Western Digital 2010 Annual Report Download - page 48

Liquidity and Capital Resources
We ended 2010 with total cash and cash equivalents of $2.7 billion, an increase of $940 million from July 3, 2009.
The following table summarizes our statements of cash flows for the three years ended July 2, 2010:
July 2,
2010
July 3,
2009
June 27,
2008
Years Ended
Net cash flow provided by (used in):
Operating activities .............................. $1,942 $1,305 $ 1,399
Investing activities .............................. (986) (551) (1,321)
Financing activities .............................. (16) (64) 326
Net increase in cash and cash equivalents ................ $ 940 $ 690 $ 404
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 and capital expenditure needs through the foreseeable
future. Our ability to sustain our working capital position is subject to a number of risks that we discuss in Item 1A of
this Annual Report on Form 10-K.
Operating Activities
Net cash provided by operating activities during 2010 was $1.9 billion as compared to $1.3 billion for 2009 and
$1.4 billion for 2008. 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 to fund working capital was
$37 million for 2010 as compared to net cash provided by working capital changes of $198 million for 2009 and
$22 million for 2008.
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 average quarterly cash conversion
cycles for the three years ended 2010 were as follows:
July 2,
2010
July 3,
2009
June 27,
2008
Years Ended
Days sales outstanding ................................ 46 47 46
Days in inventory ................................... 23 26 27
Days payables outstanding . . ........................... (72) (67) (67)
Cash conversion cycle ................................. (3) 6 6
For 2010, our average days sales outstanding (“DSOs”) decreased by 1 day, days in inventory (“DIOs”) decreased by
3 days, and days payables outstanding (“DPOs”) increased by 5 days. The decreases in average DSOs and DIOs were
primarily the result of the strong demand environment that existed during the first three quarters of 2010, which led to
better sales linearity and faster inventory turns during the corresponding period. DSOs and DIOs for the fourth quarter
were 48 and 28, respectively. 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 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 for 2010 was $986 million as compared to $551 million for 2009 and
$1.3 billion for 2008. During 2010, cash used in investing activities consisted primarily of $737 million for capital
expenditures, $233 million used for the acquisition of the magnetic media sputtering operations of Hoya and $20 million
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