Petsmart 2002 Annual Report Download - page 22

We depend on key personnel and may not be able to retain or replace these employees or recruit additional
qualiÑed personnel, which could harm our business.
Our success is largely dependent on the eÅorts and abilities of our senior executive group. The loss of the
services of one or more of our key executives could adversely impact our Ñnancial performance and our ability
to execute our strategies. In addition, our future success will depend on our ability to attract highly skilled
store managers and qualiÑed services personnel such as pet trainers and groomers. There is a high level of
competition for these employees and our ability to operate our stores and expand these services depends on our
ability to attract and retain these personnel. In addition, historically there has been a shortage of qualiÑed
veterinarians. If BanÑeld cannot attract and retain a suÇcient number of veterinarians, our ability to provide
veterinary services in our stores, and increase the number of stores in which we oÅer veterinary services, may
be impacted.
Our international operations may result in additional market risks, which may harm our business.
We entered the Canadian market in 1996, and operated 19 stores in Canada as of February 2, 2003. As
these operations grow, they may require greater management and Ñnancial resources. International operations
require the integration of personnel with varying cultural and business backgrounds and an understanding of
the relevant diÅerences in the legal and regulatory environments. In addition, we purchase signiÑcant amounts
of pet supplies from vendors outside the United States. Our results may be increasingly aÅected by the risks of
our international activities, including:
‚ Öuctuations in currency exchange rates;
‚ changes in international staÇng and employment issues;
‚ tariÅ and other trade barriers;
‚ the burden of complying with foreign laws, including tax laws; and
‚ political and economic instability and developments.
Our business may be harmed if the operation of veterinary hospitals at our stores is limited or fails to continue.
We and MMI, the third party operator of BanÑeld, The Pet Hospital
TM
, are subject to laws governing the
operation of veterinary hospitals. MMI Holdings, Inc., or MMIH, is the parent company of MMI. Statutes
and regulations in various states and Canadian provinces regulating the ownership of veterinary practices, or
the operation of veterinary hospitals in retail stores, may impact our and MMI's ability to operate veterinary
hospitals within our facilities. A determination that we or MMI are in violation of any of these applicable
statutes and regulations could require us or MMI to restructure our operations to comply or render us or MMI
unable to operate veterinary hospitals in a given location. We recorded $8.3 million and $6.7 million from
MMI during Ñscal 2002 and 2001, respectively, as a reduction to occupancy costs. If MMIH or MMI were to
experience Ñnancial or other operating diÇculties that would force it to limit its operations, or if MMIH were
to cease operating the veterinary hospitals in our stores, our business may be harmed, both directly and
because of a decrease in customer traÇc. Historically there has been a shortage of qualiÑed veterinarians. If
BanÑeld cannot attract and retain a suÇcient number of veterinarians, our ability to provide veterinary services
in our stores and increase the number of stores in which we oÅer veterinary services may be harmed. In such
event there can be no assurance that we could contract with another third party to operate the veterinary
hospitals on favorable terms, if at all, or that we could successfully operate the veterinary hospitals ourselves.
For a further discussion of our relationship with MMI please see ""Management's Discussion and Analysis of
Financial Condition and Results of Operations Ì Related Party Transactions.''
If we need to raise additional capital our business would be harmed if we were unable to do so on
acceptable terms.
We currently anticipate that our existing capital resources and cash Öows from operations will enable us
to maintain our currently planned operations for the foreseeable future. If, however, we are unable to generate
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