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Greg Idaris, Lucy (Zhao) Luo, Dana Cochrane, and Shweta Godse

4:35 pm - 5:40 pm (M.W.Th.)


Professor Jackson
March 13
th
2014
The Financial Reporting Project: Progress Report 1
EMC Corporation
Company Background:
We chose to assess EMC Corporation for our Financial Reporting Project. The ticker
symbol for EMC Corporation is EMC and the company trades its stocks at the New York Stock
Exchange. The purpose of the Auditors Report is to ensure that the companys financial
statements match its current financial position, examine as to whether or not the companys
managers are providing proper internal control over financial reporting, and offer opinions in
regards to the prosperity of the company. The auditing firm responsible for the Audit Report on
the companys most recent Annual Report is PricewaterhouseCoopers LLP. Richard Egan and
Roger Marino, both alumni of Northeastern University, founded EMC Corporation in 1979.
EMC Corporation is headquartered in Hopkinton, Massachusetts and is considered to be one of
the most highly regarded computer companies. EMC Corporation allows companies to store their
information in a more secure, inexpensive, and quicker way through the use of cloud
computing.
1
EMC Corporations major competitors are IBM, Hewlett Packard Company, and
Hitachi Data Systems. The closing price of stock for EMC Corporation on March 7, 2014 was
$27.04.
Developments Relating to the Company:
The Information Storage segments product revenues increased 4% in 2013 while
revenues from the high-end storage business (EMC VMAX) increased by 2%. From 2009 to
2013, EMC has been experiencing a fairly steady upward trend in revenues, operating income,
and net income. Demand for information technology is increasing. The industry for information
technology is rapidly accelerating, spurred by trends toward technology that is mobile, social,
cloud-based, and Big Data-driven. This has caused what is known as the third platform of IT.
The worlds data is expanding, contributing to the rise of the third platform. A primary obstacle
to fully accessing the benefits of cloud-computing and Big Data is the increasing sophistication
of cyber criminals.
In 2013, EMC continues to be a leader in the Big Data and information storage industry,
as the corporation continues it upward momentum. Some key accomplishments this year include:
EMC successfully launched its ViPR Software-Defined Storage Platform, which helps reduce the
complexity of the data-storing environment. The software is highly automated and user friendly
due to its self-service portal. The current model that has been released consists of two
components the ViPR Controller and the ViPR Data Service. EMC is also planning to launch a
third platform that includes large web-scale content depots.
The corporation is also implementing courses that give business leaders the tools necessary to
efficiently implement and utilize Big Data analytics strategies created by EMC. EMCs global
service extends beyond business leaders but also students. EMC Academic Alliance, a subsidiary
within EMC Corporation, reached a milestone when 1,000 members institutions employed the
technology curricula offered.
EMC continues to strengthen their Information Security Segment by releasing a number of
innovative solutions. The partnership with Jupiter Network will allow joint customers to protect
their private information.

