Petsmart 2002 Annual Report Download - page 23

and maintain positive operating cash Öows 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 suÇcient funds for our current or future operating plans. Our current credit
facility is secured by substantially all of our personal property assets, our subsidiaries and certain real property.
This could limit our ability to obtain, or obtain on favorable terms, additional Ñnancing and may make more
costly additional debt Ñnancing outside our credit facility. If additional capital were needed, our inability to
raise capital on favorable terms would harm our business and Ñnancial 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 to our stockholders.
A determination that we are in violation of any government regulations could require us to restructure our
operations to comply in a given government jurisdiction and could harm our business.
The transportation, handling, and sale of small pets are governed by various state and local regulations.
These laws vary from state to state and are enforced by the courts and by regulatory authorities with broad
discretion. In addition, the operation of veterinary hospitals are subject to federal, state and local statutes and
regulations such as the use, management, transport and disposal of medical materials and biohazardous
materials. While we seek to structure our operations to comply with the laws and regulations of each
jurisdiction in which we operate, there can be no assurance that, given varying and uncertain interpretations of
these laws we would be found to be in compliance in all jurisdictions. A determination that we are in violation
of applicable laws could require us to restructure our operations to comply with such requirements and/or
incur Ñnes or sanctions, which could harm our business.
Our business exposes us to claims which could result in adverse publicity, harm to our brand and reduce
our sales.
We are occasionally subject to claims due to the injury or death of a pet in our stores or while under our
care in connection with the pet services we provide. In addition, we sell certain small pets, including Ñsh, birds,
reptiles and small rodents in our stores. Given the large number of small pets we sell, deaths or injuries of
these small pets sometimes occur while they are within our control. As a result, we may be subject to claims
that we do not properly care for these small pets. We may also be subject to claims resulting from the transfer
of diseases from pets in our stores to associates and patrons of our stores. In addition, from time to time we
have been subject to product liability claims for some of the products we sell. Any negative publicity or claims
relating to any of the foregoing could harm our reputation and business, as well as expose us to litigation
expenses and damages.
Pending legislation, weather, disease or other factors could disrupt the supply of small pets we sell, which
could harm our reputation and decrease sales.
There is currently a signiÑcant amount of legislation pending at the federal, state and local levels
regarding the handling of pets. This legislation may impair our ability to transport the small pets we sell in our
stores. In addition, our supply of small pets may be negatively impacted by weather. For example, a signiÑcant
number of the vendors who supply us with small pets are concentrated in Florida. If a signiÑcant hurricane
were to strike Florida, it is possible that many our vendors would not be able to supply us with small pets in the
quantities we require, or at all. Finally, the small pets we sell in our stores are susceptible to diseases that can
quickly decrease or destroy the supply of these pets. Any disruption in the supply of small pets to our stores,
due to legislation, weather, disease or any other factor, could harm our reputation and decrease our sales.
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