-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VoT3FOYo/bizks0AkOzrT44Pktd+Jtx/jRa9+U0z4/VG5p7qBvUM+JWUTii7py0A H+2qJ95TcJMOtc48ysTb6g== 0000077449-94-000007.txt : 19940621 0000077449-94-000007.hdr.sgml : 19940621 ACCESSION NUMBER: 0000077449-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940614 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: 0203 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03381 FILM NUMBER: 94534220 BUSINESS ADDRESS: STREET 1: 3111 W ALLEGHENY AVE CITY: PHILADELPHIA STATE: PA ZIP: 19132 BUSINESS PHONE: 2152299000 10-Q 1 FORM 10-Q - 1ST QTR 1994 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 April 30, 1994 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) 215-229-9000 ---------------------------------------------------- (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 April 30, 1994 there were 61,187,166 shares of the registrant's Common Stock outstanding. 2 - - ------------------------------------------------------------------- Index Page - - ------------------------------------------------------------------- PART I - FINANCIAL INFORMATION - - ------------------------------ Item 1. Condensed Consolidated Financial Statements (Unaudited) Consolidated Balance Sheets - April 30, 1994 and January 29, 1994 3 Consolidated Statements of Earnings - Thirteen weeks ended April 30, 1994 and May 1, 1993 4 Condensed Consolidated Statements of Cash Flows - Thirteen weeks ended April 30, 1994 and May 1, 1993 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II - OTHER INFORMATION 10 - - --------------------------- SIGNATURE 11 - - ------------------------------------------------------------------- 3 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands, except per share amounts)
Apr. 30, 1994 Jan. 29, 1994* ------------- -------------- (Unaudited) ASSETS Current Assets: Cash....................................................... $ 16,106 $ 12,050 Accounts receivable, net................................... 1,969 1,525 Merchandise inventories.................................... 362,969 305,872 Deferred income taxes...................................... 10,058 9,100 Other...................................................... 7,712 13,161 ------------- ------------- Total Current Assets.................................... 398,814 341,708 Property and Equipment-at cost Land....................................................... 193,292 183,601 Building and improvements.................................. 506,621 500,467 Furniture, fixtures and equipment.......................... 233,087 229,730 Construction in progress................................... 19,989 9,364 ------------ ------------- 952,989 923,162 Less accumulated depreciation and amortization............. 210,099 199,710 ------------- ------------- Total Property and Equipment............................ 742,890 723,452 Other........................................................ 13,911 13,358 ------------- ------------- Total Assets.................................................. $1,155,615 $1,078,518 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Checks outstanding......................................... $ 30,572 $ 22,193 Accounts payable........................................... 106,145 104,248 Accrued expenses........................................... 71,721 59,574 Short-term borrowings...................................... 94,600 54,500 Income taxes payable....................................... 10,991 1,278 Current maturities of long-term debt....................... 7,317 7,397 ------------- ------------- Total Current Liabilities............................... 321,346 249,190 Long-Term Debt, less current maturities...................... 272,956 253,000 Deferred Income Taxes........................................ 28,569 28,569 Commitments Stockholders' Equity: Common Stock, par value $1 per share: Authorized 500,000,000 shares - Issued and outstanding 61,187,166 and 61,060,055..................... 61,187 61,060 Additional paid-in capital................................. 124,523 122,977 Retained earnings.......................................... 399,398 388,653 ------------- ------------ 585,108 572,690 Less: Treasury Stock, 948,200 shares at cost................... - 24,931 Shares held in benefits trust, 1,965,200 shares at cost.. 52,364 - ------------- ------------ Total Stockholders' Equity.............................. 532,744 547,759 ------------- ------------ Total Liabilities and Stockholders' Equity.................... $1,155,615 $1,078,518 ============= ============ See notes to condensed consolidated financial statements. *Taken from the audited financial statements at Jan. 29, 1994.
4 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (dollar amounts in thousands, except per share amounts) UNAUDITED
Thirteen weeks ended ------------------------------- Apr. 30, 1994 May 1, 1993 ------------- --------------- Merchandise Sales.................................... $290,826 $260,452 Service Revenue...................................... 46,874 38,695 ------------- ------------- Total Revenues....................................... 337,700 299,147 Costs of Merchandise Sales........................... 208,223 191,547 Costs of Service Revenue............................. 38,950 32,811 ------------- ------------- Total Costs of Revenues.............................. 247,173 224,358 Gross Profit from Merchandise Sales.................. 82,603 68,905 Gross Profit from Service Revenue.................... 7,924 5,884 ------------- ------------- Total Gross Profit................................... 90,527 74,789 Selling, General and Administrative Expenses......... 57,926 49,696 ------------- ------------- Operating Profit..................................... 32,601 25,093 Nonoperating Income.................................. 1,099 1,088 Interest Expense..................................... 5,720 5,012 ------------- ------------- Earnings Before Income Taxes and Cumulative Effect of Change in Accounting Principle............ 27,980 21,169 Income Taxes......................................... 10,423 7,727 ------------- ------------- Earnings Before Cumulative Effect of Change in Accounting Principle................................ 17,557 13,442 Cumulative Effect of Change in Accounting Principle.. (4,300) - ------------ ------------- Net Earnings......................................... 13,257 13,442 Retained Earnings, beginning of year................. 388,653 332,261 Cash Dividends....................................... 2,512 2,277 ------------ ------------- Retained Earnings, end of period..................... $399,398 $343,426 ============ ============= Earnings per Share Before Cumulative Effect of Change in Accounting Principle................... $ .29 $ .22 Cumulative Effect of Change in Accounting Principle.. (.07) - ------------ ------------- Net Earning per Share................................ $ .22 $ .22 ============ ============= Cash Dividends per Share............................. $ .0425 $ .0375 ============ ============= See notes to condensed consolidated financial statements.
5 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollar amounts in thousands) UNAUDITED
Thirteen weeks ended --------------------------------- Apr. 30, 1994 May 1, 1993 ------------- ------------- Net Cash Provided by (Used in) Operating Activities............. $ 3,150 $(17,357) Cash Flows from Investing Activities: Capital expenditures............................................ (30,032) (19,018) Other, net...................................................... 25 66 ------------ ------------ Net Cash Used in Investing Activities........................... (30,007) (18,952) Cash Flows from Financing Activities: Net borrowings under line of credit agreements.................. 60,100 44,000 Reduction of long-term debt..................................... (124) (4,059) Dividends paid.................................................. (2,512) (2,277) Acquisition of treasury stock................................... (28,339) - Proceeds from exercise of stock options and dividend reinvestment plan................................ 1,788 864 ------------ ----------- Net Cash Provided by Financing Activities....................... 30,913 38,528 ------------ ----------- Net Increase in Cash................................................. 4,056 2,219 Cash at Beginning of Year............................................ 12,050 11,644 ------------ ----------- Cash at End of Period................................................ $ 16,106 $ 13,863 ============ =========== See notes to condensed consolidated financial statements.
6 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 April 30, 1994, the consolidated statements of earnings for the thirteen week periods ended April 30, 1994 and May 1, 1993 and the condensed consolidated statements of cash flows for the thirteen week periods ended April 30, 1994 and May 1, 1993 have been prepared by the Company without audit. In the opinion of management, all adjustments (which included only normal recurring adjustments as well as the accounting change referred to in Note 3 below) necessary to present fairly the financial position, results of operations and cash flows at April 30, 1994 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 January 29, 1994 annual report to shareholders. The results of operations for the thirteen week period ended April 30, 1994 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 $15,852,000 and $15,452,000 higher at April 30, 1994 and January 29, 1994, respectively. NOTE 3. Postemployment Benefits On January 30, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This statement establishes accrual accounting standards for employer-provided benefits which cover former or inactive employees after employment, but before retirement. Adoption of this accounting standard on January 30, 1994 resulted in a one-time charge to earnings of $4,300,000 (net of income tax benefit of $2,552,000) or $.07 per share recognized as a cumulative effect of a change in accounting principle. NOTE 4. Employee Benefits Trust On April 29, 1994, the Company established a flexible employee benefits trust to fund a portion of its obligations arising from various employee compensation and benefit plans. The Company has authorization to purchase Common Stock having a value of up to $75,000,000 for sale to the trust. As of April 30, 1994, the Company sold 1,965,200 shares of Common Stock, having a value of $52,364,000, which it had repurchased in the open market, to the trust in exchange for a promissory note payable to the Company. 7 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIRTEEN WEEKS ENDED APRIL 30, 1994 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 April 30, 1994 May 1, 1993 Fiscal 1994 vs. (Fiscal 1994) (Fiscal 1993) Fiscal 1993 - - ------------------------------------------------------ -------------- ------------- ----------------- Merchandise Sales..................................... 86.1% 87.1% 11.7% Service Revenue (1)................................... 13.9 12.9 21.1 ------ ------ ------ Total Revenues........................................ 100.0 100.0 12.9 Costs of Merchandise Sales (2)........................ 71.6 (3) 73.5 (3) 8.7 Costs of Service Revenue (2).......................... 83.1 (3) 84.8 (3) 18.7 ------ ------ ------ Total Costs of Revenues............................... 73.2 75.0 10.2 Gross Profit from Merchandise Sales................... 28.4 (3) 26.5 (3) 19.9 Gross Profit from Service Revenue..................... 16.9 (3) 15.2 (3) 34.7 ------ ------ ------ Total Gross Profit.................................... 26.8 25.0 21.0 Selling, General and Administrative Expenses.......... 17.1 16.6 16.6 ------ ------ ------ Operating Profit...................................... 9.7 8.4 29.9 Nonoperating Income................................... .3 .4 1.0 Interest Expense...................................... 1.7 1.7 14.1 ------ ------ ------ Earnings Before Income Taxes and Cumulative Effect of Change in Accounting Principle.................... 8.3 7.1 32.2 Income Taxes.......................................... 37.3 (4) 36.5 (4) 34.9 ------ ------ ------ Earnings Before Cumulative Effect of Change in Accounting Principle.................... 5.2 4.5 30.6 Cumulative Effect of Change in Accounting Principle... (1.3) - - ------ ------ ------ Net Earnings.......................................... 3.9 4.5 (1.4) ====== ====== ====== (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 April 30, 1994 vs. Thirteen Weeks Ended May 1, 1993 - - ------------------------------------------------------------------------ Total revenues for the first quarter increased 13% due to a higher store count (387 at April 30, 1994 compared with 359 at May 1, 1993) coupled with a 6% increase in comparable store revenues (revenues generated by stores in operation during the same months of each period). Comparable store merchandise sales increased 5% while comparable service revenue increased 11%. Gross profit from merchandise sales increased, as a percentage of merchandise sales, due primarily to higher merchandise margins offset, in part, by an increase in store occupancy costs. Gross profit from service revenue increased, as a percentage of service revenue, due primarily to a decrease in service center occupancy costs. Selling, general and administrative expenses increased, as a percentage of total revenues, due primarily to higher media costs and a slight increase in store expenses. Nonoperating income consisted of the following: (in thousands)
