Dell 2002 Annual Report Download - page 24

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Table of Contents
Investment and Other Income (Loss), net
The following table summarizes Dell's investment and other income (loss), net for each of the past three fiscal years:
Fiscal Year Ended
January 31, February 1, February 2,
2003 2002 2001
(in millions)
Gains/(losses) on investments, net $ 67 $ (277) $ 307
Investment income, primarily interest 154 314 305
Interest expense (17) (29) (47)
Other (21) (66) (34)
Investment and other income (loss), net $ 183 $ (58) $ 531
The fiscal 2002 loss includes a $260 million impairment charge in the second quarter for other-than-temporary declines in fair value of its venture investments
due to ongoing market conditions as well as the investees' inability to execute their business plans. Excluding the effect of the impairment charge, the decrease
of investment and other income (loss), net, during fiscal 2003 and fiscal 2002 was due primarily to declining interest rates and fewer realized investment gains
in Dell's private and public equity securities portfolio.
Income Taxes
Dell's effective tax rate was 29.9% for fiscal 2003 compared to 28.0% for fiscal 2002 and 30.0% for fiscal 2001. Differences between the effective tax rate as
compared to the prior year and as compared to the U.S. federal statutory rate of 35% principally result from Dell's geographical distribution of taxable income
and losses and certain non-tax deductible charges.
Liquidity, Capital Commitments and Other Financing Arrangements
Liquidity
The following table presents selected financial statistics and information for each of the past three fiscal years:
Fiscal Year Ended
January 31, February 1, February 2,
2003 2002 2001
(dollars in millions)
Cash and investments $ 9,905 $ 8,287 $ 7,853
Days of sales outstanding 28 29 32
Days of supply in inventory 3 4 5
Days in accounts payable 68 69 58
Cash conversion cycle (37) (36) (21)
(a) Days of sales outstanding include the effect of product costs related to in-transit customer shipments (arising from the adoption of SAB 101) that are
classified in other current assets. At January 31, 2003, February 1, 2002, and February 2, 2001, days of sales outstanding included days of sales in
accounts receivable and days of in-transit customer shipments of 24 and 4 days; 25 and 4 days; and 27 and 5 days, respectively.
During fiscal 2003, Dell continued to generate substantial operating cash flows relative to earnings. Cash flows from operating activities represent Dell's
principal source of cash and during fiscal 2003, 2002 and 2001 were $3.5 billion, $3.8 billion and $4.2 billion, respectively. Cash flows from operating
activities resulted primarily from net income, improvements in Dell's cash conversion cycle and income tax benefits. These tax benefits totaled $260 million,
$487 million, and $929 million in fiscal 2003, 2002, and 2001, respectively, and resulted from the exercise of employee stock options.
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