SEC Info - Gap Inc. - ‘10-K’ for 1/28/23

We have served as the Company’s auditor since at least 1976, in connection with its initial public offering; however, an earlier year could not be reliably determined.

THE GAP, INC.

CONSOLIDATED BALANCE SHEETS

($ and shares in millions except par value)

ASSETS

Current assets:

Cash and cash equivalents

i 1,215

i 877

Merchandise inventory

i 2,389

i 3,018

Other current assets

i 1,013

i 1,270

Total current assets

i 4,617

i 5,165

Property and equipment, net of accumulated depreciation

i 2,688

i 3,037

Operating lease assets

i 3,173

i 3,675

Other long-term assets

i 908

i 884

Total assets

i 11,386

i 12,761

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

i 1,320

i 1,951

Accrued expenses and other current liabilities

i 1,219

i 1,367

Current portion of operating lease liabilities

i 667

i 734

Income taxes payable

i 50

i 25

Total current liabilities

i 3,256

i 4,077

Long-term liabilities:

Revolving credit facility

i 350

i —

Long-term debt

i 1,486

i 1,484

Long-term operating lease liabilities

i 3,517

i 4,033

Other long-term liabilities

i 544

i 445

Total long-term liabilities

i 5,897

i 5,962

Commitments and contingencies (see Note 15)

Stockholders' equity:

Common stock $ i i 0.05 / par value

Authorized i i 2,300 / shares for all periods presented; Issued and Outstanding i i 366 / and i i 371 / shares

i 18

i 19

Additional paid-in capital

i 27

i 43

Retained earnings

i 2,140

i 2,622

Accumulated other comprehensive income

i 48

i 38

Total stockholders' equity

i 2,233

i 2,722

Total liabilities and stockholders' equity

i 11,386

i 12,761

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Year

($ and shares in millions except per share amounts)

2022

2021

2020

Net sales

i 15,616

i 16,670

i 13,800

Cost of goods sold and occupancy expenses

i 10,257

i 10,033

i 9,095

Gross profit

i 5,359

i 6,637

i 4,705

Operating expenses

i 5,428

i 5,827

i 5,567

Operating income (loss)

( i 69)

i 810

( i 862)

Loss on extinguishment of debt

i —

i 325

i 58

Interest expense

i 88

i 167

i 192

Interest income

( i 18)

( i 5)

( i 10)

Income (loss) before income taxes

( i 139)

i 323

( i 1,102)

Income tax expense (benefit)

i 63

i 67

( i 437)

Net income (loss)

( i 202)

i 256

( i 665)

Weighted-average number of shares—basic

i 367

i 376

i 374

Weighted-average number of shares—diluted

i 367

i 383

i 374

Earnings (loss) per share—basic

( i 0.55)

i 0.68

( i 1.78)

Earnings (loss) per share—diluted

( i 0.55)

i 0.67

( i 1.78)

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Fiscal Year

($ in millions)

2022

2021

2020

Net income (loss)

( i 202)

i 256

( i 665)

Other comprehensive income (loss), net of tax:

Foreign currency translation

i 14

i 9

( i 17)

Change in fair value of derivative financial instruments, net of tax expense (tax benefit) of $ i —, $ i —, and $( i 1)

i 27

i 8

( i 3)

Reclassification adjustments on derivative financial instruments, net of (tax expense) tax benefit of $( i 2), $ i 3, and $( i 2)

( i 31)

i 12

( i 11)

Other comprehensive income (loss), net of tax

i 10

i 29

( i 31)

Comprehensive income (loss)

( i 192)

i 285

( i 696)

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income

($ and shares in millions except per share amounts)

Amount

Total

Balance as of February 1, 2020

i 371

i 19

i —

i 3,257

i 40

i 3,316

Net loss

( i 665)

Other comprehensive loss, net of tax

Foreign currency translation

( i 17)

Change in fair value of derivative instruments

( i 3)

Amounts reclassified from accumulated other comprehensive income

( i 11)

Issuance of common stock related to stock options and employee stock purchase plans

i 2

i —

i 22

Issuance of common stock and withholding tax payments related to vesting of stock units

i 1

i —

( i 9)

Share-based compensation, net of forfeitures

i 72

Common stock dividends declared ($ i 0.2425 per share) (1)

( i 91)

Balance as of January 30, 2021

i 374

i 19

i 85

i 2,501

i 9

i 2,614

Net income

i 256

Other comprehensive income, net of tax

Foreign currency translation

i 9

Change in fair value of derivative instruments

i 8

Amounts reclassified from accumulated other comprehensive income

i 12

Repurchases and retirement of common stock

( i 9)

i —

( i 201)

Issuance of common stock related to stock options and employee stock purchase plans

i 3

i —

i 54

Issuance of common stock and withholding tax payments related to vesting of stock units

i 3

i —

( i 36)

Share-based compensation, net of forfeitures

i 141

Common stock dividends declared and paid ($ i 0.36 per share)

( i 135)

Balance as of January 29, 2022

i 371

i 19

i 43

i 2,622

i 38

i 2,722

Net loss

(202)

( i 202)

Other comprehensive income (loss), net of tax

Foreign currency translation

i 14

Change in fair value of derivative instruments

i 27

Amounts reclassified from accumulated other comprehensive income

( i 31)

Repurchases and retirement of common stock

( i 11)

( i 1)

( i 62)

( i 60)

( i 123)

Issuance of common stock related to stock options and employee stock purchase plans

i 3

i —

i 27

Issuance of common stock and withholding tax payments related to vesting of stock units

i 3

i —

( i 20)

Share-based compensation, net of forfeitures

i 39

Common stock dividends declared and paid ($ i 0.60 per share)

( i 220)

Balance as of January 28, 2023

i 366

i 18

i 27

i 2,140

i 48

i 2,233

__________

(1) On March 4, 2020, the Company declared a first quarter fiscal year 2020 dividend of $0.2425 per share. The dividend payable amount was estimated based upon the shareholders of record as of January 30, 2021. The dividend was paid on April 28, 2021 to shareholders of record at the close of business on April 7, 2021.

See Accompanying Notes to Consolidated Financial Statements

THE GAP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Year

($ in millions)

2022

2021

2020

Cash flows from operating activities:

Net income (loss)

( i 202)

i 256

( i 665)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

i 540

i 504

i 507

Share-based compensation

i 37

i 139

i 77

Impairment of operating lease assets

i 33

i 8

i 391

Impairment of store assets

i 18

i 1

i 135

Impairment of intangible asset

i —

i 31

Loss on extinguishment of debt

i —

i 325

i 58

Amortization of debt issuance costs

i 6

i 14

i 12

Non-cash and other items

( i 16)

i 31

i —

Loss on divestiture activity

i 35

i 59

i —

Gain on sale of building

( i 83)

i —

Deferred income taxes

i 42

( i 61)

( i 137)

Changes in operating assets and liabilities:

Merchandise inventory

i 554

( i 593)

( i 305)

Other current assets and other long-term assets

i 161

( i 42)

i 64

Accounts payable

( i 540)

i 186

i 564

Accrued expenses and other current liabilities

( i 243)

i 172

( i 14)

Income taxes payable, net of receivables and other tax-related items

i 417

( i 85)

( i 304)

Other long-term liabilities

( i 45)

( i 3)

i 12

Operating lease assets and liabilities, net

( i 107)

( i 102)

( i 189)

Net cash provided by operating activities

i 607

i 809

i 237

Cash flows from investing activities:

Purchases of property and equipment

( i 685)

( i 694)

( i 392)

Net proceeds from sale of buildings

i 458

i —

Purchases of short-term investments

i —

( i 753)

( i 508)

Proceeds from sales and maturities of short-term investments

i —

i 1,162

i 388

Payments for acquisition activity, net of cash acquired

i —

( i 135)

i —

Net cash paid for divestiture activity

i —

( i 21)

i —

Other

i —

( i 5)

i 2

Net cash used for investing activities

( i 227)

( i 446)

( i 510)

Cash flows from financing activities:

Proceeds from revolving credit facility

i 350

i —

i 500

Payments for revolving credit facility

i —

( i 500)

Proceeds from issuance of long-term debt

i —

i 1,500

i 2,250

Payments to extinguish debt

i —

( i 2,546)

( i 1,307)

Payments for debt issuance costs

( i 6)

( i 16)

( i 61)

Proceeds from issuances under share-based compensation plans

i 27

i 54

i 22

Withholding tax payments related to vesting of stock units

( i 20)

( i 36)

( i 9)

Repurchases of common stock

( i 123)

( i 201)

i —

Cash dividends paid

( i 220)

( i 226)

i —

Other

( i 2)

i —

Net cash provided by (used for) financing activities

i 6

( i 1,471)

i 895

Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash

( i 15)

( i 6)

i 13

Net increase (decrease) in cash, cash equivalents, and restricted cash

i 371

( i 1,114)

i 635

Cash, cash equivalents, and restricted cash at beginning of period

i 902

i 2,016

i 1,381

Cash, cash equivalents, and restricted cash at end of period

i 1,273

i 902

i 2,016

Non-cash investing activities:

Purchases of property and equipment not yet paid at end of period

i 55

i 124

i 60

Supplemental disclosure of cash flow information:

Cash paid for interest during the period

i 76

i 180

i 145

Cash paid for income taxes during the period, net of refunds

( i 388)

i 215

i 20

Cash paid for operating lease liabilities

i 942

i 1,061

i 1,096

See Accompanying Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

For the Fiscal Years Ended January 28, 2023, January 29, 2022, and January 30, 2021

Note 1. i Organization and Summary of Significant Accounting Policies

Organization

The Gap, Inc., a Delaware corporation, is a collection of purpose-led, lifestyle brands offering apparel, accessories, and personal care products for men, women, and children. As of January 28, 2023, we had Company-operated stores in the United States, Canada, Japan, China, and Taiwan. Our products are available to customers online through Company-owned websites and through third party arrangements. We also have franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta stores and websites in about 40 countries around the world.

In fiscal 2022, we signed agreements to transition our Gap Greater China operations to a third party, Baozun, to operate Gap Greater China stores and the in-market website as a franchise partner. On i January 31, 2023, the Gap China transaction closed with Baozun. The Gap Taiwan operations will continue to operate as usual until regulatory approvals and closing conditions are met.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of The Gap, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

Fiscal Year and Presentation

Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31. The fiscal years ended January 28, 2023 (fiscal 2022), January 29, 2022 (fiscal 2021), and January 30, 2021 (fiscal 2020) consisted of 52 weeks. The fiscal year ending February 3, 2024 (fiscal 2023) will consist of 53 weeks.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Additionally, these estimates and assumptions may change as a result of the impact of global economic conditions such as the uncertainty regarding global inflationary pressures, the COVID-19 pandemic, and the Russia-Ukraine crisis. We will continue to consider the impact of the global economic conditions on the assumptions and estimates used when preparing these Consolidated Financial Statements. Examples include, but are not limited to, assumptions and estimates used for inventory valuation, income taxes and valuation allowances, sales return and bad debt allowances, and the impairment of long-lived assets. If the global economic conditions worsen beyond what is currently estimated by management, such future changes may have an adverse impact on the Company's results of operations and financial position.

