-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ObRzDyMQdO6iWanVmeNOSyHH7l0ns57xRUTMOQ0ujlcp4C8XtIe/r5fKXqlPB+O8 U53Yxx+k5DaS81Z7UEHQnw== /in/edgar/work/20000912/0000077449-00-000009/0000077449-00-000009.txt : 20000922 0000077449-00-000009.hdr.sgml : 20000922 ACCESSION NUMBER: 0000077449-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000729 FILED AS OF DATE: 20000912 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEP BOYS MANNY MOE & JACK CENTRAL INDEX KEY: 0000077449 STANDARD INDUSTRIAL CLASSIFICATION: [5531 ] IRS NUMBER: 230962915 STATE OF INCORPORATION: PA FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03381 FILM NUMBER: 721338 BUSINESS ADDRESS: STREET 1: 3111 W ALLEGHENY AVE CITY: PHILADELPHIA STATE: PA ZIP: 19132 BUSINESS PHONE: 2152299000 10-Q 1 0001.txt FORM 10-Q - 2ND QTR 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM 10-Q (Mark One) (x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended July 29, 2000 OR ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to ----------- ---------- Commission File No. 1-3381 ------ The Pep Boys - Manny, Moe & Jack ------------------------------------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 23-0962915 ------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer ID number) incorporation or organization) 3111 W. Allegheny Ave. Philadelphia, PA 19132 ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) 215-430-9000 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ( x ) No ( ) As of September 5, 2000 there were 53,302,123 shares of the registrant's Common Stock outstanding. 1 - --------------------------------------------------------------------------- Index Page - --------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION: Item 1. Condensed Consolidated Financial Statements (Unaudited) Consolidated Balance Sheets - July 29, 2000 and January 29, 2000 3 Consolidated Statements of Earnings - Thirteen and Twenty-six weeks ended July 29, 2000 and July 31, 1999 4 Consolidated Statements of Cash Flows - Twenty-six weeks ended July 29, 2000 and July 31, 1999 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 Item 3. Quantitative and Qualitative Disclosures 13 About Market Risk PART II - OTHER INFORMATION: Item 1. Legal Proceedings 14 Item 2. Changes in Securities and Use of Proceeds 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURE PAGE 15 2 PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Condensed Consolidated Financial Statements (Unaudited) THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands, except per share amounts)
July 29, 2000 Jan. 29, 2000* ------------- ------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents.................................. $ 14,261 $ 18,485 Accounts receivable, net................................... 19,535 17,281 Merchandise inventories.................................... 605,996 582,898 Prepaid expenses........................................... 17,972 39,184 Deferred income taxes...................................... 16,715 16,606 Other...................................................... 38,746 46,278 ------------- ------------- Total Current Assets.................................... 713,225 720,732 Property and Equipment - at cost: Land....................................................... 290,185 287,039 Building and improvements.................................. 966,438 954,638 Furniture, fixtures and equipment.......................... 661,955 647,557 Construction in progress................................... 26,253 25,763 ------------ ------------- 1,944,831 1,914,997 Less accumulated depreciation and amortization............. 626,818 597,248 ------------- ------------- Total Property and Equipment............................ 1,318,013 1,335,749 Other........................................................ 16,725 16,191 ------------- ------------- Total Assets.................................................. $2,047,963 $2,072,672 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable........................................... $ 286,312 $ 320,066 Accrued expenses........................................... 222,700 228,151 Short-term borrowings...................................... 12,000 - Current maturities of long-term debt....................... 187 183 ------------- ------------- Total Current Liabilities............................... 521,199 548,400 Long-Term Debt, less current maturities...................... 626,579 612,668 Convertible Debt, less current maturities.................... 155,332 171,356 Deferred Income Taxes........................................ 81,964 81,964 Commitments and Contingencies Stockholders' Equity: Common Stock, par value $1 per share: Authorized 500,000,000 shares - Issued 63,910,577......... 63,911 63,911 Additional paid-in capital................................. 177,247 177,247 Retained earnings.......................................... 652,271 649,487 ------------- ------------ 893,429 890,645 Less shares in treasury - 10,608,454 and 10,721,208 shares, at cost................................ 171,276 173,097 Less shares in benefits trust - 2,195,270 shares, at cost.. 59,264 59,264 ------------- ------------ Total Stockholders' Equity.............................. 662,889 658,284 ------------- ------------ Total Liabilities and Stockholders' Equity.................... $2,047,963 $2,072,672 ============= ============ See notes to condensed consolidated financial statements. *Taken from the audited financial statements at Jan. 29, 2000.
