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 May 4,
1996 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, 286,822,510 shares as of June 14, 1996
<TABLE>
<CAPTION>
PART 1 THE GAP, INC. AND SUBSIDIARIES
ITEM 1 CONSOLIDATED BALANCE SHEETS
($000) May 4, February 3, April 29,
1996 1996 1995
(Unaudited) (See Note 1) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 552,729 $ 579,566 $ 298,218
Short-term investments 79,819 89,506 157,498
Merchandise inventory 489,719 482,575 408,952
Prepaid expenses and other 146,791 128,398 113,894
Total Current Assets 1,269,058 1,280,045 978,562
Property and equipment (net) 981,011 957,752 852,824
Long-term investments 41,573 30,370 16,949
Lease rights and other assets 81,672 74,901 86,393
Total Assets $ 2,373,314 $ 2,343,068 $ 1,934,728
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable 46,836 21,815 -
Accounts payable 204,951 262,505 233,194
Accrued expenses 214,131 194,426 153,142
Income taxes payable 13,901 66,094 30,786
Deferred lease credits and other current 7,034 6,904 5,707
liabilities
Total Current Liabilities 486,853 551,744 422,829
Long-term Liabilities:
Deferred lease credits and other liabilities 156,864 150,851 127,753
156,864 150,851 127,753
Stockholders' Equity:
Common stock $.05 par value
Authorized 500,000,000 shares
Issued 316,892,180, 315,971,306
and 314,786,422 shares
Outstanding 287,248,358, 287,747,984
and 287,833,766 shares 15,845 15,799 15,739
Additional paid-in capital 399,619 335,193 312,788
Retained earnings 1,629,666 1,569,347 1,315,707
Foreign currency translation adjustment (9,830) (9,071) (6,612)
Restricted stock plan deferred compensation (43,757) (48,735)
(60,753)
Treasury stock, at cost (261,946) (222,060) (192,723)
1,729,597 1,640,473 1,384,146
Total Liabilities and Stockholders' Equity $ 2,373,314 $ 2,343,068 $ 1,934,728
See accompanying notes to consolidated financial statements.
</TABLE>
THE GAP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Unaudited
($000 except per share amounts) Thirteen Weeks Ended
May 4, 1996 April 29, 1995
Net Sales $ 1,113,154 $ 848,688
Costs and expenses
Cost of goods sold and
occupancy expenses 699,314 568,131
Operating expenses 282,627 202,575
Net interest income (3,618) (4,849)
Earnings before income taxes 134,831 82,831
Income taxes 53,258 32,718
Net earnings $ 81,573 $ 50,113
Weighted average number
of shares 288,010,684 287,744,200
Earnings per share $ .28 $ .17
Cash dividends per share $ .08 $ .06
See accompanying notes to consolidated financial statements.
THE GAP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited ($000) Thirteen Weeks Ended
May 4, 1996 April 29, 1995
Cash Flows from Operating Activities:
Net earnings $ 81,573 $ 50,113
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization (a) 52,616 45,429
Tax benefit from exercise of stock options by
employees and from vesting of restricted stock 41,276 6,765
Change in operating assets and liabilities:
Merchandise inventory (7,212) (37,370)
Prepaid expenses and other (18,750) (17,132)
Accounts payable (57,289) (31,204)
Accrued expenses 19,787 (32,400)
Income taxes payable (52,201) (10,606)
Deferred lease credits and other
long-term liabilities 6,117 (3,339)
Net cash provided by (used for) operating
activities 65,917 (29,744)
Cash Flows from Investing Activities:
Net maturity of short-term investments 9,687 31,193
Purchase of long-term investments (11,203) -
Purchase of property and equipment (69,186) (60,693)
(Acquisition) Disposition of lease rights
and other assets (7,799) 1,012
Net cash used for investing activities (78,501) (28,488)
Cash Flows from Financing Activities:
Net increase (decrease) in notes payable 24,897 (3,517)
Issuance of common stock 22,121 3,452
Purchase of treasury stock (39,886) (41,977)
Cash dividends paid (21,254) (16,707)
Net cash used for financing activities (14,122) (58,749)
Effect of exchange rate changes on cash (131) 712
Net increase (decrease) in cash and equivalents (26,837) (116,269)
Cash and equivalents at beginning of year 579,566 414,487
Cash and equivalents at end of quarter $ 552,729 $ 298,218
See accompanying notes to consolidated financial statements.
(a) Includes amortization of restricted stock.
THE GAP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of May 4, 1996 and April 29,
1995, and the interim consolidated statements of earnings and the
interim consolidated statements of cash flows for the thirteen weeks
ended May 4, 1996 and April 29, 1995 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 May 4, 1996 and April 29, 1995, 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 February 3, 1996.
The results of operations for the thirteen weeks ended May 4, 1996
are not necessarily indicative of the operating results that may be
expected for the year ending February 1, 1997.
2. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Year-to-date 1996 and 1995 gross interest payments were $0.8
million and $0.5 million respectively; income tax payments were $64.1
million and $36.4 million respectively.
3. TWO-FOR-ONE STOCK SPLIT
On February 27, 1996, the Company's Board of Directors authorized
a two-for-one split of its common stock effective April 10, 1996, in the
form of a stock dividend for stockholders of record on March 18, 1996.
Per share amounts in the accompanying consolidated financial statements
give effect to the stock split.
