SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 29, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to __________
Commission File Number 1-7562
THE GAP, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1697231
(State of Incorporation) (I.R.S. Employer
Identification No.)
One Harrison
San Francisco, California 94105
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 952-4400
_______________________
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.05 par value New York Stock Exchange, Inc.
(Title of class) Pacific Stock Exchange, Inc.
(Name of each exchange where registered)
Securities registered pursuant to Section 12(g) of the Act: None
_______________________
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, $0.05 par value, 144,057,151 shares as of June 9, 1995
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PART 1 THE
GAP, INC. AND SUBSIDIARIES
ITEM 1
CONSOLIDATED BALANCE SHEETS
<S> <C> <C> <C>
($000) April 29, January 28, April 30,
1995 1995 1994
(Unaudited) (See Note 1) (Unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 298,218 $ 414,487 $ 323,139
Short-term investments 157,498 173,543 176,393
Merchandise inventory 408,952 370,638 346,544
Prepaid expenses and other 113,894 97,019 96,829
Total Current Assets 978,562 1,055,687 942,905
Property and equipment (net) 852,824 828,777 749,368
Long-term investments 16,949 32,097 19,944
Lease rights and other assets 86,393 87,683 68,415
Total Assets $ 1,934,728 $ 2,004,244 $ 1,780,632
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ - $ - $ 75,000
Notes payable - 2,478 4,516
Accounts payable 233,194 263,724 214,289
Accrued expenses 153,142 185,375 145,786
Income taxes payable 30,786 41,156 39,757
Deferred lease credits and other current liabilities 5,707 7,127 4,432
Total Current Liabilities 422,829 499,860 483,780
Long-term Liabilities:
Deferred lease credits and other liabilities 127,753 129,152 103,976
127,753 129,152 103,976
Stockholders' Equity:
Common stock $.05 par value
Authorized 500,000,000 shares
Issued 157,393,211, 156,972,777
and 156,450,680 shares
Outstanding 143,916,883, 144,764,749
and 145,716,152 shares 7,871 7,849 7,823
Additional paid-in capital 320,656 298,413 278,919
Retained earnings 1,315,707 1,282,301 1,076,279
Foreign currency translation adjustment (6,612) (8,320) (8,975)
Restricted stock plan deferred compensation (60,753) (54,265) (58,684)
Treasury stock, at cost (192,723) (150,746) (102,486)
1,384,146 1,375,232 1,192,876
Total Liabilities and Stockholders' Equity $ 1,934,728 $ 2,004,244 $ 1,780,632
See accompanying notes to consolidated financial statements.
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THE GAP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Unaudited
($000 except per share amounts) Thirteen Weeks Ended
April 29, April 30,
1995 1994
Net Sales $ 848,688 $ 751,670
Costs and expenses
Cost of goods sold and
occupancy expenses 568,131 462,087
Operating expenses 202,575 185,724
Net interest income (4,849) (1,063)
Earnings before income taxes 82,831 104,922
Income taxes 32,718 41,444
Net earnings $ 50,113 $ 63,478
Weighted average number
of shares 143,872,100 145,361,013
Earnings per share $ .35 $ .44
Cash dividends per share $ .12 $ .10
See accompanying notes to consolidated financial statements.
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<CAPTION>
THE GAP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C>
Unaudited ($000) Thirteen Weeks Ended
April 29, 1995 April 30, 1994
Cash Flows from Operating Activities:
Net earnings $ 50,113 $ 63,478
Adjustments to reconcile net earnings to net cash
(used for) provided by operating activities:
Depreciation and amortization 45,429 39,020
Tax benefit from exercise of stock options by
employees and from vesting of restricted stock 6,765 13,670
Change in operating assets and liabilities:
Merchandise inventory (37,370) (15,886)
Prepaid expenses and other (17,132) (16,763)
Accounts payable (31,204) (1,987)
Accrued expenses (32,400) (17,498)
Income taxes payable (10,606) (30,436)
Deferred lease credits and other
long-term liabilities (3,339) 5,285
Net cash (used for) provided by operating
activities (29,744) 38,883
Cash Flows from Investing Activities:
Maturity (purchase) of short-term investments - net 31,193 (92,896)
Purchase of long-term investments - (19,944)
Purchases of property and equipment (60,693) (43,585)
Acquisition of lease rights and other assets 1,012 (1,760)
Net cash used for investing activities (28,488) (158,185)
Cash Flows from Financing Activities:
Net decrease in notes payable (3,517) (2,979)
Issuance of common stock 3,452 9,407
Purchase of treasury stock (41,977) (10,032)
Cash dividends paid (16,707) (14,035)
Net cash used for financing activities (58,749) (17,639)
Effect of exchange rate changes on cash 712 (252)
Net decrease in cash and equivalents (116,269) (137,193)
Cash and equivalents at beginning of year 414,487 460,332
Cash and equivalents at end of quarter $ 298,218 $ 323,139
See accompanying notes to consolidated financial statements.