3 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (dollar amounts in thousands, except per share amounts) (Unaudited)
Thirteen weeks ended Twenty-six weeks ended -------------------------------- --------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 -------------- -------------- -------------- -------------- Merchandise Sales.................................... $516,763 $520,686 $1,014,483 $1,009,384 Service Revenue...................................... 117,124 114,717 234,213 224,335 -------------- -------------- -------------- -------------- Total Revenues....................................... 633,887 635,403 1,248,696 1,233,719 Costs of Merchandise Sales........................... 378,145 368,583 737,653 717,756 Costs of Service Revenue............................. 98,120 90,300 193,605 177,416 -------------- -------------- -------------- -------------- Total Costs of Revenues.............................. 476,265 458,883 931,258 895,172 Gross Profit from Merchandise Sales.................. 138,618 152,103 276,830 291,628 Gross Profit from Service Revenue.................... 19,004 24,417 40,608 46,919 -------------- -------------- -------------- -------------- Total Gross Profit................................... 157,622 176,520 317,438 338,547 Selling, General and Administrative Expenses......... 139,029 132,668 279,344 265,655 -------------- -------------- -------------- -------------- Operating Profit..................................... 18,593 43,852 38,094 72,892 Nonoperating Income.................................. 535 762 1,025 1,070 Interest Expense..................................... 13,802 13,262 26,906 26,840 -------------- -------------- -------------- -------------- Earnings Before Income Taxes 5,326 31,352 12,213 47,122 Income Taxes......................................... 1,917 11,287 4,397 16,964 -------------- -------------- -------------- -------------- Net Earnings Before Extraordinary Gain............... 3,409 20,065 7,816 30,158 Extraordinary Gain, Net of Tax....................... 967 - 3,007 - -------------- -------------- -------------- -------------- Net Earnings......................................... 4,376 20,065 10,823 30,158 Retained Earnings, beginning of period............... 651,917 642,600 649,487 636,475 Cash Dividends....................................... 3,446 3,257 6,888 6,815 Dividend Reinvestment Plan........................... 576 - 1,151 - Effect of Shares Repurchased from Benefits Trust..... - - - 410 -------------- -------------- -------------- -------------- Retained Earnings, end of period..................... $652,271 $659,408 $652,271 $659,408 ============== ============== ============== ============== Basic Earnings per Share: Before Extraordinary Gain.......................... $ .07 $ .40 $ .15 $ .60 Extraordinary Gain on Extinguishment of Debt, Net of Tax.............................. .02 - .06 - ------------- ------------- ------------- ------------- Basic Earnings per Share............................. $ .09 $ .40 $ .21 $ .60 ============= ============= ============= ============= Diluted Earnings per Share: Before Extraordinary Gain.......................... $ .07 $ .39 $ .15 $ .59 Extraordinary Gain on Extinguishment of Debt, Net of Tax.............................. .02 - .06 - ------------- ------------- ------------- ------------- Diluted Earnings per Share........................... $ .09 $ .39 $ .21 $ .59 ============= ============= ============= ============= Cash Dividends per Share............................. $ .0675 $ .0675 $ .1350 $ .1350 ============= ============= ============= ============= See notes to condensed consolidated financial statements.
4 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollar amounts in thousands) (Unaudited)
Twenty-six weeks ended ---------------------------------- July 29, 2000 July 31, 1999 -------------- -------------- Cash Flows from Operating Activities: Net earnings.................................................... $ 10,823 $ 30,158 Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: Extraordinary gain on extinguishment of debt, net of tax..... (3,007) - Depreciation and amortization................................ 50,531 48,510 Accretion of bond discount................................... 3,201 3,294 Increase in deferred income taxes............................ (109) - Gain from sale of assets..................................... (1,262) (592) Changes in operating assets and liabilities: Decrease in accounts receivable, prepaid expenses and other................................................. 25,956 14,547 (Increase) Decrease in merchandise inventories................ (23,098) 14,327 (Decrease) Increase in accounts payable....................... (33,754) 16,542 (Decrease) Increase in accrued expenses....................... (5,451) 30,135 ------------- ------------- Net Cash Provided by Operating Activities....................... 23,830 156,921 Cash Flows from Investing Activities: Capital expenditures............................................ (33,626) (52,053) Net proceeds from sales of assets............................... 2,093 1,403 ------------- ------------- Net Cash Used in Investing Activities........................... (31,533) (50,650) Cash Flows from Financing Activities: Net borrowings under line of credit agreements.................. 19,910 - Short-term borrowings........................................... 12,000 - Reduction of long-term debt..................................... - (84) Reduction of convertible debt................................... - (16,500) Dividends paid.................................................. (6,888) (6,815) Net proceeds from issuance of notes............................. - 76,000 Early extinguishment of debt.................................... (22,213) - Repurchase of treasury shares................................... - (182,065) Proceeds from exercise of stock options......................... - 269 Proceeds from dividend reinvestment plan........................ 670 569 ------------- ------------- Net Cash Provided by (Used in) Financing Activities............. 3,479 (128,626) ------------- ------------- Net Decrease in Cash................................................. (4,224) (22,355) Cash and Cash Equivalents at Beginning of Period..................... 18,485 114,548 ------------- ------------- Cash and Cash Equivalents at End of Period........................... $ 14,261 $ 92,193 ============= ============= See notes to condensed consolidated financial statements.
5 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. Condensed Consolidated Financial Statements The consolidated balance sheet as of July 29, 2000, the consolidated statements of earnings for the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999 and the consolidated statements of cash flows for the twenty-six week periods ended July 29, 2000 and July 31, 1999 have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at July 29, 2000 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's annual report to shareholders for the year ended January 29, 2000. The results of operations for the thirteen and twenty-six week periods ended July 29, 2000 are not necessarily indicative of the operating results for the full year. NOTE 2. Merchandise Inventories Merchandise inventories are valued at the lower of cost (last-in, first-out) or market. If the first-in, first-out method of valuing inventories had been used by the Company, inventories would have been approximately the same at both July 29, 2000 and January 29, 2000. NOTE 3. Comprehensive Income Comprehensive Income is reported in accordance with Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." Accumulated other comprehensive income in the consolidated balance sheets as of July 29, 2000 and January 29, 2000 consists of a minimum pension liability adjustment. There were no differences between net earnings and comprehensive income for the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999. NOTE 4. Accounting for Derivative Instruments and Hedging Activities In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. As amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," this statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000, although early adoption is encouraged. The Company is in the process of analyzing the impact of the adoption of this statement on its consolidated financial statements. NOTE 5. Debt and Financing Arrangements As of the balance sheet date, the Company was not in compliance with certain financial convenants in its revolving credit agreement and operating leases for certain properties. The Company has obtained waivers for such noncompliance and amended its credit facilities. The waiver for the revolving credit agreement extends through the third fiscal quarter. The waivers for the operating leases extend through October 10, 2000. As of August 10, 2000, the revolving credit agreement was amended to reduce the Company's availability from $200,000,000 to $125,000,000; had this amendment to the revolving line of credit been in place on the balance sheet date, the availability would have been $98,000,000. In addition, the amendments restrict any cash payments for the Company's Liquid Yield Option Notes (LYONs) at any time prior to September 20, 2001. The Company has obtained firm commitments from lenders to enter into a new revolving credit agreement and operating lease facility. The new facilities will provide up to $368,000,000 of available credit and will be secured by certain assets of the Company. The Company expects to close these facilities in the third fiscal quarter. In April 2000, the Company repurchased $30,200,000 face value of its LYONs at a price of $520 per LYON. The book value of the LYONs were $19,226,000 and the after-tax extraordinary gain was $2,040,000. In June 2000, the Company repurchased $5,995,000 face value of the $49,000,000 medium-term note which was redeemable at the option of the holder on September 19, 2002. The after-tax extraordinary gain was $967,000. 6 NOTE 6. Net Earnings Per Share
