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 1, 1999 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) 427-2000
_______________________
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, 857,493,260 shares as of May 29, 1999
(adjusted to reflect a three-for-two stock declared May 20, 1999 to
shareholders of record on June 4, 1999 to be distributed on June 21, 1999.)
<TABLE>
GAP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(In thousands, except par value)
May 1, January 30, May 2,
1999 1999 1998
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 456,107 $ 565,253 $ 836,314
Merchandise inventory 1,198,497 1,056,444 823,305
Other current assets 263,927 250,127 184,815
Total Current Assets 1,918,531 1,871,824 1,844,434
Property and equipment, net 1,997,900 1,876,370 1,475,099
Lease rights and other assets 211,441 215,725 162,193
Total Assets $4,127,872 $3,963,919 $3,481,726
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 97,834 $ 90,690 $ 97,264
Accounts payable 617,597 684,130 376,413
Accrued expenses
and other current liabilities 675,955 655,770 454,338
Income taxes payable 6,153 122,513 71,009
Total Current Liabilities 1,397,539 1,553,103 999,024
Long-Term Liabilities:
Long-term debt 545,045 496,455 496,147
Deferred lease credits and other liabilities 347,517 340,682 291,999
Total Long-Term Liabilities 892,562 837,137 788,146
Shareholders' Equity:
Common stock $.05 par value
Authorized 2,300,000 shares
Issued 1,001,818; 997,496
and 992,417 shares
Outstanding 860,031; 857,960
and 883,622 shares 50,091 49,875 49,621
Additional paid-in capital 520,818 349,037 348,483
Retained earnings 3,323,831 3,121,360 2,509,420
Accumulated other comprehensive earnings (20,479) (12,518) (12,722)
Deferred compensation (33,846) (31,675) (36,965)
Treasury stock, at cost (2,002,644) (1,902,400) (1,163,281)
Total Shareholders' Equity 1,837,771 1,573,679 1,694,556
Total Liabilities and Shareholders' Equity $4,127,872 $3,963,919 $3,481,726
See accompanying notes to condensed consolidated financial statements.
</TABLE>
GAP INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Thirteen Weeks Ended
(In thousands, except share and per share amounts)
May 1, 1999 May 2, 1998
Net sales $ 2,277,734 $ 1,719,712
Costs and expenses
Cost of goods sold and occupancy expenses 1,334,155 1,031,004
Operating expenses 615,149 472,144
Net interest expense (income) 4,638 (1,141)
Earnings before income taxes 323,792 217,705
Income taxes 121,422 81,639
Net earnings $ 202,370 $ 136,066
Weighted average number of shares - basic 854,464,568 874,464,480
Weighted average number of shares - diluted 900,043,739 911,250,984
Earnings per share - basic $.24 $.16
Earnings per share - diluted $.22 $.15
Cash dividends per share $.02<F1> $.02
See accompanying notes to condensed consolidated financial statements.
<F1>
(a) Represents a dividend of $.02 per share declared in January 1999 but paid
in first quarter of fiscal 1999.
GAP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands) Thirteen Weeks Ended
May 1, 1999 May 2, 1998
Cash Flows from Operating Activities:
Net earnings $202,370 $136,066
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 94,998 74,801
Tax benefit from exercise of stock options
and vesting of restricted stock 134,312 42,624
Changes in operating assets and liabilities:
Merchandise inventory (143,079) (90,016)
Other current assets (15,074) (2,966)
Accounts payable (66,858) (38,685)
Accrued expenses 41,056 49,019
Income taxes payable (115,898) (12,587)
Deferred lease credits and other current liabilities 10,153 22,440
Net cash provided by operating activities 141,980 180,696
Cash Flows from Investing Activities:
Net purchase of property and equipment (218,973) (174,156)
Acquisition of lease rights and other assets (2,769) (19,700)
Net cash used for investing activities (221,742) (193,856)
Cash Flows from Financing Activities:
Net increase in notes payable 12,481 12,677
Net issuance of long-term debt 48,346
Issuance of common stock 30,226 11,191
Net purchase of treasury stock (100,251) (68,244)
Cash dividends paid (18,946) (19,396)
Net cash used for financing activities (28,144) (63,772)
Effect of exchange rate fluctuations on cash (1,240) 77
Net decrease in cash and equivalents (109,146) (76,855)
Cash and equivalents at beginning of year 565,253 913,169
Cash and equivalents at end of quarter $456,107 $836,314
See accompanying notes to condensed consolidated financial statements.
GAP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheets as of May 1, 1999 and May 2,
1998 and the interim condensed consolidated statements of earnings and
cash flows for the thirteen weeks ended May 1, 1999 and May 2, 1998 have
been prepared by the Company, without audit. In the opinion of
management, such statements include 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 1, 1999 and May 2, 1998, and for all periods presented.
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 30, 1999.
The condensed consolidated balance sheet as of January 30, 1999 was
derived from the Company's January 30, 1999 balance sheet included in the
Company's 1998 Annual Report on Form 10-K.
The results of operations for the thirteen weeks ended May 1, 1999 are not
necessarily indicative of the operating results that may be expected for
the year ending January 29, 2000.
2. THREE-FOR-TWO STOCK SPLIT
On May 20, 1999, the Company's Board of Directors authorized a three-for-
two stock split of its common stock to be distributed on June 21, 1999 in
the form of a stock dividend for shareholders of record at the close of
business on June 4, 1999. All share and per share amounts in the
accompanying condensed consolidated financial statements for all periods
have been restated to reflect the stock split.
3. COMPREHENSIVE EARNINGS
Other comprehensive earnings include foreign currency translation
adjustments and fluctuations in the fair market value of financial
instruments. Total comprehensive earnings for the first quarter
of 1999 and 1998 were as follows (in thousands):
Thirteen Thirteen
Weeks Ended Weeks Ended
May 1, 1999 May 2, 1998
Net earnings $202,370 $136,066
Other comprehensive earnings (7,961) 2,508
Total comprehensive earnings $194,409 $138,574
4. EARNINGS PER SHARE
Under SFAS No. 128, the Company provides dual presentation of EPS on a
basic and diluted basis. The Company's granting of certain stock options
and restricted stock resulted in potential dilution of basic EPS. The
following summarizes the effects of the assumed issuance of dilutive
securities on weighted-average shares for basic EPS.
Thirteen Thirteen
Weeks Ended Weeks Ended
May 1, 1999 May 2, 1998
Weighted-average number of shares - basic 854,464,568 874,464,480
Incremental shares from assumed
issuance of:
Stock options 42,431,804 29,519,856
Restricted stock 3,147,367 7,266,648
Weighted-average number of shares - diluted 900,043,739 911,250,984
The number of incremental shares from the assumed issuance of stock
options and restricted stock is calculated applying the treasury stock
method.
Excluded from the above computation of weighted-average shares for diluted
EPS were options to purchase 236,906 shares of common stock during the
first quarter of fiscal 1999 and 7,652,685 during the first quarter of
fiscal 1998. Issuance of these securities would have resulted in an
antidilutive effect on EPS.
5. LONG-TERM DEBT
During the first quarter of fiscal 1999, the Company's Japanese subsidiary
issued $50 million of 10-year debt securities at 6.25 percent fixed
interest rate. The Company swapped the cash flows payable under these
debt securities to Japanese yen with a fixed interest rate of 2.43
percent. These debt securities are recorded in the balance sheet at
their market value as of May 1, 1999.
Deloitte & Touche LLP
50 Fremont Street Telephone: (415) 247-4000
San Francisco, California 94105-2230 Facsimile: (415) 247-4300
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
The Gap, Inc.:
We have reviewed the accompanying condensed consolidated balance sheets of The
Gap, Inc. and subsidiaries as of May 1, 1999 and May 2, 1998 and the related
condensed consolidated statements of earnings and cash flows for the thirteen
week periods ended May 1, 1999 and May 2, 1998. 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 January 30, 1999, and the related consolidated statements of earnings,
shareholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated February 25, 1999, 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
January 30, 1999 is fairly stated in all material respects, in relation to the
consolidated balance sheet from which it was derived.
/s/ Deloitte & Touche LLP
June 4, 1999
Deloitte Touche
Tohmatsu
GAP INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information below contains certain forward-looking statements which reflect
the current view of Gap Inc. (the "Company") with respect to future events and
financial performance. Wherever used, the words "expect," "plan,"
"anticipate," "believe," and similar expressions identify forward-looking
statements.
Any such forward-looking statements are subject to risks and uncertainties and
the Company's actual results of operations to differ materially from historical
results or current expectations. Some of these risks include, without
limitation, ongoing competitive pressures in the apparel industry, risks
associated with challenging international retail environments, changes in the
level of consumer spending or preferences in apparel, trade restrictions and
political or financial instability in countries where the Company's goods are
manufactured, disruption to operations from Year 2000 issues, and/or other
factors that may be described in the Company's Annual Report on Form 10-K
and/or other filings with the Securities and Exchange Commission. Future
economic and industry trends that could potentially impact revenues and
profitability are difficult to predict.
It is suggested that this document be read in conjunction with the Management's
Discussion and Analysis included in the Company's 1998 Annual Report on Form
10-K.
The Company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any
projected results expressed or implied therein will not be realized.
RESULTS OF OPERATIONS
Net Sales
Thirteen weeks ended
May 1, 1999 May 2, 1998
Net sales ($000) $2,277,734 $1,719,712
Total net sales growth percentage 32 40
Comparable store sales growth percentage 11 17
Net sales per average square foot $118 $109
Square footage of gross store space (000) 19,517 15,975
Fifty-two Fifty-two
weeks ended weeks ended
May 1, 1999 May 2, 1998
Number of:
New stores 354 298
Expanded stores 110 112
Closed stores 21 18
The total net sales growth in the first quarter of 1999 over the same period
last year was primarily attributable to the increase in retail selling space
through the opening of new stores (net of stores closed) and the expansion of
existing stores. Additionally, the increase in comparable store sales also
contributed to net sales growth.
The increase in net sales per average square foot for the first quarter of 1999
was primarily attributable to increases in comparable store sales.
Cost of Goods Sold and Occupancy Expenses
Cost of goods sold and occupancy expenses as a percentage of net sales
decreased 1.4 percentage points from the same period in 1998. The decrease was
driven by a decrease in occupancy expenses as a percentage of net sales
slightly offset by a decrease in the merchandise margin as a percentage of net
sales.
The decrease in occupancy expenses as a percentage of net sales was primarily
attributable to leverage achieved from the increase in comparable store sales.
The decrease in merchandise margin as a percentage of net sales was primarily
attributable to a greater percentage of merchandise sold at markdown when
compared to the same period last year.
As a general business practice, 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 decreased 0.4 percentage points
for the first quarter of 1999 as compared to first quarter of 1998. The
decrease was primarily attributable to a decrease in overhead expense growth as
a percent to sales and leverage from comparable store sales growth. These
decreases were partially offset by significantly higher advertising and
marketing costs as a percentage of net sales as part of the Company's brand
development efforts.
Net Interest Income/Expense
Net interest expense increased in the first quarter of 1999 primarily due to
lower interest income resulting from a decrease in cash available for
investment. The Company had net interest income for the first quarter of 1998.
Income Taxes
The effective tax rate was 37.5 percent for both of the thirteen weeks ended
May 1, 1999 and May 2, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The following sets forth certain measures of the Company's liquidity:
Thirteen weeks ended
May 1, 1999 May 2, 1998
Cash provided by operating activities ($000) $141,980 $180,696
Working capital ($000) $520,992 $845,410
Current ratio 1.37:1 1.85:1
For the thirteen weeks ended May 1, 1999, the decrease in cash flows provided
by operating activities was attributable to the increase in merchandise
inventory and the decrease in certain payables partially offset by an increase
in net earnings.
The Company funds inventory expenditures during normal and peak periods through
a combination of cash flows provided by operations and short-term financing
arrangements. The Company's business follows a seasonal pattern, peaking over
a total of about ten to thirteen weeks during the Back-to-School and Holiday
periods.
The Company has committed credit facilities totaling $950 million, consisting
of an $800 million, 364-day revolving credit facility, and a $150 million, 5-
year revolving credit facility through June 28, 2003. These credit facilities
provide for the issuance of up to $450 million in letters of credit. The
Company has additional uncommitted credit facilities of $400 million for the
issuance of letters of credit. At May 1, 1999, the Company had outstanding
letters of credit of approximately $765 million. The credit facilities also
provide backup for the Company's $500 million commercial paper program.
During the last half of fiscal 1998, the Company issued a total of $500
million of commercial paper to cover short-term borrowing needs. The Company
had no commercial paper outstanding at May 1, 1999.
To provide financial flexibility, the Company filed a shelf registration
statement in January 1999 with the Securities and Exchange Commission for $500
million of debt securities. The net proceeds from any issuance are expected to
be used for general corporate purposes, including expansion of stores,
distribution centers and headquarters facilities, brand investment, development
of additional distribution channels and repurchases of the Company's common
stock pursuant to its ongoing repurchase program. No assurances can be given
that the Company will issue these debt securities.
During the first quarter of fiscal 1999, the Company's Japanese subsidiary
issued $50 million of 10-year debt securities. The net proceeds are intended to
be used for general corporate purposes. The cash flows relating to the bonds
were swapped for the equivalent amounts in Japanese yen to minimize currency
exposure.
For the thirteen weeks ended May 1, 1999, capital expenditures, net of
construction allowances and dispositions, totaled approximately $209 million.
The majority of these expenditures were used for expansion of the store base.
During the quarter, the Company experienced a net increase in store space of
approximately 760,000 square feet, or 4 percent, due to the addition of 105 new
stores, the expansion of 6 stores and the remodeling of certain stores.
For 1999, the Company expects capital expenditures to exceed $1 billion, net of
construction allowances. This represents the addition of 400 to 470 new stores,
the expansion of approximately 100 to 110 stores, the remodeling of certain
stores, as well as amounts for headquarters facilities, distribution centers
and equipment. The Company expects to fund such capital expenditures with cash
flow from operations and other sources of financing. Square footage growth is
expected to be in excess of 20 percent before store closings. New stores are
generally expected to be leased.
During second quarter of 1999, the Company opened a distribution center that
was constructed over fiscal 1997 and 1998 for a total cost of approximately $60
million.
During 1998, the Company purchased land on which to construct additional
headquarter facilities in San Francisco and San Bruno, California. The
estimated total project costs are approximately $240 million and $100 million,
respectively. Construction commenced on the San Francisco facility during the
third quarter of 1998 and is estimated to continue through late 2001.
Construction commenced during the first quarter of 1999 for the San Bruno
facility and is estimated to continue through late 2000.
During 1999, the Company commenced construction on three additional
distribution facilities for an estimated total cost of approximately $300
million. Approximately half of these expenditures will be incurred during
fiscal 1999, with the remainder incurred during fiscal 2000. These
expenditures are included in the projected capital expenditures as described
above. The facilities are expected to open in the second quarter of 1999,
first quarter of 2000 and third quarter of 2000, respectively.
On May 20, 1999, the Company's Board of Directors authorized a three-for-two
stock split of the Company's common stock to be distributed on June 21, 1999 in
the form of a stock dividend for shareholders of record at the close of
business on June 4, 1999. All share and per share amounts below and in the
accompanying condensed consolidated financial statements for all periods have
been restated to reflect the stock split.
During the first quarter of 1999, the Company completed a 101 million share
repurchase program approved in October 1996 by acquiring approximately 2.1
million shares for approximately $94 million. In addition, in the first
quarter of 1999, under the 67.5 million share repurchase program approved in
October 1998, the Company acquired approximately 130,000 shares for
approximately $6 million.
The Company operates in foreign countries which exposes it to market risk
associated with foreign currency exchange rate fluctuations. The Company's
risk management policy is to hedge substantially all merchandise purchases for
foreign operations through the use of foreign exchange forward contracts to
minimize this risk.
YEAR 2000 ISSUE
The Year 2000 issue is primarily the result of computer programs using a two-
digit format, as opposed to four digits, to indicate the year. Such computer
systems may be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors, leading to a disruption in the
operation of such systems. In 1996, the Company established a project team to
coordinate existing Year 2000 activities and address remaining Year 2000
issues. The team has focused its efforts on three areas: (1) information
systems software and hardware; (2) facilities and distribution equipment and
(3) third-party relationships.
The Program. The Company has adopted a five-phase Year 2000 program consisting
of: Phase I-identification and ranking of the components of the Company's
systems, equipment and suppliers that may be vulnerable to Year 2000 problems;
Phase II-assessment of items identified in Phase I; Phase III-remediation or
replacement of non-compliant systems and components and determination of
solutions for non-compliant suppliers; Phase IV-testing of systems and
components following remediation and Phase V-developing contingency plans to
address the most reasonably likely worst case Year 2000 scenarios. The Company
has completed Phases I and II and continues to make progress according to plan
on Phases III, IV and V.
Information Systems Software and Hardware. The Company has completed Phase II
and has made substantial progress on Phase III. Phase IV testing is being
conducted concurrently with Phase III activities. Management believes that the
Company is on track to complete remediation, testing and implementation of its
individual information systems by mid-1999. Phase V contingency planning has
begun and is expected to be complete by the end of the third quarter of 1999.
Facilities and Distribution Equipment. The Company has completed Phase II and
is actively working on Phase III. Phase IV testing and Phase V contingency
planning has begun and is expected to be completed by the end of the third
quarter of 1999.
Third-Party Relationships. The Company has completed Phase II and is actively
working on Phase III. Phase IV certification and Phase V contingency planning
has begun for all critical vendors and is expected to be completed by the end
of the third quarter of 1999.
Risks / Contingency Plans. Based on the assessment efforts to date, the
Company does not believe that the Year 2000 issue will have a material adverse
effect on its financial condition or results of operations. The Company
operates a large number of geographically dispersed stores and has a large
supplier base and believes that these factors will mitigate any adverse impact.
The Company's beliefs and expectations, however, are based on certain
assumptions and expectations that ultimately may prove to be inaccurate.
The Company has identified that a significant disruption in the product supply
chain represents the most reasonably likely worst case Year 2000 scenario.
Potential sources of risk include (a) the inability of principal suppliers or
logistics providers to be Year 2000-ready, which could result in delays in
product deliveries from such suppliers or logistics providers and (b)
disruption of the distribution channel, including ports, transportation
vendors, and the Company's own distribution centers as a result of a general
failure of systems and necessary infrastructure such as electricity supply.
The Company is preparing plans to flow inventory around an assumed period of
disruption to the supply chain, which could include accelerating selected
critical products to reduce the impact of significant failure.
The Company does not expect the costs associated with its Year 2000 efforts to
be substantial or material. Approximately, $40 million has been budgeted to
address the Year 2000 issue, of which $18 million has been expensed through May
1, 1999. The Company's aggregate estimate does not include time and costs that
may be incurred by the Company as a result of the failure of any third parties,
including suppliers, to become Year 2000-ready.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The market risk of the Company's financial instruments as of May 1, 1999
has not significantly changed since January 30, 1999 with the exception of the
issuance of $50 million of long-term debt during the first quarter. The
Company's Japanese subsidiary issued $50 million of 10-year debt securities
during the first quarter with a fixed interest rate of 6.25 percent payable in
US dollars. The Company swapped the cash flows payable under these debt
securities to Japanese yen with a fixed interest rate of 2.43 percent. These
debt securities are recorded in the balance sheet at their market value as of
May 1, 1999.
The market risk profile of the Company on January 30, 1999 is disclosed in the
Company's 1998 Annual Report on Form 10-K.
The net change in unrealized losses since January 30, 1999 for the Company's
foreign exchange contracts and long-term debt was an unrealized gain of $18
million.
PART II
OTHER INFORMATION
Item 5. Other Information
On May 20, 1999, the Company's Board of Directors authorized a three-for-two
split of its common stock to shareholders of record on June 4, 1999 to be
distributed June 21, 1999. The following selected financial data has been
restated to reflect the stock split.
<TABLE>
1998 1997 1996 1995 1994
Fiscal Year 52 weeks 52 weeks 52 weeks 53 weeks 52 weeks
<S> <C> <C> <C> <C> <C>
Earnings Per Share - basic 0.95 0.60 0.48 0.38 0.34
Earnings Per Share - diluted 0.91 0.58 0.47 0.37 0.33
Weighted-Average Shares - basic 864,062,060 891,404,945 938,579,921 939,866,394 948,699,959
Weighted-Average Shares - diluted 904,374,383 922,951,706 961,351,245 962,443,160 971,144,612
Number of shares outstanding 857,960,031 884,549,313 926,495,994 971,149,446 977,162,057
net of treasury shares
</TABLE>
<TABLE>
Thirteen Thirteen Thirteen Thirteen
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
Fiscal 1998 Quarter Ended May 2, 1998 August 1, 1998 October 31, 1998 January 30, 1999
<S> <C> <C> <C> <C> <C>
Earnings Per Share - basic 0.16 0.16 0.28 0.37
Earnings Per Share - diluted 0.15 0.15 0.27 0.35
Weighted-Average Shares - basic 874,464,480 874,424,015 856,978,248 850,337,033
Weighted-Average Shares - diluted 911,250,984 914,563,362 896,147,121 895,485,275
Number of shares outstanding 883,621,781 873,607,863 855,073,173 857,960,031
net of treasury shares
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(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 1, 1999.
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 7, 1999 By /s/ Warren R. Hashagen
Warren R. Hashagen
Chief Financial Officer
(Principal financial officer of the registrant)
Date: June 7, 1999 By /s/ Millard S. Drexler
Millard S. Drexler
President and Chief Executive Officer
EXHIBIT INDEX
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
EXHIBIT 15
Deloitte &
Touche LLP
50 Fremont Street Telephone: (415) 247-4000
San Francisco, California 94105-2230 Facsimile: (415) 247-4300
To the Board of Directors and Shareholders 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 condensed consolidated financial statements of The Gap, Inc.
and subsidiaries for the thirteen week periods ended May 1, 1999 and
May 2, 1998, as indicated in our report dated June 4, 1999; 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 1, 1999,
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, Registration Statement
No. 33-56021, Registration Statement No. 333-00417, Registration
Statement No. 333-12337, Registration Statement No. 333-36265,
Registration Statement No. 333-68285, Registration Statement No. 333-70991,
Registration Statement No. 333-72921 and Registration Statement No. 333-76523.
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 Statements 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 10, 1999
Deloitte Touche
Tohmatsu
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> MAY-01-1999
<CASH> 456,107,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,198,497,000
<CURRENT-ASSETS> 1,918,531,000
<PP&E> 3,241,276,000
<DEPRECIATION> 1,243,376,000
<TOTAL-ASSETS> 4,127,872,000
<CURRENT-LIABILITIES> 1,397,539,000
<BONDS> 545,045,000
0
0
<COMMON> 50,091,000
<OTHER-SE> 1,787,680,000
<TOTAL-LIABILITY-AND-EQUITY> 4,127,872,000
<SALES> 2,277,734,000
<TOTAL-REVENUES> 2,277,734,000
<CGS> 1,334,155,000
<TOTAL-COSTS> 1,334,155,000
<OTHER-EXPENSES> 615,149,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,638,000
<INCOME-PRETAX> 323,792,000
<INCOME-TAX> 121,422,000
<INCOME-CONTINUING> 202,370,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,370,000
<EPS-BASIC> 0.24<F1>
<EPS-DILUTED> 0.22<F1>
<FN>
<F1>The earnings per share information contained in this schedule reflects the
results of a 3:2 stock split to be distributed June 21, 1999, in the form of a
stock dividend to shareholders of record at the close of business on June 4,
1999. Previously reported financial data schedule information has not been
restated for this split.
</FN>
</TABLE>
