text:
x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 28, 2006 or
¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to
(State of Incorporation)
Two Folsom Street
Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date.
Common Stock, $0.05 par value, 810,622,757 shares as of November 29, 2006
Condensed Consolidated Balance Sheets (Unaudited) as of October 28, 2006, January 28, 2006 and October 29, 2005 3
Condensed Consolidated Statements of Income (Unaudited) for the Thirteen Weeks and Thirty-Nine Weeks Ended October 28, 2006 and October 29, 2005 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Thirty-Nine Weeks Ended October 28, 2006 and October 29, 2005 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Management's Discussion and Analysis of Financial Condition and Results of Operations 15
Quantitative and Qualitative Disclosures about Market Risk 25
Controls and Procedures 25
Legal Proceedings 26
Item 1A
Risk Factors 26
Unregistered Sales of Equity Securities and Use of Proceeds 26
Exhibits 27
($ in millions except par value, shares in thousands)
October 28,
2006 January 28,
2006 October 29,
Cash and equivalents
Short-term investments and restricted cash
673 1,007 915
Property and equipment, net of accumulated
depreciation of $4,004, $3,712, and $3,775
Current maturities of long-term debt
$ 325 $ — $ —
Lease incentives and other liabilities
Authorized 2,300,000 shares; Issued 1,086,866, 1,078,925, and 1,077,423 shares;
Outstanding 821,837, 856,986, and 872,254 shares
Accumulated other comprehensive earnings
— (5 ) (5 )
Treasury stock, at cost (265,029, 221,939, and 205,169 shares)
(5,967 ) (5,210 ) (4,913 )
Total shareholders' equity
Total liabilities and shareholders' equity
Thirteen Weeks Ended Thirty-Nine Weeks Ended
($ in millions except per share amounts, shares in thousands)
$ 3,856 $ 3,860 $ 11,013 $ 11,202
(33 ) (19 ) (96 ) (67 )
Earnings before income taxes
292 351 891 1,262
Net earnings
$ 189 $ 212 $ 559 $ 775
Weighted average number of shares - basic
825,359 875,086 837,719 886,608
Weighted average number of shares - diluted
Cash dividends paid per share
$ 0.08 (a) $ 0.045 (c) $ 0.24 (a)(b) $ 0.16 (c)(d)(e)
(a) Includes a dividend of $0.08 per share declared and paid in third quarter of fiscal 2006.
(b) Includes a dividend of $0.08 per share declared and paid in first and second quarters of fiscal 2006.
(c) Includes a dividend of $0.045 per share declared and paid in third quarter of fiscal 2005.
(d) Includes a dividend of $0.045 per share declared and paid in first and second quarters of fiscal 2005.
(e) Includes a dividend of $0.02 per share declared in fourth quarter of fiscal 2004 but paid in first quarter of fiscal 2005.
Thirty-Nine Weeks Ended
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization (a)
Other non-cash items
177 (45 )
Income taxes payable, net
(47 ) (102 )
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of short-term investments
Purchase of long-term investments
— (100 )
Maturities of long-term investments
Change in restricted cash
(4 ) 940
Changes in lease rights and other assets
(1 ) 31
Net cash provided by (used for) investing activities
Issuance of common stock (b)
Proceeds from exercise of stock options and other
Purchase of treasury stock
Excess tax benefit from exercise of stock options
Effect of exchange rate fluctuations on cash
7 (7 )
Net decrease in cash and equivalents
Cash and equivalents at beginning of period
Cash and equivalents at end of period
(a) Depreciation and amortization includes the amortization of lease incentives.
(b) Issuance of common stock does not include the non-cash conversion of our senior convertible debt of $1.4 billion to 85 million shares of common stock in March 2005. See Note 4.
1. BASIS OF PRESENTATION
The condensed consolidated balance sheets as of October 28, 2006, and October 29, 2005, the condensed consolidated statements of income for the thirteen and thirty-nine weeks ended October 28, 2006 and October 29, 2005, and the condensed consolidated statements of cash flows for the thirty-nine weeks ended October 28, 2006 and October 29, 2005, have been prepared by The Gap, Inc. (the "company," "we," and "our"), without audit. In the opinion of management, such statements include all adjustments (which include only normal recurring adjustments) considered necessary to present fairly our financial position, statement of income and cash flows at October 28, 2006 and October 29, 2005 and for all periods presented. The condensed consolidated balance sheet as of January 28, 2006 has been derived from our audited consolidated financial statements.
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 have been omitted from these interim financial statements. 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 year ended January 28, 2006.
During the third fiscal quarter of 2005, approximately $30 million of sourcing expenses were reclassified from operating expenses to cost of goods sold and occupancy expenses. While we had been classifying the majority of sourcing expenses in cost of goods sold and occupancy expenses, some operating costs related to certain wholly owned agent offices that source our product had been classified in operating expenses. As a result, approximately $30 million of year to date sourcing expenses were reclassified at the end of the third fiscal quarter of 2005. This reclassification had no effect on net earnings.
In fiscal 2005, the company implemented a new inventory system and effective January 29, 2006 (the beginning of fiscal 2006), the company changed its inventory flow assumption from the first-in, first-out ("FIFO") method to the weighted average cost method ("WAC"). The company determined that WAC is a preferable method because the new inventory system and method improves the overall accuracy of the company's accounting for inventory. The change in inventory accounting method did not have a material impact on prior periods presented and, accordingly, they have not been restated as would be required by Statement of Financial Accounting Standards No. ("SFAS") 154, "Accounting Changes and Error Corrections - a Replacement of APB Opinion No. 20 and FASB Statement No. 3."
The results of operations for the thirteen and thirty-nine weeks ended October 28, 2006 are not necessarily indicative of the operating results that may be expected for the fifty-three week period ending February 3, 2007.
2. COMPREHENSIVE EARNINGS
Our comprehensive earnings are comprised of net earnings, adjusted for foreign currency translation and fluctuations in fair market value of financial instruments related to foreign currency hedging activities, net of tax. Other comprehensive earnings are excluded from net earnings and reported as a separate component of shareholders' equity.
Comprehensive earnings, net of taxes, is comprised of:
Adjustments for foreign currency translation
— 4 25 (30 )
Adjustments for fluctuations in fair market value of financial instruments, net of tax related effects
(1 ) (4 ) 2 3
Comprehensive earnings
3. RECENT ACCOUNTING PRONOUNCEMENTS
In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS 151, "Inventory Costs, an Amendment of ARB No. 43, Chapter 4." SFAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material and requires that these items be recognized as current period charges. SFAS 151 applies only to inventory costs incurred during periods beginning after the effective date and also requires that the allocation of fixed production overhead to conversion costs be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal 2006. The adoption of SFAS 151 did not have a material impact on our financial position, cash flows or results of operations.
In May 2005, the FASB issued SFAS 154 which changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, voluntary changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net earnings during the period of the change. SFAS 154 requires retrospective application to prior period financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for fiscal 2006; however, the statement does not change the transition provisions of any existing accounting pronouncements. The adoption of SFAS 154 did not have a material effect on our financial position, cash flows or results of operations.
In October 2005, the FASB issued FASB Staff Position ("FSP") 13-1, "Accounting for Rental Costs Incurred During a Construction Period," to clarify the proper accounting for rental costs incurred on building or ground operating leases during a construction period. The FSP requires that rental costs incurred during a construction period be expensed, not capitalized. FSP 13-1 is effective for fiscal 2006. The adoption of FSP 13-1 did not have a material effect on our financial position, cash flows or results of operations.
In November 2005, the FASB issued FSP 123(R)-3, "Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards," that provides a practical transition election related to accounting for the tax effects of share-based payment awards to employees. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool ("APIC pool") related to the tax effects of employee share-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows of the tax effects of employee share-based payment awards that are outstanding upon adoption of SFAS 123 (Revised 2004), "Share-Based Payment" ("123(R)"). The company is in the process of evaluating whether to adopt the provisions of FSP 123(R)-3.
In June 2006, the FASB ratified the consensuses reached by the Emerging Issues Task Force ("EITF") in Issue No. 06-3, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement (That is, Gross Versus Net Presentation)". Issue No. 06-3 requires disclosure of an entity's accounting policy regarding the presentation of taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer including sales, use, value added and some excise taxes. We present such taxes on a net basis (excluded from net sales). We do not expect the adoption of Issue No. 06-3, which is effective for interim and annual reporting periods beginning after December 15, 2006, to have a material effect on our financial position, cash flows or results of operations.
In July 2006, the FASB issued FASB Interpretation No. ("FIN") 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109," which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that we recognize in our financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 is effective for fiscal 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. We are currently evaluating the impact of adopting FIN 48 on our financial statements.
In September 2006, the SEC issued Staff Accounting Bulletin No. ("SAB") 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements". SAB 108 provides interpretive guidance on how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in the current year financial statements. SAB 108 requires registrants to quantify misstatements using both an income statement ("rollover") and balance sheet ("iron curtain") approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening accumulated earnings as of the beginning of the fiscal year of adoption. SAB 108 is effective for fiscal 2006. We do not expect the adoption of SAB 108 to have a material impact on our financial position, cash flows or results of operations.
