Petsmart 2011 Annual Report Download - page 24

Our business could be harmed if we were unable to effectively manage our cash flow and raise any needed
additional capital on acceptable terms.
We expect to fund our currently planned operations with existing capital resources, including cash flows
from operations and the borrowing capacity under our credit facility. If, however, we are unable to effectively
manage our cash flows or generate and maintain positive operating cash flows and operating income in the
future, we may need additional funding. We may also choose to raise additional capital due to market conditions
or strategic considerations, even if we believe that we have sufficient funds for our current or future operating
plans. Our credit facility and letter of credit facility are secured by substantially all our personal property assets,
our subsidiaries and certain real property. This could limit our ability to obtain, or obtain on favorable terms,
additional financing and may make additional debt financing outside our credit facility and letter of credit facility
more costly. If additional capital were needed, an inability to raise capital on favorable terms could harm our
business and financial condition. In addition, to the extent that we raise additional capital through the sale of
equity or debt securities convertible into equity, the issuance of these securities could result in dilution or accre-
tion to our stockholders.
Failure to successfully integrate any business we acquire could have an adverse impact on our financial
results.
We may, from time to time, acquire businesses we believe to be complementary to our business.
Acquisitions may result in difficulties in assimilating acquired companies and may result in the diversion of our
capital and our management’s attention from other business issues and opportunities. We may not be able to
successfully integrate operations that we acquire, including their personnel, financial systems, distribution,
operations and general operating procedures. If we fail to successfully integrate acquisitions, we could
experience increased costs associated with operating inefficiencies which could have an adverse effect on our
financial results. Also, while we employ several different methodologies to assess potential business
opportunities, the new businesses may not meet or exceed our expectations and, therefore, affect our financial
performance.
Failure to protect our intellectual property could have a negative impact on our operating results.
Our trademarks, servicemarks, copyrights, patents, trade secrets, domain names and other intellectual prop-
erty are valuable assets that are critical to our success. The unauthorized reproduction or other misappropriation
of our intellectual property could diminish the value of our brands or goodwill and cause a decline in our revenue
or operating results. Protecting our intellectual property outside the United States could be time-consuming and
costly, and the local laws and regulations outside the United States may not fully protect our rights in such
intellectual property. Any infringement or other intellectual property claim made against us, whether or not it has
merit, could be time-consuming, result in costly litigation, cause product delays or require us to enter into royalty
or licensing agreements. As a result, any such claim could have an adverse effect on our operating results.
A determination that we are in violation of any contractual obligations or government regulations could result
in a disruption to our operations and could impact our financial results.
We are subject to various contractual obligations with third-party providers and federal, state, provincial and
local laws and regulations governing, among other things: our relationships with employees, including minimum
wage requirements, overtime, terms and conditions of employment, working conditions and citizenship require-
ments; veterinary practices, or the operation of veterinary hospitals in retail stores, that may impact our ability to
operate veterinary hospitals in certain facilities; the transportation, handling and sale of small pets; the gen-
eration, handling, storage, transportation and disposal of waste and biohazardous materials; the distribution,
import/export and sale of products; providing services to our customers; contracted services with various third-
party providers; environmental regulation; credit and debit card processing; the handling, security, protection and
use of customer and associate information; and the licensing and certification of services.
We seek to structure our operations to comply with all applicable federal, state, provincial and local laws
and regulations of each jurisdiction in which we operate. Given varying and uncertain interpretations of these
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