Dell 2006 Annual Report Download - page 29

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Table of Contents
(a) The restated amounts for short-term borrowings reflect (1) a correction in classification from accounts payable for vendor financing for the
periods from the end of Fiscal 2002 until termination in the first quarter of Fiscal 2006, and (2) a correction in classification from other current
liabilities for the short-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of Fiscal 2004
through Fiscal 2007.
(b) The restated amounts for long-term debt reflect (1) adjustments to record changes in the fair value of the debt where the interest rate is hedged
with interest rate swap agreements for all periods restated and (2) a correction in classification from both other current liabilities and other non-
current liabilities related to the long-term portion of outstanding advances under the DFS Credit Facilities for the periods from the third quarter of
Fiscal 2004 through Fiscal 2007.
(c) Results for the third quarter of Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in
selling, general and administrative expenses) related to the cost of servicing or replacing certain OptiPlexTM systems that include a vendor part
that failed to perform to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill
recognized in the third quarter. The related tax effect of these items was $96 million. The second quarter of Fiscal 2006 includes an $85 million
income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004
recognized in the second quarter.
(d) The cash flows have been revised to reflect a closer approximation of the weighted-average exchange rates during the reporting periods. For
most periods, this revision reduced the previously reported effect of exchange rate changes on cash and cash equivalents with an offsetting
change in effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies and changes in operating
working capital included in cash flows from operating activities.
Fiscal 2006 Restatement Adjustments to Previously Reported Net Income
The following table presents the impact of the restatement on our previously reported net income for each quarter of Fiscal
2006. See Note 2 of Notes to Consolidated Financial Statements included in "Part II — Item 8 — Financial Statements and
Supplementary Data" for further discussion of the restatement.
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
April 29, July 29, October 28, February 3, February 3,
Fiscal 2006 (As Restated) 2005 2005 2005 2006 2006
(in millions)
Net income as reported $ 934 $ 1,020 $ 606 $ 1,012 $ 3,572
Revenue recognition:
Software sales (3) (3) 3 (1) (4)
Other revenue recognition (20) (3) 9 30 16
Revenue recognition (23) (6) 12 29 12
Warranty liabilities (14) (52) (14) 25 (55)
Restructuring reserves — — — — —
Other reserves and accruals (8) 11 41 33 77
(Provision) benefit for income taxes 19 9 (10) (22) (4)
Net impact of adjustments (26) (38) 29 65 30
Net income as restated $ 908 $ 982 $ 635 $ 1,077 $ 3,602
26