NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies
Basis of Presentation
In the opinion of The Gap, Inc. (the “Company,” “we,” and “our”) management, the accompanying unaudited Condensed Consolidated Financial Statements contain all normal and recurring adjustments (except as otherwise disclosed) considered necessary to present fairly our financial position, results of operations, comprehensive income (loss), stockholders' equity, and cash flows as of July 30, 2022 and July 31, 2021 and for all periods presented. The Condensed Consolidated Balance Sheet as of January 29, 2022 has been derived from our audited financial statements.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted from these interim financial statements, although the Company believes that the disclosures made are adequate to make the information not misleading. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
The results of operations for the 13 and 26 weeks ended July 30, 2022 are not necessarily indicative of the operating results that may be expected for the 52-week period ending January 28, 2023.
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 the coronavirus ("COVID-19") pandemic, the Russia-Ukraine crisis, and global inflationary pressures. We will continue to consider the impact of the global economic conditions on the assumptions and estimates used when preparing these Condensed Consolidated Financial Statements including inventory valuation, income taxes, and the impairment of long-lived store assets and operating lease 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.
Restricted Cash
As of July 30, 2022, restricted cash primarily included consideration that serves as collateral for certain obligations occurring in the normal course of business and our insurance obligations. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within our Condensed Consolidated Balance Sheets to the total shown on our Condensed Consolidated Statements of Cash Flows:
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($ in millions) | July 30, 2022 | | January 29, 2022 | | July 31, 2021 |
Cash and cash equivalents, per Condensed Consolidated Balance Sheets | $ | 708 | | | $ | 877 | | | $ | 2,375 | |
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Restricted cash included in other long-term assets | 27 | | | 25 | | | 32 | |
Total cash, cash equivalents, and restricted cash, per Condensed Consolidated Statements of Cash Flows | $ | 735 | | | $ | 902 | | | $ | 2,407 | |
Accounting Pronouncements
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 Condensed Consolidated Financial Statements and disclosures, based on current information.
Note 2. 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 are as follows:
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| 13 Weeks Ended | | 26 Weeks Ended |
($ in millions) | July 30, 2022 | | July 31, 2021 | | July 30, 2022 | | July 31, 2021 |
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Store sales (1) | $ | 2,553 | | | $ | 2,828 | | | $ | 4,690 | | | $ | 5,212 | |
Online sales (2) | 1,304 | | | 1,383 | | | 2,644 | | | 2,990 | |
Total net sales | $ | 3,857 | | | $ | 4,211 | | | $ | 7,334 | | | $ | 8,202 | |
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__________
(1)Store sales primarily include sales made at our Company-operated stores and franchise sales.
(2)Online sales primarily include sales originating from our online channel including those that are picked up or shipped from stores.
Net sales disaggregated by brand and region are as follows:
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($ in millions) | | Old Navy Global | | Gap Global | | Banana Republic Global | | Athleta Global | | Other (2) | | Total | | |
13 Weeks Ended July 30, 2022 | | | | | | | |
U.S. (1) | | $ | 1,880 | | | $ | 565 | | | $ | 460 | | | $ | 335 | | | $ | 3 | | | $ | 3,243 | | | |
Canada | | 183 | | | 82 | | | 53 | | | 7 | | | — | | | 325 | | | |
Europe | | — | | | 51 | | | 2 | | | — | | | — | | | 53 | | | |
