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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended January 30, 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 Street
San Francisco, California 94105
(Address of principal executive offices) (Zip code)
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 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the common equity held by non-affiliates of
the registrant as of March 12, 1999 was approximately $24,332,000,000 based upon
the last price reported for such date in the NYSE-Composite transactions.
The number of shares of the registrant's Common Stock outstanding as of
March 15, 1999 was 572,932,578.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 4, 1999 (hereinafter referred to as the "1999
Proxy Statement") are incorporated into Parts I and III.
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended January 30, 1999 (hereinafter referred to as the "1998 Annual Report
to Shareholders") are incorporated into Parts II and IV.
The Exhibit Index is located on Page 13 hereof.
This Annual Report on Form 10-K and the information incorporated herein by
reference contain certain forward-looking statements which reflect the Company's
current view with respect to future events and financial performance. Whenever
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 future results of operations could differ materially from
historical results or current expectations. Some of these risks are discussed
in Item 1 of this report below, and 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 filings with the Securities and Exchange Commission. Future
economic and industry trends that could potentially impact revenue and
profitability are difficult to predict.
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.
PART I
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Item 1 - Business
General
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The Gap, Inc. (together with its subsidiaries, the "Company") is a global
specialty retailer which operates stores selling casual apparel, personal care
and other accessories for men, women and children under the Gap, Banana Republic
and Old Navy brands. As of February 27, 1999, the Company operated 2,448 stores
in the United States, Canada, the United Kingdom, France, Germany and Japan.
The Company designs virtually all of its products, which in turn are
manufactured by independent sources, and sells them under its brands in the
following store formats:
Gap, GapKids, and babyGap. Founded in 1969, Gap stores offer
extensive selections of classically-styled, high quality, casual apparel at
moderate price points. Products range from wardrobe basics, such as denim,
khakis and T-shirts, to accessories and personal care products for men and
women aged teen to adult. The Company entered the children's apparel market
with the introduction of GapKids in 1986 and babyGap in 1989. These stores
offer casual basics, outerwear, shoes and other accessories in the
tradition of Gap style and quality for children aged newborn through teen.
As of February 27, 1999, the Company operated a total of 1,749 Gap brand
stores which include: 1,109 Gap stores and 640 GapKids stores. The Gap
brand stores include 165 Gap stores and 133 GapKids stores in international
locations.
Banana Republic. Acquired in 1983 with two stores, Banana Republic
now offers sophisticated, fashionable collections of dress-casual and
tailored clothing and accessories for men and women at higher price points.
Banana Republic products range from clothing, including intimate apparel,
to personal care products and home products. As of February 27, 1999, the
Company operated 292 Banana Republic stores, including 10 in Canada.
Old Navy. The Company launched Old Navy in 1994 to address the market
for value-priced family apparel. Old Navy offers broad selections of
apparel, shoes and accessories for adults, children and infants, as well as
other items including personal care products, in an innovative, exciting
shopping environment. As of February 27, 1999, the Company operated 407 Old
Navy stores .
The Company established "Gap Online" in 1997, a web-based store located at
www.gap.com. GapKids and babyGap web-based stores were established in 1998.
Products from Gap, GapKids and babyGap stores can be
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purchased online. In 1998, Banana Republic introduced a catalog format, which
offers clothing and accessories comparable to those carried in its store
collections, and is aimed at developing a closer relationship with its customer
base.
During fiscal 1998, the Company continued to focus on developing and
growing its brands and believes that its brands are among its most important
assets. The Company is taking action to maintain and strengthen brand loyalty,
including significantly increasing its investment in advertising and marketing.
The Company continues to add flagship stores and increase television advertising
to complement its in-store customer service focus. The Company also continues to
invest in store expansion as well as development of new distribution channels to
address changing market requirements. Its new channels of distribution include
Gap Online and a catalog for Banana Republic. The Company has limited operating
history in these new channels of distribution and is faced with competition from
established retailers in these new lines. There is no guarantee that these
investments will result in increased profitability.
The Company was incorporated in the State of California in July 1969 and
was reincorporated under the laws of the State of Delaware in May 1988.
