Banana Republic 2014 Annual Report Download - page 22

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Our ability to deliver strong comparable sales results and margins depends in large part on accurately forecasting
demand and apparel trends, selecting effective marketing techniques, providing an appropriate mix of
merchandise for our broad and diverse customer base, managing inventory effectively, using effective pricing
strategies, and optimizing store performance. Failure to meet the expectations of investors, securities analysts, or
credit rating agencies in one or more future periods could reduce the market price of our common stock and
cause our credit ratings to decline.
Changes in our credit profile or deterioration in market conditions may limit our access to the capital
markets and adversely impact our financial results or our business initiatives.
In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent notes due April 2021. As a result,
we have additional costs that include interest payable semiannually on the notes. In January 2014, we also
entered into a 15 billion Japanese yen ($128 million as of January 31, 2015), four-year term loan due January
2018.
Our cash flows from operations are the primary source of funds for these debt service payments. In this regard,
we have generated annual cash flow from operating activities in excess of $1 billion per year for well over a
decade and ended fiscal 2014 with $1.5 billion of cash and cash equivalents on our balance sheet. We are also
able to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility. We continue to
target a cash balance between $1.0 billion to $1.2 billion, which provides not only for our working capital needs,
but also a reserve for unexpected business downturns. However, if our cash flows from operating activities
decline significantly, we may be required to reprioritize our business initiatives to ensure that we can continue to
service or refinance our debt with favorable rates and terms. In addition, any future reduction in our long-term
senior unsecured credit ratings could result in reduced access to the credit and capital markets and higher
interest costs on future financings.
For further information on our debt and credit facilities, see Part II, Item 8, Financial Statements and
Supplementary Data, Notes 5 and 6 of Notes to Consolidated Financial Statements of this Form 10-K.
Updates or changes to our IT systems may disrupt operations.
We continue to evaluate and implement upgrades and changes to our IT systems, some of which are significant.
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 or supporting our IT initiatives.
However, there can be no assurances that we will successfully launch these systems as planned or that they will
be implemented 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.