Thirteen weeks ended Twenty-six weeks ended (in thousands, except per share data) ---------------------------------- ---------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 -------------- -------------- -------------- -------------- (a) Net earnings before extraordinary gain........... $ 3,409 $20,065 $ 7,816 $30,158 Adjustment for interest on 4% convertible subordinated notes, net of income tax effect... - 403 - 866 Adjustment for interest on zero coupon convertible subordinated notes, net of income tax effect... - 1,060 - - - ---------------------------------------------------------------------------------------------------------------------------------- (b) Adjusted net earnings before extraordinary gain.. $ 3,409 $21,528 $ 7,816 $31,024 - ---------------------------------------------------------------------------------------------------------------------------------- (c) Average number of common shares outstanding during the period.............................. 51,055 50,420 51,026 50,466 Common shares assumed issued upon conversion of 4% convertible subordinated notes.............. - 1,525 - 1,644 Common shares assumed issued upon conversion of zero coupon convertible subordinated notes..... - 3,513 - - Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price........ 20 380 12 316 - ---------------------------------------------------------------------------------------------------------------------------------- (d) Average number of common shares assumed outstanding during the period.................. 51,075 55,838 51,038 52,426 - ---------------------------------------------------------------------------------------------------------------------------------- Basic Earnings per Share: Before Extraordinary Gain (a/c).................. $ .07 $ .40 $ .15 $ .60 Extraordinary Gain............................... .02 - .06 - - ---------------------------------------------------------------------------------------------------------------------------------- Basic Earnings per Share: $ .09 $ .40 $ .21 $ .60 - ---------------------------------------------------------------------------------------------------------------------------------- Diluted Earnings per Share: Before Extraordinary Gain (b/d).................. $ .07 $ .39 $ .15 $ .59 Extraordinary Gain............................... .02 - .06 - - ---------------------------------------------------------------------------------------------------------------------------------- Diluted Earnings per Share: $ .09 $ .39 $ .21 $ .59 - ----------------------------------------------------------------------------------------------------------------------------------
Adjustments for certain convertible securities were antidilutive during the thirteen and twenty-six week periods ended July 29, 2000 and the twenty-six week period ended July 31, 1999, and therefore, excluded from the computation of diluted EPS; however, these securities could potentially be dilutive in the future. Options to purchase shares of common stock which were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the shares of common stock during the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999 were as follows:
Thirteen weeks ended Twenty-six weeks ended (in thousands) ---------------------------------- ---------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 -------------- -------------- -------------- -------------- Common shares associated with antidilutive stock options excluded from computation of diluted EPS ...... 4,787 3,679 4,787 3,695 -------------- -------------- -------------- --------------
7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operation - The following table presents for the periods indicated certain items in the consolidated statements of earnings as a percentage of total revenues (except as otherwise provided) and the percentage change in dollar amounts of such items compared to the indicated prior period.
Percentage of Total Revenues Percentage Change - ------------------------------------------------------ ---------------------------------- ----------------- Thirteen weeks ended July 29, 2000 July 31, 1999 Fiscal 2000 vs. (Fiscal 2000) (Fiscal 1999) Fiscal 1999 - ------------------------------------------------------ -------------- -------------- ----------------- Merchandise Sales..................................... 81.5% 81.9% (0.8)% Service Revenue (1)................................... 18.5 18.1 2.1 ------ ------ ------ Total Revenues........................................ 100.0 100.0 (.2) Costs of Merchandise Sales (2)........................ 73.2 (3) 70.8 (3) 2.6 Costs of Service Revenue (2).......................... 83.8 (3) 78.7 (3) 8.7 ------ ------ ------ Total Costs of Revenues............................... 75.1 72.2 3.8 Gross Profit from Merchandise Sales................... 26.8 (3) 29.2 (3) (8.8) Gross Profit from Service Revenue..................... 16.2 (3) 21.3 (3) (22.2) ------ ------ ------ Total Gross Profit.................................... 24.9 27.8 (10.7) Selling, General and Administrative Expenses.......... 22.0 20.9 4.8 ------ ------ ------ Operating Profit...................................... 2.9 6.9 (57.6) Nonoperating Income................................... .1 .1 (29.8) Interest Expense...................................... 2.2 2.1 4.1 ------ ------ ------ Earnings Before Income Taxes.......................... .8 4.9 (83.0) Income Taxes.......................................... 36.0 (4) 36.0 (4) (83.0) ------ ------ ------ Net Earnings Before Extraordinary Gain................ .5 3.2 (83.0) Extraordinary Gain, Net of Tax........................ .2 .0 N/A ------ ------ ------ Net Earnings.......................................... .7 3.2 (78.2) ====== ====== ====== (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 before income taxes.
8 Thirteen Weeks Ended July 29, 2000 vs. Thirteen Weeks Ended July 31, 1999 - --------------------------------------------------------------------------- Total revenues for the second quarter fell 0.2% led by a 0.8% decrease in merchandise sales offset, in part, by a 2.1% increase in service revenue. Revenues fell despite an increase in total stores from 650 in 1999 to 655 in 2000. This decrease was driven by a decrease in comparable store revenues of 2.0% in 2000. Comparable store merchandise sales decreased 2.6% while comparable service revenue increased 0.4%. Gross profit from merchandise sales decreased, as a percentage of merchandise sales, due primarily to lower merchandise margins, an increase in store occupancy costs, as a percentage of merchandise sales and an increase in warehousing costs, as a percentage of merchandise sales. Gross profit from service revenue decreased, as a percentage of service revenue, due primarily to an increase in service center personnel costs and an an increase in store occupancy costs, as a percentage of service revenue. Selling, general and administrative expenses increased, as a percentage of total revenues, due primarily to increases in store payroll expenses and general office expenses, as a percentage of total revenues. Nonoperating income consisted of the following: (in thousands)
2000 1999 ------ ------ Net rental revenue $ 450 $ 201 Investment income 88 481 Other income (3) 80 ------ ------ Total $ 535 $ 762 ====== ======
Net earnings decreased, as a percentage of total revenues, due primarily to a decrease in gross profit from merchandise sales, in addition to a decrease in gross profit from service revenues and an increase in selling, general and administrative expenses offset, in part, by an extraordinary gain on the early extinguishment of debt. 9 Results of Operation - The following table presents for the periods indicated certain items in the consolidated statements of earnings as a percentage of total revenues (except as otherwise provided) and the percentage change in dollar amounts of such items compared to the indicated prior period.
