Double-Digit Growth in Shipments, Revenue and Profits Highlights Dell's Second-Quarter Results
Company Anticipates Record Revenue, 25- to 30-Percent EPS Growth in Third Quarter
AUSTIN, Texas--(BUSINESS WIRE)--Aug. 15, 2002--Dell (Nasdaq:DELL - News) demonstrated the unique advantages of its efficient, customer-focused business model again in fiscal second-quarter 2003, shipping a record number of computer systems, exceeding the company's latest revenue guidance and sharply improving profitability. The company has met or exceeded its guidance to investors for six straight quarters.
Growing customer preference for Dell systems and services earned a leading 18-percent rise in worldwide product shipments in the second quarter; without Dell, industry volumes declined 4 percent. Company shipments of servers and workstations were up 20 percent, and those products together with storage systems accounted for 20 percent of revenue.
Second Quarter
(in millions, except share data) FY'03 FY'02(a) Change
----- ----- ------
Revenue $ 8,459 $ 7,611 11%
Operating Income $ 677 $ 545 24%
Net Income $ 501 $ 433 16%
Earnings Per Share $ 0.19 $ 0.16 19%
Year to Date
(in millions, except share data) FY'03 FY'02(a) Change
----- ----- ------
Revenue $16,525 $15,639 6%
Operating Income $ 1,267 $ 1,133 12%
Net Income $ 958 $ 895 7%
Earnings Per Share $ 0.36 $ 0.33 9%
(a) FY02 income and earnings data exclude a $742 million charge
related to job reductions, consolidation of facilities and
impairment of assets.
Second-quarter revenue was $8.5 billion, up 11 percent from last year; sales by the rest of the industry are expected to be down more than 10 percent. Dell's revenue was slightly higher than the company estimated on July 11, when it raised sales and earnings guidance for Q2. Per-share earnings were 19 cents, an increase of 19 percent. In the year-ago quarter, Dell reported a 4-cent per-share loss; excluding a charge, fiscal-2002 second-quarter earnings per share were 16 cents.
NOTE: All subsequent financial information in this release excludes the fiscal-2002 charge.
"There's a fundamental, widespread customer shift to standards-based information technology occurring, because it offers great performance, tremendous flexibility and costs much less," said Kevin B. Rollins, Dell's president and chief operating officer. "Customers are getting exceptional value, and Dell is benefiting by winning new customers at an unprecedented rate."
According to Mr. Rollins, industry shipments should be flat to up slightly from the second quarter to the third. Dell's volumes, he said, could increase more than 5 percent sequentially. The company expects revenue for the period to be $8.9 billion, a Dell record and up 19 percent from the prior year's quarter. Dell's goal is to further improve operating margins, and earnings per share of 20 to 21 cents, an increase of 25 to 30 percent.
Second-quarter operating expenses were 9.9 percent of revenue, matching a company record set in Q1. Improved product mix, lean cost management and lower component costs contributed to a jump in operating profit as a percent of revenue to 8.0 percent -- the company's highest in seven quarters, and up from 7.3 percent in the first quarter and 7.2 percent one year ago.
Mr. Rollins said Dell is ahead of plans for more than $1 billion in total cost improvements this year from product design, manufacturing and logistics, operating expenses and warranty costs.
The company generated nearly $870 million in cash from operations during the second quarter. At the end of the period, total cash and investments totaled $8.6 billion. Inventory was flat with the year-ago quarter, even as product shipments rose sharply.
Dell's Enterprise Volumes Increase Sharply
Dell's second-quarter growth in unit shipments was strong in all product categories, notably enterprise systems, which again highlighted Dell's volume growth.
An 18-percent rise in shipments of PowerEdge servers compared with flat industry volumes excluding Dell. In the U.S. server category, which Dell has now led for six straight quarters, company shipments grew at double the average of others. Large corporate customers in North America have ranked Dell first in terms of server satisfaction for 18 of the last 19 quarters.
A growing number of customers are using clusters, or grids, of Dell standards-based servers to conduct high-performance computing typically done by mainframe computers. New installations of clustered servers more than doubled from the first quarter to the second. Dell standards-based server clusters commonly save customers more than 60 percent compared with the cost for proprietary technology.
Year-over-year shipments of industry-leading Dell Precision workstations rose 24 percent, 29 percent in the company's Americas region.
Revenue from external storage systems grew more than 70 percent and is now at an annual run rate of more than $1 billion. External storage accounted for 55 percent of Dell's total storage sales, up from about 50 percent in the first quarter.
Volumes of Inspiron and Latitude notebook computers increased 17 percent from the same quarter one year ago, compared with 4 percent for the industry without Dell. North American corporate customers have rated Dell No. 1 in notebook satisfaction for an unprecedented 17 straight quarters, or for more than four years.
Results Particularly Strong in Key National Markets
Dell's 23-percent shipment growth in the U.S. countered a 4-percent decline by the rest of the industry, and company revenue rose 14 percent. Strength in the U.S. market was led, in part, by a 21-percent increase in shipments to education and government customers. Products purchased by U.S. consumers jumped 47 percent.
The company's 12-percent unit growth in Asia-Pacific and Japan compared with a 3-percent decline for the rest of the industry. Dell server shipments were up 12 percent, as those for others fell an average 8 percent. Company shipments in China were up 35 percent, and enterprise volumes rose nearly one-third. Dell recorded a double-digit increase in unit shipments in Japan; without the company, total product volumes dropped 16 percent.
Earlier this month, Dell China was recognized by the country's two leading information-technology publications for product quality and customer satisfaction. In Japan, Dell recently earned nearly double the score of the closest competitor in leading a survey of satisfaction with after-sale support, and topped a separate study of server satisfaction for the fourth straight year.
Dell product shipments in Europe, the Middle East and Africa (EMEA) were up 5 percent, versus a 3-percent industry decline excluding the company. Dell's EMEA server volumes rose 7 percent, while others saw a combined 6-percent drop in server shipments. The company also outperformed industry averages in Germany and France, both strategically important markets.
Dell Germany unit shipments were up 12 percent, while the balance of the industry was flat. Company server volumes increased 12 percent in that market, while others had a 14-percent drop. Dell also led a server-comparison test by a leading German trade publication, scoring up to three times higher than competing products. In France, total Dell shipments were 20 percent higher and the company moved from No. 4 to No. 2 in national share rankings, while the rest of the industry posted a 19-percent decline.
About Dell
Dell Computer Corporation (Nasdaq:DELL - News) is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. The company's revenue for the past four quarters totaled $32.1 billion. Dell, through its direct business model, designs, manufactures and customizes products and services to customer requirements, and offers an extensive selection of software and peripherals. Information on Dell and its products can be obtained at www.dell.com.
Dell, PowerEdge, Dell Precision, Inspiron and Latitude are trademarks of Dell Computer Corporation.
Dell disclaims any proprietary interest in the marks and names of others.
Special note: Statements in this press release that relate to future results and events (including statements about future financial and operating performance) are based on the company's current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including general economic and business conditions; the level of demand for the company's products and services; the level and intensity of competition in the technology industry and the pricing pressures that have resulted; the company's ability to timely and effectively manage periodic product transitions, as well as component availability and cost; the company's ability to develop new products based on new or evolving technology and the market's acceptance of those products; the company's ability to manage its inventory levels to minimize excess inventory, declining inventory values and obsolescence; the product, customer and geographic sales mix of any particular period; and the company's ability to effectively manage its operating costs. Additional discussion of these and other factors affecting the company's business and prospects is contained in the company's periodic filings with the Securities and Exchange Commission.
Consolidated statements of income and financial position follow.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Operation
and Related Financial Highlights
(in millions, except per share data)
(unaudited)
Three Months Ended
-------------------------
Aug. 2, May 3, Aug. 3, % Growth Rates
---------------------
2002 2002 2001 Sequential Yr. to Yr.