Cash and Cash Equivalents

Cash includes funds deposited in banks and amounts in transit from banks for customer credit card and debit card transactions that process in less than seven days.

All highly liquid investments with original maturities of three months or less at the time of purchase are classified as cash equivalents. We value these investments at their original purchase prices plus interest that has accrued at the stated rate. Our cash equivalents are placed primarily in time deposits. Income related to these securities is recorded within interest income on the Consolidated Statements of Operations.

Restricted Cash

Any cash that is legally restricted from use is classified as restricted cash. If the purpose of restricted cash is related to acquiring a long-term asset, liquidating a long-term liability, or is otherwise unavailable for a period longer than one year from the balance sheet date, the restricted cash is included within other long-term assets on our Consolidated Balance Sheets. Otherwise, restricted cash is included within other current assets on our Consolidated Balance Sheets.

As of January 28, 2023, January 29, 2022, and January 30, 2021, restricted cash primarily includes consideration that serves as collateral for certain obligations occurring in the normal course of business and our insurance obligations. i The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on our Consolidated Balance Sheets to the total shown on our Consolidated Statements of Cash Flows:

($ in millions)

January 30,
2021

Cash and cash equivalents

i 1,215

i 877

i 1,988

Restricted cash included in other current assets

i 32

i —

i 4

Restricted cash included in other long-term assets

i 26

i 25

i 24

Total cash, cash equivalents, and restricted cash shown on the Consolidated Statement of Cash Flows

i 1,273

i 902

i 2,016

Merchandise Inventory

We value inventory at the LCNRV, with cost determined using the weighted-average cost method. We record an adjustment to inventory when future estimated selling price is less than cost. We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors) and we primarily use promotions and markdowns to clear merchandise. In addition, we estimate and accrue shortage for the period between the last physical count and the balance sheet date.

Property and Equipment

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:


Category						Term
Leasehold improvements						Shorter of remaining lease term or economic life, up to i 15 years
Furniture and equipment						Up to i 10 years
Software						Up to i 7 years
Buildings and building improvements						Up to i 39 years

When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts, with any resulting gain or loss recorded within operating expenses on the Consolidated Statements of Operations. Costs of maintenance and repairs are expensed as incurred. Costs incurred to implement cloud computing arrangements hosted by third party vendors are capitalized when incurred during the application development phase and amortized on a straight-line basis over the contractual term of the cloud computing arrangement. Capitalized amounts related to such arrangements are recorded within other current assets and other long-term assets on our Consolidated Balance Sheets and were not material for fiscal 2022, 2021, or 2020.

Leases

We determine if a long-term contractual obligation is a lease at inception. The majority of our operating leases relate to Company stores. We also lease some of our corporate facilities and distribution centers. These operating leases expire at various dates through fiscal i 2048. Most store leases have a five-year base period and include options that allow us to extend the lease term beyond the initial base period, subject to terms agreed upon at lease inception. Some leases also include early termination options, which can be exercised under specific conditions. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We record our lease liabilities at the present value of the lease payments not yet paid, discounted at the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term. As the Company's leases do not provide an implicit interest rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We recognize operating lease cost over the estimated term of the lease, which includes options to extend lease terms that are reasonably certain of being exercised, starting when possession of the property is taken from the landlord, which normally includes a construction period prior to the store opening. When a lease contains a predetermined fixed escalation of the fixed rent, we recognize the related operating lease cost on a straight-line basis over the lease term. In addition, certain of our lease agreements include variable lease payments, such as payments based on a percentage of sales that are in excess of a predetermined level and/or increases based on a change in the consumer price index or fair market value. These variable lease payments are excluded from minimum lease payments and are included in the determination of net lease cost when it is probable that the expense has been incurred and the amount can be reasonably estimated. If an operating lease asset is impaired, the remaining operating lease asset will be amortized on a straight-line basis over the remaining lease term.

See Note 12 of Notes to Consolidated Financial Statements for related disclosures.

Revenue Recognition

The Company’s revenues primarily include merchandise sales at stores, online, and through franchise and licensing agreements. We also receive revenue sharing from our credit card agreement for private label and co-branded credit cards, and breakage revenue related to our gift cards, credit vouchers, and outstanding loyalty points, which are realized based upon historical redemption patterns. For online sales, the Company has elected to treat shipping and handling as fulfillment activities and not a separate performance obligation. Accordingly, we recognize revenue for our single performance obligation related to online sales at the time control of the merchandise passes to the customer, which is generally at the time of shipment. We also record an allowance for estimated merchandise returns based on our historical return patterns and various other assumptions that management believes to be reasonable, which is presented on a gross basis on our Consolidated Balance Sheets. Revenues are presented net of any taxes collected from customers and remitted to governmental authorities.

We have credit card agreements with third parties to provide our customers with private label credit cards and co-branded credit cards (collectively, the “Credit Card programs"). Each private label credit card bears the logo of Gap, Banana Republic, Old Navy, or Athleta and can be used at any of our U.S. store locations and online. The current co-branded credit card is a MasterCard credit card bearing the logo of Gap, Banana Republic, Old Navy, or Athleta and can be used everywhere MasterCard credit cards are accepted. The Credit Card programs are a part of Gap Inc.’s loyalty program where members enjoy incentives in the form of rewards which can be redeemed across all of our purpose-led brands.

During fiscal 2022, the Company launched a new long-term credit card program with Barclays that replaced our prior credit card program with Synchrony Financial. Barclays, a third-party financial institution, is the sole owner of the accounts and underwrites the credit issued under the Credit Card programs. Our agreement with Barclays provides for certain payments to be made to us, including a share of revenue from the performance of the credit card portfolios and reimbursements of loyalty program discounts. We have identified separate performance obligations related to our credit card agreement that includes both providing a license and an obligation to redeem loyalty points issued under the loyalty rewards program. Our obligation to provide a license is satisfied when the subsequent sale or usage occurs and our obligation to redeem loyalty points is deferred until those loyalty points are redeemed. Income related to our credit card agreement is classified within net sales on our Consolidated Statements of Operations. In conjunction with entering into our agreement with Barclays, the Company also entered into a corresponding agreement with MasterCard for co-branded cards that replaced our prior agreement with Visa.

We defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards, credit vouchers, outstanding loyalty points, and reimbursements of loyalty program discounts associated with our credit card agreement.

We also have franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta in a number of countries throughout Asia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate, or will operate, stores and websites that sell apparel and related products under our brand names. We have identified separate performance obligations related to our franchise agreements that include both providing our franchise partners with a license and an obligation to supply franchise partners with our merchandise. Our obligation to provide a license is satisfied when the subsequent sale or usage occurs and our obligation to supply franchise partners with our merchandise is satisfied when control of the merchandise transfers.

See Note 3 of Notes to Consolidated Financial Statements for related disclosures.

Classification of Expenses

Cost of goods sold and occupancy expenses include the following:

•the cost of merchandise;

•inventory shortage and valuation adjustments;

•freight charges;

•online shipping and packaging costs;

•cost associated with our sourcing operations, including payroll, benefits, and other administrative expenses;

•lease and other occupancy related cost, depreciation, and amortization related to our store operations, distribution centers, information technology, and certain corporate functions; and

•gains and losses associated with foreign currency derivative contracts used to hedge forecasted merchandise purchases and related costs denominated in U.S. dollars made by our international subsidiaries whose functional currencies are their local currencies.

Operating expenses include the following:

•payroll, benefits, and other administrative expenses for our store operations, field management, and distribution centers;

•payroll, benefits, and other administrative expenses for our corporate functions, including product design and development;

•marketing;

•information technology expenses and maintenance costs;

•lease and other occupancy related cost, depreciation, and amortization for our corporate facilities;

•research and development expenses;

•gains and losses associated with foreign currency derivative contracts not designated as hedging instruments;

•third party credit card processing fees; and

•other expenses (income).

Payroll, benefits, and other administrative expenses for our distribution centers recorded within operating expenses were $ i 386 million, $ i 379 million, and $ i 358 million in fiscal 2022, 2021, and 2020, respectively. Research and development costs described in Accounting Standards Codification ("ASC") No. 730 are expensed as incurred. These costs primarily consist of payroll and related benefits attributable to time spent on research and development activities for new innovative products and technological improvements for existing products and process innovation. Research and development expenses recorded within operating expenses under ASC 730 were $ i 46 million, $ i 41 million, and $ i 46 million in fiscal 2022, 2021, and 2020, respectively.

The classification of expenses varies across the apparel retail industry. Accordingly, our cost of goods sold and occupancy expenses and operating expenses may not be comparable to those of other companies.

i Impairment of Long-Lived Assets

We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events that result in an impairment review include a significant decrease in the operating performance of the long-lived asset, the decision to close a store, corporate facility, or distribution center or adverse changes in business climate. Long-lived assets are considered impaired if the carrying amount exceeds the estimated undiscounted future cash flows of the asset or asset group over the estimated remaining lease term. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail and flagship stores is generally at the store level. The asset group is comprised of both property and equipment and operating lease assets. For impaired assets, we recognize a loss equal to the difference between the carrying amount of the asset or asset group and its estimated fair value, which is recorded within operating expenses on the Consolidated Statements of Operations. The estimated fair value of the asset or asset group is based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the related risk. For operating lease assets, the Company determines the estimated fair value of the assets by discounting the estimated market rental rates using available valuation techniques.

See Note 8 of Notes to Consolidated Financial Statements for related disclosures.

Impairment of Goodwill and Intangible Assets

We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually in the fourth quarter of the fiscal year and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. If goodwill is considered impaired, we recognize a loss equal to the difference between the carrying amount and the estimated fair value of the reporting unit.

A trade name is considered impaired if the carrying amount exceeds its estimated fair value. If a trade name is considered impaired, we recognize a loss equal to the difference between the carrying amount and the estimated fair value of the trade name. The fair value of a trade name is determined using the relief from royalty method, which requires management to make assumptions and to apply judgment, including forecasting future sales, and selecting appropriate discount rates and royalty rates.

Goodwill and other indefinite-lived intangible assets, including the trade names, are recorded within other long-term assets on the Consolidated Balance Sheets.

See Note 6 of Notes to Consolidated Financial Statements for related disclosures.

Advertising

Costs associated with the production of advertising, such as writing, copy, printing, and other costs, are expensed as incurred. Costs associated with communicating advertising that has been produced, such as television and magazine costs, are expensed when the advertising event takes place. Advertising expense was $ i 1,039 million, $ i 1,115 million, and $ i 816 million in fiscal 2022, 2021, and 2020, respectively, and is recorded within operating expenses on the Consolidated Statements of Operations.

i Share-Based Compensation

Share-based compensation expense for stock options and other stock awards is determined based on the grant-date fair value. We use the Black-Scholes-Merton option-pricing model to determine the fair value of stock options, which requires the input of subjective assumptions regarding the expected term, expected volatility, dividend yield, and risk-free interest rate. For units granted whereby one share of common stock is issued for each unit as the unit vests (“Stock Units”), the fair value is determined either based on the Company’s stock price on the date of grant less future expected dividends during the vesting period or a Monte Carlo method for certain Stock Units granted with a market condition. For stock options and Stock Units, we recognize share-based compensation cost over the vesting period. We account for forfeitures as they occur. Share-based compensation expense is recorded primarily within operating expenses on the Consolidated Statements of Operations.

See Note 11 of Notes to Consolidated Financial Statements for related disclosures.

Foreign Currency

Our international subsidiaries primarily use local currencies as their functional currency and translate their assets and liabilities at the current rate of exchange in effect at the balance sheet date. Revenue and expenses from their operations are translated using rates that approximate those in effect during the period in which the transactions occur. The resulting gains and losses from translation are recorded on the Consolidated Statements of Comprehensive Income (Loss) and in accumulated OCI on the Consolidated Statements of Stockholders’ Equity. Transaction gains and losses resulting from intercompany balances of a long-term investment nature are also classified as accumulated OCI. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are recorded within operating expenses on the Consolidated Statements of Operations.

The aggregate transaction gains and losses recorded within operating expenses on the Consolidated Statements of Operations are as follows:

Fiscal Year

($ in millions)

2022

2021

2020

Foreign currency transaction gain (loss)

( i 59)

( i 18)

i 23

Realized and unrealized gain (loss) from certain derivative financial instruments

i 57

i 18

( i 15)

Net foreign exchange gain (loss)

( i 2)

i —

i 8

/ / i

Income Taxes

Deferred income taxes are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts on the Consolidated Financial Statements. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Our income tax expense includes changes in our estimated liability for exposures associated with our various tax filing positions. At any point in time, many tax years are subject to or in the process of being audited by various taxing authorities. To the extent our estimates of settlements change or the final tax outcome of these matters is different from the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made.

The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties related to unrecognized tax benefits in operating expenses on the Consolidated Statements of Operations.

The Company has made an accounting policy election to treat taxes due on the global intangible low-taxed income (“GILTI”) of foreign subsidiaries as a current period expense.

Earnings per Share

Basic earnings per share is computed as net income (loss) divided by basic weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed as net income divided by diluted weighted-average number of common shares outstanding for the period including common stock equivalents. During periods of net loss, the dilutive impact of outstanding options and awards is excluded from dilutive shares. Common stock equivalents consist of shares subject to share-based awards with exercise prices less than the average market price of our common stock for the period, to the extent their inclusion would be dilutive. Stock options, stock warrants, and other stock awards that contain performance conditions are not included in the calculation of common stock equivalents until such performance conditions have been achieved.

See Note 14 of Notes to Consolidated Financial Statements for related disclosures.

Recent Accounting Pronouncements

Except as noted below, the Company has considered all recent accounting pronouncements and concluded that there are no recent accounting pronouncements that may have a material impact on our Consolidated Financial Statements and disclosures, based on current information.

In April 2020, the Financial Accounting Standards Board ("FASB") provided guidance on accounting for rent concessions resulting from the COVID-19 pandemic. We considered the FASB's guidance regarding lease modifications as a result of the effects of the COVID-19 pandemic and elected to apply the temporary practical expedient to account for lease changes as variable rent unless an amendment results in a substantial change in the Company's lease obligations. The impact of applying the temporary practical expedient was not material to our Consolidated Financial Statements.

ASU No. 2022-04, Disclosure of Supplier Finance Program Obligations

In September 2022, the FASB issued accounting standards update ("ASU") No. 2022-04, Disclosure of Supplier Finance Program Obligations. The ASU is intended to enhance the transparency of the use of supplier finance programs by requiring additional disclosures about the program’s nature and potential magnitude, including a rollforward of the obligations and activity during the period. The ASU does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations. The ASU is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective prospectively for fiscal years beginning after December 15, 2023. We are reviewing our supplier finance agreements to determine the impact to disclosures in our Consolidated Financial Statements.

Note 2. i Additional Financial Statement Information

Cash and Cash Equivalents

Cash and cash equivalents consist of the following:

($ in millions)

Cash (1)

i 1,200

i 850

Time deposits and bank certificates of deposit

i 15

i 27

Cash and cash equivalents

i 1,215

i 877

__________

(1)Cash includes $ i 60 million and $ i 64 million of amounts in transit from banks for customer credit card and debit card transactions as of January 28, 2023 and January 29, 2022, respectively.

Other Current Assets

Other current assets consist of the following:

($ in millions)

Accounts receivable

i 340

i 399

Assets held for sale (1)

i 172

i 49

Prepaid income taxes and income taxes receivable (2)

i 150

i 491

Prepaid minimum rent and occupancy expenses

i 106

i 110

Right of return asset

i 46

i 49

Derivative financial instruments

i 11

i 16

Other

i 188

i 156

Other current assets

i 1,013

i 1,270

__________

(1)The Company reclassified certain assets and liabilities as held for sale that are expected to be sold within the next twelve months. See Notes 17 and 18 of Notes to Consolidated Financial Statements for related disclosures.

(2)The decrease is primarily due to receipt of tax refunds during fiscal 2022 related to fiscal 2020 net operating loss carryback claims.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and consist of the following:

($ in millions)

Furniture and equipment

i 2,833

i 2,789

Leasehold improvements

i 2,270

i 2,487

Software

i 1,142

i 1,072

Land, buildings, and building improvements

i 1,103

i 1,416

Construction-in-progress

i 177

i 344

Property and equipment, at cost

i 7,525

i 8,108

Less: Accumulated depreciation

( i 4,837)

( i 5,071)

Property and equipment, net of accumulated depreciation

i 2,688

i 3,037

Depreciation expense for property and equipment was $ i 531 million, $ i 502 million, and $ i 505 million for fiscal 2022, 2021, and 2020, respectively.

Interest of $ i 7 million, $ i 7 million, and $ i 9 million related to assets under construction was capitalized in fiscal 2022, 2021, and 2020, respectively.

See Note 8 of Notes to Consolidated Financial Statements for information regarding impairment charges.

Other Long-Term Assets

Other long-term assets consist of the following:

($ in millions)

Long-term income tax-related assets

i 480

i 444

Goodwill

i 207

Trade names

i 54

Intangible assets subject to amortization, net of accumulated amortization

i 27

i 36

Other

i 140

i 143

Other long-term assets

i 908

i 884

See Notes 5 and 6 of Notes to Consolidated Financial Statements for additional disclosures on goodwill and other intangible assets.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

($ in millions)

Deferred revenue

i 354

i 345

Accrued compensation and benefits

i 243

i 477

Liabilities held for sale (1)

i 126

i —

Sales return allowance

i 84

i 97

Accrued advertising

i 44

i 62

Accrued interest

i 22

i 21

Derivative financial instruments

i 20

i 2

Other

i 326

i 363

Accrued expenses and other current liabilities

i 1,219

i 1,367

__________

(1)The Company reclassified certain assets and liabilities as held for sale that are expected to be sold within the next twelve months. See Note 17 of Notes to Consolidated Financial Statements for related disclosures.

Other Long-Term Liabilities

Other long-term liabilities consist of the following:

($ in millions)

Long-term income tax-related liabilities

i 327

i 198

Long-term asset retirement obligations (1)

i 38

i 48

Long-term deferred rent and tenant allowances

i 27

i 34

Other

i 152

i 165

Other long-term liabilities

i 544

i 445

__________

(1)The net activity related to asset retirement obligations includes adjustments to the asset retirement obligation balance and fluctuations in foreign currency exchange rates.

Note 3. i Revenue

Disaggregation of Net Sales

We disaggregate our net sales between stores and online and also by brand and region. Net sales by region are allocated based on the location of the store where the customer paid for and received the merchandise or the distribution center or store from which the products were shipped.

Net sales disaggregated for stores and online sales for fiscal 2022, 2021, and 2020 are as follows:

Fiscal Year

($ in millions)

2022

2021

2020

Store sales (1)

i 9,651

i 10,239

i 7,522

Online sales (2)

i 5,965

i 6,431

i 6,278

Total net sales

i 15,616

i 16,670

i 13,800

__________

(1)Store sales primarily include sales made at our Company-operated stores and franchise sales. Fiscal 2020 store sales were negatively impacted by the COVID-19 pandemic.

(2)Online sales primarily include sales originating from our online channel including those that are picked up or shipped from stores and net sales from revenue-generating strategic initiatives.

Net sales disaggregated by brand and region are as follows:

($ in millions)

Old Navy Global

Gap Global

Banana
Republic Global

Athleta Global

Other (2)

Total

Fiscal 2022

U.S. (1)

i 7,471

i 2,461

i 1,829

i 1,428

i 12

i 13,201

Canada

i 679

i 332

i 192

i 33

i —

i 1,236

Europe

i 2

i 198

i 5

i 4

i —

i 209

Asia

i 1

i 606

i 65

i —

i 672

Other regions

i 81

i 177

i 25

i 15

i —

i 298

Total

i 8,234

i 3,774

i 2,116

i 1,480

i 12

i 15,616

($ in millions)

Old Navy Global

Gap Global

Banana
Republic Global

Athleta Global

Other (3)

Total

Fiscal 2021

U.S. (1)

i 8,272

i 2,608

i 1,703

i 1,432

i 102

i 14,117

Canada

i 713

i 349

i 178

i 12

i —

i 1,252

Europe

i 2

i 328

i 8

i 2

i —

i 340

Asia

i 2

i 658

i 70

i —

i 730

Other regions

i 93

i 120

i 17

i 1

i —

i 231

Total

i 9,082

i 4,063

i 1,976

i 1,447

i 102

i 16,670

($ in millions)

Old Navy Global

Gap Global

Banana
Republic Global

Athleta Global

Other (3)

Total

Fiscal 2020

U.S. (1)

i 6,898

i 2,099

i 1,242

i 1,135

i 276

i 11,650

Canada

i 578

i 261

i 130

i —

i 3

i 972

Europe

i —

i 319

i 10

i —

i 329

Asia

i 4

i 642

i 64

i —

i 710

Other regions

i 56

i 67

i 16

i —

i 139

Total

i 7,536

i 3,388

i 1,462

i 1,135

i 279

i 13,800

__________

(1)U.S. includes the United States and Puerto Rico. Fiscal 2020 results also include Guam.

(2)Primarily consists of net sales from revenue-generating strategic initiatives.

(3)Primarily consists of net sales for the Intermix and Janie and Jack brands, as well as other revenue-generating strategic initiatives. The divestiture of Janie and Jack was completed on April 8, 2021. The divestiture of Intermix was completed on May 21, 2021. Fiscal 2020 results also include results from the Hill City brand, which was closed in January 2021.

Deferred Revenue

We defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards, licensing agreements, outstanding loyalty points, and reimbursements of loyalty program discounts associated with our credit card agreement. For fiscal 2022, the opening balance of deferred revenue for these obligations was $ i 345 million, of which $ i 241 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $ i 354 million as of January 28, 2023.

For fiscal 2021, the opening balance of deferred revenue for these obligations was $ i 231 million, of which $ i 157 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $ i 345 million as of January 29, 2022.

The increase in the revenue recognition during the 52 weeks ended January 28, 2023 is primarily due to our integrated loyalty program across the U.S. and Puerto Rico, which launched in July 2021 and allows for faster accumulation and redemption of rewards.

In April 2021, the Company entered into agreements with Barclays and Mastercard relating to a new long-term credit card program. In May 2022, the Company launched the new long-term credit card program with Barclays and Mastercard and accordingly, our prior credit card program with Synchrony Financial was discontinued. The Company received an upfront payment of $ i 60 million related to the new agreements prior to the program launch, which is being recognized as revenue over the term of the agreements.

Note 4. i Income Taxes

For financial reporting purposes, components of income (loss) before income taxes are as follows:

Fiscal Year

($ in millions)

2022

2021

2020

United States

( i 280)

i 217

( i 928)

Foreign

i 141

i 106

( i 174)

Income (loss) before income taxes

( i 139)

i 323

( i 1,102)

/ i

The tax expense (benefit) for income taxes consists of the following:

Fiscal Year

($ in millions)

2022

2021

2020

Current:

Federal

( i 35)

i 46

( i 337)

State

i 6

i 38

( i 21)

Foreign

i 50

i 44

i 58

Total current

i 21

i 128

( i 300)

Deferred:

Federal

i 24

( i 50)

( i 94)

State

i 15

( i 23)

( i 56)

Foreign

i 3

i 12

i 13

Total deferred

i 42

( i 61)

( i 137)

Total tax expense (benefit)

i 63

i 67

( i 437)

The difference between the effective tax rate and the U.S. federal statutory tax rate is as follows:

Fiscal Year

2022

2021

2020

Federal statutory tax rate

i 21.0

State and local income taxes, net of federal benefit

( i 13.7)

i 5.3

i 4.7

Tax impact of foreign operations

( i 28.1)

( i 2.5)

i 1.4

Impact of the CARES Act of 2020

i —

( i 5.6)

i 11.1

Valuation Allowances (1)

( i 3.6)

i 7.4

( i 12.1)

Impact of divestiture activity

( i 21.6)

( i 6.4)

i —

Impact of legal entity structure changes

i —

i 13.4

Other

i 0.7

i 1.5

i 0.2

Effective tax rate

( i 45.3)

i 20.7

i 39.7

__________

(1)Beginning in fiscal 2022, we have made a change for all periods presented to separately disclose valuation allowances as its own line item. Previously, the impact of valuation allowances were grouped within various line items in fiscal 2021 and fiscal 2020.

During fiscal 2022, we recorded a $ i 37 million expense related to foreign divestiture activity.

On March 27, 2020, the CARES Act was signed into law in the United States. The CARES Act includes certain provisions that affect our income taxes, including temporary five-year net operating loss carryback provisions, modifications to the interest deduction limitations, and the technical correction for depreciation of qualified leasehold improvements.

During fiscal 2021, we recorded a $ i 18 million benefit related to finalization of the net operating loss carryback provisions prescribed in the CARES Act. We also recorded a $ i 21 million benefit related to recognition of certain tax benefits associated with divestiture activity.

During fiscal 2020, we recorded a $ i 122 million benefit related to the CARES Act. We also recorded a $ i 113 million benefit related to recognition of certain tax benefits associated with foreign entity structure changes.

Deferred tax assets (liabilities) consist of the following:

($ in millions)

Gross deferred tax assets:

Operating lease liabilities

i 1,126

i 1,277

Accrued payroll and related benefits

i 44

i 111

Accruals

i 180

i 192

Inventory capitalization and other adjustments

i 93

i 67

Deferred income

i 51

i 44

Federal, state, and foreign net operating losses

i 290

i 260

Other

i 95

i 120

Total gross deferred tax assets

i 1,879

i 2,071

Valuation allowance

( i 369)

( i 377)

Total deferred tax assets, net of valuation allowance

i 1,510

i 1,694

Deferred tax liabilities:

Depreciation and amortization

( i 246)

( i 265)

Operating lease assets

( i 881)

( i 1,000)

Unremitted earnings of certain foreign subsidiaries

( i 1)

Unrealized net gain on cash flow hedges

( i 1)

( i 3)

Other

( i 10)

( i 11)

Total deferred tax liabilities

( i 1,139)

( i 1,280)

Net deferred tax assets

i 371

i 414

As of January 28, 2023, we had approximately $ i 67 million of federal, $ i 1,133 million of state and $ i 950 million of foreign loss carryovers in multiple taxing jurisdictions that could be utilized to reduce tax liabilities of future years. We also had approximately $ i 18 million of foreign tax credit carryovers as of January 28, 2023.

Approximately $ i 67 million of federal losses do not expire. Approximately $ i 876 million of state losses expire between fiscal 2023 and fiscal 2042, and $ i 257 million of the state losses do not expire. Approximately $ i 392 million of the foreign losses expire between fiscal 2023 and fiscal 2042, and $ i 558 million of the foreign losses do not expire. The foreign tax credits begin to expire in fiscal 2023.

A valuation allowance is recorded if, based on the assessment of available evidence, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. Management must analyze all available positive and negative evidence regarding realization of the deferred tax assets and make an assessment of the likelihood of sufficient future taxable income. We have provided a valuation allowance of $ i 369 million on certain federal, state, and foreign deferred tax assets that were not deemed realizable based upon estimates of future taxable income.

The activity related to our unrecognized tax benefits is as follows:

Fiscal Year

($ in millions)

2022

2021

2020

Balance at beginning of fiscal year

i 359

i 340

i 152

Increases related to current year tax positions

i 11

i 26

i 165

Prior year tax positions:

Increases

i 1

i 7

i 40

Decreases

( i 24)

( i 9)

( i 4)

Lapse of Statute of Limitations

i —

( i 1)

Cash settlements

( i 2)

( i 14)

Foreign currency translation

( i 1)

( i 2)

i 2

Balance at end of fiscal year

i 344

i 359

i 340

Of the $ i 344 million, $ i 359 million, and $ i 340 million of total unrecognized tax benefits as of January 28, 2023, January 29, 2022, and January 30, 2021, respectively, approximately $ i 326 million, $ i 339 million, and $ i 323 million, respectively, represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

During fiscal 2022, 2021, and 2020, interest expense of $ i 12 million, $ i 6 million, and $ i 12 million, respectively, has been recognized on the Consolidated Statements of Operations relating to income tax liabilities.

As of January 28, 2023 and January 29, 2022, the Company had total accrued interest related to income tax liabilities of $ i 43 million and $ i 31 million, respectively. There were i i no / accrued penalties related to income tax liabilities as of January 28, 2023 or January 29, 2022.

The Company conducts business globally, and as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Canada, France, the United Kingdom, China, Hong Kong, Japan, and India. We are no longer subject to U.S. federal income tax examinations for fiscal years before 2009, and with few exceptions, we also are no longer subject to U.S. state, local, or non-U.S. income tax examinations for fiscal years before 2010.

The Company engages in continual discussions with taxing authorities regarding tax matters in the various U.S. and foreign jurisdictions in the normal course of business. As of January 28, 2023, it is reasonably possible that we will recognize a decrease in gross unrecognized tax benefits within the next 12 months of up to $ i 21 million, primarily due to the closing of settlements and audits, all of which could impact the effective tax rate, if recognized.

Note 5. i Acquisitions

On August 26, 2021, the Company acquired Drapr Inc. ("Drapr"), a startup that powers 3D-fit technology and virtual fitting rooms. On October 1, 2021, the Company acquired Context-based 4 Casting Ltd. ("CB4"), an artificial intelligence and machine learning company.

The aggregate purchase price for the net assets was approximately $ i 147 million. The purchase price allocation included goodwill of $ i 108 million and intangible assets of $ i 39 million. The total purchase price was allocated to the net tangible and intangible assets acquired based on their estimated fair values. Such estimated fair values require management to make estimates and judgments, especially with respect to intangible assets. The purchase price allocation was finalized in fiscal 2022 with no material measurement period adjustments.

The intangible assets acquired primarily include technology and developed software and their estimated fair value will be amortized over the related useful lives.

The impact of the acquisitions on the Company's results of operations is not significant. The results of operations for Drapr and CB4 since the date of acquisitions were not material to the Consolidated Statements of Operations.

Note 6. i Goodwill and Other Intangible Assets

The following goodwill and other intangible assets are included in other long-term assets on the Consolidated Balance Sheets:

($ in millions)

Goodwill

i 207

Trade names

i 54

Intangible assets subject to amortization

i 54

Less: Accumulated amortization

( i 27)

( i 18)

Intangible assets subject to amortization, net

i 27

i 36

As discussed in Note 5 of Notes to Consolidated Financial Statements, in fiscal 2021, we acquired intangible assets subject to amortization in connection with our acquisitions of Drapr and CB4. The intangible assets subject to amortization primarily consist of technology and developed software, which are being amortized over a useful life of approximately i five years. The amortization expense for intangible assets subject to amortization recorded in operating expenses on the Consolidated Statements of Operations was $ i 9 million, $ i 2 million, and $ i 2 million for fiscal 2022, 2021, and 2020, respectively.

We did i i i not / / recognize any impairment charges for goodwill in fiscal 2022, 2021, or 2020. We did i i not / recognize any impairment charges for other intangible assets in fiscal 2022 or 2021.

See Note 8 of Notes to Consolidated Financial Statements for information regarding the impairment charge for intangible assets related to the Intermix trade name in fiscal 2020.

Note 7. i Debt and Credit Facilities

Long-term debt recorded on the Consolidated Balance Sheets consists of the following:


($ in millions)	January 28, 2023		January 29, 2022
2029 Notes	$	i 750	$	i 750
2031 Notes	i 750		i 750
Less: Unamortized debt issuance costs	( i 14)		( i 16)
Total long-term debt	$	i 1,486	$	i 1,484

On September 27, 2021, we completed the issuance of $ i 1.5 billion aggregate principal amount of the Senior Notes at par in a private placement to qualified institutional buyers. We recorded $ i 16 million of debt issuance costs related to the issuance of the Senior Notes within long-term debt on the Consolidated Balance Sheet, which is being amortized through interest expense over the life of the instrument. The Company used the net proceeds from the offering of the Senior Notes, together with cash on hand, to complete tender offers and purchase an aggregate principal amount of $ i 1.9 billion of the Company's Secured Notes. On October 27, 2021, the Company redeemed the remaining outstanding Secured Notes that were not tendered in the tender offers and paid the related make-whole premiums. Our obligations under the Secured Notes were discharged following their redemption.

In conjunction with these transactions, in fiscal 2021, we incurred a loss on extinguishment of debt of $ i 325 million, which was recorded in the Consolidated Statement of Operations and primarily consisted of tender premiums of $ i 253 million, make-whole premiums of $ i 40 million, and unamortized debt issuance costs relating to the Secured Notes of $ i 28 million.

In June 2020, we redeemed $ i 1.25 billion aggregate principal amount of the Company's 2021 Notes. We incurred a loss on extinguishment of debt of $ i 58 million, primarily related to the make-whole premium, which was recorded on the Consolidated Statement of Operations. Following the redemption, our obligations under the 2021 Notes were discharged.

