Abercrombie & Fitch 2008 Annual Report Download - page 18

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Table of Contents
Protection Team interacts with investigators, customs officials and law enforcement entities throughout
the world to combat the illegal use of the Company’s trademarks. Although brand security initiatives are
being taken, the Company cannot guarantee that its efforts against the counterfeiting of its brands will be
successful.
The Company’s Unsecured Credit Agreement Includes Financial and Other Covenants that Impose
Restrictions on its Financial and Business Operations.
The Company’s unsecured credit agreement expires on April 12, 2013 and market conditions could
potentially impact the size and terms of a replacement facility.
In addition, the unsecured credit agreement contains financial covenants that require the Company to
maintain a minimum fixed charge coverage ratio and a maximum leverage ratio. If the Company fails to
comply with the covenants and is unable to obtain a waiver or amendment, an event of default would
result and the lenders could declare outstanding borrowings immediately due and payable. If that should
occur, the Company cannot guarantee that it would have sufficient liquidity, at that time, to repay or
refinance borrowings under the unsecured credit agreement.
The inability to obtain credit on commercially reasonable terms or a default under the current
unsecured credit agreement could adversely impact liquidity and results of operations.
Changes in Taxation Requirements Could Adversely Impact Financial Results.
The Company is subject to income tax in numerous jurisdictions, including international and domestic
locations. In addition, the Company’s products are subject to import and excise duties and/or sales or
value-added taxes in many jurisdictions. Fluctuations in tax rates and duties could have a material adverse
effect on the financial condition, results of operations or cash flows of the Company.
Modifications and/or Upgrades to Information Technology Systems may Disrupt Operations.
The Company regularly evaluates its information technology systems and requirements and is
currently implementing modifications and/or upgrades to the information technology systems that support
the business. Modifications include replacing legacy systems with successor systems, making changes to
legacy systems or acquiring new systems with new functionality. The Company is aware of inherent risks
associated with replacing and modifying these systems, including inaccurate system information and
system disruptions. The Company believes it is taking appropriate action to mitigate the risks through
testing, training and staging implementation, as well as securing appropriate commercial contracts with
third-party vendors supplying such replacement technologies. Information technology system disruptions
and inaccurate system information, if not anticipated and appropriately mitigated, could have a material
adverse effect on the Company’s financial condition or results of operations. Additionally, there is no
assurance that a successfully implemented system will deliver value to the Company.
Our Business Could Suffer if the Company’s Computer Systems are Disrupted or Cease to Operate
Effectively.
The Company relies heavily on its computer systems to record and process transactions and manage
and operate the Company’s operations. Given the significant number of transactions that are completed
annually, it is vital to maintain constant operation of the computer hardware and software systems.
Despite efforts to prevent such an occurrence, the Company’s systems are vulnerable from time-to-time to
damage or interruption from computer viruses, power outages and other technical malfunctions. If our
systems are
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Source: ABERCROMBIE & FITCH CO /DE/, 10-K, March 27, 2009 Powered by Morningstar® Document Research℠