Western Digital 2008 Annual Report Download - page 44

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liquidity while maximizing return through the full investment of available funds. The following table summarizes the
results of our statements of cash flows for the three years ended June 27, 2008:
June 27,
2008
June 29,
2007
June 30,
2006
Years Ended
Net cash flow provided by (used in):
Operating activities ............................. $1,399 $ 618 $ 368
Investing activities .............................. (1,321) (383) (303)
Financing activities .............................. 326 (86) 1
Net increase in cash and cash equivalents ................ $ 404 $149 $ 66
Operating Activities
Net cash provided by operating activities during 2008 was $1.4 billion as compared to $618 million for 2007 and
$368 million for 2006. Cash flow from operations consists of net income, adjusted for non-cash charges, plus or minus
working capital changes. This represents our principal source of cash. Net cash provided by changes in working capital
was $22 million for 2008 as compared to $78 million and $207 million used to fund working capital for 2007 and 2006,
respectively.
Our working capital requirements primarily depend upon the effective management of our cash conversion cycle,
which measures how quickly we can convert our products into cash through sales. The following table summarizes the
cash conversion cycle for the three years ended 2008:
June 27,
2008
June 29,
2007
June 30,
2006
Years Ended
Days sales outstanding .............................. 46 45 39
Days in inventory ................................. 27 20 19
Days payables outstanding ........................... (67) (66) (64)
Cash conversion cycle .............................. 6 (1) (6)
The decrease in the cash conversion cycle for 2008 was primarily due to our days in inventory (“DIOs”), which
increased by 7 days from 2007. This increase was primarily due to an increase in our inventory on-hand as a result of our
acquisition of Komag, which requires us to hold precious metals to be used in the production of recording media. The
1 day increase in days sales outstanding (“DSOs”) is primarily a result of changes in customer mix.
From time to time, we modify the timing of payments to our vendors. We make these modifications primarily to
manage our vendor relationships and to manage our cash flows, including our cash balances. Generally, we make the
payment modifications through negotiations with or by granting to or receiving from our vendors payment term
accommodations.
Investing Activities
Net cash used in investing activities for 2008 was $1.3 billion as compared to $383 million for 2007 and
$303 million for 2006. During 2008, cash used in investing activities consisted of $927 million for acquisitions and
$615 million for capital expenditures, partially offset by cash provided by investments of $221 million. During 2007,
cash used in investing activities consisted of $324 million for capital expenditures and $59 million for investments. The
increase in capital expenditures in 2008 compared to 2007 primarily consisted of the on-going conversion of our head
wafer fabrication facilities to utilizing 8-inch wafers from 6-inch wafers, continued investment in advanced head
technologies, increased capacity for our broadening and growing product portfolio and continued investment in media
equipment as a result of the Acquisition. The increase in capital expenditures in 2007 compared to 2006 was primarily a
result of equipment purchased to support our investments in advanced head technologies, new product platforms and
capacity for our broadening and growing product portfolio.
38