Deloitte & 2101 Webster Street Telephone (510)287-2700
Touche Oakland, California 94612-3027 Facsimile (510)835-4888
INDEPENDENT ACCOUNTANTS' 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 May 4, 1996 and April 29, 1995 and the
related consolidated statements of earnings and cash flows for the
thirteen week periods ended May 4, 1996 and April 29, 1995. These
financial statements are the responsibility of the Company's management.
We conducted our reviews 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 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 February 3, 1996, 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 February 29,
1996 (except for the effects of the stock split, as to which the date is
April 10, 1996), we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of February 3,
1996 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it was derived.
/S/ Deloitte & Touche LLP
May 16, 1996
THE GAP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Sales Thirteen weeks ended
May 4, 1996 April 29, 1995
Net sales ($000) $1,113,154 $848,688
Total net sales growth percentage 31 13
Comparable store sales growth percentage
(Based on a comparable 13 - week period) 9 <2>
Net sales per average square foot 98 90
Average square footage of gross store space (000) 11,334 9,392
Fifty-three Fifty-two
weeks ended weeks ended
May 4, 1996 April 29, 1995
Number of
New stores 225 176
Expanded stores 50 77
Closed stores 44 39
The increase in first quarter fiscal 1996 net sales over the same period
last year was attributable to the opening of new stores (net of stores
closed), an increase in comparable store sales, and the expansion of
existing stores.
The increase in net sales per average square foot compared with the same
period last year was primarily attributable to an increase in comparable
stores sales partially offset by the growing impact of the Old Navy
division where lower priced merchandise and significantly larger stores
result in lower net sales per average square foot when compared to other
divisions .
Cost of Goods Sold and Occupancy Expenses
Cost of goods sold and occupancy expenses as a percentage of net sales
decreased to 62.8 percent for the first quarter of fiscal 1996 from 66.9
percent for the same period in fiscal 1995. The resulting 4.1
percentage point increase in gross margin net of occupancy expenses was
attributable to a 2.4 percentage point increase in merchandise margins
as a percentage of net sales and a 1.7 percentage point decrease in
occupancy expenses as a percentage of net sales.
The increase in merchandise margins as a percentage of net sales was
primarily attributable to higher initial merchandise margins. The
decrease in occupancy expense as a percentage of net sales was primarily
attributable to sales leverage resulting from positive comparable store
sales growth. The growth of the Old Navy division with lower occupancy
expenses as a percentage of net sales per average square foot when
compared to other divisions also contributed to the decrease 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.
Such markdowns may have an adverse impact on earnings depending upon the
extent of the markdowns and amount of inventory affected.
Operating Expenses
Operating expenses as a percentage of net sales increased to 25.4
percent for first quarter of fiscal 1996 compared to 23.9 percent for
the same period last year.
The 1.5 percentage point increase in operating expenses was primarily
attributable to a 1.1 percentage point increase in incentive bonus
expense as a percentage of net sales. No incentive bonus expense was
recognized in the first quarter of fiscal 1995 . Insurance recoveries
received in the first quarter last year for business interruption losses
resulted in a .4 percentage point unfavorable comparison this year as a
percentage of net sales.
Net Interest Income/Expense
Net interest income was approximately $3.6 million for the first quarter
of fiscal 1996 compared to $4.8 million for the same period last year.
Income Taxes
The effective tax rate was 39.5 percent for the thirteen weeks ended
May 4, 1996 and April 29, 1995 .
LIQUIDITY AND CAPITAL RESOURCES
The following sets forth certain measures of the Company's liquidity:
Thirteen weeks ended
May 4, 1996 April 29, 1995
Cash provided by (used for) operating activities
($000) $ 65,917 $(29,744)
Working capital ($000) $782,205 $555,733
Current ratio 2.61:1 2.31:1
For the thirteen weeks ended May 4, 1996, the increase in cash provided
by operating activities was primarily attributable to an increase in net
earnings exclusive of depreciation expense.
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 to twelve weeks during the late summer
and holiday periods.
For the thirteen weeks ended May 4, 1996, capital expenditures, net of
construction allowances and dispositions, totaled approximately $66
million. These expenditures included the addition of 40 new stores, the
expansion of 9 stores and the remodeling of certain stores resulting in
a net increase in store space of approximately 336,000 square feet or 3
percent since February 3, 1996.
For fiscal 1996, the Company expects capital expenditures to total
approximately $300 to $350 million, net of construction allowances,
representing the addition of approximately 175 to 200 new stores, the
expansion of approximately 40 to 50 stores, and the remodeling of
certain stores. 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. Square footage growth is expected to be approximately 15
percent before store closings. New stores are generally expected to be
leased.
During fiscal 1995, the Company commenced construction of a distribution
center in Gallatin, Tennessee for an estimated cost at completion of $45
to $55 million. The facility is expected to be in operation in late
fiscal 1996. Additionally in May 1996, the Company exercised an option
to purchase land and a building in the Netherlands to relocate its
European distribution center. The building was under construction at
the time of purchase and is estimated to be operational by Summer 1996.
Estimated cost at completion for the land and building is approximately
$10 million. This move will result in a more centralized shipping
location to the European continent and will support store growth in
Europe.
In February 1996, the Company exercised an option to purchase land for
$9 million in San Bruno, California to expand its headquarters
facilities. Construction commenced in April 1996 for an estimated cost
at completion of $55 to $60 million. The facility is expected to be in
operation in late fiscal 1997.
On February 27, 1996, the Company's Board of Directors authorized a two-
for-one split of its common stock effective April 10, 1996, in the form
of a stock dividend for stockholders of record at the close of business
on March 18, 1996. Per share amounts in the accompanying consolidated
financial statements give effect to the stock split.
