Abercrombie & Fitch 1997 Annual Report Download - page 11

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INFORMATION SYSTEMS AND “YEAR 2000” COMPLIANCE
The Company recently completed a comprehensive review of
its information systems and is involved in a program to update
computer systems and applications in preparation for the year
2000. The Company will incur internal staff costs as well as out-
side consulting and other expenditures related to this initiative.
Total expenditures related to remediation, testing, conversion,
replacement and upgrading system applications are expected to
range from $3.0 to $4.0 million from 1997 through 2000. Total
incremental expenses, including depreciation and amortization
of new package systems, remediation to bring current systems into
compliance and writing off legacy systems are not expected to have
a material impact on the Company’s financial condition in any
year during the conversion process from 1997 through 2000.
The Company is attempting to contact vendors and others on
whom it relies to ensure that their systems will be converted in a
timely fashion. However, there can be no assurance that the sys-
tems of other companies on which the Company’s systems rely
will also be converted in a timely fashion or that any such failure
to convert by another company would not have an adverse effect
on the Company’s systems. Furthermore, no assurance can be
given that any or all of the Company’s systems are or will be Year
2000 compliant, or that the ultimate costs required to address the
Year 2000 issue or the impact of any failure to achieve substantial
Year 2000 compliance will not have a material adverse effect on
the Company’s financial condition.
REGISTRATION STATEMENT FOR EXCHANGE OFFER
The Company and The Limited will enter into certain service
agreements upon the consummation of the Exchange Offer (see
Note 11) which will include among other things, tax, information
technology and store design and construction. These agree-
ments generally will be for a term of one year. Service agreements
will also be entered into for the continued use by the Company
of its distribution and home office space and transportation and
logistic services. These agreements generally will be for a term of
three years. Costs for these services will generally be the costs and
expenses incurred by The Limited plus 5% of such amounts.
Upon expiration of these agreements with The Limited, the
Company may bring certain services in-house, contract with
other outside parties or take other actions the Company deems
appropriate at that time.
Abercrombie &Fitch Co.
The Company does not anticipate that costs associated with
these service agreements or costs to be incurred upon their
expiration will have a material impact on its financial condition.
IMPACT OF INFLATION The Company’s results of operations
and financial condition are presented based upon historical
cost. While it is difficult to accurately measure the impact of infla-
tion due to the imprecise nature of the estimates required, the
Company believes that the effects of inflation, if any, on its
results of operations and financial condition have been minor.
ADOPTION OF NEW ACCOUNTING STANDARDS During
the fourth quarter of 1997, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, “Earnings
Per Share” which requires the Company to disclose earnings per
basic and diluted share for all periods presented.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECUR-
ITIES LITIGATION REFORM ACT OF 1995 The Company
cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995)
contained in this Report, the Company’s Form 10-K or made by
management of the Company involve risks and uncertainties, and
are subject to change based on various important factors. The
following factors, among others, in some cases have affected and
in the future could affect the Company’s financial performance
and actual results and could cause actual results for 1998 and
beyond to differ materially from those expressed or implied in any
such forward-looking statements: changes in consumer spend-
ing patterns, consumer preferences and overall economic
conditions, the impact of competition and pricing, changes in
weather patterns, political stability, currency and exchange risks
and changes in existing or potential duties, tariffs or quotas, avail-
ability of suitable store locations at appropriate terms, ability to
develop new merchandise and ability to hire and train associates.