SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] | Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
[ ] | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
to
The Pep Boys—Manny, Moe & Jack
(Exact name of registrant as specified in its charter)
Pennsylvania | 23-0962915 | |||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) | |||||
3111 West Allegheny Avenue, Philadelphia, PA | 19132 | |||||
(Address of principal executive office) | (Zip code) |
(Registrant’s telephone number, including area code)
Title of each class | Name of each exchange on which registered | |||||
Common Stock, $1.00 par value | New York Stock Exchange | |||||
Common Stock Purchase Rights | New York Stock Exchange |
None
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Page | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
PART I | ||||||||||
1. | Business | 1 | ||||||||
2. | Properties | 10 | ||||||||
3. | Legal Proceedings | 11 | ||||||||
4. | Submission of Matters to a Vote of Security Holders | 11 | ||||||||
PART II | ||||||||||
5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 11 | ||||||||
6. | Selected Financial Data | 13 | ||||||||
7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||||||||
7A. | Quantitative and Qualitative Disclosures About Market Risk | 28 | ||||||||
8. | Financial Statements and Supplementary Data | 30 | ||||||||
9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 70 | ||||||||
9A. | Controls and Procedures | 70 | ||||||||
9B. | Other Information | 72 | ||||||||
PART III | ||||||||||
10. | Directors and Executive Officers of the Registrant | 72 | ||||||||
11. | Executive Compensation | 72 | ||||||||
12. | Security Ownership of Certain Beneficial Owners and Management | 72 | ||||||||
13. | Certain Relationship and Related Transactions | 72 | ||||||||
14. | Principal Accounting Fees and Services | 72 | ||||||||
PART IV | ||||||||||
15. | Exhibits and Financial Statement Schedules | 73 | ||||||||
Signatures | 77 |
PART I
ITEM 1 | BUSINESS |
GENERAL
Year ended | | Jan. 29, 2005 | | Jan. 31, 2004 | | Feb. 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Parts and Accessories | 67.7 | % | 65.2 | % | 64.9 | % | ||||||||
Tires | 14.3 | 15.8 | 16.0 | |||||||||||
Total Merchandise Sales | 82.0 | 81.0 | 80.9 | |||||||||||
Service | 18.0 | 19.0 | 19.1 | |||||||||||
Total Revenues | 100.0 | % | 100.0 | % | 100.0 | % |
1
NUMBER OF STORES AT END OF FISCAL YEARS 2000 THROUGH 2004
State | | 2000 Year End | | Opened | | Closed | | 2001 Year End | | Opened | | Closed | | 2002 Year End | | Opened | | Closed | | 2003 Year End | | Opened | | Closed | | 2004 Year End | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Alabama | 1 | — | — | 1 | — | — | 1 | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||
Arizona | 23 | — | — | 23 | — | — | 23 | — | 1 | 22 | — | — | 22 | |||||||||||||||||||||||||||||||||||||||||
Arkansas | 1 | — | — | 1 | — | — | 1 | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||
California | 135 | — | — | 135 | — | 1 | 134 | — | 12 | 122 | — | — | 122 | |||||||||||||||||||||||||||||||||||||||||
Colorado | 8 | — | — | 8 | — | — | 8 | — | — | 8 | — | — | 8 | |||||||||||||||||||||||||||||||||||||||||
Connecticut | 8 | — | — | 8 | — | — | 8 | — | — | 8 | — | — | 8 | |||||||||||||||||||||||||||||||||||||||||
Delaware | 6 | — | — | 6 | — | — | 6 | — | — | 6 | — | — | 6 | |||||||||||||||||||||||||||||||||||||||||
Florida | 47 | — | — | 47 | — | — | 47 | — | 4 | 43 | — | — | 43 | |||||||||||||||||||||||||||||||||||||||||
Georgia | 26 | — | — | 26 | — | — | 26 | — | 1 | 25 | — | — | 25 | |||||||||||||||||||||||||||||||||||||||||
Illinois | 24 | — | — | 24 | — | — | 24 | — | 1 | 23 | — | — | 23 | |||||||||||||||||||||||||||||||||||||||||
Indiana | 9 | — | — | 9 | — | — | 9 | — | — | 9 | — | — | 9 | |||||||||||||||||||||||||||||||||||||||||
Kansas | 2 | — | — | 2 | — | — | 2 | — | — | 2 | — | — | 2 | |||||||||||||||||||||||||||||||||||||||||
Kentucky | 4 | — | — | 4 | — | — | 4 | — | — | 4 | — | — | 4 | |||||||||||||||||||||||||||||||||||||||||
Louisiana | 10 | — | — | 10 | — | — | 10 | — | — | 10 | — | — | 10 | |||||||||||||||||||||||||||||||||||||||||
Maine | 1 | — | — | 1 | — | — | 1 | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||
Maryland | 19 | — | — | 19 | — | — | 19 | — | — | 19 | — | — | 19 | |||||||||||||||||||||||||||||||||||||||||
Massachusetts | 8 | — | — | 8 | — | — | 8 | — | 1 | 7 | — | — | 7 | |||||||||||||||||||||||||||||||||||||||||
Michigan | 7 | — | — | 7 | — | — | 7 | — | — | 7 | — | — | 7 | |||||||||||||||||||||||||||||||||||||||||
Minnesota | 3 | — | — | 3 | — | — | 3 | — | — | 3 | — | — | 3 | |||||||||||||||||||||||||||||||||||||||||
Missouri | 1 | — | — | 1 | — | — | 1 | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||
Nevada | 12 | — | — | 12 | — | — | 12 | — | — | 12 | — | — | 12 | |||||||||||||||||||||||||||||||||||||||||
New Hampshire | 4 | — | — | 4 | — | — | 4 | — | — | 4 | — | — | 4 | |||||||||||||||||||||||||||||||||||||||||
New Jersey | 28 | — | — | 28 | 1 | — | 29 | — | 1 | 28 | — | — | 28 | |||||||||||||||||||||||||||||||||||||||||
New Mexico | 8 | — | — | 8 | — | — | 8 | — | — | 8 | — | — | 8 | |||||||||||||||||||||||||||||||||||||||||
New York | 29 | 1 | — | 30 | 1 | — | 31 | — | 2 | 29 | — | — | 29 | |||||||||||||||||||||||||||||||||||||||||
North Carolina | 11 | — | — | 11 | — | — | 11 | — | 1 | 10 | — | — | 10 | |||||||||||||||||||||||||||||||||||||||||
Ohio | 13 | — | — | 13 | — | — | 13 | — | 1 | 12 | — | — | 12 | |||||||||||||||||||||||||||||||||||||||||
Oklahoma | 6 | — | — | 6 | — | — | 6 | — | — | 6 | — | — | 6 | |||||||||||||||||||||||||||||||||||||||||
Pennsylvania | 46 | — | 1 | 45 | — | — | 45 | — | 3 | 42 | — | — | 42 | |||||||||||||||||||||||||||||||||||||||||
Puerto Rico | 27 | — | — | 27 | — | — | 27 | — | — | 27 | — | — | 27 | |||||||||||||||||||||||||||||||||||||||||
Rhode Island | 3 | — | — | 3 | — | — | 3 | — | — | 3 | — | — | 3 | |||||||||||||||||||||||||||||||||||||||||
South Carolina | 6 | — | — | 6 | — | — | 6 | — | — | 6 | — | — | 6 | |||||||||||||||||||||||||||||||||||||||||
Tennessee | 7 | — | — | 7 | — | — | 7 | — | — | 7 | — | — | 7 | |||||||||||||||||||||||||||||||||||||||||
Texas | 60 | — | — | 60 | — | — | 60 | — | 5 | 55 | — | — | 55 | |||||||||||||||||||||||||||||||||||||||||
Utah | 6 | — | — | 6 | — | — | 6 | — | — | 6 | — | — | 6 | |||||||||||||||||||||||||||||||||||||||||
Virginia | 17 | — | — | 17 | — | — | 17 | — | 1 | 16 | — | — | 16 | |||||||||||||||||||||||||||||||||||||||||
Washington | 2 | — | — | 2 | — | — | 2 | — | — | 2 | — | — | 2 | |||||||||||||||||||||||||||||||||||||||||
Total | 628 | 1 | 1 | 628 | 2 | 1 | 629 | — | 34 | 595 | — | — | 595 |
STORE IMPROVEMENTS
2
In fiscal 2006 we expect to remodel and grand reopen an additional 200-250 stores with the balance expected to be completed in 2007. The Company expects to fund the redesign plan from net cash generated from operating activities, its existing line of credit and a portion of the proceeds from its financing activities in fiscal 2004.
PRODUCTS AND SERVICES
3
STORE OPERATIONS AND MANAGEMENT
INVENTORY CONTROL AND DISTRIBUTION
SUPPLIERS
COMPETITION
4
REGULATION
EMPLOYEES
Description | | Full-time | | % | | Part-time | | % | | Total | | % | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | 6,371 | 45.4 | 4,773 | 70.5 | 11,144 | 53.6 | ||||||||||||||||||||
Service Center | 6,036 | 43.1 | 1,834 | 27.1 | 7,870 | 37.9 | ||||||||||||||||||||
STORE TOTAL | 12,407 | 88.5 | 6,607 | 97.6 | 19,014 | 91.5 | ||||||||||||||||||||
Warehouses | 654 | 4.7 | 141 | 2.1 | 795 | 3.8 | ||||||||||||||||||||
Offices | 954 | 6.8 | 18 | 0.3 | 972 | 4.7 | ||||||||||||||||||||
TOTAL EMPLOYEES | 14,015 | 100.0 | 6,766 | 100.0 | 20,781 | 100.0 |
RISK FACTORS
Risks Related to Pep Boys
If we are unable to generate sufficient cash flows from our operations, our liquidity will suffer and we may be unable to satisfy our obligations.
• | our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired in the future; |
• | a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our debt, thereby reducing the funds available for other purposes; |
• | our failure to comply with the financial and other restrictive covenants governing our debt, which, among other things, require us to maintain financial ratios and limit our ability to incur additional debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse effect on our business or our prospects; and |
• | if we are substantially more leveraged than some of our competitors, we might be at a competitive disadvantage to those competitors that have lower debt service obligations and significantly greater operating and financial flexibility than we do. |
5
We depend on our relationships with our vendors and a disruption of these relationships or of our vendors’ operations could have a material adverse effect on our business and results of operations.
We depend on our senior management team and our other personnel, and we face substantial competition for qualified personnel.
We face possible adverse changes in tax laws.
We are subject to environmental laws and may be subject to environmental liabilities that could have a material adverse effect on us in the future.
Risks Related to Our Industry
Our industry is highly competitive, and price competition in some categories of the automotive aftermarket or a loss of trust in our participation in the “do-it-for-me” market, could cause a material decline in our revenues and earnings.
6
Do-It-Yourself
• | automotive parts and accessories stores; |
• | automobile dealers that supply manufacturer replacement parts and accessories; and |
• | mass merchandisers and wholesale clubs that sell automotive products. |
Do-It-For-Me
• | regional and local full service automotive repair shops; |
• | automobile dealers that provide repair and maintenance services; |
• | national and regional (including franchised) tire retailers that provide additional automotive repair and maintenance services; and |
• | national and regional (including franchised) specialized automotive (such as exhaust, brake and transmission) repair facilities that provide additional automotive repair and maintenance services. |
• | mass merchandisers, wholesalers and jobbers (some of which are associated with national parts distributors or associations). |
• | national and regional (including franchised) tire retailers; and |
• | mass merchandisers and wholesale clubs that sell tires. |
Vehicle miles driven may decrease, resulting in a decline of our revenues and negatively affecting our results of operations.
• | the weather—as vehicle maintenance may be deferred during periods of inclement weather; |
• | the economy—as during periods of poor economic conditions, customers may defer vehicle maintenance or repair, and during periods of good economic conditions, consumers may opt to purchase new vehicles rather than service the vehicles they currently own and replace worn or damaged parts; |
• | gas prices—as increases in gas prices may deter consumers from using their vehicles; and |
7
• | travel patterns—as changes in travel patterns may cause consumers to rely more heavily on train and airplane transportation. |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
SEC REPORTING
8
EXECUTIVE OFFICERS OF THE COMPANY
Name | Age | Tenure with Company | Position with the Company and Date of Election to Position | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lawrence N. Stevenson | 48 | 1 year, 10 months | Chairman since September 2004 and Chief Executive Officer since May 2003 | |||||||||||
Harold L. Smith | 54 | 1 year, 8 months | Executive Vice President—Merchandising & Marketing since August 2003 | |||||||||||
Mark S. Bacon | 41 | 1 month | Senior Vice President—Retail Operations since February 2005 | |||||||||||
Mark L. Page | 48 | 29 years | Senior Vice President—Service Center Operations since February 2005 | |||||||||||
Harry F. Yanowitz | 38 | 1 year, 9 months | Senior Vice President—Chief Financial Officer since August 2004 |
9
ITEM 2 | PROPERTIES |
Warehouse Location | | Products Warehoused | | Square Footage | | Owned or Leased | | Stores Serviced | | States Serviced | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Los Angeles, CA | All except tires | 216,000 | Leased | 151 | AZ, CA, NM, NV, UT, WA | |||||||||||||||||
Los Angeles, CA | Tires/parts | 73,000 | Leased | 151 | AZ, CA, NM, NV, UT, WA | |||||||||||||||||
Los Angeles, CA | All except tires | 137,000 | Leased | 151 | AZ, CA, NM, NV, UT, WA | |||||||||||||||||
Atlanta, GA | All | 392,000 | Owned | 133 | AL, FL, GA, LA, NC, PR, SC, TN, VA | |||||||||||||||||
Mesquite, TX | All | 244,000 | Owned | 91 | AR, AZ, CO, LA, NM, OK, TX | |||||||||||||||||
Plainfield, IN | All | 403,000 | Leased | 78 | IL, IN, KS, KY, MI, MN, MO, OH, OK, PA, TN, VA | |||||||||||||||||
Chester, NY | All | 400,400 | Leased | 142 | CT, DE, MA, MD, ME, NH, NJ, NY, PA, RI, VA | |||||||||||||||||
Total | 1,865,400 |
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ITEM 3 | LEGAL PROCEEDINGS |
ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
PART II
ITEM 5 | MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
MARKET PRICE PER SHARE
Market Price Per Share | Cash Dividends | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal year ended January 29, 2005 | High | Low | Per Share | |||||||||||||
Fourth Quarter | $ | 17.24 | $ | 13.06 | $ | 0.0675 | ||||||||||
Third Quarter | 20.70 | 11.83 | 0.0675 | |||||||||||||
Second Quarter | 28.10 | 20.36 | 0.0675 | |||||||||||||
First Quarter | 29.37 | 21.29 | 0.0675 | |||||||||||||
Fiscal year ended January 31, 2004 | ||||||||||||||||
Fourth Quarter | $ | 23.99 | $ | 18.53 | $ | 0.0675 | ||||||||||
Third Quarter | 19.94 | 14.05 | 0.0675 | |||||||||||||
Second Quarter | 15.90 | 8.54 | 0.0675 | |||||||||||||
First Quarter | 10.69 | 6.00 | 0.0675 |
11
REPURCHASE OF COMMON STOCK
Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announcing Plans or Programs(1) | | Maximum Dollar Value That May Yet Be Purchased Under the Plans or Programs(1)(2) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
November 2004 | 59,000 | $ | 14.00 | 59,000 | $ | 60,282,000 |
(1) | All repurchases referenced in this table were made on the open market at prevailing market rates plus related expenses under our stock repurchase program, which was authorized by our Board of Directors and publicly announced on September 9, 2004, for a maximum of $100 million in common stock expiring September 8, 2005. |
(2) | Excludes expenses. |
EQUITY COMPENSATION PLANS
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted-average price of outstanding options (excluding securities reflected in column (a)) (b) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | 5,541,961 | $ | 16.98 | 2,065,128 | ||||||||||
Equity compensation plans not approved by security holders | 174,540 | (1) | $ | 8.70 | — | |||||||||
Total | 5,716,501 | $ | 16.72 | 2,065,128 |
(1)Inducement options granted to the current CEO in connection with his hire.
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ITEM 6 | SELECTED FINANCIAL DATA |
(dollar amounts are in thousands except share data) | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended | | Jan. 29, 2005 | | Jan. 31, 2004 | | Feb. 1, 2003 | | Feb. 2, 2002 | | Feb. 3, 2001 | |||||||||||
STATEMENT OF OPERATIONS DATA | |||||||||||||||||||||
Merchandise sales | $ | 1,863,015 | $ | 1,728,386 | $ | 1,697,628 | $ | 1,707,190 | $ | 1,891,046 | |||||||||||
Service revenue | 409,881 | 405,884 | 400,149 | 403,505 | 444,233 | ||||||||||||||||
Total revenues | 2,272,896 | 2,134,270 | 2,097,777 | 2,110,695 | 2,335,279 | ||||||||||||||||
Gross profit from merchandise sales | 529,719 | 486,026 | (1) | 509,611 | (2) | 494,237 | (3) | 434,227 | (4) | ||||||||||||
Gross profit from service revenue | 92,739 | 94,762 | (1) | 100,355 | (2) | 99,381 | (3) | 76,799 | (4) | ||||||||||||
Total gross profit | 622,458 | 580,788 | (1) | 609,966 | (2) | 593,618 | (3) | 511,026 | (4) | ||||||||||||
Selling, general and administrative expenses | 547,336 | 569,834 | (1) | 504,163 | (2) | 497,798 | (3) | 542,077 | (4) | ||||||||||||
Operating profit (loss) | 75,122 | 10,954 | (1) | 105,803 | (2) | 95,820 | (3) | (31,051 | )(4) | ||||||||||||
Non-operating income | 1,824 | 3,340 | 3,097 | 4,623 | 7,314 | ||||||||||||||||
Interest expense | 35,965 | 38,255 | 47,237 | 53,709 | 59,718 | ||||||||||||||||
Earnings (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle | 40,981 | (23,961 | )(1) | 61,663 | (2) | 46,734 | (3) | (83,456 | ) (4) | ||||||||||||
Net earnings (loss) from continuing operations before cumulative effect of change in accounting principle | 25,666 | (15,145 | )(1) | 38,881 | (2) | 30,030 | (3) | (52,976 | )(4) | ||||||||||||
(Loss) earnings from discontinued operations, net of tax | (2,087 | ) | (16,265 | ) | 587 | 337 | (382 | ) | |||||||||||||
Cumulative effect of change in accounting principle, net of tax | — | (2,484 | ) | — | — | — | |||||||||||||||
Net earnings (loss) | 23,579 | (33,894 | )(1) | 39,468 | (2) | 30,367 | (3) | (53,358 | )(4) | ||||||||||||
BALANCE SHEET DATA | |||||||||||||||||||||
Working capital | $ | 180,651 | $ | 76,227 | $ | 130,680 | $ | 115,201 | $ | 130,861 | |||||||||||
Current ratio | 1.27 to 1 | 1.10 to 1 | 1.24 to 1 | 1.21 to 1 | 1.23 to 1 | ||||||||||||||||
Merchandise inventories | $ | 602,760 | $ | 553,562 | $ | 488,882 | $ | 519,473 | $ | 547,735 | |||||||||||
Property and equipment-net | 945,031 | 923,209 | 974,673 | 1,008,697 | 1,091,955 | ||||||||||||||||
Total assets | 1,867,023 | 1,778,046 | 1,741,650 | 1,755,990 | 1,863,995 | ||||||||||||||||
Long-term debt (includes all convertible debt) | 471,682 | 408,016 | 525,577 | 544,418 | 654,194 | ||||||||||||||||
Total stockholders’ equity | 653,456 | 569,734 | 605,880 | 578,010 | 559,954 | ||||||||||||||||
DATA PER COMMON SHARE | |||||||||||||||||||||
Basic earnings (loss) from continuing operations before cumulative effect of change in accounting principle | $ | 0.46 | $ | (0.29 | )(1) | $ | 0.75 | (2) | $ | 0.58 | (3) | $ | (1.04 | )(4) | |||||||
Basic earnings (loss) | 0.42 | (0.65 | )(1) | 0.77 | (2) | 0.59 | (3) | (1.04 | )(4) | ||||||||||||
Diluted earnings (loss) from continuing operations before cumulative effect of change in accounting principle | 0.45 | (0.29 | )(1) | 0.73 | (2) | 0.58 | (3) | (1.04 | )(4) | ||||||||||||
Diluted net earnings (loss) | 0.41 | (0.65 | )(1) | 0.74 | (2) | 0.58 | (3) | (1.04 | )(4) | ||||||||||||
Cash dividends | 0.27 | 0.27 | 0.27 | 0.27 | 0.27 | ||||||||||||||||
Stockholders’ equity | 11.87 | 10.79 | 11.73 | 11.24 | 10.92 | ||||||||||||||||
Common share price range: | |||||||||||||||||||||
High | 29.37 | 23.99 | 19.38 | 18.48 | 7.69 | ||||||||||||||||
Low | 11.83 | 6.00 | 8.75 | 4.40 | 3.31 | ||||||||||||||||
OTHER STATISTICS | |||||||||||||||||||||
Return on average stockholders’ equity | 3.9 | % | (5.8 | )% | 6.7 | % | 5.3 | % | (9.0 | )% | |||||||||||
Common shares issued and outstanding | 55,056,641 | 52,787,148 | 51,644,578 | 51,430,861 | 51,260,663 | ||||||||||||||||
Capital expenditures | $ | 103,766 | $ | 43,262 | $ | 43,911 | $ | 25,375 | $ | 57,336 | |||||||||||
Number of retail outlets | 595 | 595 | 629 | 628 | 628 | ||||||||||||||||
Number of service bays | 6,181 | 6,181 | 6,527 | 6,507 | 6,498 |
(1) | Includes pretax charges of $88,980 related to corporate restructuring and other one-time events of which $29,308 reduced gross profit from merchandise sales, $3,278 reduced gross profit from service revenue and $56,394 was included in selling, general and administrative expenses. |
(2) | Includes pretax charges of $2,529 related to the Profit Enhancement Plan of which $2,014 reduced the gross profit from merchandise sales, $491 reduced gross profit from service revenue and $24 was included in selling, general and administrative expenses. |
(3) | Includes pretax charges of $5,197 related to the Profit Enhancement Plan of which $4,169 reduced the gross profit from merchandise sales, $813 reduced gross profit from service revenue and $215 was included in selling, general and administrative expenses. |
(4) | Includes pretax charges of $70,872 related to the Profit Enhancement Plan of which $63,389 reduced the gross profit from merchandise sales, $4,855 reduced gross profit from service revenue and $2,628 was included in selling, general and administrative expenses. |
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ITEM 7 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
OVERVIEW
Introduction
Business Strategy
• | Improving Our Merchandising Capabilities. We will continue to fill our stores with a new and flexible merchandising mix designed to increase customer traffic. We will take advantage of our industry-leading average retail square footage to improve and intensify its merchandise displays. We utilize product-specific advertising to highlight promotional items and pricing, primarily through weekly print advertising. |
• | Enhancing Our Stores. We continue to reinvest in our existing stores to completely redesign our interiors and enhance their exterior appeal. We believe that this layout will provide customers with a clear and concise way of finding what they need and will promote cross-selling. |
14
• | Focusing Our Service Offering and Introducing Name Brand Tires. We continue to build upon the competitive advantage that our service offering provides over our parts-only competitors by sharpening our focus on the most profitable maintenance services and introducing name brand tires. By narrowing our service offering, we believe that we can improve our financial performance, both by eliminating less profitable heavy repair services and by better managing the skills of our staff. In addition, the introduction of name brand tires is expected to attract more customers and to help establish those customer relationships earlier in the post-warranty period of their car’s life. |
• | New Store Growth. We expect new store growth to begin in fiscal 2006. This growth will focus primarily upon increasing penetration in our existing markets to further leverage our investments. We are likely to grow our total number of service bays through a combination of acquisitions and building new stores. The format of these new stores is likely to include both SUPERCENTERS and a service-only format that will utilize existing SUPERCENTERS for most of their inventory needs. |
CAPITAL & LIQUIDITY
Capital Resources and Needs
15
exempt from the overtime provisions of California law and sought to be compensated for all overtime hours worked. The Company made final payments of $26,582,000 in satisfaction of the settlement in the first quarter of fiscal 2004 from its legal reserves recorded in accrued expenses on the Company’s Consolidated Balance Sheet.
Contractual Obligations
(dollar amounts in thousands) | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Obligation | | Total | | Due in less than 1 year | | Due in 1–3 years | | Due in 3–5 years | | Due after 5 years | |||||||||||||
Long-term debt(1) | $ | 512,142 | $ | 40,460 | $ | 163,246 | $ | 8,152 | $ | 300,284 | |||||||||||||
Operating leases | 471,028 | 59,039 | 112,021 | 80,524 | 219,444 | ||||||||||||||||||
Expected scheduled interest payments on all long-term debt | 253,119 | 34,098 | 77,121 | 65,760 | 76,140 | ||||||||||||||||||
Capital leases | 422 | 422 | — | — | — | ||||||||||||||||||
Unconditional purchase obligation | 7,009 | 7,009 | — | — | — | ||||||||||||||||||
Total cash obligations | $ | 1,243,720 | $ | 141,028 | $ | 352,388 | $ | 154,436 | $ | 595,868 |
(1) | Long-term debt includes current maturities. |
(dollar amounts in thousands) | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commercial Commitments | | Total | | Due in less than 1 year | | Due in 1–3 years | | Due in 3–5 years | | Due after 5 years | |||||||||||||
Import letters of credit | $ | 960 | $ | 960 | $ | — | $ | — | $ | — | |||||||||||||
Standby letters of credit | 35,493 | 35,493 | — | — | — | ||||||||||||||||||
Surety bonds | 4,442 | 4,442 | — | — | — | ||||||||||||||||||
Total commercial commitments | $ | 40,895 | $ | 40,895 | $ | — | $ | — | $ | — |
Long-term Debt
16
up to $99,000,000 of reserves required as of December 2, 2004 to support certain operating leases. This reserve was reduced to $76,401,378 on December 2, 2004. Finally, the amendment extended the term of the agreement through December 2009. The weighted average interest rate on borrowings under the line of credit agreement was 4.1% and 3.4% at January 29, 2005 and January 31, 2004, respectively.
Other Contractual Obligations
17
Off-balance Sheet Arrangements
Pension Plans
18
and transferred a portion of their accrued benefits to the new defined contribution portion of the SERP. These obligations resulted in an expense under SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” of approximately $5,231,000 and $2,191,000, respectively, in fiscal 2003.
RESULTS OF OPERATIONS
Restructuring—Fiscal 2003
Discontinued Operations
(dollar amounts in thousands) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
Total Revenues | $ | 1 | $ | 37,722 | $ | 74,711 | ||||||||
Total Gross (Loss) Profit | (3,342 | ) | (15,695 | ) | 17,215 | |||||||||
Selling, General, and Administrative Expenses | (10 | ) | 9,981 | 16,283 | ||||||||||
(Loss) Earnings from Discontinued Operations Before Income Taxes | (3,332 | ) | (25,675 | ) | 932 | |||||||||
(Loss) Earnings from Discontinued Operations, Net of Tax | $ | (2,087 | ) | $ | (16,265 | ) | $ | 587 |
(dollar amounts in thousands) | | January 29, 2005 | | January 31, 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Land | $ | 543 | $ | 8,954 | ||||||
Building and improvements | 122 | 7,975 | ||||||||
$ | 665 | $ | 16,929 |
19
20
Analysis of Statement of Operations
| Percentage of Total Revenues | | Percentage Change | | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended | | Jan. 29, 2005 (fiscal 2004) | | Jan. 31, 2004 (fiscal 2003) | | Feb. 1, 2003 (Fiscal 2002) | | Fiscal 2004 vs. Fiscal 2003 | | Fiscal 2003 vs. Fiscal 2002 | ||||||||||||||
Merchandise Sales | 82.0 | % | 81.0 | % | 80.9 | % | 7.8 | % | 1.8 | % | ||||||||||||||
Service Revenue(1) | 18.0 | 19.0 | 19.1 | 1.0 | 1.4 | |||||||||||||||||||
Total Revenues | 100.0 | 100.0 | 100.0 | 6.5 | 1.7 | |||||||||||||||||||
Costs of Merchandise Sales(2) | 71.6 | (3) | 71.9 | (3) | 70.0 | (3) | 7.3 | 4.6 | ||||||||||||||||
Costs of Service Revenue(2) | 77.4 | (3) | 76.7 | (3) | 74.9 | (3) | 1.9 | 3.8 | ||||||||||||||||
Total Costs of Revenues | 72.6 | 72.8 | 70.9 | 6.2 | 4.4 | |||||||||||||||||||
Gross Profit from Merchandise Sales | 28.4 | (3) | 28.1 | (3) | 30.0 | (3) | 9.0 | (4.6 | ) | |||||||||||||||
Gross Profit from Service Revenue | 22.6 | (3) | 23.3 | (3) | 25.1 | (3) | (2.1 | ) | (5.6 | ) | ||||||||||||||
Total Gross Profit | 27.4 | 27.2 | 29.1 | 7.2 | (4.8 | ) | ||||||||||||||||||
Selling, General and Administrative Expenses | 24.1 | 26.7 | 24.0 | (3.9 | ) | 13.0 | ||||||||||||||||||
Operating Profit | 3.3 | 0.5 | 5.1 | 585.8 | (89.7 | ) | ||||||||||||||||||
Non-operating Income | 0.1 | 0.2 | 0.1 | (45.4 | ) | 7.8 | ||||||||||||||||||
Interest Expense | 1.6 | 1.8 | 2.2 | (6.0 | ) | (19.0 | ) | |||||||||||||||||
Earnings (Loss) from Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle | 1.8 | (1.1 | ) | 3.0 | 271.0 | (138.9 | ) | |||||||||||||||||
Income Tax Expense (Benefit) | 37.4 | (4) | 36.7 | (4) | 36.9 | (4) | 273.7 | (138.7 | ) | |||||||||||||||
Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle | 1.1 | (0.7 | ) | 1.9 | 269.5 | (139.0 | ) | |||||||||||||||||
(Loss) Earnings from Discontinued Operations, Net of Tax | (0.1 | ) | (0.8 | ) | 0.0 | 87.2 | (2,870.9 | ) | ||||||||||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax | — | (0.1 | ) | — | — | — | ||||||||||||||||||
Net Earnings (Loss) | 1.0 | (1.6 | ) | 1.9 | 169.6 | (185.9 | ) |
(1) | Service revenue consists of the labor charge for installing merchandise or maintaining or repairing vehicles, excluding the sale of any installed parts or materials. |
(2) | Costs of merchandise sales include the cost of products sold, buying, warehousing and store occupancy costs. Costs of service revenue include service center payroll and related employee benefits and service center occupancy costs. Occupancy costs include utilities, rents, real estate and property taxes, repairs and maintenance and depreciation and amortization expenses. |
(3) | As a percentage of related sales or revenue, as applicable. |
(4) | As a percentage of earnings (loss) before income taxes. |
21
Fiscal 2004 vs. Fiscal 2003
Fiscal 2003 vs. Fiscal 2002
22
inventory write-down associated with the corporate restructuring, increased store occupancy costs, increased warehousing costs and an impairment charge of $1,371,000, offset by reduced product costs as a result of an increase of $18,634,000 in excess cooperative advertising reimbursements. The increase in store occupancy costs was due to higher rent and utilities expenses. The increase in warehousing costs was due to higher rent and delivery expenses.
Effects of Inflation
Industry Comparison
23
(dollar amounts in thousands) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
Retail Revenues | $ | 1,352,695 | $ | 1,195,757 | $ | 1,163,808 | ||||||||
Service Business Revenues | 920,201 | 938,513 | 933,969 | |||||||||||
Total Revenues | $ | 2,272,896 | $ | 2,134,270 | $ | 2,097,777 | ||||||||
Gross Profit from Retail Revenues(1) | $ | 367,118 | $ | 309,214 | $ | 322,986 | ||||||||
Gross Profit from Service Business Revenues(1) | 255,340 | 271,574 | 286,980 | |||||||||||
Total Gross Profit | $ | 622,458 | $ | 580,788 | $ | 609,966 |
(1) | Gross Profit from Retail Revenues includes the cost of products sold, buying, warehousing and store occupancy costs. Gross Profit from Service Business Revenues includes the cost of installed products sold, buying, warehousing, service center payroll and related employee benefits and service center occupancy costs. Occupancy costs include utilities, rents, real estate and property taxes, repairs and maintenance and depreciation and amortization expenses. |
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
• | The Company evaluates whether inventory is stated at the lower of cost or market based on historical experience with the carrying value and life of inventory. The assumptions used in this evaluation are based on current market conditions and the Company believes inventory is stated at the lower of cost or market in the consolidated financial statements. In addition, historically the Company has been able to return excess items to vendors for credit. Future changes in vendors, in their policies or in their willingness to accept returns of excess inventory could require a revision in the estimates. If our estimates regarding excess or obsolete inventory are inaccurate, we may be exposed to losses or gains that could be material. A 10% difference in these estimates at January 29, 2005 would have affected net earnings by approximately $795,000 for the fiscal year ended January 29, 2005. |
• | The Company has risk participation arrangements with respect to casualty and health care insurance. The amounts included in the Company’s costs related to these arrangements are estimated and can vary based on changes in assumptions, claims experience or the providers included in the associated insurance programs. A 10% change in our self-insurance liabilities at January 29, 2005 would have affected net earnings by approximately $3,750,000 for the fiscal year ended January 29, 2005. |
• | The Company records reserves for future product returns and warranty claims. The reserves are based on current sales of products and historical claims experience. If claims experience differs from historical levels, revisions in the Company’s estimates may be required. A 10% change in our reserve for future product returns and warranty claims at January 29, 2005 would have affected net earnings by approximately $394,000 for the fiscal year ended January 29, 2005. |
24
• | The Company has significant pension costs and liabilities that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected return on plan assets, mortality rates and merit and promotion increases. The Company is required to consider current market conditions, including changes in interest rates, in selecting these assumptions. Changes in the related pension costs or liabilities may occur in the future due to changes in the assumptions. The following table highlights the sensitivity of our pension benefit obligations (PBO) and expense to changes in these assumptions, assuming all other assumptions remain constant: |
(dollar amounts in thousands) | |||||||||
---|---|---|---|---|---|---|---|---|---|
Change in Assumption | | Impact on Annual Pension Expense | Impact on PBO | ||||||
0.25 percentage point decrease in discount rate | Increase $220 | Increase $1,250 | |||||||
0.25 percentage point increase in discount rate | Decrease $220 | Decrease $1,250 | |||||||
5% decrease in expected rate of return on assets | Increase $110 | — | |||||||
5% increase in expected rate of return on assets | Decrease $115 | — |
• | The Company periodically evaluates its long-lived assets for indicators of impairment. Management’s judgments are based on market and operational conditions at the time of evaluation. Future events could cause management’s conclusion on impairment to change, requiring an adjustment of these assets to their then current fair market value. |
• | The Company provides estimates of fair value for real estate assets and lease liabilities related to store closures when appropriate to do so based on accounting principles generally accepted in the United States of America. Future circumstances may result in the Company’s actual future costs or the amounts recognized upon the sale of the property to differ substantially from original estimates. A 10% change in our location closing liability at January 29, 2005 would have affected net earnings by approximately $1,187,000 for the fiscal year ended January 29, 2005. |
• | The Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This requires the Company to estimate its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation of property and equipment and valuation of inventories, for tax and accounting purposes. The Company determines its provision for income taxes based on federal and state tax laws and regulations currently in effect, some of which have been recently revised. Legislation changes currently proposed by certain of the states in which we operate, if enacted, could increase our transactions or activities subject to tax. Any such legislation that becomes law could result in an increase in our state income tax expense and our state income taxes paid, which could have an effect on our net income. |
The temporary differences between the book and tax treatment of income and expenses result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income. To the extent we believe that recovery is not more likely than not, we must establish a valuation allowance. To the extent we establish a valuation allowance or change the allowance in a future period, income tax expense will be impacted. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. Net deferred tax liabilities as of January 29, 2005 and January 31, 2004 totaled $45,374,000 and $9,150,000, respectively, representing approximately 3.7% and 0.8% of liabilities, respectively. |
NEW ACCOUNTING STANDARDS
25
that may be settled by the issuance of those equity instruments. Entities will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.
RECENTLY ADOPTED ACCOUNTING STANDARDS
26
annual and interim disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement benefit plans. Except for certain provisions, the adoption of this Statement is required for financial statements with fiscal years ending after December 15, 2003. The Company adopted the provisions of SFAS No. 132R in the fourth quarter of fiscal 2003 with no material effect on its consolidated financial statements. The revised disclosure requirements are reflected in Note 10 of the consolidated financial statements included in Item 8 herein.
27
Company elected early adoption for the provisions of this consensus prospectively in the fourth quarter of fiscal 2003 with no material effect on its consolidated financial statements.
ITEM 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
(dollar amounts in thousands) | | Amount | | Average Interest Rate | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Fair value at January 29, 2005 | $ | 512,170 | ||||||||
Expected maturities: | ||||||||||
2005 | $ | 40,444 | 7.0 | % | ||||||
2006 | 43,000 | 6.9 | ||||||||
2007 | 119,215 | 4.3 | ||||||||
2008 | — | — | ||||||||
2009 | — | — | ||||||||
Thereafter | 300,000 | 7.3 | ||||||||
$ | 502,659 |
28
29
ITEM 8 | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
The Pep Boys—Manny, Moe & Jack
We have audited the accompanying consolidated balance sheets of The Pep Boys—Manny, Moe & Jack and subsidiaries (the “Company”) as of January 29, 2005 and January 31, 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended January 29, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Pep Boys—Manny, Moe & Jack and subsidiaries as of January 29, 2005 and January 31, 2004, and the results of their operations and their cash flows for each of the three years in the period ended January 29, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of January 29, 2005, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 13, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Philadelphia, Pennsylvania
April 13, 2005
30
CONSOLIDATED BALANCE SHEETS | The Pep Boys—Manny, Moe & Jack and Subsidiaries |
(dollar amounts in thousands, except share data) |
| January 29, 2005 | | January 31, 2004 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents | $ | 82,758 | $ | 60,984 | ||||||
Accounts receivable, less allowance for uncollectible accounts of $1,030 and $739 | 30,994 | 30,562 | ||||||||
Merchandise inventories | 602,760 | 553,562 | ||||||||
Prepaid expenses | 45,349 | 39,480 | ||||||||
Deferred income taxes | — | 20,826 | ||||||||
Other | 96,065 | 81,096 | ||||||||
Assets held for disposal | 665 | 16,929 | ||||||||
Total Current Assets | 858,591 | 803,439 | ||||||||
Property and Equipment—at cost: | ||||||||||
Land | 261,985 | 263,907 | ||||||||
Buildings and improvements | 916,099 | 899,114 | ||||||||
Furniture, fixtures and equipment | 633,098 | 586,607 | ||||||||
Construction in progress | 40,426 | 12,800 | ||||||||
1,851,608 | 1,762,428 | |||||||||
Less accumulated depreciation and amortization | 906,577 | 839,219 | ||||||||
Total Property and Equipment—Net | 945,031 | 923,209 | ||||||||
Other | 63,401 | 51,398 | ||||||||
Total Assets | $ | 1,867,023 | $ | 1,778,046 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable | $ | 310,981 | $ | 342,584 | ||||||
Accrued expenses | 306,671 | 267,565 | ||||||||
Deferred income taxes | 19,406 | — | ||||||||
Current maturities of long-term debt and obligations under capital lease | 40,882 | 117,063 | ||||||||
Total Current Liabilities | 677,940 | 727,212 | ||||||||
Long-term debt and obligations under capital leases, less current maturities | 352,682 | 258,016 | ||||||||
Convertible long-term debt | 119,000 | 150,000 | ||||||||
Other long-term liabilities | 37,977 | 43,108 | ||||||||
Deferred income taxes | 25,968 | 29,976 | ||||||||
Commitments and Contingencies | ||||||||||
Stockholders’ Equity: | ||||||||||
Common stock, par value $1 per share: Authorized 500,000,000 shares; Issued 68,557,041 and 63,910,577 shares | 68,557 | 63,911 | ||||||||
Additional paid-in capital | 284,966 | 177,317 | ||||||||
Retained earnings | 536,780 | 531,933 | ||||||||
Common stock subscriptions receivable | (167 | ) | — | |||||||
Accumulated other comprehensive loss | (4,852 | ) | (15 | ) | ||||||
885,284 | 773,146 | |||||||||
Less cost of shares in treasury—11,305,130 shares and 8,928,159 shares | 172,564 | 144,148 | ||||||||
Less cost of shares in benefits trust—2,195,270 shares | 59,264 | 59,264 | ||||||||
Total Stockholders’ Equity | 653,456 | 569,734 | ||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,867,023 | $ | 1,778,046 |
See notes to the consolidated financial statements
31
CONSOLIDATED STATEMENTS OF OPERATIONS | The Pep Boys—Manny, Moe & Jack and Subsidiaries |
(dollar amounts in thousands, except per share amounts) |
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise Sales | $ | 1,863,015 | $ | 1,728,386 | $ | 1,697,628 | ||||||||
Service Revenue | 409,881 | 405,884 | 400,149 | |||||||||||
Total Revenues | 2,272,896 | 2,134,270 | 2,097,777 | |||||||||||
Costs of Merchandise Sales | 1,333,296 | 1,242,360 | 1,188,017 | |||||||||||
Costs of Service Revenue | 317,142 | 311,122 | 299,794 | |||||||||||
Total Costs of Revenues | 1,650,438 | 1,553,482 | 1,487,811 | |||||||||||
Gross Profit from Merchandise Sales | 529,719 | 486,026 | 509,611 | |||||||||||
Gross Profit from Service Revenue | 92,739 | 94,762 | 100,355 | |||||||||||
Total Gross Profit | 622,458 | 580,788 | 609,966 | |||||||||||
Selling, General and Administrative Expenses | 547,336 | 569,834 | 504,163 | |||||||||||
Operating Profit | 75,122 | 10,954 | 105,803 | |||||||||||
Non-operating Income | 1,824 | 3,340 | 3,097 | |||||||||||
Interest Expense | 35,965 | 38,255 | 47,237 | |||||||||||
Earnings (Loss) from Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle | 40,981 | (23,961 | ) | 61,663 | ||||||||||
Income Tax Expense (Benefit) | 15,315 | (8,816 | ) | 22,782 | ||||||||||
Net Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle | 25,666 | (15,145 | ) | 38,881 | ||||||||||
(Loss) Earnings from Discontinued Operations, Net of Tax of $(1,245), $(9,410) and $345 | (2,087 | ) | (16,265 | ) | 587 | |||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax | — | (2,484 | ) | — | ||||||||||
Net Earnings (Loss) | $ | 23,579 | $ | (33,894 | ) | $ | 39,468 | |||||||
Basic Earnings (Loss) per Share: | ||||||||||||||
Net Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle | $ | 0.46 | $ | (0.29 | ) | $ | 0.75 | |||||||
(Loss) Earnings from Discontinued Operations, Net of Tax | (0.04 | ) | (0.31 | ) | 0.02 | |||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax | — | (0.05 | ) | — | ||||||||||
Basic Earnings (Loss) per Share | $ | 0.42 | $ | (0.65 | ) | $ | 0.77 | |||||||
Diluted Earnings (Loss) per Share: | ||||||||||||||
Net Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle | $ | 0.45 | $ | (0.29 | ) | $ | 0.73 | |||||||
(Loss) Earnings from Discontinued Operations, Net of Tax | (0.04 | ) | (0.31 | ) | 0.01 | |||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax | — | (0.05 | ) | — | ||||||||||
Diluted Earnings (Loss) per Share | $ | 0.41 | $ | (0.65 | ) | $ | 0.74 |
See notes to the consolidated financial statements
32
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY | The Pep Boys—Manny, Moe & Jack and Subsidiaries |
