Banana Republic 2006 Annual Report Download - page 41

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Cash Flows from Financing Activities
Our cash outflows related to financing activities consist primarily of the repurchase of our common stock,
while cash inflows typically consist of proceeds from share-based compensation. For fiscal 2006, cash flows used
for financing activities decreased $938 million compared with fiscal 2005, driven by us repurchasing
approximately $1.0 billion less common stock than last year.
For fiscal 2005, cash flows used for financing activities increased $244 million compared with fiscal 2004.
In fiscal 2005, we repurchased $2.0 billion of common stock and received $139 million of proceeds from share-
based compensation. In fiscal 2004, we repurchased $1.0 billion of common stock and received $154 million of
proceeds from share-based compensation. In addition, we made $871 million of payments for long-term debt in
fiscal 2004.
Free Cash Flow
Free cash flow is a non-GAAP measure. We believe free cash flow is an important metric, as it represents a
measure of how much cash a company has available after the deduction of capital expenditures, as we require
regular capital expenditures to build and maintain stores and purchase new equipment to keep the business
growing. We use this metric internally, as we believe our sustained ability to increase free cash flow is an
important driver of value creation.
The following table reconciles free cash flow, a non-GAAP financial measure, to a GAAP financial
measure.
($ in millions)
53 Weeks Ended
February 3, 2007
52 Weeks Ended
January 28, 2006
52 Weeks Ended
January 29, 2005
Net cash provided by operating activities ................. $1,250 $1,551 $1,597
Less: Purchases of property and equipment ............... (572) (600) (419)
Free cash flow .................................. $ 678 $ 951 $1,178
The following table sets forth our reconciliation of projected fiscal 2007 free cash flow:
($ in millions)
Projected
52 Weeks Ending
February 2, 2008
Projected net cash provided by operating activities .................................... $1,200
Less: Projected purchase of property and equipment ................................... (700)
Projected fiscal 2007 free cash flow ................................................ $ 500
In fiscal 2006, we delivered $678 million in free cash flow, which represented 87% of net earnings. Our
earnings continue to generate strong free cash flow. Free cash flow as a percent of net earnings was 85% and
102% for fiscal 2005 and 2004, respectively. For the year ended February 3, 2007, our free cash flow decreased
$273 million compared with the prior year primarily due to lower earnings in fiscal 2006.
We are committed to maintaining sufficient liquidity to support the needs of our business and withstand
unanticipated business volatility and plan to keep about $1.5 billion of cash and investments available. We will
continue to evaluate our $1.5 billion target over time to reflect the changing needs of our business.
Dividend Policy
In determining whether to, and at what level to, declare a dividend, we considered a number of financial
factors, including sustainability and financial flexibility, as well as other factors including operating performance
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