Western Digital 2009 Annual Report Download - page 48

We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109” (“FIN 48”), as of June 30, 2007. As a result of the implementation of FIN 48,
we recognized no adjustment in the net liability for unrecognized tax benefits. The total amount of gross unrecognized
tax benefits as of the date of adoption of FIN 48 was $58 million, all of which would affect our effective tax rate if realized.
During the year ended June 27, 2008, we recognized a $17 million increase in the liability for unrecognized tax benefits
and recorded $32 million of liabilities for unrecognized tax benefits related to Komag. As of June 27, 2008, we had
approximately $107 million of unrecognized tax benefits which included the $32 million of gross unrecognized tax
benefits related to Komag.
Liquidity and Capital Resources
We ended 2009 with total cash and cash equivalents of $1.8 billion, an increase of $690 million from June 27, 2008.
The following table summarizes the results of our statements of cash flows for the three years ended July 3, 2009:
July 3,
2009
June 27,
2008
June 29,
2007
Years Ended
Net cash flow provided by (used in):
Operating activities.............................. $1,305 $ 1,399 $ 618
Investing activities .............................. (551) (1,321) (383)
Financing activities .............................. (64) 326 (86)
Net increase in cash and cash equivalents ................ $ 690 $ 404 $149
Our investment policy is to manage our investment portfolio to preserve principal and liquidity while maximizing
return through the full investment of available funds. We believe our current cash, cash equivalents and cash generated
from operations will be sufficient to meet our working capital needs through the foreseeable future. Our ability to sustain
our working capital position is subject to a number of risks that are discussed in Item 1A of this Annual Report on
Form 10-K.
Operating Activities
Net cash provided by operating activities during 2009 was $1.3 billion as compared to $1.4 billion for 2008 and
$618 million for 2007. 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 provided by changes in working
capital was $198 million for 2009 as compared to $22 million for 2008 and $78 million used to fund working capital for
2007.
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 2009:
July 3,
2009
June 27,
2008
June 29,
2007
Years Ended
Days sales outstanding ............................... 47 46 45
Days in inventory .................................. 26 27 20
Days payables outstanding ............................ (67) (67) (66)
Cash conversion cycle................................ 6 6 (1)
For the year ended July 3, 2009, our days sales outstanding (“DSOs”) increased by 1 day, days in inventory (“DIOs”)
decreased by 1 day, and days payables outstanding remained consistent with 2008.
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
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