Banana Republic 2005 Annual Report Download - page 27

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Our largest source of operating cash flows is cash collections from our customers. Our primary uses of cash include personnel related expenses,
merchandise inventory purchases, payment of taxes, occupancy and capital expenditures. Net cash provided by operating activities decreased $46
million compared with fiscal 2004. The decrease in source of cash from fiscal 2004 is primarily due to the decrease in accounts payable mainly as a
result of lower merchandise inventory levels, and the decrease in accrued expenses, driven primarily by the decreased bonus as a result of fiscal
2005 performance. These decreases were offset by an increase in source of cash due to the decreased inventory balance as a result of disciplined
inventory management.
For fiscal 2004, the $563 million decrease in cash provided by operating activities compared with fiscal 2003 was due to increased purchases to replenish
our inventory to support our increased sales activity. In addition, higher tax payments due to our stronger earnings performance required more cash.
Inventory management remains an area of focus. We continue to execute against our strategies to optimize inventory productivity and more tightly
manage the receipt and timing of our inventory, while maintaining appropriate in-store merchandise levels and product assortment to support sales
growth. Inventory per square foot at January 28, 2006 was $43, an 11 percent decrease over fiscal 2004 primarily due to earlier Spring and later Sum-
mer product flow. Inventory per square foot at January 29, 2005 was $48, a 6 percent increase over fiscal 2003 primarily due to earlier Easter and
Spring product flow and also missed holiday opportunities.
We fund inventory expenditures during normal and peak periods through cash flows from operating activities and available cash. Our business follows
a seasonal pattern, peaking over a total of about 13 weeks during the back-to-school and holiday periods. During fiscal 2005, fiscal 2004, and fiscal
2003, these periods accounted for 32 percent, 32 percent, and 33 percent, respectively, of our annual net sales. The seasonality of our operations may
lead to significant fluctuations in certain asset and liability accounts between fiscal year-end and subsequent interim periods.
We expect the percent decrease in inventory per square foot at the end of both the first and second quarters of 2006 to be in the low single digits
compared to last year.
Cash Flows from Investing Activities
We are committed to maintaining sufficient cash to support the needs of our business and withstand unanticipated business volatility; therefore,
we plan to keep $2 billion of cash available. We will continue to evaluate our $2 billion cash balance target over time to reflect the changing needs
of our business.
Cash Flows from Operating Activities
52 Weeks Ended
($ in millions) January 28, 2006 January 29, 2005 January 31, 2004
Net earnings $ 1,113 $ 1,150 $ 1,031
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation and amortization 625 615 675
Other non-cash reconciling adjustments (74) (23) 180
Change in merchandise inventory 114 (90) 385
Other changes in operating assets and liabilities (227) (55) (111)
Net cash provided by operating activities $ 1,551 $ 1,597 $ 2,160
52 Weeks Ended
($ in millions) January 28, 2006 January 29, 2005 January 31, 2004
Purchase of property and equipment $ (600) $ (419) $ (261)
Proceeds from sale of property and equipment 27 - 1
Purchase of short-term investments (1,768) (1,813) (1,202)
Maturities of short-term investments 1,645 2,072 442
Change in restricted cash 959 337 (1,303)
Change in other assets 23 6 5
Net cash provided by (used for) investing activities $ 286 $ 183 $ (2,318)