In September 2006, the FASB issued SFAS 157, "Fair Value Measurements". SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. SFAS 157 is effective for fiscal 2008. We are currently in the process of assessing the impact the adoption of SFAS 157 will have on our financial statements.
4. DEBT AND CREDIT FACILITY
As of October 28, 2006, the remaining balance of our 6.90 percent notes payable of $325 million, due September 2007, was classified as current maturities of long-term debt in our balance sheet. In addition, the remaining balance of our 8.80 percent notes payable of $138 million, due December 2008 ("2008 Notes") is subject to an increasing or decreasing rate of interest based on certain credit rating fluctuations.
On November 17, 2006, Standard & Poor's downgraded our senior unsecured debt rating to BB+ from BBB-. As a result of this downgrade by Standard & Poor's, the interest rate payable on our 2008 Notes will increase by 25 basis points from 9.55 percent to 9.80 percent per annum as of December 15, 2006.
As of October 28, 2006, we had $221 million in trade letters of credit issued under our letter of credit agreements totaling $500 million. There were no drawings under our $750 million revolving credit facility at October 28, 2006.
On May 6, 2005, we entered into four separate $125 million, 3-year letter of credit agreements and four separate $100 million, 364-day letter of credit agreements for a total aggregate availability of $900 million, which collectively replaced our prior letter of credit agreements. Unlike the previous letter of credit agreements, the current letter of credit agreements are unsecured. Consequently, the $900 million of restricted cash that collateralized the prior letter of credit agreements was fully released in May 2005. As of May 5, 2006, the four $100 million 364-day letter of credit agreements expired and the total letter of credit capacity was reduced to $500 million. This reduction in the letter of credit capacity was driven by the transition to open account payment terms as well as the available capacity under our $750 million revolving credit facility to issue trade letters of credit.
On March 11, 2005, we called for the full redemption of our outstanding $1.4 billion, 5.75 percent senior convertible notes (the "Notes") due March 15, 2009. The redemption was complete by March 31, 2005. Note holders had the option to receive cash at a redemption price equal to 102.46 percent of the principal amount of the Notes, plus accrued interest, for a total of approximately $1,027 per $1,000 principal amount of Notes. Alternatively, note holders could elect to convert their Notes into approximately 62.03 shares of Gap Inc. common stock per $1,000 principal amount. As of March 31, 2005, $1.4 billion of principal was converted into 85 million shares of Gap Inc. common stock and approximately $0.5 million was paid in cash redemption.
5. OTHER OPERATING CHARGES
We have excess facility space as of October 28, 2006 as a result of our 2001 decision to consolidate and downsize corporate facilities in our San Francisco and San Bruno campuses. We record a sublease loss reserve for the net present value of the difference between the contractual rent obligations and the rate at which we expect to be able to sublease the properties. These estimates and assumptions are monitored on at least a quarterly basis for changes in circumstances. We estimate the reserve based on the status of our efforts to lease vacant office space, including a review of real estate market conditions, our projections for sublease income and sublease commencement assumptions. Sublease loss charges are reflected in operating expenses in our condensed consolidated statements of income.
The following table provides the liability balances and activities of our sublease loss reserve:
Additional provision (reversals), net
2 (61 )
Cash payments, net of sublease income
(4 ) (17 )
During the quarter ended July 30, 2005 we completed our assessment of available space and future office facility needs and in mid-May 2005 decided that we would occupy one of our vacant leased properties in San Francisco. As a result, the sublease loss reserve of $58 million associated with this space at April 30, 2005 was reversed.
In June 2006, an Agreement of Purchase and Sale was executed with a buyer for our distribution center located in Brampton, Ontario, Canada. Upon completion of the sale in the third fiscal quarter of 2006, we recorded a gain of $3 million associated with the sale, which is included in operating expenses in the condensed consolidated statements of income.
Remaining cash expenditures associated with the headquarters facilities sublease loss reserve are expected to be paid over the various remaining lease terms through 2012. Based on our assumptions as of October 28, 2006, we expect our lease payments, net of sublease income, to result in a total net cash outlay of approximately $17 million for future rent.
6. COMMON STOCK
On February 23, 2006, we announced the authorization of an additional $500 million for our share repurchase program all of which has been used. On August 3, 2006, we announced the authorization of an additional $750 million for our ongoing share repurchase program. Under this authorization, shares may be repurchased over 12 months. During the third fiscal quarter of 2006, we repurchased approximately 16 million shares of our common stock at a total cost of approximately $271 million, at an average price per share of $16.86 including commissions. During the first thirty-nine weeks of 2006, we repurchased approximately 44 million shares of our common stock for a total cost of approximately $771 million, resulting in an average price per share of $17.53 including commissions.
In February 2006, we announced our intention to increase our annual dividend per share from $0.18 to $0.32 for fiscal 2006. Pursuant to this plan, a dividend of $0.08 per share was paid in April 2006, July 2006, and October 2006. The remaining quarterly dividend is expected to be paid in January 2007.
7. SHARE-BASED PAYMENT
Stock Award Plans
The 1996 Stock Option and Award Plan (the "1996 Plan") was established on March 26, 1996, and amended and restated on January 28, 2003. The Board authorized 123 million shares for issuance under the 1996 Plan, which includes shares available under the Management Incentive Restricted Stock Plan and an earlier stock option plan established in 1981, both of which were superseded by the 1996 Plan. The 1996 Plan was further amended and restated on January 24, 2006 and renamed the 2006 Long-Term Incentive Plan (the "2006 Plan"). On May 9, 2006, the shareholders approved an increase in the number of shares available for grant under the 2006 Plan by the sum of (a) the number of shares that remained available for grant under the 2002 Stock Option Plan (the "2002 Plan") as of January 24, 2006, the date of board approval of the 2006 Plan, and (b) any shares that otherwise would have been returned to the 2002 Plan after January 24, 2006, on account of the expiration, cancellation, or forfeiture of awards granted thereunder. The 2006 Plan empowers the Compensation and Management Development Committee of the Board of Directors (the "Committee") to award compensation primarily in the form of nonqualified stock options, restricted stock, or performance units to key employees.
The 2002 Plan, formerly known as Stock Up On Success, was established on January 1, 1999. The Board originally authorized 53 million shares for issuance under the 2002 Plan, which includes shares available under an earlier stock option plan established in 1999 that was merged with the 2002 Plan. On May 9, 2006, the 2002 Plan was discontinued and only those awards then outstanding continue to be subject to the terms of the 2002 Plan under which they were granted. The 2002 Plan empowered the Committee to award nonqualified stock options to non-officer employees.
At October 28, 2006, we had reserved 150 million shares of our common stock for the issuance of common stock under our stock award plans. Stock options generally expire 10 years from the grant date, three months after employee termination, or one year after the date of an employees' retirement or death, if earlier. In addition, stock options generally vest over a four-year period, with shares becoming exercisable in equal annual installments of 25 percent. Performance units generally vest over a four year period, and one share of common stock is issued for each performance unit upon vesting.
Prior to December 1, 2006, under our Employee Stock Purchase Plan ("ESPP"), eligible U.S. employees could purchase our common stock at 85 percent of the lower of the closing price on the New York Stock Exchange on the first or last day of the six-month purchase period. After December 1, 2006, eligible U.S. employees will be able to purchase our common stock at 85 percent of the closing price on New York Stock Exchange on the last day of three-month purchase periods. Employees pay for their stock purchases through payroll deductions at a rate equal to any whole percentage from 1 percent to 15 percent. There were 0.9 million and 0.8 million shares issued under the plan during the thirty-nine weeks ended October 28, 2006 and October 29, 2005, respectively. At October 28, 2006, there were 6 million shares reserved for future issuances.
Stock Compensation
On January 26, 2006, we accelerated the vesting of all stock options with an exercise price equal to or greater than $21 per share except options held by non-employee directors and performance-based options to purchase 1 million shares granted to our Chief Executive Officer. Options to purchase approximately 15 million shares of common stock that were scheduled to vest from fiscal 2006 to 2009 were impacted by this action. Although these options became immediately exercisable, the exercise price did not change. The primary purpose of the accelerated vesting was to reduce total compensation expense after the adoption of SFAS 123(R). There was no impact to our consolidated statement of income in fiscal 2005.
On January 29, 2006, we adopted the provisions of SFAS 123(R) using the modified prospective transition method. Prior to the adoption of SFAS 123(R), stock-based compensation expense related to stock options was not recognized in the results of operations if the exercise price was equal to the market value of the common stock on the grant date, in accordance with Accounting Principles Board Opinion No. ("APB") 25, "Accounting for Stock Issued to Employees." As a result, the recognition of stock-based compensation expense was generally limited to the expense attributed to discounted stock options, performance units and stock option modifications. Under the modified prospective transition method, compensation cost recognized in the first thirty-nine weeks of fiscal 2006 included: a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 28, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, "Accounting for Stock-Based Compensation" and b) compensation cost for all share-based payments granted subsequent to January 28, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized.
We use the Black-Scholes-Merton option-pricing model to determine the fair value of stock awards and ESPP shares. This model requires the input of subjective assumptions that have a significant impact on the fair value estimate. The assumptions for the current period grants were developed based on SFAS 123(R) and SEC guidance contained in SAB 107, "Share-Based Payment." The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of subjective variables. These variables include our expected stock price volatility over the term of the awards, the expected term based on projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amount recognized on the consolidated statements of income.
