Abercrombie & Fitch 2010 Annual Report Download - page 24

Table of Contents
already registered similar marks in those countries. Accordingly, it may be possible, in those foreign countries where the status of
various applications is pending or unclear, for a third-party owner of the national trademark registration for a similar mark to prohibit
the manufacture, sale or exportation of branded goods in or from that country. If we are unable to reach an arrangement with any such
party, our manufacturers may be unable to manufacture our products, and we may be unable to sell in those countries. Our inability to
register our trademarks or purchase or license the right to use our trademarks or logos in these jurisdictions could limit our ability to
obtain supplies from, or manufacture in, less costly markets or penetrate new markets should our business plan include selling our
merchandise in those non-U.S. jurisdictions.
We have an anti-counterfeiting program, under the auspices of the Abercrombie & Fitch Brand Protection Team, whose goal is
to eliminate the supply of illegal pieces of our products. The Brand Protection Team interacts with investigators, customs officials and
law enforcement entities throughout the world to combat the illegal use of our trademarks. Although brand security initiatives are
being taken, we cannot guarantee that our efforts against the counterfeiting of our brands will be successful.
Fluctuations in Our Tax Obligations and Effective Tax Rate May Result in Volatility in Our Operating Results.
We are subject to income taxes in many U.S. and certain foreign jurisdictions. In addition, our products are subject to import and
excise duties and/or sales, consumption or value-added taxes (or "VAT") in many jurisdictions. We record tax expense based on our
estimates of future payments, which include reserves for estimates of probable settlements of foreign and domestic tax audits. At any
one time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing
authorities may affect the ultimate settlement of these issues. As a result, we expect that throughout the year there could be ongoing
variability in our quarterly tax rates as taxable events occur and exposures are evaluated. In addition, our effective tax rate in any
given financial statement period may be materially impacted by changes in the mix and level of earnings or by changes to existing
accounting rules or regulations. Fluctuations in duties could also have a material impact on our financial condition, results of
operations or cash flows. In some international markets, we are required to hold and submit VAT to the appropriate local tax
authorities. Failure to correctly calculate or submit the appropriate amounts could subject us to substantial fines and penalties that
could have an adverse effect on our financial condition, results of operations or cash flows. In addition, tax legislation may be enacted
in the future, domestically or abroad, that impacts our current or future tax structure and effective tax rate.
The Effects of War or Acts of Terrorism Could Have a Material Adverse Effect on Our Operating Results and Financial
Condition.
The continued threat of terrorism and the associated heightened security measures and military actions in response to acts of
terrorism have disrupted commerce and have intensified uncertainties in the U.S. economy. Any further acts of terrorism or a future
war may disrupt commerce and undermine consumer confidence, which could negatively impact our sales revenue by causing
consumer spending and/or mall traffic to decline. Furthermore, an act of terrorism or war, or the threat thereof, or any other
unforeseen interruption of commerce, could negatively impact our business by interfering with our ability to obtain merchandise from
foreign manufacturers. Our inability to obtain merchandise from our foreign manufacturers or substitute other manufacturers, at
similar costs and in a timely manner, could adversely affect our operating results and financial condition.
21