-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dgj8zVM15xvnWZIuCBlMkbRNViaMmB9fkmEuFvd+gTftrmfAi10VAQBOg/V1N7nk 9a1B2LWu6ef6/ehHbXOtBg== 0000039911-94-000019.txt : 19940617 0000039911-94-000019.hdr.sgml : 19940617 ACCESSION NUMBER: 0000039911-94-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GAP INC CENTRAL INDEX KEY: 0000039911 STANDARD INDUSTRIAL CLASSIFICATION: 5651 IRS NUMBER: 941697231 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07562 FILM NUMBER: 94533977 BUSINESS ADDRESS: STREET 1: ONE HARRISON CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159524400 MAIL ADDRESS: STREET 1: ONE HARRISON STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 FORMER COMPANY: FORMER CONFORMED NAME: GAP STORES INC DATE OF NAME CHANGE: 19850617 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended April 30, 1994 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, 145,738,648 shares as of June 10, 1994 PART 1 THE GAP, INC. AND SUBSIDIARIES ITEM 1 CONSOLIDATED BALANCE SHEETS
($000) April 30, January 29, May 1, 1994 1994 1993 (Unaudited) (See Note 1) (Unaudited) ASSETS Current Assets: Cash and equivalents $ 323,139 $ 460,332 $ 216,747 Short-term investments 176,393 83,497 - Accounts receivable 18,420 15,225 8,103 Merchandise inventory 346,544 331,155 361,403 Prepaid expenses and other 78,409 66,229 86,245 Total Current Assets 942,905 956,438 672,498 Property and equipment (net) 749,368 740,422 667,498 Long-term investments 19,944 - - Lease rights and other assets 68,415 66,257 40,134 Total Assets $ 1,780,632 $ 1,763,117 $ 1,380,130 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 75,000 $ - $ - Notes payable 4,516 7,603 - Accounts payable 214,289 216,664 163,053 Accrued expenses 145,786 163,350 113,104 Income taxes payable 39,757 70,431 11,485 Current deferred lease credits 4,432 4,196 3,046 Total Current Liabilities 483,780 462,244 290,688 Long-term Liabilities: Long-term debt - 75,000 75,000 Other liabilities 9,281 11,353 12,133 Deferred lease credits 94,695 88,045 68,328 subtotal 103,976 174,398 155,461 Stockholders' Equity: Common stock $.05 par value Authorized 500,000,000 shares Issued 156,450,680, 155,733,256 and 155,245,578 shares Outstanding 145,716,152, 145,248,728 and 144,761,050 shares 7,823 7,787 7,762 Additional paid-in capital 278,919 240,655 231,704 Retained earnings 1,076,279 1,026,836 851,840 Foreign currency translation adjustment (8,975) (8,314) (5,959) Restricted stock plan deferred compensation (58,684) (48,035) (58,912) Treasury stock, at cost (102,486) (92,454) (92,454) subtotal 1,192,876 1,126,475 933,981 Total Liabilities and Stockholders' Equity $ 1,780,632 $ 1,763,117 $ 1,380,130 See accompanying notes to consolidated financial statements.
THE GAP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Unaudited ($000 except per share amounts) Thirteen Weeks Ended April 30, May 1, 1994 1993 Net Sales $ 751,670 $ 643,580 Costs and expenses Cost of goods sold and occupancy expenses 462,087 423,956 Operating expenses 185,724 151,913 Interest expense (income), net (1,063) 767 Earnings before income taxes 104,922 66,944 Income taxes 41,444 25,439 Net earnings $ 63,478 $ 41,505 Weighted average number of shares 144,361,013 144,357,362 Earnings per share $ .44 $ .29 Cash dividends per share $ .10 $ .08 See accompanying notes to consolidated financial statements. THE GAP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited ($000) Thirteen Weeks Ended April 30, 1994 May 1, 1993 Cash Flows from Operating Activities: Net earnings $ 63,478 $ 41,505 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 39,020 32,013 Tax benefit from exercise of stock options by employees and from vesting of restricted stock 13,670 5,230 Deferred income taxes - (1,908) Change in operating assets and liabilities: Accounts receivable (3,195) 1,783 Merchandise inventory (15,886) 4,289 Prepaid expenses and other (13,568) (15,793) Accounts payable (1,987) (30,673) Accrued expenses (17,498) (15,339) Income taxes payable (30,436) 946 Other long-term liabilities (2,073) (1,892) Deferred lease credits 7,358 4,618 Net cash provided by operating activities 38,883 24,779 Cash Flows from Investing Activities: Purchase of short-term investments (92,896) - Purchase of long-term investments (19,944) - Net purchases of property and equipment (43,585) (43,232) Acquisition of lease rights (683) (1,052) Other assets (1,077) (1,285) Net cash used for investing activities (158,185) (45,569) Cash Flows from Financing Activities: Net decrease in notes payable (2,979) - Issuance of common stock, net of cancellations 9,407 5,229 Purchase of treasury stock (10,032) - Cash dividends paid (14,035) (11,118) Net cash used