Dell 2006 Annual Report Download - page 52

Table of Contents
intent is that those cash balances would remain outside of the U.S., and we would meet our U.S. liquidity needs through
operating cash flows, external borrowings, or both. We utilize a variety of tax planning and financing strategies with the
objective of having our worldwide cash available in the locations in which it is needed.
In Fiscal 2007, we continued to maintain strong liquidity with cash flows from operations of $4.0 billion, compared to
$4.8 billion in Fiscal 2006. We ended Fiscal 2007 with $12.4 billion in cash and investments, an increase of $689 million over
the prior fiscal year-end. The following table summarizes our ending cash, cash equivalents, and investments and contains a
summary of our Consolidated Statements of Cash Flows for the past three fiscal years:
February 2, February 3,
2007 2006
As
Restated
(in millions)
Cash, cash equivalents, and investments:
Cash and cash equivalents $ 9,546 $ 7,054
Debt securities 2,784 4,606
Equity and other securities 115 96
Cash, cash equivalents and investments $ 12,445 $ 11,756
Fiscal Year Ended
February 2, February 3, January 28,
2007 2006 2005
As As
Restated Restated
(in millions)
Net cash flow provided by (used in):
Operating activities $ 3,969 $ 4,751 $ 5,821
Investing activities 1,003 4,149 (1,678)
Financing activities (2,551) (6,252) (3,129)
Effect of exchange rate changes on cash and cash equivalents 71 (73) 46
Net increase in cash and cash equivalents $ 2,492 $ 2,575 $ 1,060
• Operating Activities — Cash flows from operating activities during Fiscal 2007, 2006, and 2005 resulted primarily from net
income, which represents our principal source of cash. In Fiscal 2007, the decrease in operating cash flows was primarily
led by a decrease in net income slightly offset by changes in working capital. In Fiscal 2006, the decrease in cash provided
by operating activities versus Fiscal 2005 is primarily due to changes in operating working capital accounts and slightly
offset by an increase in net income.
Upon adopting SFAS 123(R) in the first quarter of Fiscal 2007, the excess tax benefits associated with employee stock
compensation are classified as a financing activity; however, the offset reduces cash flows from operations. In Fiscal 2007,
the excess tax benefit was $80 million. Prior to adopting SFAS 123(R), operating cash flows were impacted by income tax
benefits that resulted from the exercise of employee stock options. These tax benefits totaled $224 million and $249 million
in Fiscal 2006 and 2005, respectively. These benefits are the tax effects of corporate income tax deductions (that are
considered taxable income to the employee) that represent the amount by which the fair value of our stock exceeds the
option strike price on the day the employee exercises a stock option. The decline in tax benefits in Fiscal 2007 from Fiscal
2006 is due to fewer stock option exercises.
Key Performance Metrics — Our direct business model allows us to maintain an efficient asset management system in
comparison to our major competitors. We are capable of minimizing inventory risk while collecting amounts due from
customers before paying vendors, thus allowing us to generate
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