-----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, KTRZC9fop2lHFYnPiy1JI7l7MNYWJ1fGVR3/Hu1slDdKq3TigbjDp23Tq87rNeAJ J97RWKjzDNq5ayea7phf2w== 0000077449-99-000010.txt : 19990615 0000077449-99-000010.hdr.sgml : 19990615 ACCESSION NUMBER: 0000077449-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990501 FILED AS OF DATE: 19990614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEP BOYS MANNY MOE & JACK CENTRAL INDEX KEY: 0000077449 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [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: 99645483 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 1999 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 May 1, 1999 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 May 1, 1999 there were 52,607,972 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 - May 1, 1999 and January 30, 1999 3 Consolidated Statements of Earnings - Thirteen weeks ended May 1, 1999 and May 2, 1998 4 Condensed Consolidated Statements of Cash Flows - Thirteen weeks ended May 1, 1999 and May 2, 1998 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 PART II - OTHER INFORMATION 13 - --------------------------- SIGNATURE 14 2 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands, except per share amounts)
May 1, 1999 Jan. 30, 1999* ------------- ------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents.................................. $ 30,395 $ 114,548 Accounts receivable, net................................... 21,165 17,393 Merchandise inventories.................................... 526,434 527,397 Prepaid expenses........................................... 22,560 36,634 Deferred income taxes...................................... 17,073 17,073 Other...................................................... 38,530 41,099 ------------- ------------- Total Current Assets.................................... 656,157 754,144 Property and Equipment-at cost: Land....................................................... 285,826 281,804 Building and improvements.................................. 919,080 907,309 Furniture, fixtures and equipment.......................... 604,086 596,840 Construction in progress................................... 32,396 30,951 ------------ ------------- 1,841,388 1,816,904 Less accumulated depreciation and amortization............. 509,395 486,648 ------------- ------------- Total Property and Equipment............................ 1,331,993 1,330,256 Other........................................................ 12,354 11,712 ------------- ------------- Total Assets.................................................. $2,000,504 $2,096,112 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable........................................... $ 230,845 $ 240,391 Accrued expenses........................................... 211,864 199,551 Current maturities of convertible debt..................... 72,294 72,294 Current maturities of long-term debt....................... 173 170 ------------- ------------- Total Current Liabilities............................... 515,176 512,406 Long-Term Debt, less current maturities...................... 602,806 526,851 Convertible Debt, less current maturities.................... 166,501 164,863 Deferred Income Taxes........................................ 80,208 80,208 Commitments and Contingencies Stockholders' Equity: Common Stock, par value $1 per share: Authorized 500,000,000 shares - Issued 63,884,670 and 63,847,640................................. 63,885 63,848 Additional paid-in capital................................. 176,397 175,940 Retained earnings.......................................... 642,600 636,475 Accumulated other comprehensive income..................... (4,210) (4,210) ------------- ------------ 878,672 872,053 Less: Cost of shares in treasury - 11,276,698 shares, at cost 183,595 - Cost of shares in benefits trust - 2,195,270 and 2,232,500 shares, at cost 59,264 60,269 ------------- ------------ Total Stockholders' Equity.............................. 635,813 811,784 ------------- ------------ Total Liabilities and Stockholders' Equity.................... $2,000,504 $2,096,112 ============= ============ See notes to condensed consolidated financial statements. *Taken from the audited financial statements at Jan. 30, 1999.
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 ------------------------------- May 1, 1999 May 2, 1998 ------------- ------------- Merchandise Sales.................................... $488,698 $483,636 Service Revenue...................................... 109,618 100,588 ------------- ------------- Total Revenues....................................... 598,316 584,224 Costs of Merchandise Sales........................... 349,173 349,977 Costs of Service Revenue............................. 87,116 79,865 ------------- ------------- Total Costs of Revenues.............................. 436,289 429,842 Gross Profit from Merchandise Sales.................. 139,525 133,659 Gross Profit from Service Revenue.................... 22,502 20,723 ------------- ------------- Total Gross Profit................................... 162,027 154,382 Selling, General and Administrative Expenses......... 132,987 126,239 ------------- ------------- Operating Profit..................................... 29,040 28,143 Nonoperating Income.................................. 308 84 Interest Expense..................................... 13,578 12,512 ------------- ------------- Earnings Before Income Taxes 15,770 15,715 Income Taxes......................................... 5,677 5,657 ------------- ------------- Net Earnings......................................... 10,093 10,058 Retained Earnings, beginning of period............... 636,475 647,505 Cash Dividends....................................... 3,558 3,999 Effect of Shares Repurchased from Benefits Trust..... 410 - ------------- ------------- Retained Earnings, end of period..................... $642,600 $653,564 ============= ============= Basic Earnings per Share............................. $ .20 $ .16 Diluted Earnings per Share........................... $ .20 $ .16 ============= ============= Cash Dividends per Share............................. $ .0675 $ .0650 ============= ============= See notes to condensed consolidated financial statements.