</TABLE>
THE GAP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.BASIS OF PRESENTATION
The consolidated balance sheets as of April 29, 1995 and April 30, 1994, and
the interim consolidated statements of earnings and of cash flows for the
thirteen weeks ended April 29, 1995 and April 30, 1994 have been prepared
by the Company, without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) considered necessary to
present fairly the financial position, results of operations and cash flows
of the Company at April 29, 1995 and April 30, 1994, and for all periods
presented, have been made.
Certain information and footnote disclosures normally included in the annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted from these interim financial statements. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended
January 28, 1995.
The results of operations for the thirteen weeks ended April 29, 1995 are not
necessarily indicative of the operating results that may be expected for the
year ending February 3, 1996.
2. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Year-to-date 1995 and 1994 gross interest payments were $0.5 million and
$2.1 million respectively; income tax payments were $36.4 million and
$58.3 million respectively.
Deloitte & Touche LLP
2101 Webster Street Telephone (510)287-2700
Oakland, Califonria 94612-3027 Facsimile (510)835-4888
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Stockholders of
The Gap, Inc.:
We have reviewed the accompanying consolidated balance sheets of The Gap, Inc.
and subsidiaries as of April 29, 1995 and April 30, 1994 and the related
consolidated statements of earnings and cash flows for the thirteen-week
periods ended April 29, 1995 and April 30, 1994. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than
an audit conducted in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such interim consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Gap, Inc. and subsidiaries
as of January 28, 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated March 2, 1995, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheets as of
January 28, 1995 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it was derived.
/s/ Deloitte & Touche LLP
May 9, 1995
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Sales
Thirteen weeks ended
April 29, 1995 April 30, 1994
Net sales ($000) $848,688 $751,670
Total net sales growth percentage 13 17
Comparable store sales (decline)/growth percentage <2> 7
Net sales per average square foot 90 97
Fifty-two weeks ended
April 29, 1995 April 30, 1994
Number of:
New Stores 176 131
Expanded Stores 77 120
Closed Stores 39 52
The increase in first quarter 1995 net sales was attributable to the opening
of new stores (net of stores closed) and the expansion of existing stores,
partially offset by a decrease in comparable store sales. The decrease in
comparable store sales was primarily attributable to negative comparable
store sales in the Gap division.
The decrease in first quarter net sales per average square foot compared with
the same period last year was primarily attributable to the expansion of
existing stores and an increase in the average size of new stores in
connection with the Company's store expansion program. In addition, negative
comparable store sales as well as continued store growth in the Old Navy
division, with lower priced merchandise and significantly larger stores,
contributed to the decline.
The Company expects that the challenging retail sales environment which was
experienced during the first quarter of 1995 will continue into the second
quarter. For the four week period ended May 27, 1995, net sales increased
14 percent over the same period last year, as compared to an 11 percent
increase in net sales for the four week period ended May 28, 1994 over the
prior year. Comparable store sales decreased 2 percent for the four weeks
ended May 27, 1995 as compared with a 1 percent increase in May 1994.
Cost of Goods Sold and Occupancy Expenses
Cost of goods sold and occupancy expenses as a percentage of net sales
increased to 66.9 percent for the first quarter of 1995 from 61.4 percent
for the same period in 1994. The resulting 5.5 percentage point decrease
in gross margin net of occupancy expenses was attributable to a 4.7
percentage point decrease in merchandise margins as a percentage of net
sales and a .8 percentage point increase in occupancy expenses as a
percentage of net sales.
