Express 2010 Annual Report Download - page 38

In addition to increased regulatory compliance requirements, changes in laws could make ordinary conduct of
our business more expensive or require us to change the way we do business. For example, changes in federal
and state minimum wage laws could raise the wage requirements for certain of our employees. Other laws related
to employee benefits and treatment of employees, including laws related to limitations on employee hours,
supervisory status, leaves of absence, mandated health benefits, or overtime pay, could also negatively impact us,
such as by increasing compensation and benefits costs for overtime and medical expenses.
Moreover, changes in product safety or other consumer protection laws could lead to increased costs to us for
certain merchandise or additional costs associated with readying merchandise for sale. It is often difficult for us
to plan and prepare for potential changes to applicable laws and future actions or payments related to such
changes could be material to us.
We may be unable to protect our trademarks or other intellectual property rights, which could harm our
business.
We rely on certain trademark registrations and common law trademark rights to protect the distinctiveness of our
brand. However, there can be no assurance that the actions we have taken to establish and protect our trademarks
will be adequate to prevent imitation of our trademarks by others or to prevent others from claiming that sales of
our products infringe, dilute or otherwise violate third-party trademarks or other proprietary rights in order to
block sales of our products.
The laws of certain foreign countries may not protect the use of unregistered trademarks to the same extent as do
the laws of the United States. As a result, international protection of our brand image may be limited and our
right to use our trademarks outside the United States could be impaired. Other persons or entities may have rights
to trademarks that contain portions of our marks or may have registered similar or competing marks for apparel
and/or accessories in foreign countries in which our vendors source our merchandise. There may also be other
prior registrations of trademarks identical or similar to our trademarks in other foreign countries. Accordingly, it
may be possible for others to prevent the manufacture of our branded goods in certain foreign countries, the sale
of our branded goods into foreign countries, or the exportation of our branded goods from certain foreign
countries to the United States. Our inability to register our trademarks or purchase or license the right to use the
relevant trademarks or logos in these jurisdictions could limit our ability to obtain supplies from such markets or
penetrate new markets in jurisdictions outside the United States.
Litigation may be necessary to protect our trademarks and other intellectual property rights, to enforce these
rights, or to defend against claims by third parties alleging that we infringe, dilute or otherwise violate third-party
trademark or other intellectual property rights. Any litigation or claims brought by or against us, whether with or
without merit, or whether successful or not, could result in substantial costs and diversion of our resources, which
could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual
property rights, could subject us to significant liabilities, require us to seek licenses on unfavorable terms, if
available at all, prevent us from manufacturing or selling certain products, and/or require us to redesign or
re-label our products or rename our brand, any of which could have a material adverse effect on our business,
financial condition, results of operations, or cash flows.
Our substantial indebtedness and lease obligations could adversely affect our financial flexibility and our
competitive position.
We have, and we will continue to have, a significant amount of indebtedness. As of January 29, 2011, we had
$367.4 million of outstanding indebtedness (net of unamortized original issue discounts of $3.2 million). As of
January 29, 2011, we had no borrowings outstanding and $163.6 million available under our $200.0 million
secured Asset-Based Loan Credit Agreement (the “Opco revolving credit facility”). Our substantial level of
indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of
our indebtedness. We also have, and will continue to have, significant lease obligations. As of January 29, 2011,
22