financing activities
|
|
|
(1,839 |
) |
|
|
(1,017 |
) |
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
62 |
|
|
|
96 |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$ |
1,127 |
|
|
$ |
(242 |
) |
|
|
|
|
|
|
|
Operating Activities Cash provided by
operating activities during the three month period ended
April 29, 2005 was $1.2 billion, compared to
$1.0 billion for the same period last year. Cash flows from
operating activities resulted primarily from net income during
both periods, which represents our principal source of cash. The
year-over-year increase in operating cash flows during the first
quarter of fiscal 2006 was primarily driven by an increase in
net income.
16
Dells direct model allows us to maintain an efficient cash
conversion cycle, which is among the leaders in our industry.
The following table presents the components of our cash
conversion cycle as of April 29, 2005 and January 28,
2005:
|
|
|
|
|
|
|
|
|
|
|
April 29, | |
|
January 28, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
Days of sales outstanding(a)
|
|
|
32 |
|
|
|
32 |
|
Days of supply in inventory
|
|
|
4 |
|
|
|
4 |
|
Days in accounts payable
|
|
|
(75 |
) |
|
|
(73 |
) |
|
|
|
|
|
|
|
Cash conversion cycle
|
|
|
(39 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
(a) |
|
Days of sales outstanding include the effect of product costs
related to customer shipments not yet recognized as revenue that
are classified in other current assets. For both periods ended
April 29, 2005 and January 28, 2005, days of sales in
accounts receivable and days of customer shipments not yet
recognized were 29 and 3 days, respectively. |
Days in accounts payable reached a record 75 days at the
end of the period contributing to the negative 39 day cash
conversion cycle. However, we expect our cash conversion cycle
days to trend down to more historical levels in future periods.
We defer the cost of revenue associated with customer shipments
not yet recognized as revenue until they are delivered. These
deferred costs are included in our reported days of sales
outstanding because we believe it presents a more accurate
presentation of our days of sales outstanding and cash
conversion cycle. These deferred costs are recorded in other
current assets in our unaudited condensed consolidated statement
of financial position and totaled $414 million and
$430 million as of April 29, 2005 and January 28,
2005, respectively.
Investing Activities Cash provided by
investing activities for the three month period ended
April 29, 2005 was $1.7 billion, compared to cash used
in investing activities of $323 million for the same period
last year. Cash provided by and used in investing activities
principally consists of net maturities and sales or purchases of
investments and capital expenditures for property, plant and
equipment. During the three month period ended April 29,
2005, Dell re-invested a lower amount of proceeds from
maturities and sales of investments to fund share repurchases.
Financing Activities Cash used in financing
activities during the three month period ended April 29,
2005 was $1.8 billion, compared to $1.0 billion during
the same period last year. Financing activities primarily
consist of the repurchase of Dell common stock, partially offset
by proceeds from the issuance of common stock under employee
stock plans and other items. Dell repurchased 50 million
shares during the three month period ended April 29, 2005,
compared to 34 million shares in the same period last year.
The year-over-year increase in cash used in financing activities
is due primarily to the increase in share repurchases.
Dell has typically generated annual cash flows from operating
activities in amounts greater than net income, driven mainly by
its efficient cash conversion cycle, the growth in accrued
service liabilities and noncash depreciation and amortization
expenses. Management currently believes that Dells fiscal
2006 cash flows from operations will exceed net income and be
more than sufficient to support Dells operations and
capital requirements. Dell currently anticipates that it will
continue to utilize its strong liquidity and cash flows from
operations to repurchase its common stock, make capital
investments, and fund DFSs operations.
Capital Commitments
Share Repurchases Dell has a share repurchase
program that authorizes the purchase of common stock to return
cash to stockholders and manage dilution resulting from shares
issued under Dells employee stock plans. On March 3,
2005, Dells Board of Directors amended the plan to
increase the number of authorized shares available for
repurchase by 250 million to 1.5 billion, and the
aggregate dollar cost threshold by $10 billion to
$30 billion. Dell expects to repurchase shares of common
stock through a systematic program of open market purchases.
During the three month period ended April 29, 2005, Dell
repurchased 50 million shares at an aggregate cost of
$2.0 billion; see Part II
Item 2 Unregistered Sales of Equity Securities
and Use of Proceeds. Dell evaluates its share repurchase
program quarterly and expects share repurchases during the
second quarter of fiscal 2006 to be at least $1.4 billion.
17
Capital Expenditures Dell spent approximately
$143 million on property, plant, and equipment during the
three month period ended April 29, 2005. Product demand and
mix, as well as ongoing investments in operating and information
technology infrastructure, influence the level and
prioritization of Dells capital expenditures. Capital
expenditures for all of fiscal 2006 are currently expected to be
approximately $800 million.
