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Table of Contents
Contingencies and Litigation
The Company is involved in various legal proceedings and other claims related to environmental, labor, product
liability, intellectual property and other matters, all of which arise in the normal course of business. The Company is
required to assess the likelihood of any adverse judgment or outcome to these matters, as well as the range of
potential losses. A determination of the reserves required, if any, is made after careful analysis by management and
internal and, when necessary, external counsel. The required reserves may change in the future due to developments
or a change in circumstances, which could increase or decrease earnings in the period the changes are effective.
Revenue Recognition
The Company does not consider revenue recognition to be a critical accounting policy due to the nature of its
business in which revenues are generally recognized when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the sales price is fixed or determinable and collectibility is reasonably
assured. Generally, these criteria are met upon the actual shipment of product to the customer. Accordingly, other
than for estimates related to possible returns of products from customers, discounts or rebates, the recording of
revenue does not require significant judgments or estimates. Provisions for returns are estimated based on historical
sales returns, credit memo analysis and other known factors. Provisions are made for discounts and rebates, which
are primarily volume-based, and are generally based on historical trends and anticipated customer buying patterns.
Finally, revenues from maintenance contracts, which are deferred and recognized in income over the life of the
agreement, are not material to the consolidated results of operations of the Company.
Recently Issued Accounting Pronouncements
See Note 1 in the Notes to Consolidated Financial Statements contained in Item 15 of this Report for the
discussion of recently issued accounting pronouncements.
Liquidity and Capital Resources
Cash Flows
Cash Flows from Operating Activities
During fiscal 2008, the Company generated $453.6 million of cash and cash equivalents from its operating
activities as compared with $724.6 million in fiscal 2007. These results are comprised of: (1) cash flow generated
from net income excluding non-cash and other reconciling items, which consist of the add-back of depreciation and
amortization, deferred income taxes, stock-based compensation, gain on sale of assets and other non-cash items
(primarily the provision for doubtful accounts and periodic pension costs) and (2) cash flow generated from (used
for) working capital, excluding cash and cash equivalents. The working capital outflow in fiscal 2008 was driven by
cash payments on accounts payable ($123.3 million) and other items ($170.7 million), partially offset by collection
of receivables and a reduction in inventory. The cash outflow for payables was primarily attributable to TS and the
cash outflow for other items was primarily a result of income tax payments.
During fiscal 2007, the Company generated $724.6 million of cash and cash equivalents from its operating
activities of which $126.2 million was generated from working capital, excluding cash and cash equivalents. TS
experienced growth in receivables as well as payables driven, in part, by the acquisition of the Access business for
which the largest supplier is Sun Microsystems whose strongest quarter is typically its June fiscal year end. The
reduction in inventory was a net result of EM’s decrease of $74 million partially offset by a small increase in
inventory at TS. In addition, during fiscal 2007, the Company paid $29.7 million associated with the restructuring,
integration and other charges and exit-related costs accrued through purchase accounting.
In fiscal 2006, the Company utilized $423.4 million of cash and cash equivalents for working capital needs. The
working capital outflows consisted of growth in receivables ($254.7 million), growth in inventory ($142.6 million),
growth in accounts payable ($99.7 million) and outflow for other working capital items ($125.8 million). The driver
of the change in working capital included organic sales growth and a small investment in inventory at TS. In
addition, the Company paid $92.9 million during fiscal 2006 relating to restructuring, integration and payments of
amounts accrued
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