The Company has a credit agreement which provides for a $250 million
revolving credit facility through June 30, 1998. In addition, the credit
agreement provides for the issuance of letters of credit up to $500
million at any one time. The Company had outstanding letters of credit
of approximately $412 million at May 4, 1996.
Under a program announced in October 1994 to repurchase up to 18 million
shares of the Company's outstanding common stock, the Company acquired
1,420,500 shares during the first quarter of 1996 for approximately $40
million. To date under this program, 8,560,300 shares have been
repurchased for approximately $161 million.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(10.1) Form of Non-Qualified Stock Option Agreement for
employees under Registrant's 1996 Stock Option and Award Plan
(10.2) Form of Non-Qualified Stock Option Agreement for non-employee
directors under Registrant's 1996 Stock Option and Award Plan
(10.3) Form of Restricted Stock Agreement under
Registrant's 1996 Stock Option and Award Plan
(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 May 4, 1996.
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 14, 1996 By /s/ Warren R. Hashagen
Warren R. Hashagen
Chief Financial Officer
(Principal financial
officer of the registrant)
Date: June 14, 1996 By /s/ Millard S. Drexler
Millard S. Drexler
President and Chief
Executive Officer
EXHIBIT INDEX
(10.1) Form of Non-Qualified Stock Option Agreement for employees
under Registrant's 1996 Stock Option and Award Plan
(10.2) Form of Non-Qualified Stock Option Agreement for non-employee
directors under Registrant's 1996 Stock Option and Award Plan
(10.3) Form of Restricted Stock Agreement under Registrant's 1996
Stock Option and Award Plan
(11) Computation of Earnings per Share
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
THE GAP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
The Gap, Inc. (the "Company") hereby grants to 2x 1x (the "Employee"),
a stock option under The Gap, Inc. 1996 Stock Option and Award Plan (the
"Plan"), to purchase shares of common stock of the Company, $0.05 par value
("Shares"). This option is subject to all of the terms and conditions
contained in this Agreement, including the terms and conditions contained
in the attached Appendix A. The date of this Agreement is 7x. Subject to
the provisions of Appendix A and of the Plan, the principal features of this
option are as follows:
Number of Shares
Purchasable with this Option: 9x
Price per Share: 8x
Date Option was Granted: 7x
Date Option is Scheduled to
become Exercisable: 10x
Latest Date Option Expires: 11x
As provided in the Plan and in this Agreement, this option may terminate
before the date written above, including before the option becomes
exercisable or is exercised. For example, if Employee's employment ends
before the date this option becomes exercisable, this option will
terminate at the same time as Employee's employment terminates. See
paragraphs 5, 6 and 7 of Appendix A for further information concerning
how changes in employment affect termination of this option. PLEASE BE
SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND
CONDITIONS OF THIS OPTION.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement, in duplicate, to be effective as of the date first above written.
THE GAP, INC.
Dated: _____________________________
Donald G. Fisher
Chairman of the Board
My signature below indicates that I understand that this option is subject
to all of the terms and conditions of this Agreement (including the attached
Appendix A) and of the Plan.
EMPLOYEE
Dated: _______________ ____________________________
Address:____________________
____________________________
____________________________
Social Security No.: __________
STOCK OPTION AGREEMENT APPENDIX - EMPLOYEE VERSION APPENDIX A
TERMS AND CONDITIONS OF NON-QUALIFIED STOCK OPTION
1. Grant of Option. The Company hereby grants to
Employee under the Plan, as a separate incentive in connection with his
or her employment and not in lieu of any salary or other compensation
for his or her services, a non-qualified stock option to purchase, on
the terms and conditions set forth in this Agreement and the Plan, all
or any part of the number of Shares set forth on page 1 of this
Agreement. The option granted hereby is not intended to be an Incentive
Stock Option within the meaning of Section 422 of the Code.
2. Exercise Price. The purchase price per Share (the
"Option Price") shall be equal to the price set forth on page 1 of this
Agreement, which is the fair market value per Share on the date of this
Agreement. The Option Price shall be payable in the legal tender of the
United States.
3. Number of Shares. The number and class of Shares
specified in paragraph 1 above, and/or the Option Price, are subject to
appropriate adjustment in the event of changes in the capital stock of
the Company by reason of stock dividends, split-ups or combinations of
shares, reclassifications, mergers, consolidations, reorganizations or
liquidations. Subject to any required action of the stockholders of the
Company, if the Company shall be the surviving corporation in any merger
or consolidation, the option granted hereunder (to the extent that it is
still outstanding) shall pertain to and apply to the securities to which
a holder of the same number of Shares that are then subject to the
option would have been entitled. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Compensation and Stock Option Committee
of the Company's Board of Directors (the "Committee"), whose
determination in that respect shall be final, binding and conclusive.
4. Commencement of Exercisability. Except as otherwise
provided in this Agreement, the right to exercise the option awarded by
this Agreement shall accrue as to 100% of the Shares subject to such
option on the third anniversary date of the date of this Agreement,
assuming that Employee is still employed with the Company or an
Affiliate on such date. If Employee is not employed on such date, the
option shall terminate, as set out in paragraph 7.
5. Postponement of Exercisability. Notwithstanding
paragraph 4 or any other provision of this Agreement, prior to the third
anniversary of the date of this Agreement, the Committee, in its sole
discretion, may determine that the right to exercise the option awarded
by this Agreement shall accrue on a date later than the third
anniversary of this Agreement. The Committee shall exercise its power to
postpone the commencement of exercisability only if the Committee, in
its sole discretion, determines that Employee has taken a personal leave
of absence (as defined from time to time by the Committee) since the
date of this Agreement. The duration of the period of postponement
shall equal the duration of the personal leave of absence. If Employee
does not return from the personal leave of absence, the option shall
terminate as set out in paragraph 7.
