Gap (GPS)

Earnings per Share

The company expects diluted earnings per share of $1.70 to $1.75 for fiscal year 2010.

Note 10. Earnings Per Share

Basic earnings per share are computed as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share are computed as net earnings divided by the weighted-average number of common shares outstanding for the period plus common stock equivalents. Common stock equivalents consist of shares subject to share-based awards with exercise prices less than the average market price of our common stock for the period, to the extent their inclusion would be dilutive.

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Weighted-average number of shares are as follows:

The above computations of weighted-average number of shares - diluted exclude 35 million and 27 million shares related to stock options and other stock awards for the thirteen weeks ended May 2, 2009 and May 3, 2008, respectively, as their inclusion would be antidilutive.

Note 14. Earnings Per Share

Basic earnings per share are computed as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share are computed as net earnings divided by the weighted-average number of common shares outstanding for the period plus common stock equivalents. Common stock equivalents consist of shares subject to share-based awards with exercise prices less than the average market price of common stock for the period, to the extent their inclusion would be dilutive.

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Weighted-average number of shares is as follows:

The above computations of weighted-average number of shares—diluted exclude stock options and other stock awards to purchase 31 million, 33 million, and 42 million shares of common stock for fiscal 2008, 2007, and 2006, respectively, as their inclusion would be antidilutive.

NOTE 13. EARNINGS PER SHARE

Basic earnings per share is computed as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed as net earnings divided by the weighted-average number of common shares outstanding for the period plus common stock equivalents. Common stock equivalents consist of shares subject to share-based awards with exercise prices less than the average market price of common stock for the period, to the extent their inclusion would be dilutive. The following summarizes the incremental shares from the potentially dilutive securities:

The above computations of weighted-average number of shares—diluted exclude stock options and other stock awards to purchase 33 million, 42 million, and 44 million shares of common stock for fiscal 2007, 2006, and 2005, respectively, as their inclusion would be antidilutive.

NOTE 10. 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 includes certain stock options and unvested shares of stock options and Service Awards, 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 shares from the potentially dilutive securities:

The above computations of weighted-average shares for diluted earnings per share exclude options to purchase 42 million, 44 million, and 33 million shares of common stock for fiscal 2006, 2005, and 2004, respectively, 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. EARNINGS PER SHARE

Basic earnings per share are 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 shares from the potentially dilutive securities:

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Excluded from the above computations of weighted-average shares for diluted earnings per share (in thousands) were options to purchase 45,475 and 35,814 shares of common stock during the thirteen weeks ended April 29, 2006 and April 30, 2005, respectively, 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.

NOTE I: 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 includes certain stock options and unvested shares of restricted stock, 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 shares from the potentially dilutive securities:

Excluded from the above computations of weighted-average shares for diluted earnings per share were options to purchase 44,499,102, 32,943,414, and 30,788,277 shares of common stock for fiscal 2005, 2004 and 2003, respectively, 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.

NOTE J: 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 includes certain stock options and unvested shares of restricted stock, 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 shares from the potentially dilutive securities:

Excluded from the above computations of weighted-average shares for diluted earnings per share were options to purchase 32,943,414, 30,788,277 and 73,472,472 shares of common stock and zero, 1,194 and 88,080 shares of unvested restricted stock for fiscal 2004, 2003 and 2002, respectively. The calculation above also excludes senior convertible notes, which are convertible to 79,728,274 shares of common stock, during the 52 weeks ended February 1, 2003, because their inclusion would have an anti-dilutive effect on earnings per share.

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GAP INC. FINANCIALS 2004