Understanding the Annual Report and 10-K
According to EMC Corporations 2013 annual report and 10-K filing to the U.S.
Securities and Exchange Commission, EMC reported a net income of $1,088,000,000 in 2009. In
2010, net income grew to $1,900,000,000; a 74.63% increase from the previous year. In 2011,
net income was $2,461,000,000 yielding an annual growth rate of 29.52%. In 2012, net income
had increased to $2,733,000,000, reflecting growth of 11.05% from 2011. By 2013, net income
has risen to $2,889,000,000; a 5.71% increase from 2012. Over the last five-year period, net
income has been increasing at a decreasing pace. One reason is that EMC has been allocating
more resources in research and development over the years, which increases expenses. From
2011 to 2013, expenses in research and development increased by $ 610,000,000. Other
expenses saw slight increases as well. In addition, IT product demand was lower than
expectations in 2013, which directly affected sales revenue. Nevertheless, EMC Corporations
net sales were increasing more than expenses, resulting in a positive earning trend in the past five
years.
The gross margin was 60.8% in 2011, 62.8% in 2012, and 62.3% in 2013. The gross
profit was $12,169,000,000 in 2011, $13,638,000,000 in 2012, and $14,473,000,000 in 2013
with net sales of $20,008,000,000 in 2011, $21,714,000,000 in 2012, and $23,222,000,000 in
2013 respectively. The average gross margin over the past three years was 61.97%, which means
out of the net sales approximately 61.97% becomes gross profit, which is can then used to cover
other operating expenses. EMCs gross profit margin has been increasing slightly over the past
few years as net sales generally increase more substantially that cost of goods sold, indicating the
companys growth over the years. The high gross margin makes EMC a good investment choice.
EMC Corporations ability to balance its liabilities and assets is a reason for the
companys success as a leader in IT solutions. As of December 31
st
2013, total assets equaled
$45,849,000,000 out of which $17,278,000,000 were allocated in current assets. Current assets
accounted for 37.68% of total assets. Non-current assets totaled $28,571,000,000, accounted for
62.32% of total assets. A majority of the long-term assets were allocated in Goodwill since EMC
has been a leader in cloud computing, Big Data, and IT solutions. The company has a well-
known reputation and was rated the second World Most Admired Company in 2012
2
. In
comparison to December 31
st
of 2012, total assets equaled $37,962,000,000 out of which
$12,019,000,000 were current assets and $25,943,000,000 were non-current assets. Current
assets accounted for 31.66% of total assets while non-current assets accounted for the remaining
68.34%.
As of December 31
st
2013, EMC has a total of $22,063,000,000 in liabilities. 53.47%
($11,799,000,000) of EMCs liabilities were current liabilities, and the remaining 46.53%
($10,264,000,000) were long-term liabilities. In comparison to December 31
st
2012s annual
report, total liabilities were $14,380,000,000 with $10,274,000,000 being current liabilities and
$4,106,000,000 as long-term liabilities. Current liabilities accounted for 71.45% of total
liabilities and long-term liabilities accounted for 28.55% of total liabilities.
EMC Corporation utilizes the straight-line depreciation method for their non-current
assets. EMC evaluates the useful life of their long-lived assets by the following breakdowns: 2-
10 years for furniture and fixtures, 2-10 years for equipment and software, 5-31 years for
improvements, and 15-51 years for buildings. EMC values its inventory using the First-in-First-
out (FIFO) system of inventory accounting, so the oldest pieces of inventory are recorded as
being sold first, regardless of which piece of inventory was actually sold. The inventory turnover
ratio is calculated as the cost of goods sold over the average total inventory. The ratio for 2011,
2012, and 2013 was 6.06, 4.76, and 4.20 respectively. The inventory turnover ratio is showing a
trend of decreasing over this three-year period.
As of December 31
st
2013, the shareholders equity of EMC is made up of 2,020,000,000
shares of common stock at $0.01 par value with $1,406,000,000 of additional paid in capital,
$21,114,000,000 of retained earnings, and - $239,000,000 of accumulated comprehensive loss.
Shareholders equity totaled $23,786,000,000 in 2013. In comparison to December 31
st
2012, the
shareholders equity of EMC was made up of 2,107,000,000 shares of common stock at $0.01
par value, $3,691,000,000 of additional paid in capital, $18,853,000,000 of retained earnings,
and -$208,000,000 of accumulated comprehensive loss. Total shareholders equity at the end of
2012 was $23,524,000,000. There was a small change in shareholders equity between 2012 and
2013, of $262,000,000. This increase was caused by the increase in retained earnings between
the two years.
The 10K form is an annual report that provides essential information to shareholders and
investors, the form provides a variety of different information. Three basic pieces of information
are contained in the report, information about the company, financial reports, and notes to clarify
the financial reports. The beginning portion of the form contains information about the
organizational structure of the company, its history, the nature of its business, subsidiaries, its
risk factors, and similar notes about the company itself. The financial reports provide data about
the finances and operations of the company. The form also contains notes to the financial reports.
These notes provide additional information that clarifies parts of the reports and explains things
that the numbers cannot.


Appendix A: Work Cited

"EMC - Investor Relations - SEC Filings." EMC - Investor Relations - SEC Filings. N.p., n.d.
Web. 12 Mar. 2014. <http://ir.emc.com/phoenix.zhtml?c=106202&p=irol-sec#9289836>.

1. "Corporate Profile." EMC. N.p., n.d. Web. 12 Mar. 2014.
<http://www.emc.com/corporate/emc-at-glance/corporate-profile/index.htm>.

2. "Computers." CNNMoney. Cable News Network, n.d. Web. 12 Mar. 2014.
<http://money.cnn.com/magazines/fortune/most-admired/2012/industries/7.html>.

EMC Company Financials. NASDAQ. N.p., n.d. Web. 12 Mar. 2014.
<http://www.nasdaq.com/symbol/emc/financials?query=balance-sheet>

































Appendix B: Calculations

Calculating Annual Growth Rate

2009 2010 2011 2012 2013
Net Income 1,088,000,000 1,900,000,000 2,461,000,000 2,733,000,000 2,889,000,000
Difference
From Previous
Year

812,000,000 561,000,000 272,000,000 156,000,000
Growth Rate

74.63% 29.53% 11.05% 5.71%

Calculating Gross Margin Percentage

2011 2012 2013
Net Sales 20,008,000,000 21,714,000,000 23,222,000,000
Cost of Revenue 7,839,000,000 8,076,000,000 8,749,000,000
Gross Profit 12,169,000,000 13,638,000,000 14,473,000,000
Gross Profit Margin 60.82% 62.81% 62.32%

Asset Allocation

2012 2013
Current Assets 12,019,000,000 17,278,000,000
Noncurrent Assets 25,943,000,000 28,571,000,000
Total Assets 37,962,000,000 45,849,000,000
% in Current Assets 31.66% 37.68%
% in Noncurrent Assets 68.34% 62.32%

Liabilities Allocation

2012 2013
Current Liabilities 10,274,000,000 11,799,000,000
Long-term Liabilities 4,106,000,000 10,264,000,000
Total Liabilities 14,380,000,000 22,063,000,000
% in Current Liabilities 71.45% 53.48%
% in Long-term Liabilities 28.55% 46.52%


Inventory Turnover Ratio

2011 2012 2013
Cost of Goods Sold 5,650,000,000 5,259,000,000 5,320,000,000
Average Inventory 932,500,000 1,105,000,000 1,267,500,000
Inventory Turnover Ratio 6.06 4.76 4.20