Pep Boys Manny Moe & Jack (PBY) 8-K Pep Boys Reports Q2 Results

Exhibit 99.2

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES		(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS	(dollar amounts in thousands, except per share amounts)

	Thirteen weeks ended										Twenty-six weeks ended
	July 29, 2006					July 30, 2005					July 29, 2006					July 30, 2005
				%					%					%					%
	Amount			Sales		Amount			Sales		Amount			Sales		Amount			Sales
Merchandise Sales	$	481,997		83.3		$	480,608		83.2		$	939,312		82.7		$	944,456		82.7
Service Revenue	96,568			16.7		96,810			16.8		195,854			17.3		197,188			17.3
Total Revenues	578,565			100.0		577,418			100.0		1,135,166			100.0		1,141,644			100.0
Costs of Merchandise Sales	342,874			71.1		352,265			73.3		672,422			71.6		693,214			73.4
Costs of Service Revenue	90,589			93.8		86,792			89.7		178,764			91.3		170,688			86.6
Total Costs of Revenues	433,463			74.9		439,057			76.0		851,186			75.0		863,902			75.7
Gross Profit from Merchandise Sales	139,123			28.9		128,343			26.7		266,890			28.4		251,242			26.6
Gross Profit from Service Revenue	5,979			6.2		10,018			10.3		17,090			8.7		26,500			13.4
Total Gross Profit	145,102			25.1		138,361			24.0		283,980			25.0		277,742			24.3
Selling, General and Administrative Expenses	139,544			24.1		133,201			23.1		270,765			23.9		268,330			23.5
Net Gain from Sales of Assets	6,431			1.1		4,499			0.8		6,016			0.5		3,606			0.3
Operating Profit	11,989			2.1		9,659			1.7		19,231			1.7		13,018			1.1
Non-operating Income	2,018			0.3		483			0.1		4,277			0.4		2,221			0.2
Interest Expense	11,968			2.1		9,234			1.6		22,305			2.0		18,149			1.6
Earnings (Loss) From Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle	2,039			0.4		908			0.2		1,203			0.1		(2,910		)	(0.3	)
Income Tax Expense (Benefit)	569			27.9	(1)	76			8.4	(1)	600			49.9	(1)	(1,356		)	46.6	(1)
Net Earnings (Loss) From Continuing Operations Before Cumulative Effect of Change in Accounting Principle	1,470			0.3		832			0.1		603			0.1		(1,554		)	(0.1	)
Discontinued Operations, Net of Tax	(30		)	0.0		210			0.0		(133		)	0.0		(178		)	0.0
Cumulative Effect of Change in Accounting Principle, Net of Tax	(88		)	0.0		—			0.0		179			0.0		—			0.0
Net Earnings (Loss)	1,352			0.2		1,042			0.2		649			0.1		(1,732		)	(0.2	)
Retained Earnings, beginning of period	477,438					529,177					481,926					536,780
Cash Dividends	(3,811		)			(3,758		)			(7,516		)			(7,320		)
Effect of Stock Options	(10		)			(717		)			(76		)			(1,974		)
Dividend Reinvestment Plan	(111		)			(41		)			(125		)			(51		)
Retained Earnings, end of period	$	474,858				$	525,703				$	474,858				$	525,703
Basic Earnings (Loss) per Share:
Net Earnings (Loss) From Continuing Operations Before Cumulative Effect of Change in Accounting Principle	$	0.03				$	0.01				$	0.01				$	(0.03	)
Discontinued Operations, Net of Tax	—					0.01					—					—
Cumulative Effect of Change in Accounting Principle, Net of Tax	—					—					—					—
Basic Earnings (Loss) per Share	$	0.03				$	0.02				$	0.01				$	(0.03	)
Diluted Earnings (Loss) per Share:
Net Earnings (Loss) From Continuing Operations Before Cumulative Effect of Change in Accounting Principle	$	0.03				$	0.01				$	0.01				$	(0.03	)
Discontinued Operations, Net of Tax	—					0.01					—					—
Cumulative Effect of Change in Accounting Principle, Net of Tax	—					—					—					—
Diluted Earnings (Loss) per Share	$	0.03				$	0.02				$	0.01				$	(0.03	)
Cash Dividends per Share	$	0.0675				$	0.0675				$	0.1350				$	0.1350

(1)As a percentage of earnings (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle.