The decrease in merchandise margins as a percentage of net sales was driven
by a decline in initial merchandise margins and an increase in markdowns
when compared to the same period last year. The Company reviews its
inventory levels in order to identify slow-moving merchandise and broken
assortments (items no longer in stock in a sufficient range of sizes) and
uses markdowns to clear merchandise. During the first quarter, these
markdowns did have an adverse impact on earnings and may do so in future
quarters, depending upon the extent of the markdowns and amount of inventory
affected.
The Company expects overall merchandise margins to be lower in the second
quarter of 1995 than the very high levels achieved in the second quarter of
1994.
Occupancy expenses as a percentage of net sales increased for the first
quarter of 1995 when compared to the same period in 1994. The increase
was primarily attributable to a lack of sales leverage resulting from
negative comparable store sales.
Operating Expenses
Operating expenses as a percentage of net sales decreased to 23.9 percent
for the first quarter of 1995 compared to 24.7 percent for the same period
last year.
The .8 percentage point decrease in operating expenses was primarily
attributable to a .6 percentage point decrease in incentive bonus expense
as a percentage of net sales and a .4 percentage point decrease for
insurance recoveries for business interruption losses. Without these
favorable comparisons, operating expenses would have been unchanged as a
percentage of net sales in the first quarter of 1995 compared to the same
period last year.
Incentive bonus expense is accrued quarterly based on year-to-date
performance against established targets. Due to lower than planned earnings,
no incentive bonus expense was recognized in the first quarter of 1995.
Net Interest Income
Net interest income was approximately $5.0 million for the first quarter of
1995 compared to $1.1 million for the same period last year. The change was
attributable to an increase in income from higher average interest rates and
a reduction in interest expense resulting from the repayment of $75 million
of long-term debt in the second quarter of 1994.
Income Taxes
The effective income tax rate was 39.5 percent for the thirteen weeks ended
April 29, 1995 and April 28, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The following sets forth certain measures of the Company's liquidity:
Thirteen weeks ended
April 29, 1995 April 30, 1994
Cash (used for) provided by operating
activities ($000) $ (29,744) $ 38,883
Working capital ($000) $ 555,733 $ 459,125
Current ratio 2.31:1 1.95:1
For the thirteen weeks ended April 29, 1995, the decrease in cash flows from
operating activities was attributable to an increased investment in inventory
to support the Company's expansion of its Old Navy and International
divisions, the timing of payment of certain year-end payables, and the
decrease in net earnings. The Company's overall cash and liquidity position
continues to be strong.
The Company funds inventory expenditures during normal and peak periods through
a combination of cash flows provided by operations and normal trade credit
arrangements. The Company's business follows a seasonal pattern, peaking
over a total of about ten weeks during the late summer and holiday periods.
For the thirteen weeks ended April 29, 1995, capital expenditures, net of
construction allowances and dispositions, totaled approximately $56 million.
These expenditures included the addition of 40 new stores, the expansion of 14
stores and the remodeling of certain stores resulting in a net increase in store
space of approximately 330,000 square feet or 4 percent since January 28, 1995.
For fiscal year 1995, the Company expects capital expenditures to total
approximately $275 to $300 million, net of construction allowances,
representing the addition of approximately 175 to 200 new stores, the
expansion of approximately 50 to 70 stores, and the remodeling of certain
stores. Square footage growth is expected to be approximately 20 percent
after accounting for store closings. New stores are generally expected to
be leased. Planned expenditures also include amounts for administrative
facilities, distribution centers and equipment. The Company expects to fund
such capital expenditures with cash flow from operations.
The Company continues to explore alternatives for headquarters facilities in
San Francisco and San Bruno, California. The Company has acquired land in
Gallatin, Tennessee for the purpose of constructing a distribution center at
an estimated total cost of $45 to $55 million. The Company expects the
facility to be in operation in late 1996.
The Company has a credit agreement which provides for a $250 million revolving
credit facility until March 1998. In addition, the credit agreement provides
for the issuance of letters of credit up to $425 million at any one time.
The Company had outstanding letters of credit of approximately $323 million at
April 29, 1995.
