The Gap 2013 Annual Report Download - page 49

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• $77 million less proceeds from issuances under share-based compensation plans, net of withholding taxes, in
fiscal 2013 compared with fiscal 2012.
Net cash used for financing activities during fiscal 2012 increased $879 million compared with fiscal 2011,
primarily due to the following:
• $1.6 billion of proceeds from our issuance of long-term debt in fiscal 2011; and
• $400 million of payments of long-term debt in fiscal 2012; partially offset by
• $1.1 billion less repurchases of common stock in fiscal 2012 compared with fiscal 2011.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it
represents a measure of how much cash a company has available for discretionary and non-discretionary items
after the deduction of capital expenditures, as we require regular capital expenditures to build and maintain stores
and purchase new equipment to improve our business. We use this metric internally, as we believe our sustained
ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial
measure is not intended to supersede or replace our GAAP result.
The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure.
Fiscal Year
($ in millions) 2013 2012 2011
Net cash provided by operating activities $ 1,705 $ 1,936 $ 1,363
Less: Purchases of property and equipment (670) (659) (548)
Free cash flow $ 1,035 $ 1,277 $ 815
Long-Term Debt
In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent notes (the “Notes”) due
April 2021 and received proceeds of $1.24 billion in cash, net of underwriting and other fees. Interest is payable
semi-annually on April 12 and October 12 of each year and commenced on October 12, 2011. We have an option
to call the Notes in whole or in part at any time, subject to a make whole premium. The Notes agreement is
unsecured and does not contain any financial covenants.
In January 2014, we entered into a 15 billion Japanese yen ($147 million as of February 1, 2014), four-year,
unsecured term loan ("Japan Term Loan") due January 2018. Repayments of 2.5 billion Japanese yen are
payable on January 15 of each year, commencing on January 15, 2015, with a final repayment of 7.5 billion
Japanese yen due on January 15, 2018. In addition, interest is payable at least quarterly based on an interest rate
equal to the Tokyo Interbank Offered Rate ("TIBOR") plus a fixed margin. The Japan Term Loan agreement
contains certain requirements, including that the covenants in our $500 million, five-year, unsecured revolving
credit facility are upheld. As of February 1, 2014, we were in compliance with all such covenants. Violation of
these covenants would result in a default under the Japan Term Loan agreement, which, at the bank's discretion,
could require the immediate repayment of outstanding amounts.
Credit Facilities
We have a $500 million, five-year, unsecured revolving credit facility (the "Facility"), which expires in May 2018.
The Facility is available for general corporate purposes including working capital, trade letters of credit, and
standby letters of credit. The Facility fees 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 base rate, which is typically the London
Interbank Offered Rate ("LIBOR"), plus a margin based on our long-term senior unsecured credit ratings and our
leverage ratio on the unpaid principal amount. To maintain availability of funds under the Facility, we pay a facility
fee on the full facility amount, regardless of usage. As of February 1, 2014, there were no borrowings under the
Facility. The net availability of the Facility, reflecting $23 million of outstanding standby letters of credit, was $477
million as of February 1, 2014.