Percentage of Total Revenues Percentage Change - ------------------------------------------------------ ---------------------------------- ----------------- Twenty-six weeks ended July 29, 2000 July 31, 1999 Fiscal 2000 vs. (Fiscal 2000) (Fiscal 1999) Fiscal 1999 - ------------------------------------------------------ -------------- -------------- ----------------- Merchandise Sales..................................... 81.2% 81.8% .5 % Service Revenue (1)................................... 18.8 18.2 4.4 ------ ------ ------ Total Revenues........................................ 100.0 100.0 1.2 Costs of Merchandise Sales (2)........................ 72.7 (3) 71.1 (3) 2.8 Costs of Service Revenue (2).......................... 82.7 (3) 79.1 (3) 9.1 ------ ------ ------ Total Costs of Revenues............................... 74.6 72.6 4.0 Gross Profit from Merchandise Sales................... 27.3 (3) 28.9 (3) (5.1) Gross Profit from Service Revenue..................... 17.3 (3) 20.9 (3) (13.5) ------ ------ ------ Total Gross Profit.................................... 25.4 27.4 (6.2) Selling, General and Administrative Expenses.......... 22.3 21.5 5.2 ------ ------ ------ Operating Profit...................................... 3.1 5.9 (47.7) Nonoperating Income................................... .1 .1 (4.2) Interest Expense...................................... 2.2 2.2 .3 ------ ------ ------ Earnings Before Income Taxes.......................... 1.0 3.8 (74.1) Income Taxes.......................................... 36.0 (4) 36.0 (4) (74.1) ------ ------ ------ Net Earnings Before Extraordinary Gain................ .6 2.4 (74.1) Extraordinary Gain, Net of Tax........................ .2 .0 N/A ------ ------ ------ Net Earnings.......................................... .9 2.4 (64.1) ====== ====== ====== (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 before income taxes.
10 Twenty-six Weeks Ended July 29, 2000 vs. Twenty-six Weeks Ended July 31, 1999 - ------------------------------------------------------------------------------- Total revenues for the first half increased 1.2% due to an increase in store count from 650 stores in 1999 to 665 in 2000. This increase was offset, in part, by a decrease in total comparable store sales of 0.8%. Comparable store merchandise sales decreased 1.5% while comparable service revenue increased 2.4%. Gross profit from merchandise sales decreased, as a percentage of merchandise sales, due primarily to lower merchandise margins and an increase in warehousing costs, as a percentage of merchandise sales. Gross profit from service revenue decreased, as a percentage of service revenue due primarily to an increase in service payroll, as a percentage of service revenue. Selling, general and administrative expenses increased, as a percentage of total revenues, due primarily to an increase in store expenses, as a percentage of total revenues. Nonoperating income consisted of the following: (in thousands)
2000 1999 ------ ------ Net rental revenue $ 897 $ 377 Investment income 151 613 Other income (23) 80 ------ ------ Total $1,025 $1,070 ====== ======
Net earnings decreased, as a percentage of total revenues, due primarily to a decrease in gross profit from merchandise sales, as a percentage of merchandise sales, coupled with a decrease in gross profit from service revenue, as a percentage of service revenue and higher selling, general and administrative expenses, as a percentage of total revenues offset, in part, by an extraordinary gain on the early extinguishment of debt. 11 LIQUIDITY AND CAPITAL RESOURCES - July 29, 2000 - ------------------------------------------------ The Company's cash requirements arise principally from the need to finance the acquisition, construction and equipping of new stores, to renovate existing stores, and to purchase inventory. During the first six months of 2000, the Company invested $33,626,000 in property and equipment while net inventory (net inventory includes the change in inventory less the change in accounts payable) increased $56,852,000. Working capital increased from $172,332,000 at January 29, 2000 to $192,026,000 at July 29, 2000. At July 29, 2000, the Company had stockholders' equity of $662,889,000 and long-term debt of $781,911,000. The Company's long-term debt was 54% of its total capitalization at July 29, 2000 and 54% at January 29, 2000. As of July 29, 2000, the Company had available lines of credit totaling $173,000,000. As of the balance sheet date, the Company was not in compliance with certain financial convenants in its revolving credit agreement and operating leases for certain properties. The Company has obtained waivers for such noncompliance and amended its credit facilities. The waiver for the revolving credit agreement extends through the third fiscal quarter. The waivers for the operating leases extend through October 10, 2000. As of August 10, 2000, the revolving credit agreement was amended to reduce the Company's availability from $200,000,000 to $125,000,000; had this amendment to the revolving line of credit been in place on the balance sheet date, the availability would have been $98,000,000. In addition, the amendments restrict any cash payments for the Company's Liquid Yield Option Notes (LYONs) at any time prior to September 20, 2001. The Company has obtained firm commitments from lenders to enter into a new revolving credit agreement and operating lease facility. The new facilities will provide up to $368,000,000 of available credit and will be secured by certain assets of the Company. The Company expects to close these facilities in the third fiscal quarter. The Company plans to open 2 new stores during the balance of the current fiscal year. Management estimates that the cost of the expansion, coupled with expenditures in renovating existing stores, and expenditures for warehouses and offices will be approximately $26,374,000. Funds required to finance the store expansion including related inventory requirements, to finance the renovation project of existing stores and to repay its debt maturities are expected to come primarily from operating activities and the Company's lines of credit. In April 2000, the Company repurchased $30,200,000 face value of its LYONs at a price of $520 per LYON. The book value of the LYONs were $19,226,000 and the after-tax extraordinary gain was $2,040,000. In June 2000, the Company repurchased $5,995,000 face value of the $49,000,000 medium-term note which was redeemable at the option of the holder on September 19, 2002. The after-tax extraordinary gain was $967,000. NEW ACCOUNTING STANDARDS - ------------------------ In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. As amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," this statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000, although early adoption is encouraged. The Company is in the process of analyzing the impact of the adoption of this statement on its consolidated financial statements. FORWARD LOOKING STATEMENTS - -------------------------- Certain statements made herein, including those discussing management's expectations for future periods, are forward-looking and involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements due to factors beyond the control of the Company, including the strength of the national and regional economies and retail and commercial consumers' ability to spend, the health of the various sectors of the market that the Company serves, the weather in geographical regions with a high concentration of the Company's stores, competitive pricing, location and number of competitors' stores and product and labor costs. Further factors that might cause such a difference include, but are not limited to, the factors described in the Company's filings with the Securities and Exchange Commission. 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company does not utilize financial instruments for trading purposes and holds no derivative financial instruments which could expose the Company to significant market risk. The Company's primary market risk exposure with regard to financial instruments is to changes in interest rates. Pursuant to the terms of certain revolving credit agreements, changes in the federal funds rate, the lenders' prime rate or LIBOR could affect the rates at which the Company could borrow funds thereunder. At July 29, 2000, the Company had $42,000,000 outstanding borrowings under these credit facilities. There have been no material changes to the market risk disclosures as reported in the Company's Form 10-K for the fiscal year ended January 29, 2000. 13 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings None. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders An annual meeting of shareholders was held on May 31, 2000. The shareholders approved the election of directors shown below. Directors Elected at Annual Meeting of Shareholders --------------------------------------------------- Name Votes For Votes Withheld ---- --------- -------------- Bernard J. Korman 43,156,311 4,729,577 J. Richard Leaman, Jr. 43,164,060 4,721,828 .................................................................. Directors whose term of office continued after the Annual Meeting of Shareholders ----------------------------------------------------------------- Name ---- Lennox K. Black Mitchell G. Leibovitz Lester Rosenfeld Benjamin Strauss Myles H. Tanenbaum Malcolmn D. Pryor .................................................................. The shareholders also approved the appointment of the independent auditors Deloitte & Touche LLP with 47,091,932 affirmative votes, 639,268 negative votes and 154,688 abstentions. .................................................................. The shareholders disapproved the shareholder proposal regarding the sale of the Company to the highest bidder with 27,589,361 negative votes, 6,689,146 affirmative votes, 1,340,253 abstentions, and 12,267,128 broker non-votes. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
(10.53) AMENDMENT NO. 6 AND WAIVER dated as of July 28, 2000 to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 21, 1995 between THE PEP BOYS - MANNY, MOE & JACK, the guarantors signatory thereto, the banks signatory thereto and THE CHASE MANHATTAN BANK, as agent. (10.54) Amendment and waiver dated as of August 10, 2000 to Master Lease between the Company and State Street Bank and Trust Company dated as of November 13, 1995. (10.55) Amendment and waiver dated as of August 10, 2000 to Master Lease between the Company and State Street Bank and Trust Company dated as of February 28, 1997. (11) Statement Re: Computation of Earnings Per Share (27) Financial Data Schedules
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. 14 SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE PEP BOYS - MANNY, MOE & JACK -------------------------------- (Registrant) Date: September 12, 2000 By: /s/ George Babich Jr. ----------------------- ------------------------- George Babich Jr. Senior Vice President & Chief Financial Officer 15 INDEX TO EXHIBITS - ----------------- (10.53) AMENDMENT NO. 6 AND WAIVER dated as of July 28, 2000 to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 21, 1995 between THE PEP BOYS - MANNY, MOE & JACK, the guarantors signatory thereto, the banks signatory thereto and THE CHASE MANHATTAN BANK, as agent. (10.54) Amendment and waiver dated as of August 10, 2000 to Master Lease between the Company and State Street Bank and Trust Company dated as of November 13, 1995. (10.55) Amendment and waiver dated as of August 10, 2000 to Master Lease between the Company and State Street Bank and Trust Company dated as of February 28, 1997. (11) Computations of Earnings Per Share (27) Financial Data Schedule EX-10.53 2 0002.txt AMENDMENT NO. 6 AND WAIVER AMENDMENT NO. 6 AND WAIVER dated as of July 28, 2000 to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 21, 1995 between THE PEP BOYS - MANNY, MOE & JACK (the "Company"), the guarantors signatory thereto (the "Guarantors"), the banks signatory thereto (the "Banks") and THE CHASE MANHATTAN BANK, as agent (the "Agent"). W I T N E S S E T H: WHEREAS, the Company, the Guarantors, the Banks and the Agent are parties to the Amended and Restated Credit Agreement referred to above (as heretofore amended, the "Credit Agreement") pursuant to which the Banks have agreed to extend credit to the Company as provided therein; WHEREAS, the Company has requested that the Banks and the Agent amend the Credit Agreement in order to reduce the Commitments (as defined in the Credit Agreement) of the Banks and waive compliance with Sections 9.07 and 9.10 of the Credit Agreement as hereinafter set forth; WHEREAS, the Majority Banks (as defined in the Credit Agreement) and the Agent are agreeable to such amendment and waivers on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein it is hereby agreed as follows: Section 1. Definitions. All terms defined in the Credit Agreement shall be used herein as defined in the Credit Agreement unless otherwise defined herein or the context otherwise requires. Section 2. Amendments to the Agreement. Effective as provided in Section 5 of this Amendment No. 6 and Waiver: (a) the Company hereby irrevocably agrees that the aggregate Commitments available under the Credit Agreement shall be reduced from $200,000,000 to $125,000,000 as of August 10, 2000. Such reduction shall be effected automatically as of said date without further action by any Person and shall be applied to the Commitments of the Banks in accordance with Section 4.02 of the Credit Agreement; and (b) Section 9 of the Credit Agreement is hereby amended by inserting a new Section 9.14 to read as follows: "9.14. Limitation on LYONS Payments. The Company shall not at any time prior to September 20, 2001 make any payments in cash, whether by purchase, redemption or otherwise, in respect of its Liquid Yield Option Notes due 2011 (the "LYONS") issued pursuant to the Indenture dated as of September 20, 1996 (the "Indenture") other than in connection with a Change in Control as provided in Section 3.09 of the Indenture and paragraph 6 of the LYONS." Section 3. Waivers. Effective as provided in Section 5 of this Amendment No. 6 and Waiver, but effective as of the date hereof, the Banks hereby waive the Company's compliance with the Leverage Ratio under Section 9.07 of the Credit Agreement and the Interest Coverage Ratio under Section 9.10 of the Credit Agreement, in each case for the period ending on July 28, 2000. Section 4. Representations and Warranties. In order to induce the Majority Banks and the Agent to make this Amendment No. 6 and Waiver, the Company hereby represents and warrants that: (a) the execution and delivery of this Amendment No. 6 and Waiver and the performance of the Company thereunder and under the Credit Agreement as amended hereby (i) have been duly authorized by all necessary corporate action, will not violate any provision of law, or the Company's charter or by-laws, or result in the breach of or constitute a default, or require a consent, under any indenture or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or their respective property may be bound or affected, and (ii) each of this Amendment No. 6 and Waiver and the Credit Agreement as amended hereby constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; (b) the representations and warranties in Section 8 of the Credit Agreement are true and correct as of the date hereof as if they were being made on such date and as if reference therein to the Credit Agreement (or words of similar import) referred to the Credit Agreement as amended hereby and to this Amendment No. 6 and Waiver; and (c) (except as provided in Section 3 of this Amendment No. 6 and Waiver) no Event of Default or event which with notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing as of the date hereof. Section 5. Conditions. The amendment set forth in Section 2 of this Amendment No. 6 and Waiver, and the waivers set forth in Section 3 of this Amendment No. 6 and Waiver, shall become effective, as of the respective dates specified therein, when all of the following conditions shall have been met: (a) The Agent shall have received one or more counterparts of this Amendment No. 6 and Waiver duly executed by Company, the Guarantors, the Agent and the Majority Banks. (b) The Company shall have paid to the Agent for the account of each Bank that has executed and delivered a counterpart of this Amendment on or prior to 5:00 p.m. (New York time) on August 10, 2000 (or has advised the Agent in a manner satisfactory to the Agent that such Bank has executed this Amendment on or prior to such time) an amendment fee equal to 0.10% of the amount of such Bank's Commitment. Section 6. Miscellaneous. (a) Except as specifically amended and waived hereby, all the provisions of the Credit Agreement shall remain unchanged and in full force and effect, and the term "Credit Agreement", and words of like import shall be deemed to refer to the Credit Agreement as amended by this Amendment No. 6 and Waiver unless otherwise provided herein or the context otherwise requires. Nothing herein shall affect the obligations of the Company under the Credit Agreement with respect to any period prior to the effectiveness of this Amendment No. 6 and Waiver. (b) This Amendment No. 6 and Waiver shall be governed by and construed and interpreted in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 6 and Waiver to be executed by their duly authorized officers as of the day and year first above written. THE PEP BOYS - MANNY, MOE & JACK By Title: THE PEP BOYS - MANNY, MOE & JACK OF CALIFORNIA, as a Guarantor By__________________________________ Title: PBY CORPORATION, as a Guarantor By__________________________________ Title: PEP BOYS - MANNY, MOE & JACK OF DELAWARE, INC., as a Guarantor By__________________________________ Title: PEP BOYS - MANNY, MOE & JACK OF PUERTO RICO, INC., as a Guarantor By__________________________________ Title: CARRUS SUPPLY CORPORATION, as a Guarantor By_________________________________ Title: BANKS THE CHASE MANHATTAN BANK, as Agent and a Bank By_________________________________ Title: BANK OF AMERICA, N.A. By__________________________________ Title: SUNTRUST BANKS. By__________________________________ Title: FIRST UNION NATIONAL BANK By__________________________________ Title: PNC BANK, NATIONAL ASSOCIATION By__________________________________ Title: FLEET BANK By__________________________________ Title: UNION BANK OF CALIFORNIA By__________________________________ Title: CREDIT SUISSE FIRST BOSTON By__________________________________ Title: By__________________________________ Title: BANCO POPULAR DE PUERTO RICO By__________________________________ Title: By__________________________________ Title: EX-10.54 3 0003.txt August 10, 2000 The Pep Boys - Manny, Moe & Jack 3111 West Allegheny Avenue Philadelphia, PA 19132 Re: Pep Boys I Synthetic Lease Facility Gentlemen: Effective as of November 13, 1995, State Street Bank and Trust Company, a Massachusetts trust company, not in its individual capacity, but solely as Trustee under Declaration of Trust dated November 13, 1995 ("Lessor"), and The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation ("Guarantor"), entered into that certain Lease Guarantee pursuant to which Guarantor guaranteed certain obligations of Guarantor, The Pep Boys Manny Moe & Jack of California, a California corporation, and Pep Boys - Manny, Moe & Jack of Delaware, Inc., a Delaware corporation (collectively, "Lessee"), under that certain Master Lease (as amended, supplemented or otherwise modified from time to time, the "Lease") dated effective as of November 13, 1995, between Lessor and Lessee, with respect to certain property more particularly described therein. Such Lease Guarantee, as heretofore modified by certain amendment letters dated as of January 31, 1998, July 31, 1998, October 31, 1998, January 21, 1999, and July 26, 1999, and September 28, 1999 (but effective as of July 26, 1999), is herein referred to as the "Guarantee". All terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Guarantee. By execution hereof Lessor, with the approval of Agent (on behalf of itself and the other Instrument Holders), hereby confirms and agrees with Lessee and Guarantor as to the following matters: 1. Guarantor has advised Agent that Guarantor, as of the end of Guarantor's fiscal quarter July 29, 2000, will not be in compliance with (A) the Leverage Ratio requirement of Section 8(b) of the Guarantee, and (B) the Interest Coverage Ratio requirement of Section 8(e) of the Guarantee (the "Applicable Covenants"). Subject to the conditions hereinafter stated, Lessor waives its right to take remedial actions in respect of such non-compliance by Guarantor with the Applicable Covenants during the period commencing August 10, 2000, and ending October 10, 2000 ("Waiver Period"). 2. The foregoing waiver shall be rescinded and of no force and effect upon the earlier of (i) the expiration of the Waiver Period, or (ii) the date upon which that certain [Commitment] dated August 10, 2000, issued by Congress Financial Corporation, together with other lenders (collectively, "Take Out Holder") to Guarantor with respect to the purchase by the Take Out Holder of all of the Instruments held by all of the existing Instrument Holders is terminated, rescinded, repudiated, expires, or in any other manner whatsoever ceases to be in effect between the Take Out Holders and Guarantor. At any such time as the foregoing waiver is rescinded as aforesaid an immediate Event of Default shall exist under the Lease and the Guarantee as a result of Guarantor's failure to comply with the Applicable Covenants as of July 29, 2000. By acceptance hereof Lessee and Guarantor hereby waive any notice requirements, grace or cure periods, or similar provisions that would otherwise apply before the non-compliance with the Applicable Covenants as of July 29, 2000, would ripen into an Event of Default. 3. Guarantor shall notify Agent in writing within 24 hours after any event of circumstance occurs that would cause the foregoing waiver to be rescinded pursuant to clause 2(ii) above. Any failure by Guarantor to so notify Agent shall be an immediate Event of Default without notice, grace, or cure rights. 4. Guarantor shall not at any time prior to September 20, 2001, make any payments in cash, whether by purchase, redemption or otherwise, in respect of its Liquid Yield Option Notes due 2011 (the "LYONS") issued pursuant to the Indenture dated as of September 20, 1996 (the "Indenture") other than in connection with a Change in Control as provided in Section 3.09 of the Indenture and paragraph 6 of the LYONS. Nothing herein shall be deemed or construed as a waiver of any rights or remedies available to the undersigned as a result of any other existing defaults or Events of Default (whether known or unknown) under the Lease or the Guarantee, nor shall such waiver be applicable as to any future failure by Guarantor to satisfy any and all requirements of the Guarantee. This waiver shall not be applicable to any failure of Guarantor to satisfy the Applicable Covenants in respect of any period other than the fiscal quarter ended July 29, 2000. In consideration of the foregoing waiver, and as a condition to the effectiveness thereof, Guarantor shall pay to Agent, on behalf of itself as a Purchaser and Instrument Holder and the other Purchasers and Instrument Holders, a fee in the amount of 10 basis points (.1%) times the aggregate outstanding balance of the Instruments held by each such Instrument Holder. Further, in the event the existing Instrument Holders have not been paid out by the Take Out Holders on or before September 12, 2000, on September 12, 2000, Guarantor shall pay to Agent, on behalf of itself as Purchaser and Instrument Holder and the other Purchasers and Instrument Holders, an additional fee in the amount of fifteen basis points (0.15%) times the aggregate outstanding balance of the Instruments held by each such Instrument Holder. The Guaranty (as previously amended) shall remain unchanged and in full force and effect, and Guarantor and Lessor hereby ratify and confirm the terms thereof. Very truly yours, STATE STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as Trustee under Declaration of Trust, Lessor By: Donald E. Smith, Vice President ACKNOWLEDGED AND ACCEPTED: THE PEP BOYS - MANNY, MOE & JACK, as Guarantor and Lessee By:___________________________________ Name:________________________________ Title:_________________________________ THE PEP BOYS - MANNY, MOE & JACK OF CALIFORNIA, as Lessee By:___________________________________ Name:________________________________ Title:_________________________________ PEP BOYS - MANNY, MOE & JACK OF DELAWARE, INC., as Lessee By:___________________________________ Name:________________________________ Title:_________________________________ APPROVED: CITICORP LEASING, INC., Agent By:___________________________________ Virginia S. Clark, Vice President EX-10.55 4 0004.txt August 10, 2000 The Pep Boys - Manny, Moe & Jack 3111 West Allegheny Avenue Philadelphia, PA 19132 Re: Pep Boys II Synthetic Lease Facility Gentlemen: Effective as of February 28, 1997, State Street Bank and Trust Company, a Massachusetts trust company, not in its individual capacity, but solely as Trustee under Declaration of Trust dated February 28, 1997 ("Lessor"), and The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation ("Guarantor"), entered into that certain Lease Guarantee pursuant to which Guarantor guaranteed certain obligations of Guarantor, The Pep Boys Manny Moe & Jack of California, a California corporation, and Pep Boys - Manny, Moe & Jack of Delaware, Inc., a Delaware corporation (collectively, "Lessee"), under that certain Master Lease (as amended, supplemented or otherwise modified from time to time, the "Lease") dated effective as of February 28, 1997, between Lessor and Lessee, with respect to certain property more particularly described therein. Such Lease Guarantee, as heretofore modified by certain amendment letters dated as of January 31, 1998, July 31, 1998, October 31, 1998, January 21, 1999, and July 26, 1999, and September 28, 1999 (but effective as of July 26, 1999), is herein referred to as the "Guarantee". All terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Guarantee. By execution hereof Lessor, with the approval of Agent (on behalf of itself and the other Instrument Holders), hereby confirms and agrees with Lessee and Guarantor as to the following matters: 1. Guarantor has advised Agent that Guarantor, as of the end of Guarantor's fiscal quarter ended July 29, 2000, will not be in compliance with (A) the Leverage Ratio requirement of Section 8(b) of the Guarantee, and (B) the Interest Coverage Ratio requirement of Section 8(e) of the Guarantee (the "Applicable Covenants"). Subject to the conditions hereinafter stated, Lessor waives its right to take remedial actions in respect of such non-compliance by Guarantor with the Applicable Covenants during the period commencing August 10, 2000 and ending October 10, 2000 ("Waiver Period"). 