for financing activities (17,639) (5,889) Effect of exchange rate changes on cash (252) 124 Net decrease in cash and equivalents (137,193) (26,555) Cash and equivalents at beginning of year 460,332 243,302 Cash and equivalents at end of quarter $323,139 $216,747 See accompanying notes to consolidated financial statements. THE GAP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The consolidated balance sheets as of April 30, 1994 and May 1, 1993, and the consolidated statements of earnings and cash flows for the thirteen weeks ended April 30, 1994 and May 1, 1993 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flows of the Company at April 30, 1994 and May 1, 1993, 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. These consolidated financial statements should 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 29, 1994. The results of operations for the thirteen weeks ended April 30, 1994 are not necessarily indicative of the operating results that may be expected for the year ending January 28, 1995. 2. INVESTMENTS The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, as of January 30, 1994. The Company's short and long-term investments consist primarily of debt securities which have been classified as held to maturity and are carried at amortized cost. The adoption of SFAS No. 115 had no material effect on the Company's consolidated financial statements. 3. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Year-to-date 1994 and 1993 gross interest payments were $2.1 million and $1.9 million respectively; income tax payments were $58.3 million and $22.2 million respectively. Deloitte & Touche 2101 Webster Street Telephone: (510) 287-2700 Oakland, California 94612-3027 Telefax: (510) 835-4888 INDEPENDENT ACCOUNTANT'S REPORT To the Board of Directors and Stockholders of The Gap, Inc.: We have reviewed the accompanying consolidated balance sheets of The Gap, Inc. and subsidiaries as of April 30, 1994 and May 1, 1993, the related consolidated statements of earnings and cash flows for the thirteen-week periods then ended. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and 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 review, we are not aware of any material modifications that should be made to such condensed 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 29, 1994, and the related consolidated statements of earnings, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated March 3, 1994, 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 29, 1994 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it was derived. /S/ Deloitte & Touche May 10, 1994 Item 2 MANAGEMENTS'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net Sales Thirteen weeks ended April 30, 1994 May 1, 1993 Net Sales ($000) $751,670 $643,580 Total net sales growth percentage 17 9 Comparable store sales growth percentage 7 (1) Fifty-two weeks ended April 30, 1994 May 1, 1993 Number of: New Stores 131 104 Expanded Stores 120 102 Closed Stores 52 21 The increase in first quarter 1994 sales is attributable to the opening of new stores (net of stores closed), the expansion of existing stores and also the increase in comparable store sales. Over the past five years, the Company has increased the average size of its new stores and expanded existing stores as a long-term investment. New and expanded store growth resulted in a net increase in total store square footage of 17 percent since the end of last year's first quarter. As a result, net sales per average square foot was flat at approximately $97 for the first quarter of 1994 when compared to the same period in 1993. The leverage obtained from first quarter sales growth was offset by the square footage increase resulting from the Company's store expansion program. Cost of Goods Sold and Occupancy Expenses Cost of goods sold and occupancy expenses as a percentage of net sales decreased to 61.4 percent for the first quarter of 1994 from 65.9 percent for the same period in 1993. The corresponding 4.5 percentage point increase in gross margin net of occupancy expenses was attributable to a combination of higher initial merchandise margins and more merchandise being sold at regular prices. 