The Gap 2013 Annual Report Download - page 77

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We maintain two separate agreements in China (the "China Facilities") to make unsecured revolving credit
facilities available for our operations in China; they are uncommitted and are available for borrowings, overdraft
borrowings, and the issuance of bank guarantees. The 196 million Chinese yuan China Facilities expired in
October 2012 and they were subsequently renewed with an increased availability of 250 million Chinese yuan
($41 million as of February 1, 2014) and no expiration date. As of February 1, 2014, there were no borrowings
under the China Facilities. There were 42 million Chinese yuan ($7 million as of February 1, 2014) in bank
guarantees primarily related to store leases under the China Facilities as of February 1, 2014. The China Facility
agreements do not contain any financial covenants.
We have a bilateral unsecured standby letter of credit agreement that is uncommitted and does not have an
expiration date. As of February 1, 2014, we had $50 million in standby letters of credit issued under the
agreement. We also have a $50 million, two-year, unsecured committed letter of credit agreement with an
expiration date of September 2014. As of February 1, 2014, we had no trade letters of credit issued under this
letter of credit agreement.
The Facility and the unsecured committed letter of credit agreement contain financial and other covenants
including, but not limited to, limitations on liens and subsidiary debt, as well as the maintenance of two financial
ratios—a minimum annual fixed charge coverage ratio of 2.00 and a maximum annual leverage ratio of 2.25. As
of February 1, 2014, we were in compliance with all such covenants. Violation of these covenants could result in a
default under the Facility and letter of credit agreement, which would permit the participating banks to terminate
our ability to access the Facility for letters of credit and advances, terminate our ability to request letters of credit
under the letter of credit agreement, require the immediate repayment of any outstanding advances under the
Facility, and require the immediate posting of cash collateral in support of any outstanding letters of credit under
the letter of credit agreement.
Note 7. Fair Value Measurements
There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during
fiscal 2013 or 2012. There were no transfers into or out of level 1 and level 2 during fiscal 2013 or 2012.
Financial Assets and Liabilities
Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents and short-term
investments held at amortized cost are as follows:
Fair Value Measurements at Reporting Date Using
($ in millions) February 1, 2014
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents $ 519 $ 196 $ 323 $ —
Derivative financial instruments 64 — 64 —
Deferred compensation plan assets 37 37 — —
Total $ 620 $ 233 $ 387 $ —
Liabilities:
Derivative financial instruments $ 15 $ — $ 15 $ —