Dell 2011 Annual Report Download - page 35

Table of Contents
headcount increased approximately 6% due to our acquisitions and new hires related to our strategic initiatives. We also experienced a year-over-year increase
of $111 million in advertising and promotional expenses. These increases were offset in part by decreases in severance and facility action costs and
acquisition-related charges, discussed below.
•Research, Development, and Engineering — During Fiscal 2011, research, development, and engineering expenses remained at approximately 1.0% of
revenue, consistent with the prior fiscal year.
Total operating expenses for Fiscal 2011 increased 12% to $8.0 billion on a GAAP basis and 14% to $7.6 billion on a non-GAAP basis for Fiscal 2011 over
Fiscal 2010. Operating expenses on a GAAP basis for Fiscal 2011 and Fiscal 2010 includes the effects of severance and facility action costs and acquisition-
related charges as well as amortization of intangible assets. For Fiscal 2011, operating expenses on a GAAP basis also includes $140 million in settlements we
incurred related to an SEC investigation and a securities litigation matter. As set forth in the reconciliation under “Non-GAAP Financial Measures” below,
non-GAAP operating expenses for Fiscal 2011 and for Fiscal 2010 excludes the effects of severance and facility action costs and acquisition-related charges,
amortization of intangible assets, and, for Fiscal 2011, the settlements referred to above. Severance and facility action costs and acquisition-related charges
included in operating expenses decreased year-over-year by 53% to $170 million for Fiscal 2011. The decrease in severance and facility action costs and
acquisition-related charges was primarily due to a decrease in cost reduction activities from Fiscal 2010. Amortization of intangibles included in operating
expenses increased 31% to $71 million over Fiscal 2010, and was primarily related to our acquisition of Perot Systems in Fiscal 2010 as well as our Fiscal
2011 acquisitions.
Operating and Net Income
Fiscal 2012 compared to Fiscal 2011
•Operating Income — During Fiscal 2012, operating income increased 29% to $4.4 billion on a GAAP basis and 24% to $5.1 billion on a non-GAAP
basis over Fiscal 2011. The increases were primarily attributable to the improved gross margins discussed above, the effect of which was partially offset
by an increase in selling and marketing costs.
•Net Income — During Fiscal 2012, net income increased 33% to $3.5 billion on a GAAP basis and 27% to $4.0 billion on a non-GAAP basis over Fiscal
2011. Net income was positively impacted by increases in operating income and a lower effective tax rate, offset in part by unfavorable changes in
Interest and other, net. Interest and other, net for Fiscal 2011 was favorably impacted by our receipt of a $72 million merger termination fee. This fee is
excluded from net income on a non-GAAP basis. See “Income and Other Taxes” and “Interest and Other, net” below for a discussion of our effective tax
rates and Interest and other, net.
Fiscal 2011 compared to Fiscal 2010
•Operating Income — During Fiscal 2011, operating income increased 58% to $3.4 billion on a GAAP basis and 40% to $4.1 billion on a non-GAAP
basis over Fiscal 2010. The increases were primarily attributable to increased revenue, improved gross margins, and better operating leverage resulting
from the increase in net revenue.
•Net Income — During Fiscal 2011, net income increased 84% to $2.6 billion on a GAAP basis and 51% to $3.1 billion on a non-GAAP basis over Fiscal
2010. Net income was positively impacted by increases in operating income and a lower effective income tax rate. In addition, on a GAAP basis, Interest
and other, net increased favorably by 44% for Fiscal 2011 due primarily to a $72 million merger termination fee that we received during the third quarter
of Fiscal 2011. See “Income and Other Taxes” and “Interest and Other, net” below for discussion of our effective tax rates and Interest and other, net.
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