The expected term represents the estimated time until exercise and is based on historical exercise patterns, which we believe are representative of future behavior. The expected term of employee stock purchase rights is the purchase period under each offering period. The expected volatility of our common stock is based on a combination of historical volatility of our stock for a period approximating the expected term and the implied volatility based on traded options of our stock. Prior to fiscal 2006, only historical volatility was considered. The expected dividend yield is based on our expected annual dividend payout for the current fiscal year. The risk-free interest rate is based on zero-coupon U.S. Treasury instruments with a remaining term equal to the expected term of the share options.
We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. With the adoption of SFAS 123(R) at the beginning of our first fiscal quarter of 2006, we added "Share-Based Payment" as a critical accounting policy and estimate.
The weighted average assumptions used to value option grants are as follows:
Expected term (in years)
Expected volatility
28.7 % 33.1 % 29.1 % 38.5 %
1.6 % 1.0 % 1.6 % 0.8 %
Risk-free interest rate
The weighted-average fair value of stock options granted during the thirteen weeks ended October 28, 2006 and October 29, 2005 was $5.27 and $5.36 per share, respectively. The weighted-average fair value of stock options granted during the thirty-nine weeks ended October 28, 2006 and October 29, 2005 was $4.99 and $7.64 per share, respectively. The fair value of stock options that vested during the thirteen weeks ended October 28, 2006 and October 29, 2005 was $6 million and $28 million, respectively. The fair value of stock options that vested during the thirty-nine weeks ended October 28, 2006 and October 29, 2005 was $36 million and $93 million, respectively.
The assumptions used to value employee stock purchase rights are as follows:
Beginning in fiscal 2005, the Committee began granting stock awards in the form of performance units. One share of common stock is issued for each performance unit where vesting is subject to continued service by the employee ("Stock Awards") and, in some cases, vesting is subject to the achievement of certain performance metrics ("Performance Stock Awards").
In accordance with SFAS 123(R), we recognize the estimated compensation cost of Stock Awards, net of estimated forfeitures, and Performance Stock Awards based on the value of our traded stock price on the date of grant, with an offsetting increase to shareholder's equity. We evaluate the probability that the Performance Stock Awards will vest at the end of each reporting period and adjust compensation cost accordingly. Prior to the adoption of SFAS 123(R), we recognized the compensation expense related to Stock Awards based on actual forfeitures. As such we evaluated the need to record a cumulative effect adjustment for estimated forfeitures upon the adoption of SFAS 123(R). Because the adjustment was not material, it was recognized as a credit to operating expenses in the first quarter of fiscal 2006.
For Performance Stock Awards, we evaluate the probability that they will be granted. In addition, we revalue compensation cost at the end of each reporting period, based on the value of our traded stock price and the probability that the performance metrics will be achieved, with an offsetting increase to current liabilities. Upon achievement of the performance metrics, the stock award is granted, accounted for as a fixed equity award and valued using our traded stock price on the date of grant, and the associated liability is reclassified to shareholders' equity.
The weighted-average fair value of Stock Awards and Performance Stock Awards granted during the thirteen weeks ended October 28, 2006 and October 29, 2005 was $17.86 and $18.73 per share, respectively. The weighted-average fair value of Stock Awards and Performance Stock Awards granted during the thirty-nine weeks ended October 28, 2006 and October 29, 2005 was $17.84 and $22.02 per share, respectively. The fair value of Stock Awards that vested during the thirteen weeks ended October 28, 2006 and thirty-nine weeks ended October 29, 2006 was $1 million and $9 million, respectively. Through the third quarter of fiscal 2006 and all of fiscal 2005, no Performance Stock Awards vested.
As required by SFAS 123(R), the estimated fair value of our stock-based awards granted prior to the adoption of SFAS 123(R), less expected forfeitures, will continue to be amortized based on an accelerated recognition method. The estimated fair value of our stock-based awards granted after the adoption of SFAS 123(R), less expected forfeitures, with time-based service conditions are being amortized on a straight-line basis, while those with performance conditions are being amortized on an accelerated basis.
Total stock-based compensation expense recognized in the condensed consolidated statements of income for the thirteen and thirty-nine weeks ended October 28, 2006 was $11 million, net of related tax effects of $6 million, and $25 million, net of related tax effects of $14 million, respectively. Total cash paid related to liability awards for the thirteen and thirty-nine weeks ended October 28, 2006 was $1 million and $3 million, respectively. At October 28, 2006, there was $58 million (before any related tax benefit) of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested share-based compensation that is expected to be recognized over a weighted-average period of 3 years. Total unrecognized compensation may be adjusted for future changes in estimated forfeitures. There was no share-based compensation capitalized as of or during the thirteen weeks and thirty-nine weeks ended October 28, 2006.
The following table shows the effect on net earnings and earnings per share had compensation cost been recognized based upon the estimated fair value on the grant date of stock options, and employee stock purchase rights during the comparable period last year.
($ in millions, except per share data)
Thirteen Weeks
2005 Thirty-Nine
Weeks Ended
Net earnings:
As reported
Add: Stock-based compensation expense included in reported net earnings, net of tax related effects
Deduct: Total stock-based compensation expense determined under fair-value based method for all awards, net of related tax effects
Pro forma net earnings
As reported-basic
Pro forma-basic
As reported-diluted
Pro forma-diluted
There were no material modifications made to our outstanding stock options, Stock Awards or Performance Stock Awards in fiscal 2006.
General Stock Option Information
Under our stock option plans, nonqualified options to purchase common stock are granted to officers, directors, eligible employees and consultants at exercise prices equal to the fair market value of the stock at the date of grant or as determined by the Compensation and Management Development Committee of the Board of Directors.
The following table summarizes stock option activity for our stock option plans:
Shares Weighted-Average
Balance at January 28, 2006
75,982,500 $ 20.03
5,664,283 17.85
(7,695,447 ) 12.46
Forfeited/Canceled/Expired
(11,415,860 ) 22.80
Balance at October 28, 2006
The aggregate intrinsic value of options exercised during the thirteen weeks ended October 28, 2006 and October 29, 2005 was $19.3 million and $6.6 million, respectively. The aggregate intrinsic value of options exercised during the thirty-nine weeks ended October 28, 2006 and October 29, 2005 was $45.5 million and $49.0 million, respectively.
The following table summarizes additional information about stock options outstanding and exercisable at October 28, 2006:
Options Outstanding Options Exercisable
Range of Exercise Prices
Shares at
2006 Weighted-
Life (in years) Weighted-Average
Exercise Price Number of
$2.85 – 12.87
11,277,158 5.77 $ 11.73 7,275,983 $ 11.42
10,467,334 5.59 15.00 8,903,315 14.72
6,213,139 3.31 40.34 6,213,139 40.34
62,535,476 6.12 $ 20.26 47,554,109 $ 21.25
The aggregate intrinsic value of options outstanding and options exercisable at October 28, 2006 was $179 million and $124 million, respectively. Options exercisable at October 28, 2006 had a weighted-average remaining contractual life of 5.61 years.
The following table summarizes unvested Stock Award and Performance Stock Award activity:
Weighted-Average
Grant-Date
Fair Value Price
2,106,686 $ 21.65
(430,831 ) 22.07
The aggregate intrinsic value of unvested Stock Awards and Performance Stock Awards at October 28, 2006 was $73 million. Stock Awards and Performance Stock Awards at October 28, 2006 had a weighted-average remaining contractual life of 3 years.
8. EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share includes the additional dilutive effect of our potentially dilutive securities, which include certain stock options and unvested performance units, calculated using the treasury stock method, and convertible notes which are potentially dilutive at certain earnings levels calculated using the if-converted method. The following summarizes the incremental earnings and shares from the potentially dilutive securities:
Net earnings-basic ($ in millions)
Add: Interest on convertible notes ($ in millions)
Net earnings-diluted ($ in millions)
Weighted-average number of shares-basic (in thousands)
Incremental shares resulting from:
Stock options and performance units
Senior convertible notes
— — — 17,344
Weighted-average number of shares-diluted (in thousands)
Earnings per share-basic
Earnings per share-diluted
Excluded from the above computations of weighted-average shares for diluted earnings per share were options to purchase 41 million and 44 million shares of common stock during the thirteen and thirty-nine weeks ended October 28, 2006, respectively. Excluded from the above computations of weighted-average shares for diluted earnings per share were options to purchase 47 million and 41 million shares of common stock during the thirteen and thirty-nine weeks ended October 29, 2005, respectively. The calculated amounts have been excluded because the exercise price was greater than the average market price of the company's common stock during the period and, therefore, the effect is antidilutive.
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, intellectual property, financial agreements and various other agreements. Under these contracts we may provide certain indemnifications relating to representations and warranties (e.g., ownership of assets, environmental or tax indemnifications), or personal injury matters or other 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 financial condition or results of operations.
As a party to a reinsurance pool for workers' compensation, general liability and automobile liability, we have guarantees with a maximum exposure of $74 million, of which $6 million has been cash collateralized.
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. Actions filed against us include commercial, intellectual property, customer, and labor and employment related claims, including class action lawsuits in which plaintiffs allege that we violated federal and state wage and hour and other laws. 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. If the outcome of an Action is expected to result in a loss that is considered probable and reasonably estimable, we will record a liability for the estimated loss.