The scheduled maturity of the Senior Notes is as follows:

($ in millions)

Principal

Interest Rate

Interest Payments

October 1, 2029 (1)

i 750

i 3.625%

Semi-Annual

October 1, 2031 (2)

i 750

i 3.875%

Semi-Annual

Total issuance

i 1,500

__________

(1)Includes an option to redeem the 2029 Notes, in whole or in part at any time, subject to a make-whole premium, prior to October 1, 2024. On or after October 1, 2024, includes an option to redeem the 2029 Notes, in whole or in part at any time, at stated redemption prices.

(2)Includes an option to redeem the 2031 Notes, in whole or in part at any time, subject to a make-whole premium, prior to October 1, 2026. On or after October 1, 2026, includes an option to redeem the 2031 Notes, in whole or in part at any time, at stated redemption prices.

As of January 28, 2023, the aggregate estimated fair value of the Senior Notes was $ i 1.15 billion and was based on the quoted market prices for each of the Senior Notes (level 1 inputs) as of the last business day of the fiscal year. The aggregate principal amount of the Senior Notes is recorded in long-term debt on the Consolidated Balance Sheet, net of the unamortized debt issuance cost.

On May 7, 2020, we entered into the ABL Facility, which was previously scheduled to expire in May 2023. On July 13, 2022, we entered into an amendment and restatement of the ABL Facility. Among other changes, the amendment and restatement extended the maturity of the ABL Facility to July 2027, increased the borrowing capacity from $ i 1.8675 billion to $ i 2.2 billion, modified the reference rate from LIBOR to SOFR, and reduced the applicable interest rate margin. Following the amendment and restatement, the ABL Facility generally bears interest at a per annum rate based on SOFR (subject to a zero floor) plus a margin, depending on borrowing base availability. We recorded $ i 6 million of debt issuance costs related to the amendment and restatement of the ABL Facility, which will be amortized through interest expense over the term of the agreement. The ABL Facility is available for working capital, capital expenditures, and other general corporate purposes.

As of January 28, 2023, the Company's outstanding borrowing under the ABL Facility was $ i 350 million. The variable interest rate on the drawn amount is adjusted SOFR (calculated to include a i 0.10% credit adjustment spread) plus a margin of i 1.25%. The borrowing was recorded in long-term liabilities on the Consolidated Balance Sheet as of January 28, 2023.

We also have the ability to issue letters of credit on our ABL Facility. As of January 28, 2023, we had $ i 49 million in standby letters of credit issued under the ABL Facility.

The Senior Notes contain covenants that may limit the Company’s ability to, among other things: (i) grant or incur liens and (ii) enter into sale and lease-back transactions. The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by each of our existing wholly owned domestic subsidiaries that is a borrower or guarantor under our existing ABL Facility. These guarantees also extend to each of our future wholly owned domestic subsidiaries that is a borrower or guarantor under any credit facility of the Company, any guarantor, a guarantor of capital markets debt of the Company, or any guarantor in an aggregate principal amount in excess of a certain amount.

The ABL Facility is secured by specified U.S. and Canadian assets, including a first lien on inventory, certain receivables, and related assets. The ABL Facility contains customary covenants restricting the Company's activities, as well as those of its subsidiaries, including limitations on the ability to sell assets, engage in mergers or other fundamental changes, enter into capital leases or certain leases not in the ordinary course of business, enter into transactions involving related parties or derivatives, incur or prepay indebtedness, grant liens or negative pledges on its assets, make loans or other investments, pay dividends or repurchase stock or other securities, guarantee third-party obligations, engage in sale and lease-back transactions and make changes in its corporate structure. There are exceptions to these covenants, and some are only applicable when unused availability falls below specified thresholds. In addition, the ABL Facility includes, as a financial covenant, a springing fixed charge coverage ratio which arises when availability falls below a specified threshold.

We also maintain multiple agreements with third parties that make unsecured revolving credit facilities available for our operations in foreign locations (the “Foreign Facilities”). The Foreign Facilities are uncommitted and had a total capacity of $ i 22 million as of January 28, 2023. As of January 28, 2023, there were i no borrowings under the Foreign Facilities. There were $ i 7 million in bank guarantees issued and outstanding primarily related to store leases under the Foreign Facilities as of January 28, 2023.

Following the closing of the Gap China transaction with Baozun on i January 31, 2023, the respective Gap China credit facilities were terminated. See Note 17 of Notes to Consolidated Financial Statements for related disclosures.

Note 8. i Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives. The Company categorizes financial assets and liabilities recorded at fair value based upon a three-level hierarchy that considers the related valuation techniques.

There were i i no / material purchases, sales, issuances, or settlements related to recurring level 3 measurements during fiscal 2022 or 2021.

Financial Assets and Liabilities

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents held at amortized cost are as follows:

Fair Value Measurements at Reporting Date Using

($ in millions)

January 28, 2023

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets:

Cash equivalents

i 15

i —

i 15

i —

Derivative financial instruments

i 11

i —

i 11

i —

Deferred compensation plan assets

i 34

i —

Other assets

i 4

i —

i 4

Total

i 64

i 34

i 26

i 4

Liabilities:

Derivative financial instruments

i 20

i —

i 20

i —

Fair Value Measurements at Reporting Date Using

($ in millions)

January 29, 2022

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets:

Cash equivalents

i 27

i —

i 27

i —

Derivative financial instruments

i 16

i —

i 16

i —

Deferred compensation plan assets

i 40

i —

Other assets

i 4

i —

i 4

Total

i 87

i 40

i 43

i 4

Liabilities:

Derivative financial instruments

i 2

i —

i 2

i —

We have highly liquid fixed and variable income investments classified as cash equivalents. We value these investments at their original purchase prices plus interest that has accrued at the stated rate. Our cash equivalents are placed primarily in time deposits.

Derivative financial instruments primarily include foreign exchange forward contracts. See Note 9 of Notes to Consolidated Financial Statements for information regarding currencies hedged against the U.S. dollar.

We maintain the Gap, Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees to defer base compensation and bonus up to a maximum percentage, and non-employee directors to defer receipt of a portion of their Board fees. Plan investments are directed by participants and are recorded at market value and designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices, and the assets are recorded within other long-term assets on the Consolidated Balance Sheets.

See Note 13 of Notes to Consolidated Financial Statements for information regarding employee benefit plans.

Nonfinancial Assets

Long-lived assets, which for us primarily consist of store assets and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The estimated fair value of the long-lived assets is based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. For operating lease assets, the Company determines the estimated fair value of the assets by comparing discounted contractual rent payments to estimated market rental rates using available valuation techniques. These fair value measurements qualify as level 3 measurements in the fair value hierarchy.

See Note 1 of Notes to Consolidated Financial Statements for further information regarding the impairment of long-lived assets.

We recorded the following long-lived asset impairment charges in operating expenses on the Consolidated Statements of Operations:

Fiscal Year

($ in millions)

2022

2021

2020

Operating lease assets (1)

i 33

i 8

i 391

Store assets (2)

i 18

i 1

i 135

Other indefinite-lived intangible assets (3)

i —

i 31

Total impairment charges of long-lived and indefinite-lived assets

i 51

i 9

i 557

__________

(1)The impairment charge reduced the then carrying amount of the applicable operating lease assets of $ i 248 million, $ i 24 million, and $ i 1,635 million to their fair value of $ i 215 million, $ i 16 million, and $ i 1,244 million during fiscal 2022, 2021, and 2020, respectively.

(2)The impairment charge reduced the then carrying amount of the applicable store assets of $ i 21 million, $ i 1 million, and $ i 143 million to their fair value of $ i 3 million, i zero, and $ i 8 million during fiscal 2022, 2021, and 2020, respectively.

(3)The impairment charge reduced the then carrying amount of the Intermix trade name of $ i 38 million to its fair value of $ i 7 million during fiscal 2020.

In fiscal 2020, the impact of the COVID-19 pandemic resulted in a qualitative indication of impairment related to our store long-lived assets. For store locations, we analyzed our store asset recoverability. As a result, we recorded an impairment charge related to store assets and operating lease assets during fiscal 2020.

In the fourth quarter of fiscal 2020, we also performed a strategic review of the Intermix business which resulted in a qualitative indication of impairment related to our store long-lived assets. We recorded an impairment charge of Intermix store assets and operating lease assets of $ i 4 million and $ i 21 million, respectively, within operating expenses on the Consolidated Statement of Operations during fiscal 2020.

In addition, the Company performed a strategic review of the Intermix business in fiscal 2020 which resulted in a qualitative indication of impairment related to the Intermix trade name. During the fourth quarter of fiscal 2020, management updated the fiscal 2021 budget and financial projections beyond fiscal 2021, and we determined that it was more likely than not that the carrying value of the Intermix trade name exceeded its fair value as of the date of our annual impairment review.

The fair value of the Intermix trade name was determined using the relief from royalty method. The cash flows were then discounted to present value using the applicable discount rate and compared to the carrying value of the Intermix trade name. These fair value measurements qualify as level 3 measurements in the fair value hierarchy.

The Intermix trade name impairment test resulted in an impairment charge of $ i 31 million related to the Intermix trade name in fiscal 2020. This impairment charge was recorded within operating expenses on the Consolidated Statement of Operations during fiscal 2020.

In fiscal 2021, the Company completed the divestiture of its Intermix brand. See Note 17 of Notes to Consolidated Financial Statements for additional disclosures on the divestiture.

Note 9. i Derivative Financial Instruments

We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. We use derivative financial instruments to manage our exposure to foreign currency exchange rate risk and do not enter into derivative financial contracts for trading purposes. Consistent with our risk management guidelines, we hedge a portion of our transactions related to merchandise purchases for foreign operations and certain intercompany transactions using foreign exchange forward contracts. These contracts are entered into with large, reputable financial institutions that are monitored for counterparty risk. The currencies hedged against changes in the U.S. dollar are the Canadian dollar, Japanese yen, British pound, New Taiwan dollar, Mexican peso, and Euro. Cash flows from derivative financial instruments are classified as cash flows from operating activities on the Consolidated Statements of Cash Flows.

Derivative financial instruments are recorded at fair value on the Consolidated Balance Sheets as other current assets, other long-term assets, accrued expenses and other current liabilities, or other long-term liabilities.

Cash Flow Hedges

We designate foreign exchange forward contracts used to hedge forecasted merchandise purchases and related costs denominated in U.S. dollars made by our international subsidiaries whose functional currencies are their local currencies as cash flow hedges. The foreign exchange forward contracts entered into to hedge forecasted merchandise purchases and related costs generally have terms of up to 24 months. The effective portion of the gain or loss on the derivative financial instruments is reported as a component of other comprehensive income (loss) and is recognized into net income (loss) during the period in which the underlying transaction impacts the Consolidated Statements of Operations.

Other Derivatives Not Designated as Hedging Instruments

We use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance. The gain or loss on the derivative financial instruments that represent economic hedges, as well as the remeasurement impact of the underlying intercompany balances, is recorded in operating expenses on the Consolidated Statements of Operations in the same period and generally offset each other.

Outstanding Notional Amounts

As of January 28, 2023 and January 29, 2022, we had foreign exchange forward contracts outstanding in the following notional amounts:


($ in millions)	January 28, 2023		January 29, 2022
Derivatives designated as cash flow hedges	$	i 441	$	i 524

Derivatives not designated as hedging instruments	i 645		i 702
Total	$	i 1,086	$	i 1,226

Quantitative Disclosures about Derivative Financial Instruments

i The fair values of foreign exchange forward contracts are as follows:


($ in millions)	January 28, 2023		January 29, 2022
Derivatives designated as cash flow hedges:
Other current assets	$	i 9	$	i 10

Accrued expenses and other current liabilities	i 5		i —








Derivatives not designated as hedging instruments:
Other current assets	i 2		i 6

Accrued expenses and other current liabilities	i 15		i 2


Total derivatives in an asset position	$	i 11	$	i 16
Total derivatives in a liability position	$	i 20	$	i 2

All of the unrealized gains and losses from designated cash flow hedges as of January 28, 2023 will be recognized in income (loss) within the next 12 months at the then-current values, which may differ from the fair values as of January 28, 2023 shown above.

Our foreign exchange forward contracts are subject to master netting arrangements with each of our counterparties and such arrangements are enforceable in the event of default or early termination of the contract. We do not elect to offset the fair values of our derivative financial instruments on the Consolidated Balance Sheets and as such the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements are i i not / material for all periods presented.

See Note 8 of Notes to Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.

The pre-tax amounts recognized in net income (loss) related to derivative instruments are as follows:

Location and Amount of (Gain) Loss Recognized in Income (Loss)

Fiscal Year 2022

Fiscal Year 2021

Fiscal Year 2020

($ in millions)

Cost of goods sold and occupancy expenses

Operating expenses

Cost of goods sold and occupancy expenses

Operating expenses

Cost of goods sold and occupancy expenses

Operating expenses

Total amount of expense line items presented on the Consolidated Statements of Operations in which the effects of derivatives are recorded

i 10,257

i 5,428

i 10,033

i 5,827

i 9,095

i 5,567

(Gain) loss recognized in net income (loss):

Derivatives designated as cash flow hedges

( i 33)

i —

i 15

i —

( i 13)

i —

Derivatives not designated as hedging instruments

i —

( i 57)

i —

( i 18)

i —

i 15

Total (gain) loss recognized in net income (loss)

( i 33)

( i 57)

i 15

( i 18)

( i 13)

i 15

Note 10. i Common Stock

Common and Preferred Stock

The Company is authorized to issue i 2.3 billion shares of common stock. We are also authorized to issue i 60 million shares of Class B common stock, which is convertible into shares of common stock on a share-for-share basis. Transfer of the Class B shares is restricted. In addition, the holders of the Class B common stock have i six votes per share on most matters and are entitled to a lower cash dividend. i No Class B shares have been issued as of January 28, 2023.

The Company is authorized to issue i 30 million shares of one or more series of preferred stock, which has a par value of $ i 0.05 per share, and to establish at the time of issuance the issue price, dividend rate, redemption price, liquidation value, conversion features, and such other terms and conditions of each series (including voting rights) as the Board deems appropriate, without further action on the part of the stockholders. i No preferred shares have been issued as of January 28, 2023.

Share Repurchases

Share repurchase activity is as follows:

Fiscal Year

($ and shares in millions except average per share cost)

2022

2021

2020

Number of shares repurchased (1)

i 11

i 9

i —

Total cost

i 123

i 201

i —

Average per share cost including commissions

i 11.59

i 23.47

i —

__________

(1)Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.

In February 2019, the Board approved a $ i 1.0 billion share repurchase authorization. The February 2019 repurchase program had $ i 476 million remaining as of January 28, 2023. All common stock repurchased is immediately retired.

Note 11. i Share-Based Compensation

Share-based compensation expense is as follows:

Fiscal Year

($ in millions)

2022

2021

2020

Stock units

i 26

i 122

i 62

Stock options

i 7

i 13

i 12

Employee stock purchase plan

i 4

i 3

Share-based compensation expense

i 37

i 139

i 77

Less: Income tax benefit

( i 14)

( i 23)

( i 15)

Share-based compensation expense, net of tax

i 23

i 116

i 62

i i i No / / material share-based compensation expense was capitalized in fiscal 2022, 2021, or 2020.

There were i i i no / / material modifications made to our outstanding stock options and other stock awards in fiscal 2022, 2021, or 2020.

General Description of Stock Option and Other Stock Award Plans

The 2016 Long-Term Incentive Plan (the "2016 Plan") was amended and restated in May 2019 and further amended and restated in March 2020. The 2016 Plan was further amended and restated in May 2021. Under the 2016 Plan, nonqualified stock options and other stock awards are granted to officers, directors, eligible employees, and consultants at exercise prices or initial values equal to the fair market value of the Company’s common stock at the date of grant or as determined by the Compensation and Management Development Committee of the Board.

As of January 28, 2023, there were i 286,586,871 shares that have been authorized for issuance under the 2016 Plan.

Stock Units

Under the 2016 Plan, Stock Units are granted to employees and members of the Board. Vesting generally occurs over a period of three to four years of continued service by the employee in equal annual installments for the majority of the Stock Units granted. In some cases, Stock Unit vesting is also subject to the attainment of pre-determined performance metrics and/or the satisfaction of market conditions ("Performance Shares"). At the end of each reporting period, we evaluate the probability that the Performance Shares will vest. We record share-based compensation expense on an accelerated basis over a period of three to four years once granted, based on the grant-date fair value and the probability that the pre-determined performance metrics will be achieved. We use the Monte Carlo method to calculate the grant date fair value of Performance Shares containing a market condition. Based on the probability of our performance shares vesting, shared-based compensation expense decreased in fiscal 2022 as compared with fiscal 2021.

A summary of Stock Unit activity under the 2016 Plan for fiscal 2022 is as follows:

Weighted-Average
Grant-Date
Fair Value Per Share

Balance as of January 29, 2022

i 13,129,235

i 22.03

Granted

i 7,156,024

i 11.54

Granted, with vesting subject to performance and market conditions

i 3,612,861

i 12.66

Vested

( i 4,145,665)

i 20.06

Forfeited

( i 4,750,464)

i 19.01

Balance as of January 28, 2023

i 15,001,991

i 16.27

A summary of additional information about Stock Units is as follows:


	Fiscal Year
($ in millions except per share amounts)	2022		2021		2020
Weighted-average fair value per share of Stock Units granted	$	i 11.92	$	i 31.28	$	i 11.22
Fair value of Stock Units vested	$	i 83	$	i 62	$	i 65

The aggregate intrinsic value of unvested Stock Units as of January 28, 2023 was $ i 198 million.

As of January 28, 2023, there was $ i 124 million (before any related tax benefit) of unrecognized share-based compensation expense related to unvested Stock Units, which is expected to be recognized over a weighted-average period of i 1.9 years. Total unrecognized share-based compensation expense may be adjusted for future forfeitures as they occur.

Stock Options

We have stock options outstanding under the 2016 Plan. Stock options generally expire the earlier of i 10 years from the grant date, three months after employee termination, or one year after the date of an employee’s retirement or death. Vesting generally occurs over a period of four years of continued service by the employee, with i 25 percent vesting on each of the four anniversary dates.

The fair value of stock options issued to employees during fiscal 2022, 2021, and 2020 was estimated on the date of grant using the following assumptions:


	Fiscal Year
	2022		2021		2020
Expected term (in years)	i 4.6		i 4.5		i 4.5
Expected volatility	i 51.7	%	i 56.9	%	i 46.9	%
Dividend yield	i 4.0	%	i 1.8	%	i 1.6	%
Risk-free interest rate	i 2.5	%	i 0.6	%	i 0.4	%

/ i

A summary of stock option activity under the 2016 Plan for fiscal 2022 is as follows:

Weighted-
Average
Exercise Price Per Share

Balance as of January 29, 2022

i 10,689,824

i 21.17

Granted

i 1,433,388

i 13.92

Exercised

( i 563,236)

i 7.41

Forfeited/Expired

( i 3,734,543)

i 21.35

Balance as of January 28, 2023

i 7,825,433

i 20.75

/ i

A summary of additional information about stock options is as follows:


	Fiscal Year
($ in millions except per share amounts)	2022		2021		2020
Weighted-average fair value per share of stock options granted	$	i 4.66	$	i 12.35	$	i 3.28
Aggregate intrinsic value of stock options exercised	$	i 2	$	i 20	$	i —
Fair value of stock options vested	$	i 13	$	i 13	$	i 13

Information about stock options outstanding and exercisable as of January 28, 2023 is as follows:

Intrinsic Value as of January 28, 2023
(in millions)

Number of
Shares as of
January 28, 2023

Weighted-
Average
Remaining
Contractual
Life (in years)

Weighted-
Average
Exercise Price Per Share

Options Outstanding

i 11

i 7,825,433

i 5.8

i 20.75

Options Exercisable

i 5

i 4,933,903

i 4.6

i 23.97

Nonemployee Stock Units and Stock Warrants

Under the 2016 Plan, some Stock Units are granted to members of the Board. Vesting is generally immediate in the case of members of the Board.

Additionally, during fiscal 2020, the Company issued stock warrants for up to i 8.5 million shares of the Company's common stock in connection with a strategic agreement entered into by Gap and Yeezy Supply LLC. However, effective with the termination of this agreement, net sales performance targets have not been met.

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan (“ESPP”), eligible U.S. and Canadian employees are able to purchase our common stock at i 85 percent of the closing price on the New York Stock Exchange on the last day of the three-month purchase periods. Accordingly, compensation expense is recognized for an amount equal to the i 15 percent discount. Employees pay for their stock purchases through payroll deductions at a rate equal to any whole percentage from i 1 percent to i 15 percent. There were i 2,337,159, i 1,117,669, and i 1,718,007 shares issued under the ESPP in fiscal 2022, 2021, and 2020, respectively. As of January 28, 2023, there were i 12,581,864 shares reserved for future issuances under the ESPP.

Note 12. i Leases

Net lease cost recognized on our Consolidated Statements of Operations is summarized as follows:


	Fiscal Year
($ in millions)	2022		2021
Operating lease cost	$	i 825	$	i 947
Variable lease cost	i 447		i 428
Sublease (income) loss	( i 1)		i 1
Net lease cost	$	i 1,271	$	i 1,376

As of January 28, 2023, the maturities of lease liabilities based on the total minimum lease commitment amount including options to extend lease terms that are reasonably certain of being exercised are as follows:


($ in millions)
Fiscal Year
2023	$	i 866
2024	i 764
2025	i 648
2026	i 559
2027	i 485
Thereafter	i 1,967
Total minimum lease payments	i 5,289
Less: Interest	( i 1,105)
Present value of operating lease liabilities	i 4,184
Less: Current portion of operating lease liabilities	( i 667)

Long-term operating lease liabilities	$	i 3,517

During fiscal 2022, non-cash operating lease asset activity, net of remeasurements and modifications, was $ i 124 million and includes permanent store closures and the derecognition of leases related to the transition of certain foreign operations to franchise partners. During fiscal 2021, non-cash operating lease asset activity, net of remeasurements and modifications, was $ i 140 million and includes permanent store closures and the derecognition of leases related to the divestitures and changes to our European operating model. As of January 28, 2023 and January 29, 2022, the minimum lease commitment amount for operating leases signed but not yet commenced, primarily for retail stores, was $ i 116 million and $ i 91 million, respectively.

