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FORM 10-K
Liquidity and related ratios:
The following table highlights our liquidity and related ratios as of December 31, 2015 and 2014 (dollars in millions):
December 31, Percentage
ChangeLiquidity and Related Ratios 2015 2014
Current assets (1) $ 3,010 $ 3,065 (1.8)%
Current liabilities (1) 3,046 2,813 8.3 %
Working capital (1)(2) (36)252 (114.3)%
Total debt (1) 1,390 1,388 0.1 %
Total equity $ 1,961 $ 2,018 (2.8)%
Debt to equity (1)(3) 0.71:1 0.69:1 2.9 %
(1) Prior period amounts have been reclassified to conform to current period presentation, due to the Company's adoption of new accounting standards
during the fourth quarter ended December 31, 2015. See Note 1 "Summary of Significant Accounting Policies" to the Consolidated Financial
Statements for more information.
(2) Working capital is calculated as current assets less current liabilities.
(3) Debt to equity is calculated as total debt divided by total equity.
Current liabilities increased 8% from 2014 to 2015. The increase in current liabilities was primarily due to the increase in accounts
payable, resulting from inventory growth related to new store openings supported in part by our suppliers and additional supplier
participation in our enhanced supplier financing program during the year, which allowed us to obtain more favorable payment terms.
Our accounts payable to inventory ratio was 99.1% as of December 31, 2015, as compared to 94.6% in the prior year.
The following table identifies cash provided by/(used in) our operating, investing and financing activities for the years ended December 31,
2015, 2014 and 2013 (in thousands):
For the Year Ended
December 31,
Liquidity 2015 2014 2013
Total cash provided by (used in):
Operating activities $ 1,281,476 $ 1,190,430 $ 908,026
Investing activities (407,188)(423,402) (388,754)
Financing activities (1,008,547)(747,786) (536,082)
Net (decrease) increase in cash and cash equivalents $(134,259)$ 19,242 $ (16,810)
Capital expenditures $ 414,020 $ 429,987 $ 395,881
Free cash flow (1) 867,456 760,443 512,145
(1) Calculated as net cash provided by operating activities, less capital expenditures for the period.
Operating activities:
The increase in net cash provided by operating activities in 2015 compared to 2014 was primarily due to an increase in net income and
a greater increase in income taxes payable, partially offset by a smaller decrease in net inventory investment and a decrease in accrued
payroll-related liabilities. The larger increase in income taxes payable was primarily the result of higher accrued income taxes payable
at the end of 2015, as compared to the end of 2014. Net inventory investment reflects our investment in inventory, net of the amount of
accounts payable to suppliers. Our net inventory investment continues to decrease as a result of the impact of our enhanced supplier
financing programs. Our supplier financing programs enable us to reduce overall supply chain costs and negotiate extended payment
terms with our suppliers. The smaller decrease in net inventory investment in 2015 was the result of fewer new suppliers entering our
supplier financing programs in 2015, as compared to 2014. Our accounts payable to inventory ratio was 99.1% and 94.6% as of December
31, 2015 and 2014, respectively. The decrease in accrued payroll-related liabilities during 2015, as compared to the increase in 2014,
was due to the timing of pay period end dates versus check dates.
The increase in net cash provided by operating activities in 2014 compared to 2013 was primarily due to a greater decrease in net inventory
investment and larger increases in net income and accrued payroll-related liabilities in 2014 as compared to 2013. The greater decrease
in our net inventory investment was the result of increased supplier participation and support of our supplier financing programs. Our
accounts payable to inventory ratio was 94.6% and 86.6% as of December 31, 2014 and 2013, respectively. The increase in accrued
payroll-related liabilities during 2014, as compared to 2013, was due to the timing of pay period end dates versus check dates and timing
of payments for employer obligations under certain benefit plans.