Banana Republic 2010 Annual Report Download - page 33

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We fund inventory expenditures during normal and peak periods through cash flows from operating activities and
available cash. Our business follows a seasonal pattern, with sales peaking over a total of about eight weeks during
the end-of-year holiday period. The seasonality of our operations may lead to significant fluctuations in certain
asset and liability accounts between fiscal year-end and subsequent interim periods.
Cash Flows from Investing Activities
Our cash outflows from investing activities are primarily for capital expenditures and purchases of investments,
while cash inflows are primarily proceeds from maturities of investments. Net cash used for investing activities
during fiscal 2010 decreased $108 million compared with fiscal 2009, primarily due to the following:
• $350 million more net maturities of short-term investments in fiscal 2010 compared with fiscal 2009; partially
offset by
• $223 million more purchases of property and equipment in fiscal 2010 compared with fiscal 2009; and
• $17 million less release of restricted cash in fiscal 2010 compared with fiscal 2009.
Net cash used for investing activities during fiscal 2009 increased $139 million compared with fiscal 2008, primarily
due to the following:
• $401 million more net purchases of short-term investments in fiscal 2009 compared with net maturities in fiscal
2008; offset by
• $142 million, net of cash acquired, used for the acquisition of Athleta in September 2008; and
• $97 million less purchases of property and equipment in fiscal 2009 compared with fiscal 2008.
For fiscal 2011, we expect capital expenditures to be about $575 million.
Cash Flows from Financing Activities
Our cash outflows from financing activities consist primarily of the repurchases of our common stock and dividend
payments. Cash inflows primarily consist of proceeds from share-based compensation, net of withholding tax
payments. Net cash used for financing activities during fiscal 2010 increased $1.4 billion compared with fiscal 2009,
primarily due to the following:
• $1.4 billion more repurchases of common stock in fiscal 2010 compared with fiscal 2009.
Net cash used for financing activities during fiscal 2009 decreased $234 million compared with fiscal 2008,
primarily due to the following:
• 158 million less repurchases of common stock in fiscal 2009 compared with fiscal 2008; and
• $88 million less repayments of long-term debt in fiscal 2009 compared with fiscal 2008.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it
represents a measure of how much cash a company has available for discretionary and non-discretionary items
after the deduction of capital expenditures, as we require regular capital expenditures to build and maintain stores
and purchase new equipment to improve our business. We use this metric internally, as we believe our sustained
ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial
measure is not intended to supersede or replace our GAAP results.
26 Gap Inc. Form 10-K