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES (UNAUDITED)

CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands, except per share amounts)

	July 29, 2006			January 28, 2006			July 30, 2005
Assets
Current Assets:
Cash and cash equivalents	$	55,295		$	48,281		$	41,670
Accounts receivable, net	33,821			36,434			35,093
Merchandise inventories	612,681			616,292			634,352
Prepaid expenses	32,770			40,952			34,250
Other	64,346			85,446			77,893
Assets held for disposal	881			652			—
Total Current Assets	799,794			828,057			823,258
Property and Equipment - at cost:
Land	256,717			257,802			259,239
Buildings and improvements	918,266			916,580			913,324
Furniture, fixtures and equipment	658,765			671,189			644,224
Construction in progress	18,225			15,858			20,712
	1,851,973			1,861,429			1,837,499
Less accumulated depreciation and amortization	932,217			914,040			890,859
Property and Equipment - net	919,756			947,389			946,640
Other	50,094			46,307			66,663
Total Assets	$	1,769,644		$	1,821,753		$	1,836,561
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	295,041		$	261,940		$	333,303
Trade payable program liability	7,223			11,156			12,071
Accrued expenses	275,879			290,761			263,610
Deferred income taxes	17,780			15,417			18,383
Current maturities of long-term debt and obligations under capital leases	2,258			1,257			144,461
Convertible short-term debt	119,000			—			—
Total Current Liabilities	717,181			580,531			771,828
Long-term debt and obligations under capital leases, less current maturities	404,884			467,239			215,534
Convertible long-term debt	—			119,000			119,000
Other long-term liabilities	59,168			57,481			52,172
Deferred income taxes	—			2,937			27,333
Commitments and Contingencies
Stockholders’ Equity:
Common Stock, par value $1 per share: Authorized 500,000,000 shares; Issued 68,557,041 shares	68,557			68,557			68,557
Additional paid-in capital	287,583			288,098			286,617
Retained earnings	474,858			481,926			525,703
Accumulated other comprehensive loss	(3,441		)	(3,565		)	(3,524		)
Less cost of shares in treasury - 12,060,582 shares 12,152,968 shares and 10,981,577 shares	(179,882		)	(181,187		)	(167,395		)
Less cost of shares in benefits trust - 2,195,270 shares	(59,264		)	(59,264		)	(59,264		)
Total Stockholders’ Equity	588,411			594,565			650,694
Total Liabilities and Stockholders’ Equity	$	1,769,644		$	1,821,753		$	1,836,561

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES (UNAUDITED)

CONSOLIDATED STATEMENTS OF CASH FLOWS (dollar amounts in thousands)

Twenty-six Weeks Ended	July 29, 2006			July 30, 2005
Cash Flows from Operating Activities:
Net earnings (loss)	$	649		$	(1,732	)
Adjustments to reconcile net earnings (loss) to net cash provided by continuing operations:
Net loss from discontinued operations	133			178
Depreciation and amortization	41,419			38,655
Cumulative effect of change in accounting principle, net of tax	(179		)	—
Accretion of asset disposal obligation	135			56
Stock compensation expense	1,718			1,403
Deferred income taxes	(5,252		)	(239		)
Gain from sales of assets	(6,016		)	(3,606		)
Loss from asset impairment	550			—
Excess tax benefits from stock based awards	(33		)	—
Increase in cash surrender value of life insurance policies	(1,167		)	(1,684		)
Changes in Operating Assets and Liabilities:
Decrease in accounts receivable, prepaid expenses and other	34,084			26,593
Decrease (increase) in merchandise inventories	3,611			(31,592		)
Increase in accounts payable	33,101			22,322
Decrease in accrued expenses	(18,136		)	(45,090		)
Increase in other long-term liabilities	1,687			14,195
Net cash provided by continuing operations	86,304			19,459
Net cash used in discontinued operations	(245		)	(704		)
Net Cash Provided by Operating Activities	86,059			18,755
Cash Flows from Investing Activities:
Cash paid for property and equipment	(14,364		)	(42,463		)
Proceeds from sales of assets	687			1,262
Proceeds from sales of assets held for disposal	6,981			7,844
Premiums paid on life insurance policies	—			(488		)
Net Cash Used in Investing Activities	(6,696		)	(33,845		)
Cash Flows from Financing Activities:
Net (payments) borrowings under line of credit agreements	(60,266		)	6,815
Excess tax benefits from stock based awards	33			—
Net (payments) borrowings on trade payable program liability	(3,933		)	12,071
Reduction of long-term debt	(1,041		)	(40,452		)
Payments on capital lease obligations	(131		)	(53		)
Dividends paid	(7,516		)	(7,320		)
Proceeds from exercise of stock options	56			2,451
Proceeds from dividend reinvestment plan	449			490
Net Cash Used in Financing Activities	(72,349		)	(25,998		)
Net Increase (Decrease) in Cash	7,014			(41,088		)
Cash and Cash Equivalents at Beginning of Period	48,281			82,758
Cash and Cash Equivalents at End of Period	$	55,295		$	41,670
Supplemental Disclosure of Cash Flow Information:
Non-cash operating activities:
Accrued payment of stock option settlement	$	1,056		$	—
Non-cash investing activities:
Accrued purchases of property and equipment	$	1,759		$	2,148
Non-cash financing activities:
Equipment capital leases	$	84		$	121

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES (UNAUDITED)

COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE (in thousands, except per share data)

	Thirteen weeks ended				Twenty-six weeks ended
	July 29, 2006		July 30, 2005		July 29, 2006		July 30, 2005
(a)Net Earnings (Loss) From Continuing Operations Before Cumulative Effect of Change in Accounting Principle	$	1,470	$	832	$	603	$	(1,554	)
(b)Average number of common shares outstanding during period	54,254		55,683		54,239		55,597
Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price	936		449		967		—
(c)   Average number of common shares assumed outstanding during period	55,190		56,132		55,206		55,597
Basic Loss per Share:
Net Earnings (Loss) From Continuing Operations Before Cumulative Effect of Change in Accounting Principle	$	0.03	$	0.01	$	0.01	$	(0.03	)
Discontinued Operations, Net of Tax	—		0.01		—		—
Cumulative Effect of Change in Accounting Principle, Net of Tax	—		—		—		—
Basic Earnings (Loss) per Share	$	0.03	$	0.02	$	0.01	$	(0.03	)
Diluted Loss per Share:
Net Earnings (Loss) From Continuing Operations Before Cumulative Effect of Change in Accounting Principle	$	0.03	$	0.01	$	0.01	$	(0.03	)
Discontinued Operations, Net of Tax	—		0.01		—		—
Cumulative Effect of Change in Accounting Principle, Net of Tax	—		—		—		—
Diluted Earnings (Loss) per Share	$	0.03	$	0.02	$	0.01	$	(0.03	)

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES (UNAUDITED)

ADDITIONAL INFORMATION (dollar amounts in thousands)

	Thirteen weeks ended						Twenty-six weeks ended
	July 29, 2006			July 30, 2005			July 29, 2006			July 30, 2005
Capital expenditures	$	9,823		$	22,119		$	16,123		$	44,611
Depreciation and amortization	$	20,696		$	19,870		$	41,419		$	38,655
Non-operating income:
Net rental revenue	$	497		$	349		$	1,170		$	714
Investment income	1,572			210			3,279			505
Other (expense) income	(51		)	(76		)	(172		)	1,002
Total	$	2,018		$	483		$	4,277		$	2,221
Comparable sales percentages:
Merchandise	0.4		%	-1.5		%	-0.3		%	-0.4		%
Service	0.0		%	-7.4		%	-0.3		%	-6.0		%
Total	0.4		%	-2.5		%	-0.3		%	-1.4		%
Total square feet of retail space (including service centers)							12,167,089			12,167,089
Total Store Count							593			593
Sales and Gross Profit by Line of Business (A):
Retail Sales	$	353,554		$	355,656		$	681,511		$	695,010
Service Center Revenue	225,011			221,762			453,655			446,634
Total Revenues	$	578,565		$	577,418		$	1,135,166		$	1,141,644
Gross Profit from Retail Sales	$	100,179		$	93,809		$	189,768		$	179,606
Gross Profit from Service Center Revenue	44,923			44,552			94,212			98,136
Total Gross Profit	$	145,102		$	138,361		$	283,980		$	277,742
Comparable Sales Percentages (A):
Retail Sales	-0.5		%	0.1		%	-1.7		%	0.7		%
Service Center Revenue	1.7		%	-6.4		%	2.0		%	-4.5		%
Total Revenues	0.4		%	-2.5		%	-0.3		%	-1.4		%
Gross Profit Percentage by Line of Business (A):
Gross Profit Percentage from Retail Sales	28.3		%	26.4		%	27.8		%	25.8		%
Gross Profit Percentage from Service Center Revenue	20.0		%	20.1		%	20.8		%	22.0		%
Total Gross Profit Percentage	25.1		%	24.0		%	25.0		%	24.3		%

(A) Retail Sales include DIY and Commercial sales.  Service Center Revenue includes revenue from labor and installed parts and tires.

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES (UNAUDITED)

ADDITIONAL INFORMATION (continued) (dollar amounts in thousands)

Adjustments

In the fourth quarter of 2005 we completed the restructuring of substantially all of our vendor agreements to provide flexibility in how we use vendor support funds.  Previously, the vendor agreements required us to use certain vendor support funds exclusively for promotions and to partially offset certain other direct expenses.  Under EITF No. 02-16, these types of allowances are to be netted against the appropriate expenses they offset, once it is determined that the allowances are for specific, identifiable and incremental expenses.  Under the restructured contracts it is not possible to make this determination.  Therefore, all vendor support funds are now treated as a reduction of inventories and are recognized as a reduction to Costs of Merchandise Sales as the inventories are sold, in accordance with EITF No. 02-16.  For the periods below, all previously identified costs which had been netted against Selling, General and Administrative Expenses have been reclassified to Gross Profit from Merchandise Sales as if the vendor agreements had been restructured as of January 30, 2005.

Please see the table below illustrating the effect of this adjustment on the thirteen and twenty-six week periods ended July 30, 2005 (presented in both GAAP and Line of Business formats), assuming that such change had been in effect during such periods.

STATEMENTS OF OPERATIONS

GAAP Format

	Thirteen weeks ended						Thirteen weeks ended			Thirteen weeks ended
	July 30, 2005						July 30, 2005			July 29, 2006
	ACTUAL			ADJUSTMENTS			AS ADJUSTED			ACTUAL
			%			%			%			%
	Amount		Sales	Amount		Sales	Amount		Sales	Amount		Sales
Gross Profit from Merchandise Sales	$	128,343	26.7	$	10,593	2.2	$	138,936	28.9	$	139,123	28.9
Gross Profit from Service Revenue	10,018		10.3	—		—	10,018		16.4	5,979		6.2
Total Gross Profit	138,361		24.0	10,593		1.8	148,954		25.8	145,102		25.1
Selling, General and Administrative Expenses	133,201		23.1	10,593		1.8	143,794		24.9	139,544		24.1
Net Gain on Sales of Assets	4,499		0.8	—		—	4,499		0.8	6,431		1.1
Operating Profit	$	9,659	1.7	$	—	—	$	9,659	1.7	$	11,989	2.1

	Twenty-six weeks ended						Twenty-six weeks ended			Twenty-six weeks ended
	July 30, 2005						July 30, 2005			July 29, 2006
	ACTUAL			ADJUSTMENTS			AS ADJUSTED			ACTUAL
			%			%			%			%
	Amount		Sales	Amount		Sales	Amount		Sales	Amount		Sales
Gross Profit from Merchandise Sales	$	251,242	26.6	$	19,419	2.1	$	270,661	28.7	$	266,890	28.4
Gross Profit from Service Revenue	26,500		13.4	—		—	26,500		13.4	17,090		8.7
Total Gross Profit	277,742		24.3	19,419		1.7	297,161		26.0	283,980		25.0
Selling, General and Administrative Expenses	268,330		23.5	19,419		1.7	287,749		25.2	270,765		23.9
Net Gain on Sales of Assets	3,606		0.3	—		—	3,606		0.3	6,016		0.5
Operating Profit	$	13,018	1.1	$	—	—	$	13,018	1.1	$	19,231	1.7

Line of Business Format

	Thirteen weeks ended						Thirteen weeks ended			Thirteen weeks ended
	July 30, 2005						July 30, 2005			July 29, 2006
	ACTUAL			ADJUSTMENTS			AS ADJUSTED			ACTUAL
			%			%			%			%
	Amount		Sales	Amount		Sales	Amount		Sales	Amount		Sales
Gross Profit from Retail Sales	$	93,809	26.4	$	7,468	2.1	$	101,277	28.5	$	100,179	28.3
Gross Profit from Service Center Revenue	44,552		20.1	3,125		1.4	47,677		21.5	44,923		20.0
Total Gross Profit	138,361		24.0	10,593		1.8	148,954		25.9	145,102		25.1
Selling, General and Administrative Expenses	133,201		23.1	10,593		1.8	143,794		24.9	139,544		24.1
Net Gain on Sales of Assets	4,499		0.8	—		—	4,499		0.4	6,431		1.1
Operating Profit	$	9,659	1.7	$	—	—	$	9,659	1.7	$	11,989	2.1

	Twenty-six weeks ended						Twenty-six weeks ended			Twenty-six weeks ended
	July 30, 2005						July 30, 2005			July 29, 2006
	ACTUAL			ADJUSTMENTS			AS ADJUSTED			ACTUAL
			%			%			%			%
	Amount		Sales	Amount		Sales	Amount		Sales	Amount		Sales
Gross Profit from Retail Sales	$	179,606	25.8	$	13,815	2.0	$	193,421	27.8	$	189,768	27.8
Gross Profit from Service Center Revenue	98,136		22.0	5,604		1.3	103,740		23.2	94,212		20.8
Total Gross Profit	277,742		24.3	19,419		1.7	297,161		26.0	283,980		25.0
Selling, General and Administrative Expenses	268,330		23.5	19,419		1.7	287,749		25.2	270,765		23.9
Net Gain on Sales of Assets	3,606		0.3	—		—	3,606		0.3	6,016		0.5
Operating Profit	$	13,018	1.1	$	—	—	$	13,018	1.1	$	19,231	1.2