8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

March 25, 2020

THE GAP, INC.

(Exact name of registrant as specified in its charter)

Delaware	1-7562	94-1697231
(State of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Two Folsom Street
San Francisco,	California	94105
(Address of principal executive offices)		(Zip Code)

(415) 427-0100

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.05 par value	GPS	The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.	☐

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

As previously disclosed, The Gap, Inc. (the "Company") and certain of its subsidiaries are party to the Second Amended and Restated Credit Agreement dated May 31, 2018 (the "Credit Agreement"). The Credit Agreement provides the Company a $500 million revolving credit facility (the "Revolver"). A copy of the Credit Agreement, as amended, was filed as an exhibit to the Company’s 10-Q filed with the Securities and Exchange Commission on August 31, 2018.

On March 25, 2020, the Company drew down the entire available amount ($500 million) under the Revolver resulting in a total of $500 million outstanding under the Revolver. Borrowings under the Revolver are scheduled to mature on May 31, 2023, and the Company may repay amounts borrowed at any time prior to maturity without penalty (other than potential LIBOR breakage fees).

Borrowings under the Revolver will bear interest, at the Company’s option, at a base rate or LIBOR, plus an applicable interest rate margin varying depending on the Company’s corporate ratings or leverage ratio, whichever yields a lower pricing level. The additional interest rate margin for borrowings ranges from 0.00% to 0.50% per annum in the case of base rate borrowings and from 0.90% to 1.50% per annum in the case of LIBOR borrowings. With respect to this draw of $500 million under the Revolver, the Company has elected a six month LIBOR rate, plus a current 1.1% margin, for a total interest rate of 2.073250%. The Company elected to borrow under the Revolver as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak. The draw-down proceeds from the Revolver are currently being held on the Company’s balance sheet and may be used for general corporate purposes.

Item 7.01 Regulation FD Disclosure.

On March 26, 2020, the Company issued a press release announcing that it was deferring the record and payment dates for its previously declared first quarter dividend to the first quarter of fiscal year 2021 and suspending its dividend program for the remainder of fiscal year 2020. A copy of the press release is furnished hereto as Exhibit 99.1. The previously declared dividend will now be payable on or after April 28, 2021 to shareholders of record at the close of business on April 7, 2021. The Company’s board of directors determined that deferring payment of the previously announced dividend was in the best interests of the Company in order to preserve liquidity in the context of the impact of COVID-19 on the Company’s operations. The Company reserves the right to further defer the record and payment dates for the previously declared first quarter dividend, depending upon, among other factors, the progression of the COVID-19 outbreak, business performance and the macroeconomic environment.

On March 26, 2020, the Company also announced in the same press release that, given the uncertainty regarding the potential duration and impact of COVID-19, it is withdrawing the full year 2020 guidance issued on March 12, 2020 and is not providing an updated outlook at this time. A copy of the press release is furnished hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.

Exhibit No.	Exhibit Description
99.1	Press Release dated March 26, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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 hereunto duly authorized.

	THE GAP, INC.
Date: March 26, 2020	By:	/s/ Katrina O'Connell
		Katrina O'Connell
		Executive Vice President and
		Chief Financial Officer

EX-99.1

Exhibit 99.1

GAP INC. PROVIDES UPDATE IN RESPONSE TO COVID-19 OUTBREAK

SAN FRANCISCO – March 26, 2020 – Gap Inc. (NYSE: GPS) today announced a number of precautionary actions to strengthen financial flexibility in response to the rapidly evolving impact of the COVID-19 pandemic.

“We entered 2020 in a strong financial position. However, in this time of unprecedented disruption to the retail sector, we are proactively taking the prudent actions to further strengthen our financial liquidity and flexibility,” said Gap Inc. President and CEO, Sonia Syngal. “We are fortunate to have a senior team of deeply experienced retail leaders who are fully dedicated to managing our response through this challenging moment in time, while continuing to build toward the future.”

To strengthen the balance sheet the company is taking the following actions:

• drawing down the entire $500 million on its revolving credit facility;

• deferring the record and payment dates for the company’s previously announced first quarter fiscal year 2020 dividend, and suspending the company’s regular quarterly cash dividend for the remainder of fiscal year 2020;

• reducing capital expenditures by approximately $300 million in fiscal 2020; and

• reviewing all operating expenses for opportunities to reduce spending along with realigning inventory to expected sales trends.

The company’s previously declared first quarter fiscal year 2020 dividend, of $0.2425 per share, will now be payable on or after April 28, 2021 to shareholders of record at the close of business on April 7, 2021, subject to the right of the company to further defer the record and payment dates, depending upon, among other factors, the progression of the COVID-19 outbreak, business performance and the macroeconomic environment. The company determined that taking these actions was in the best interests of the company in order to preserve liquidity in the context of the impact of COVID-19 on its operations. The company intends to review its quarterly cash dividend policy as developments warrant.

Full Year Fiscal 2020 Earnings Outlook Update

On March 17, 2020 the company announced the temporary closure of all of its North American stores to assist the vast local, state and federal efforts underway to slow the spread of COVID-19. Pursuant to a strict safety protocol at its distribution centers, all of the Gap Inc. brands continue be available for customers through the company’s online business, which generated over $4 billion in net sales in fiscal 2019.

Given the uncertainty regarding the potential duration and impact of COVID-19, the company is withdrawing the full year 2020 guidance issued on March 12, 2020 and is not providing an updated outlook at this time. More information will be provided during the company’s first quarter fiscal 2020 conference call in May 2020.

Forward-Looking Statements

This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as "expect," "anticipate," "believe," "estimate," "intend," "plan," and similar expressions also identify forward-looking statements. Forward-looking statements include, without limitation, statements relating to reducing capital expenditures in fiscal 2020; deferral of first quarter dividend record and payable dates to fiscal year 2021; duration of the suspension of regular quarterly cash dividends; and duration and impact of COVID-19 on our business plans, objectives and expected operating results.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause the company’s actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following risks, any of which could have an adverse effect on the company’s financial condition, results of operations, and reputation: the risk that the company or its franchisees will be unsuccessful in gauging apparel trends and changing consumer preferences; the highly competitive nature of the company’s business in the United States and internationally; the risks associated with engaging in or seeking to engage in strategic transactions; the risk of failure to maintain, enhance and protect the company’s brand image; the risk of failure to manage key executive succession and retention and to continue to attract qualified personnel; the risk that the company’s investments in customer, digital, and omni-channel shopping initiatives may not deliver the results the company anticipates; the risk if the company is unable to manage its inventory effectively; the risks to the company’s business, including its costs and supply chain, associated with global sourcing and manufacturing; the risk that the company is subject to data or other security breaches that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in the company’s security measures; the risk that a failure of, or updates or changes to, the company’s information technology systems may disrupt its operations; the risk of changes in global economic conditions or consumer spending patterns; the risks to the company’s efforts to expand internationally, including its ability to operate in regions where it has less experience; the risk that the company or its franchisees will be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively; the risks to the company’s reputation or operations associated with importing merchandise from foreign countries, including failure of the company’s vendors to adhere to its Code of Vendor Conduct; the risk that the company’s franchisees’ operation of franchise stores is not directly within the company’s control and could impair the value of its brands; the risk that trade matters could increase the cost or reduce the supply of apparel available to the company; the risk of foreign currency exchange rate fluctuations; the risk that comparable sales and margins will experience fluctuations; the risk that changes in the company’s credit profile or deterioration in market conditions may limit the company’s access to the capital markets; the risk of changes in the regulatory or administrative landscape; the risk of natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events; the risk of reductions in income and cash flow from the company’s credit card arrangement related to its private label and co-branded credit cards; the risk that the adoption of new accounting pronouncements will impact future results; the risk that the company does not repurchase some or all of the shares it anticipates purchasing pursuant to its repurchase program; and the risk that the company will not be successful in defending various proceedings, lawsuits, disputes, and claims.

Additional information regarding these factors that could cause results to differ can be found in the company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020, as well as the company’s subsequent filings with the Securities and Exchange Commission.

These forward-looking statements are based on information as of March 26, 2020. The company assumes no obligation 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.

About Gap Inc.

Gap Inc. is a leading global retailer offering clothing, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix, Janie and Jack, and Hill City brands. Fiscal

year 2019 net sales were $16.4 billion. Gap Inc. products are available for purchase in more than 90 countries worldwide through company-operated stores, franchise stores, and e-commerce sites. For more information, please visit www.gapinc.com.

Investor Relations Contact:

Tina Romani

(415) 427-5264

Investor_relations@gap.com

Media Relations Contact:

Sandy Goldberg

(415) 427-3022

press@gap.com

XML

Cover Page Cover Page	Mar. 25, 2020
Cover page.
Document Type	8-K
Document Period End Date	Mar. 25, 2020
Entity Registrant Name	THE GAP, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	1-7562
Entity Tax Identification Number	94-1697231
Entity Address, Address Line One	Two Folsom Street
Entity Address, City or Town	San Francisco,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94105
City Area Code	415
Local Phone Number	427-0100
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.05 par value
Trading Symbol	GPS
Security Exchange Name	NYSE
Entity Emerging Growth Company	false
Entity Central Index Key	0000039911
Amendment Flag	false