Western Digital 2011 Annual Report Download - page 43

Liquidity and Capital Resources
We ended 2011 with total cash and cash equivalents of $3.5 billion, an increase of $756 million from July 2, 2010.
The following table summarizes our statements of cash flows for the three years ended July 1, 2011 (in millions):
July 1,
2011
July 2,
2010
July 3,
2009
Years Ended
Net cash flow provided by (used in):
Operating activities . ............................. $1,655 $1,942 $1,305
Investing activities . . ............................. (793) (986) (551)
Financing activities . ............................. (106) (16) (64)
Net increase in cash and cash equivalents ................. $ 756 $ 940 $ 690
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 2011 was $1.7 billion as compared to $1.9 billion for 2010 and
$1.3 billion for 2009. 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 working capital
changes was $238 million for 2011 as compared to net cash used to fund working capital of $37 million for 2010 and net
cash provided by working capital changes of $198 million for 2009.
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 2011 were as follows:
July 1,
2011
July 2,
2010
July 3,
2009
Years Ended
Days sales outstanding ................................. 47 46 47
Days in inventory .................................... 27 23 26
Days payables outstanding .............................. (75) (72) (67)
Cash conversion cycle .................................. (1) (3) 6
For 2011, our average days sales outstanding (“DSOs”) increased by one day, days in inventory (“DIOs”) increased by
four days, and days payables outstanding (“DPOs”) increased by three days. Changes in average DSOs and DIOs are
generally related to linearity of shipments and the timing of inventory builds, 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 2011 was $793 million as compared to $986 million for 2010 and
$551 million for 2009. During 2011, cash used in investing activities consisted of capital expenditures of $778 million
and $15 million for equipment related to the acquisition of a semiconductor wafer fabrication facility. 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 used for the acquisition of the land and
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