The Gap 2009 Annual Report Download - page 42

For fiscal 2010, we expect capital expenditures to be about $575 million. We expect to open about 65 new store
locations and close about 110 store locations. As a result, we expect net square footage to decrease about 3 percent
for fiscal 2010.
Cash Flows from Financing Activities
Our cash outflows from financing activities consist primarily of the repurchases of our common stock, dividend
payments, and the repayment of debt. Cash inflows typically consist of proceeds from share-based compensation,
net of withholding tax payments. Net cash used for financing activities for 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.
Net cash used for financing activities for fiscal 2008 decreased $1.1 billion compared with fiscal 2007, primarily due
to the following:
• $995 million less repurchases of common stock in fiscal 2008 compared with fiscal 2007;
• $188 million less repayments of long-term debt in fiscal 2008 compared with fiscal 2007; offset by
• $50 million less cash inflows from share-based compensation in fiscal 2008 compared with fiscal 2007.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it
represents a measure of how much cash a company has available for discretionary and non-discretionary items
after the deduction of capital expenditures, as we require regular capital expenditures to build and maintain stores
and purchase new equipment to improve our business. We use this metric internally, as we believe our sustained
ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial
measure is not intended to supersede or replace our GAAP results.
The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure.
Fiscal Year
($ in millions) 2009 2008 2007
Net cash provided by operating activities .......................................... $1,928 $1,412 $2,081
Less: Purchases of property and equipment ........................................ (334) (431) (682)
Freecashflow.............................................................. $1,594 $ 981 $1,399
Credit Facilities
Trade letters of credit represent a payment undertaking guaranteed by a bank on our behalf to pay a vendor a
given amount of money upon presentation of specific documents demonstrating that merchandise has shipped.
Vendor payables are recorded in the Consolidated Balance Sheets at the time of merchandise title transfer,
although the letters of credit are generally issued prior to this. Most of our merchandise vendors are now on open
account payment terms. As of January 30, 2010, our letter of credit agreements consist of two separate $100
million, three-year, unsecured committed letter of credit agreements, with two separate banks, for a total
aggregate availability of $200 million with an expiration date of May 2011. As of January 30, 2010, we had $24
million in trade letters of credit issued under these letter of credit agreements.
We also have a $500 million, five-year, unsecured revolving credit facility scheduled to expire in August 2012 (the
“Facility”). The Facility is available for general corporate purposes including working capital, trade letters of credit,
and standby letters of credit. The facility usage fees and fees related to the Facility fluctuate based on our long-
term senior unsecured credit ratings and our leverage ratio. If we were to draw on the Facility, interest would be a
26 Gap Inc. Form 10-K