Petsmart 2010 Annual Report Download - page 21

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veterinary services in our stores and our ability to increase the number of stores in which veterinary services are
provided, 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 operate 69 stores in Canada as of January 30, 2011. As these
operations grow, they may require greater management and financial resources. International operations require the
integration of personnel with varying cultural and business backgrounds and an understanding of the relevant
differences in the cultural, legal and regulatory environments. Our results may be increasingly affected by the risks
of our international activities, including:
• Fluctuations in currency exchange rates;
• Changes in international staffing and employment issues;
• Tariff and other trade barriers;
• Greater difficulty in utilizing and enforcing our intellectual property rights;
• Failure to understand the local culture and market;
• The burden of complying with foreign laws, including tax laws and financial accounting standards; 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 Banfield, the third-party operator of Banfield, The Pet Hospital, and our other third-party operators are
subject to statutes and regulations in various states and Canadian provinces regulating the ownership of veterinary
practices, or the operation of veterinary hospitals in retail stores, that may impact our ability to host and Banfield’s
ability to operate veterinary hospitals within our facilities. A determination that we, or Banfield, are in violation of
any of these applicable statutes and regulations could require us, or Banfield, to restructure our operations to
comply, or render us, or Banfield, unable to operate veterinary hospitals in a given location. If Banfield were to
experience financial or other operating difficulties that would force it to limit its operations, or if Banfield were to
cease operating the veterinary hospitals in our stores, our business may be harmed. We can make no assurances 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. Any significant decrease in Banfield’s financial
results may negatively impact our financial performance.
We face various risks as an e-commerce retailer.
We may require additional capital in the future to sustain or grow our e-commerce business. We have engaged a
third-party to maintain our e-commerce website and process all customer orders placed through that site. Business
risks related to our e-commerce business include our ability to keep pace with rapid technological change; failure in
our, or any third-party processor’s, security procedures and operational controls; failure or inadequacy in our, or any
third-party processor’s, systems or ability to process customer orders; government regulation and legal uncertainties
with respect to e-commerce; and collection of sales or other taxes by one or more states or foreign jurisdictions. If
any of these risks materialize, it could have an adverse effect on our business.
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 consid-
erations, even if we believe that we have sufficient funds for our current or future operating plans. Our credit facility
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