Restricted Cash Pursuant to the joint venture
agreement between DFS and CIT, DFS is required to maintain
certain escrow cash accounts that are held as recourse reserves
for credit losses, performance fee deposits related to
Dells private label credit card and deferred servicing
revenue. Due to the consolidation of DFS during the third
quarter of fiscal 2004, $468 million and $438 million
in restricted cash is included in other current assets as of
April 29, 2005 and January 28, 2005, respectively.
Contractual Cash Obligations
Operating Leases Dell leases property and
equipment, manufacturing facilities, and office space under
non-cancelable leases. Certain of these leases obligate Dell to
pay taxes, maintenance, and repair costs. Our future operating
lease commitments increased from $257 million at
January 28, 2005 to $270 million at April 29,
2005.
Purchase Obligations Our purchase obligations
increased from $107 million at January 28, 2005 to
approximately $226 million at April 29, 2005,
primarily due to commitments entered into in connection with the
construction of our new North Carolina manufacturing facility.
New Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123
(revised 2004) (SFAS No. 123(R)),
Share-Based Payment, which replaced
SFAS No. 123, Accounting for Stock-Based
Compensation, and superseded Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees. SFAS No. 123(R) requires all
share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements
based on their fair values. The pro forma disclosures previously
permitted under SFAS No. 123 will no longer be an
alternative to financial statement recognition. Under
SFAS No. 123(R), Dell must determine the appropriate
fair value method to be used for valuing share-based payments,
the amortization method of compensation cost and the transition
method to be used at the date of adoption.
In April 2005, the Securities Exchange Commission
(SEC) amended Rule 401(a) of
Regulation S-X to delay the effective date for compliance
with SFAS No. 123(R). Based on the amended rule, Dell
is required to adopt SFAS No. 123(R) effective the
beginning of its fiscal year 2007. Dell is evaluating the
requirements of SFAS No. 123(R) and expects that the
adoption of SFAS No. 123(R) will have a material
effect on its results of operations and earnings per share. Dell
has not yet determined its method of adoption of
SFAS No. 123(R). See Footnote 3, Earnings
Per Common Share and Pro Forma Effects of Stock-Based
Compensation for the pro forma impact of
SFAS No. 123(R).
Factors Affecting Dells Business and Prospects
There are many factors that affect Dells business and the
results of its operations, some of which are beyond Dells
control. Actual results in future periods could differ
materially from those projected in Dells forward-looking
statements because of a number of risks and uncertainties,
including general economic, business and industry conditions;
the level and intensity of competition in the technology
industry and the pricing pressures that have resulted; local
economic and labor conditions, political instability, unexpected
regulatory changes, trade protection measures, changes in tax
laws; fluctuations in foreign currency exchange rates; the
ability to accurately predict product, customer and geographic
sales mix; the ability to timely and effectively manage periodic
product transitions; reliance on third-party suppliers for
product components, including dependence on several
single-source supplier relationships; the ability to effectively
manage operating costs; the level of demand for the products and
services Dell offers; the ability to manage inventory levels to
minimize excess inventory, declining inventory values and
obsolescence; and the effect of armed hostilities, terrorism,
natural disasters and public health issues on the global economy
generally, on the level of demand for Dells products and
services and on Dells ability to manage its supply and
delivery logistics in such an environment. For a discussion of
these and other factors affecting Dells business and
prospects, see Item 1
Business Factors Affecting Dells Business and
Prospects in Dells Annual Report on Form 10-K
for the fiscal year ended January 28, 2005.
18
|
|
ITEM 3. |
Quantitative and Qualitative Disclosures About Market
Risk |
For a description of Dells market risks, see
Item 7 Managements Discussion and
Analysis of Financial Condition and Results of
Operations Market Risk in Dells Annual
Report on Form 10-K for the fiscal year ended
January 28, 2005. Dells exposure to market risks has
not changed materially from the description in the Annual Report
on Form 10-K.
|
|
ITEM 4. |
Controls and Procedures |
Evaluation of Disclosure Controls and
Procedures Dells Chief Executive Officer
and Chief Financial Officer, after evaluating the effectiveness
of Dells disclosure controls and procedures (as defined in
Rule 13a-15(e) or 15d-15(e) under the Exchange Act) as of
the end of the period covered by this report, have concluded
that, based on the evaluation of these controls and procedures,
Dells disclosure controls and procedures were effective.
