The Gap 2010 Annual Report Download - page 20

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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.
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.
As of January 29, 2011, the Company had $1.7 billion in cash and cash equivalents and short-term investments.
For further information on our credit facilities, see the section entitled “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. In addition, we face the possibility of
anti-dumping or countervailing duties lawsuits from U.S. domestic producers. 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 are in place
with third-party vendors supplying such replacement technologies. However, 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, or failure to successfully implement new or
upgraded systems, 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 sixth year of a ten-year non-exclusive services agreement with International Business
Machines Corporation (“IBM”) under which IBM operates certain significant aspects of our IT 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 services remain with IBM per the original agreement. Our ability to realize the expected
benefits of this arrangement is subject to various risks, some of which are not within our complete control. These
risks include, but are not limited to, disruption in services and the failure to protect the security and integrity of the
Company’s data under the terms of the agreement. We are unable to provide assurances that some or all of these
risks will not occur. Failure to effectively mitigate these risks, if they occur, could have a material adverse effect on
our operations and financial results.
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