6. Elimination of Exercisability. Notwithstanding
paragraph 4 or any other provision of this Agreement, prior to the third
anniversary of the date of this Agreement, the Committee, in its sole
discretion, may determine that the right to exercise the option awarded
by this Agreement shall never accrue as to all or part of the Shares
specified in paragraph 1 (and as adjusted pursuant to paragraph 3, if
appropriate). The Committee shall exercise such power only if the
Committee, in its sole discretion, determines that (a) Employee's
employment with the Company or an Affiliate has been reduced to less
than a full-time basis, and/or (b) Employee has transferred to a
position which, under the Committee's then existing policy, normally
would not qualify Employee to be granted options under the Plan.
7. Termination of Option. In the event that Employee's
employment with the Company or an Affiliate terminates for any reason
other than Retirement (as defined in the Plan) or death, this option
shall immediately thereupon terminate. In the event of Employee's
Retirement, Employee may, within one (1) year after the date of such
Retirement, or within ten (10) years from the date of this Agreement,
whichever shall first occur, exercise any unexercised portion of the
option. In the event that Employee shall die while in the employ of the
Company or an Affiliate, any unexercised portion of the option may be
exercised by Employee's beneficiary or transferee, as hereinafter
provided, for a period of one (1) year after the date of Employee's
death or within ten (10) years from the date of this Agreement,
whichever shall first occur. Notwithstanding the preceding two
sentences, in the event that within one year of the date of this
Agreement, Employee dies or terminates employment due to Retirement,
this option shall immediately thereupon terminate.
8. Persons Eligible to Exercise. The option shall be
exercisable during Employee's lifetime only by Employee. The option
shall be non-transferable by Employee other than by a beneficiary
designation made in a form and manner acceptable to the Committee, or by
will or the applicable laws of descent and distribution.
9. Death of Employee. To the extent exercisable after
Employee's death, the option shall be exercised only by Employee's
designated beneficiary or beneficiaries, or if no beneficiary survives
Employee, by the person or persons entitled to the option under
Employee's will, or if Employee shall fail to make testamentary
disposition of the option, his or her legal representative. Any
transferee exercising the option must furnish the Company (a) written
notice of his or her status as transferee, (b) evidence satisfactory to
the Company to establish the validity of the transfer of the option and
compliance with any laws or regulations pertaining to said transfer, and
(c) written acceptance of the terms and conditions of the option as
prescribed in this Agreement.
10. Exercise of Option. The option may be exercised by
the person then entitled to do so as to any Shares which may then be
purchased (a) by giving written notice of exercise to the Company,
specifying the number of full Shares to be purchased and accompanied by
full payment of the purchase price thereof (and the amount of any income
tax the Company determines is required to be withheld by reason of such
exercise), and (b) by giving satisfactory assurances in writing if
requested by the Company, signed by the person exercising the option,
that the Shares to be purchased upon such exercise are being purchased
for investment and not with a view to the distribution thereof.
11. No Rights of Stockholder. Neither Employee nor any
person claiming under or through said Employee shall be or have any of
the rights or privileges of a stockholder of the Company in respect of
any of the Shares issuable upon the exercise of the option, unless and
until certificates representing such Shares shall have been issued,
recorded on the records of the Company or its transfer agents or
registrars, and delivered to Employee.
12. No Right to Continued Employment. Employee
understands and agrees that this agreement does not impact in any way
the right of the Company, or the Affiliate employing Employee, as the
case may be, to terminate or change the terms of the employment of
Employee at any time for any reason whatsoever, with or without good
cause. Employee understands and agrees that his or her employment is
"at-will" and that either the Company or Employee may terminate
Employee's employment at any time and for any reason. Employee also
understands and agrees that his or her "at-will" status can only be
changed by an express written contract signed by an authorized officer
of the Company and Employee.
13. Addresses for Notices. Any notice to be given to the
Company under the terms of this Agreement shall be addressed to the
Company, in care of its Law Department, at The Gap, Inc., One Harrison,
San Francisco, California 94105, or at such other address as the Company
may hereafter designate in writing. Any notice to be given to Employee
shall be addressed to Employee at the address set forth beneath
Employee's signature hereto, or at such other address as Employee may
hereafter designate in writing. Any such notice shall be deemed to have
been duly given if and when enclosed in a properly sealed envelope,
addressed as aforesaid, registered or certified and deposited, postage
and registry fee prepaid, in a United States post office.
14. Non-Transferability of Option. Except as otherwise
herein provided, the option herein granted and the rights and privileges
conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and
shall not be subject to sale under execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of said option, or of any right or privilege conferred
hereby, contrary to the provisions hereof, or upon any attempted sale
under any execution, attachment or similar process upon the rights and
privileges conferred hereby, said option and the rights and privileges
conferred hereby shall immediately become null and void.
15. Maximum Term of Option. Notwithstanding any other
provision of this Agreement, this option is not exercisable after the
expiration of ten (10) years from the date of this Agreement.
16. Binding Agreement. Subject to the limitation on the
transferability of the option contained herein, this Agreement shall be
binding upon and inure to the benefit of the heirs, legatees, legal
representatives, successors and assigns of the parties hereto.
