EMC Corp. (NYSE:EMC)

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EMC Corp., Profitability Ratios: Reported vs. Adjusted

EMC Corp., adjusted profitability ratios

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Net Profit Margin
Reported net profit margin	8.06%	11.10%	12.44%	12.58%	12.30%
Adjusted net profit margin	7.82%	11.18%	12.30%	12.81%	12.17%
Return on Equity (ROE)
Reported ROE	9.41%	12.39%	12.95%	12.22%	12.98%
Adjusted ROE	9.13%	12.48%	12.81%	12.44%	12.85%
Return on Assets (ROA)
Reported ROA	4.27%	5.91%	6.30%	7.18%	7.18%
Adjusted ROA	4.14%	5.95%	6.23%	7.30%	7.11%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

Profitability metrics across all analyzed categories exhibit a general downward trend, with a significant acceleration in decline observed between 2014 and 2015. While performance remained relatively stable from 2011 to 2013, a systemic contraction in margins and returns is evident in the final two years of the period.

Net Profit Margin: Reported net profit margins remained consistent, fluctuating between 12.30% and 12.58% from 2011 through 2013. A downward shift began in 2014, with the margin falling to 11.10% and continuing to decline to 8.06% by December 31, 2015. Adjusted margins followed a nearly identical pattern, ending the period at 7.82%.
Return on Equity (ROE): Return on equity showed resilience through 2014, maintaining a range between 12.22% and 12.98%. However, a sharp decrease occurred in 2015, where the reported ROE dropped to 9.41% and the adjusted ROE fell to 9.13%, representing the lowest levels of equity efficiency in the five-year sequence.
Return on Assets (ROA): A steady erosion of asset efficiency is observable. Reported ROA peaked and plateaued at 7.18% in 2011 and 2012, followed by a consistent year-over-year decline to 6.30% in 2013, 5.91% in 2014, and finally 4.27% in 2015.
Impact of Mark-to-Market Adjustments: The variance between reported and adjusted figures is minimal across all three profitability ratios. The close alignment between these values suggests that the mark-to-market adjustments for available-for-sale securities had a negligible impact on the overall financial performance and return profiles during this period.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to EMC Corporation	1,990)	2,714)	2,889)	2,733)	2,461)
Revenues	24,704)	24,440)	23,222)	21,714)	20,008)
Profitability Ratio
Net profit margin¹	8.06%	11.10%	12.44%	12.58%	12.30%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to EMC Corporation	1,931)	2,732)	2,856)	2,781)	2,436)
Revenues	24,704)	24,440)	23,222)	21,714)	20,008)
Profitability Ratio
Adjusted net profit margin²	7.82%	11.18%	12.30%	12.81%	12.17%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ Net profit margin = 100 × Net income attributable to EMC Corporation ÷ Revenues
= 100 × 1,990 ÷ 24,704 = 8.06%

² Adjusted net profit margin = 100 × Adjusted net income attributable to EMC Corporation ÷ Revenues
= 100 × 1,931 ÷ 24,704 = 7.82%

An analysis of profitability metrics from 2011 to 2015 reveals a period of relative stability and growth in the early years, followed by a significant contraction in both absolute income and margin percentages toward the end of the period.

Net Income Trends: Both reported and adjusted net income exhibited an upward trajectory between 2011 and 2013, with reported net income peaking at 2,889 million US dollars in 2013. However, a downward trend emerged thereafter, resulting in a decline to 1,990 million US dollars by December 31, 2015. The adjusted net income followed a nearly identical pattern, peaking in 2013 at 2,856 million US dollars before dropping to 1,931 million US dollars in 2015.
Adjusted Net Profit Margin Performance: The adjusted net profit margin reached its highest point in 2012 at 12.81%, reflecting a slight improvement from the 12.17% recorded in 2011. A gradual decline began in 2013, moving to 12.30%, and accelerated in 2014 to 11.18%. A sharp contraction is observed in 2015, where the margin fell to 7.82%, representing the lowest profitability level within the analyzed five-year period.
Comparative Analysis of Reported and Adjusted Metrics: A high degree of correlation exists between reported and adjusted figures throughout the period. The variance between reported and adjusted net profit margins remained minimal, typically within a few basis points. This suggests that non-recurring items or adjustments had a negligible impact on the overall profitability profile, indicating that the observed decline in margins was driven by core operational factors rather than one-time accounting adjustments.