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 markdown and the amount of inventory affected. Occupancy costs as a percentage of net sales were flat for the first quarter of 1994 when compared to the same period in 1993. Sales leverage achieved from comparable stores and a decrease in pre-opening rent expense offset the increase in occupancy costs associated with the opening of new stores and the expansion of existing stores. Operating Expenses Operating expenses as a percentage of net sales increased to 24.7 percent for the first quarter of 1994 from 23.6 percent for the same period in 1993. The 1.1 percentage point increase was primarily attributable to increases in bonus and store payroll expense of 0.5 percentage points each. Bonus expense is accrued quarterly, based on year-to-date performance against established targets. Due to strong first quarter earnings, bonus expense was recognized during the first quarter of 1994 against minimal expense in the comparable period last year. Fiscal year 1994 store payroll expense was higher than last year as an investment to increase the focus on customer service. Net Interest Income/Expense Net interest income was approximately $1 million for the first quarter of 1994 compared to net interest expense of $767,000 for the same period in 1993. The change is primarily attributable to an increase in gross average investments, including cash equivalents and short-term and long-term investments. Income Taxes The effective tax rate was 39.5 percent in 1994 compared to 38.0 percent in 1993. The 1.5 percentage point increase occurred in the second quarter last year to reflect changes in federal income tax law. The Company expects the effective income tax rate to be 39.5 percent for fiscal year 1994. LIQUIDITY AND CAPITAL RESOURCES The following sets forth certain measures of the Company's liquidity: Thirteen weeks ended April 30, 1994 May 1, 1993 Cash provided by operating activities ($000) $38,883 $24,779 Working capital ($000) $459,125 $381,810 Current ratio 1.95:1 2.31:1 The Company's improved cash flow and working capital is primarily the result of an increase in net earnings exclusive of depreciation expense and improved inventory management, offset by an increase in income tax payments. Improved inventory management continues to result in higher inventory turnover and lower inventory levels per square foot, resulting in increased working capital and improved cash flows. (See accompanying Consolidated Financial Statements). The Company funds inventory expenditures during normal and peak periods through a combination of cash flows provided by operations and normal trade credit arrangements. The Company's business follows a seasonal pattern, peaking over a total of about ten weeks during the late summer and holiday periods. Capital expenditures, net of construction allowances and dispositions, totalled approximately $40 million for the quarter ended April 30, 1994. These expenditures included the addition of 36 new stores, the expansion of 19 stores and the remodeling of certain stores resulting in a net increase in store space of approximately 300,000 square feet or 4 percent since January 29, 1994. For fiscal year 1994, the Company expects capital expenditures to total approximately $275 million, net of construction allowances, representing the addition of approximately 185 to 200 new stores, the expansion of approximately 90 stores, and the remodeling of certain stores. Square footage growth is expected to be approximately 15 to 20 percent after accounting for store closings. The Company expects to fund such capital expenditures with cash flow from operations. New stores are generally expected to be leased. The Company continues to explore alternatives for headquarters facilities in San Francisco, and San Bruno, California. The amounts above do not include any expenditures related to headquarters facilities. In February 1991, the Company issued $75 million of 8.87 percent Senior Notes which are due in February 1995 and therefore have been classified as current. Interest is payable quarterly. The Senior Notes are redeemable, in whole or in part, at any time at the option of the Company at a premium approximately equal to the difference between the stated interest rate and current market rates. The Company has a credit agreement which provides for a $250 million revolving credit facility until March 1997.In addition, the credit agreement provides for the issuance of letters of credit up to $350 million at any one time. The Company had outstanding letters of credit of approximately $208 million at April 30, 1994. During the first quarter of 1994, the Company repurchased 250,000 shares of its common stock for $10,032,000 from a senior executive of the Company. PART II OTHER INFORMATION Item 4. Submissions of Matters to a Vote of Security Holders a) On May 24, 1994, the Annual Meeting of Stockholders of the Company was held in San Francisco, California. There were 145,635,552 shares of common stock outstanding on the record date and entitled to vote at the Annual Meeting. b) The following directors were elected: Votes In Favor Votes Withheld John