Advance Auto Parts 2008 Annual Report Download - page 27

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13
Additionally, we are subject to numerous federal, state and local laws and governmental regulations relating to
environmental protection, product quality standards, building and zoning requirements, as well as employment law
matters. If we fail to comply with existing or future laws or regulations, we may be subject to governmental or
judicial fines or sanctions, while incurring substantial legal fees and costs. In addition, our capital expenses could
increase due to remediation measures that may be required if we are found to be noncompliant with any existing or
future laws or regulations.
War or acts of terrorism, or the threat of either, may negatively impact the availability and cost of
merchandise and our customers and adversely impact our sales and profitability.
War or acts of terrorism, or the threat of either, may have a negative impact on our ability to obtain merchandise
available for sale in our stores. Some of our merchandise is imported from other countries. If imported goods
become difficult or impossible to import into the United States, and if we cannot obtain such merchandise from
other sources at similar costs, our sales and profit margins may be negatively affected.
In the event that commercial transportation is curtailed or substantially delayed, our business may be adversely
impacted, as we may have difficulty shipping merchandise to our distribution centers and stores.
Furthermore, terrorist attacks, war in the Middle East, or war within or between any oil producing country
would likely result in an abrupt increase in the price of crude oil, gasoline, diesel fuel and energy costs. Such price
increases would increase the cost of doing business for us and our suppliers, and also would negatively impact our
customers' disposable income and have an adverse impact on our business, sales, profit margins and results of
operations.
Risks Relating to Our Financial Condition
The covenants governing our revolving and term loan facilities impose restrictions on us.
The terms of our revolving and term loan facilities include covenants that impose operating and financial
restrictions on us and our subsidiaries and require us to meet certain financial ratios and conditions. These
restrictions may also have a negative impact on our business, financial condition, results of operations and cash
flows by significantly limiting or prohibiting us from engaging in certain transactions, including:
• incurring or guaranteeing additional indebtedness;
• making capital expenditures and other investments;
• incurring liens on our assets and engaging in sale-leaseback transactions;
• issuing or selling capital stock of our subsidiaries;
• transferring or selling assets currently held by us; and
• engaging in mergers or acquisitions.
The failure to comply with any of these covenants would cause a default under our credit facilities.
Furthermore, our credit facilities contain certain financial covenants, including a maximum leverage ratio and a
minimum coverage ratio, which, if not maintained by us, will cause us to be in default under our credit facilities.
Any of these defaults, if not waived, could result in the acceleration of all of our debt, in which case the debt would
become immediately due and payable. If this occurs, we may not be able to repay our debt or borrow sufficient
funds to refinance it. Even if new financing were available, it may be on terms that are less favorable or otherwise
not acceptable to us.
Item 1B. Unresolved Staff Comments.
None.