The overall financial trajectory indicates a significant erosion of profitability starting in 2014, culminating in a substantial reduction in the net profit margin by the end of 2015.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to EMC Corporation	1,990)	2,714)	2,889)	2,733)	2,461)
Total EMC Corporation’s shareholders’ equity	21,140)	21,896)	22,301)	22,357)	18,959)
Profitability Ratio
ROE¹	9.41%	12.39%	12.95%	12.22%	12.98%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to EMC Corporation	1,931)	2,732)	2,856)	2,781)	2,436)
Total EMC Corporation’s shareholders’ equity	21,140)	21,896)	22,301)	22,357)	18,959)
Profitability Ratio
Adjusted ROE²	9.13%	12.48%	12.81%	12.44%	12.85%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ ROE = 100 × Net income attributable to EMC Corporation ÷ Total EMC Corporation’s shareholders’ equity
= 100 × 1,990 ÷ 21,140 = 9.41%

² Adjusted ROE = 100 × Adjusted net income attributable to EMC Corporation ÷ Total EMC Corporation’s shareholders’ equity
= 100 × 1,931 ÷ 21,140 = 9.13%

The financial performance from 2011 to 2015 is characterized by an initial period of growth followed by a notable decline in both absolute earnings and equity efficiency.

Net Income Trends: Reported net income exhibited an upward trajectory between 2011 and 2013, increasing from US$ 2,461 million to a peak of US$ 2,889 million. This growth was followed by a contraction, with net income falling to US$ 2,714 million in 2014 and further declining to US$ 1,990 million by December 31, 2015. Adjusted net income followed a nearly identical pattern, reaching its highest point in 2013 at US$ 2,856 million before dropping to US$ 1,931 million in 2015.
Analysis of Return on Equity (ROE): Both reported and adjusted ROE remained relatively stable from 2011 through 2014. During this four-year window, reported ROE fluctuated within a narrow range of 12.22% to 12.98%, while adjusted ROE stayed between 12.44% and 12.85%. A significant downward shift is observed in 2015, where reported ROE fell to 9.41% and adjusted ROE decreased to 9.13%, marking a substantial reduction in the return generated on shareholder equity.
Comparative Variance: The correlation between reported and adjusted metrics is consistently high. The difference between reported and adjusted ROE is marginal, typically varying by less than 0.4 percentage points annually. This indicates that the adjustments made to the net income figures did not fundamentally alter the overall trend of the company's equity performance.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to EMC Corporation	1,990)	2,714)	2,889)	2,733)	2,461)
Total assets	46,612)	45,885)	45,849)	38,069)	34,268)
Profitability Ratio
ROA¹	4.27%	5.91%	6.30%	7.18%	7.18%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to EMC Corporation	1,931)	2,732)	2,856)	2,781)	2,436)
Total assets	46,612)	45,885)	45,849)	38,069)	34,268)
Profitability Ratio
Adjusted ROA²	4.14%	5.95%	6.23%	7.30%	7.11%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ ROA = 100 × Net income attributable to EMC Corporation ÷ Total assets
= 100 × 1,990 ÷ 46,612 = 4.27%

² Adjusted ROA = 100 × Adjusted net income attributable to EMC Corporation ÷ Total assets
= 100 × 1,931 ÷ 46,612 = 4.14%

Financial performance between 2011 and 2015 is characterized by a period of moderate growth in earnings followed by a significant contraction in both absolute profitability and asset utilization efficiency.

Net Income Trends: Adjusted net income grew from US$ 2,436 million in 2011 to a peak of US$ 2,856 million in 2013. This growth phase was followed by a steady decline, with a sharp reduction in 2015, where adjusted net income fell to US$ 1,931 million, representing a 32.7% decrease from its 2013 peak.
Adjusted Return on Assets (ROA) Performance: A consistent downward trend in asset efficiency is observed after 2012. Adjusted ROA reached its highest point of 7.30% in 2012, subsequently declining to 6.23% in 2013, 5.95% in 2014, and reaching a low of 4.14% by the end of 2015. This represents a total decline of 3.16 percentage points from the peak.
Comparative Analysis of Reported and Adjusted Metrics: The variance between reported and adjusted figures remains minimal throughout the period. However, while reported net income peaked in 2013, adjusted net income showed a slightly different trajectory, peaking in the same year but remaining higher than reported figures in 2012 and 2014. The convergence of reported and adjusted ROA toward 2015 suggests that non-recurring items had a diminishing impact on overall asset efficiency as performance declined.
Asset Efficiency Insights: The decline in Adjusted ROA is more pronounced than the fluctuation in net income between 2012 and 2014, suggesting that the asset base expanded at a rate that outpaced earnings growth. By 2015, the simultaneous drop in both net income and ROA indicates a simultaneous reduction in profitability and a failure to optimize the existing asset base.

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