EMC Corp. (NYSE:EMC)

The financial data reveals several key trends regarding the company's profitability, capital utilization, and economic value creation over the five-year period ending in 2015.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes remained relatively stable around 4,200 million US dollars during the first three years, with a slight increase from 4,267 in 2011 to 4,442 million in 2013. However, it declined notably in the subsequent years, reaching 2,862 million in 2015, reflecting a downward trend in operating profitability.

Cost of Capital

The cost of capital showed moderate fluctuations around the high teens. It started at 18.62% in 2011, slightly increased to 18.81% in 2012, then steadily decreased to 17.48% by 2015. This gradual decline suggests some improvement in the company’s capital costs or risk profile, despite remaining relatively elevated.

Invested Capital

Invested capital consistently increased each year, from 24,594 million US dollars in 2011 to 33,788 million in 2015. This steady growth indicates ongoing investments in the company's assets or operations, expanding the capital base over the period.

Economic Profit

The economic profit was negative throughout the entire period and worsened significantly over time. Starting at a negative 312 million US dollars in 2011, it deteriorated each year to reach a substantial negative 3,044 million by 2015. This indicates that the company did not cover its cost of capital with its operating profits, leading to value destruction during these years.

Overall, despite a stable to slightly declining net operating profit and a decreasing cost of capital, the increase in invested capital outpaced profits, resulting in escalating economic losses. This pattern suggests that the company’s investments did not generate sufficient returns to exceed its capital costs, thereby reducing shareholder value over the analyzed period.

The financial data over the five-year period reveals notable shifts in profitability metrics for the company.

Net Income Attributable to EMC Corporation

This indicator demonstrates an initial upward trajectory from 2011 to 2013, increasing from 2,461 million US dollars to a peak of 2,889 million US dollars. Subsequently, net income declined in the following years, dropping to 2,714 million US dollars in 2014 and falling more sharply to 1,990 million US dollars by the end of 2015. This downward trend in the latter years suggests challenges affecting net profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a relatively stable pattern in the first three years, with a slight increase from 4,267 million US dollars in 2011 to 4,442 million US dollars in 2013. However, in 2014, NOPAT decreased significantly to 3,737 million US dollars and continued to decline to 2,862 million US dollars in 2015. The decline in NOPAT aligns with the reduction in net income, indicating reduced operating efficiency or higher operating expenses.

Overall, the financial trends indicate a strengthening in profitability during the initial years, followed by a period of contraction in both net income and operating profit after taxes. The data suggests the company faced operational or market challenges after 2013 that adversely impacted earnings and operating performance.

Provision for Income Taxes

The provision for income taxes demonstrates a fluctuating pattern over the five-year period. It increased notably from US$640 million in 2011 to a peak of US$918 million in 2012. This was followed by a decline to US$772 million in 2013. Subsequently, the provision rose again in 2014 to US$868 million, before decreasing to US$710 million in 2015. Overall, the provision shows variability without a consistent upward or downward trend, suggesting changes in taxable income or tax rates during the analyzed years.

Cash Operating Taxes

Cash operating taxes display a general increasing trend from 2011 to 2014, rising from US$739 million to US$1309 million. This represents a significant growth in actual cash payments for income taxes. However, in 2015, cash operating taxes decrease to US$992 million. Despite this drop, the values for 2015 remain considerably higher than the initial amount in 2011. The rising trend through 2014 followed by a decline in 2015 could indicate changes in the timing of tax payments, tax planning strategies, or variations in taxable income.

Comparison Between Provision for Income Taxes and Cash Operating Taxes

Throughout the period, cash operating taxes consistently exceed the provision for income taxes each year. The gap between cash taxes and provisions widens in 2012 and remains substantial through 2014, suggesting that actual tax payments were higher than the accounting estimates reflected in the provisions. By 2015, while both items decreased, cash payments still remained well above provisions. This pattern may indicate timing differences between tax accruals and payments, or adjustments in working capital related to tax obligations.

Total Reported Debt & Leases

The total reported debt and leases exhibit significant fluctuations over the analyzed periods. There is a notable decrease from 4,450 million USD at the end of 2011 to 2,942 million USD at the end of 2012, indicating a substantial reduction in debt within that year. However, this trend reverses sharply in 2013, with debt increasing to 8,530 million USD. Subsequently, it declines in 2014 to 7,199 million USD before rising again in 2015 to 8,562 million USD. Overall, the company experienced volatile debt levels with an upward tendency in the latter years.

Total EMC Corporation’s Shareholders’ Equity

Shareholders’ equity shows a generally stable trend across the five-year period. It increased from 18,959 million USD in 2011 to 22,357 million USD in 2012, followed by minor fluctuations in subsequent years: a slight decrease to 22,301 million USD in 2013, a further small decline to 21,896 million USD in 2014, and another decrease to 21,140 million USD in 2015. This pattern suggests a modest erosion of equity after a strong initial increase.

Invested Capital

Invested capital demonstrates consistent growth throughout the period. Starting at 24,594 million USD in 2011, it rises steadily each year, reaching 27,392 million USD in 2012, then moving up to 31,439 million USD in 2013, 32,268 million USD in 2014, and finally peaking at 33,788 million USD in 2015. This continual increase indicates ongoing investment and resource allocation expansion within the company.

Summary of Financial Trends

The contrasting movements between debt levels and shareholders’ equity reflect changing financing strategies. The initial reduction in debt was followed by sharp increases, whereas equity experienced a peak early on and then a gradual decline. Invested capital's steady rise suggests active growth or asset acquisition. The data imply that the company may have shifted toward greater leverage in later years to support its investments. These trends highlight a dynamic approach to capital structure management with a balanced focus on growth and financing costs.

The financial data of the company from 2011 to 2015 reflects a consistent deterioration in economic performance alongside an increase in invested capital.

Economic Profit

Economic profit shows a deepening negative trend over the five-year period. Starting at a loss of US$312 million in 2011, the economic profit worsened steadily, reaching a deficit of US$3,044 million by 2015. This indicates persistently negative returns exceeding the cost of capital, with the magnitude of loss increasing each year.

Invested Capital

Invested capital demonstrated a steady upward trajectory during the period, growing from US$24,594 million at the end of 2011 to US$33,788 million by the close of 2015. The increase in invested capital suggests ongoing investments or asset accumulation despite diminishing economic profitability.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and cost of capital, consistently remained negative and showed a worsening pattern. It declined from -1.27% in 2011 to -9.01% in 2015, signifying that the returns generated were increasingly insufficient relative to the capital costs.

Overall, the data depicts a scenario where the company has been investing more capital over the years but has experienced increasingly negative economic profitability. The deteriorating economic spread ratio underscores inefficiencies in capital utilization and suggests challenges in generating adequate returns above the cost of capital.

Adjusted Revenues Trend

Adjusted revenues showed a consistent upward trajectory from 2011 to 2014, increasing from 21,518 million US dollars to a peak of 25,626 million US dollars. However, in 2015 there was a slight decline to 25,341 million US dollars, interrupting the previous growth pattern.

Economic Profit Development

Economic profit exhibited a persistent negative trend throughout the entire period. The deficit deepened each year, starting at -312 million US dollars in 2011 and worsening to -3,044 million US dollars by 2015. This indicates increasing economic losses over time.

Economic Profit Margin Behavior

The economic profit margin also mirrored the deteriorating financial efficiency. It decreased from -1.45% in 2011 to -12.01% in 2015, signifying a substantial decline in profitability relative to revenues. The margin's steep drop especially after 2013 suggests increasing cost pressures or operational inefficiencies.

Overall Financial Insights

Despite revenue growth in the first four years, the company’s economic profit and profit margins consistently worsened, indicating that increased revenues were insufficient to offset rising costs or capital charges. The pronounced decline in economic profit margin points to a systemic issue in value creation, suggesting that the company’s investments and operations have not delivered positive returns for shareholders over this five-year period.