Petsmart 2014 Annual Report Download - page 24

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Table of Contents
Our international operations may result in additional market risks, which may harm our business.
We operate stores outside of the United States. 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 and reporting
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, Banfield, and the third-party operators of our other veterinary hospitals are subject to statutes and regulations in
various states, territories, and provinces regulating the ownership of veterinary practices, or the operation of veterinary
hospitals in 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. In addition, due to our equity investment in
Banfield, any significant decrease in Banfield's financial results may negatively impact our financial position.
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, petsmart.com, 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 developments and change;
our ability to accurately anticipate pet parent e-commerce expectations; 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, territories, or foreign jurisdictions. If any of these risks materialize, it could impair our ability to
deliver a positive omnichannel experience to our pet parents, and therefore, 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 revolving 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 revolving credit facility and stand-alone
letter of credit facility are secured by substantially all our financial assets. This could limit our ability to obtain, or obtain on
favorable terms, additional financing and may make additional debt financing outside our revolving credit facility and stand-
alone letter of credit facility more costly. If additional capital were needed, an inability to raise capital on favorable terms
(including any limitation caused by disruption in the broader financial markets) could harm our business and financial
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