Asia | | 1 | | | 141 | | | 18 | | | — | | | — | | | 160 | | | |
Other regions | | 26 | | | 42 | | | 6 | | | 2 | | | — | | | 76 | | | |
Total | | $ | 2,090 | | | $ | 881 | | | $ | 539 | | | $ | 344 | | | $ | 3 | | | $ | 3,857 | | | |
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($ in millions) | | Old Navy Global | | Gap Global | | Banana Republic Global | | Athleta Global | | Other (3) | | Total | | |
13 Weeks Ended July 31, 2021 | | | | | | | |
U.S. (1) | | $ | 2,177 | | | $ | 615 | | | $ | 428 | | | $ | 340 | | | $ | 11 | | | $ | 3,571 | | | |
Canada | | 191 | | | 79 | | | 43 | | | — | | | — | | | 313 | | | |
Europe | | — | | | 116 | | | 1 | | | 1 | | | — | | | 118 | | | |
Asia | | — | | | 135 | | | 19 | | | — | | | — | | | 154 | | | |
Other regions | | 22 | | | 29 | | | 4 | | | — | | | — | | | 55 | | | |
Total | | $ | 2,390 | | | $ | 974 | | | $ | 495 | | | $ | 341 | | | $ | 11 | | | $ | 4,211 | | | |
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($ in millions) | | Old Navy Global | | Gap Global | | Banana Republic Global | | Athleta Global | | Other (2) | | Total |
26 Weeks Ended July 30, 2022 | | | | | |
U.S. (1) | | $ | 3,553 | | | $ | 1,062 | | | $ | 876 | | | $ | 679 | | | $ | 6 | | | $ | 6,176 | |
Canada | | 330 | | | 146 | | | 96 | | | 16 | | | — | | | $ | 588 | |
Europe | | 1 | | | 105 | | | 3 | | | 2 | | | — | | | $ | 111 | |
Asia | | 1 | | | 282 | | | 34 | | | — | | | — | | | $ | 317 | |
Other regions | | 46 | | | 77 | | | 12 | | | 7 | | | — | | | 142 | |
Total | | $ | 3,931 | | | $ | 1,672 | | | $ | 1,021 | | | $ | 704 | | | $ | 6 | | | $ | 7,334 | |
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($ in millions) | | Old Navy Global | | Gap Global | | Banana Republic Global | | Athleta Global | | Other (3) | | Total |
26 Weeks Ended July 31, 2021 | | | | | |
U.S. (1) | | $ | 4,276 | | | $ | 1,171 | | | $ | 761 | | | $ | 687 | | | $ | 100 | | | $ | 6,995 | |
Canada | | 350 | | | 147 | | | 77 | | | — | | | — | | | 574 | |
Europe | | — | | | 185 | | | 4 | | | 1 | | | — | | | 190 | |
Asia | | 1 | | | 298 | | | 35 | | | — | | | — | | | 334 | |
Other regions | | 43 | | | 59 | | | 7 | | | — | | | — | | | 109 | |
Total | | $ | 4,670 | | | $ | 1,860 | | | $ | 884 | | | $ | 688 | | | $ | 100 | | | $ | 8,202 | |
__________
(1)U.S. includes the United States and Puerto Rico.
(2)Primarily consists of net sales from revenue generating strategic initiatives.
(3)Primarily consists of net sales for the Intermix brand, which was divested on May 21, 2021. Additionally, results for the 26 weeks ended July 31, 2021 also include net sales for the Janie and Jack brand, which was divested on April 8, 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 the 13 weeks ended July 30, 2022, the opening balance of deferred revenue for these obligations was $323 million, of which $125 million was recognized as revenue during the period. For the 26 weeks ended July 30, 2022, the opening balance of deferred revenue for these obligations was $345 million, of which $185 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $321 million as of July 30, 2022.
For the 13 weeks ended July 31, 2021, the opening balance of deferred revenue for these obligations was $222 million, of which $81 million was recognized as revenue during the period. For the 26 weeks ended July 31, 2021, the opening balance of deferred revenue for these obligations was $231 million, of which $125 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $239 million as of July 31, 2021.
The increase in the deferred revenue balance as of July 30, 2022 and the revenue recognition during the 13 and 26 weeks ended July 30, 2022 is primarily due to our new 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. During the second quarter of fiscal 2022, the Company launched the new 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 $60 million related to the new agreements prior to the program launch, which is being recognized as revenue over the term of the agreement.
Note 3. Debt and Credit Facilities
Long-term debt recorded on the Condensed Consolidated Balance Sheets consists of the following:
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($ in millions) | July 30, 2022 | | January 29, 2022 | | July 31, 2021 |
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Secured Notes | | | | | |
2023 Notes | $ | — | | | $ | — | | | $ | 500 | |
2025 Notes | — | | | — | | | 750 | |
2027 Notes | — | | | — | | | 1,000 | |
Senior Notes | | | | | |
2029 Notes | 750 | | | 750 | | | — | |
2031 Notes | 750 | | | 750 | | | — | |
Less: Unamortized debt issuance costs | (15) | | | (16) | | | (30) | |
Total long-term debt | $ | 1,485 | | | $ | 1,484 | | | $ | 2,220 | |
The scheduled maturity of the Senior Notes is as follows:
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Scheduled Maturity ($ in millions) | Principal | | Interest Rate | | Interest Payments |
Senior Notes | | | | | |
October 1, 2029 (1) | $ | 750 | | | 3.625 | % | | Semi-Annual |
October 1, 2031 (2) | 750 | | | 3.875 | % | | Semi-Annual |
Total issuance | $ | 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.
In September 2021, we completed the issuance of $1.5 billion aggregate principal amount of 3.625 percent senior notes due 2029 (“2029 Notes”) and 3.875 percent senior notes due 2031 (“2031 Notes”) (the 2029 Notes and the 2031 Notes, collectively, the “Senior Notes”). As of July 30, 2022, the aggregate estimated fair value of the Senior Notes was $1.10 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 quarter. The aggregate principal amount of the Senior Notes is recorded in long-term debt on the Condensed Consolidated Balance Sheet, net of the unamortized debt issuance cost.
On May 7, 2020, we entered into a senior secured asset-based revolving credit agreement (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 $1.8675 billion to $2.2 billion, modified the reference rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("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. The ABL Facility is available for working capital, capital expenditures, and other general corporate purposes.
As of July 30, 2022, the Company's outstanding borrowing under the ABL Facility was $350 million. The variable interest rate on the drawn amount is adjusted SOFR (calculated to include a 0.10% credit adjustment spread) plus a margin of 1.25%. The borrowing was recorded in long-term liabilities on our Condensed Consolidated Balance Sheet as of July 30, 2022.
We also have the ability to issue letters of credit on our ABL Facility. As of July 30, 2022, we had $51 million in standby letters of credit issued under the ABL Facility.
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 $47 million as of July 30, 2022. As of July 30, 2022, there were no borrowings under the Foreign Facilities. There were $9 million in bank guarantees issued and outstanding primarily related to store leases under the Foreign Facilities as of July 30, 2022.
Note 4. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale debt securities. The Company categorizes financial assets and liabilities recorded at fair value based upon a three-level hierarchy that considers the related valuation techniques.
There were no material purchases, sales, issuances, or settlements related to recurring level 3 measurements for the 13 and 26 weeks ended July 30, 2022 or July 31, 2021. There were no transfers of financial assets or liabilities into or out of level 1, level 2, and level 3 for the 13 and 26 weeks ended July 30, 2022 or July 31, 2021.
Financial Assets and Liabilities
Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents are as follows:
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| | | Fair Value Measurements at Reporting Date Using |
($ in millions) | July 30, 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 | $ | 28 | | | $ | — | | | $ | 28 | | | $ | — | |
| | | | | | | |
Derivative financial instruments | 27 | | | — | | | 27 | | | — | |
Deferred compensation plan assets | 41 | | | 41 | | | — | | | — | |
Other assets | 4 | | | — | | | — | | | 4 | |
Total | $ | 100 | | | $ | 41 | | | $ | 55 | | | $ | 4 | |
Liabilities: | | | | | | | |
Derivative financial instruments | $ | 6 | | | $ | — | | | $ | 6 | | | $ | — | |
| | | 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 | $ | 27 | | | $ | — | | | $ | 27 | | | $ | — | |
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Derivative financial instruments | 16 | | | — | | | 16 | | | — | |
Deferred compensation plan assets | 40 | | | 40 | | | — | | | — | |
Other assets | 4 | | | — | | | — | | | 4 | |
Total | $ | 87 | | | $ | 40 | | | $ | 43 | | | $ | 4 | |
Liabilities: | | | | | | | |
Derivative financial instruments | $ | 2 | | | $ | — | | | $ | 2 | | | $ | — | |
| | | Fair Value Measurements at Reporting Date Using |
($ in millions) | July 31, 2021 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Cash equivalents | $ | 476 | | | $ | 1 | | | $ | 475 | | | $ | — | |
Short-term investments | 337 | | | 304 | | | 33 | | | — | |
Derivative financial instruments | 9 | | | — | | | 9 | | | — | |
Deferred compensation plan assets | 51 | | | 51 | | | — | | | — | |
Other assets | 4 | | | — | | | — | | | 4 | |
Total | $ | 877 | | | $ | 356 | | | $ | 517 | | | $ | 4 | |
Liabilities: | | | | | | | |
Derivative financial instruments | $ | 16 | | | $ | — | | | $ | 16 | | | $ | — | |
We have highly liquid fixed and variable income investments classified as cash equivalents. With the exception of our available-for-sale investments noted below, 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.
Our available-for-sale securities are comprised of investments in debt securities and are recorded in both short-term investments and cash and cash equivalents on the Condensed Consolidated Balance Sheet. These securities are recorded at fair value using market prices. As of July 30, 2022 and January 29, 2022, the Company held no available-for-sale debt securities on the Condensed Consolidated Balance Sheets. As of July 31, 2021, the Company held $337 million of available-for-sale debt securities with maturity dates greater than three months and less than two years within short-term investments on the Condensed Consolidated Balance Sheet. In addition, as of July 31, 2021, the Company held $363 million of available-for-sale debt securities with maturities of three months or less at the time of purchase within cash and cash equivalents on the Condensed Consolidated Balance Sheet. Unrealized gains and losses on available-for-sale debt securities included within accumulated other comprehensive income were not material as of July 31, 2021.
The Company regularly reviews any available-for-sale debt securities for other-than-temporary impairment. For the 13 and 26 weeks ended July 31, 2021, the Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment loss.
Derivative financial instruments primarily include foreign exchange forward contracts. The fair value of the Company’s derivative financial instruments is determined using pricing models based on current market rates. See Note 6 of Notes to Condensed 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 in other long-term assets on the Condensed Consolidated Balance Sheets.
Nonfinancial 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. The fair value of the long-lived assets is determined using level 3 inputs and based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. 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 stores is at the store level.
There were no material impairment charges recorded for long-lived assets during the 13 and 26 weeks ended July 30, 2022 or July 31, 2021.
We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.
There were no impairment charges recorded for goodwill or other indefinite-lived intangible assets for the 13 and 26 weeks ended July 30, 2022 or July 31, 2021.
Note 5. Income Taxes
The effective income tax rate was negative 2.1 percent for the 13 weeks ended July 30, 2022, compared with 28.1 percent for the 13 weeks ended July 31, 2021. The effective income tax rate was 20.1 percent for the 26 weeks ended July 30, 2022, compared with 22.3 percent for the 26 weeks ended July 31, 2021. The decrease in the effective tax rate for the 13 and 26 weeks ended July 30, 2022 compared with the 13 and 26 weeks ended July 31, 2021 is primarily due to changes in valuation allowances and the jurisdictional mix of pre-tax earnings.
Note 6. 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, British pound, Japanese yen, Mexican peso, New Taiwan dollar, and Euro. Cash flows from derivative financial instruments are classified as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.
Derivative financial instruments are recorded at fair value on the Condensed 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 12 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 Condensed 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 Condensed Consolidated Statements of Operations in the same period and generally offset each other.