G. Bowes 124,721,914 1,549,912 Millard S. Drexler 125,093,254 1,178,572 Donald G. Fisher 125,089,536 1,182,290 Doris F. Fisher 125,091,400 1,180,426 Robert J. Fisher 125,091,689 1,180,137 William A. Hasler 125,092,996 1,178,830 John M. Lillie 125,092,196 1,179,630 Charles R. Schwab 125,094,188 1,177,638 Brooks Walker, Jr. 125,090,802 1,181,024 There were no abstentions and no broker non-votes. c) The approval of the Executive Management Incentive Cash Award Plan was ratified with 122,342,666 votes in favor, 3,066,350 votes against, 862,810 abstentions and no broker non-votes. d) The selection of Deloitte & Touche as independent auditors for the fiscal year ending January 28, 1995 was ratified with 126,134,848 votes in favor, 51,412 votes against, 85,563 abstentions and no broker non-votes. Item 6. Exhibits and Reports on Form 8-K a) Exhibits (10) Fourth Amendment to Credit Agreement, dated as of February 4, 1994 (11) Computation of Earnings per Share (15) Letter re: Unaudited Interim Financial Information b) The Company did not file any reports on Form 8-K during the three months ended April 30, 1994. 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 10, 1994 By /s/ Robert J. Fisher Robert J. Fisher Executive Vice President and Chief Financial Officer (Principal financial officer of the registrant) Date: June 10, 1994 By /s/ Donald G. Fisher Donald G. Fisher Chairman and Chief Executive Officer EXHIBIT INDEX (10) Fourth Amendment to Credit Agreement, dated as of February 4, 1994 (11) Computation of Earnings per Share (15) Letter re: Unaudited Interim Financial Information EX-10 2 FOURTH AMENDMENT TO CREDIT AGREEMENT FOURTH AMENDMENT AGREEMENT Fourth Amendment Agreement dated as of February 4, 1994 (this "Fourth Amendment Agreement"), among The Gap, Inc., a Delaware corporation (the "Borrower"), the LC Subsidiaries (as defined in the Credit Agreement referred to below) signatory hereto, the lenders (the "Lenders") listed on the signature pages hereof and Citibank, N.A., ("Citibank"), as issuing bank (the "Issuing Bank") and as agent (the "Agent") for the Issuing Bank and the Lenders. PRELIMINARY STATEMENTS: 1. The Borrower, the LC Subsidiaries, the Lenders, the Issuing Bank and the Agent have entered into a Credit Agreement, dated as of March 2, 1990, as amended by the First Amendment Agreement, dated as of March 1, 1991 (the "First Amendment Agreement"), as amended by the Second Amendment Agreement, dated as of September 16, 1992 (the "Second Amendment Agreement"), and as amended by the Third Amendment Agreement, dated as of January 22, 1993 (the "Third Amendment Agreement") (such credit agreement, as so amended and as it may be further amended and in effect from time to time, being referred to herein as the "Credit Agreement"; terms defined therein and not otherwise defined herein being used herein as therein defined). 2. Pursuant to Section 2.14 of the Credit Agreement, the Borrower has requested that the A Lenders and the Agent extend the Revolver Termination Date to March 2, 1997. The Borrower has also requested an extension of the LC Termination Date to March 2, 1997 and has requested that Section 3.11 of the Credit Agreement, previously deleted by the Third Amendment Agreement, be reinserted into the Credit Agreement to provide for annual extension of the LC Termination Date. In addition, the Borrower has requested an increase in the LC Commitments and the reduction of certain fees. 3. The Borrower, the LC Subsidiaries, the Lenders, the Issuing Bank and the Agent wish to amend the Credit Agreement, among other things, to (i) memorialize the extension of the Revolver Termination Date to March 2, 1997, (ii) provide that the Borrower shall have the right to request extension of the LC Termination Date, (iii) memorialize the extension of the LC Termination Date to March 2, 1997, (iv) increase the aggregate amount of LC Commitments from $300,000,000 to $350, 000,000, (v) decrease the facility fee payable under Section 2.04 with respect to the A Commitments and (vi) decrease the facility fee payable under Section 3.01 with respect to the LC Commitments. NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Amendments to Credit Agreement. The Credit Agreement is, effective as of March 1, 1994 and subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, hereby amended as follows: (a) The second sentence of the Preliminary Statement of the Credit Agreement is hereby amended by deleting the dollar amount "$300,000,000" appearing therein and inserting in its place the dollar amount "$350,000,000". (b) The definition of the term "A Commitment" appearing in Section 1.01 of the Credit Agreement is hereby amended