We cannot predict with assurance the outcome of Actions brought against us. Accordingly, adverse developments, settlements or resolutions may occur and negatively impact earnings 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 adverse effect on our results of operations, liquidity or financial position taken as a whole.
We are a global specialty retailer operating retail and outlet stores selling casual apparel, accessories, and personal care products for women, men and children under the Gap, Banana Republic, Old Navy and Forth & Towne brand names. We operate stores in the United States, Canada, Ireland, the United Kingdom, France and Japan, while our independent third party franchisees own and operate stores in Asia under the Gap brand name. Our U.S. customers may shop online at gap.com, bananarepublic.com, and oldnavy.com. Beginning in October 2006, we launched Piperlime.com, an online shoe store selling an assortment of third party brands for women, men and children.
The third quarter remained challenging due to weak traffic and disappointing product acceptance. Comparable store sales were negative 5 percent compared to last year, and we experienced higher operating expenses associated with investing in marketing and stores to improve performance. As a result, net earnings were 11 percent lower than third quarter last year and earnings per share was $0.23 compared to $0.24 in the third quarter of fiscal 2005.
Our cash flows continue to be strong. For the thirty-nine weeks ended October 28, 2006, we generated free cash flow of $214 million, an increase of $334 million compared to the prior year primarily driven by an increase in our accounts payable balance as a result of timing differences in our payment terms and additional accruals associated with increased marketing activities and other initiatives. For a reconciliation of free cash flow, a non-GAAP measure, to a GAAP measure, see the Financial Condition section of this Management's Discussion and Analysis.
We continue to make progress against our strategic priorities. During the third quarter, we returned excess cash to shareholders by repurchasing approximately 16 million shares of our common stock for $271 million and declared and paid a quarterly dividend of $0.08 per share. Cash distribution to shareholders will continue to play an important role in delivering shareholder returns; however, our first priority for excess cash is investing in our business in a way that meets or exceeds our return criteria.
Even though the third quarter was challenging, we remain committed to the strategies underway to turnaround our business performance. We are focused on creating stronger product assortments, improving the store experience for our customers, and delivering marketing with compelling messages. We remain confident in our growth strategies, which we believe will create and deliver value to our shareholders over the long-term. These strategies include: extending our existing lifestyle brands and creating new brands, growing brands internationally, becoming the best online apparel retailer, and leveraging our scale and operating discipline to yield superior shareholder returns. Examples of these growth initiatives in the third quarter of fiscal 2006 are:
• we launched Piperlime, our online shoe store;
• we rolled-out in the U.S. our partnership with (PRODUCT) RED, an organization that is dedicated to fighting AIDS in Africa;
• we opened our first franchised stores in Singapore and Malaysia under the Gap brand name;
• we entered into agreements with independent third parties to operate additional stores under the Gap and Banana Republic brand names in Indonesia.
This Quarterly Report on Form 10-Q contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as "expect," "anticipate," "believe," "estimate," "plan," "project," and similar expressions also identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding: (i) the impact of new accounting pronouncements; (ii) the amount of future lease payments net of sublease income; (iii) the timing and amount of dividends in fiscal 2006; (iii) expected stock price volatility; (iv) the impact of losses under contractual indemnifications; (v) the impact of various proceedings, lawsuits, disputes and claims; (vi) confidence in our growth strategies; (vii) interest expense for fiscal 2006; (viii) effective tax rate for fiscal 2006; (ix) free cash flow in fiscal 2006; (x) minimum net cash provided by operating activities in fiscal 2006; (xi) year over year change in inventory per square foot at the end of the fourth quarter of fiscal 2006; (xii) capital expenditures (net purchases of property and equipment) in fiscal 2006; (xiii) number of new store openings and store closings in fiscal 2006; (xiv) net square footage change in fiscal 2006; (xv) funding of capital expenditures in fiscal 2006; (xvi) dividend policy and increases in future periods; (xvii) maximum exposure and cash collateralized balance for reinsurance pool in future periods, and (xviii) the impact of changes in our rating by credit rating agencies.
Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following: the risk that subsequent events may occur that require adjustments to our unaudited financial statements; the risk that the adoption of new accounting pronouncements will impact future results; the risk that we will be unsuccessful in gauging fashion trends and changing consumer preferences; the highly competitive nature of our business in the U.S. and internationally and our dependence on consumer spending patterns, which are influenced by numerous other factors; the risk that we will be unsuccessful in identifying and negotiating new store locations effectively; the risk that comparable store sales and margins will experience fluctuations; the risk that we will be unsuccessful in implementing our strategic, operating and people initiatives; the risk that adverse changes in our credit ratings may have a negative impact on our financing costs and structure in future periods; the risk that trade matters, events causing disruptions in product shipments from China and other foreign countries, or IT systems changes may disrupt our supply chain or operations; and the risk that we will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits; any of which could impact net sales, costs and expenses, and/or planned strategies. Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for the fiscal year ended January 28, 2006.
Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of November 30, 2006 and we assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
We suggest that you read this document in conjunction with the Management's Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2006.
Business in the third quarter continued to be challenging and we experienced a decrease in sales at Gap and Old Navy brands, offset by an increase in sales at Banana Republic and online for overall flat sales compared to the third quarter of last year. Our operating expenses were higher than last year as we invested in marketing and store-related activities to improve performance and continued to invest in our growth initiatives. For the thirteen weeks ended October 28, 2006, net earnings decreased 11 percent to $189 million or $0.23 per diluted share, compared to net earnings of $212 million or $0.24 per diluted share for the thirteen weeks ended October 29, 2005. For the thirty-nine weeks ended October 28, 2006, net earnings decreased 28 percent to $559 million or $0.66 per diluted share, compared to net earnings of $775 million or $0.86 per diluted share for the thirty-nine weeks ended October 29, 2005.
Net sales consist of retail sales, online sales and shipping fees received from customers for delivery of merchandise. Outlet retail sales are reflected within the respective results of each brand. The following tables disclose net sales by brand, region and channel for the thirteen and thirty-nine weeks ended October 28, 2006 and October 29, 2005:
Thirteen Weeks Ended October 28, 2006
Net Sales ($ in millions)
Gap Old Navy Banana
Republic Other (3) Total
Stores $ 1,215 $ 1,556 $ 563 $ 5 $ 3,339
Direct (Online)
Stores 187 — — — 187
Stores 121 — 17 — 138
Other Regions (2)
— — — 10 10
$ 1,590 $ 1,644 $ 607 $ 15 $ 3,856
Net Sales Growth (Decline)
(4 %) — 12 % 67 % —
Stores 128 — 6 — 134
— — — 7 7
$ 1,660 $ 1,648 $ 543 $ 9 $ 3,860
(6 %) (1 %) 1 % — (3 %)
Thirty-Nine Weeks Ended October 28, 2006
Stores $ 3,387 $ 4,566 $ 1,603 $ 10 $ 9,566
173 229 76 1 479
$ 4,469 $ 4,795 $ 1,720 $ 29 $ 11,013
(6 %) (1 %) 8 % 93 % (2 %)
Stores $ 3,616 $ 4,656 $ 1,526 $ 2 $ 9,800
147 177 55 — 379
(5 %) 2 % 1 % — (1 %)
(1) North America includes the United States, Canada and Puerto Rico.
(2) Other Regions includes our International Sales Program and our franchise business beginning September 2006.
(3) Other includes Forth & Towne beginning August 2005, Business Direct, International Sales Program, franchise business beginning September 2006, and Piperlime.com beginning October 2006.
A store is included in comparable store sales ("Comp") when all three of the following requirements have been met: the store has been open at least one year, square footage has not changed 15 percent or more within the past year, and the store has not been permanently repositioned within the past year. A store is included in Comp on the first day it has comparable prior year sales. Stores in which square footage has changed by 15 percent or more as a result of remodel, expansion, or reduction are excluded from Comp until the first day they have comparable prior year sales. Current year foreign exchange rates are applied to both current year and prior year Comp store sales to achieve a consistent basis for comparison.
A store is considered non-comparable ("Non-comp") when, in general, the store has no comparable prior year sales. For example, a store that has been open for less than one year, a store that has changed its square footage by 15 percent or more within the past year, or a store that has been permanently repositioned within the past year is considered Non-comp. Non-store sales such as online operations are also considered Non-comp.
A store is considered "Closed" if it is temporarily closed for three or more full consecutive days or is permanently closed. When a temporarily closed store reopens, the store will be placed in the Comp/Non-comp status it was in prior to its closure. If a store was in "Closed" status for three or more days in the prior year then the store will be in "Non-comp" status for the same days in the following year.
Increase (decrease) ($ in millions)
Gap (2) Old Navy Banana
Republic (2) Other (3) Total
2005 Net Sales
Comparable store sales
(81 ) (110 ) 12 — (179 )
Noncomparable store sales
(13 ) 73 44 6 110
15 26 7 — 48
(242 ) (354 ) (15 ) — (611 )
(75 ) 241 124 13 303
(7 ) 23 4 — 20
(1) Foreign exchange is the translation impact of current year sales at current year exchange rates versus current year sales at prior year exchange rates.
(2) Includes International stores.