Outstanding Notional Amounts
We had foreign exchange forward contracts outstanding in the following notional amounts:
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($ in millions) | July 30, 2022 | | January 29, 2022 | | July 31, 2021 |
Derivatives designated as cash flow hedges | $ | 504 | | | $ | 524 | | | $ | 673 | |
Derivatives not designated as hedging instruments | 786 | | | 702 | | | 733 | |
Total | $ | 1,290 | | | $ | 1,226 | | | $ | 1,406 | |
Quantitative Disclosures about Derivative Financial Instruments
The fair values of foreign exchange forward contracts are as follows:
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($ in millions) | July 30, 2022 | | January 29, 2022 | | July 31, 2021 |
Derivatives designated as cash flow hedges: | | | | | |
Other current assets | $ | 11 | | | $ | 10 | | | $ | 3 | |
Other long-term assets | 1 | | | — | | | — | |
Accrued expenses and other current liabilities | — | | | — | | | 10 | |
Other long-term liabilities | 1 | | | — | | | 1 | |
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Derivatives not designated as hedging instruments: | | | | | |
Other current assets | 15 | | | 6 | | | 6 | |
Accrued expenses and other current liabilities | 5 | | | 2 | | | 5 | |
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Total derivatives in an asset position | $ | 27 | | | $ | 16 | | | $ | 9 | |
Total derivatives in a liability position | $ | 6 | | | $ | 2 | | | $ | 16 | |
Substantially all of the unrealized gains and losses from designated cash flow hedges as of July 30, 2022 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 July 30, 2022 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 Condensed Consolidated Balance Sheets, and as such, the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements were not material for all periods presented.
See Note 4 of Notes to Condensed 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:
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| Location and Amount of (Gain) Loss Recognized in Income (Loss) |
| 13 Weeks Ended July 30, 2022 | | 13 Weeks Ended July 31, 2021 |
($ in millions) | 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 in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded | $ | 2,527 | | | $ | 1,358 | | | $ | 2,388 | | | $ | 1,414 | |
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(Gain) loss recognized in net income (loss) | | | | | | | |
Derivatives designated as cash flow hedges | (5) | | | — | | | 6 | | | — | |
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Derivatives not designated as hedging instruments | — | | | (7) | | | — | | | (6) | |
Total (gain) loss recognized in net income (loss) | $ | (5) | | | $ | (7) | | | $ | 6 | | | $ | (6) | |
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| Location and Amount of (Gain) Loss Recognized in Income (Loss) |
| 26 Weeks Ended July 30, 2022 | | 26 Weeks Ended July 31, 2021 |
($ in millions) | 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 in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded | $ | 4,908 | | | $ | 2,651 | | | $ | 4,749 | | | $ | 2,804 | |
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(Gain) loss recognized in net income (loss) | | | | | | | |
Derivatives designated as cash flow hedges | (8) | | | — | | | 9 | | | — | |
Derivatives not designated as hedging instruments | — | | | (29) | | | — | | | 5 | |
Total (gain) loss recognized in net income (loss) | $ | (8) | | | $ | (29) | | | $ | 9 | | | $ | 5 | |
Note 7. Share Repurchases
Share repurchase activity is as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| 13 Weeks Ended | | 26 Weeks Ended |
($ and shares in millions except average per share cost) | July 30, 2022 | | July 31, 2021 | | July 30, 2022 | | July 31, 2021 |
Number of shares repurchased (1) | 5.7 | | | 1.8 | | | 9.4 | | | 1.8 | |
Total cost | $ | 57 | | | $ | 55 | | | $ | 111 | | | $ | 55 | |
Average per share cost including commissions | $ | 9.99 | | | $ | 31.55 | | | $ | 11.77 | | | $ | 31.55 | |
_________ (1)Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.
In February 2019, the Company's Board of Directors (the "Board") approved a $1.0 billion share repurchase authorization (the "February 2019 repurchase program"). The February 2019 repurchase program had $488 million remaining as of July 30, 2022. All common stock repurchased is immediately retired.