Changes in Internal Control Over Financial
Reporting Dells management, with the
participation of Dells Chief Executive Officer and Chief
Financial Officer, has evaluated whether any change in
Dells internal control over financial reporting occurred
during the first quarter of fiscal 2006. Based on that
evaluation, management concluded that there has been no change
in Dells internal control over financial reporting during
the first quarter of fiscal 2006 that has materially affected,
or is reasonably likely to materially affect, Dells
internal control over financial reporting.
19
PART II OTHER INFORMATION
|
|
ITEM 1. |
Legal Proceedings |
Dell is subject to various legal proceedings and claims arising
in the ordinary course of business. Dells management does
not expect that the outcome in any of these legal proceedings,
individually or collectively, will have a material adverse
effect on Dells financial condition, results of
operations, or cash flows.
|
|
ITEM 2. |
Unregistered Sales of Equity Securities and Use of
Proceeds |
Dell has a share repurchase program that authorizes the company
to purchase shares of common stock in order to both distribute
cash to stockholders and manage dilution resulting from shares
issued under Dells equity compensation plans. As of
April 29, 2005, Dells share repurchase program
authorized the purchase of up to 1.5 billion shares of
common stock at an aggregate cost not to exceed
$30 billion. The following are details of repurchases under
this program for the period covered by this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | |
|
Maximum | |
|
|
|
|
|
|
Number of | |
|
Number of | |
|
|
|
|
|
|
Shares | |
|
Shares that | |
|
|
|
|
|
|
Repurchased | |
|
May Yet Be | |
|
|
|
|
|
|
as Part of | |
|
Repurchased | |
|
|
Total Number | |
|
Average | |
|
Publicly | |
|
Under the | |
|
|
of Shares | |
|
Price Paid | |
|
Announced | |
|
Announced | |
Period |
|
Repurchased(a) | |
|
per Share | |
|
Plans | |
|
Plans | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except average price paid per share) | |
Repurchases from January 29, 2005 through February 25,
2005
|
|
|
28 |
|
|
$ |
40.32 |
|
|
|
28 |
|
|
|
49 |
|
Repurchases from February 26, 2005 through March 25,
2005(b)
|
|
|
13 |
|
|
|
39.79 |
|
|
|
13 |
|
|
|
286 |
|
Repurchases from March 26, 2005 through April 29, 2005
|
|
|
9 |
|
|
|
37.05 |
|
|
|
9 |
|
|
|
277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50 |
|
|
$ |
39.61 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
All shares were purchased in open-market transactions.
Dells share repurchase program was announced on
February 20, 1996; up to 1.5 billion shares of common
stock are currently authorized to be purchased. |
|
(b) |
|
On March 3, 2005, the Board of Directors of Dell approved
an amendment to the plan to increase the number of authorized
shares available for repurchase by 250 million to
1.5 billion, and the aggregate dollar cost threshold by
$10 billion to $30 billion. |
(a) Exhibits See Index to Exhibits below.
20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
DELL INC. |
|
Date: June 3, 2005
|
|
/s/ JOAN S. HOOPER
|
|
|
|
|
|
Joan S. Hooper
Vice President, Corporate Finance and
Chief Accounting Officer
(On behalf of the registrant and as
principal accounting officer) |
21
INDEX TO EXHIBITS
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
|
|
Description of Exhibit |
|
|
|
|
|
|
3 |
.1 |
|
|
|
Restated Certificate of Incorporation, filed July 24, 2003
(incorporated by reference to Exhibit 3.2 of Dells
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 1, 2003, Commission File No. 0-17017) |
|
3 |
.2 |
|
|
|
Restated Bylaws, as adopted on July 18, 2003 (incorporated
by reference to Exhibit 3.3 of Dells Quarterly Report
on Form 10-Q for the fiscal quarter ended August 1,
2003, Commission File No. 0-17017) |
|
4 |
.1 |
|
|
|
Rights Agreement, dated as of November 29, 1995
(incorporated by reference to Exhibit 4 of Dells
Current Report on Form 8-K filed on November 30, 1995,
Commission File No. 0-17017) |
|
4 |
.2 |
|
|
|
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 |
.3 |
|
|
|
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 |
.4 |
|
|
|
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 |
.5 |
|
|
|
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 |
.6 |
|
|
|
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) |
|
31 |
.1 |
|
|
|
Certification of Kevin B. Rollins, President and Chief Executive
Officer, pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934 |
|
31 |
.2 |
|
|
|
Certification of James M. Schneider, Senior Vice President and
Chief Financial Officer, pursuant to Rule 13a-14(a) under
the Securities Exchange Act of 1934 |
|
32 |
.1 |
|
|
|
Certifications of Kevin B. Rollins, President and Chief
Executive Officer, and James M. Schneider, Senior Vice President
and Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350 |