in full to read as follows: ""A Commitment" means, as to each A Lender, the amount set forth opposite such A Lender's name on the signature pages of the Fourth Amendment Agreement, dated as of February 4, 1994 among the Borrower, the LC Subsidiaries,the Lenders parties thereto, the Issuing Bank and the Agent with respect to the caption "A Commitment", or, if such A Lender has entered into one or more Assignment and Acceptances, the amount set forth for such A Lender with respect thereto in the Register maintained by the Agent pursuant to Section 10.07 hereof." (c) The definition of the term "LC Commitment" appearing in Section 1.01 of the Credit Agreement is hereby amended in full to read as follows: ""LC Commitment" means, as to any LC Lender, the amount set forth opposite such LC Lender's name on the signature pages of the Fourth Amendment Agreement, dated as of February 4, 1994, among the Borrower, the LC Subsidiaries, the Lenders parties thereto, the Issuing Bank and the Agent with respect to the caption "LC Commitment", or, if such LC Lender has entered into one or more Assignment and Acceptances, the amount set forth for such LC Lender with respect thereto in the Register maintained by the Agent pursuant to Section 10.07 hereof." (d) The definition of "LC Termination Date" appearing in Section 1.01 of the Credit Agreement is hereby amended to read in full as follows: ""LC Termination Date" means, subject to Section 3.11 hereof, March 2, 1997, or the earlier date of termination in whole of the LC Commitments pursuant to Section 3.09 or Section 8.01." (e) The definition of "Revolver Termination Date" appearing in Section 1.01 of the Credit Agreement is hereby amended by deleting the reference to "March 2, 1996" and replacing it with "March 2, 1997". (f) Subsection (a) of Section 2.04 of the Credit Agreement is hereby amended to read in full as follows: "(a) Facility Fee. The Borrower agrees to pay the Agent for the account of each A Lender a facility fee of 0.175% per annum for all periods prior to March 2, 1994 and 0.10% per annum for all periods on and after March 2, 1994 on the amount of such A Lender's A Commitment (computed without giving effect to any B Reduction or any other usage of the A Commitment of such Lender), payable quarterly in arrears on the last day of each January, April, July and October and on the Revolver Termination Date." (g) Section 2.14 of the Credit Agreement is hereby amended to read in full as follows: "SECTION 2.14. Extension of Revolver Termination Date. At least 90 but not more than 120 days prior to the next Anniversary Date, the Borrower, by written notice to the Agent, may request that the Revolver Termination Date be extended one calendar year from its then current scheduled expiration. The Agent shall promptly notify each A Lender of such request, and each A Lender shall in turn, within 45 days prior to such next Anniversary Date, notify the Borrower and the Agent in writing regarding whether such A Lender will consent to such extension. If, and only if, all A Lenders consent in writing to such extension prior to the tenth Business Day preceding such next Anniversary Date, the Revolver Termination Date shall be so extended for such one calendar year and references herein to the "Revolver Termination Date" shall refer to such "Revolver Termination Date" as so extended. If any A Lender shall fail to deliver such notice to the Borrower and the Agent as provided above, such A Lender shall be deemed not to have consented to any requested extension." (h) Section 3.01 of the Credit Agreement is hereby amended by deleting the dollar amount "$300,000,000" appearing therein and inserting in its place the dollar amount $350,000,000". (i) Subsection (a) of Section 3.05 of the Credit Agreement is hereby amended to read in full as follows: "(a) Facility Fee. The Borrower hereby agrees to pay to each LC Lender (in accordance with its LC Commitment Percentage) a letter of credit facility fee equal to 0.125% per annum for all periods prior to March 2, 1994 and 0.10% per annum for all periods on and after March 2, 1994 on the total amount of LC Commitments (regardless of the actual or deemed usage thereof) payable quarterly in arrears on the last day of April, July, October and January and on the LC Termination Date." (j) Section 3.11 of the Credit Agreement is hereby amended to read in full as follows: "SECTION 3.11. Extension of LC Termination Date. At least 90 but not more than 120 days prior to the next Anniversary Date, the Borrower, by written notice to the Agent, may request that the LC Termination Date be extended one calendar year from its then current scheduled expiration. The Agent