Petsmart 2014 Annual Report Download - page 26

Table of Contents
Failure to successfully integrate any business we acquire could have an adverse impact on our financial results.
We may, from time to time, acquire businesses we believe to be complementary to our business. Acquisitions may result
in difficulties in assimilating acquired companies and may result in the diversion of our capital and our management's
attention from other business issues and opportunities. We may not be able to successfully integrate operations that we
acquire, including their personnel, financial systems, distribution, operations, and general operating procedures. If we fail to
successfully integrate acquisitions, we could experience increased costs associated with operating inefficiencies which could
have an adverse effect on our financial results. Also, while we employ several different methodologies to assess potential
business opportunities, the new businesses may not meet or exceed our expectations, and therefore, affect our financial
performance.
Failure to protect our intellectual property could have a negative impact on our operating results.
Our trademarks, servicemarks, copyrights, patents, trade secrets, domain names, and other intellectual property are
valuable assets that are critical to our success. The unauthorized reproduction, or other misappropriation of our intellectual
property, could diminish the value of our brands or goodwill and cause a decline in our revenue or operating results.
Protecting our intellectual property outside the United States could be time-consuming and costly, and the local laws and
regulations outside the United States may not fully protect our rights in such intellectual property. Any infringement or other
intellectual property claim made against us, whether or not it has merit, could be time-consuming, result in costly litigation,
cause product delays or require us to enter into royalty or licensing agreements. As a result, any such claim could have an
adverse effect on our operating results.
Changes in existing or new laws and regulations or regulatory enforcement priorities could adversely affect our business.
Laws and regulations at the local, regional, state, federal and international levels change frequently and the changes can
impose significant costs and other burdens of compliance on our business and our vendors. Any changes in regulations, the
imposition of additional regulations, or the enactment of any new legislation that affect employment/labor (including
minimum wage requirements, overtime, terms and conditions of employment, working conditions, and citizenship
requirements); veterinary practices, or the operation of veterinary hospitals in stores; that may impact our ability to operate
veterinary hospitals in certain facilities; the transportation, handling, and sale of small pets; the generation, handling, storage,
transportation, and disposal of waste and biohazardous materials; the distribution, import/export, and sale of products;
providing services to our customers; contracted services with various third-party providers; environmental regulation; credit
and debit card processing; the handling, security, protection, and use of customer and associate information; the licensing and
certification of services; and product safety, could have an adverse impact, directly or indirectly, on our financial condition
and results of operations. In addition, changes in enforcement priorities by governmental agencies charged with enforcing
existing laws and regulations can increase our cost of doing business.
We seek to structure our operations to comply with all applicable federal, state, provincial, and local laws and regulations
of each jurisdiction in which we operate. Given varying and uncertain interpretations of these laws and regulations and the
fact that the laws and regulations are enforced by the courts and by regulatory authorities with broad discretion, we can make
no assurances that we would be found to be in compliance in all jurisdictions. We also could be subject to costs, including
fines, penalties, or sanctions and third-party claims as a result of violations of, or liabilities under, the above-referenced laws
and regulations.
We may be subject to various types of litigation and our insurance may not be sufficient to cover damages related to those
claims.
From time to time the Company or its subsidiaries may be involved in lawsuits or other claims arising in the course of
business, including those related to federal or state wage and hour laws, product liability, consumer protection, advertising,
employment, intellectual property, tort and other matters. We may also be subject to lawsuits relating to the design,
manufacture or distribution of our proprietary brand products. We may incur losses relating to claims filed against us,
including costs associated with defending against them, and there is risk that any such claims or liabilities will exceed our
insurance coverage, or affect our ability to retain adequate liability insurance in the future.
Insurance costs continue to be volatile, and affected by natural catastrophes, fear of terrorism, financial irregularities, and
fraud at other publicly traded companies, and fiscal viability of insurers. We believe that commercial insurance coverage is
prudent for risk management, and insurance costs may increase substantially in the future. In addition, for certain types or
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