1994 1993 ------ ------ Rental revenue $ 328 $ 241 Investment income 474 22 Other income 297 448 Net gain on disposal of assets - 377 ------ ------ Total $1,099 $1,088 ====== ======
The increase in income taxes, as a percentage of earnings before income taxes, was due primarily to a 1% increase in the federal statutory tax rate from 34% to 35%. The 31% increase in earnings before the cumulative effect of a change in accounting principle in 1994 as compared with 1993, was due primarily to an increase in gross profit from merchandise sales, as a percentage of merchandise sales, offset, in part, by an increase in selling, general and administrative expenses, as a percentage of total revenues. On January 30, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This statement establishes accrual accounting standards for employer-provided benefits which cover former or inactive employees after employment, but before retirement. Adoption of this accounting standard on January 30, 1994 resulted in a one-time charge to earnings of $4,300,000 (net of income tax benefit of $2,552,000) or $.07 per share recognized as a cumulative effect of a change in accounting principle. 9 LIQUIDITY AND CAPITAL RESOURCES - April 30, 1994 - - ---------------------------------------------- The Company's cash requirements arise principally from the need to finance the acquisition, construction and equipping of new stores and the purchase of inventory. During the first quarter of 1994, the Company invested $30,032,000 in property and equipment while inventory increased $57,097,000. Working capital decreased from $92,518,000 at January 29, 1994 to $77,468,000 at April 30, 1994. At April 30, 1994 the Company had stockholders' equity of $532,744,000 and long-term debt of $272,956,000. The Company's long-term debt was 34% of its total capitalization at April 30, 1994. The Company plans to open approximately 48 new stores during the balance of the current fiscal year. Management estimates that the cost of this expansion, coupled with expenditures in existing stores, warehouses and offices will be approximately $125,000,000. In addition to the funds required to finance the Company's store expansion, the Company has authorization to purchase up to $75,000,000 of Common Stock for sale to an employee benefits trust, of which Common Stock having a value of $52,364,000 had been repurchased as of April 30, 1994. Funds required to finance the store expansion including related inventory requirements and stock repurchase are expected to come primarily from operating activities with the remainder provided by unused lines of credit which totalled $104,400,000 at April 30, 1994, or from accessing traditional lending sources such as the public capital markets. 10 PART II - OTHER INFORMATION - - --------------------------- Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (11) Statement Re: Computation of Earnings Per Share (b) On May 6, 1994, the Company filed a Form 8-K, dated April 29, 1994, reporting, under Item 5 thereof, the establishment of a flexible trust for the benefit of various existing employee compensation and benefit plans of the Company. 11 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: June 14, 1994 By: \s\ Michael J. Holden ----------------------- ------------------------- Michael J. Holden Senior Vice President & Chief Financial Officer and Treasurer 12 INDEX TO EXHIBITS - - ----------------- (11) Computations of Earnings Per Share EX-11 2 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES Exhibit 11 COMPUTATION OF EARNINGS PER SHARE (in thousands, except per share data)
Thirteen weeks ended ---------------------------------- April 30, 1994 May 1, 1993 -------------- -------------- (a) Earnings Before Cumulative Effect of Change in Accounting Principle.............. $17,557 $13,442 (b) Cumulative Effect of Change in Accounting Principle........................... (4,300) - ------------- -------------- (c) Net Earnings..................................... $13,257 $13,442 ============= ============== Average number of Common Shares outstanding during the period.............................. 59,242 60,707 Common Shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price, using the treasury stock method (1)............ 1,245 1,192 ------------- ------------- (d) Average number of Common Shares assumed outstanding during the period.................. 60,487 61,899 ============= ============= Earnings per Share Before Cumulative Effect of Change in Accounting Principle (a/d)........ $ .29 $ .22 Cumulative Effect of Change in Accounting Principle (b/d)................................ (.07) - ------------ ------------- Net Earnings per Share (c/d)..................... $ .22 $ .22 ============ ============= (1) The number of Common Shares assumed issued upon exercise of dilutive stock options is essentially the same for fully diluted earnings per share.
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