17. Plan Governs. This Agreement is subject to all terms
and provisions of the Plan. In the event of a conflict between one or
more provisions of this Agreement and one or more provisions of the
Plan, the provisions of the Plan shall govern. Terms used and not
defined in this Agreement shall have the meaning set forth in the Plan.
18. Committee Authority. The Committee shall have the
power to interpret the Plan and this Agreement and to adopt such rules
for the administration, interpretation and application of the Plan as
are consistent therewith and to interpret or revoke any such rules. All
actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon Employee, the
Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this
Agreement.
19. Captions. Captions provided herein are for
convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.
20. Agreement Severable. In the event that any provision
in this Agreement shall be held invalid or unenforceable, such provision
shall be severable from, and such invalidity or unenforceability shall
not be construed to have any effect on, the remaining provisions of this
Agreement.
THE GAP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
The Gap, Inc. (the "Company") hereby grants to 2x 1x (the "Director"), a
stock option under The Gap, Inc. 1996 Stock Option and Award Plan (the
"Plan"), to purchase shares of common stock of the Company, $0.05 par value
("Shares"). This option is subject to all of the terms and conditions
contained in this Agreement, including the terms and conditions contained
in the attached Appendix A. The date of this Agreement is 7x. Subject
to the provisions of Appendix A and of the Plan, the principal features of
this option are as follows:
Number of Shares
Purchasable with this Option: 9x
Price per Share: 8x
Date Option was Granted: 7x
Date Option is
Scheduled to become Exercisable: 10x
Latest Date Option Expires: 11x
As provided in the Plan and in this Agreement, this option
may terminate before the date written above, including before the option
becomes exercisable or is exercised. For example, if Director's term
ends before the date this option becomes exercisable, this option will
terminate at the same time as Director's term terminates. PLEASE BE
SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND
CONDITIONS OF THIS OPTION.
IN WITNESS WHEREOF, the Company and the Director have
executed this Agreement, in duplicate, to be effective as of the day and
year first above written.
THE GAP, INC.
Dated: 7x _____________________________________
Donald G. Fisher
Chairman of the Board
My signature below indicates that I understand that this
option is subject to all of the terms and conditions of this Agreement
(including the attached Appendix A) and of the Plan.
DIRECTOR
Dated: _________________ _____________________________
Address: ____________________
_____________________________
_____________________________
Social Security No.: _________________
STOCK OPTION AGREEMENT APPENDIX - DIRECTOR'S VERSION APPENDIX A
TERMS AND CONDITIONS OF NON-QUALIFIED STOCK OPTION
1. Grant of Option. The Company hereby grants to the
Director under the Plan, as a separate incentive in connection with his
or her service and not in lieu of any salary or other compensation for
his or her services, a non-qualified stock option to purchase, on the
terms and conditions set forth in this Agreement and the Plan, all or
any part of the number of shares set forth on page 1 of this Agreement.
The option granted hereby is not intended to be an Incentive Stock
Option within the meaning of Section 422 of the Code.
2. Exercise Price. The purchase price per Share (the
"Option Price") shall be equal to the price set forth on page 1 of this
Agreement, which is the fair market value per Share on the date of this
Agreement. The Option Price shall be payable in the legal tender of the
United States.
3. Number of Shares. The number and class of Shares
specified in paragraph 1 above, and/or the Option Price, are subject to
appropriate adjustment in the event of changes in the capital stock of
the Company by reason of stock dividends, split-ups or combinations of
Shares, reclassifications, mergers, consolidations, reorganizations or
liquidations. Subject to any required action of the stockholders of the
Company, if the Company shall be the surviving corporation in any merger
or consolidation, the option granted hereunder (to the extent that it is
still outstanding) shall pertain to and apply to the securities to which
a holder of the same number of Shares of Common Stock that are then
subject to the option would have been entitled. To the extent that the
foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Compensation and Stock Option Committee
of the Company's Board of Directors (the "Committee"), whose
determination in that respect shall be final, binding and conclusive.
4. Commencement of Exercisability. Except as otherwise
provided in this Agreement, the right to exercise the option awarded by
this Agreement shall accrue as to 100% of the Shares subject to such
option on the third anniversary date of the date of this Agreement.
5. Reduction or Elimination of Exercisability.
Notwithstanding paragraph 4 or any other provision of this Agreement,
prior to the third anniversary of the date of this Agreement, the
Committee, in its sole discretion, may determine that the right to
exercise the option awarded by this Agreement shall not accrue as to all
or part of the Shares specified in paragraph 1 (and as adjusted pursuant
to paragraph 3, if appropriate).
6. Termination of Option. In the event that Director's
service with the Company or an Affiliate terminates for any reason other
than Retirement, Total Disability or death, this option shall
immediately thereupon terminate. In the event of the Director's
Retirement or Termination of Employment by reason of his or her Total
Disability, the Director may, within one (1) year after the date of such
Termination of Employment, or within ten (10) years from the date of
this Agreement, whichever shall first occur, exercise any unexercised
portion of the option. In the event that the Director shall die while
in the employ of the Company or an Affiliate, any unexercised portion of
the option may be exercised by the Director's beneficiary or transferee,
as hereinafter provided, for a period of one (1) year after the date of
the Director's death or within eight ten (10) years from the date of
this Agreement, whichever shall first occur. Notwithstanding the
preceding two sentences, in the event that within one year of the date
of this Agreement, Director's service with the Company or an Affiliate
is terminated on account of his or her Retirement, Total Disability or
death, this option shall immediately thereupon terminate.
7. Persons Eligible to Exercise. The option shall be
exercisable during the Director's lifetime only by the Director. The
option shall be non-transferable by the Director other than by a
beneficiary designation made in a form and manner acceptable to the
Committee, or by will or the applicable laws of descent and
distribution.