4 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollar amounts in thousands) UNAUDITED
Thirteen weeks ended ---------------------------------- May 1, 1999 May 2, 1998 -------------- -------------- Net Cash Provided by (Used in) Operating Activities............. $ 49,493 $(115,980) Cash Flows from Investing Activities: Capital expenditures............................................ (27,706) (52,541) Proceeds from sales of assets................................... 2,055 450 ------------- ------------- Net Cash Used in Investing Activities........................... (25,651) (52,091) Cash Flows from Financing Activities: Net borrowings under line of credit agreements.................. - 72,000 Net proceeds from issuance of notes............................. 76,000 99,429 Reduction of long-term debt..................................... (42) (39) Dividends paid.................................................. (3,558) (3,999) Purchase of treasury shares..................................... (180,889) - Proceeds from exercise of stock options and dividend reinvestment plan................................ 494 2,107 ------------- ------------- Net Cash (Used in) Provided by Financing Activities............. (107,995) 169,498 ------------- ------------- Net (Decrease) Increase in Cash...................................... (84,153) 1,427 Cash and Cash Equivalents at Beginning of Period..................... 114,548 10,811 ------------- ------------- Cash and Cash Equivalents at End of Period........................... $ 30,395 $ 12,238 ============= ============= 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 May 1, 1999, the consolidated statements of earnings for the thirteen week periods ended May 1, 1999 and May 2, 1998 and the condensed consolidated statements of cash flows for the thirteen week periods ended May 1, 1999 and May 2, 1998 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 May 1, 1999 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 30, 1999. The results of operations for the thirteen week period ended May 1, 1999 are not necessarily indicative of the operating results for the full year. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year's presentation. 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 $0 higher at both May 1, 1999 and January 30, 1999. 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 May 1, 1999 and January 30, 1999 consists of a minimum pension liability adjustment. There were no differences between net earnings and comprehensive income for the thirteen week periods ended May 1, 1999 and May 2, 1998. 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. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999, although early adoption is encouraged. The Company is still in the process of analyzing the impact of the adoption of this statement on its consolidated financial position and results of operations. NOTE 5. Dutch Auction Self-Tender Stock Repurchase On February 1, 1999, the Company repurchased 11,276,698 of its common shares outstanding pursuant to a Dutch Auction self-tender offer at a price of $16.00 per share. The repurchased shares included 1,276,698 common shares which were repurchased as a result of the Company exercising its option to purchase an additional 2% of its outstanding shares. Prior to the repurchase of the common shares, the Company had 63,847,640 shares outstanding, with 2,232,500 shares in a benefits trust, at January 30, 1999. As a result of the tender offer share repurchase, the Company had 52,570,942 shares outstanding, with 2,195,270 shares in the benefits trust, at February 1, 1999. Expenses related to the share repurchase were approximately $3,168,000 and were included as part of the cost of the shares acquired. 6 The Company financed the tender offer share repurchase with $110,427,000 in cash and with the $70,000,000 proceeds received in connection with a private placement of Senior Notes on February 1, 1999. The Senior Notes were issued in two series at par, and pay interest semiannually on January 31, and July 31, commencing July 31, 1999. Series A Senior Notes, with an aggregate principal balance of $25,000,000, will mature in 2009 and bear interest at 7.80% per annum. Series B Senior Notes, with an aggregate principal balance of $45,000,000, will mature in 2011 and bear interest at 7.95% per annum. In addition, the interest rates on the Senior Notes are subject to a .50% increase for such time as the credit rating of the Company's long-term unsecured debt securities decreases below investment grade as rated by both Moody's and Standard & Poor's. NOTE 6. Net Earnings Per Share
Thirteen weeks ended (in thousands, except per share data) ---------------------------------- May 1, 1999 May 2, 1998 -------------- -------------- (a) Net earnings..................................... $10,093 $10,058 Adjustment for interest on 4% convertible subordinated notes, net of income tax effect... - - Adjustment for interest on zero coupon convertible subordinated notes, net of income tax effect... - - - ------------------------------------------------------------------------------------------- (b) Adjusted net earnings $10,093 $10,058 - ------------------------------------------------------------------------------------------- (c) Average number of common shares outstanding during the period.............................. 50,511 61,470 Common shares assumed issued upon conversion of 4% convertible subordinated notes.............. - - Common shares assumed issued upon conversion of zero coupon convertible subordinated notes..... - - