Advance Auto Parts 2011 Annual Report Download - page 28

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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.
Impact on Operating Expenses
Rising energy prices could directly impact our operating costs, including our merchandise distribution,
commercial delivery, utility and product costs.
Because we are involved in litigation from time to time, and are subject to numerous laws and governmental
regulations, we could incur substantial judgments, fines, legal fees and other costs.
We are sometimes the subject of complaints or litigation from customers, employees or other third parties for
various actions. From time to time, we are involved in litigation involving claims related to, among other things,
breach of contract, tortious conduct, employment law matters, payment of wages, asbestos exposure, real estate, and
product defects. The damages sought against us in some of these litigation proceedings are substantial. Although we
maintain liability insurance for some litigation claims, if one or more of the claims were to greatly exceed our
insurance coverage limits or if our insurance policies do not cover a claim, this could have a material adverse affect
on our business, financial condition, results of operations and cash flows.
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.
Business interruptions may negatively impact our store hours, operability of our computer systems and the
availability and cost of merchandise which may adversely impact our sales and profitability.
War or acts of terrorism, hurricanes, tornados, earthquakes or other natural disasters, or the threat of any of
these calamities or others, may have a negative impact on our ability to obtain merchandise available for sale in our
stores, result in certain of our stores being closed for an extended period of time, negatively affect the lives of our
customers or team members, or otherwise negatively impact our operations. 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 receiving merchandise from our suppliers and shipping it to our stores.
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.
We rely extensively on our computer systems and the systems of our business partners to manage inventory,
process transactions and report results. Any such systems are subject to damage or interruption from power outages,
telecommunication failures, computer viruses, security breaches and catastrophic events. If our computer systems or
those of our business partners fail we may experience loss of critical data and interruptions or delays in our ability to