8. Death of Director. To the extent exercisable after
the Director's death, the option shall be exercised only by the
Director's designated beneficiary or beneficiaries, or if no beneficiary
survives the Director, by the person or persons entitled to the option
under the Director's will, or if the Director shall fail to make
testamentary disposition of the option, his or her legal representative.
Any transferee exercising the option must furnish the Company (a)
written notice of his or her status as transferee, (b) evidence
satisfactory to the Company to establish the validity of the transfer of
the option and compliance with any laws or regulations pertaining to
said transfer, and (c) written acceptance of the terms and conditions of
the option as prescribed in this Agreement.
9. Exercise of Option. The option may be exercised by
the person then entitled to do so as to any Shares which may then be
purchased (a) by giving written notice of exercise to the Company,
specifying the number of full Shares to be purchased and accompanied by
full payment of the purchase price thereof (and the amount of any income
tax the Company is required by law to withhold by reason of such
exercise), and (b) by giving satisfactory assurances in writing if
requested by the Company, signed by the person exercising the option,
that the Shares to be purchased upon such exercise are being purchased
for investment and not with a view to the distribution thereof.
10. No Rights of Stockholder. Neither the Director nor
any person claiming under or through said Director shall be or have any
of the rights or privileges of a stockholder of the Company in respect
of any of the Shares issuable upon the exercise of the option, unless
and until certificates representing such Shares shall have been issued,
recorded on the records of the Company or its transfer agents or
registrars, and delivered to Director.
11. No Effect on Service. Nothing in this Agreement shall
confer upon the Director the right to continue in service on the Board.
12. Addresses for Notices. Any notice to be given to the
Company under the terms of this Agreement shall be addressed to the
Company, in care of its Law Department, at The Gap, Inc., One Harrison
Street, San Francisco, California 94105, or at such other address as the
Company may hereafter designate in writing. Any notice to be given to
the Director shall be addressed to the Director at the address set forth
beneath the Director's signature hereto, or at such other address as the
Director may hereafter designate in writing. Any such notice shall be
deemed to have been duly given if and when enclosed in a properly sealed
envelope, addressed as aforesaid, registered or certified and deposited,
postage and registry fee prepaid, in a United States post office.
13. Non-Transferability of Option. Except as otherwise
herein provided, the option herein granted and the rights and privileges
conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and
shall not be subject to sale under execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of said option, or of any right or privilege conferred
hereby, contrary to the provisions hereof, or upon any attempted sale
under any execution, attachment or similar process upon the rights and
privileges conferred hereby, said option and the rights and privileges
conferred hereby shall immediately become null and void.
14. Maximum Term of Option. Notwithstanding any other
provision of this Agreement, this option is not exercisable after the
expiration of ten (10) years from the date of this Agreement.
15. Binding Agreement. Subject to the limitation on the
transferability of the option contained herein, this Agreement shall be
binding upon and inure to the benefit of the heirs, legatees, legal
representatives, successors and assigns of the parties hereto.
16. Plan Governs. This Agreement is subject to all terms
and provisions of the Plan. In the event of a conflict between one or
more provisions of this Agreement and one or more provisions of the
Plan, the provisions of the Plan shall govern. Terms used and not
defined in this Agreement shall have the meaning set forth in the Plan.
17. Committee Authority. The Committee shall have the
power to interpret the Plan and this Agreement and to adopt such rules
for the administration, interpretation and application of the Plan as
are consistent therewith and to interpret or revoke any such rules. All
actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon Director, the
Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this
Agreement.
18. Captions. Captions provided herein are for
convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.
19. Agreement Severable. In the event that any provision
in this Agreement shall be held invalid or unenforceable, such provision
shall be severable from, and such invalidity or unenforceability shall
not be construed to have any effect on, the remaining provisions of this
Agreement.
Grant No. 6x
THE GAP, INC.
RESTRICTED STOCK AWARD AGREEMENT
The Gap, Inc. (the "Company") hereby grants to 2x 1x (the "Employee"), an
award of Restricted Stock under The Gap, Inc. 1996 Stock Option and Award
Plan (the "Plan"). This award is subject to all of the terms and conditions
contained in this Agreement, including the terms and conditions contained in
the attached Appendix A. The date of this Agreement is 7x. Subject to the
provisions of Appendix A and of the Plan, the principal features of this
award are as follows:
Number of Shares: 8x
Date of Grant: 7x
Date(s) Restrictions on
Shares Scheduled to Lapse: 10x shares on datex
12x shares on datex
14x shares on datex
16x shares on datex
18x shares on datex
As provided in the Plan and in this Agreement, this award may terminate
before the restrictions on all or part of the shares lapse. For example,
if Employee's employment ends before the date the restrictions lapse, this
award will terminate and the shares awarded shall revert to the Company.
See paragraph 4 of Appendix A for further information concerning how
termination of employment affects termination of this award.
IN WITNESS WHEREOF, the Company and the Employee have
executed this Agreement, in duplicate, to be effective as of the date
first above written.
THE GAP, INC.
Dated: _________________________________________
Donald G. Fisher
Chairman of the Board
My signature below indicates that I understand that this
award is subject to all of the terms and conditions of this Agreement
(including the attached Appendix A) and of the Plan.