(3) Other includes Forth & Towne beginning August 2005, franchise business beginning September 2006, and Piperlime.com beginning in October 2006.
Our third quarter 2006 sales of $3.9 billion were flat compared to third quarter 2005 sales of $3.9 billion and our comparable store sales declined 5 percent compared to last year. Sales productivity in the third quarter of fiscal 2006 decreased to $95 per average square foot compared with $99 per average square foot in the third quarter of fiscal 2005. During the third quarter of fiscal 2006, we closed 13 under-performing stores, and opened 85 new stores.
Comparable store sales percentage change by brand for the third quarter 2006 over 2005 were as follows:
• Gap North America reported negative 7 percent in 2006 versus negative 4 percent in 2005
• Old Navy North America reported negative 7 percent in 2006 versus negative 8 percent in 2005
• Banana Republic North America reported positive 3 percent in 2006 versus negative 7 percent in 2005
• International reported negative 6 percent in 2006 versus negative 10 percent in 2005
Our first thirty-nine weeks of 2006 sales of $11.0 billion declined 2 percent, compared to the first thirty-nine weeks of 2005 sales of $11.2 billion. Our comparable store sales declined 7 percent, primarily driven by traffic deterioration at Gap and Old Navy brands. Sales productivity decreased to $275 per average square foot in the first thirty-nine weeks of fiscal 2006 compared with $291 per average square foot in the first thirty-nine weeks of fiscal 2005.
Comparable store sales percentage change by brand for the first thirty-nine weeks of 2006 over 2005 were as follows:
• Banana Republic North America reported negative 1 percent in 2006 versus negative 5 percent in 2005
• International reported negative 9 percent in 2006 versus negative 5 percent in 2005
Store count and square footage were as follows:
1,338 12.7 1,402 13.1
167 1.5 165 1.5
102 1.0 88 0.9
1,008 19.2 958 18.4
Banana Republic Japan
Forth & Towne
Increase over Prior Period
1 % 2 % 2 % 3 %
Cost of goods sold and occupancy expenses include the cost of merchandise, inventory shortage and valuation adjustments, freight charges, costs associated with our sourcing operations, production costs, insurance costs related to merchandise and occupancy, rent, common area maintenance, real estate taxes, utilities, and depreciation for our stores and distribution centers.
Weeks Ended Thirty-Nine
Weeks Ended Thirteen
Thirty-Nine
Oct. 28,
2006 Oct. 29,
$ 2,415 $ 2,497 $ 6,967 $ 6,974 62.6 % 64.7 % 63.3 % 62.3 %
Cost of goods sold and occupancy expenses as a percentage of net sales decreased 2.1 percentage points during the third quarter of fiscal 2006 and increased 1.0 percentage point during the first thirty-nine weeks of 2006, compared to the same periods last year. The increase in gross margin in the third quarter of fiscal 2006 compared to fiscal 2005 was driven by increased sales of regular-priced products at Gap and Banana Republic brands. Rent, occupancy and depreciation expense as a percentage of sales was flat during the third quarter and the first thirty-nine weeks of fiscal 2006, compared to the same periods last year.
Operating expenses include payroll and related benefits (for our store operations, field management, distribution centers, and corporate functions), advertising, and general and administrative expenses. Also included are costs to design and develop our products, merchandise handling and receiving in distribution centers and stores, distribution center general and administrative expenses, and rent, occupancy, and depreciation for headquarter facilities.
Operating expenses increased $150 million during the third quarter of fiscal 2006 and increased $226 million during the first thirty-nine weeks of 2006, compared to the same periods last year. Our operating expenses were higher than last year driven by increased marketing and store-related activities to improve performance, continued investment in our growth initiatives, and the effect of the sublease loss reserve reversal of $58 million in the second quarter of fiscal 2005 as a result of the decision to occupy certain headquarter facilities in San Francisco. The increases were partially offset by $14 million in income recognized in the second quarter of fiscal 2006 relating to the Visa/MasterCard litigation settlement, and $31 million relating to the change in our estimate of the elapsed time for recording income associated with unredeemed gift cards in the second quarter of fiscal 2006. See the Critical Accounting Policies and Estimates section of this Management's Discussion and Analysis for further information related to unredeemed gift card income.
Operating margin was 7.0 percent and 8.8 percent for the third quarters of fiscal 2006 and 2005, respectively, and 7.5 percent and 11.0 percent for the first thirty-nine weeks of fiscal 2006 and 2005, respectively.
$ 9 $ 8 $ 30 $ 38 0.2 % 0.2 % 0.3 % 0.3 %
The decrease in interest expense of $8 million during the first thirty-nine weeks of fiscal 2006 compared with fiscal 2005 was primarily due to the lower debt level as a result of our March 2005 redemption of the convertible notes.
For fiscal 2006, we expect interest expense to be about $40 million.
$ 33 $ 19 $ 96 $ 67 0.9 % 0.5 % 0.9 % 0.6 %
The increase of $14 million in interest income during the third quarter of fiscal 2006 over fiscal 2005 and the increase of $29 million in interest income during the first thirty-nine weeks of fiscal 2006 over fiscal 2005 was primarily due to rising interest rates, which resulted in higher yields on our investments.
The decrease in the effective tax rate during the third quarter of fiscal 2006 compared to the third quarter of fiscal 2005 primarily reflects an adjustment related to a favorable tax treaty resolution that was originally recorded in January of fiscal 2005.
We currently expect the fiscal 2006 effective tax rate to be about 39 percent, although the respective quarterly effective tax rates may vary. The actual rate will ultimately depend on several variables, including the mix of earnings between domestic and international operations, the overall level of earnings, and the potential resolution of outstanding tax contingencies.
FINANCIAL CONDITION
The following sets forth certain measures of our liquidity:
2006 Jan. 28,
Working capital ($ in millions) (a)
Current ratio (a)
1.93:1 2.70:1 2.43:1
(a) Our working capital and current ratio calculations include restricted cash.
Working capital and current ratio as of October 28, 2006 decreased compared to January 28, 2006 due primarily to lower cash balances, higher accounts payable as a result of timing differences in our payment terms, additional accruals associated with increased marketing activities and other initiatives, and the reclassification of the current portion of our long-term debt to current liabilities, offset by higher inventory as a result of the seasonal nature of our business. Working capital and current ratio as of October 28, 2006 decreased compared to October 29, 2005 due primarily to higher accounts payable and the reclassification of the current portion of our long-term debt to current liabilities.
Free cash flow is a non-GAAP measure. We believe free cash flow is an important metric, as it represents a measure of how much cash is available after the deduction of capital expenditures, as we require regular capital expenditures to build and maintain stores and purchase new equipment to keep the business growing. We use this metric internally, as we believe our sustained ability to increase free cash flow is an important driver of value creation.
The following table reconciles free cash flow, a non-GAAP measure, to a GAAP financial measure.
$ (282 ) $ (873 )
Less: Net purchases of property and equipment
$ 214 $ (120 )
The following table sets forth our projected minimum fiscal 2006 free cash flow components to accomplish our target to generate free cash flow of at least $800 million:
Fifty-Three
Weeks Ending
Projected minimum net cash provided by operating activities
Less: Projected net purchases of property and equipment
Projected minimum free cash flow
Net cash provided by operating activities for the thirty-nine weeks ended October 28, 2006 was $620 million, an increase of $292 million compared with the same period in the prior year. This increase was mainly due to increases in accrued expenses and accounts payable offset by an increase in merchandise inventory and a decrease in net earnings.
Inventory per square foot at October 28, 2006 was $64, flat compared to the prior year. We fund inventory expenditures during normal and peak periods through cash flows from operating activities and available cash. Our business follows a seasonal pattern, peaking over a total of about 13 weeks during the back-to-school and holiday periods. The seasonality of our operations may lead to significant fluctuations in certain asset and liability accounts between fiscal year-end and subsequent interim periods.
We will continue to focus on inventory productivity. The percent increase in inventory per square foot at the end of the fourth quarter is still expected to be in the low-single digits, compared with an 11 percent decrease last year.
Net cash used for investing activities for the thirty-nine weeks ended October 28, 2006 was $50 million compared to net cash provided by investing activities of $530 million in the prior year. The decrease was driven by release of restricted cash as a result of the amendment to our letter of credit agreement in fiscal 2005. This was partially offset by $339 million of cash provided by net maturities of investments in the first thirty-nine weeks of fiscal 2006 compared to net purchases of $14 million in the first thirty-nine weeks of fiscal 2005.
During the first thirty-nine weeks of fiscal 2006, capital expenditures totaled $406 million. The majority of these expenditures were used for 160 new store locations, store remodels and information technology. Capital expenditures during the first thirty-nine weeks of fiscal 2005 were $448 million primarily for 180 new store locations, store remodels and information technology.
For fiscal 2006, we expect capital expenditures to be about $625 million. We expect to open about 190 new store locations and to close about 125 store locations. As a result, we expect net square footage to increase between 2 and 3 percent for the full fiscal 2006 year. We expect to fund these capital expenditures with cash flows from operations and available cash.