As of January 28, 2023 and January 29, 2022, the weighted-average remaining operating lease term was i 8.0 years and i 8.1 years, respectively, and the weighted-average discount rate was i 5.6 percent and i 5.4 percent, respectively, for operating leases recognized on our Consolidated Financial Statements.

As of January 28, 2023 and January 29, 2022, the Company's finance leases were i i i i i i not / / / / / material to our Consolidated Financial Statements.

See Note 1 of Notes to Consolidated Financial Statements for additional disclosures related to leases.

Note 13. i Employee Benefit Plans

We have two qualified defined contribution retirement plans, the GapShare 401(k) Plan and the GapShare Puerto Rico Plan (the “Plans”), which are available to employees who meet the eligibility requirements. The Plans permit eligible employees to make contributions up to the maximum limits allowable under the applicable Internal Revenue Codes. Under the Plans, we match, in cash, all or a portion of employees’ contributions under a predetermined formula. Our contributions vest immediately. Our matching contributions to the Plans were $ i 49 million, $ i 46 million, and $ i 42 million in fiscal 2022, 2021, and 2020, respectively.

We maintain the Gap, Inc. Deferred Compensation Plan, which allows eligible employees to defer base compensation and bonus up to a maximum percentage, and non-employee board members to defer receipt of a portion of their Board fees. Plan investments are directed by participants and are recorded at fair market value and designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices, and the assets are recorded within other long-term assets on the Consolidated Balance Sheets. As of January 28, 2023 and January 29, 2022, the assets related to the DCP were $ i 34 million and $ i 40 million, respectively. As of January 28, 2023 and January 29, 2022, the corresponding liabilities related to the DCP were $ i 37 million and $ i 45 million, respectively, and were recorded within other long-term liabilities on the Consolidated Balance Sheets. We match all or a portion of employees’ contributions under a predetermined formula. Plan investments are elected by the participants, and investment returns are not guaranteed by the Company. Our matching contributions to the DCP in fiscal 2022, 2021, and 2020 were i i i not / / material.

Note 14. i Earnings (Loss) per Share

Weighted-average number of shares used for earnings (loss) per share is as follows:

Fiscal Year

(shares in millions)

2022

2021

2020

Weighted-average number of shares—basic

i 367

i 376

i 374

Common stock equivalents (1)

i —

i 7

i —

Weighted-average number of shares—diluted

i 367

i 383

i 374

__________

(1)For fiscal 2022 and 2020, the dilutive impact of outstanding options and awards was excluded from dilutive shares as a result of the Company’s net loss for the respective periods.

The anti-dilutive shares related to stock options and other stock awards excluded from the computation of weighted-average number of shares—diluted were i 11 million, i 7 million, and i 12 million for fiscal 2022, 2021, and 2020, respectively, as their inclusion would have an anti-dilutive effect on earnings (loss) per share.

Note 15. i Commitments and Contingencies

We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases, trademarks, intellectual property, financial agreements, and various other agreements. Under these contracts, we may provide certain routine indemnifications relating to representations and warranties (e.g., ownership of assets, environmental or tax indemnifications), or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Generally, the maximum obligation under such indemnifications is not explicitly stated, and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our Consolidated Financial Statements taken as a whole.

As a multinational company, we are subject to various Actions arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. As of January 28, 2023, Actions filed against us included commercial, intellectual property, customer, employment, securities, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages and some are covered in part by insurance. As of January 28, 2023 and January 29, 2022, we recorded a liability for an estimated loss if the outcome of an Action is expected to result in a loss that is considered probable and reasonably estimable. The liability recorded as of January 28, 2023 and January 29, 2022 was i i not / material for any individual Action or in total. Subsequent to January 28, 2023 and through the filing date of March 14, 2023, no information has become available that indicates a change is required that would be material to our Consolidated Financial Statements taken as a whole.

We cannot predict with assurance the outcome of Actions brought against us. Accordingly, developments, settlements, or resolutions may occur and impact income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material effect on our Consolidated Financial Statements taken as a whole.

Note 16. i Segment Information

We identify our operating segments according to how our business activities are managed and evaluated. As of January 28, 2023, our operating segments included: Old Navy Global, Gap Global, Banana Republic Global, and Athleta Global. Each operating segment has a brand president who is responsible for various geographies and channels. Each of our brands serves customer demand through stores and online channels, leveraging our omni-channel capabilities that allow customers to shop seamlessly across all of our brands. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the results of our operating segments are aggregated into i one reportable segment as of January 28, 2023. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.

Long-lived assets, excluding long-term deferred tax assets, by geographic location are as follows:

($ in millions)

Incorporated by Reference

January 29, 2022

U.S. (1)

i 5,726

i 6,164

Other regions

i 672

i 1,018

Total long-lived assets

i 6,398

i 7,182

__________

(1)U.S. includes the United States and Puerto Rico.

See Note 3 of Notes to Consolidated Financial Statements for disaggregation of revenue for stores and online and by brand and region.

Note 17. i Divestitures

On April 8, 2021 and May 21, 2021, we completed the divestitures of the Janie and Jack and Intermix brands, respectively. As a result of these transactions, the Company recognized a pre-tax loss of $ i 59 million within operating expenses on the Consolidated Statement of Operations for the 52 weeks ended January 29, 2022.

On October 1, 2021, we completed the transition of our Gap France operations to a third party, Hermione People & Brands, to operate Gap France stores as a franchise partner. The impact to the Consolidated Financial Statements upon divestiture was not material for the 52 weeks ended January 29, 2022.

On February 1, 2022, we completed the transition of our Gap Italy operations to a third party, OVS, to operate Gap Italy stores as a franchise partner. We completed the transition of our United Kingdom and Ireland online operations to a franchise partner through a joint venture with Next Plc on August 10, 2022. The impacts to the Consolidated Financial Statements upon divestiture were not material for the 52 weeks ended January 28, 2023.

As our European partnership model transition is now complete, we sold our distribution center in Rugby, England for $ i 125 million on September 30, 2022. As a result of this transaction, the Company recognized a pre-tax gain on sale of $ i 83 million within operating expenses on the Consolidated Statement of Operations during the 52 weeks ended January 28, 2023.

We also completed the transition of our Old Navy Mexico operations to a third party, Grupo Axo, to operate Old Navy Mexico stores as a franchise partner, on August 1, 2022. As a result of this transaction, the Company recognized a pre-tax loss of $ i 35 million within operating expenses on the Consolidated Statement of Operations during the 52 weeks ended January 28, 2023.

On November 7, 2022, we signed agreements to transition our Gap Greater China operations to a third party, Baozun, to operate Gap Greater China stores and the in-market website as a franchise partner, subject to regulatory approvals and closing conditions. As of January 28, 2023, the Company reclassified $ i 142 million of assets and $ i 126 million of liabilities for Gap China as held for sale within other current assets and accrued expenses and other current liabilities, respectively, on the Consolidated Balance Sheet. The aggregate carrying amount of assets classified as held for sale primarily consists of $ i 55 million of net operating lease assets, $ i 35 million of inventory, $ i 26 million of fixed assets, and $ i 20 million of other current assets. The aggregate carrying amount of liabilities classified as held for sale primarily consists of $ i 70 million of operating lease liabilities, $ i 33 million of accounts payable, and $ i 19 million of accrued expenses and other current liabilities. We measured the disposal group at its estimated fair value less costs to sell. On i January 31, 2023, the Gap China transaction closed with Baozun. The Gap Taiwan operations will continue to operate as usual until regulatory approvals and closing conditions are met.

Note 18. i Subsequent Events

On January 26, 2023, the Company entered in an agreement for the sale of a building and reclassified certain assets as held for sale assets that were expected to be sold in the next 12 months. The aggregate carrying amount of the assets held for sale, primarily consisting of fixed assets, was $ i 30 million and was reclassified within other current assets on the Consolidated Balance Sheet as of January 28, 2023. On i February 9, 2023, the Company completed the sale of the building.

On i January 31, 2023, the Gap China transaction closed with Baozun. See Note 17 of Notes to Consolidated Financial Statements for related disclosures.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the interim Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, the interim Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an assessment of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (released in 2013). Based on the assessment, management concluded that as of January 28, 2023, our internal control over financial reporting is effective. The Company’s internal control over financial reporting as of January 28, 2023 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 of this Form 10-K.

Changes in Internal Control over Financial Reporting

During the third quarter of fiscal 2022, we shifted our legacy enterprise resource planning ("ERP") system to a cloud-based ERP system. As part of the system conversion, we assessed the impact to the control environment and modified internal controls where necessary.

There was no further change in the Company’s internal control over financial reporting that occurred during the Company’s fourth quarter of fiscal 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated herein by reference to the sections entitled “Proposal No. 1 – Election of Directors—Nominees for Election as Directors,” “Other Information—Delinquent Section 16(a) Reports,” and “Corporate Governance—Board Committees—Audit and Finance Committee” in the 2023 Proxy Statement. See also “Information about our Executive Officers” in Part I, Item 1 of this Form 10-K.

The Company has adopted a code of ethics, our Code of Business Conduct, which applies to all employees including our principal executive officer, principal financial officer, controller, and persons performing similar functions. Our Code of Business Conduct is available on our website, www.gapinc.com, under “Investors, Corporate Compliance.” Any amendments and waivers to the Code will also be available on the website.

Item 11. Executive Compensation.

The information required by this item is incorporated herein by reference to the sections entitled “Compensation of Directors,” “Corporate Governance—Board Committees—Compensation and Management Development Committee,” “Compensation Discussion and Analysis,” and “Executive Compensation” in the 2023 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated herein by reference to the sections entitled “Equity Compensation Plan Information” and “Beneficial Ownership of Shares” in the 2023 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated herein by reference to the sections entitled “Corporate Governance—Policies and Procedures with Respect to Related Party Transactions,” “Corporate Governance—Certain Relationships and Related Party Transactions,” and “Proposal No. 1 – Election of Directors—Nominees for Election as Directors—Director Independence” in the 2023 Proxy Statement.

Item 14. Principal Accounting Fees and Services.

Information about aggregate fees billed to us by our principal accountant, Deloitte & Touche LLP (PCAOB ID No. i 34) is incorporated herein by reference to the section entitled “Proposal No. 2 – Ratification of Selection of Independent Registered Public Accounting Firm—Principal Accounting Firm Fees” in the 2023 Proxy Statement.

Part IV

Item 15. Exhibits, Financial Statement Schedules.


1.			Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.


2.			Financial Statement Schedules: Schedules are included in the Consolidated Financial Statements or notes of this Form 10-K or are not required.


3.			Exhibits: The exhibits listed in the below Exhibit Index are filed or incorporated by reference as part of this Form 10-K.

Exhibit Index

Exhibit
No.

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed/
Furnished
Herewith

3.1

Amended and Restated Certificate of Incorporation. (P)

10-K

3.1

April 26, 1993

3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation.

