Banana Republic 2013 Annual Report Download - page 47

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23
Liquidity and Capital Resources
Our largest source of cash flows is cash collections from the sale of our merchandise and proceeds from issuance
of debt. Our primary uses of cash include merchandise inventory purchases, occupancy costs, personnel-related
expenses, purchases of property and equipment, share repurchases, and payment of taxes.
In the first quarter of fiscal 2011, we made the strategic decision to issue debt in the aggregate amount of $1.65
billion. Given favorable market conditions and our history of generating consistent and strong operating cash flow,
we took this step to provide a more optimal capital structure. We remain committed to maintaining a strong
financial profile with ample liquidity. Proceeds from the debt issuance were available for general corporate
purposes, including share repurchases. During fiscal 2012, we repaid our $400 million, five-year, unsecured term
loan in full.
In the fourth quarter of fiscal 2013, we entered into a 15 billion Japanese yen ($147 million as of February 1,
2014), four-year, unsecured term loan.
We consider the following to be measures of our liquidity and capital resources:
($ in millions) February 1,
2014 February 2,
2013 January 28,
2012
Cash, cash equivalents, and short-term investments $ 1,510 $ 1,510 $ 1,885
Debt $ 1,394 $ 1,246 $ 1,665
Working capital $ 1,985 $ 1,788 $ 2,181
Current ratio 1.81:1 1.76:1 2.02:1
As of February 1, 2014, about half of our cash and cash equivalents were held in the U.S. and are generally
accessible without any limitations.
We believe that current cash balances and cash flows from our operations will be sufficient to support our
business operations, including growth initiatives and planned capital expenditures, for the next 12 months and
beyond. We are also able to supplement near-term liquidity, if necessary, with our $500 million revolving credit
facility.
Cash Flows from Operating Activities
Net cash provided by operating activities during fiscal 2013 decreased $231 million compared with fiscal 2012,
primarily due to the following:
• a decrease of $220 million related to income taxes payable, net of prepaid income taxes and other tax-related
items, in fiscal 2013 compared with fiscal 2012 primarily due to the timing of tax payments;
• a decrease of $73 million related to accrued expenses and other current liabilities primarily due to a higher
bonus payout in fiscal 2013 compared with fiscal 2012;
• a decrease of $71 million related to non-cash and other items primarily due to the realized gain related to our
derivative financial instruments in fiscal 2013 compared with a realized loss in fiscal 2012;
• a decrease of $67 million related to lease incentives and other long-term liabilities primarily due to the resolution
of tax matters, including interest, and an increase in lease incentives in fiscal 2012 related to the relocation of
our New York headquarter offices; and
• a decrease of $50 million related to merchandise inventory primarily due to volume and timing of receipts;
partially offset by
• an increase in net income of $145 million; and
• a deferred tax provision of $69 million in fiscal 2013 compared with a deferred tax benefit of $37 million in fiscal
2012.