During the first thirty-nine weeks of fiscal 2006, cash flows used for financing activities decreased $865 million compared to the first thirty-nine weeks of fiscal 2005 driven primarily by the decrease in cash used for share repurchases. During the first thirty-nine weeks of fiscal 2006, we utilized $771 million to repurchase common stock under our share repurchase program and reissued $13 million of treasury stock, mainly under our employee stock purchase program, as compared to the first thirty-nine weeks of fiscal 2005, where we utilized $1.7 billion to repurchase common stock under our share repurchase program and reissued $13 million of treasury stock.
The increase in cash dividends paid reflects the declaration and accelerated payment schedule of our fiscal 2006 first, second, and third quarter dividends at the increased $0.08 per share amount compared to $0.045 per share in each quarter in fiscal 2005.
In determining whether and at what level to declare a dividend, we consider a number of financial factors, including sustainability, financial flexibility, operating performance and capital resources.
We announced our intent to increase our dividends, which had been $0.18 per share for fiscal 2005, to $0.32 per share for fiscal 2006, starting with the dividend approved by the Board of Directors in March 2006. While we intend to increase dividends over time at a rate greater than our growth in net earnings, we will balance future increases with the corresponding cash requirements of growing our business.
On February 23, 2006, we announced the authorization of an additional $500 million for our share repurchase program all of which has been used. On August 3, 2006, we announced the authorization of an additional $750 million for our ongoing share repurchase program. Under this authorization, shares may be repurchased over 12 months. During the third quarter of 2006, we repurchased
approximately 16 million shares of our common stock at a total cost of approximately $271 million, at an average price per share of $16.86 including commissions. During the first thirty-nine weeks of 2006, we repurchased approximately 44 million shares of our common stock at a total cost of approximately $771 million, at an average price per share of $17.53 including commissions.
Debt and Credit Facility
During the third fiscal quarter ended October 28, 2006, $325 million of our 6.90 percent note payable, due September 2007, was classified to current maturities of long-term debt. Our 8.80 percent note payable due December 2008 ("2008 Notes"), with a balance outstanding of $138 million as of October 28, 2006, has an interest rate that is subject to adjustment if our credit rating is upgraded or downgraded by certain credit rating agencies.
On November 17, 2006, Standard & Poor's downgraded our senior unsecured debt rating to BB+ from BBB-. As a result of this downgrade by Standard & Poor's, the interest rate payable on our 2008 Notes will increase by 25 basis points from 9.55 percent to 9.80 percent per annum as of December 15, 2006. Our access to the capital markets and interest expense on future financings is dependent on our senior unsecured debt rating. We do not expect this downgrade to have a material impact on our financial statements.
Letters of credit represent a payment undertaking guaranteed by a bank on our behalf to pay the vendor a given amount upon presentation of specific documents demonstrating that merchandise has shipped. Vendor payables are recorded in the condensed consolidated balance sheets at the time of merchandise title transfer, although the letters of credit are generally issued prior to the transfer. As of October 28, 2006, we had $221 million in trade letters of credit issued under our letter of credit agreements totaling $500 million and there were no drawings under our $750 million revolving credit facility.
On May 6, 2005, we entered into four separate $125 million 3-year letter of credit agreements and four separate $100 million 364-day letter of credit agreements for a total aggregate availability of $900 million, which collectively replaced our prior letter of credit agreements. Unlike the previous letter of credit agreements, the current letter of credit agreements are unsecured. Consequently, the $900 million of restricted cash that collateralized the prior letter of credit agreements was fully released in May 2005. As of May 5, 2006, the four $100 million 364-day letter of credit agreements expired and the total letter of credit capacity was reduced to $500 million. This reduction in the letter of credit capacity reflects our transition to open account payment terms as well as the available capacity under our $750 million revolving credit facility to issue trade letters of credit.
We have standby letters of credit, surety bonds and bank guarantees outstanding at October 28, 2006, January 28, 2006, and October 29, 2005. As of October 28, 2006, we have standby letters of credits, surety bonds and bank guarantees amounting to $52 million (of which $43 million was issued under the revolving credit facility lines), $53 million and $3 million, respectively.
As a party to a reinsurance pool for workers' compensation, general liability and automobile liability, we have guarantees with a maximum exposure of $74 million, of which $6 million has already been cash collateralized as of October 28, 2006. We are currently in the process of winding down our participation in the reinsurance pool. Our maximum exposure and cash collateralized balance are expected to decrease in the future as our participation in the reinsurance pool diminishes.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We
maintain a process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements of a large, global corporation. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information. There have been no significant changes to the policies and estimates as discussed in our Annual Report on Form 10-K for the year ended January 28, 2006, other than unredeemed gift card income, share-based payment and inventory valuation described below.
Unredeemed Gift Card Income
Sales of gift cards are recorded as a liability on the balance sheet. As the gift cards are redeemed for merchandise, we record revenue. Over time, some portion of the gift cards issued is not redeemed. Beginning with the second quarter of 2006, we changed our estimate of the elapsed time for recording income associated with unredeemed gift cards to three years from our prior estimate of five years. During the second quarter of 2006, we completed an analysis of our historical gift card redemption patterns. Based on this analysis, we concluded that three years after the gift card is issued, we can determine the portion of the liability where redemption is remote. In the second quarter of fiscal 2006, this change in estimate resulted in income recognition of approximately $31 million before tax in other income and is included in operating expenses.
Share-Based Payment
With the adoption of SFAS 123(R) at the beginning of our first fiscal quarter of 2006, we added "Share-Based Payment" as a critical accounting policy and estimate.
We account for share-based payments in accordance with the fair value recognition provisions of SFAS 123(R). We use the Black-Scholes-Merton option-pricing model which requires the input of highly subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them, the estimated volatility of our common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements. Changes in the subjective assumptions can materially affect the estimate of fair value of share-based payments and, consequently, the related amount recognized on the consolidated statements of income.
In the second quarter of fiscal 2006, we proactively reviewed our stock option granting practices over the 10-year period ended June 2006, given the heightened scrutiny regarding this topic. We concluded that the compensation expense recorded in our historical financial statements was materially correct. Specifically, we identified no backdating in connection with the grants of stock options to Vice Presidents and above. We found some errors relating to the dating of stock option grants to certain lower-level employees as well as some calculation errors. We finalized our review and recorded $4.5 million of additional compensation expense in the third quarter of fiscal 2006 related to historical stock option accounting.
Inventory Valuation
In fiscal 2005, the company implemented a new inventory system and effective January 29, 2006 (the beginning of fiscal 2006), the company changed its inventory flow assumption from the first-in, first-out ("FIFO") method to the weighted average cost method ("WAC"). The change in inventory accounting method did not have a material impact on the fiscal 2006 financial statements and because the effect on prior periods presented is not material, they have not been restated as would be required by SFAS 154.
See Note 3 to the condensed consolidated financial statements for recent accounting pronouncements, including the expected dates of adoption and estimated effects on our financial statements.
We operate in foreign countries which exposes us to market risk associated with foreign currency exchange rate fluctuations. Our risk management policy is to hedge substantially all forecasted merchandise purchases for foreign operations using foreign exchange forward contracts. We also use forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany loans and balances denominated in currencies other than the functional currency of the entity holding or issuing the intercompany loan or balance. These contracts are entered into with large, reputable financial institutions, thereby minimizing the credit exposure from our counter-parties. The principal currencies hedged during the third quarter of 2006 were the Euro, British Pound, Japanese Yen, and Canadian Dollar. Our use of derivative financial instruments represents risk management; we do not use derivative financial instruments for trading purposes.
We hedge the net assets of certain international subsidiaries to offset the foreign exchange translation related to our investments in these subsidiaries. The change in fair value of the hedging instrument is reported in accumulated other comprehensive earnings within shareholders' equity to offset the foreign currency translation adjustments on the investments.
In addition, we used a cross-currency interest rate swap to swap the interest and principal payable of $50 million debt securities of our Japanese subsidiary, Gap (Japan) KK, from a fixed interest rate of 6.25 percent, payable in U.S. dollars, to 6.1 billion Japanese yen with a fixed interest rate of 2.43 percent. These debt securities are recorded on the condensed consolidated balance sheets at their issuance amount, net of unamortized discount. The derivative instruments are recorded in the condensed consolidated balance sheets at their fair value as of October 28, 2006.
We have limited exposure to interest rate fluctuations on our borrowings. The interest on our long-term debt is set at a fixed coupon, with the exception of the interest rates payable by us on our outstanding $500 million notes due December 2008, of which only $138 million remains outstanding, which are subject to change based on our long-term senior unsecured debt ratings. The interest rates earned on our cash and equivalents will fluctuate in line with short-term interest rates.
Our market risk profile as of October 28, 2006 has not significantly changed since January 28, 2006. Our market risk profile on January 28, 2006 is disclosed in our 2005 Annual Report on Form 10-K.
Management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based on this review, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of October 28, 2006.
During our third fiscal quarter of 2006, there were no changes in the company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting.
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. Actions filed against us include commercial, intellectual property, customer, and labor and employment related claims, including class action lawsuits in which plaintiffs allege that we violated federal and state wage and hour and other laws. 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.
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended January 28, 2006.
The following table presents information with respect to purchases of common stock of the Company made during the thirteen weeks ended October 28, 2006, by Gap Inc. or any affiliated purchaser, as defined in Rule 10b-18(a)(3) under the Exchange Act.