2. The foregoing waiver shall be rescinded and of no force and effect upon the earlier of (i) the expiration of the Waiver Period, or (ii) the date upon which that certain Commitment letter dated August 10, 2000, issued by Congress Financial Corporation, together with other lenders (collectively "Take Out Holder") to Guarantor with respect to the purchase by the Take Out Holder of all of the Instruments held by all of the existing Instrument Holders is terminated, rescinded, repudiated, expires, or in any other manner whatsoever ceases to be in effect between the Take Out Holder and Guarantor. At any such time as the foregoing waiver is rescinded as aforesaid an immediate Event of Default shall exist under the Lease and the Guarantee as a result of Guarantor's failure to comply with the Applicable Covenants as of July 29, 2000. By acceptance hereof Lessee and Guarantor hereby waive any notice requirements, grace or cure periods, or similar provisions that would otherwise apply before the non-compliance with the Applicable Covenants as of July 29, 2000, would ripen into an Event of Default. 3. Guarantor shall notify Agent in writing within 24 hours after any event of circumstance occurs that would cause the foregoing waiver to be rescinded pursuant to clause 2(ii) above. Any failure by Guarantor to so notify Agent shall be an immediate Event of Default without notice, grace, or cure rights. 4. Guarantor shall not at any time prior to September 20, 2001 make any payments in cash, whether by purchase, redemption or otherwise, in respect of its Liquid Yield Option Notes due 2011 (the "LYONS") issued pursuant to the Indenture dated as of September 20, 1996 (the "Indenture") other than in connection with a Change in Control as provided in Section3.09 of the Indenture and paragraph 6 of the LYONS. Nothing herein shall be deemed or construed as a waiver of any rights or remedies available to the undersigned as a result of any other existing defaults or Events of Default (whether known or unknown) under the Lease or the Guarantee, nor shall such waiver be applicable as to any future failure by Guarantor to satisfy any and all requirements of the Guarantee. This waiver shall not be applicable to any failure of Guarantor to satisfy the Applicable Covenants in respect of any period other than the fiscal quarter ended July 29, 2000. In consideration of the foregoing waiver, Guarantor shall pay to Agent, on behalf of itself as a Purchaser and Instrument Holder and the other Purchasers and Instrument Holders, a fee in the amount of 10 basis points (.1%) times the aggregate outstanding balance of the Instruments held by each such Instrument Holder. Further, in the event the existing Instrument Holders have not been paid out by the Take Out Holder on or before September 12, 2000, Guarantor shall pay to Agent, on behalf of itself as Purchaser and Instrument Holder and the other Purchasers and Instrument Holders, an additional fee in the amount of fifteen basis points (0.15%) times the aggregate outstanding balance of the Instruments held by each such Instrument Holder. The Guaranty (as previously amended) shall remain unchanged and in full force and effect, and Guarantor and Lessor hereby ratify and confirm the terms thereof. Very truly yours, STATE STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as Trustee under Declaration of Trust, Lessor By: Donald E. Smith, Vice President ACKNOWLEDGED AND ACCEPTED: THE PEP BOYS - MANNY, MOE & JACK, as Guarantor and Lessee By:___________________________________ Name:________________________________ Title:_________________________________ THE PEP BOYS - MANNY, MOE & JACK OF CALIFORNIA, as Lessee By:___________________________________ Name:________________________________ Title:_________________________________ PEP BOYS - MANNY, MOE & JACK OF DELAWARE, INC., as Lessee By:___________________________________ Name:________________________________ Title:_________________________________ APPROVED: CITICORP LEASING, INC., Agent By:___________________________________ Virginia S. Clark, Vice President EX-11 5 0005.txt THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES Exhibit 11 COMPUTATION OF NET EARNINGS PER SHARE (in thousands, except per share data) (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------- Thirteen weeks ended Twenty-six weeks ended ---------------------------------- ---------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 -------------- -------------- -------------- -------------- (a) Net earnings..................................... $ 3,409 $20,065 $ 7,816 $30,158 Adjustment for interest on 4% convertible subordinated notes, net of income tax effect... - 403 - 866 Adjustment for interest on zero coupon convertible subordinated notes, net of income tax effect... - 1,060 - - - --------------------------------------------------------------------------------------------------------------------------------- (b) Adjusted net earnings $ 3,409 $21,528 $ 7,816 $31,024 - --------------------------------------------------------------------------------------------------------------------------------- (c) Average number of common shares outstanding during the period.............................. 51,055 50,420 51,026 50,466 Common shares assumed issued upon conversion of 4% convertible subordinated notes.............. - 1,525 - 1,644 Common shares assumed issued upon conversion of zero coupon convertible subordinated notes..... - 3,513 - - Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price........ 20 380 12 316 - --------------------------------------------------------------------------------------------------------------------------------- (d) Average number of common shares assumed outstanding during the period.................. 51,075 55,838 51,038 52,426 - --------------------------------------------------------------------------------------------------------------------------------- Basic Earnings per Share: Before Extraordinary Gain (a/c).................. $ .07 $ .40 $ .15 $ .60 Extraordinary Gain............................... .02 - .06 - - ---------------------------------------------------------------------------------------------------------------------------------- Basic Earnings per Share: $ .09 $ .40 $ .21 $ .60 - ---------------------------------------------------------------------------------------------------------------------------------- Diluted Earnings per Share: Before Extraordinary Gain (b/d).................. $ .07 $ .39 $ .15 $ .59 Extraordinary Gain............................... .02 - .06 - - ---------------------------------------------------------------------------------------------------------------------------------- Diluted Earnings per Share: $ .09 $ .39 $ .21 $ .59 - ----------------------------------------------------------------------------------------------------------------------------------
EX-27 6 0006.txt ART 5. FDS FOR 2ND QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF JULY 29, 2000 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWENTY-SIX WEEK PERIOD ENDED JULY 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS FEB-03-2001 JUL-29-2000 14,261 0 19,535 743 605,996 713,225 1,944,831 626,818 2,047,963 521,199 781,911 0 0 63,911 598,978 2,047,963 1,014,483 1,248,696 737,653 931,258 0 0 26,906 12,213 4,397 7,816 0 3,007 0 10,823 .21 .21 -----END PRIVACY-ENHANCED MESSAGE-----