Pep Boys 2005 Annual Report Download - page 13

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8
We face possible adverse changes in tax laws.
From time to time changes in state and local tax laws or regulations are enacted, which may increase our tax liability.
The shortfalls in tax revenues for states and municipalities in recent years have led and may continue to lead to an increase in the
frequency and scope of such changes and to increases in the number of tax audits initiated by such jurisdictions, particularly with
respect to large and well-known retailers. We also face the risk that tax authorities may challenge certain aspects of our acquisition,
operation or disposition of properties. If such challenges are successful, we may be required to pay additional taxes on our assets
or income and may be assessed interest and penalties on such additional taxes. These increased tax costs could adversely affect
our financial condition and results of operations and our ability to make interest payments to holders of the notes.
We are subject to environmental laws and may be subject to environmental liabilities that could have a material
adverse effect on us in the future.
We are subject to various federal, state and local laws and governmental regulations relating to the operation of our
business, including those governing the handling, storage and disposal of hazardous substances contained in the products we sell
and use in our service bays, the recycling of batteries, tires and used lubricants, and the ownership and operation of real property.
As a result of investigations undertaken in connection with a number of our store acquisitions and financings, we are aware that
soil or groundwater may be contaminated at some of our properties. Any failure by us to comply with environmental laws and
regulations could have a material adverse effect on us.
Risks Related to Our Industry
Our industry is highly competitive, and price competition in some categories of the automotive aftermarket or a loss
of trust in our participation in the "do-it-for-me" market, could cause a material decline in our revenues and earnings.
The automotive aftermarket retail and service industry is highly competitive and subjects us to a wide variety of
competitors. We compete primarily with the following types of businesses in each category of the automotive aftermarket:
Do-It-Yourself
Retail
● automotive parts and accessories stores;
● automobile dealers that supply manufacturer replacement parts and accessories; and
● mass merchandisers and wholesale clubs that sell automotive products and select non-automotive merchandise that
appeals to automotive “Do-It-Yourself” customers, such as generators, power tools and canopies.
Do-It-For-Me
Service Labor
● regional and local full service automotive repair shops;
● automobile dealers that provide repair and maintenance services;
● national and regional (including franchised) tire retailers that provide additional automotive repair and maintenance
services; and
● national and regional (including franchised) specialized automotive (such as exhaust, brake and transmission)
repair facilities that provide additional automotive repair and maintenance services.
Installed Merchandise/Commercial
● mass merchandisers, wholesalers and jobbers (some of which are associated with national parts distributors or
associations).