Purchased Average
per Share Total Number of
or Programs Maximum Number (or
approximate dollar
amount) of shares that
Month #1 (July 30 - August 26)
6,885,900 $ 16.69 6,885,900 $ 635 million
Month #2 (August 27 - September 30)
Month #3 (October 1 - October 28)
305,400 $ 19.33 305,400 $ 479 million
16,068,840 $ 16.86 16,068,840
(1) On January 24, 2006, the Board of Directors approved an additional $500 million for our share repurchase program, which we announced on February 23, 2006. The authority with respect to that authorization expires on January 24, 2008.
(2) On July 18, 2006, the Board of Directors approved an additional $750 million for our share repurchase program, which we announced on August 3, 2006. The authority with respect to that authorization expires on August 1, 2007.
(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
* Filed herewith.
+ Furnished herewith.
Date: December 1, 2006 By /s/ PAUL S. PRESSLER
Paul S. Pressler
Date: December 1, 2006 By /s/ BYRON H. POLLITT, JR.
Byron H. Pollitt, Jr.


Welcome to the Pet Portrait of Les and Alfie. Kerrie and her mum emailed us to see if we would be able to paint a portrait of Kerrie's dad and their dearly missed and much loved dog Alfie. They had seen a portrait Nicholas painted of a man with his dog on a boat on our website and hoped we could create them a portrait along the same lines.
Kerrie's dad Les was going to be 65 and he was also retiring. So they commissioned Nicholas to paint a portrait for them as a joint present. Kerrie emailed us their favourite photo of Les with Alfie however they were sitting in a car park. We chatted at light what we could add in the background and we came up with a beach scene, not far form where they live that would mean a lot to Les as it was where he would walk Alfie on occasion. So after creating a mockup, and perfecting the design, Nicholas paint the portrait that you can see below.
The portrait has been painted in oils on Italian linen canvas at 16 x 12 size. I have added some photos of the portrait with Nicholas' hand holding his brush. Our readers can see the scale of the painting. The portrait was also framed using our traditional flat frame too with inner linen slip. If you scroll down you can see photos, including some Kerrie took when the portrait was displayed on their wall. Les was over the moon with the painting.
here are some close up photos of the portrait with Nicholas' hand on to show scale.
What an absolutely stunning portrait! What a wonderful gift to give to someone. All I can say is WOW!!


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Labor Esq Reps INT'L
Sony Hack: Channing Tatum's 'Ghostbusters' Pitch and 4 Other Revelations
1:57 AM PST 12/16/2014 by Ryan Gajewski
Arthur Mola/Invision/AP
Channing Tatum at the Foxcatcher photocall Monday.
In an email, Sony co-chairman Amy Pascal had harsh words for Cameron Crowe's upcoming Bradley Cooper film
Does Channing Tatum want to be the person you call if there's something strange in your neighborhood?
As more leaked emails hit the web following the Nov. 24 cyber attack on Sony Pictures Entertainment's systems, the actor's pitch for a new Ghostbusters movie in which he would star has come to light.
Here are five of the most notable revelations to have recently surfaced from the leaked emails, published by Defamer (here and here), The Daily Beast and Vulture.
1. Channing Tatum wants himself and Chris Pratt to strap on proton packs.
In August, Tatum sent the following email to Sony co-chairman Amy Pascal, seemingly to express his interest in starring in a new Ghostbusters film: "Let us show the world The DarkSide and let us fight it with all the glory and epicness of a HUGE BATMAN BEGINS MOVIE. I know we can make this a huge franchise. Fun adventure craziness. COME OONNNN!!!"
An email sent the following day by Columbia Pictures co-president of production Hannah Minghella shed more light on the possible project, which brothers Anthony and Joe Russo (who directed Captain America: The Winter Soldier) would develop and produce for Tatum and Pratt to star in. "In a curious turn of events, the Russos and Channing want to develop Ghostbusters as a vehicle for Channing and Chris Pratt to do together," Minghella wrote. "The Russos, Channing and [Tatum's producing partner] Reid [Carolin] have been brainstorming ideas and want to create a whole new mythology that would support multiple movies (the way that [Christopher] Nolan reinvented Batman)."
Minghella, who wrote that the film would be "simultaneously super scary while also super funny," pointed out that the Russo brothers are close with Paul Feig, who is helming a female-centric Ghostbusters reboot. According to Minghella, the Russos would like Feig to direct the Tatum-Pratt film, as well as the all-female one.
Minghella wrote that she thinks both films could exist together, and her fellow Sony execs appear to agree. They all wrote back with enthusiastic replies, including Pascal, who summed up her sentiment with one simple word: "f—."
See more Channing Tatum: Exclusive Portraits of the 'Foxcatcher' Star
2. Prepare to jump out of your seat during Paul Feig's Ghostbusters film.
An email from Feig revealed that he plans to make his film "scarier and more hi-tech" than the 1984 original. He wants Peter Dinklage to play the film's main villain, a convicted murderer who returns as a ghost when his execution is disrupted by "a supercharged electrical storm."
3. Feig wants a certain Saturday Night Live actress in it, too.
Feig's email stated that the film will center on four female Ghostbusters who work for the government, although the government claims not to be affiliated with them in order to deny the official existence of ghosts. The women "figure out in funny, scary and action-packed ways how to save New York City and the world."
Feig also hopes to have SNL's Cecily Strong as a bureaucratic antagonist who is "always saying terrible things about them in press conferences and then apologizing to them behind the scenes."
Read more Can Sony Get Around the First Amendment to Sue the Media Over the Hack?
4. Pascal had some harsh words for Cameron Crowe's forthcoming Bradley Cooper rom-com.
Following the still-untitled film's November test screenings in New York City and Huntington Beach, Calif., Pascal fired off an email in which she had this to say about the film: "I'm never starting a movie again when the script is ridiculous." She added, "I don't care how much I love the director and the actors. It never, not even once, ever works."
She wrote that the test scores for the film, which also stars Emma Stone and Rachel McAdams, are "same as last time" and "way way worse in New York." She criticized Crowe for not changing anything since the film was screened previously. She also wrote, "People don't like people in movies who flirt with married people or married people who flirt."
5. Not all Sony execs think The Interview is very good.
In an email to another Sony exec, U.K. Sony Pictures' Peter Taylor criticized the forthcoming Seth Rogen-James Franco comedy as a "misfire," calling it "unfunny and repetitive." Taylor also wrote that Franco "proves once again that irritation is his strong suit, which is a shame because the character could have been appealing and funny out of his hands."
Email: Ryan.Gajewski@pgmedia.org
Twitter: @_RyanGajewski
Ryan Gajewski
thrnews@thr.com @thr

redpajama_set_name: RedPajamaCommonCrawl


As a parent, you might be wondering how often should my child visit a pediatric dentist for care?
When children are just beginning to develop teeth, it's sometimes recommended that they see a pediatric dentist every four months. In general, though, children should see a dentist as often as an adult does, which is about twice a year. If our pediatric dentist sees that your little one has an increased risk of decay or a growth pattern that needs to be closely monitored, more frequent visits may be recommended.
Staying cavity-free is one of the major reasons that children (and adults) need to see a dentist for regular checkups. It's true that some patients are less vulnerable to cavities than others, but not having a cavity now doesn't mean you won't develop one in the future. Young children should see a dentist twice a year regardless of any clean bill of health they've received in the past.
To provide your child with extra protection following her checkup, dental sealants or a fluoride treatment may be included. These effective services help strengthen teeth and protect them from bacteria and decay. Sealants work by physically blocking teeth from both of these. Fluoride, on the other hand, draws important minerals and nutrients to teeth, strengthening the enamel as a result.
Cavity protection is just one aspect of regular care, though. Professional cleanings are also important. When bacteria and plaque collect around teeth and gums the resulting irritations can lead to gum disease. Visits give our pediatric dentists a chance to talk to both you and your child. During our time together we can come up with an appropriate appointment schedule for your little one, in addition to discussing any treatments that are needed and offering helpful oral hygiene tips. Our pediatric dentist will also consider your child's medical and dental history.
Sometimes X-rays are needed to fully understand your child's current health and future needs. But concerned parents should know that X-rays will not be taken at every appointment; they're used only in special cases to deliver truly comprehensive care. If you have any questions or concerns about us taking X-rays, feel free to raise them. We understand your concern and we're happy to answer any questions you might have.
Brush twice a day and floss once.
Take advantage of dental sealants and fluoride supplements when offered.
Drink tap water, which includes fluoride, instead of bottled water and brush with a trusted fluoride toothpaste.
By following these tips, you can help your little one stay healthy in between visits to our pediatric dentistry office.
Is it time for your child's next visit? Are you unsure of when to bring your little one in for a first visit? Call Kidtastic today to reserve an appointment or to ask about any of our services. We have locations in Mesa, Gilbert and Queen Creek. Our team has years of experiencing and training to help our youngest patients develop healthy, beautiful smiles. We're ready to hear from you today.
Category: Oral Education | Tags: How Often Should My Child Visit a Pediatric Dentist For Care?


These are the same boots worn in the series "Pacific". No detail overlooked, tough Goodyear welt construction, rubber soles and heels. Heavy grease impregnated rough out steerhide leather. Aluminum eyelets and govt Markings. There is no better on the market today.