10-K

3.2

April 4, 2000

3.3

Amended and Restated Bylaws (effective August 15, 2022).

10-Q

3.3

4.1

Indenture, dated as of September 27, 2021, by and among the Registrant, the Guarantors party thereto and U.S. Bank National Association as trustee, registrar and paying agent.

8-K

4.1

September 28, 2021

4.2

Form of 3.625% Senior Note due 2029, included as Exhibit A-1 to the Indenture.

8-K

4.2

September 28, 2021

4.3

Form of 3.875% Senior Note due 2031, included as Exhibit A-2 to the Indenture.

8-K

4.3

September 28, 2021

4.4

Description of Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.

10.1

Fourth Amended and Restated Revolving Credit Agreement dated as of July 13, 2022.

10-Q

10.1

November 22, 2022

10.2

Credit Card Program Agreement, dated as of April 8, 2021, by and among the Registrant, Old Navy, LLC, Banana Republic, LLC, Athleta LLC and Barclays Bank Delaware.

10-Q

10.4

May 28, 2021

10.3†

Executive Management Incentive Compensation Award Plan.

DEF 14A

App. A

April 7, 2015

10.4†

The Gap, Inc. Executive Deferred Compensation Plan (January 1, 1999 Restatement).

10-Q

10.3

December 15, 1998

10.5†

Amendment to Executive Deferred Compensation Plan - Freezing of Plan Effective December 31, 2005.

8-K

10.1

November 8, 2005

10.6†

Amendment to Executive Deferred Compensation Plan - Merging of Plan into the Supplemental Deferred Compensation Plan.

10-K

10.29

10.7†

Amendment to Executive Deferred Compensation Plan - Suspension of Pending Merger into Supplemental Deferred Compensation Plan.

10-K

10.30

10.8†

Amendment to Executive Deferred Compensation Plan - Merging of Plan into the Deferred Compensation Plan.

10-Q

10.1

December 8, 2009

10.9†

Deferred Compensation Plan, amended and restated effective September 1, 2011.

10-Q

10.1

December 7, 2011

10.10†

Deferred Compensation Plan, amended and restated effective November 17, 2015.

10-K

10.24

March 21, 2016

10.11†

Deferred Compensation Plan, amended and restated effective March 24, 2016.

10-Q

10.2

June 3, 2016

10.12†

Deferred Compensation Plan, amended and restated effective January 1, 2023.

10.13†

Supplemental Deferred Compensation Plan.

S-8

333-129986

4.1

November 29, 2005

10.14†

First Amendment to Supplemental Deferred Compensation Plan.

10-K

10.32

10.15†

Second Amendment to Supplemental Deferred Compensation Plan - Merging of Executive Deferred Compensation Plan into the Plan and Name Change to Deferred Compensation Plan.

10-K

10.33

10.16†

Third Amendment to Supplemental Deferred Compensation Plan - Suspension of Pending Merging of Executive Deferred Compensation Plan into the Plan and Name Change to Deferred Compensation Plan.

10-K

10.34

10.17†

Fourth Amendment to Supplemental Deferred Compensation Plan - Merging of Executive Deferred Compensation Plan into the Plan and Name Change to Deferred Compensation Plan.

10-Q

10.2

December 8, 2009

10.18†

2011 Long-Term Incentive Plan.

DEF 14A

App. A

April 5, 2011

10.19†

Amended and Restated 2011 Long-Term Incentive Plan (effective February 26, 2014).

8-K

10.1

March 6, 2014

10.20†

2016 Long-Term Incentive Plan.

DEF 14A

App. A

April 5, 2016

10.21†

Amended and Restated 2016 Long-Term Incentive Plan (effective February 22, 2017).

10-K

10.30

March 20, 2018

10.22†

Amended and Restated 2016 Long Term-Incentive Plan (effective May 21, 2019).

DEF 14A

App. A

April 9, 2019

10.23†

Amended and Restated 2016 Long-Term Incentive Plan (effective May 11, 2021).

DEF 14A

App. B

March 30, 2021

10.24†

Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.

10-Q

10.8

June 8, 2011

10.25†

Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.

10-Q

10.9

August 31, 2012

10.26†

Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.

10-K

10.72

March 26, 2013

10.27†

Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.

8-K

10.2

March 6, 2014

10.28†

Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.

8-K

10.1

March 6, 2015

10.29†

Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.

10-K

10.60

March 21, 2016

10.30†

Form of Non-Qualified Stock Option Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.1

10.31†

Form of Non-Qualified Stock Option Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.1

10.32†

Form of Non-Qualified Stock Option Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.1

March 15, 2019

10.33†

2020 Form of Nonqualified Stock Option Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.1

10.34†

2021 Form of Nonqualified Stock Option Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.1

March 9, 2021

10.35†

2022 Form of Nonqualified Stock Option Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.1

March 11, 2022

10.36†

Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.3

10.37†

Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.3

10.38†

Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.3

March 15, 2019

10.39†

2020 Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.3

10.40†

2021 Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.3

March 9, 2021

10.41†

2022 Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.3

March 11, 2022

10.42†

Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan.

10-K

10.75

March 21, 2016

10.43†

Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.2

10.44†

Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.2

10.45†

Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.2

March 15, 2019

10.46†

2020 Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan

8-K

10.2

10.47†

2021 Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.2

March 9, 2021

10.48†

2022 Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan.

8-K

10.2

March 11, 2022

10.49†

Form of Restricted Stock Unit Award Agreement (Retention Version) under the 2016 Long-Term Incentive Plan.

8-K

10.4

10.50†

Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2011 Long-Term Incentive Plan.

10-Q

10.10

June 8, 2011

10.51†

Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2016 Long-Term Incentive Plan.

8-K

10.4

10.52†

2020 Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2016 Long-Term Incentive Plan.

8-K

10.4

10.53†

Agreement with Mark Breitbard dated February 27, 2017 and confirmed on March 2, 2017.

10-Q

10.1

August 25, 2017

10.54†

Agreement for Post-Termination Benefits with Mark Breitbard dated June 2, 2017.

10-Q

10.2

June 5, 2017

10.55†

Letter Agreement dated March 9, 2020 by and between Mark Breitbard and the Registrant.

10-K

10.57

March 17, 2020

10.56†

Amendment, dated November 23, 2020, to the Letter Agreement dated March 9, 2020 by and between Mark Breitbard and the Registrant.

10-Q

10.4

10.57†

Letter Agreement dated October 5, 2020 by and between Nancy Green and the Registrant.

10-Q

10.3

10.58†

Amendment, dated November 20, 2020, to the Letter Agreement dated October 5, 2020 by and between Nancy Green and the Registrant.

10-Q

10.6

10.59†

Agreement with Julie Gruber dated February 1, 2016 and confirmed on February 4, 2016.

10-Q

10.3

June 3, 2016

10.60†

Agreement for Post-Termination Benefits with Julie Gruber dated June 2, 2017.

10-Q

10.5

June 5, 2017

10.61†

Letter Agreement dated March 10, 2020 by and between Julie Gruber and the Registrant.

10-K

10.64

March 17, 2020

10.62†

Amendment, dated November 20, 2020, to the Letter Agreement dated March 10, 2020 by and between Julie Gruber and the Registrant.

10-Q

10.7

10.63†

Agreement with Sonia Syngal dated April 11, 2016 and confirmed on April 11, 2016.

8-K

10.1

April 13, 2016

10.64†

Agreement for Post-Termination Benefits with Sonia Syngal dated June 2, 2017.

10-Q

10.10

June 5, 2017

10.65†

Letter Agreement dated March 4, 2020 by and between Sonia Syngal and the Registrant.

8-K

10.1

March 5, 2020

10.66†

Amendment, dated November 23, 2020, to the Letter Agreement dated March 4, 2020 by and between Sonia Syngal and the Registrant.

10-Q

10.10

10.67†

Agreement and Release by and between Sonia Syngal and the Registrant dated July 11, 2022.

10-Q

10.4

10.68†

Letter Agreement dated March 10, 2020 by and between Katrina O'Connell and the Registrant.

10-K

10.74

March 17, 2020

10.69†

Amendment, dated November 20, 2020, to the Letter Agreement dated March 10, 2020 by and between Katrina O’Connell and the Registrant.

10-Q

10.8

10.70†

Letter Agreement dated March 6, 2020 by and between Sheila Peters and the Registrant.

10-Q

10.1

10.71†

Amendment, dated November 20, 2020, to the Letter Agreement dated March 6, 2020 by and between Sheila Peters and the Registrant.

10-Q

10.9

10.72†

Letter Agreement dated November 17, 2020 by and between Asheesh Saksena and the Registrant.

10-K

10.82

March 16, 2021

10.73†

Letter Agreement dated November 17, 2020 by and between Sandra Stangl and the Registrant.

10-K

10.83

March 16, 2021

10.74†

Letter Agreement dated March 15, 2021 by and between John Strain and the Registrant.

10-K

10.81

March 15, 2022

10.75†

Letter Agreement dated November 3, 2021 by and between Mary Beth Laughton and the Registrant.

10-K

10.82

March 15, 2022

10.76†

Letter Agreement dated August 1, 2022 by and between Bob L. Martin and the Registrant.

8-K/A

10.1

August 3, 2022

10.77†

Letter Agreement dated June 2, 2022 by and between Horacio Barbeito and the Registrant

10-Q

10.3

10.78†

Form of Restricted Stock Unit Award Agreement with Bob L. Martin under the 2016 Long-Term Incentive Plan.

10-Q

10.9

June 9, 2020

10.79†

Form of Restricted Stock Unit Award Agreement with Bob L. Martin under the 2016 Long-Term Incentive Plan.

10-Q

10.5

Code of Business Conduct.

10-K

March 26, 2010

Subsidiaries of Registrant.

Consent of Independent Registered Public Accounting Firm.

31.1

Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002).

31.2

Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002).

32.1

Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following materials from The Gap, Inc.’s Annual Report on Form 10-K for the year ended January 28, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

__________

* Pursuant to a request for confidential treatment, confidential portions of this Exhibit have been redacted and have been filed separately with the Securities and Exchange Commission.

† Indicates management contract or compensatory plan or arrangement.

(P) This Exhibit was originally filed in paper format. Accordingly, a hyperlink has not been provided.

Item 16. Form 10-K Summary

None.

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:

/s/ BOB L. MARTIN

Bob L. Martin
Interim Chief Executive Officer and Director
(Principal Executive Officer)

Date:

/s/ KATRINA O'CONNELL

Katrina O'Connell
Executive 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:

/s/ RICHARD DICKSON

Richard Dickson, Director

Date:

/s/ ELISABETH B. DONOHUE

Elisabeth B. Donohue, Director

Date:

/s/ ROBERT J. FISHER

Robert J. Fisher, Director

Date:

/s/ WILLIAM S. FISHER

William S. Fisher, Director

Date:

/s/ TRACY GARDNER

Tracy Gardner, Director

Date:

/s/ KATHRYN A. HALL

Kathryn A. Hall, Director

Date:

/s/ AMY MILES

Amy Miles, Director

Date

/s/ CHRIS O'NEILL

Chris O'Neill, Director

Date:

/s/ MAYO A. SHATTUCK III

Mayo A. Shattuck III, Director

Date: