On Jan. 25, hard drive maker Western Digital (NYSE:WDC) released second-quarter 2007 earnings for the period ended Dec. 29, 2006.
- These results exceeded management guidance on both the top and bottom lines, despite a fungible amount of share dilution and shrinking gross margins.
- However, be aware that some of these gains may not have been very tangible. Free cash flow grew slower than net income, and is smaller by dollar amount. Owner earnings actually decreased, and is the shortest of the three stacks.
- Retail operations may care the most about the cash conversion cycle (CCC), but widget manufacturers need to make sure their cash is working effectively, too. In WD's case, every conceivable cash conversion metric moved in a negative direction, worsening the overall cycle by more than a week.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q2 2007 |
Q2 2006 |
Change | |
|---|---|---|---|
|
Sales |
$1,428 |
$1,117 |
27.8% |
|
Net Profit |
$128 |
$104 |
22.7% |
|
EPS |
$0.57 |
$0.47 |
21.3% |
|
Diluted Shares |
226.0 |
221.5 |
2.0% |
Get back to basics with a look at the income statement.
Margin Checkup
|
Q2 2007 |
Q2 2006 |
Change* | |
|---|---|---|---|
|
Gross Margin |
17.9% |
20.4% |
(2.6) |
|
Operating Margin |
8.5% |
10.0% |
(1.4) |
|
Net Margin |
9.0% |
9.3% |
(0.4) |
Margins are the earnings engine. See how they work.
Management Effectiveness
|
Q2 2007 |
Q2 2006 |
Change* | |
|---|---|---|---|
|
Return on Assets |
21.0% |
24.0% |
(2.9) |
|
Return on Equity |
38.0% |
49.9% |
(12.0) |
See how management puts its financial tools to work.
Balance Sheet Highlights
|
Assets |
Q2 2007 |
Q2 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$830 |
$645 |
28.7% |
|
Accounts Rec. |
$668 |
$428 |
56.0% |
|
Inventory |
$265 |
$168 |
57.5% |
|
Liabilities |
Q2 2007 |
Q2 2006 |
Change |
|---|---|---|---|
|
Accounts Payable |
$816 |
$580 |
40.6% |
|
Long-Term Debt |
$21 |
$32 |
(34.2%) |
Learn the ways of the balance sheet.
Cash Flow Highlights
|
Q2 2007 |
Q2 2006 |
Change | |
|---|---|---|---|
|
Cash From Ops. |
$184 |
$126 |
46.0% |
|
Capital Expenditures |
$110 |
$62 |
77.4% |
|
Free Cash Flow |
$74 |
$64 |
15.6% |
|
$68 |
$81 |
(15.9%) |
Find out why Fools always follow the money.
Cash Conversion Checkup
|
Q2 2007 |
Q2 2006 |
Change | |
|---|---|---|---|
|
Days in Inventory |
18.5 |
17.3 |
1.2 |
|
Days in Receivables |
40.4 |
36.2 |
4.2 |
|
Days Payables Outstanding |
60.1 |
62.2 |
(2.1) |
|
Cash Conversion Cycle |
(1.2) |
(8.7) |
7.5 |
Read up on cash conversion metrics.
Related Companies:
- Seagate (NYSE:STX)
- Hitachi (NYSE:HIT)
- IBM (NYSE:IBM)
- Micron (NYSE:MU)
- Hewlett-Packard (NYSE:HPQ)
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At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.
