Advance Auto Parts 2015 Annual Report Download - page 27

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global credit market could have a material adverse effect on our access to short and long-term borrowings to finance our
operations and the terms and cost of that debt. It is possible that one or more of the banks that provide us with financing under
our revolving credit facility may fail to honor the terms of our existing credit facility or be financially unable to provide the
unused credit.
Our overall credit rating may be negatively impacted by deteriorating and uncertain credit markets or other factors which
may or may not be within our control. The interest rates on our publicly issued debt, term loan and revolving credit facility 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 on any borrowings under our revolving credit facility, term loan or future issuances of public debt
and less favorable terms on other operating and financing arrangements. In addition, it could reduce the attractiveness of our
vendor payment programs, where certain of our vendors finance payment obligations from us with designated third party
financial institutions, which could result in increased working capital requirements. An inability to obtain sufficient financing at
cost-effective rates could have a material adverse effect 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
and willingness to sell quality products to us at favorable prices and terms. Many factors outside our control may harm these
relationships and the ability or willingness of these suppliers to sell us products on favorable terms. Such factors include 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. If our suppliers fail to develop new products we
may not be able to meet the demands of our customers and our results of operations could be negatively affected.
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 our customers' willingness or ability to pay for accessories, maintenance or
repair of their vehicles, which results in lower sales in our stores. An increase in fuel costs may also reduce the overall number
of miles driven by our customers resulting in fewer parts failures and a reduced need for elective maintenance.
Impact on Operating Costs
Rising energy prices could directly impact our operating and product costs, including our merchandise distribution,
commercial delivery, utility and product acquisition 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, which may include class action litigation from customers, Team
Members or others 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, labor discrimination (including The Americans With Disabilities
Act), payment of wages, asbestos exposure, real estate, regulatory compliance 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 effect on our business, financial condition, results of operations and cash flows.
We are subject to numerous federal, state and local laws and governmental regulations relating to, among other things,
environmental protection, product quality standards, building and zoning requirements, discrimination (including The
Americans With Disabilities Act), labor and employment. The implementation of and compliance with existing and future laws