------- ------- ------- ---------------------
Net revenue $ 8,459 $ 8,066 $ 7,611 4.9% 11.1%
Cost of revenue 6,944 6,675 6,281 4.0% 10.6%
------- ------- -------
Gross margin 1,515 1,391 1,330 8.9% 13.9%
Selling, general
and administrative 727 691 672 5.1% 8.1%
Research, development
and engineering 111 110 113 1.3% (1.8%)
Special charge(a) -- -- 482 N/A (100.0%)
------- ------- -------
Total operating
expenses 838 801 1,267 4.6% (33.9%)
------- ------- -------
Operating income 677 590 63 14.6% 981.6%
Investment and other
income (loss), net(a) 49 48 (207) 2.3% 123.7%
------- ------- -------
Income (loss)
before income taxes 726 638 (144) 13.7% 603.3%
Income tax
provision (benefit) 225 181 (43) 25.0% 616.6%
------- ------- -------
Net income (loss) $ 501 $ 457 $ (101) 9.7% 597.6%
======= ======= =======
Earnings (loss)
per common share:
Basic $ 0.19 $ 0.18 $ (0.04)
======= ======= =======
Diluted $ 0.19 $ 0.17 $ (0.04)
======= ======= =======
Weighted average
shares outstanding:
Basic 2,586 2,595 2,601
Diluted 2,649 2,672 2,601
Percentage of Net Revenue:
-------------------------
Gross margin 17.9% 17.2% 17.5%
Selling, general
and administrative 8.6% 8.5% 8.8%
Research, development
and engineering 1.3% 1.4% 1.5%
Total operating
expenses 9.9% 9.9% 16.7%
Operating income 8.0% 7.3% 0.8%
Income (loss) before
income taxes 8.6% 7.9% (1.9%)
Net income (loss) 5.9% 5.7% (1.3%)
Income tax rate 31.0% 28.5% 30.2%
Net Revenue by geographic region:
--------------------------------
% of total revenue
------------------
Americas 73% 69% 71%
Europe 18% 21% 19%
Asia-Pacific
and Japan 9% 10% 10%
Revenue by product line:
-----------------------
% of system revenue
-------------------
Desktops 52% 54% 51%
Enterprise 20% 19% 19%
Portables 28% 27% 30%
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
(a) Special charge related to job reductions, consolidation of
facilities and impairment of assets.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Operation
and Related Financial Highlights
Excludes Special Charge
(in millions, except per share data)
(unaudited)
Three Months Ended
-------------------------
Aug. 2, May 3, Aug. 3, % Growth Rates
---------------------
2002 2002 2001 Sequential Yr. to Yr.
------- ------- ------- ---------------------
Net revenue $ 8,459 $ 8,066 $ 7,611 4.9% 11.1%
Cost of revenue 6,944 6,675 6,281 4.0% 10.6%
------- ------- -------
Gross margin 1,515 1,391 1,330 8.9% 13.9%
Selling, general
and administrative 727 691 672 5.1% 8.1%
Research, development
and engineering 111 110 113 1.3% (1.8%)
------- ------- -------
Total operating
expenses 838 801 785 4.6% 6.6%
------- ------- -------
Operating income 677 590 545 14.6% 24.3%
Investment and other
income (loss), net 49 48 53 2.3% (7.2%)
------- ------- -------
Income before
income taxes 726 638 598 13.7% 21.5%
Income tax provision 225 181 165 25.0% 37.1%
------- ------- -------
Net income $ 501 $ 457 $ 433 9.7% 15.6%
======= ======= =======
Earnings per
common share:
Basic $ 0.19 $ 0.18 $ 0.17
======= ======= =======
Diluted $ 0.19 $ 0.17 $ 0.16
======= ======= =======
Weighted average
shares outstanding:
Basic 2,586 2,595 2,601
Diluted 2,649 2,672 2,731
Percentage of Net Revenue:
-------------------------
Gross margin 17.9% 17.2% 17.5%
Selling, general
and administrative 8.6% 8.5% 8.8%
Research, development
and engineering 1.3% 1.4% 1.5%
Total operating
expenses 9.9% 9.9% 10.3%
Operating income 8.0% 7.3% 7.2%
Income before
income taxes 8.6% 7.9% 7.9%
Net income 5.9% 5.7% 5.7%
Income tax rate 31.0% 28.5% 27.5%
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Operation
and Related Financial Highlights
(in millions, except per share data)
(unaudited)
Six Months Ended
-------------------------
August 2, August 3,
2002 2001 % Growth Rates
----------- ----------- --------------
Net revenue $ 16,525 $ 15,639 5.7%
Cost of revenue 13,619 12,861 5.9%
----------- -----------
Gross margin 2,906 2,778 4.6%
Selling, general
and administrative 1,418 1,409 0.6%
Research, development
and engineering 221 236 (6.7%)
Special charge(a) -- 482 (100.0%)
----------- -----------
Total operating
expenses 1,639 2,127 (23.0%)
----------- -----------
Operating income 1,267 651 94.7%
Investment and other
income (loss), net(a) 97 (149) 165.2%
----------- -----------
Income before
income taxes 1,364 502 171.6%
Income tax provision 406 141 189.5%
----------- -----------
Net income $ 958 $ 361 164.6%
=========== ===========
Earnings per
common share:
Basic $ 0.37 $ 0.14
=========== ===========
Diluted $ 0.36 $ 0.13
=========== ===========
Weighted average
shares outstanding:
Basic 2,591 2,600
Diluted 2,649 2,743
Percentage of Net Revenue:
-------------------------
Gross margin 17.6% 17.8%
Selling, general
and administrative 8.6% 9.0%
Research, development
and engineering 1.3% 1.5%
Total operating
expenses 9.9% 13.6%
Operating income 7.7% 4.2%
Income before
income taxes 8.3% 3.2%
Net income 5.8% 2.3%
Income tax rate 29.9% 28.0%
Net revenue by geographic region:
--------------------------------
% of total net revenue
----------------------
Americas 71% 69%
Europe 19% 21%
Asia-Pacific and Japan 10% 10%
Revenue by product line:
-----------------------
% of system revenues
--------------------
Desktops 53% 51%
Enterprise 20% 19%
Portables 27% 30%
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
(a) Special charge related to job reductions, consolidation of
facilities and impairment of assets.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Operation
and Related Financial Highlights
Excludes Special Charge
(in millions, except per share data)
(unaudited)
Six Months Ended
-------------------------
August 2, August 3,
2002 2001 % Growth Rates
----------- ----------- --------------
Net revenue $ 16,525 $ 15,639 5.7%
Cost of revenue 13,619 12,861 5.9%
----------- -----------
Gross margin 2,906 2,778 4.6%
Selling, general
and administrative 1,418 1,409 0.6%
Research, development
and engineering 221 236 (6.7%)
----------- -----------
Total operating
expenses 1,639 1,645 (0.4%)
----------- -----------
Operating income 1,267 1,133 11.9%
Investment and other
income (loss), net 97 111 (12.7%)
----------- -----------
Income before
income taxes 1,364 1,244 9.7%
Income tax provision 406 349 16.9%
----------- -----------
Net income $ 958 $ 895 6.9%
=========== ===========
Earnings per
common share:
Basic $ 0.37 $ 0.35
=========== ===========
Diluted $ 0.36 $ 0.33
=========== ===========
Weighted average
shares outstanding:
Basic 2,591 2,600
Diluted 2,649 2,743
Percentage of Net Revenue:
-------------------------
Gross margin 17.6% 17.8%
Selling, general
and administrative 8.6% 9.0%
Research, development
and engineering 1.3% 1.5%
Total operating
expenses 9.9% 10.5%
Operating income 7.7% 7.3%
Income before
income taxes 8.3% 8.0%
Net income 5.8% 5.7%
Income tax rate 29.9% 28.0%
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Operation
and Related Financial Highlights
(in millions, except for "Ratios" and "Other Information")
(unaudited)
August 2, May 3, August 3,(b)
2002 2002 2001
--------- --------- ---------
Assets:
------
Current assets:
Cash and cash equivalents $ 3,725 $ 3,617 $ 4,160
Short term investments 319 343 405
Accounts receivable, net 2,590 2,308 2,316
Inventories, net 291 284 292
Other 1,358 1,286 1,712
--------- --------- ---------
Total current assets 8,283 7,838 8,885
Property, plant
and equipment, net 872 834 851
Investments 4,589 4,234 3,241
Other non-current assets 318 410 582
--------- --------- ---------
Total assets $ 14,062 $ 13,316 $ 13,559
========= ========= =========
Liabilities and Stockholders' Equity:
------------------------------------
Current liabilities:
Accounts payable $ 5,621 $ 5,062 $ 4,587
Accrued and other 2,424 2,345 2,730
--------- --------- ---------
Total current liabilities 8,045 7,407 7,317
Long term debt 516 520 520
Other 935 868 772
--------- --------- ---------
Total liabilities 9,496 8,795 8,609
Stockholders' equity 4,566 4,521 4,950
--------- --------- ---------
Total liabilities
and stockholders' equity $ 14,062 $ 13,316 $ 13,559
========= ========= =========
Ratios:
------
Quick ratio 0.82 0.85 0.94
Days supply in inventory 4 4 4
Days of sales
in accounts receivable(a) 32 30 32
Days in accounts payable 73 68 66
Other Information:
-----------------
Headcount (approximate) 36,000 34,800 35,300
Average total
revenue/unit (approximate) $ 1,770 $ 1,770 $ 1,850
Note: Ratios are calculated based on underlying data in thousands.
(a) Days of sales in accounts receivable include the effect of
in-transit customer shipments recorded in other current assets for
all periods presented in the consolidated statement of financial
position.
(b) The Aug. 3, 2001, amounts have been reclassified to conform to the
Aug. 2, 2002, and May 3, 2002, presentation. |