EMPLOYEE
Dated: _______________ ____________________________________________
Address: ___________________________________
___________________________________
___________________________________
Social Security No.: _______________________
APPENDIX A
TERMS AND CONDITIONS OF RESTRICTED STOCK AWARD
1. Grant of Award. The Company hereby grants to Employee for past
services and as a separate incentive in connection with his or her
employment and not in lieu of any salary or other compensation for his
or her services, an award of the number of restricted shares of common
stock of the Company, $0.05 par value, set forth on page 1 of this
Agreement, which shares of Restricted Stock shall be granted on the date
hereof, subject to all the terms and conditions in this Agreement and
the Plan.
2. Shares held in Escrow. Unless and until the restrictions on the
shares of Restricted Stock shall have lapsed in the manner set forth in
paragraph 3 below, such shares shall be issued in the name of Employee
and held by the Secretary of the Company as escrow agent (the "Escrow
Agent"), and shall not be sold, transferred or otherwise disposed of and
shall not be pledged or otherwise hypothecated. The Company may
instruct the transfer agent for its common stock to place a legend on
the certificates representing the Restricted Stock or otherwise note its
records as to the restrictions on transfer set forth in this Agreement
and the Plan. The certificate or certificates representing such shares
shall be delivered by the Escrow Agent to Employee only after the
restrictions on such shares have lapsed and all other terms and
conditions in this Agreement have been satisfied.
3. Lapse of Restrictions. Subject to the provisions of paragraph 3(b),
the restrictions on the shares of Restricted Stock awarded by this
Agreement shall lapse with respect to a number of shares on a date (the
"Lapse Date") determined under paragraph 3(a).
(a) The Lapse Date shall be as set forth on page 1 of this Agreement.
(b) If compliance with a trading restriction imposed by the Company's
policy prohibiting trading on undisclosed material information, as set
forth in the Company's Corporate Compliance Manual (the "Insider Trading
Policy") would prohibit Employee from selling any shares of the
Company's common stock on a Lapse Date set forth in paragraph 3(a), then
the Lapse Date with respect to that number of Shares which would
otherwise become vested pursuant to paragraph 3(a) shall be the earlier
of (i) the first subsequent day on which both (A) the Company's common
stock is traded on a national securities exchange within the meaning of
Section 6 of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") (such as the New York Stock Exchange) or a national
market system within the meaning of Section 11A of the Exchange Act and
(B) on which Employee may sell shares of the Company's common stock
without violating the Insider Trading Policy, or (ii) the date which is
ninety (90) days after the Lapse Date.
4. Termination of Employment. The shares of Restricted Stock as to which
restrictions have not lapsed at the time of Employee's Termination of
Employment shall thereupon be forfeited and automatically transferred to
and reacquired by the Company at no cost to the Company. Employee
hereby appoints the Escrow Agent with full power of substitution, as
Employee's true and lawful attorney-in-fact with irrevocable power and
authority in the name and on behalf of Employee to take any action and
execute all documents and instruments, including, without limitation,
stock powers which may be necessary to transfer the certificate or
certificates evidencing such unvested shares to the Company upon such
Termination of Employment.
5. Continuous Employment Required. Restrictions on shares
of Restricted Stock shall not lapse in accordance with any of the
provisions of this Agreement unless Employee shall have been
continuously employed by the Company or by one of its Affiliates from
the date of the award until the date such restrictions are deemed to
have lapsed.
6. Withholding Taxes. Notwithstanding anything in this
Agreement to the contrary, no certificate representing Restricted Stock
may be released from the escrow established pursuant to paragraph 2 of
this Agreement unless and until Employee shall have delivered to the
Company or its designated Affiliate, the full amount of any federal,
state or local income and other taxes which the Company or such
Affiliate may be required by law to withhold with respect to such
shares.
7. Beneficiary Designation. Any distribution or delivery
to be made to Employee under this Agreement shall, if the Employee is
then deceased, be made to the Employee's designated beneficiary, or if
no such beneficiary survives the Employee, the person or persons
entitled to such distribution or delivery under the Employee's will or,
if the Employee shall fail to make testamentary disposition of such
property, the executor of his or her estate. In order to be effective,
a beneficiary designation must be made by the Employee in a form and
manner acceptable to the Committee. Any transferee must furnish the
Company with (a) written notice of his or her status as transferee, and
(b) evidence satisfactory to the Company to establish the validity of
the transfer and compliance with any laws or regulations pertaining to
said transfer.
8. Conditions to Issuance of Shares. The shares of stock
deliverable to Employee may be either previously authorized but unissued
shares or issued shares which have been reacquired by the Company. The
Company shall not be required to issue any certificate or certificates
for shares of stock hereunder prior to fulfillment of all of the
following conditions: (a) The admission of such shares to listing on
all stock exchanges on which such class of stock is then listed; (b) The
completion of any registration or other qualification of such shares
under any State or Federal law or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall, in its absolute discretion,
deem necessary or advisable; (c) The obtaining of any approval or other
clearance from any State or Federal governmental agency, which the
Committee shall, in its absolute discretion, determine to be necessary
or advisable; and (d) The lapse of such reasonable period of time
following the date of grant of the Restricted Stock as the Committee may
establish from time to time for reasons of administrative convenience.
9. Rights as Stockholder. Except as otherwise provided in
this Agreement, after the date of this Agreement, Employee shall have
all rights of a stockholder of the Company with respect to voting such
shares and receipt of dividends and distributions on such shares.
