JCP » Topics » Free Cash Flow (Non-GAAP Financial Measure)

These excerpts taken from the JCP 10-K filed Mar 31, 2009.

Free Cash Flow (Non-GAAP Financial Measure)

We define free cash flow as net cash provided by operating activities of continuing operations less capital expenditures and dividends paid, plus proceeds from sale of assets. Free cash flow is considered a non-GAAP financial measure under the rules of the Securities and Exchange Commission. We believe that free cash flow is a relevant indicator of our ability to repay maturing debt, revise our dividend policy or fund other uses of capital that we believe will enhance stockholder value. Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt maturities and other obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow in addition to, rather than as a substitute for, our entire statement of cash flows and those measures prepared in accordance with GAAP.

The following table reconciles net cash provided by operating activities of continuing operations, the most directly comparable GAAP measure, to free cash flow, a non-GAAP financial measure.

 

($ in millions)    2008     2007     2006  

Net cash provided by operating activities of continuing operations (GAAP measure)

   $     1,155     $     1,249 (1)   $     1,258 (1)

Less:

      

Capital expenditures

     (969 )     (1,243 )     (772 )

Dividends paid, common

     (178 )     (174 )     (153 )

Plus:

      

Proceeds from sale of assets

     13       26       20  
                        

Free cash flow (a non-GAAP financial measure)

   $ 21     $ (142 )   $ 353  
                        

(1) Includes a $300 million discretionary cash contribution to our qualified pension plan in 2006. The approximately $110 million tax benefit related to the 2006 contribution was realized in 2007. No such contributions were made in 2008 or 2007.

Notwithstanding the difficult operating conditions in 2008, we generated $21 million of positive free cash flow, an improvement of $163 million over 2007.

 

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Free
Cash Flow (Non-GAAP Financial Measure)

We define free cash flow as net cash provided by operating activities of continuing operations less capital
expenditures and dividends paid, plus proceeds from sale of assets. Free cash flow is considered a non-GAAP financial measure under the rules of the Securities and Exchange Commission. We believe that free cash flow is a relevant indicator of our
ability to repay maturing debt, revise our dividend policy or fund other uses of capital that we believe will enhance stockholder value. Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures
due to the fact that the measure does not deduct the payments required for debt maturities and other obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow in addition to, rather than as
a substitute for, our entire statement of cash flows and those measures prepared in accordance with GAAP.

The following table reconciles net cash provided
by operating activities of continuing operations, the most directly comparable GAAP measure, to free cash flow, a non-GAAP financial measure.

 



























































































































































($ in millions)  2008  2007  2006 

Net cash provided by operating activities of continuing operations (GAAP measure)

  $    1,155  $    1,249(1) $    1,258(1)

Less:

    

Capital expenditures

   (969)  (1,243)  (772)

Dividends paid, common

   (178)  (174)  (153)

Plus:

    

Proceeds from sale of assets

   13   26   20 
             

Free cash flow (a non-GAAP financial measure)

  $21  $(142) $353 
             

(1) Includes a $300 million discretionary cash contribution to our qualified pension plan in 2006. The
approximately $110 million tax benefit related to the 2006 contribution was realized in 2007. No such contributions were made in 2008 or 2007.

SIZE="2">Notwithstanding the difficult operating conditions in 2008, we generated $21 million of positive free cash flow, an improvement of $163 million over 2007.

SIZE="1"> 


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EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 31, 2009
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