On Tuesday, storage and information wrangler EMC (NYSE:EMC) released Q3 2006 earnings for the period ended Sept. 30.
- Here's a company that likes to pay cash. Over the last three years, EMC has acquired a whopping 21 companies, and yet the balance sheet is free of long-term debt, with a decreasing share count year over year.
- Margins aren't looking so hot. The decrease starts right at the top and only accelerates the farther down the income statement we go. This is a common side effect of acquisition-related indigestion.
- The good news: Free cash flow was positive, as it has been for every quarter since Q2 1997. The bad: Capital expenditures amounted to more than 40% of operating cash flow, one of the highest ratios since Q1 2003. As a result, FCF got a serious haircut.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Avg. Est. |
Q3 2006 |
Q3 2005 |
Change | |
|---|---|---|---|---|
|
Sales |
$2,670 |
$2,815.3 |
$2,365.7 |
19.0% |
|
Net Profit |
-- |
$283.7 |
$421.7 |
(32.7%) |
|
EPS |
$0.12 |
$0.13 |
$0.17 |
(23.5%) |
|
Diluted Shares |
2240.3 |
2433.1 |
(7.9%) |
Get back to basics with a look at the income statement.
Margin Checkup
|
Q3 2006 |
Q3 2005 |
Change* | |
|---|---|---|---|
|
Gross Margin |
52.70% |
54.00% |
(1.30) |
|
Operating Margin |
12.15% |
15.89% |
(3.74) |
|
Net Margin |
10.08% |
17.82% |
(7.74) |
Margins are the earnings engine. See how they work.
Balance Sheet Highlights
|
Assets |
Q3 2006 |
Q3 2005 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$2,669.5 |
$4,464.8 |
(40.2%) |
|
Accounts Rec. |
$1,449.8 |
$1,166.2 |
24.3% |
|
Inventory |
$895.1 |
$756.2 |
18.4% |
|
Liabilities |
Q3 2006 |
Q3 2005 |
Change |
|---|---|---|---|
|
Accounts Payable |
$745.7 |
$517.5 |
44.1% |
|
Long-Term Debt |
$0.0 |
$127.3 |
(100.0%) |
Learn the ways of the balance sheet.
Cash Flow Highlights
|
Q3 2006 |
Q3 2005 |
Change | |
|---|---|---|---|
|
Cash From Ops. |
$458.3 |
$590.4 |
(22.4%) |
|
Capital Expenditures |
$189.9 |
$165.3 |
14.9% |
|
Free Cash Flow |
$268.4 |
$425.1 |
(36.9%) |
Find out why Fools always follow the money.
Related companies:
- McKesson (NYSE:MCK)
- Hewlett-Packard (NYSE:HPQ)
- Microsoft (NASDAQ:MSFT)
- IBM (NYSE:IBM)
- Electronic Data Systems (NYSE:EDS)
- Hitachi (NYSE:HIT)
Related Foolishness:
- Foolish Forecast: EMC Equals What?
- EMC Spends Billions for a Secure Future
- EMC Expands Its Reach
- Is EMC Eeeeewwww?
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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.
At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned, but he's an avid user of EMC's VMWare products. Fool rules are here.