Cai C, et al. A clinical prediction rule for classifying patients with low back pain who demonstrate short-term improvement with mechanical lumbar traction. Eur Spine J. 2009; 18(4): 554-61.
Childs JD, Fritz JM, Flynn TW, et al. "A clinical prediction rule to identify patients with low back pain most likely to benefit from spinal manipulation: a validation study." Ann Intern Med 2004; 141: 920-928.
Cook C, Brown C, Michael K, Isaacs R, Howes C, Richardson W, Roman M, Hegedus E. The clinical value of a cluster of patient history and observational findings as a diagnostic support tool for lumbar spine stenosis. Physiother Res Int. 2011; 16(3):170-8.
Fritz JM, et al. Is there a subgroup of patients with low back pain likely to benefit from mechanical traction? Results of a randomized clinical trial and subgrouping analysis. Spine. 2007; 32(26): E793-800.
Laslett M, et al. Diagnosis of sacroiliac joint pain: validity of individual provocation tests and composites of tests. Manual Therapy. 2005; 10(3): 207-18.


Your home will be listed on all of the top real estate websites such as MLS multiple listing service, Realtor.com, Zillow, Trulia and syndicated to many more websites until your home is SOLD.
Our real estate broker that has decades of experience will be available to you for full phone support prior to the listing, all the way to closing.
You will be provided with a comparable market analysis at your request to help price your home at the right price for sale.
A professional photographer will come to your home to take high resolution photography and do a virtual tour to showcase your home on all of the websites for the world to see.
A combination lock box will be provided to enable realtors to enter your home with potential buyers with your permission.
This is everything needed to get your home sold quickly and your opportunity to save thousands to tens of thousands of dollars of your hard earned equity in your home.
Choose the sign with your phone number on it to try and sell on your own and save all realtor commissions. If you do not have time or do not want to take calls from potential buyers and do not mind paying the realtor who brings the buyer a commission, then choose the sign with our number on it.
Question: Is it really possible to only pay $1,495 to sell my home?
Answer: YES - If you take all calls from potential buyers directly and sell your home to a buyer yourself, there will be no realtor commissions to pay.
Question: What if I don't want to take phone calls from potential buyers and show my home to them?
Scenario 1 - We will take all calls from potential buyers by placing the Listed Smarter phone number on your lawn sign and public websites. If we show and sell your home, you will still only pay our flat fee for listing and marketing your property plus the 2% to 3% commission that you would have paid to any realtor who brought the buyer for your home. You still save thousands to tens of thousands of dollars by not paying an additional traditional 2% to 3% to the listing realtor.
Scenario 2 - All realtors who need to make an appointment to show your home to their potential buyer will call you directly because your phone number will be on the MLS listing showing instructions, which is only viewed by realtors, not the public.
Question: How long will my listing run?
Answer: We will run your listing as long as it takes to get your home sold. Renewals are complimentary.
Question: Can I have my listing removed at any time?
Question: How do I know if a potential buyer is qualified to purchase my home before I show it to them?
Answer: You can ask potential buyer if they are planning on getting a mortgage or paying cash. If they are getting a mortgage do not hesitate to ask them for a pre-qualification letter from their lending institution. If they are paying cash, you may request proof of funds.
Question: What if I don't know the right attorney to write the contract, review it and help me with the closing?
Answer: If a realtor sells your home they will write up the contract and the attorney of your choice will review it and get you through to closing. We recommend doing a google search for a real estate attorney in your area. We would be happy to recommend an attorney to you if you would like us to do so.
Question: How do realtors show my property if I am not home?
Answer: We will set up showing instructions on the MLS listing however you would like. We will also provide a combination lock box so that you may give a code to the realtors to show your property without you needing to be there.
Question: Will there be any additional charges to making price change or modifications to the listing?
Answer: No. Please e-mail any changes to listedsmarter.com. Most changes will be done within 48 hours.


Rid A Pest has been doing our home for the last year now and we couldn't be more pleased with the service. Always right on time, smiling and get the work done quickly and correctly. Thanks Rid A Pest for keeping us pest free in our home.


Have been you conscious that water stress above 80 psi can truly trigger a loud hammering sound to occur in your plumbing system? This can be easily resolved by putting in a valve that may modify the incoming water stress. For extra nice skilled ideas, check out the rest of this article. During the week, hair and soap can build up in your drains and might trigger serious clogs. Make sure that you have strainers in each of your drains to help catch this debris so that it doesn't turn out to be an issue. This can help to keep your water flowing efficiently.
Preserve a grease vat in your kitchen to pour all used cooking grease into. Grease is an enormous purpose that kitchen drains sluggish and ultimately, stop up. Even the harshest drain cleaning merchandise, tend to not be a match for a heavy grease clog. The grease you save within the vat will be shaped into balls and rolled in chook seed for great winter hen feeders. To stop pipe banging while you turn on the water, take into consideration rubber blankets or straps. As a substitute of assuming the pipes want replaced, think about anchoring them or buffering them. In case your pipes are plastic, leave them some room for enlargement and contraction. If pipes do not leak but just make noise, eliminate the noise.
There are easy ways to test your rest room for leaks that can ultimately lead to great cost financial savings in the long term. The simplest means to do that is to pour a small amount of meals dye into the holding tank of your rest room overnight. Within the morning, if in case you have any color in the basin then you realize you may have a leak that wants some consideration. DIY plumbing jobs will require that you perceive methods to solder copper for the strains for the water provide. You may observe this ability in order that it is possible for you to to run your strains with out worrying about it leaking. Search online for video tutorials that may allow you to get a handle on easy methods to go about soldering.
Many individuals attempt to do their own plumbing with a view to save money on repair prices. They often fail resulting from an absence of proper plumbing data or by using the incorrect instruments for the job. If you want to do your own plumbing with out doing extra harm than good, then learn the ideas in the following article. Some recommendations on how one can begin with plumbing makes an incredible begin for newbies. Under are some tips that can hopefully help you into making higher selections and to start out sustaining your individual home system. You need it to work successfully, so it's to your profit to learn one thing from the following pointers.
Check your gasoline water heater periodically to make sure the pilot flame is lit.
Many individuals complain of low water strain. While there are a number of issues that can trigger this, one should not be missed when starting your investigation. What sort of pipes do you've got? In case your piping is galvanized, you might be higher off just replacing your piping which can eradicate the issue. To achieve success in any plumbing project, make sure you flip the water off earlier than you start unscrewing pipes. This tip would possibly really sound insulting, however you're probably getting caught up in having the proper tools and components and being dressed proper. Double test that there is not a splash waiting for you. Then triple and quadruple check.
In order to keep away from unsightly and unnecessary clogs in your shower, spend money on a drain strainer. This cost-effective addition to your shower will gather your hair earlier than it makes it to the drain, and limit the possibilities that you will find yourself showering whereas standing in a clogged up mess. Set the temperature in your sizzling water heater to a temperature that doesn't exceed 120 degrees. This helps to save lots of energy and prevents the water from becoming too sizzling and potentially scalding someone in your family. Older models that wouldn't have a temperature setting needs to be set on Medium.
Having to wiggle the toilet deal with or maintain it right down to get your bathroom to completely flush indicates that the tank components have to be replaced. Kits that include all of the elements needed might be purchased in any hardware or home enchancment store to easily do the restore your self. Plumbing issues are by no means that simple to deal with, however you can see it's simpler to navigate the issue when you may have solid advice. Whether you need assistance diagnosing or putting the venture together yourself, these steps will information you thru each course of that you'll encounter as you take on your private home's plumbing.
This could help enhance the water pressure, as a result of any obstacles within the aerator will have been removed. Brass plumbing fixtures are extremely really helpful if you happen to need any form of plumbing fixture.


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June 22nd – 29th The Rocky Horror Show, Lynn Trefzger, and dance
After 39 long years of debauchery and Rock N' Roll fun, The Rocky Horror Show – the original cult classic musical – finally makes its debut at the Chapel Street Playhouse! The Rocky Horror Showis the timeless story of what happens when two seemingly innocent, straight laced kids get their worlds rocked and turned upside down by a deranged mad scientist. Audience participation is highly encouraged! Due to content and language, Rocky is not recommended for children under 13 years of age. Chapel Street Playhouse, June 22nd, 8 P.M. and 11:59 P.M., June 23rd, 8 P.M.
Lynn Trefzger, Ventriloquist & Comedian
Lynn has won the hearts and laughs of her fans with her goofy humor and oddball characters. She even turns members of the audience into living dummies. "A first-rate entertainer" named Ventriloquist of the Year three times. The Grand's Summer Children's Theater presents a variety of fun and engaging performances by both local and national artists. Each show is a unique adventure offering something for everyone, with magic, ventriloquism, comedy, singing and dancing, classic fairy tales, and even a chance for local children to star in the show! The Grand, June 28th, 10 A.M. and 1 P.M.
Illstyle & Peace Productions Dance Company
Impossible IZZpossible celebrates the art and movement of hip-hop and includes a funky blend of locking, breaking, popping, tap and house dancing, vocal percussions, DJing, blending both modern and traditional dance forms. The work emphasizes hip-hop's use of similar steps to those found in ballet, modern and other, more traditional dance forms, adding an urban style to them to create new steps. Free! The Freeman Stage at Bayside, June 28th, 2012 7 P.M.