shall promptly notify the Issuing Bank and each LC Lender of such request, and the issuing Bank and each LC Lender shall in turn, within 45 days prior to such next Anniversary Date, notify the Borrower and the Agent in writing regarding whether the Issuing Bank or such LC Lender (as the case may be) will consent to such extension. If, and only if, all LC Lenders and the Issuing Bank consent in writing to such extension prior to the tenth Business Day preceding such next Anniversary Date, the LC Termination Date shall be so extended for such one calendar year and references herein to the "LC Termination Date" shall refer to such "LC Termination Date" as so extended. If the Issuing Bank or any LC Lender shall fail to deliver such notice to the Borrower and the Agent as provided above, such Issuing Bank and such Lender shall be deemed not to have consented to such requested extension." SECTION 2. Conditions of Effectiveness. This Fourth Amendment Agreement shall become effective as of March 1, 1994 if, on or prior to that date, (i) the Agent shall have received counterparts of this Fourth Amendment Agreement duly executed by the Borrower, the LC Subsidiaries, the Lenders, the Issuing Bank and the Agent, together with such other documents or information as the Agent may reasonably request and (ii) the Agent shall have received (a) confirmatory letters from Continental Bank N.A., Nationsbank of North Carolina, N.A. and Swiss Bank Corporation (the "Departing Banks") acknowledging the cancellation of their respective commitments hereunder effectuated by this Fourth Amendment Agreement and (b) payment from the Borrower, for the account of the Departing Banks, of accrued commitment, facility and other fees owned to the Departing Banks to March 1, 1994. SECTION 3. Reference to and Effect on the Credit Agreement. (a) Upon the effectiveness of this Fourth Amendment Agreement, on and after the date hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically amended above, the Credit Agreement is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. (c) The execution, delivery and effectiveness of this Fourth Amendment Agreement shall not operate as a waiver of any right, power or remedy of any Lender, the Issuing Bank or the Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. Each of The Fuji Bank, Limited and Societe Generale shall be a Lender under the Credit Agreement, as amended hereby. SECTION 4. Fees, Costs and Expenses. The Borrower agrees to pay on demand all costs and expenses of the Agent and the Issuing Bank incurred in connection with the preparation, execution, delivery, administration, modification and amendment of this Fourth Amendment Agreement and the other documents to be delivered hereunder, including, without limitation, the fees and out-of-pocket expenses of the Agent's legal counsel. The Borrower further agrees to pay on demand all costs and expenses of the Agent, the Issuing Bank and the Lenders (including, without limitation, reasonable fees and expenses of the Agent's legal counsel) in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Fourth Amendment Agreement and other documents to be delivered under this Fourth Amendment Agreement. SECTION 5. Execution in Counterparts. This Fourth Amendment Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 6. GOVERNING LAW. THIS FOURTH AMENDMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. LC Subsidiaries. Each LC Subsidiary hereby (i) consents in all respects to the transactions contemplated hereby, (ii) acknowledges and irrevocably agrees that none of its respective obligations under the Credit Agreement or with respect to the Letters of Credit for which it is the account party shall be affected hereby, (iii) acknowledges and irrevocably agrees that all of its respective obligations under the Credit Agreement, as amended hereby, and with respect to the Letters of Credit for which it is the account party are in full force and effect, (iv) ratifies and reaffirms in all respects the Credit Agreement, as amended hereby, and the Letters of Credit for which it is the account party and all of its respective obligations with respect thereto, (v) certifies that it has received a copy hereof, has reviewed the same and is fully apprised of the contents and substance hereof and (vi) confirms that it shall be bound by the terms hereof. IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BORROWER: THE GAP, INC. By /s/ Richard S. McKinley Name: Richard S. McKinley Title: Vice President-Finance and Treasurer THE LC SUBSIDIARIES BANANA REPUBLIC, INC. By /s/ Richard S. McKinley Name: Richard S. McKinley Title: Vice President-Finance and Treasurer GPS (GREAT