The Gap 2008 Annual Report Download - page 22

The current unfavorable financial market conditions have resulted in diminished availability of external funding
and increased the related costs. There can be no assurance that our current levels of liquidity will continue or that
our ability to access the credit or capital markets will not be adversely affected by changes in the financial markets
and the global economy.
Due to our long-term credit ratings, we do not have meaningful access to the commercial paper market. Any
future reduction in our long-term senior unsecured credit rating could result in reduced access to the credit and
capital markets and higher interest costs on future financings.
We repaid our $50 million, 6.25 percent notes payable in March 2009. The Company now has no debt. As a result,
Moody’s has withdrawn its credit ratings. As of January 31, 2009, the Company had $1.8 billion in cash, cash
equivalents, and restricted cash.
For further information on our debt and credit facilities see the sections entitled “Debt” and “Credit Facilities” in
our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Part II,
Item 7 of this Form 10-K.
Trade matters may disrupt our supply chain.
Trade restrictions, including increased tariffs or quotas, embargoes, safeguards, and customs restrictions against
apparel items, as well as U.S. or foreign labor strikes, work stoppages or boycotts, could increase the cost or reduce
the supply of apparel available to us and adversely affect our business, financial condition, and results of
operations. We cannot predict whether any of the countries in which our merchandise currently is manufactured
or may be manufactured in the future will be subject to additional trade restrictions imposed by the U.S. and other
foreign governments, including the likelihood, type or effect of any such restrictions. For example, the quota
system established by the Agreement on Textiles and Clothing was phased out for World Trade Organization
countries and the U.S.-China textile and apparel agreement expired on December 31, 2008, but there are no
assurances that additional restrictions will not be reestablished for certain categories in specific countries.
Moreover, with the disappearance of quotas, the possibility of anti-dumping or countervailing duties lawsuits from
U.S. domestic producers against importers increases. We are unable to determine the impact of the changes to the
quota system or the impact that potential tariff lawsuits could have on our global sourcing operations. Our
sourcing operations may be adversely affected by trade limits or political and financial instability resulting in the
disruption of trade from exporting countries, significant fluctuation in the value of the U.S. dollar against foreign
currencies, restrictions on the transfer of funds, and/or other trade disruptions.
Updates or changes to our IT systems may disrupt operations.
We continue to evaluate and implement upgrades to our IT systems. Upgrades involve replacing existing systems
with successor systems, making changes to existing systems or cost-effectively acquiring new systems with new
functionality. We are aware of inherent risks associated with replacing these systems, including accurately
capturing data and system disruptions, and believe we are taking appropriate action to mitigate the risks through
testing, training, and staging implementation as well as ensuring appropriate commercial contracts with third-
party vendors supplying such replacement technologies are in place. Although we are on track with the
replacement or upgrade of our systems, there can be no assurances that we will successfully launch these systems
as planned or that they will occur without disruptions to our operations. IT system disruptions, if not anticipated
and appropriately mitigated, could have a material adverse effect on our results of operations.
Our IT services agreement with IBM could cause disruptions in our operations and have an adverse effect
on our financial results.
We have entered into the fourth year of a ten-year non-exclusive services agreement with IBM under which IBM
operates certain significant aspects of our information technology infrastructure. Under the original agreement,
this included supporting our mainframe, server, network and data center, and store operations, as well as help
desk, end user support, and some disaster recovery. The agreement was amended effective March 2, 2009 to
return to us certain services originally performed by IBM under the agreement. These returned services include
services related to management of our server and data center environment, along with disaster recovery. All other
10 Gap Inc. Form 10-K