(dollar amounts in thousands, except share data) |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Common Stock Subscriptions Receivable | Benefits Trust | Total Stockholders’ Equity | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
Balance, February 2, 2002 | 63,910,577 | $ | 63,911 | $ | 177,244 | $ | 562,164 | (10,284,446 | ) | $ | (166,045 | ) | $ | — | $ | — | $ | (59,264 | ) | $578,010 | ||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net earnings | 39,468 | |||||||||||||||||||||||||||||||||||
Minimum pension liability adjustment, net of tax | (151 | ) | ||||||||||||||||||||||||||||||||||
Total Comprehensive Income | 39,317 | |||||||||||||||||||||||||||||||||||
Cash dividends ($.27 per share) | (13,911 | ) | (13,911) | |||||||||||||||||||||||||||||||||
Effect of stock options and related tax benefits | (21 | ) | (632 | ) | 111,000 | 1,792 | 1,139 | |||||||||||||||||||||||||||||
Dividend reinvestment plan | 21 | (354 | ) | 102,717 | 1,658 | 1,325 | ||||||||||||||||||||||||||||||
Balance, February 1, 2003 | 63,910,577 | 63,911 | 177,244 | 586,735 | (10,070,729 | ) | (162,595 | ) | (151 | ) | — | (59,264 | ) | 605,880 | ||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
Net loss | (33,894 | ) | ||||||||||||||||||||||||||||||||||
Minimum pension liability adjustment, net of tax | (1,253 | ) | ||||||||||||||||||||||||||||||||||
Fair market value adjustment on derivatives, net of tax | 1,389 | |||||||||||||||||||||||||||||||||||
Total Comprehensive Loss | (33,758) | |||||||||||||||||||||||||||||||||||
Cash dividends ($.27 per share) | (14,089 | ) | (14,089) | |||||||||||||||||||||||||||||||||
Effect of stock options and related tax benefits | (39 | ) | (6,499 | ) | 1,054,250 | 17,021 | 10,483 | |||||||||||||||||||||||||||||
Dividend reinvestment plan | 112 | (320 | ) | 88,320 | 1,426 | 1,218 | ||||||||||||||||||||||||||||||
Balance, January 31, 2004 | 63,910,577 | 63,911 | 177,317 | 531.933 | (8,928,159 | ) | (144,148 | ) | (15 | ) | — | (59,264 | ) | 569,734 | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 23,579 | |||||||||||||||||||||||||||||||||||
Minimum pension liability adjustment, net of tax | (5,799 | ) | ||||||||||||||||||||||||||||||||||
Fair market value adjustment on derivatives, net of tax | 962 | |||||||||||||||||||||||||||||||||||
Total Comprehensive Income | 18,742 | |||||||||||||||||||||||||||||||||||
Issuance of Common Stock | 4,646,464 | 4,646 | 104,208 | 108,854 | ||||||||||||||||||||||||||||||||
Cash dividends ($.27 per share) | (15,676 | ) | (15,676) | |||||||||||||||||||||||||||||||||
Effect of stock options and related tax benefits | 2,064 | (2,984 | ) | 638,210 | 10,304 | (167 | ) | 9,217 | ||||||||||||||||||||||||||||
Stock compensation expense | 1,184 | 1,184 | ||||||||||||||||||||||||||||||||||
Repurchase of Common Stock | (3,077,000 | ) | (39,718 | ) | (39,718 | ) | ||||||||||||||||||||||||||||||
Dividend reinvestment plan | 193 | (72 | ) | 61,819 | 998 | 1,119 | ||||||||||||||||||||||||||||||
Balance, January 29, 2005 | 68,557,041 | $ | 68,557 | $ | 284,966 | $ | 536,780 | (11,305,130 | ) | $ | (172,564 | ) | $ | (4,852 | ) | $ | (167 | ) | $ | (59,264 | ) | $653,456 |
See notes to the consolidated financial statements
33
CONSOLIDATED STATEMENTS OF CASH FLOWS | The Pep Boys—Manny, Moe & Jack and Subsidiaries |
(dollar amounts in thousands, except share data) |
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows from Operating Activities: | ||||||||||||||
Net Earnings (Loss) | $ | 23,579 | $ | (33,894 | ) | $ | 39,468 | |||||||
Net (Loss) Earnings from discontinued operations | (2,087 | ) | (16,265 | ) | 587 | |||||||||
Net Earnings (Loss) from continuing operations | 25,666 | (17,629 | ) | 38,881 | ||||||||||
Adjustments to Reconcile Net Earnings (Loss) From Continuing Operations to Net Cash Provided by Continuing Operations: | ||||||||||||||
Depreciation and amortization | 76,620 | 78,275 | 83,649 | |||||||||||
Cumulative effect of change in accounting principle, net of tax | — | 2,484 | — | |||||||||||
Accretion of asset disposal obligation | 135 | 163 | — | |||||||||||
Stock compensation expense | 1,184 | — | — | |||||||||||
Deferred income taxes | 26,853 | (1,402 | ) | (3,775 | ) | |||||||||
Deferred gain on sale leaseback | (130 | ) | (425 | ) | (112 | ) | ||||||||
Loss on assets held for disposal | — | — | 826 | |||||||||||
Loss on asset impairments | — | 14,535 | — | |||||||||||
(Gain) loss from sale of assets | (11,848 | ) | 61 | (1,909 | ) | |||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Increase in accounts receivable, prepaid expenses and other | (23,071 | ) | (33,197 | ) | (12,901 | ) | ||||||||
(Increase) decrease in merchandise inventories | (49,198 | ) | (64,680 | ) | 30,591 | |||||||||
(Decrease) increase in accounts payable | (24,387 | ) | 142,531 | (16,032 | ) | |||||||||
Increase in accrued expenses | 25,853 | 25,765 | 11,661 | |||||||||||
(Decrease) increase in other long-term liabilities | (1,272 | ) | 1,726 | 92 | ||||||||||
Net Cash Provided by Continuing Operations | 46,405 | 148,207 | 130,971 | |||||||||||
Net Cash (Used in) Provided by Discontinued Operations | (2,732 | ) | 2,448 | 4,945 | ||||||||||
Net Cash Provided by Operating Activities | 43,673 | 150,655 | 135,916 | |||||||||||
Cash Flows from Investing Activities: | ||||||||||||||
Capital expenditures | (88,068 | ) | (41,847 | ) | (39,405 | ) | ||||||||
Capital expenditures from discontinued operations | — | — | (2,022 | ) | ||||||||||
Proceeds from sales of assets | 18,021 | 3,316 | 2,636 | |||||||||||
Proceeds from sales of assets held for disposal | 13,327 | 13,214 | 8,422 | |||||||||||
Net Cash Used in Investing Activities | (56,720 | ) | (25,317 | ) | (30,369 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||||
Net borrowings (payments) under line of credit agreements | 8,102 | (497 | ) | (70,295 | ) | |||||||||
Repayment of life insurance loan | — | — | (20,686 | ) | ||||||||||
Payments for finance issuance costs | (5,500 | ) | (2,356 | ) | (3,750 | ) | ||||||||
Payments on short term borrowings | (7,216 | ) | — | — | ||||||||||
Payments on capital lease obligations | (1,040 | ) | (700 | ) | (642 | ) | ||||||||
Reduction of long-term debt | (189,991 | ) | (101,183 | ) | (121,938 | ) | ||||||||
Reduction of convertible debt | (31,000 | ) | — | — | ||||||||||
Proceeds from issuance of notes | 200,000 | — | 150,000 | |||||||||||
Dividends paid | (15,676 | ) | (14,089 | ) | (13,911 | ) | ||||||||
Repurchase of common stock | (39,718 | ) | — | — | ||||||||||
Proceeds from issuance of common stock | 108,854 | — | — | |||||||||||
Proceeds from exercise of stock options | 6,887 | 10,483 | 1,139 | |||||||||||
Proceeds from dividend reinvestment plan | 1,119 | 1,218 | 1,325 | |||||||||||
Net Cash Provided by (Used in) Financing Activities | 34,821 | (107,124 | ) | (78,758 | ) | |||||||||
Net Increase in Cash | 21,774 | 18,214 | 26,789 | |||||||||||
Cash and Cash Equivalents at Beginning of Year | 60,984 | 42,770 | 15,981 | |||||||||||
Cash and Cash Equivalents at End of Year | $ | 82,758 | $ | 60,984 | $ | 42,770 | ||||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||||
Cash Paid during the year for: | ||||||||||||||
Income taxes | $ | (25,442 | ) | $ | 6,553 | $ | 22,856 | |||||||
Interest, net of amounts capitalized | 30,019 | 35,048 | 44,840 | |||||||||||
Non-cash investing activities: | ||||||||||||||
Accrued purchases of property and equipment | 15,698 | 1,415 | 2,484 | |||||||||||
Non-cash financing activities: | ||||||||||||||
Equipment capital leases | 1,414 | — | 1,301 |
See notes to the consolidated financial statements
34
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
35
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Ending Balance at February 1, 2003 | $ | 911 | ||||
Additions related to fiscal 2003 sales | 6,677 | |||||
Warranty costs incurred in fiscal 2003 | (6,974 | ) | ||||
Adjustments to accruals related to prior year sales | — | |||||
Ending Balance at January 31, 2004 | $ | 614 | ||||
Additions related to fiscal 2004 sales | 7,684 | |||||
Warranty costs incurred in fiscal 2004 | (6,974 | ) | ||||
Adjustments to accruals related to prior year sales | — | |||||
Ending Balance at January 29, 2005 | $ | 1,324 |
36
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
37
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings (loss): | ||||||||||||||
As reported | $ | 23,579 | $ | (33,894 | ) | $ | 39,468 | |||||||
Less: Total stock-based compensation expense determined under fair value-based method, net of tax | (2,117 | ) | (2,839 | ) | (3,510 | ) | ||||||||
Pro forma | $ | 21,462 | $ | (36,733 | ) | $ | 35,958 | |||||||
Net earnings (loss) per share: | ||||||||||||||
Basic: | ||||||||||||||
As reported | $ | 0.42 | $ | (0.65 | ) | $ | 0.77 | |||||||
Pro forma | $ | 0.38 | $ | (0.70 | ) | $ | 0.70 | |||||||
Diluted: | ||||||||||||||
As reported | $ | 0.41 | $ | (0.65 | ) | $ | 0.74 | |||||||
Pro forma | �� | $ | 0.38 | $ | (0.70 | ) | $ | 0.67 |
38
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dividend yield | 1.67 | % | 1.57 | % | 1.44 | % | ||||||||
Expected volatility | 41 | % | 41 | % | 41 | % | ||||||||
Risk-free interest rate range: | ||||||||||||||
High | 4.8 | % | 4.6 | % | 5.4 | % | ||||||||
Low | 2.0 | % | 1.5 | % | 2.3 | % | ||||||||
Ranges of expected lives in years | 3–8 | 4–8 | 4–8 |
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Parts and Accessories | $ | 1,539,513 | $ | 1,392,179 | $ | 1,362,112 | ||||||||
Tires | 323,502 | 336,207 | 335,516 | |||||||||||
Total Merchandise Sales | 1,863,015 | 1,728,386 | 1,697,628 | |||||||||||
Service | 409,881 | 405,884 | 400,149 | |||||||||||
Total Revenues | $ | 2,272,896 | $ | 2,134,270 | $ | 2,097,777 |
NEW ACCOUNTING STANDARDS
39
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
obtains employee services in share-based payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. Entities will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.
40
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECENTLY ADOPTED ACCOUNTING STANDARDS
41
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
42
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 2—DEBT
| January 29, 2005 | | January 31, 2004 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Medium-Term Notes, 6.7% to 6.9%, due March 2004 through March 2006 | $ | 43,000 | $ | 100,000 | |||||||
7.0% Senior Notes due June 2005 | 40,444 | 100,000 | |||||||||
6.92% Term Enhanced ReMarketable Securities, due July 2016 | 100,000 | 100,000 | |||||||||
7.5% Senior Subordinated Notes due December 2014 | 200,000 | — | |||||||||
Medium-Term Notes, 6.4% to 6.52%, due July 2007 through September 2007 | 215 | 51,215 | |||||||||
Senior Secured Credit Facility, payable through July 2006 | — | 22,419 | |||||||||
Other notes payable, 3.8% to 8.0% | 1,331 | 1,347 | |||||||||
Capital lease obligations, payable through July 2005 | 422 | 48 | |||||||||
Line of credit agreement | 8,152 | 50 | |||||||||
393,564 | 375,079 | ||||||||||
Less current maturities | 40,882 | 117,063 | |||||||||
Total Long-term Debt | $ | 352,682 | $ | 258,016 |
43
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 2—DEBT (Continued)
market, $5,000 aggregate principal amount of the 6.71% Medium-Term Notes. In the fourth quarter of 2003, the Company reclassified the $35,000 aggregate principal amount of the 6.71% Medium-Term Notes then outstanding to current liabilities on the balance sheet.
CONVERTIBLE DEBT
| January 29, 2005 | | January 31, 2004 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
4.25% Senior convertible notes, due June 2007 | $ | 119,000 | $ | 150,000 | |||||||
Less current maturities | — | — | |||||||||
Total Long-term Convertible Debt | $ | 119,000 | $ | 150,000 |
44
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 2—DEBT (Continued)
Year | | Long-Term Debt | | Capital Leases | | Total | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | $ | 40,460 | $ | 422 | $ | 40,882 | ||||||||
2006 | 44,031 | — | 44,031 | |||||||||||
2007 | 119,215 | — | 119,215 | |||||||||||
2008 | 8,152 | — | 8,152 | |||||||||||
2009 | — | — | — | |||||||||||
Thereafter | 300,284 | — | 300,284 | |||||||||||
Total | $ | 512,142 | $ | 422 | $ | 512,564 |
NOTE 3—ACCRUED EXPENSES
| January 29, 2005 | | January 31, 2004 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Casualty and medical risk insurance | $ | 164,065 | $ | 136,599 | ||||||
Accrued compensation and related taxes | 45,899 | 51,043 | ||||||||
Legal reserves | 1,877 | 26,576 | ||||||||
Other | 94,830 | 53,347 | ||||||||
Total | $ | 306,671 | $ | 267,565 |
NOTE 4—OTHER CURRENT ASSETS
| January 29, 2005 | | January 31, 2004 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Reinsurance premiums receivable | $ | 80,397 | $ | 67,326 | ||||||
Income taxes receivable | 15,404 | 13,517 | ||||||||
Other | 264 | 253 | ||||||||
Total | $ | 96,065 | $ | 81,096 |
NOTE 5—LEASE AND OTHER COMMITMENTS
45
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 5—LEASE AND OTHER COMMITMENTS (Continued)
Year | | Operating Leases | | Capital Leases | ||||||
---|---|---|---|---|---|---|---|---|---|---|
2005 | $ | 59,039 | $ | 422 | ||||||
2006 | 57,137 | — | ||||||||
2007 | 54,884 | — | ||||||||
2008 | 46,878 | — | ||||||||
2009 | 33,646 | — | ||||||||
Thereafter | 219,444 | — | ||||||||
Aggregate minimum lease payments | $ | 471,028 | $ | 422 | ||||||
Less: interest on capital leases | — | |||||||||
Present Value of Net Minimum Lease Payments | $ | 422 |
46
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 5—LEASE AND OTHER COMMITMENTS (Continued)
expenses in the quarter ending July 31, 2004 related to the anticipated shortfall in this purchase commitment. The minimum required purchases for 2005 (the remaining year of this commitment) is $7,009, which the Company expects to meet.
NOTE 6—STOCKHOLDERS’ EQUITY
47
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 7—RESTRUCTURING
Closure of 33 under-performing stores on July 31, 2003
Discontinuation of certain merchandise offerings
Corporate realignment
48
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 7—RESTRUCTURING (Continued)
Reserve Summary
| Severance | | Lease Expenses | | Contractual Obligations | | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Reserve balance at Feb. 1, 2003 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Original reserve | 4,050 | 2,332 | 887 | 7,269 | ||||||||||||||
Provision for present value of liabilities | — | 92 | 25 | 117 | ||||||||||||||
Changes in assumptions about future sublease income, lease termination, contractual obligations and severance | (744 | ) | 2,098 | (44 | ) | 1,310 | ||||||||||||
Cash payments | (2,933 | ) | (2,154 | ) | (405 | ) | (5,492 | ) | ||||||||||
Reserve balance at Jan. 31, 2004 | 373 | 2,368 | 463 | 3,204 | ||||||||||||||
Provision for present value of liabilities | — | 160 | 256 | 416 | ||||||||||||||
Changes in assumptions about future sublease income, lease termination, contractual obligations and severance | (158 | ) | 82 | — | (76 | ) | ||||||||||||
Cash payments | (215 | ) | (855 | ) | (578 | ) | (1,648 | ) | ||||||||||
Reserve balance at Jan. 29, 2005 | $ | — | $ | 1,755 | $ | 141 | $ | 1,896 |
NOTE 8—DISCONTINUED OPERATIONS
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total Revenues | $ | 1 | $ | 37,722 | $ | 74,711 | ||||||||
Total Gross (Loss) Profit | (3,342 | ) | (15,695 | ) | 17,215 | |||||||||
Selling, General, and Administrative Expenses | (10 | ) | 9,981 | 16,283 | ||||||||||
(Loss) Earnings from Discontinued Operations Before Income Taxes | (3,332 | ) | (25,676 | ) | 932 | |||||||||
(Loss) Earnings from Discontinued Operations, Net of Tax | $ | (2,087 | ) | $ | (16,265 | ) | $ | 587 |
49
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 8—DISCONTINUED OPERATIONS (Continued)
| January 29, 2005 | | January 31, 2004 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Land | $ | 543 | $ | 8,954 | ||||||
Building and improvements | 122 | 7,975 | ||||||||
$ | 665 | $ | 16,929 |
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION
50
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING BALANCE SHEET
As of January 29, 2005 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 59,032 | $ | 8,474 | $ | 15,252 | $ | — | $ | 82,758 | ||||||||||||
Accounts receivable, net | 14,150 | 16,844 | — | — | 30,994 | |||||||||||||||||
Merchandise inventories | 205,908 | 396,852 | — | — | 602,760 | |||||||||||||||||
Prepaid expenses | 28,535 | 17,450 | 21,499 | (22,135 | ) | 45,349 | ||||||||||||||||
Deferred income taxes | 3,140 | (28,192 | ) | 5,645 | 19,407 | — | ||||||||||||||||
Other | 19,170 | 12,097 | 64,798 | — | 96,065 | |||||||||||||||||
Assets held for disposal | — | 665 | — | — | 665 | |||||||||||||||||
Total Current Assets | 329,935 | 424,190 | 107,194 | (2,728 | ) | 858,591 | ||||||||||||||||
Property and Equipment—at cost: | ||||||||||||||||||||||
Land | 87,314 | 174,671 | — | — | 261,985 | |||||||||||||||||
Buildings and improvements | 315,170 | 600,929 | — | — | 916,099 | |||||||||||||||||
Furniture, fixtures and equipment | 296,732 | 336,366 | — | — | 633,098 | |||||||||||||||||
Construction in progress | 38,240 | 2,186 | — | — | 40,426 | |||||||||||||||||
737,456 | 1,114,152 | — | — | 1,851,608 | ||||||||||||||||||
Less accumulated depreciation and amortization | 390,331 | 516,246 | — | — | 906,577 | |||||||||||||||||
Total Property and Equipment—Net | 347,125 | 597,906 | — | — | 945,031 | |||||||||||||||||
Investment in subsidiaries | 1,585,211 | 1,130,247 | — | (2,715,458 | ) | — | ||||||||||||||||
Intercompany receivable | — | 845,384 | 85,881 | (931,265 | ) | — | ||||||||||||||||
Other | 59,900 | 3,501 | — | — | 63,401 | |||||||||||||||||
Total Assets | $ | 2,322,171 | $ | 3,001,228 | $ | 193,075 | $ | (3,649,451 | ) | $ | 1,867,023 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||
Accounts payable | $ | 310,972 | $ | 9 | $ | — | $ | — | $ | 310,981 | ||||||||||||
Accrued expenses | 60,178 | 90,014 | 178,614 | (22,135 | ) | 306,671 | ||||||||||||||||
Current deferred taxes | — | — | — | 19,406 | 19,406 | |||||||||||||||||
Current maturities of long-term debt and obligations under capital leases | 40,882 | — | — | — | 40,882 | |||||||||||||||||
Total Current Liabilities | 412,032 | 90,023 | 178,614 | (2,729 | ) | 677,940 | ||||||||||||||||
Long-term debt and obligations under capital leases, less current maturities | 347,315 | 5,367 | — | — | 352,682 | |||||||||||||||||
Convertible long-term debt, less current maturities | 119,000 | — | — | — | 119,000 | |||||||||||||||||
Other long-term liabilities | 11,416 | 26,561 | — | — | 37,977 | |||||||||||||||||
Intercompany liabilities | 765,068 | 166,196 | — | (931,264 | ) | — | ||||||||||||||||
Deferred income taxes | 13,884 | 12,084 | — | — | 25,968 | |||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||||
Common stock | 68,557 | 1,502 | 100 | (1,602 | ) | 68,557 | ||||||||||||||||
Additional paid-in capital | 284,966 | 436,858 | 3,900 | (440,758 | ) | 284,966 | ||||||||||||||||
Retained earnings | 536,780 | 2,262,637 | 10,461 | (2,273,098 | ) | 536,780 | ||||||||||||||||
Common stock subscriptions receivable | (167 | ) | — | — | — | (167 | ) | |||||||||||||||
Accumulated other comprehensive loss | (4,852 | ) | — | — | — | (4,852 | ) | |||||||||||||||
885,284 | 2,700,997 | 14,461 | (2,715,458 | ) | 885,284 | |||||||||||||||||
Less: | ||||||||||||||||||||||
Cost of shares in treasury | 172,564 | — | — | — | 172,564 | |||||||||||||||||
Cost of shares in benefits trust | 59,264 | — | — | — | 59,264 | |||||||||||||||||
Total Stockholders’ Equity | 653,456 | 2,700,997 | 14,461 | (2,715,458 | ) | 653,456 | ||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 2,322,171 | $ | 3,001,228 | $ | 193,075 | $ | (3,649,451 | ) | $ | 1,867,023 |
51
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING BALANCE SHEET
As of January 31, 2004 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 43,929 | $ | 9,072 | $ | 7,983 | $ | — | $ | 60,984 | ||||||||||||
Accounts receivable, net | 14,573 | 15,989 | — | — | 30,562 | |||||||||||||||||
Merchandise inventories | 191,111 | 362,451 | — | — | 553,562 | |||||||||||||||||
Prepaid expenses | 25,860 | 16,714 | 17,656 | (20,750 | ) | 39,480 | ||||||||||||||||
Deferred income taxes | 7,224 | 8,354 | 5,248 | — | 20,826 | |||||||||||||||||
Other | 17,891 | 7,494 | 55,711 | — | 81,096 | |||||||||||||||||
Assets held for disposal | 8,083 | 8,846 | — | — | 16,929 | |||||||||||||||||
Total Current Assets | 308,671 | 428,920 | 86,598 | (20,750 | ) | 803,439 | ||||||||||||||||
Property and Equipment—at cost: | ||||||||||||||||||||||
Land | 87,484 | 176,423 | — | — | 263,907 | |||||||||||||||||
Buildings and improvements | 308,066 | 591,048 | — | — | 899,114 | |||||||||||||||||
Furniture, fixtures and equipment | 286,472 | 300,135 | — | — | 586,607 | |||||||||||||||||
Construction in progress | 12,800 | — | — | — | 12,800 | |||||||||||||||||
694,822 | 1,067,606 | — | — | 1,762,428 | ||||||||||||||||||
Less accumulated depreciation and amortization | 363,652 | 475,567 | — | — | 839,219 | |||||||||||||||||
Total Property and Equipment—Net | 331,170 | 592,039 | — | — | 923,209 | |||||||||||||||||
Investment in subsidiaries | 1,440,412 | 1,162,965 | — | (2,603,377 | ) | — | ||||||||||||||||
Intercompany receivable | — | 667,856 | 98,633 | (766,489 | ) | — | ||||||||||||||||
Other | 48,240 | 3,158 | — | — | 51,398 | |||||||||||||||||
Total Assets | $ | 2,128,493 | $ | 2,854,938 | $ | 185,231 | $ | (3,390,616 | ) | $ | 1,778,046 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||
Accounts payable | $ | 342,575 | $ | 9 | $ | — | $ | — | $ | 342,584 | ||||||||||||
Accrued expenses | 43,670 | 91,564 | 153,081 | (20,750 | ) | 267,565 | ||||||||||||||||
Current maturities of long-term debt and obligations under capital leases | 117,063 | — | — | — | 117,063 | |||||||||||||||||
Total Current Liabilities | 503,308 | 91,573 | 153,081 | (20,750 | ) | 727,212 | ||||||||||||||||
Long-term debt and obligations under capital leases, less current maturities | 257,983 | 33 | — | — | 258,016 | |||||||||||||||||
Convertible long-term debt, less current maturities | 150,000 | — | — | — | 150,000 | |||||||||||||||||
Other long-term liabilities | 13,444 | 29,664 | — | — | 43,108 | |||||||||||||||||
Intercompany liabilities | 607,168 | 159,321 | — | (766,489 | ) | — | ||||||||||||||||
Deferred income taxes | 26,856 | 3,120 | — | — | 29,976 | |||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||||
Common stock | 63,911 | 1,502 | 100 | (1,602 | ) | 63,911 | ||||||||||||||||
Additional paid-in capital | 177,317 | 436,857 | 3,900 | (440,757 | ) | 177,317 | ||||||||||||||||
Retained earnings | 531,933 | 2,132,868 | 28,150 | (2,161,018 | ) | 531,933 | ||||||||||||||||
Accumulated other comprehensive loss | (15 | ) | — | — | — | (15 | ) | |||||||||||||||
773,146 | 2,571,227 | 32,150 | (2,603,377 | ) | 773,146 | |||||||||||||||||
Less: | ||||||||||||||||||||||
Cost of shares in treasury | 144,148 | — | — | — | 144,148 | |||||||||||||||||
Cost of shares in benefits trust | 59,264 | — | — | — | 59,264 | |||||||||||||||||
Total Stockholders’ Equity | 569,734 | 2,571,227 | 32,150 | (2,603,377 | ) | 569,734 | ||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 2,128,493 | $ | 2,854,938 | $ | 185,231 | $ | (3,390,616 | ) | $ | 1,778,046 |
52
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
Year ended January 29, 2005 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise Sales | $ | 647,135 | $ | 1,215,880 | $ | — | $ | — | $ | 1,863,015 | ||||||||||||
Service Revenue | 141,915 | 267,966 | — | — | 409,881 | |||||||||||||||||
Other Revenue | — | — | 28,432 | (28,432 | ) | — | ||||||||||||||||
Total Revenues | 789,050 | 1,483,846 | 28,432 | (28,432 | ) | 2,272,896 | ||||||||||||||||
Costs of Merchandise Sales | 469,421 | 863,875 | — | — | 1,333,296 | |||||||||||||||||
Costs of Service Revenue | 108,554 | 208,588 | — | — | 317,142 | |||||||||||||||||
Costs of Other Revenue | — | — | 35,693 | (35,693 | ) | — | ||||||||||||||||
Total Costs of Revenues | 577,975 | 1,072,463 | 35,693 | (35,693 | ) | 1,650,438 | ||||||||||||||||
Gross Profit from Merchandise Sales | 177,714 | 352,005 | — | — | 529,719 | |||||||||||||||||
Gross Profit from Service Revenue | 33,361 | 59,378 | — | — | 92,739 | |||||||||||||||||
Gross Loss from Other Revenue | — | — | (7,261 | ) | 7,261 | — | ||||||||||||||||
Total Gross Profit (Loss) | 211,075 | 411,383 | (7,261 | ) | 7,261 | 622,458 | ||||||||||||||||
Selling, General and Administrative Expenses | 189,161 | 350,598 | 316 | 7,261 | 547,336 | |||||||||||||||||
Operating Profit (Loss) | 21,914 | 60,785 | (7,577 | ) | — | 75,122 | ||||||||||||||||
Equity in Earnings of Subsidiaries | 62,122 | 64,958 | — | (127,080 | ) | — | ||||||||||||||||
Non-Operating (Expense) Income | (18,317 | ) | 71,679 | 3,397 | (54,935 | ) | 1,824 | |||||||||||||||
Interest Expense | 64,268 | 26,632 | — | (54,935 | ) | 35,965 | ||||||||||||||||
(Loss) Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle | 1,451 | 170,790 | (4,180 | ) | (127,080 | ) | 40,981 | |||||||||||||||
Income Tax (Benefit) Expense | (22,515 | ) | 39,320 | (1,490 | ) | — | 15,315 | |||||||||||||||
Net (Loss) Earnings from Continuing Operations Before Cumulative Effect of Change in Accounting Principle | 23,966 | 131,470 | (2,690 | ) | (127,080 | ) | 25,666 | |||||||||||||||
Loss from Discontinued Operations, Net of Tax | (387 | ) | (1,700 | ) | — | — | (2,087 | ) | ||||||||||||||
Net (Loss) Earnings | $ | 23,579 | $ | 129,770 | $ | (2,690 | ) | $ | (127,080 | ) | $ | 23,579 |
53
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
Year ended January 31, 2004 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise Sales | $ | 591,505 | $ | 1,136,881 | $ | — | $ | — | $ | 1,728,386 | ||||||||||||
Service Revenue | 141,304 | 264,580 | — | — | 405,884 | |||||||||||||||||
Other Revenue | — | — | 26,825 | (26,825 | ) | — | ||||||||||||||||
Total Revenues | 732,809 | 1,401,461 | 26,825 | (26,825 | ) | 2,134,270 | ||||||||||||||||
Costs of Merchandise Sales | 426,260 | 816,100 | — | — | 1,242,360 | |||||||||||||||||
Costs of Service Revenue | 105,940 | 205,182 | — | — | 311,122 | |||||||||||||||||
Costs of Other Revenue | — | — | 31,636 | (31,636 | ) | — | ||||||||||||||||
Total Costs of Revenues | 532,200 | 1,021,282 | 31,636 | (31,636 | ) | 1,553,482 | ||||||||||||||||
Gross Profit from Merchandise Sales | 165,245 | 320,781 | — | — | 486,026 | |||||||||||||||||
Gross Profit from Service Revenue | 35,364 | 59,398 | — | — | 94,762 | |||||||||||||||||
Gross Loss from Other Revenue | — | — | (4,811 | ) | 4,811 | — | ||||||||||||||||
Total Gross Profit (Loss) | 200,609 | 380,179 | (4,811 | ) | 4,811 | 580,788 | ||||||||||||||||
Selling, General and Administrative Expenses | 192,228 | 372,481 | 314 | 4,811 | 569,834 | |||||||||||||||||
Operating Profit (Loss) | 8,381 | 7,698 | (5,125 | ) | — | 10,954 | ||||||||||||||||
Equity in Earnings of Subsidiaries | 16,070 | 41,666 | — | (57,736 | ) | — | ||||||||||||||||
Non-Operating (Expense) Income | (17,055 | ) | 65,075 | 3,390 | (48,070 | ) | 3,340 | |||||||||||||||
Interest Expense | 61,675 | 24,650 | — | (48,070 | ) | 38,255 | ||||||||||||||||
(Loss) Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle | (54,279 | ) | 89,789 | (1,735 | ) | (57,736 | ) | (23,961 | ) | |||||||||||||
Income Tax (Benefit) Expense | (24,920 | ) | 16,728 | (624 | ) | — | (8,816 | ) | ||||||||||||||
Net (Loss) Earnings from Continuing Operations Before Cumulative Effect of Change in Accounting Principle | (29,359 | ) | 73,061 | (1,111 | ) | (57,736 | ) | (15,145 | ) | |||||||||||||
Loss from Discontinued Operations, Net of Tax | (3,636 | ) | (12,629 | ) | — | — | (16,265 | ) | ||||||||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax | (899 | ) | (1,585 | ) | — | — | (2,484 | ) | ||||||||||||||
Net (Loss) Earnings | $ | (33,894 | ) | $ | 58,847 | $ | (1,111 | ) | $ | (57,736 | ) | $ | (33,894 | ) |
54
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
Year ended February 1, 2003 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise Sales | $ | 585,819 | $ | 1,111,809 | $ | — | $ | — | $ | 1,697,628 | ||||||||||||
Service Revenue | 140,419 | 259,730 | — | — | 400,149 | |||||||||||||||||
Other Revenue | — | — | 26,075 | (26,075 | ) | — | ||||||||||||||||
Total Revenues | 726,238 | 1,371,539 | 26,075 | (26,075 | ) | 2,097,777 | ||||||||||||||||
Costs of Merchandise Sales | 407,538 | 780,479 | — | — | 1,188,017 | |||||||||||||||||
Costs of Service Revenue | 101,894 | 197,900 | — | — | 299,794 | |||||||||||||||||
Costs of Other Revenue | — | — | 29,498 | (29,498 | ) | — | ||||||||||||||||
Total Costs of Revenues | 509,432 | 978,379 | 29,498 | (29,498 | ) | 1,487,811 | ||||||||||||||||
Gross Profit from Merchandise Sales | 178,281 | 331,330 | — | — | 509,611 | |||||||||||||||||
Gross Profit from Service Revenue | 38,525 | 61,830 | — | — | 100,355 | |||||||||||||||||
Gross Loss from Other Revenue | — | — | (3,423 | ) | 3,423 | — | ||||||||||||||||
Total Gross Profit (Loss) | 216,806 | 393,160 | (3,423 | ) | 3,423 | 609,966 | ||||||||||||||||
Selling, General and Administrative Expenses | 168,327 | 332,120 | 293 | 3,423 | 504,163 | |||||||||||||||||
Operating Profit (Loss) | 48,479 | 61,040 | (3,716 | ) | — | 105,803 | ||||||||||||||||
Equity in Earnings of Subsidiaries | 63,983 | 70,805 | — | (134,788 | ) | — | ||||||||||||||||
Non-Operating (Expense) Income | (16,977 | ) | 64,362 | 4,083 | (48,371 | ) | 3,097 | |||||||||||||||
Interest Expense | 70,099 | 25,509 | — | (48,371 | ) | 47,237 | ||||||||||||||||
Earnings from Continuing Operations Before Income Taxes | 25,386 | 170,698 | 367 | (134,788 | ) | 61,663 | ||||||||||||||||
Income Tax (Benefit) Expense | (13,502 | ) | 36,170 | 114 | — | 22,782 | ||||||||||||||||
Net Earnings from Continuing Operations | 38,888 | 134,528 | 253 | (134,788 | ) | 38,881 | ||||||||||||||||
Earnings from Discontinued Operations, Net of Tax | 580 | 7 | — | — | 587 | |||||||||||||||||
Net Earnings | $ | 39,468 | $ | 134,535 | $ | 253 | $ | (134,788 | ) | $ | 39,468 |
55
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
Year ended January 29, 2005 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows from Operating Activities: | ||||||||||||||||||||||
Net Earnings (Loss) | $ | 23,579 | $ | 129,770 | $ | (2,690 | ) | $ | (127,080 | ) | $ | 23,579 | ||||||||||
Net Loss from Discontinued Operations | (387 | ) | (1,700 | ) | — | — | (2,087 | ) | ||||||||||||||
Net Earnings (Loss) from Continuing Operations | 23,966 | 131,470 | (2,690 | ) | (127,080 | ) | 25,666 | |||||||||||||||
Adjustments to Reconcile Net Earnings (Loss) to Net Cash (Used in) Provided By Continuing Operations: | ||||||||||||||||||||||
Depreciation and amortization | 29,261 | 47,359 | — | — | 76,620 | |||||||||||||||||
Accretion of asset disposal obligation | 29 | 106 | — | — | 135 | |||||||||||||||||
Equity in earnings of subsidiaries | (144,798 | ) | 32,718 | — | 112,080 | — | ||||||||||||||||
Stock compensation expense | 1,184 | — | — | — | 1,184 | |||||||||||||||||
Deferred income taxes | (18,584 | ) | 45,835 | (398 | ) | — | 26,853 | |||||||||||||||
Deferred gain on sale leaseback | (34 | ) | (96 | ) | — | — | (130 | ) | ||||||||||||||
Gain from sale of assets | (199 | ) | (11,649 | ) | — | — | (11,848 | ) | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||
(Increase) decrease in accounts receivable, prepaid expenses and other | (5,677 | ) | (5,849 | ) | (12,930 | ) | 1,385 | (23,071 | ) | |||||||||||||
Increase in merchandise inventories | (14,797 | ) | (34,401 | ) | — | — | (49,198 | ) | ||||||||||||||
Increase in accounts payable | (24,387 | ) | — | — | — | (24,387 | ) | |||||||||||||||
Increase (increase) in accrued expenses | 15,624 | (13,920 | ) | 25,534 | (1,385 | ) | 25,853 | |||||||||||||||
(Decrease) increase in other long-term liabilities | (887 | ) | (385 | ) | — | — | (1,272 | ) | ||||||||||||||
Net Cash (Used in) Provided by Continuing Operations | (139,299 | ) | 191,188 | 9,516 | (15,000 | ) | 46,405 | |||||||||||||||
Net Cash Provided by Discontinued Operations | (479 | ) | (2,253 | ) | — | — | (2,732 | ) | ||||||||||||||
Net Cash (Used in) Provided by Operating Activities | (139,778 | ) | 188,935 | 9,516 | (15,000 | ) | 43,673 | |||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||||
Capital expenditures | (43,975 | ) | (44,093 | ) | — | — | (88,068 | ) | ||||||||||||||
Proceeds from sales of assets | 331 | 17,690 | — | — | 18,021 | |||||||||||||||||
Proceeds from sales of assets held for disposal | 7,826 | 5,501 | — | — | 13,327 | |||||||||||||||||
Net Cash (Used in) Provided by Investing Activities | (35,818 | ) | (20,902 | ) | — | — | (56,720 | ) | ||||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||||
Net payments under line of credit agreements | 2,768 | 5,334 | — | — | 8,102 | |||||||||||||||||
Payments for finance issuance costs | (5,500 | ) | — | — | — | (5,500 | ) | |||||||||||||||
Payments on short term borrowing | (7,216 | ) | — | — | — | (7,216 | ) | |||||||||||||||
Payments on capital lease obligations | (1,040 | ) | — | — | — | (1,040 | ) | |||||||||||||||
Reduction of long-term debt | (189,991 | ) | — | — | — | (189,991 | ) | |||||||||||||||
Reduction of convertible debt | (31,000 | ) | — | — | — | (31,000 | ) | |||||||||||||||
Proceeds from issuance of notes | 200,000 | — | — | — | 200,000 | |||||||||||||||||
Intercompany Loan | 161,212 | (173,965 | ) | 12,753 | — | — | ||||||||||||||||
Dividends paid | (15,676 | ) | — | (15,000 | ) | 15,000 | (15,676 | ) | ||||||||||||||
Repurchase of common stock | (39,718 | ) | — | — | — | (39,718 | ) | |||||||||||||||
Proceeds from issuance of common stock | 108,854 | — | — | — | 108,854 | |||||||||||||||||
Proceeds from exercise of stock options | 6,887 | — | — | — | 6,887 | |||||||||||||||||
Proceeds from dividend reinvestment plan | 1,119 | — | — | — | 1,119 | |||||||||||||||||
Net Cash Provided by Financing Activities | 190,699 | (168,631 | ) | (2,247 | ) | 15,000 | 34,821 | |||||||||||||||
Net Increase (Decrease) in Cash | 15,103 | (598 | ) | 7,269 | — | 21,774 | ||||||||||||||||
Cash and Cash Equivalents at Beginning of Year | 43,929 | 9,072 | 7,983 | — | 60,984 | |||||||||||||||||
Cash and Cash Equivalents at End of Year | $ | 59,032 | $ | 8,474 | $ | 15,252 | $ | — | $ | 82,758 |
56
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
Year ended January 31, 2004 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows from Operating Activities: | ||||||||||||||||||||||
Net (Loss) Earnings | $ | (33,894 | ) | $ | 58,849 | $ | (1,111 | ) | $ | (57,738 | ) | $ | (33,894 | ) | ||||||||
Net Loss from Discontinued Operations | (3,351 | ) | (12,914 | ) | — | — | (16,265 | ) | ||||||||||||||
Net (Loss) Earnings from Continuing Operations | (30,543 | ) | 71,763 | (1,111 | ) | (57,738 | ) | (17,629 | ) | |||||||||||||
Adjustments to Reconcile Net (Loss) Earnings to Net Cash Provided By Continuing Operations: | ||||||||||||||||||||||
Depreciation and amortization | 31,312 | 46,963 | — | — | 78,275 | |||||||||||||||||
Cumulative effect of change in accounting principle, net of tax | 899 | 1,585 | — | — | 2,484 | |||||||||||||||||
Accretion of asset disposal obligation | 38 | 125 | — | — | 163 | |||||||||||||||||
Equity in earnings of subsidiaries | (16,072 | ) | (41,666 | ) | — | 57,738 | — | |||||||||||||||
Deferred income taxes | 2,838 | (6,722 | ) | 2,482 | — | (1,402 | ) | |||||||||||||||
Deferred gain on sale leaseback | (149 | ) | (276 | ) | — | — | (425 | ) | ||||||||||||||
Loss on asset impairments | 13,164 | 1,371 | — | — | 14,535 | |||||||||||||||||
(Gain) loss from sale of assets | (7 | ) | 68 | — | — | 61 | ||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||
(Increase) decrease in accounts receivable, prepaid expenses and other | (22,786 | ) | (12,614 | ) | 828 | 1,375 | (33,197 | ) | ||||||||||||||
Increase in merchandise inventories | (24,945 | ) | (39,735 | ) | — | — | (64,680 | ) | ||||||||||||||
Increase in accounts payable | 142,531 | — | — | — | 142,531 | |||||||||||||||||
(Decrease) increase in accrued expenses | (21,104 | ) | 37,652 | 10,592 | (1,375 | ) | 25,765 | |||||||||||||||
Increase (decrease) in other long-term liabilities | 3,610 | (1,884 | ) | — | — | 1,726 | ||||||||||||||||
Net Cash Provided by Continuing Operations | 78,786 | 56,630 | 12,791 | — | 148,207 | |||||||||||||||||
Net Cash Provided by Discontinued Operations | 768 | 1,680 | — | — | 2,448 | |||||||||||||||||
Net Cash Provided by Operating Activities | 79,554 | 58,310 | 12,791 | — | 150,655 | |||||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||||
Capital expenditures from continuing operations | (26,309 | ) | (15,538 | ) | — | — | (41,847 | ) | ||||||||||||||
Proceeds from sales of assets | 870 | 2,446 | — | — | 3,316 | |||||||||||||||||
Proceeds from sales of assets held for disposal | — | 13,214 | — | — | 13,214 | �� | ||||||||||||||||
Net Cash (Used in) Provided by Investing Activities | (25,439 | ) | 122 | — | — | (25,317 | ) | |||||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||||
Net payments under line of credit agreements | (169 | ) | (328 | ) | — | — | (497 | ) | ||||||||||||||
Payments for finance issuance costs | (2,356 | ) | — | — | — | (2,356 | ) | |||||||||||||||
Payments on capital lease obligations | (700 | ) | — | — | — | (700 | ) | |||||||||||||||
Reduction of long-term debt | (101,183 | ) | — | — | — | (101,183 | ) | |||||||||||||||
Intercompany loan | 63,956 | (58,752 | ) | (5,204 | ) | — | — | |||||||||||||||
Dividends paid | (14,089 | ) | — | — | — | (14,089 | ) | |||||||||||||||
Proceeds from exercise of stock options | 10,483 | — | — | — | 10,483 | |||||||||||||||||
Proceeds from dividend reinvestment plan | 1,218 | — | — | — | 1,218 | |||||||||||||||||
Net Cash Used In Financing Activities | (42,840 | ) | (59,080 | ) | (5,204 | ) | — | (107,124 | ) | |||||||||||||
Net Increase (Decrease) in Cash | 11,275 | (648 | ) | 7,587 | — | 18,214 | ||||||||||||||||
Cash and Cash Equivalents at Beginning of Year | 32,654 | 9,720 | 396 | — | 42,770 | |||||||||||||||||
Cash and Cash Equivalents at End of Year | $ | 43,929 | $ | 9,072 | $ | 7,983 | $ | — | $ | 60,984 |
57
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 9—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
Year ended February 1, 2003 | | Pep Boys | | Subsidiary Guarantors | | Non- Guarantor Subsidiaries | | Consolidation/ Elimination | | Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows from Operating Activities: | ||||||||||||||||||||||
Net Earnings | $ | 39,468 | $ | 134,535 | $ | 253 | $ | (134,788 | ) | $ | 39,468 | |||||||||||
Net Earnings from Discontinued Operations | 557 | 30 | — | — | 587 | |||||||||||||||||
Net Earnings from Continuing Operations | 38,911 | 134,505 | 253 | (134,788 | ) | 38,881 | ||||||||||||||||
Adjustments to Reconcile Net Earnings to Net Cash Provided By Continuing Operations: | ||||||||||||||||||||||
Depreciation and amortization | 34,986 | 48,663 | — | — | 83,649 | |||||||||||||||||
Deferred income taxes | 2,126 | (5,113 | ) | (788 | ) | — | (3,775 | ) | ||||||||||||||
Deferred gain on sale leaseback | (11 | ) | (101 | ) | — | — | (112 | ) | ||||||||||||||
Equity in earnings of subsidiaries | (63,983 | ) | (70,805 | ) | — | 134,788 | — | |||||||||||||||
Loss on assets held for disposal | 11 | 815 | — | — | 826 | |||||||||||||||||
Gain from sale of assets | (216 | ) | (1,693 | ) | — | — | (1,909 | ) | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||
Decrease (increase) in accounts receivable, prepaid expenses and other | 15,170 | (41,131 | ) | 10,935 | 2,125 | (12,901 | ) | |||||||||||||||
Decrease in merchandise inventories | 10,530 | 20,061 | — | — | 30,591 | |||||||||||||||||
Decrease in accounts payable | (16,032 | ) | — | — | — | (16,032 | ) | |||||||||||||||
Increase in accrued expenses | 472 | 269 | 13,045 | (2,125 | ) | 11,661 | ||||||||||||||||
(Decrease) increase in other long-term liabilities | (652 | ) | 744 | — | — | 92 | ||||||||||||||||
Net Cash Provided by Continuing Operations | 21,312 | 86,214 | 23,445 | — | 130,971 | |||||||||||||||||
Net Cash Provided by Discontinued Operations | 1,895 | 3,050 | — | — | 4,945 | |||||||||||||||||
Net Cash Provided by Operating Activities | 23,207 | 89,264 | 23,445 | — | 135,916 | |||||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||||
Capital expenditures from continuing operations | (24,521 | ) | (14,884 | ) | — | — | (39,405 | ) | ||||||||||||||
Capital expenditures from discontinued operations | (163 | ) | (1,859 | ) | — | — | (2,022 | ) | ||||||||||||||
Proceeds from sales of assets | 816 | 1,820 | — | — | 2,636 | |||||||||||||||||
Proceeds from assets held for disposal | 1,234 | 7,188 | — | — | 8,422 | |||||||||||||||||
Net Cash Used in Investing Activities | (22,634 | ) | (7,735 | ) | — | — | (30,369 | ) | ||||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||||
Net payments under line of credit agreements | (23,841 | ) | (46,454 | ) | — | — | (70,295 | ) | ||||||||||||||
Payments for finance issuance costs | (3,750 | ) | — | — | — | (3,750 | ) | |||||||||||||||
Repayment of life insurance policy loan | (17,908 | ) | (2,778 | ) | — | — | (20,686 | ) | ||||||||||||||
Payments on capital lease obligations | (642 | ) | — | — | — | (642 | ) | |||||||||||||||
Reduction of long-term debt | (121,938 | ) | — | — | — | (121,938 | ) | |||||||||||||||
Net proceeds from issuance of notes | 150,000 | — | — | — | 150,000 | |||||||||||||||||
Intercompany loan | 56,811 | (33,445 | ) | (23,366 | ) | — | — | |||||||||||||||
Dividends paid | (13,911 | ) | — | — | — | (13,911 | ) | |||||||||||||||
Proceeds from exercise of stock options | 1,139 | — | — | — | 1,139 | |||||||||||||||||
Proceeds from dividend reinvestment plan | 1,325 | — | — | — | 1,325 | |||||||||||||||||
Net Cash Provided by (Used in) Financing Activities | 27,285 | (82,677 | ) | (23,366 | ) | — | (78,758 | ) | ||||||||||||||
Net Increase (Decrease) in Cash | 27,858 | (1,148 | ) | 79 | — | 26,789 | ||||||||||||||||
Cash and Cash Equivalents at Beginning of Year | 4,796 | 10,867 | 318 | — | 15,981 | |||||||||||||||||
Cash and Cash Equivalents at End of Year | $ | 32,654 | $ | 9,719 | $ | 397 | $ | — | $ | 42,770 |
58
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 10—BENEFIT PLANS
DEFINED BENEFIT PLANS
Year ended | | Jan. 29, 2005 | | Jan. 31, 2004 | | Feb. 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Service cost | $ | 438 | $ | 611 | $ | 587 | ||||||||
Interest cost | 2,903 | 3,056 | 2,934 | |||||||||||
Expected return on plan assets | (2,299 | ) | (2,064 | ) | (2,300 | ) | ||||||||
Amortization of transitional obligation | 163 | 274 | 274 | |||||||||||
Amortization of prior service cost | 364 | 615 | 297 | |||||||||||
Recognized actuarial loss | 1,733 | 1,723 | 1,451 | |||||||||||
Net periodic benefit cost | 3,302 | 4,215 | 3,243 | |||||||||||
FAS 88 curtailment charge | — | 2,191 | — | |||||||||||
FAS 88 settlement charge | 774 | 5,231 | — | |||||||||||
FAS 88 special termination benefits | — | 300 | — | |||||||||||
Total Pension Expense | $ | 4,076 | $ | 11,937 | $ | 3,243 |
59
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 10—BENEFIT PLANS (Continued)
Year ended | | January 29, 2005 | | January 31, 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Change in Benefit Obligation: | ||||||||||
Benefit obligation at beginning of year | $ | 47,197 | $ | 46,587 | ||||||
Service cost | 438 | 611 | ||||||||
Interest cost | 2,903 | 3,056 | ||||||||
Plan amendments | — | 2,282 | ||||||||
Curtailment gain | — | (505 | ) | |||||||
Settlement loss | 2,316 | 5,576 | ||||||||
Special termination benefits | — | 300 | ||||||||
Liability transfer | — | (671 | ) | |||||||
Actuarial loss | 2,383 | 4,201 | ||||||||
Benefits paid | (2,853 | ) | (14,240 | ) | ||||||
Benefit Obligation at End of Year | $ | 52,384 | $ | 47,197 | ||||||
Change in Plan Assets: | ||||||||||
Fair value of plan assets at beginning of year | $ | 34,730 | $ | 31,087 | ||||||
Actual return on plan assets (net of expenses) | 2,055 | 4,732 | ||||||||
Employer contributions | 1,576 | 13,151 | ||||||||
Benefits paid | (2,853 | ) | (14,240 | ) | ||||||
Fair Value of Plan Assets at End of Year | $ | 35,508 | $ | 34,730 | ||||||
Reconciliation of the Funded Status: | ||||||||||
Funded status | $ | (16,876 | ) | $ | (12,468 | ) | ||||
Unrecognized transition obligation | 980 | 1,143 | ||||||||
Unrecognized prior service cost | 1,718 | 2,083 | ||||||||
Unrecognized actuarial loss | 14,024 | 10,937 | ||||||||
Amount contributed after measurement date | 1,140 | 897 | ||||||||
Net Amount Recognized at Year-End | $ | 986 | $ | 2,592 | ||||||
Amounts Recognized on Consolidated Balance Sheets Consist of: | ||||||||||
Prepaid benefit cost | $ | — | $ | 8,411 | ||||||
Accrued benefit liability | (13,137 | ) | (11,266 | ) | ||||||
Intangible asset | 2,698 | 3,226 | ||||||||
Accumulated other comprehensive loss | 11,425 | 2,221 | ||||||||
Net Amount Recognized at Year End | $ | 986 | $ | 2,592 | ||||||
Other comprehensive loss attributable to change in additional minimum liability recognition | $ | 9,204 | $ | 1,979 | ||||||
Accumulated Benefit Obligation at End of Year | $ | 48,646 | $ | 44,112 | ||||||
Cash Flows | ||||||||||
Employer contributions expected during fiscal 2005 | $ | 1,090 | — |
60
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 10—BENEFIT PLANS (Continued)
Year ended | | January 29, 2005 | | January 31, 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Projected benefit obligation | $ | 16,624 | $ | 14,352 | ||||||
Accumulated benefit obligation | 12,885 | 11,266 |
Year ended | | January 29, 2005 | | January 31, 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Weighted-Average Assumptions as of December 31: | ||||||||||
Discount rate | 5.75 | % | 6.25 | % | ||||||
Rate of compensation increase | 4.0 | %(1) | 4.0 | % | ||||||
Weighted-Average Assumptions for Net Periodic Benefit Cost Development: | ||||||||||
Discount rate | 6.25 | % | 6.75 | % | ||||||
Expected return on plan assets | 6.75 | % | 6.75 | % | ||||||
Rate of compensation expense | 4.0 | %(1) | 4.0 | % | ||||||
Measurement Date | December 31 | December 31 |
(1) | In addition, bonuses are assumed to be 25% of base pay for the SERP. |
Plan Assets | | As of 12/31/2004 | | As of 12/31/2003 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity securities | 57 | % | 53 | % | ||||||
Debt securities | — | — | ||||||||
Fixed income | 43 | % | 47 | % | ||||||
Total | 100 | % | 100 | % |
61
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 10—BENEFIT PLANS (Continued)
2005 | $ | 2,530 | ||||
2006 | 2,474 | |||||
2007 | 2,633 | |||||
2008 | 2,651 | |||||
2009 | 3,441 | |||||
2010 – 2014 | 17,148 |
DEFINED CONTRIBUTION PLAN
DEFERRED COMPENSATION PLAN
NOTE 11—NET EARNINGS PER SHARE
62
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 11—NET EARNINGS PER SHARE (Continued)
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Earnings (loss) from Continuing Operations: | ||||||||||||||
Basic earnings (loss) from continuing operations available to common stockholders | $ | 25,666 | $ | (15,145 | ) | $ | 38,881 | |||||||
Adjustment for interest on convertible senior notes, net of tax | — | — | 2,807 | |||||||||||
Diluted earnings (loss) from continuing operations available to common stockholders | $ | 29,607 | $ | (15,145 | ) | $ | 41,688 | |||||||
Shares: | ||||||||||||||
Basic average number of common shares outstanding | 56,353 | 52,185 | 51,517 | |||||||||||
Common shares assumed issued upon conversion of convertible senior notes | — | — | 4,729 | |||||||||||
Common shares assumed issued upon exercise of dilutive stock options | 1,296 | — | 953 | |||||||||||
Diluted average number of common shares outstanding assuming conversion | 57,649 | 52,185 | 57,199 | |||||||||||
Per Share: | ||||||||||||||
Basic earnings (loss) from continuing operations per share | $ | 0.46 | $ | (0.29 | ) | $ | 0.75 | |||||||
Diluted earnings (loss) from continuing operations per share | $ | 0.45 | $ | (0.29 | ) | $ | 0.73 |
NOTE 12—EQUITY COMPENSATION PLANS
63
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 12—EQUITY COMPENSATION PLANS (Continued)
options are fully exercisable on the third anniversary of their grant date or become exercisable over a four-year period with one-fifth exercisable on the grant date and one-fifth on each anniversary date for the four years following the grant date. Options cannot be exercised more than ten years after the grant date. As of January 29, 2005, there are 614,979 shares remaining available for grant.
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted-average price of outstanding options (excluding securities reflected in column (a)) (b) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | 5,541,961 | $ | 16.98 | 2,065,128 | ||||||||||
Equity compensation plans not approved by security holders | 174,540 | (1) | $ | 8.70 | — | |||||||||
Total | 5,716,501 | $ | 16.72 | 2,065,128 |
(1) | Inducement options granted to the current CEO in connection with his hire. |
64
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 12—EQUITY COMPENSATION PLANS (Continued)
Fiscal 2004 | Fiscal 2003 | Fiscal 2002 | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | ||||||||||||||||||
Outstanding—beginning of year | 6,910,610 | $ | 16.31 | 6,898,170 | $ | 16.57 | 6,316,787 | $ | 16.48 | ||||||||||||||||||||
Granted | 412,666 | 13.74 | 1,624,790 | 10.38 | 1,213,300 | 16.27 | |||||||||||||||||||||||
Exercised | (632,985 | ) | 11.05 | (1,048,200 | ) | 7.52 | (108,880 | ) | 8.10 | ||||||||||||||||||||
Canceled | (973,790 | ) | 16.23 | (564,150 | ) | 18.79 | (523,037 | ) | 16.45 | ||||||||||||||||||||
Outstanding—end of year | 5,716,501 | $ | 16.72 | 6,910,610 | $ | 16.31 | 6,898,170 | $ | 16.57 | ||||||||||||||||||||
Options exercisable at year end | 3,997,545 | 18.56 | 4,210,678 | 19.55 | 4,148,570 | 20.54 | |||||||||||||||||||||||
Weighted average estimated fair value of options granted | 13.60 | 4.17 | 7.20 |
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of Exercise Prices | | Number Outstanding at Jan. 29, 2005 | | Weighted Average Remaining Contractual Life | | Weighted Average Exercise Price | | Number Exercisable at Jan. 29, 2005 | | Weighted Average Exercise Price | ||||||||||||||
$0.00 to $13.00 | 1,950,621 | 7 | Years | $ | 7.38 | 1,074,515 | $ | 7.33 | ||||||||||||||||
$13.01 to $21.00 | 1,822,650 | 6 | Years | 15.94 | 1,144,400 | 15.79 | ||||||||||||||||||
$21.01 to $29.00 | 1,081,128 | 4 | Years | 23.09 | 916,528 | 23.03 | ||||||||||||||||||
$29.01 to $33.88 | 862,102 | 1 | Year | 31.53 | 862,102 | 31.53 | ||||||||||||||||||
$0.00 to $33.88 | 5,716,501 | 3,997,545 |
NOTE 13—ASSET RETIREMENT OBLIGATION
65
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 13—ASSET RETIREMENT OBLIGATION (Continued)
Asset retirement obligation, January 31, 2004 | $ | 4,901 | ||||
Asset retirement obligation incurred during the period | 142 | |||||
Asset retirement obligation settled during the period | (121 | ) | ||||
Accretion expense | 135 | |||||
Asset retirement obligation, January 29, 2005 | $ | 5,057 |
Year ended | | February 1, 2003 | | ||||
---|---|---|---|---|---|---|---|
Net Earnings: | |||||||
As reported | $ | 39,468 | |||||
Pro Forma | $ | 38,858 | |||||
Net earnings per share: | |||||||
Basic: | |||||||
As reported | $ | 0.77 | |||||
Pro Forma | $ | 0.75 | |||||
Diluted: | |||||||
As reported | $ | 0.74 | |||||
Pro Forma | $ | 0.73 |
NOTE 14—INCOME TAXES
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current: | ||||||||||||||
Federal | $ | (21,639 | ) | $ | (8,109 | ) | $ | 24,502 | ||||||
State | (1,268 | ) | 1,856 | 1,903 | ||||||||||
Deferred: | ||||||||||||||
Federal | 35,379 | (289 | ) | (3,512 | ) | |||||||||
State | 2,843 | (2,274 | ) | (111 | ) | |||||||||
$ | 15,315 | $ | (8,816 | ) | $ | 22,782 |
66
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 14—INCOME TAXES (Continued)
Year ended | | January 29, 2005 | | January 31, 2004 | | February 1, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
State income taxes, net of federal tax benefits | 2.8 | 0.7 | 1.9 | |||||||||||
Job credits | (1.0 | ) | 0.5 | (0.3 | ) | |||||||||
Other, net | 0.6 | 0.5 | 0.3 | |||||||||||
37.4 | % | 36.7 | % | 36.9 | % |
| January 29, 2005 | | January 31, 2004 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Deferred tax assets: | ||||||||||
Inventories | $ | — | $ | 5,380 | ||||||
Employee compensation | 5,915 | 4,919 | ||||||||
Store closing reserves | 995 | 1,508 | ||||||||
Legal | 704 | 10,491 | ||||||||
Insurance | — | 5,146 | ||||||||
Net operating loss carryforwards | 8,260 | — | ||||||||
Tax credit carryforwards | 9,089 | 2,749 | ||||||||
Accrued leases | 13,067 | 12,326 | ||||||||
Other | 2,484 | 1,483 | ||||||||
Gross deferred tax assets | 40,514 | 44,002 | ||||||||
Valuation allowance | (1,558 | ) | (902 | ) | ||||||
$ | 38,956 | $ | 43,100 | |||||||
Deferred tax liabilities: | ||||||||||
Depreciation | $ | 57,677 | $ | 43,643 | ||||||
Inventories | 17,802 | — | ||||||||
Real estate tax | 2,434 | — | ||||||||
State taxes | — | 2,366 | ||||||||
Insurance | 3,840 | — | ||||||||
Benefit accruals | 1,189 | 5,418 | ||||||||
Interest rate swap | 1,388 | 823 | ||||||||
$ | 84,330 | $ | 52,250 | |||||||
Net deferred tax liability | $ | 45,374 | $ | 9,150 |
67
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 14—INCOME TAXES (Continued)
NOTE 15—CONTINGENCIES
NOTE 16—INTEREST RATE SWAP AGREEMENT
NOTE 17—FAIR VALUE OF FINANCIAL INSTRUMENTS
January 29, 2005 | January 31, 2004 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value | |||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 82,758 | $ | 82,758 | $ | 60,984 | $ | 60,984 | ||||||||||||
Accounts receivable | 30,994 | 30,994 | 30,562 | 30,562 | ||||||||||||||||
Cash flow hedge derivative | 3,721 | 3,721 | 2,195 | 2,195 | ||||||||||||||||
Liabilities: | ||||||||||||||||||||
Accounts payable | 310,981 | 310,981 | 342,584 | 342,584 | ||||||||||||||||
Long-term debt including current maturities | 393,564 | 401,527 | 375,079 | 383,723 | ||||||||||||||||
Senior convertible notes | 119,000 | 120,549 | 150,000 | 174,600 |
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
68
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2005, January 31, 2004 and February 1, 2003
(dollar amounts in thousands, except per share amounts)
NOTE 17—FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
CASH FLOW HEDGE DERIVATIVE
LONG-TERM DEBT INCLUDING CURRENT MATURITIES AND SENIOR CONVERTIBLE NOTES
QUARTERLY FINANCIAL DATA (UNAUDITED) | The Pep Boys—Manny, Moe & Jack and Subsidiaries |
Total Revenues | Gross Profit | Operating (Loss) Profit | Net Earnings (Loss) From Continuing Operations Before Cumulative Effect of Change in Accounting Principle | Net (Loss) Earnings | Net Earnings (Loss) Per Share From Continuing Operations Before Cumulative Effect of Change in Accounting Principle | Net Earnings (Loss) Per Share | Cash Dividends Per Share | Market Price Per Share | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended Jan. 29, 2005 | Basic | Diluted | Basic | Diluted | High | Low | ||||||||||||||||||||||||||||||||||||||||||||||||||
1st Quarter | $ | 566,133 | $ | 162,208 | $ | 32,646 | $ | 15,082 | $ | 14,551 | $ | 0.27 | $ | 0.25 | $ | 0.26 | $ | 0.24 | $ | 0.0675 | $ | 29.37 | $ | 21.29 | ||||||||||||||||||||||||||||||||
2nd Quarter | 593,426 | 165,476 | 28,782 | 13,515 | 12,663 | 0.23 | 0.22 | 0.22 | 0.21 | 0.0675 | 28.10 | 20.36 | ||||||||||||||||||||||||||||||||||||||||||||
3rd Quarter | 559,198 | 150,183 | 17,659 | 6,736 | 6,500 | 0.12 | 0.11 | 0.12 | 0.11 | 0.0675 | 20.70 | 11.83 | ||||||||||||||||||||||||||||||||||||||||||||
4th Quarter | 554,139 | 144,591 | (3,965 | ) | (9,667 | ) | (10,135 | ) | (0.17 | ) | (0.17 | ) | (0.18 | ) | (0.18 | ) | 0.0675 | 17.24 | 13.06 | |||||||||||||||||||||||||||||||||||||
Year Ended Jan. 31, 2004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1st Quarter1 | $ | 510,910 | $ | 144,131 | $ | (3,646 | ) | $ | (8,368 | ) | $ | (10,314 | ) | $ | (0.16 | ) | $ | (0.16 | ) | $ | (0.20 | ) | $ | (0.20 | ) | $ | 0.0675 | $ | 10.69 | $ | 6.00 | |||||||||||||||||||||||||
2nd Quarter2 | 556,030 | 129,314 | (13,735 | ) | (14,178 | ) | (34,935 | ) | (0.27 | ) | (0.27 | ) | (0.67 | ) | (0.67 | ) | 0.0675 | 15.90 | 8.54 | |||||||||||||||||||||||||||||||||||||
3rd Quarter | 537,691 | 157,903 | 27,869 | 12,416 | 13,710 | 0.24 | 0.22 | 0.26 | 0.24 | 0.0675 | 19.94 | 14.05 | ||||||||||||||||||||||||||||||||||||||||||||
4th Quarter3 | 529,639 | 149,440 | 466 | (5,015 | ) | (2,355 | ) | (0.09 | ) | (0.09 | ) | (0.04 | ) | (0.04 | ) | 0.0675 | 23.99 | 18.53 |
1 | Includes pretax charges of $25,132 related to corporate restructuring and other one-time events all of which was included in selling, general and administrative expenses. |
2 | Includes pretax charges of $47,895 related to corporate restructuring and other one-time events of which $29,308 reduced gross profit from merchandise sales, $3,278 reduced gross profit from service revenue and $15,308 was included in selling, general and administrative expenses. |
3 | Includes pretax charges of $15,953 related to corporate restructuring and other one-time events all of which was included in selling, general and administrative expenses. |
Under the Company’s present accounting system, actual gross profit from merchandise sales can be determined only at the time of physical inventory, which is taken at the end of the fiscal year. Gross profit from merchandise sales for the first, second and third quarters is estimated by the Company based upon recent historical gross profit experience and other appropriate factors. Any variation between estimated and actual gross profit from merchandise sales for the first three quarters is reflected in the fourth quarter’s results.
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ITEM 9 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A | CONTROLS AND PROCEDURES |
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Pep Boys—Manny, Moe & Jack
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of January 29, 2005, is fairly stated, in all material respects, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 29, 2005, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended January 29, 2005 of the Company and our report, dated April 13, 2005, expressed an unqualified opinion on those financial statements and financial statement schedule.
April 13, 2005
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ITEM 9B | OTHER INFORMATION |
PART III
ITEM 10 | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
ITEM 11 | EXECUTIVE COMPENSATION |
ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
ITEM 13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
ITEM 14 | PRINCIPAL ACCOUNTING FEES AND SERVICES |
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PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) | Page | |||||||||||||
1. | The following consolidated financial statements of The Pep Boys—Manny, Moe & Jack are included in Item 8. | |||||||||||||
Report of Independent Registered Public Accounting Firm | 30 | |||||||||||||
Consolidated Balance Sheets—January 29, 2005 and January 31, 2004 | 31 | |||||||||||||
Consolidated Statements of Operations—Years ended January 29, 2005, January 31, 2004 and February 1, 2003 | 32 | |||||||||||||
Consolidated Statements of Stockholders’ Equity—Years ended January 29, 2005, January 31, 2004 and February 1, 2003 | 33 | |||||||||||||
Consolidated Statements of Cash Flows —Years ended January 29, 2005, January 31, 2004 and February 1, 2003 | 34 | |||||||||||||
Notes to Consolidated Financial Statements | 35 | |||||||||||||
2. | The following consolidated financial statement schedule of The Pep Boys—Manny, Moe & Jack is included. | |||||||||||||
Schedule II Valuation and Qualifying Accounts and Reserves | 79 | |||||||||||||
All other schedules have been omitted because they are not applicable or not required or the required information is included in the consolidated financial statements or notes thereto. | ||||||||||||||
3. | Exhibits |
(3.1) | Articles of Incorporation, as amended | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended January 30, 1988. | ||||||||||||
(3.2) | By-Laws, as amended | Incorporated by reference from the Registration Statement on Form S-3 (File No. 33-39225). | ||||||||||||
(3.3) | Amendment to By-Laws (Declassification of Board of Directors) | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended January 29, 2000. | ||||||||||||
(4.1) | Indenture, dated as of June 12, 1995, between the Company and First Fidelity Bank, National Association as Trustee, including form of security. | Incorporated by reference from the Registration Statement on Form S-3 (File No. 33-59859). | ||||||||||||
(4.2) | Supplemental Indenture, dated as of December 10, 2004 (to Indenture dated as of June 12, 1995), between the Company and Wachovia Bank, National Association, as trustee, including form of security. | Incorporated by reference from the Company’s Form 8-K dated December 15, 2004. | ||||||||||||
(4.3) | Indenture, dated as of July 15, 1997, between the Company and PNC Bank, National Association, as Trustee, including form of security. | Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-30295). | ||||||||||||
(4.4) | Indenture, dated as of February 18, 1998 between the Company and PNC Bank, National Association, as Trustee, including form of security. | Incorporated by reference from the Registration Statement on Form S-3/A (File No. 333-45793). |
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(4.5) | Indenture dated May 21, 2002, between the Company and Wachovia Bank, National Association, as Trustee, including form of security. | Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-98255). | ||||||||||||
(4.6) | Indenture, dated December 14, 2004, between the Company and Wachovia Bank, National Association, as trustee, including form of security. | Incorporated by reference from the Company’s Form 8-K dated December 15, 2004. | ||||||||||||
(4.7) | Supplemental Indenture, dated December 14, 2004, between the Company and Wachovia Bank, National Association, as trustee. | Incorporated by reference from the Company’s Form 8-K dated December 15, 2004. | ||||||||||||
(4.8) | Rights Agreement dated as of December 5, 1997 between the Company and First Union National Bank | Incorporated by reference from the Company’s Form 8-K dated December 8, 1997. | ||||||||||||
(4.9) | Dividend Reinvestment and Stock Purchase Plan dated January 4, 1990 | Incorporated by reference from the Registration Statement on Form S-3 (File No. 33-32857). | ||||||||||||
(10.1)* | Medical Reimbursement Plan of the Company | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended January 31, 1982. | ||||||||||||
(10.2)* | Directors’ Deferred Compensation Plan, as amended | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended January 30, 1988. | ||||||||||||
(10.3)* | Form of Employment Agreement dated as of June 1998 between the Company and certain officers of the Company. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended October 31, 1998. | ||||||||||||
(10.4)* | The Pep Boys—Manny, Moe and Jack 1999 Stock Incentive Plan—amended and restated as of August 31, 1999. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended October 30, 1999. | ||||||||||||
(10.5)* | Amendment Number One to The Pep Boys—Manny, Moe & Jack 1999 Stock Incentive Plan. | Incorporated by reference from the Company’s Form 10-Q for the Quarter ended November 2, 2002. | ||||||||||||
(10.6)* | Amendment Number Two to The Pep Boys— Manny, Moe & Jack 1999 Stock Incentive Plan. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended August 2, 2003. | ||||||||||||
(10.7)* | The Pep Boys—Manny, Moe and Jack 1990 Stock Incentive Plan—Amended and Restated as of March 26, 2001. | Incorporated by reference from the Company’s Form 10-K for the year ended February 1, 2003. | ||||||||||||
(10.8)* | The Pep Boys—Manny, Moe & Jack Pension Plan—Amended and Restated as of September 10, 2001. | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended February 1, 2003 | ||||||||||||
(10.9)* | Long-Term Disability Salary Continuation Plan amended and restated as of March 26, 2002. | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended February 1, 2003. | ||||||||||||
(10.10)* | Amendment and restatement as of September 3, 2002 of The Pep Boys Savings Plan. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended November 2, 2002. |
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(10.11)* | The Pep Boys Savings Plan Amendment 2004-1 | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended January 31, 2004. | ||||||||||||
(10.12)* | Amendment and restatement as of September 3, 2002 of The Pep Boys Savings Plan—Puerto Rico. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended November 2, 2002. | ||||||||||||
(10.13)* | Employment Agreement between Lawrence N. Stevenson and the Company dated as of April 28, 2003. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended May 3, 2003. | ||||||||||||
(10.14)* | Employment Agreement, dated June 1, 2003, between the Company and Harry Yanowitz. | Incorporated by reference from The Company’s Form 10-Q for the quarter ended November 1, 2003. | ||||||||||||
(10.15)* | The Pep Boys Deferred Compensation Plan | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended January 31, 2004. | ||||||||||||
(10.16)* | The Pep Boys Annual Incentive Bonus Plan (amended and restated as of December 9, 2003) | Incorporated by reference from the Company’s Form 10-K for the fiscal year ended January 31, 2004. | ||||||||||||
(10.17)* | Amendment to and Restatement of the Executive Supplemental Pension Plan, effective as of January 31, 2004. | Incorporated by reference from The Company’s Form 10-Q for the quarter ended May 1, 2004. | ||||||||||||
(10.18) | Flexible Employee Benefits Trust | Incorporated by reference from the Company’s Form 8-K dated May 6, 1994. | ||||||||||||
(10.19) | Amended and Restated Loan and Security Agreement, dated August 1, 2003, by and among the Company, Congress Financial Corporation, as Agent, The CIT Group/Business Credit, Inc. and General Electric Capital Corporation, as Co-Documentation Agents, and the Lenders from time to time party thereto. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended August 2, 2003. | ||||||||||||
(10.20) | Amendment No. 1, dated October 24, 2003, to the Amended and Restated Loan and Security Agreement, by and among the Company, Congress Financial Corporation, as Agent, and the other parties thereto | Incorporated by reference from the Company’s Form 10-Q for the quarter ended November 1, 2003. | ||||||||||||
(10.21) | Amendment No. 3, dated December 2, 2004, to the Amended and Restated Loan and Security Agreement, by and among the Company, Congress Financial Corporation, as Agent, and the other parties thereto. | Incorporated by reference from the Company’s Form 8-K dated December 3, 2004. | ||||||||||||
(10.22) | Participation Agreement, dated as of August 1, 2003, among the Company, Wachovia Development Corporation, as the Borrower and the Lessor, the Lenders and Wachovia Bank, National Association, as Agent for the Lenders and the Secured Parties. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended August 2, 2003. |
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(10.23) | Amended and Restated Lease Agreement, dated as of August 1, 2003, between Wachovia Development Corporation, as Lessor, and the Company. | Incorporated by reference from the Company’s Form 10-Q for the quarter ended August 2, 2003. | ||||||||||||
(10.24) | Trade Agreement, dated October 18, 2004, between the Company and GMAC Commercial Finance, LLC. | Incorporated by reference from the Company’s Form 8-K dated October 19, 2004. | ||||||||||||
(10.25) | Master Lease Agreement, dated October 18, 2004, between the Company and with RBS Lombard, Inc. | Incorporated by reference from the Company’s Form 8-K dated October 19, 2004. | ||||||||||||
(12) | Computation of Ratio of Earnings to Fixed Charges | |||||||||||||
(21) | Subsidiaries of the Company | |||||||||||||
(23) | Consent of Independent Registered Public Accounting Firm | |||||||||||||
(31.1) | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||
(31.2) | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||
(32.1) | Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||||||||
(32.2) | Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(b) | None |
* | Management contract or compensatory plan or arrangement. |
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SIGNATURES
THE PEP BOYS—MANNY, MOE & JACK (Registrant) | ||||||
Dated:April 14, 2005 | by:/s/ HARRY F. YANOWITZ Harry F. Yanowitz Senior Vice President and Chief Financial Officer |
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SIGNATURE | CAPACITY | DATE | ||||||||
/s/ LAWRENCE N. STEVENSON Lawrence N. Stevenson | Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | April 14, 2005 | ||||||||
/s/ HARRY F. YANOWITZ Harry F. Yanowitz | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | April 14, 2005 | ||||||||
/s/ BERNARD K. MCELROY Bernard K. McElroy | Chief Accounting Officer and Treasurer (Principal Accounting Officer) | April 14, 2005 | ||||||||
/s/ M. SHAN ATKINS M. Shan Atkins | Director | April 14, 2005 | ||||||||
/s/ PETER A. BASSI Peter A. Bassi | Director | April 14, 2005 | ||||||||
/s/ J. RICHARD LEAMAN, Jr. J. Richard Leaman, Jr. | Director | April 14, 2005 | ||||||||
/s/ WILLIAM LEONARD William Leonard | Director | April 14, 2005 | ||||||||
/s/ MALCOLMN D. PRYOR Malcolmn D. Pryor | Director | April 14, 2005 | ||||||||
/s/ JANE SCACCETTI Jane Scaccetti | Director | April 14, 2005 | ||||||||
/s/ BENJAMIN STRAUSS Benjamin Strauss | Director | April 14, 2005 | ||||||||
/s/ JOHN T. SWEETWOOD John T. Sweetwood | Director | April 14, 2005 |
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FINANCIAL STATEMENT SCHEDULES FURNISHED PURSUANT TO THE REQUIREMENTS OF FORM 10-K
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES | SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES |
(in thousands) | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Column A | | Column B | | Column C | | Column D | | Column E | | |||||||||||||||
Description | | Balance at Beginning of Period | | Additions Charged to Costs and Expenses | | Additions Charged to Other Accounts | | Deductions1 | | Balance at End of Period | ||||||||||||||
ALLOWANCE FOR DOUBTFUL ACCOUNTS: | ||||||||||||||||||||||||
Year Ended January 29, 2005 | $ | 739 | $ | 1,831 | $ | — | $ | 1,540 | $ | 1,030 | ||||||||||||||
Year Ended January 31, 2004 | $ | 422 | $ | 1,768 | $ | — | $ | 1,451 | $ | 739 | ||||||||||||||
Year Ended February 1, 2003 | $ | 725 | $ | 1,643 | $ | — | $ | 1,946 | $ | 422 |
1 | Uncollectible accounts written off. |
Column A | | Column B | | Column C | | Column D | | Column E | | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description | | Balance at Beginning of Period | | Additions Charged to Costs and Expenses | | Additions Charged to Other Accounts2 | | Deductions3 | | Balance at End of Period | ||||||||||||||
SALES RESERVE: | ||||||||||||||||||||||||
Year Ended January 29, 2005 | $ | 1,217 | $ | — | $ | 104,767 | $ | 104,525 | $ | 1,459 | ||||||||||||||
Year Ended January 31, 2004 | $ | 959 | $ | — | $ | 93,699 | $ | 93,441 | $ | 1,217 | ||||||||||||||
Year Ended February 1, 2003 | $ | 723 | $ | — | $ | 92,160 | $ | 91,924 | $ | 959 |
2 | Additions charged to merchandise sales. |
3 | Actual returns and allowances. |
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