Under a program announced in October 1994 to repurchase up to 9 million shares
of the Company's outstanding common stock, the Company acquired 1,268,300
shares during the first quarter of 1995 for $41,978,000. Included in this
transaction was the purchase of 250,000 shares from a senior executive of
the Company for $8,438,000. To date, 2,741,800 shares have been repurchased
for $90,238,000.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(10) Fifth Amendment to Credit Agreement, dated as of February 15, 1995
(11) Computation of Earnings per Share
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
b) The Company did not file any reports on Form 8-K during the three months
ended April 29, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GAP, INC.
Date: June 9, 1995 By /s/ Robert J. Fisher
Robert J. Fisher
Executive Vice President and
Chief Financial Officer
(Principal financial officer of the
registrant)
Date: June 9, 1995 By /s/ Donald G. Fisher
Donald G. Fisher
Chairman and Chief Executive Officer
EXHIBIT INDEX
(10) Fifth Amendment to Credit Agreement, dated as of
February 15, 1995
(11) Computation of Earnings per Share
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
FIFTH AMENDMENT AGREEMENT
Fifth Amendment Agreement, dated as of February 15, 1995 (this "Fifth
Amendment Agreement"), among The Gap, Inc., a Delaware corporation (the
"Borrower"), the LC Subsidiaries (as defined in the Credit Agreement
referred to below) signatory hereto, the lenders (the "Lenders") listed
on the signature pages hereof and Citibank, N.A., ("Citibank"), as issuing
bank (the "Issuing Bank") and, after giving effect to Section 8 hereof,
Citicorp USA Inc. ("CUSA"), as agent (the "Agent") for the Issuing Bank and
the Lenders.
PRELIMINARY STATEMENTS:
1. The Borrower, the LC Subsidiaries, the Lenders, the Issuing Bank
and Citibank,as agent have entered into a Credit Agreement, dated as of March 2,
1990, as amended by the First Amendment Agreement, dated as of March 1, 1991
(the "First Amendment Agreement"), as amended by the Second Amendment
Agreement, dated as of September 16, 1992 (the "Second Amendment Agreement"),
as amended by the Third Amendment Agreement, dated as of January 22, 1993
(the "Third Amendment Agreement"), and as amended by the Fourth Amendment
Agreement, dated as of February 4, 1994 (the "Fourth Amendment Agreement")
(such credit agreement, as so amended and as it may be further amended and in
effect from time to time, being referred to herein as the "Credit Agreement";
terms defined therein and not otherwise defined herein being used herein as
therein defined).
2. Pursuant to Section 2.14 of the Credit Agreement, the Borrower has
requested that the A Lenders and the Agent extend the Revolver Termination
Date to March 2, 1998. The Borrower has also requested that the Letter of
Credit facility provided for in Article III of the Credit Agreement be
converted into a 364-day facility with an annual renewal option. In
addition, the Borrower has requested an increase in the LC Commitments and
the reduction of certain fees.
3. The Borrower, the LC Subsidiaries, the Lenders, the Issuing Bank
and the Agent wish to amend the Credit Agreement, among other things, to
(i) memorialize the extension of the Revolver Termination Date to March 2,
1998, (ii) convert the Letter of Credit facility provided for in Article III
of the Credit Agreement into a 364-day facility with an annual renewal
option, (iii) increase the aggregate amount of LC Commitments from
$350,000,000 to $425,000,000 and (iv) decrease the facility fee payable
under Section 3.01 with respect to the LC Commitments.
NOW, THEREFORE, in consideration of the premises set forth above and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Credit Agreement. The Credit Agreement is,
effective as of March 2, 1995 and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The second sentence of the Preliminary Statement of the
Credit Agreement is hereby amended by deleting the dollar amount
"$350,000,000" appearing therein and inserting in its place the
dollar amount "$425,000,000".
(b) The definition of "LC Commitment" appearing in Section 1.01 of
the Credit Agreement is hereby amended in full to read as follows:
""LC Commitment" means, as to any LC Lender, the amount set forth
opposite such LC Lender's name on the signature pages of the
Fifth Amendment Agreement, dated as of February 15, 1995, among
the Borrower, the LC Subsidiaries, the Lenders parties thereto,
the Issuing Bank and the Agent with respect to the caption "LC
Commitment", or, if such LC Lender has entered into one or more
Assignment and Acceptances, the amount set forth for such LC
Lender with respect thereto in the Register maintained by the
Agent pursuant to Section 10.07 hereof."