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 will 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 are scheduled to begin in the first 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 are expected to begin in the first 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
3
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. Approximately $30 million has been budgeted to address the
Year 2000 issue, of which $16.5 million has been expensed through January 30,
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 or costs to implement any
contingency plans.
Merchandise Inventory, Replenishment and Distribution
- - -----------------------------------------------------
The retail apparel business fluctuates according to changes in customer
preferences dictated in part by fashion and season. These fluctuations
especially affect the inventory owned by apparel retailers, since merchandise
usually must be ordered well in advance of the season and sometimes before
fashion trends are evidenced by customer purchases. The Company is also
vulnerable to changing fashion trends. In addition, the cyclical nature of the
retail business requires the Company to carry a significant amount of inventory,
especially prior to peak selling seasons when the Company and other retailers
generally build up their inventory levels. The Company must enter into
contracts for the purchase and manufacture of apparel well in advance of the
applicable selling season. As a result, the Company is vulnerable to demand and
pricing shifts and to suboptimal selection and timing of merchandise purchases.
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. Markdowns may be used
if inventory exceeds customer demand for reasons of style, seasonal adaptation,
changes in customer preference or lack of consumer acceptance of fashion items,
or if it is determined that the inventory in stock will not sell at its
currently marked price. Such markdowns may have an adverse impact on earnings,
depending on the extent of the markdowns and amount of inventory affected.
Because the Company does not carry much replenishment inventory in its
stores, such inventory is maintained in the Company's distribution centers in
California, Kentucky, Maryland, Ohio, Tennessee, Canada and The Netherlands, and
in distribution centers operated by third parties in Japan and England, and then
shipped to the stores.
Store Operations and Expansion
- - ------------------------------
The Company's stores offer a shopper-friendly environment with an
assortment of casual clothing and accessories which emphasize style, quality and
good value. The range of apparel displayed in each store varies significantly
depending on the selling season and the size and location of the store.
The Company's stores generally are open seven days per week (where
permitted by law), three to six nights per week and most holidays. All sales are
tendered for cash, personal checks or credit cards issued by others, including a
Banana Republic private label credit card.
The Company's continued success depends, in part, upon its ability to
increase sales at existing store locations, to open new stores and to operate
stores on a profitable basis. There can be no assurance that the Company's
growth will result in enhanced profitability or that it will continue at the
same rate in future years.
In early 1998, the Company began a process to integrate the Gap and GapKids
field organizations to achieve a singular brand focus. This process of
integration allowed Gap and GapKids to think and act as a single brand which
allowed the Company to better serve its customers, work more closely with the
community, and take full advantage of real estate opportunities. To date,
integration has been successful and has allowed the Company to gain efficiencies
in staffing and training. As the Company continues the process of integration a
number of risks exist, including possible employee concerns with changes in job
scope or supervisor assignments and diversion of management's attention from
4
other business matters. The Company continues to implement integration in a
phased approach that accommodates employee training and provides time for
supervisors to become confident and competent in the new environment.
International Expansion
- - -----------------------
The Company continued to expand internationally in fiscal 1998. It is faced
with competition in European and Japanese markets from established regional and
national chains. If international expansion is not successful, the Company's
results of operations could be adversely affected. The Company's ability to grow
successfully in the continental European markets will depend in part on
determining a sustainable profit formula to build brand loyalty and gain market
share in the especially challenging retail environments of France and Germany.
Certain financial information about international operations is set forth
in Note A to Notes to Consolidated Financial Statements, incorporated by
reference in Item 8 Financial Statements and Supplementary Data.
Suppliers
- - ---------
The Company purchases merchandise from approximately 1,200 suppliers
located domestically and overseas. No supplier accounted for more than 5% of the
Company's fiscal 1998 purchases. Of the Company's merchandise sold during fiscal
1998 approximately 20% of all units (representing approximately 12% of total
cost) were produced domestically while the remaining 80% of all units (88% of
cost) were made outside the United States. Approximately 6% of the Company's
total merchandise units (representing 11% of cost) was from Hong Kong, with the
remainder coming from 54 other countries. Any event causing a sudden disruption
of imports from Hong Kong or other foreign countries, including the imposition
of additional import restrictions, could have a material adverse effect on the
Company's operations. Substantially all of the Company's foreign purchases of
merchandise are negotiated and paid for in U.S. dollars.
