Pep Boys 2010 Annual Report Download - page 69

Download and view the complete annual report

Please find page 69 of the 2010 Pep Boys annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

ITEM 1A RISK FACTORS
The following section discloses all known material risks that we face. However, it does not include
risks that may arise in the future that are yet unknown nor existing risks that we do not judge material
to the presentation of our financial statements. If any of the events or circumstances described as risk
below actually occurs, our business, results of operations and/or financial condition could be materially
and adversely affected.
Risks Related to Pep Boys
We may not be able to successfully implement our business strategy, which could adversely affect our
business, financial condition, results of operations and cash flows.
Our long-term strategic plan, which we update annually, includes numerous initiatives to increase
sales, enhance our margins and increase our return on invested capital in order to increase our
earnings and cash flow. If these initiatives are unsuccessful, or if we are unable to implement the
initiatives efficiently and effectively, our business, financial condition, results of operations and cash
flows could be adversely affected.
Successful implementation of our business strategy also depends on factors specific to the
automotive aftermarket industry, many of which may be beyond our control (see ‘‘Risks Related to Our
Industry’’).
If we are unable to generate sufficient cash flows from our operations, our liquidity will suffer and we
may be unable to satisfy our obligations.
We require significant capital to fund our business. While we believe we have the ability to
sufficiently fund our planned operations and capital expenditures for the next fiscal year, circumstances
could arise that would materially affect our liquidity. For example, cash flows from our operations
could be affected by changes in consumer spending habits or the failure to maintain favorable vendor
payment terms or our inability to successfully implement sales growth initiatives. We may be
unsuccessful in securing alternative financing when needed, on terms that we consider acceptable, or at
all.
The degree to which we are leveraged could have important consequences to your investment in
our securities, including the following risks:
• our ability to obtain additional financing for working capital, capital expenditures, acquisitions or
general corporate purposes may be impaired in the future;
• a substantial portion of our cash flow from operations must be dedicated to the payment of rent
and the principal and interest on our debt, thereby reducing the funds available for other
purposes;
• our failure to comply with financial and operating restrictions placed on us and our subsidiaries
by our credit facilities could result in an event of default that, if not cured or waived, could have
a material adverse effect on our business or our prospects; and
• if we are substantially more leveraged than some of our competitors, we might be at a
competitive disadvantage to those competitors that have lower debt service obligations and
significantly greater operating and financial flexibility than we do.
11