Note 8. Earnings (Loss) Per Share
Weighted-average number of shares used for earnings (loss) per share is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| 13 Weeks Ended | | 26 Weeks Ended |
(shares in millions) | July 30, 2022 | | July 31, 2021 | | July 30, 2022 | | July 31, 2021 |
Weighted-average number of shares - basic | 367 | | | 378 | | | 369 | | | 377 | |
Common stock equivalents (1) | — | | | 8 | | | — | | | 8 | |
Weighted-average number of shares - diluted | 367 | | | 386 | | | 369 | | | 385 | |
_________(1)For the 13 and 26 weeks ended July 30, 2022, the dilutive impact of outstanding options and awards was excluded from dilutive shares as a result of the Company's net loss for the period.
The anti-dilutive shares related to stock options and other stock awards excluded from the computation of weighted-average number of shares – diluted were 17 million and 3 million for the 13 weeks ended July 30, 2022 and July 31, 2021, respectively, and 12 million and 3 million for the 26 weeks ended July 30, 2022 and July 31, 2021, respectively, as their inclusion would have an anti-dilutive effect on earnings (loss) per share.
Note 9. 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 Condensed Consolidated Financial Statements taken as a whole.
As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims ("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 July 30, 2022, 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 July 30, 2022, January 29, 2022, and July 31, 2021, 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 was not material for any individual Action or in total for all periods presented. Subsequent to July 30, 2022, and through the filing date of this Quarterly Report on Form 10-Q, no information has become available that indicates a change is required that would be material to our Condensed Consolidated Financial Statements taken as a whole.
We cannot predict with assurance the outcome of Actions brought against us. However, we do not believe that the outcome of any current Action would have a material effect on our Condensed Consolidated Financial Statements taken as a whole.
Note 10. Segment Information
We identify our operating segments according to how our business activities are managed and evaluated. As of July 30, 2022, 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 one reportable segment as of July 30, 2022. 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.
See Note 2 of Notes to Condensed Consolidated Financial Statements for disaggregation of revenue for stores and online and by brand and region.
Note 11. Divestitures
On February 1, 2022, we completed the transition of our Gap Italy operations to a third party, OVS S.p.A. ("OVS"), to operate Gap Italy stores as a franchise partner. The impact from the transaction was not material to our Condensed Consolidated Financial Statements for the 26 weeks ended July 30, 2022.
During the 13 weeks ended July 30, 2022, we received regulatory approvals to transition our Old Navy Mexico operations to a third party, Grupo Axo, to operate Old Navy Mexico stores as a franchise partner. As of July 30, 2022, the Company reclassified $73 million of assets and $35 million of liabilities for Old Navy Mexico as held for sale within other current assets and accrued expenses and other current liabilities, respectively, on the Condensed Consolidated Balance Sheet. The aggregate carrying amount of assets and liabilities classified as held for sale consists of $49 million of net operating lease assets, $16 million of fixed assets, $8 million of inventory, and $35 million of operating lease liabilities. We measured the disposal group at its estimated fair value less costs to sell. As a result of this transaction, the Company recognized a pre-tax loss of $35 million within operating expenses on the Condensed Consolidated Statement of Operations during the 13 weeks ended July 30, 2022. On August 1, 2022, we closed the transaction and transitioned our Old Navy stores in Mexico to Grupo Axo.
The Company has also reclassified certain assets as held for sale assets that are expected to be sold in the next 12 months related to our distribution center in Rugby, England. The aggregate carrying amount of the assets held for sale, primarily consisting of fixed assets, was $43 million and was recorded within other current assets on the Condensed Consolidated Balance Sheet as of July 30, 2022.
The Company divested its Janie and Jack and Intermix brands during the 26 weeks ended July 31, 2021. The divestiture of Janie and Jack was completed on April 8, 2021 and the divestiture of Intermix was completed on May 21, 2021. As a result of these transactions, the Company recognized a pre-tax loss of $59 million within operating expenses on the Condensed Consolidated Statement of Operations for the 26 weeks ended July 31, 2021.