Western Digital 2015 Annual Report Download - page 50

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2015 from one of our foreign subsidiaries using cash and cash equivalents held outside of the United States. Our Board of
Directors previously approved a capital allocation plan that includes repurchases of our common stock and the adoption
of a quarterly cash dividend policy. Our current plans do not anticipate that we will need funds generated from foreign
operations to fund our domestic operations or capital allocation plan. In the event funds from foreign operations are
needed in the United States, any repatriation could result in the accrual and payment of additional U.S. income tax.
Operating Activities
Net cash provided by operating activities was $2.2 billion in 2015 as compared to $2.8 billion and $3.1 billion
in 2014 and 2013, respectively. Cash flow from operating activities consists of net income, adjusted for non-cash
charges, plus or minus working capital changes. This represents our principal source of cash. Net cash used in working
capital changes was $593 million for 2015 as compared to net cash used in working capital changes of $234 million in
2014 and net cash provided by working capital changes of $715 million for 2013.
Our working capital requirements primarily depend on the effective management of our cash conversion cycle,
which measures how quickly we can convert our products into cash through sales. The cash conversion cycles for the
three years ended 2015 were as follows:
Years Ended
July 3,
2015
June 27,
2014
June 28,
2013
Days sales outstanding .................................. 39 48 43
Days in inventory ...................................... 49 41 39
Days payables outstanding ............................... (67) (67) (66)
Cash conversion cycle ................................... 21 22 16
In 2015, our days sales outstanding (“DSOs”) decreased by 9 days, days in inventory (“DIOs”) increased by 8
days, and days payables outstanding (“DPOs”) remained flat compared to 2014. Changes in DSOs are generally related
to the linearity of shipments. For 2015, the decrease in DSOs was due to both the linearity of shipments and the sale
of trade receivables in connection with our factoring agreement. Changes in DIOs are generally related to the timing
of inventory builds. Changes in DPOs are generally related to production volume and the timing of purchases during
the period. From time to time, we modify the timing of payments to our vendors. We make modifications primarily
to manage our vendor relationships and to manage our cash flows, including our cash balances. Generally, we make
the payment term modifications through negotiations with our vendors or by granting to, or receiving from, our
vendors’ payment term accommodations.
Investing Activities
Net cash used in investing activities in 2015 was $1.0 billion as compared to $1.9 billion for 2014 and $1.0 bil-
lion for 2013. During 2015, cash used in investing activities consisted primarily of $257 million related to acquis-
itions, net of cash acquired, $612 million of capital expenditures, $857 million related to the purchase of investments,
offset by $5 million of other investing activities, net, and $768 million of proceeds from the sales and maturities of
investments. In 2014, cash used in investing activities consisted primarily of $823 million related to acquisitions, net
of cash acquired, $628 million of capital expenditures, $561 million related to the purchase of investments, offset by
$4 million of other investing activities, net, and $72 million of proceeds from the sales and maturities of investments.
Our cash equivalents are invested in highly liquid money market funds that are invested in U.S. Treasury secu-
rities and U.S. Government Agency securities. In addition, we invest directly in U.S. Treasury securities,
U.S. Government Agency securities, commercial paper and certificates of deposit.
Financing Activities
Net cash used in financing activities was $1.1 billion in 2015 as compared to $385 million and $1.0 billion for
2014 and 2013, respectively. Net cash used in financing activities in 2015 consisted of $125 million to repay debt,
$970 million to repurchase shares of our common stock and $396 million to pay dividends on our common stock,
44