The Company cannot predict whether any of the countries in which its
products currently are manufactured or may be manufactured in the future will be
subject to trade restrictions imposed by U.S. or foreign governments, including
the likelihood, type or effect of any such restrictions. Trade restrictions,
including increased tariffs or quotas, or both, against apparel items could
increase the cost or reduce the supply of apparel available to the Company and
adversely affect the Company's business, financial condition and results of
operations. The Company pursues a diversified global sourcing strategy which
includes relationships with vendors in over 50 countries. These sourcing
operations may be adversely affected by political and financial instability
resulting in the disruption of trade from exporting countries, significant
fluctuation in the value of the U.S. dollar against foreign currencies,
restrictions on the transfer of funds and/or other trade disruptions. The
current financial instability in Asia is an example of the instability which
could affect some suppliers adversely. Although to date the instability in Asia
has not had an adverse effect on the Company's ability to import apparel and
therefore the Company's results of operations and financial condition, no
assurances can be given that they will not have such an effect in the future.
Seasonal Business
- - -----------------
The Company's business follows a seasonal pattern, peaking over a total of
about 10 to 13 weeks during the Back-to-School (mid-August through early
September) and Holiday (November through December) periods. During fiscal year
1998, these periods accounted for approximately 37% of the Company's annual
sales.
Competition
- - -----------
The Company's business is highly competitive. The Company competes with
national and local department, specialty and discount store chains, independent
retail stores and internet and catalog businesses which handle similar lines of
merchandise. Some competitors have more resources than the Company.
Depth of selection in sizes, colors and styles of merchandise, merchandise
procurement and pricing, ability to anticipate fashion trends and customer
preferences, inventory control, reputation, quality of merchandise, store design
5
and location, advertising and customer service are all important factors in
competing successfully in the retail industry. Given the large number of
companies in the retail industry, the Company cannot estimate the number of its
competitors.
The performance of the Company in recent years has increased the amount of
imitation by other retailers. Such imitation has made and will continue to make
the retail environment in which the Company operates more competitive. In
addition, the success of the Company's operations depends upon a number of
factors relating to consumer spending, including future economic conditions
affecting disposable consumer income such as employment, business conditions,
interest rates and taxation. A decline in consumer spending on apparel could
have a material adverse effect on the Company's net sales and profitability.
Advertising
- - -----------
In fiscal 1998, the Company significantly increased its investment in
advertising and marketing. Besides expanding the number of print ads placed in
major metropolitan newspapers and their Sunday magazines, major news weeklies
and lifestyle and fashion magazines, the Company's ads appeared in various
outdoor venues, such as mass transit posters, exterior bus panels, bus shelters
and gigantic billboards spanning entire buildings. The Company continues to run
TV ads for all of its brands and radio ads for Old Navy. The Company plans to
continue increasing its investments in advertising and marketing in 1999. There
can be no assurances that these increased investments will result in increased
sales or profitability.
Employees
- - ---------
On January 30, 1999, the Company had a work force of approximately 111,000
employees. In addition the Company also hires temporary employees during the
peak Back-to-School and Holiday seasons. The Company considers its employee
relations to be good.
Trademarks and Service Marks
- - ----------------------------
The Gap, GapKids, babyGap, Banana Republic and Old Navy trademarks and
service marks, and certain other trademarks, either have been registered, or are
the subject of pending trademark applications, with the United States Patent and
Trademark Office and with the registries of many foreign countries.
Executive Officers of the Registrant
- - ------------------------------------
The Chairman of the Company is Donald G. Fisher. Millard S. Drexler is the
President and Chief Executive Officer of the Company. Robert J. Fisher is
Executive Vice President of the Company and President of Gap Division. Each of
Donald G. Fisher, Robert J. Fisher and Millard S. Drexler is a director of the
Company and the required information for each of them is set forth in the table
located in the section entitled "Nominees for Election as Directors" of the 1999
Proxy Statement and is incorporated by reference herein. The following are also
executive officers of the Company:
Name, Age, Position and Principal Occupation During Past Five Years:
Charles K. Crovitz, 45, Executive Vice President, Supply Chain and
Technology since September 1998; Senior Vice President of Strategy,
Logistics and Information Systems from March 1998 to September 1998; Senior
Vice President of Strategic Planning and Business Development from 1993 to
March 1998. Joined the Company in 1993.
Anne B. Gust, 41, Executive Vice President, Human Resources, Legal and
Corporate Administration since September 1998; Senior Vice President and
General Counsel from April 1994 to September 1998; Vice President - General
Counsel, 1993-94. Joined the Company in 1991.
Warren R. Hashagen, 48, Senior Vice President, Finance and Chief Financial
Officer since November 1995; Senior Vice President, Finance, 1992-95.
Joined the Company in 1982.
6
John B. Wilson, 39, Chief Operating Officer since March 1998; Executive
Vice President and Chief Administrative Officer from October 1996 to March
1998. Executive Vice President, Finance and Strategy and Chief Financial
Officer of Staples, Inc., 1992-96.
Item 2 - Properties
During fiscal year 1998, the Company opened 318 stores and closed 20. The
newly-opened stores include 102 Gap stores (including 27 international
locations), 65 GapKids and babyGap stores (including 23 international
locations), 33 Banana Republic stores (including 1 in Canada) and 118 Old Navy
stores. In addition, during fiscal 1998, the Company expanded 135 stores. The
expanded stores include 91 Gap stores, 17 GapKids stores, 23 Banana Republic
stores and 4 Old Navy stores. The 2,428 stores operating as of January 30, 1999
aggregated approximately 19 million square feet. The Company leases virtually
all of its store premises. Terms generally range from four to five years with
options to renew, or eight to ten years with options to renew and rights to
terminate if specified sales levels are not achieved. In the United States, the
Company's stores are located in all of the 50 largest metropolitan statistical
areas.
The Company currently leases its regional offices and much of its
headquarters office space, including approximately 540,000 square feet in three
buildings in San Francisco, California, 265,000 square feet in three buildings
in San Bruno, California (near the San Francisco Airport), and 240,000 square
feet in a building in New York City. The Company also leases its Eastern
Distribution Center/Kentucky Distribution Center complex (EDC/KDC) and certain
other distribution facilities. The EDC/KDC facilities in Erlanger, Kentucky
(near Cincinnati) consist of approximately 725,000 square feet. Nearby Northern
Kentucky facilities include an approximately 325,000 square foot warehouse for
consolidation/deconsolidation purposes, an approximately 520,000 square foot
warehouse for distribution purposes, and an approximately 175,000 square foot
warehouse for supply purposes. The Company also leases a warehouse/call center
of approximately 90,000 square feet in Grove City, Ohio (near Columbus), which
presently services the Banana Republic catalog; this facility is expected to be
expanded to a total of approximately 270,000 square feet by mid-1999 to service
other aspects of the Company's direct-to-consumer business (such as Gap Online).
The Company leases its Japan Distribution Center (JDC), approximately 65,000
square feet, in Funabashi City, Chiba, Japan. The JDC is operated by a third
party. During the fourth quarter of 1998, the Company entered into a lease for
an approximately 156,000 square foot warehouse in Essex, England for supply and
distribution purposes.
The Company owns an office facility in San Bruno of approximately 190,000
square feet and nearby land at that site which potentially could accommodate up
to an additional 760,000 square feet, and also owns an office/computer facility
of approximately 40,000 square feet in Rocklin, California (near Sacramento).
The Company currently is in the process of developing an office building of
approximately 540,000 square feet near its existing leased facilities in San
Francisco, and an office building of approximately 260,000 square feet near its
existing leased and owned facilities in San Bruno.
The Company owns the following distribution facilities:
Title Location Square Footage (Approximate)
- - ----------------------------------------------------------------------------------------------------------------
Western Distribution Center (WDC) Ventura, California 225,000 square feet
- - ----------------------------------------------------------------------------------------------------------------
Atlantic Distribution Center (ADC) Edgewood, Maryland 600,000 square feet
- - ----------------------------------------------------------------------------------------------------------------
Southern Distribution Center (SDC) Gallatin, Tennessee 1,030,000 square feet
- - ----------------------------------------------------------------------------------------------------------------
Pacific Distribution Center (PDC) Fresno, California 530,000 square feet
(Under Construction)
- - ----------------------------------------------------------------------------------------------------------------
Old Navy East Distribution Center (ODC) Fishkill, New York 1,400,000 square feet
(Planned Construction)
- - ----------------------------------------------------------------------------------------------------------------
Canadian Distribution Center (CDC) Brampton, Ontario 325,000 square feet
- - ----------------------------------------------------------------------------------------------------------------
Holland Distribution Center (HDC) Roosendaal, The Netherlands 130,000 square feet
7
The WDC, ADC and SDC sites have additional land available for expansion or for
additional facilities, and the Company presently is constructing a new
approximately 555,000 square foot consolidation/deconsolidation facility and a
new approximately 655,000 square foot distribution facility at the SDC Gallatin
campus.
Item 3 - Legal Proceedings
The Company has been named as a defendant in two lawsuits relating to
sourcing of products from Saipan (Commonwealth of the Northern Mariana Islands).
A complaint was filed on January 13, 1999 in California Superior Court in San
Francisco by the Union of Needletrades Industrial and Textile Employees, AFL-
CIO; Global Exchange; Sweatshop Watch; and Asian Law Caucus against the Company
and 17 other parties. The plaintiffs allege violations of California's unlawful,
fraudulent and unfair business practices and untrue and misleading advertising
statutes in connection with labeling of product and labor practices regarding
workers of factories that make product for the Company in Saipan. The plaintiffs
seek injunctive relief, restitution, disgorgement of profits and other damages.
On March 29, 1999, the Company, along with other defendants, filed a demurrer in
California Superior Court in San Francisco, seeking dismissal of the complaint.
A second complaint was filed on January 13, 1999 in Federal District
Court, Central District of California, by various unidentified worker plaintiffs
against the Company and 25 other parties. Those unidentified worker plaintiffs
seek class-action status and allege, among other things, that the Company (and
other defendants) violated the Racketeer Influenced and Corrupt Organizations
Act in connection with the labor practices and treatment of workers of
factories in Saipan that make product for the Company. The plaintiffs seek
injunctive relief as well as actual and punitive damages. On March 29, 1999, the
Company, along with several other defendants, filed a motion in Federal District
Court, Central District of California, to transfer the venue of the case to the
Commonwealth of the Northern Mariana Islands.
The Company also is a party to routine litigation incidental to its
business. Some of the lawsuits to which the Company is a party are covered by
insurance and are being defended by the Company's insurance carriers.
The Company has established reserves which management believes are
adequate to cover any litigation losses which may occur.
Item 4 - Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
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Item 5 - Market For Registrant's Common Equity and Related Stockholder Matters
The information required by this item is incorporated herein by reference
to page 27 of the 1998 Annual Report to Shareholders included as Exhibit 13 to
this Annual Report on Form 10-K.
Item 6 - Selected Financial Data
The information required by this item is incorporated herein by
reference to pages 22 and 23 of the 1998 Annual Report to Shareholders included
as Exhibit 13 to this Annual Report on Form 10-K.
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is incorporated herein by
reference to pages 24-27 of the 1998 Annual Report to Shareholders included as
Exhibit 13 to this Annual Report on Form 10-K.
8
Item 7A - Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is incorporated herein by
reference to page 41 of the 1998 Annual Report to Shareholders included as
Exhibit 13 to this Annual Report on Form 10-K.
Item 8 - Financial Statements and Supplementary Data
The information required by this item is incorporated herein by
reference to pages 28-40 of the 1998 Annual Report to Shareholders included as
Exhibit 13 to this Annual Report on Form 10-K.
Item 9 - Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
--------
Item 10 - Directors and Executive Officers of the Registrant
The information required by this item is incorporated herein by
reference to the section entitled "Nominees for Election as Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the 1999 Proxy
Statement. See also Item 1 above in the section entitled "Executive Officers of
the Registrant."
Item 11 - Executive Compensation
The information required by this item is incorporated herein by
reference to the sections entitled "Compensation of Directors," "Summary of
Executive Compensation," "Stock Options," "Employment Contracts," and
"Compensation Committee Interlocks and Insider Participation" in the 1999 Proxy
Statement.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by
reference to the section entitled "Beneficial Ownership of Shares" in the 1999
Proxy Statement .
Item 13 - Certain Relationships and Related Transactions
The information required by this item is incorporated herein by
reference to the section entitled "Other Reportable Transactions" in the 1999
Proxy Statement .
PART IV
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Item 14 - Exhibits, Financial Statements, Schedules, and Reports On Form 8-K
(a) The following consolidated financial statements, schedules and
exhibits are filed as part of this report or are incorporated herein as
indicated.
(1) Financial Statements
--------------------
(i) Independent Auditors' Report. Incorporated by
reference to page 28 of the 1998 Annual Report to
Shareholders included as Exhibit 13 to this Annual
Report on Form 10-K.
9
(ii) The consolidated balance sheets as of January 30,
1999 and January 31, 1998 and the related
consolidated statements of earnings, shareholders'
equity, cash flows, and notes thereto for each of
the three fiscal years in the period ended January
30, 1999 are incorporated by reference to pages 29-
40 of the 1998 Annual Report to Shareholders
included as Exhibit 13 to this Annual Report on Form
10-K.
(2) Financial Statement Schedules
-----------------------------
Schedules have been omitted because they are not required
or are not applicable or because the information required to be
set forth therein either is not material or is included in the
financial statements or notes thereto.
(3) Exhibits
--------
Incorporated herein by reference is a list of the Exhibits
contained in the Exhibit Index which begins on sequentially
numbered page 13 of this Annual Report on Form 10-K.
(b) No reports on Form 8-K were filed or required to be filed for
the last quarter of the fiscal year.
10
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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: March 30, 1999 By /s/ MILLARD S. DREXLER
----------------------
Millard S. Drexler,
Chief Executive Officer
(Principal Executive Officer)
Date: March 30, 1999 By /s/ WARREN R. HASHAGEN
----------------------
Warren R. Hashagen,
Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 30, 1999 By /s/ ADRIAN D.P. BELLAMY
------------------------------
Adrian D. P. Bellamy, Director
Date: March 30, 1999 By /s/ MILLARD S. DREXLER
----------------------------
Millard S. Drexler, Director
Date: March 30, 1999 By /s/ DONALD G. FISHER
--------------------------
Donald G. Fisher, Director
Date: March 30, 1999 By /s/ DORIS F. FISHER
-------------------------
Doris F. Fisher, Director
Date: March 30, 1999 By /s/ ROBERT J. FISHER
--------------------------
Robert J. Fisher, Director
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SIGNATURES (con't.)
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Date: March 30, 1999 By /s/ JOHN M. LILLIE
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John M. Lillie, Director
Date: March 30, 1999 By /s/ CHARLES R. SCHWAB
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Charles R. Schwab, Director
Date: March 30, 1999 By /s/ BROOKS WALKER, JR.
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Brooks Walker, Jr., Director
Date: March 30, 1999 By /s/ SERGIO S. ZYMAN
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Sergio S. Zyman, Director
Date: March 30, 1999 By /s/ EVAN S. DOBELLE
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Evan S. Dobelle, Director
Date: March 30, 1999 By /s/ GLENDA A. HATCHETT
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Glenda A. Hatchett
12
Exhibit Index
3.1 Registrant's Amended and Restated Certificate of Incorporation, filed as
Exhibit 3.1 to Registrant's Annual Report on Form 10-K for the year ended
January 30, 1993, Commission File No. 1-7562.
3.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation filed as Exhibit 3 to
Registrant's Form 10-Q for the quarter ended May 2, 1998, Commission File No. 1-7562
3.3 Registrant's By-Laws, filed as Exhibit C to Registrant's definitive proxy statement for its annual
meeting of stockholders held on May 24, 1988, Commission File No. 1-7562
3.4 Amended Article IV of Registrant's By-Laws, filed as Exhibit 4.4 to Registrant's Registration
Statement on Form S-8, Commission File No. 333-00417
4 Indenture, dated September 1, 1997, between the Registrant and Harris Trust Company of California
filed as Exhibit 4 to Registrant's Form 10-Q for the quarter ended November 1, 1997, Commission File
No. 1-7562
10.1 Credit Agreement dated as of July 1, 1997 between the Registrant; Citicorp USA Inc.; Bank Of America
National; Trust & Savings Association; The Hongkong and Shanghai Banking Corporation Limited;
Nationsbank Of Texas, N.A.; The Royal Bank Of Canada; Bank Of Montreal; Societe Generale; The Fuji
Bank, Limited; Morgan Guaranty Trust Company Of New York; The Sumitomo Bank Limited; Deutsche Bank
AG New York Branch and/or Cayman Islands Branch; Union Bank Of Switzerland, New York Branch; U.S.
National Bank Of Oregon; and Citibank, N.A. filed as Exhibit 10.3 to Registrant's Form 10-Q for the
quarter ended August 2, 1997, Commission File No. 1-7562
10.2 First Letter Amendment dated June 30, 1998 to the Credit Agreement dated July 1, 1997.
10.3 Credit Agreement dated as of July 1, 1997 between the Registrant; Citicorp USA Inc.; Bank Of America
National; Trust & Savings Association; The Hongkong and Shanghai Banking Corporation Limited;
Nationsbank Of Texas, N.A.; The Royal Bank Of Canada; Bank Of Montreal; Societe Generale; The Fuji
Bank, Limited; Morgan Guaranty Trust Company Of New York; The Sumitomo Bank Limited; Deutsche Bank
AG New York Branch and/or Cayman Islands Branch; Union Bank of Switzerland, New York Branch; U.S.
National Bank of Oregon; and Citibank, N.A. filed as Exhibit 10.4 to Registrant's Form 10-Q for the
quarter ended August 2, 1997, Commission File No. 1-7562
10.4 First Letter Amendment dated June 30, 1998 to the Credit Agreement
dated July 1, 1997
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.5 1981 Stock Option Plan, filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-8,
Commission File No. 33-54690
10.6 Management Incentive Restricted Stock Plan II, filed as exhibit 4.1 to Registrant's Registration
Statement on Form S-8, Commission File No. 33-54686
10.7 Description of Management Incentive Cash Award Plan filed as Exhibit 10.34 to Registrant's Annual
Report on Form 10-K for the year ended January 29, 1994, Commission File No. 1-7562
10.8 Executive Management Incentive Cash Award Plan (March 21, 1995 Amendment and Restatement), filed as
Exhibit B to the Registrant's definitive proxy statement for its annual meeting of stockholders held
on May 23, 1995, Commission File No. 1-7562
10.9 The Gap, Inc. Executive Deferred Compensation Plan, filed as Exhibit 10.3 to Registrant's Form 10-Q
for the quarter ended October 31, 1998, Commission File No.1-7562
10.10 1996 Stock Option and Award Plan, filed as Exhibit A to the Registrant's definitive proxy statement
for its annual meeting of stockholders held on May 21, 1996, Commission File No. 1-7562
10.11 Amendment Number 1 to the Registrant's 1996 Stock Option and Award Plan filed as Exhibit 10.1 to
Registrant's Form 10-Q for the quarter ended August 2, 1997, Commission File No. 1-7562
10.12 Amendment Number 2 to the Registrant's 1996 Stock Option and Award Plan filed as Exhibit 10.15 to
Registrant's Form 10-K for the year ended January 31, 1998, Commission File No. 1-7562
10.13 Amendment Number 3 to the Registrant's 1996 Stock Option and Award Plan filed as Exhibit 10.1 to
Registrant's Form 10-Q for the quarter ended October 31, 1998, Commission File No. 1-7562
10.14 Form of Nonqualified Stock Option Agreement for employees under Registrant's 1996 Stock Option and
Award Plan filed as Exhibit 10.5 to Registrant's Form 10-Q for the quarter ended August 2, 1997,
Commission File No. 1-7562
10.15 Form of Nonqualified Stock Option Agreement for directors under Registrant's 1996 Stock Option and
Award Plan filed as Exhibit 10.6 to Registrant's Form 10-Q for the quarter ended August 2, 1997,
Commission File No. 1-7562
10.16 Form of Restricted Stock Agreement under Registrant's 1996 Stock Option and Award Plan filed as
Exhibit 10.7 to Registrant's Form 10-Q for the quarter ended August 2, 1997, Commission File No.
1-7562
10.17 Form of Nonqualified Stock Option Agreement for consultants under Registrant's 1996 Stock Option and
Award Plan filed as Exhibit 10.4 to Registrant's Form 10-Q for the quarter ended October 31, 1998,
Commission File No. 1-7562
10.18 Form of Nonqualified Stock Option Agreement for employees in France under Registrant's 1996 Stock
Option and Award Plan filed as Exhibit 10.5 to Registrant's Form 10-Q for the quarter ended October
31, 1998, Commission File No. 1-7562
10.19 Form of Nonqualified Stock Option Agreement for international employees under Registrant's 1996
Stock Option and Award Plan filed as Exhibit 10.6 to Registrant's Form 10-Q for the quarter ended
October 31, 1998, Commission File No. 1-7562
10.20 Form of Nonqualified Stock Option Agreement for employees in Japan under Registrant's 1996 Stock
Option and Award Plan filed as Exhibit 10.7 to Registrant's Form 10-Q for the quarter ended October
31, 1998, Commission File No. 1-7562
10.21 Form of stock option agreement for employees under the UK Sub-plan to the U.S. Stock Option and
Award Plan filed as Exhibit 10.8 to Registrant's Form 10-Q for the quarter ended October 31, 1998,
Commission File No. 1-7562
10.22 Executive Long-Term Cash Award Performance Plan (January 26, 1999 Restatement), filed as Exhibit B
to the Registrant's definitive proxy statement for its annual meeting of stockholders held on May 4,
1999, Commission File No. 1-7562
10.23 Relocation Loan Plan, filed as Exhibit A to Registrant's definitive proxy statement for its annual
meeting of stockholders held on October 25, 1977, Commission File No. 1-7562
10.24 Certificate of Corporate Resolution amending the Relocation Loan Plan, adopted by the Board of
Directors on November 27, 1990, filed as Exhibit 10.34 to Registrant's Annual Report on Form 10-K
for the year ended February 2, 1991, Commission File No. 1-7562
10.25 Restricted Stock Award Agreement, dated April 13, 1992, between Registrant and Millard Drexler,
filed as Exhibit 10.41 to Registrant's Annual Report on Form 10-K for the year ended January 30,
1993, Commission File No. 1-7562
10.26 First Amendment to Restricted Stock Award Agreement, dated October 23, 1992, between Registrant and
Millard Drexler, filed as Exhibit 10.42 to Registrant's
Annual Report on Form 10-K for the year ended January 30, 1993,
Commission File No. 1-7562
10.27 Non-Employee Director Retirement Plan, dated October 27, 1992, filed as Exhibit 10.43 to
Registrant's Annual Report on Form 10-K for the year ended January 30, 1993, Commission File No.
1-7562
10.28 Statement Regarding Non-Employee Director Retirement Plan filed as Exhibit 10.25 to Registrant's
Form 10-K for the year ended January 31, 1998, Commission File No. 1-7562
10.29 The Gap, Inc. Nonemployee Director Deferred Compensation Plan, filed as Exhibit 4.1 to Registrant's
Registration Statement on Form S-8, Commission File No. 333-36265
10.30 Amendment Number 1 to the Registrant's Nonemployee Director Deferred Compensation Plan filed as
Exhibit 10.2 to Registrant's Form 10-Q for the quarter ended October 31, 1998, Commission File No.
1-7562
10.31 Form of Discounted Stock Option Agreement under the Nonemployee Director Deferred Compensation Plan,
filed as Exhibit 4.5 to Registrant's Registration Statement on Form S-8, Commission File No.
333-36265
10.32 Employment arrangement, dated July 16, 1997, between Registrant and John B. Wilson, filed as Exhibit
10.45 to Registrant's Annual Report on Form 10-K for the year ended February 1, 1997, Commission
File No. 1-7562
10.33 Income continuation protection arrangement, dated December 21, 1998, between Registrant and John B.
Wilson
13 Portions of Registrant's annual report to security holders for the fiscal year ended January 30, 1999
21 Subsidiaries of Registrant
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule for the year ended January 30, 1999