(c) The definition of "LC Commitment Percentage" appearing in Section
1.01 of the Credit Agreement is hereby amended in full to read as
follows:
""LC Commitment Percentage" means, with respect to each LC
Lender, the percentage of which the then existing LC Commitment
of such LC Lender is of the LC Commitments of all LC Lenders;
provided, however; that with respect to Letters of Credit
which expire after the LC Termination Date has occurred, the
LC Commitment Percentage of each LC Lender shall be the
percentage of which such LC Lender's LC Commitment immediately
prior to the LC Termination Date is of the LC Commitment of
all LC Lenders immediately prior to the LC Termination Date."
(d) The definition of "LC Termination Date" appearing in Section
1.01 of the Credit Agreement is hereby amended in full to read
as follows:
""LC Termination Date" means, subject to Section 3.11 hereof,
March 1, 1996, or the earlier date of termination in whole of
the LC Commitments pursuant to Section 3.09 or Section 8.01."
(e) The definition of "Revolver Termination Date" appearing in Section
1.01 of the Credit Agreement is hereby amended by deleting the
reference to "March 2, 1997 and replacing it with March 2, 1998".
(f) Section 2.14 of the Credit Agreement is hereby amended to read in
full as follows:
"SECTION 2.14. Extension of Revolver Termination Date. At
least 45 but not more than 60 days prior to the next Anniversary
Date, the Borrower, by written notice to the Agent, may request
that the Revolver Termination Date be extended one calendar
year from its then current scheduled expiration. The Agent
shall promptly notify each A Lender of such request, and each
A Lender shall in turn, within 30 days prior to such next
Anniversary Date, notify the Borrower and the Agent in writing
regarding whether such A Lender will consent to such extension.
If, and only if, all A Lenders consent in writing to such
extension prior to the tenth Business Day preceding such next
Anniversary Date, the Revolver Termination Date shall be so
extended for such one calendar year and references herein to
the "Revolver Termination Date" shall refer to such "Revolver
Termination Date" as so extended. If any A Lender shall fail
to deliver such notice to the Borrower and the Agent as provided
above, such A Lender shall be deemed not to have consented to any
requested extension and all of the A Lenders' A Commitments shall
terminate on the scheduled Revolver Termination Date. It is
understood that no A Lender shall have any obligation
whatsoever to agree to any request made by the Borrower for
an extension of the Revolver Termination Date."
(g) Section 3.01 of the Credit Agreement is hereby amended as follows:
(i) by deleting the phrase "30 days" appearing therein and
inserting in its place the phrase "one day";
(ii) by deleting the dollar amount "$350,000,000" appearing
therein and inserting in its place the dollar amount
"$425,000,000";
(iii) by deleting the phrase "the earlier of (i)" appearing
therein; and
(iv) by deleting the phrase "or (ii) the LC Termination
Date" appearing therein.
(h) Subsection (a) of Section 3.05 of the Credit Agreement is hereby
amended to read in full as follows:
"(a) Facility Fee. The Borrower hereby agrees to pay to each LC
Lender (in accordance with its LC Commitment Percentage) a letter
of credit facility fee equal to 0.10% per annum for all periods
prior to March 2, 1995 and 0.08% per annum for all periods on
and after March 2, 1995 on the total amount of LC Commitments
(regardless of the actual or deemed usage thereof) payable
quarterly in arrears on the last day of April, July, October
and January and on the LC Termination Date."
(i) Section 3.11 of the Credit Agreement is hereby amended to read in
full as follows:
"SECTION 3.11. Extension of LC Termination Date. At least
45 but not more than 60 days prior to the LC Termination Date,
the Borrower, by written notice to the Agent, may request that
the LC Termination Date be extended for a period of 364 days
from its then current scheduled expiration. The Agent shall
promptly notify the Issuing Bank and each LC Lender of such
request, and the Issuing Bank and each LC Lender shall in
turn, within 30 days prior to such LC Termination Date, notify
the Borrower and the Agent in writing regarding whether the
Issuing Bank, or such LC Lender (as the case may be) will
consent to such extension. If, and only if, all LC Lenders
and the Issuing Bank consent in writing to such extension
prior to the tenth Business Day preceding such LC Termination
Date, the LC Termination Date shall be so extended for such
364-day period and references herein to the "LC Termination
Date" shall refer to such "LC Termination Date" as so
extended. If the Issuing Bank or any LC Lender shall fail to
deliver such notice to the Borrower and the Agent as provided
above, the Issuing Bank or such Lender shall be deemed not to
have consented to such requested extension and the Issuing
Bank's and all LC Lenders' LC Commitments shall terminate on
the scheduled LC Termination Date. It is understood that
neither the Issuing Bank nor any LC Lender shall have any
obligation whatsoever to agree to any request made by the
Borrower for an extension of the LC Termination Date."
SECTION 2. Conditions of Effectiveness. This Fifth Amendment Agreement shall
become effective as of March 2, 1995 if, on or prior to that date, the Agent
shall have received counterparts of this Fifth Amendment Agreement duly
executed by the Borrower, the LC Subsidiaries, the Lenders, the Issuing Bank
and the Agent, together with such other documents or information as the Agent
may reasonably request.
SECTION 3. Reference to and Effect on the Credit Agreement. (a) Upon the
effectiveness of this Fifth Amendment Agreement, on and after the date
hereof, each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof" or words of like import referring to the Credit
Agreement, shall mean and be a reference to the Credit Agreement as amended
hereby.
(b) Except as specifically amended above, the Credit Agreement is and
shall continue to be in full force and effect and is hereby
ratified and confirmed in all respects.
(c) The execution, delivery and effectiveness of this Fifth Amendment
Agreement shall not operate as a waiver of any right, power or
remedy of any Lender, the Issuing Bank or the Agent under the
Credit Agreement, nor constitute a waiver of any provision of the
Credit Agreement.
SECTION 4. Fees, Costs and Expenses. The Borrower agrees to pay on demand all
costs and expenses of the Agent and the Issuing Bank incurred in connection with
the preparation, execution, delivery, administration, modification and amendment
of this Fifth Amendment Agreement and the other documents to be delivered
hereunder, including, without limitation, the fees and out-of-pocket expenses
of the Agent's legal counsel. The Borrower further agrees to pay on demand
all costs and expenses of the Agent, the Issuing Bank and the Lenders
(including, without limitation, reasonable fees and expenses of the Agent's
legal counsel) in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Fifth Amendment Agreement
and other documents to be delivered under this Fifth Amendment Agreement.
SECTION 5. Execution in Counterparts. This Fifth Amendment Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
SECTION 6. GOVERNING LAW. THIS FIFTH AMENDMENT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. LC Subsidiaries. From and after the date hereof, Gap (Canada), Inc.
shall be an LC Subsidiary hereunder and under the Credit Agreement. Each LC
Subsidiary hereby (i) consents in all respects to the transactions
contemplated hereby, (ii) acknowledges and irrevocably agrees that none of
its respective obligations under the Credit Agreement or with respect to the
Letters of Credit for which it is the account party shall be affected hereby,
(iii) acknowledges and irrevocably agrees that all of its respective
obligations under the Credit Agreement, as amended hereby, and with respect
to the Letters of Credit for which it is the account party are in full force
and effect, (iv) ratifies and reaffirms in all respects the Credit Agreement,
as amended hereby, and the Letters of Credit for which it is the account party
and all of its respective obligations with respect thereto, (v) certifies that
it has received a copy hereof, has reviewed the same and is fully apprised of
the contents and substance hereof and (vi) confirms that it shall be bound by
the terms hereof.
SECTION 8. Citicorp USA Inc. Notwithstanding anything contained in the Credit
Agreement to the contrary, from and after the date hereof Citicorp USA Inc.
("CUSA") shall be Lender and the Agent hereunder and under the Credit
Agreement. The Credit Agreement is, effective the date hereof, hereby
amended as follows:
(a) The introductory paragraph is hereby amended in full to read as
follows:
"CREDIT AGREEMENT, dated as of March 2, 1990 (this "Agreement"),
among The Gap, Inc., a Delaware corporation (the "Borrower"),
the LC Subsidiaries (as hereinafter defined), the banks (the
"Banks") listed on the signature pages hereof, Citibank, N.A.,
("Citibank"), as issuing bank (the "Issuing Bank"), and Citicorp
USA Inc. ("CUSA") as agent (the "Agent") for the Lenders and
Issuing Bank hereunder:"
(b) Each reference in the Credit Agreement to "Citibank" shall be
amended to refer to "CUSA" except as follows:
(i) The reference to "Citibank" in the definition of "Base Rate"
shall continue to refer to Citibank;
(ii) The reference to "Citibank" in the definition of "Issuing Bank"
shall continue to refer to Citibank; and
(iii) The reference to "Citibank" in the definition of "Reference
Bank" shall continue to refer to Citibank.
