Advance Auto Parts 2009 Annual Report Download - page 23

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10
Item 1A. Risk Factors.
Our business is subject to a variety of risks, both known and unknown. Our business, financial condition, results
of operations and cash flows could be negatively impacted by the following risk factors. These risks are not the only
risks that may impact our business.
Deterioration in general macro-economic conditions, including unemployment, inflation or deflation,
consumer debt levels, high fuel and energy costs, uncertain credit markets or other recessionary type
conditions could have a negative impact on our business, financial condition, results of operations and cash
flows.
Deterioration in general macro-economic conditions impacts us through (i) higher operating costs from higher
energy prices, (ii) potential adverse effects from deteriorating and uncertain credit markets and (iii) the negative
impact on our suppliers and customers.
Impact of Credit Market Uncertainty
Our overall credit rating may be negatively impacted by deteriorating and uncertain credit markets. The interest
rates on our credit facilities are linked directly to our credit ratings. Accordingly, any negative impact on our credit
rating would likely result in higher interest rates and interest expense we pay on borrowed funds. Additionally, we
may be limited in our ability to borrow additional funds to finance our operations. It is possible that one or more of
the banks that provides us with financing under our credit facilities may fail to honor the terms of our existing credit
facilities or be financially unable to provide the unused credit. An inability to obtain sufficient financing at cost-
effective rates could have a materially adverse affect on our business, financial condition, results of operations and
cash flows.
Impact on our Suppliers
Our business depends on developing and maintaining close relationships with our suppliers and on our
suppliers' ability or willingness to sell quality products to us at favorable prices and terms. Many factors outside of
our control may harm these relationships and the ability or willingness of these suppliers to sell us products on
favorable terms. One such factor is a general decline in the economy and economic conditions and prolonged
recessionary conditions. These events could negatively affect our suppliers’ operations and make it difficult for
them to obtain the credit lines or loans necessary to finance their operations in the short-term or long-term and meet
our product requirements. Financial or operational difficulties that some of our suppliers may face could also
increase the cost of the products we purchase from them or our ability to source product from them. We might not
be able to pass our increased costs onto our customers. In addition, the trend towards consolidation among
automotive parts suppliers as well as the off-shoring of manufacturing capacity to foreign countries may disrupt or
end our relationship with some suppliers, and could lead to less competition and result in higher prices. We could
also be negatively impacted by suppliers who might experience bankruptcies, work stoppages, labor strikes or other
interruptions to or difficulties in the manufacture or supply of the products we purchase from them.
Impact on our Customers
Deterioration in macro-economic conditions may have a negative impact on our customers’ net worth, financial
resources and disposable income. This impact could reduce their willingness or ability to pay for accessories,
maintenance or repair of their vehicles, which results in lower sales in our stores. Higher fuel costs may also reduce
the overall number of miles driven by our customers resulting in less parts failures and elective maintenance
required to be completed.
If overall demand for products sold by our stores slows or declines, our business, financial condition, results
of operations and cash flows will suffer. Decreased demand could also negatively impact our stock price.
Overall demand for products sold by our stores depends on many factors and may slow or decrease due to any
number of reasons, including: