Gap (GPS)

Cash and Cash Equivalents

The company ended the first quarter with $1.7 billion in cash, cash equivalents, and restricted cash. For the first quarter, free cash flow, defined as net cash provided by operating activities less purchases of

property and equipment, was an inflow of $139 million. Please see the reconciliation of free cash flow, a non-GAAP financial measure, from the GAAP financial measure in the tables at the end of this release.

Cash and Equivalents

Cash and equivalents represent cash and short-term, highly liquid investments with original maturities of three months or less. Amounts in-transit from banks for customer credit card, debit card and electronic benefit transfer transactions that process in less than seven days are classified as cash and equivalents in our Consolidated Balance Sheets. The banks process the majority of these amounts within one to two business days. Outstanding checks classified in accounts payable on the Consolidated Balance Sheets totaled $67 million and $70 million as of the end of fiscal 2005 and 2004, respectively.

Cash and Equivalents

Cash and equivalents represent cash and short-term, highly liquid investments with original maturities up to three months or less. Outstanding checks classified in accounts payable on the Consolidated Balance Sheets totaled $70 million and $115 million as of the end of fiscal 2004 and 2003, respectively.