BRITAIN) LIMITED By /s/ Richard S. McKinley Name: Richard S. McKinley Title: Vice President-Finance and Treasurer GAP INTERNATIONAL, INC. By /s/ Richard S. McKinley Name: Richard S. McKinley Title: Vice President-Finance and Treasurer THE GAP (FAR EAST) LIMITED By /s/ Richard S. McKinley Name: Richard S. McKinley Title: Vice President-Finance and Treasurer THE GAP (SINGAPORE) PTE. LIMITED By /s/ Richard S. McKinley Name: Richard S. McKinley Title: Vice President-Finance and Treasurer THE AGENT: CITIBANK, N.A. By /s/ Edward Lettieri Name: Edward Lettieri Title: Vice President THE ISSUING BANK: CITIBANK, N.A. By /s/ Edward Lettieri Name: Edward Lettieri Title: Vice President THE LENDERS: A Commitment $50,000,000 CITIBANK, N.A. LC COMMITMENT $95,000,000 By /s/ Edward Lettieri Name: Edward Lettieri Title: Vice President A Commitment $35,000,000 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION LC COMMITMENT $77,500,000 By /s/ Stephen J. DeMarti Name: Stephen J. DeMarti Title: Vice President A Commitment $20,000,000 NATIONAL WESTMINSTER BANK PLC LC COMMITMENT $57,500,000 By /s/ Daniel Dornblaser Name: Daniel Dornblaser Title: Vice President A Commitment $30,000,000 NATIONSBANK OF TEXAS, N.A. LC COMMITMENT $30,000,000 By /s/ Overton Colton Name: Overton Colton Title: Vice President A Commitment $20,000,000 THE ROYAL BANK OF CANADA LC COMMITMENT $20,000,000 By /s/ Everett Harner Name: Everett Harner Title: Manager A Commitment $10,000,000 BANK OF MONTREAL LC COMMITMENT $30,000,000 By /s/ J. Donald Higgins Name: J. Donald Higgins Title: Managing Director A Commitment $20,000,000 SOCIETE GENERALE LC COMMITMENT $17,500,000 By /s/ J. Blaine Sitaum Name: J. Blaine Sitaum Title: Regional Manager A Commitment $15,500,000 THE FUJI BANK, LIMITED LC COMMITMENT $12,500,000 By /s/ Shigeo Matsumoto Name: Shigeo Matsumoto Title: General Manager A Commitment $15,000,000 U.S. NATIONAL BANK OF OREGON LC COMMITMENT $10,000,000 By /s/ Johnathan A. Horton Name: Johnathan A. Horton Title: Assistant Vice President A Commitment $20,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK LC COMMITMENT $0 By /s/ Carl J. Mehldau, Jr. Name: Carl J. Mehldau, Jr. Title: Associate A Commitment $15,000,000 THE SUMITOMO BANK LIMITED LC COMMITMENT $0 By /s/ Jun Ogata Name: Jun Ogata Title: Joint General Manger Los Angeles Branch $250,000,000 Total of the A Commitments $350,000,000 Total of the LC Commitments EX-11 3 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS THE GAP, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Thirteen Weeks Ended April 30, 1994 May 1, 1993 Net earnings ($000) $ 63,478 $ 41,505 Weighted average shares of common stock outstanding during the period 145,361,013 144,357,362 Add incremental shares from assumed exercise of stock options (primary) 934,174 716,475 subtotal 146,295,187 145,073,837 Primary earnings per share $ .43 $ .29 Weighted average shares of common stock outstanding during the period 145,361,013 144,357,362 Add incremental shares from assumed exercise of stock options (fully-diluted) 995,131 714,763 subtotal 146,356,144 145,072,125 Fully-diluted earnings per share $ .43 $ .29 NOTE: The information provided in the exhibit is presented in accordance with Regulation S-K, Item 601(b)(11), while net earnings per share on the Consolidated Statements of Earnings is presented in accordance with APB Opinion 15. This information is not required under APB Opinion 15, as the difference between primary and fully-diluted earnings per share and earnings per share calculated on a weighted average shares basis is less than 3%. EX-15 4 LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION Deloitte & Touche 2101 Webster Street Telephone: (510) 287-2700 Oakland, California 94612-3027 Telefax: (510) 835-4888 INDEPENDENT ACCOUNTANT'S REPORT To the Board of Directors and Stockholders of The Gap, Inc.: We have reviewed the accompanying consolidated balance sheets of The Gap, Inc. and subsidiaries as of April 30, 1994 and May 1, 1993, the related consolidated statements of earnings and cash flows for the thirteen-week periods then ended. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and 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 review, we are not aware of any material modifications that should be made to such condensed 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 29, 1994, and the related consolidated statements of earnings, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated March 3, 1994, 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 29, 1994 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it was derived. /S/ Deloitte & Touche May 10, 1994 -----END PRIVACY-ENHANCED MESSAGE-----