10. Changes in Stock. In the event that as a result of a
stock dividend, stock split, reclassification, recapitalization,
combination of shares or the adjustment in capital stock of the Company
or otherwise, or as a result of a merger, consolidation, spin-off or
other reorganization, the Company's common stock shall be increased,
reduced or otherwise changed, and by virtue of any such change a
Employee shall in his or her capacity as owner of unvested shares of
Restricted Stock which have been awarded to him or her (the "Prior
Shares") be entitled to new or additional or different shares of stock
or securities (other than rights or warrants to purchase securities);
such new or additional or different shares or securities shall thereupon
be considered to be unvested Restricted Stock and shall be subject to
all of the conditions and restrictions which were applicable to the
Prior Shares pursuant to the Plan. If an Employee receives rights or
warrants with respect to any Prior Shares, such rights or warrants may
be held or exercised by the Employee, provided that until such exercise
any such rights or warrants and after such exercise any shares or other
securities acquired by the exercise of such rights or warrants shall be
considered to be unvested Restricted Stock and shall be subject to all
of the conditions and restrictions which were applicable to the Prior
Shares pursuant to the Plan.
11. Plan Governs. This Agreement is subject to all the
terms and provisions of the Plan. In the event of a conflict between
one or more provisions of this Agreement and one or more provisions of
the Plan, the provisions of the Plan shall govern. Terms used in this
Agreement that are not defined in this Agreement shall have the meaning
set forth in the Plan.
12. Committee Authority. The Committee shall have the
power to interpret the Plan and this Agreement and to adopt such rules
for the administration, interpretation and application of the Plan as
are consistent therewith and to interpret or revoke any such rules. All
actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon Employee, the
Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this
Agreement.
13. No Right to Continued Employment. The Employee
understands and agrees that this agreement does not impact in any way
the right of the Company, or the Affiliate employing the Employee, as
the case may be, to terminate or change the terms of the employment of
the Employee at any time for any reason whatsoever, with or without good
cause. The Employee understands and agrees that his or her employment
is "at-will" and that either the Company or the Employee may terminate
Employee's employment at any time and for any reason. Employee also
understands and agrees that his or her "at-will" status can only be
changed by an express written contract signed by an authorized officer
of the Company and the Employee.
14. Non-Transferability of Award. Except as otherwise
herein provided, the Restricted Stock herein granted and the rights and
privileges conferred hereby shall not be transferred, assigned, pledged
or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to sale under execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of such award, or of any right or privilege conferred
hereby, contrary to the provisions hereof, or upon any attempted sale
under any execution, attachment or similar process upon the rights and
privileges conferred hereby, such award and the rights and privileges
conferred hereby shall immediately become null and void.
15. Binding Agreement. Subject to the limitation on the
transferability of the Restricted Stock contained herein, this Agreement
shall be binding upon and inure to the benefit of the heirs, legatees,
legal representatives, successors and assigns of Employee and the
Company.
16. Addresses for Notices. Any notice to be given to the
Company under the terms of this Agreement shall be addressed to the
Company, in care of its Law Department, at The Gap, Inc., One Harrison,
San Francisco, California 94105, or at such other address as the Company
may hereafter designate in writing. Any notice to be given to the
Employee shall be addressed to the Employee at the address set forth
beneath the Employee's signature hereto, or at such other address as the
Employee may hereafter designate in writing. Any such notice shall be
deemed to have been duly given if and when enclosed in a properly sealed
envelope, addressed as aforesaid, registered or certified and deposited,
postage and registry fee prepaid, in a United States post office.
17. Captions. Captions provided herein are for convenience
only and are not to serve as a basis for interpretation or construction
of this Agreement.
18. Agreement Severable. In the event that any provision
in this Agreement shall be held invalid or unenforceable, such provision
shall be severable from, and such invalidity or unenforceability shall
not be construed to have any effect on, the remaining provisions of this
Agreement.
THE GAP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Thirteen Weeks Ended
May 4, 1996 April 29, 1995
Net earnings ($000) $ 81,573 $50,113
Weighted average shares of
common stock outstanding
during the period 288,010,684 287,744,200
Add incremental shares
from assumed exercise of stock
options (primary) 3,314,299 334,224
291,324,983 288,078,424
Primary earnings per share $ 0.28 $ 0.17
Weighted average shares of
common stock outstanding
during the period 288,010,684 287,744,200
Add incremental shares from
assumed exercise of stock
options (fully-diluted) 3,808,505 334,158
291,819,189 288,078,358
Fully-diluted earnings
per share $ 0.28 $ 0.17
NOTE:
(1) The information provided above 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. The information in this exhibit 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 share bases is less than 3%.
(2) All share and per share data have been restated to reflect the 2-
for-1 split of common stock in the form of a stock dividend effective
April 10, 1996.
Deloitte & 2101 Webster Street Telephone (510)287-2700
Touche Oakland, California 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 May 4, 1996 and April
29, 1995, as indicated in our report dated May 16, 1996, 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 May 4, 1996, in
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, Registration Statement
No. 33-56021, and Registration No. 333-00417.
We also are 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 15, 1996
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 552,729
<SECURITIES> 79,819
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 489,719
<CURRENT-ASSETS> 1,269,058
<PP&E> 1,626,967
<DEPRECIATION> 645,956
<TOTAL-ASSETS> 2,373,314
<CURRENT-LIABILITIES> 486,853
<BONDS> 0
0
0
<COMMON> 15,845
<OTHER-SE> 1,713,752
<TOTAL-LIABILITY-AND-EQUITY> 2,373,314
<SALES> 1,113,154
<TOTAL-REVENUES> 1,113,154
<CGS> 699,314
<TOTAL-COSTS> 282,627
<OTHER-EXPENSES> (3,618)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 134,831
<INCOME-TAX> 53,258
<INCOME-CONTINUING> 81,573
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