Dick's Sporting Goods 2012 Annual Report Download - page 38

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16
Our private brand offerings expose us to various risks.
In addition to brand name products, we offer our customers private brand products that are not
available from other retailers. We expect to continue to grow our exclusive private brand offerings
through a combination of brands that we own and the ones that we license from third parties. We have
invested in our development and procurement resources and marketing efforts relating to these private
brand offerings. Although we believe that our private brand products offer value to our customers at
each price point and provide us with higher gross margins than comparable products we sell, the
expansion of our private brand offerings also subjects us to certain specific risks in addition to those
discussed elsewhere in this section, such as: potential mandatory or voluntary product recalls; our
ability to successfully protect our proprietary rights (e.g., defending against counterfeit, knock offs,
grey-market, infringing or otherwise unauthorized goods); our ability to successfully navigate and avoid
claims related to the proprietary rights of third parties; our ability to successfully administer and
comply with obligations under license agreements that we have with the licensors of brands, including
in some instances certain sales minimums that if not met could cause us to lose the licensing rights or
pay damages; and other risks generally encountered by entities that source, sell and market exclusive
branded offerings for retail. An increase in sales of our private brands may also adversely affect sales
of our vendors’ products, which may, in turn, adversely affect our relationship with our vendors. Our
failure to adequately address some or all of these risks could have a material adverse effect on our
business, results of operations and financial condition.
We rely on a single third-party provider to maintain and operate certain aspects of our
www.DicksSportingGoods.com operations, and disruptions with the provider or in the services it provides to us
could materially affect our reputation, operations or financial results.
We have contracted with a single third party to operate and host our DicksSportingGoods.com
eCommerce website and provide related fulfillment and customer service. We rely on that party’s
operational, privacy and security procedures and controls to operate and host our Dick’s eCommerce
business. Failure by such third party to adequately service these aspects of our DicksSportingGoods.com
eCommerce business could result in a prolonged disruption that affects our customers’ ability to utilize
our website or receive product in a timely manner. As a result, we may lose customer sales and / or
experience increased costs, which could materially affect our reputation, operations or financial results.
Our ability to operate and expand our business and to respond to changing business and economic conditions
will be dependent upon the availability of adequate capital. The terms of our senior secured revolving credit
facility impose certain restrictions that may impair our ability to access sufficient capital.
The operation of our business, the rate of our expansion and our ability to respond to changing
business and economic conditions depend on the availability of adequate capital, which in turn depends
on cash flow generated by our business and, if necessary, the availability of equity or debt capital. We
cannot assure you that our cash flow will be sufficient to meet these needs or that we would be able to
obtain equity or debt capital on acceptable terms or at all. Our current senior secured revolving credit
facility contains provisions that limit our ability to incur additional indebtedness or make substantial
asset sales, which might otherwise be used to finance our operations. In the event of our insolvency,
liquidation, dissolution or reorganization, the lenders under our senior secured revolving credit facility
would be entitled to payment in full from our assets before distributions, if any, were made to our
stockholders.
If we are unable to generate sufficient cash flows from operations in the future, and if availability
under our current senior secured revolving credit facility is not sufficient, we may have to obtain
additional financing. We cannot assure you that we could obtain refinancing or additional financing on
favorable terms or at all. Our liquidity or access to capital could also be adversely affected by
unforeseen changes in the financial markets and global economy.