(c) Section 9.03 of the Credit Agreement is hereby amended to read in
full as follows:
"SECTION 9.03. CUSA, Citibank and Affiliates. With respect
to CUSA's A Commitment, its LC Commitment and the Advances
made by it, and with respect to Citibank as Issuing Bank, CUSA
and Citibank shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as
though it were not the Agent or Issuing Bank, as the case may
be; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include CUSA and Citibank in
their individual capacities. CUSA, Citibank and each of
their respective Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally
engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own
securities of the Borrower or any such Subsidiary, all as if
CUSA were not the Agent or Citibank were not the Issuing
Bank, as the case may be, and without any duty to account
therefor to the Lenders."
(d) Section 10.04 of the Credit Agreement is hereby amended
by adding the following subsection (d):
"(d) The Borrower hereby acknowledges that the funding
method by each Lender of its Advances hereunder shall
be in the sole discretion of such Lender. The Borrower
agrees that for purposes of any determination to be
made under Sections 2.08, 2.12(a), 2.13 or 10.04(b)
of this Agreement each Lender shall be deemed to have
funded its Eurodollar rate Advances with proceeds of
Dollar deposits in the London interbank market."
(e) Each reference in Section 10.05 of the Credit Agreement to a
Lender shall be amended to refer to such Lender and its Affiliates.
(f) Section 10.07 of the Credit Agreement is hereby amended by
adding the following subsection (h):
"(h) Notwithstanding anything herein contained to the
contrary, each Lender may assign any of its rights and
obligations under this Agreement to any of its Affiliates
without notice to or consent of the Borrower or the Agent;
and each Lender or any of its Affiliates may assign any
of its rights (including, without limitation, rights to
payment of principal and/or interest hereunder) under this
Agreement to any Federal Reserve Bank without notice to or
consent of the Borrower or the Agent."
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWER:
THE GAP, INC.
By /s/ Richard S. McKinley
Name: Richard S. McKinley
Title: Vice President-Finance and
Treasurer
LC SUBSIDIARIES:
BANANA REPUBLIC, INC.
By /s/ Richard S. McKinley
Name: Richard S. McKinley
Title: Vice President-Finance and
Treasurer
GPS (GREAT BRITAIN) LIMITED
By /s/ Richard S. McKinley
Name: Richard S. McKinley
Title: Vice President-Finance and
Treasurer
GAP (CANADA), INC.
By /s/ Richard S. McKinley
Name: Richard S. McKinley
Title: Vice President-Finance and
Treasurer
GAP (FAR EAST) LIMITED
By /s/ Richard S. McKinley
Name: Richard S. McKinley
Title: Vice President-Finance and
Treasurer
THE GAP (SINGAPORE) PTE. LIMITED
By /s/ Richard S. McKinley
Name: Richard S. McKinley
Title: Vice President-Finance and
Treasurer
THE AGENT:
CITICORP USA INC.
By /s/ Barbara A. Cohen
Name: Barbara A. Cohen
Title: Vice President
THE ISSUING BANK:
CITIBANK, N.A.
By /s/ Edward Leitieri
Name: Edward Leitieri
Title: Vice President
THE LENDERS:
A Commitment
$ 50,000,000 CITICORP USA INC.
LC Commitment
$ 100,000,000
By /s/ Barbara A. Cohen
Name: Barbara A. Cohen
Title: Vice President
A Commitment BANK OF AMERICA NATIONAL
$ 35,000,000 TRUST & SAVINGS ASSOCIATION
LC Commitment
$ 85,000,000
By /s/ Richard E. Bryson
Name: Richard E. Bryson
Title: Vice President
A Commitment NATIONAL WESTMINSTER
$ 20,000,000 BANK PLC
LC Commitment New York Branch
$ 65,000,000
By /s/ Hal S. Sadoff
Name: Hal S. Sadoff
Title: Vice President
Nassau Branch
By /s/ Hal S. Sadoff
Name: Hal S. Sadoff
Title: Vice President
A Commitment NATIONSBANK
$ 30,000,000 OF TEXAS, N.A.
LC Commitment
$ 35,000,000
By /s/ Overton Colton
Name: Overton Colton
Title: Vice President
A Commitment ROYAL BANK OF CANADA
$ 20,000,000
LC Commitment
$ 25,000,000 By /s/ Brian W. Dixon
Name: Brian W. Dixon
Title: Senior Manager
A Commitment BANK OF MONTREAL
$ 10,000,000
LC Commitment
$ 35,000,000 By /s/ Cecily Mistarz
Name: Cecily Mistarz
Title: Senior Manager, Credit
A Commitment SOCIETE GENERALE
$ 20,000,000
LC Commitment
$ 25,000,000 By /s/ J. Blaine Shaum
Name: J. Blaine Shaum
Title: Regional Manager
A Commitment THE FUJI BANK, LIMITED
$ 15,000,000
LC Commitment
$ 20,000,000 By /s/ Shigeo Matsumoto
Name: Shigeo Matsumoto
Title: General Manager
A Commitment U.S. NATIONAL BANK OF OREGON
$ 15,000,000
LC Commitment
$ 15,000,000 By /s/ Janet E. Jordan
Name: Janet E. Jordan
Title: Vice President
A Commitment MORGAN GUARANTY TRUST
$ 20,000,000 COMPANY OF NEW YORK
LC Commitment
$ 10,000,000
By /s/ Carl J. Mehldau, Jr.
Name: Carl J. Mehldau, Jr.
Title: Associate
A Commitment THE SUMITOMO BANK LIMITED
$ 15,000,000
LC Commitment
$ 10,000,000 By /s/ Hiroshi Amano
Name: Hiroshi Amano
Title: General Manager
$ 250,000,000 Total of the A Commitments
$ 425,000,000 Total of the LC Commitments
THE GAP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Thirteen Weeks Ended
April 29, 1995 April 30, 1994
Net earnings ($000) $ 50,113 $ 63,478
Weighted average shares of
common stock outstanding
during the period 143,872,100 145,361,013
Add incremental shares from
assumed exercise of stock
options (primary) 167,112 934,174
144,039,212 146,295,187
Primary earnings per share $ .35 $ .43
Weighted average shares of
common stock outstanding
during the period 143,872,100 145,361,013
Add incremental shares from
assumed exercise of stock
options (fully-diluted) 167,079 995,131
144,039,179 146,356,144
Fully-diluted earnings
per share $ .35 $ .43
NOTE: The information provided in the exhibit is presented in accordance with
Regulation S-K, Item 601(b)(11), while net earnings per share on the
Consolidated Statements of Earnings is presented in accordance with APB
Opinion 15. This information is not required under APB Opinion 15, as
the difference between primary and fully-diluted earnings per share and
earnings per share calculated on a weighted average shares basis is less
than 3%.
Deloitte & Touche LLP
2101 Webster Street Telephone (510)287-2700
Oakland, Califonria 94612-3027 Facsimile (510)835-4888
To the Board of Directors and Stockholders of
The Gap, Inc.:
We have made reviews, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim consolidated
financial statements of The Gap, Inc. and subsidiaries for the thirteen-week
periods ended April 29, 1995 and April 30, 1994, as indicated in our reported
dated May 9, 1995, because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended April 29, 1995, is
incorporated by reference in Post Effective Amendment No. 1 to Registration
Statement No. 2-72586, Registration Statement No. 2-60029, Registration
Statement No. 33-39089, Registration Statement No. 33-40505, Registration
Statement No. 33-54686, Registration Statement No. 33-54688, Registration
Statement No. 33-54690 and Registration Statement No. 33-56021.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the
Registration Statement prepared or certified by an accountant or a report
prepared or certified by an accountant within the meaning of Sections 7 and
11 of that Act.
/s/ Deloitte & Touche LLP
June 9, 1995
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<PERIOD-END> APR-29-1995
<CASH> 298,218
<SECURITIES> 157,498
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0
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<OTHER-SE> 1,376,275
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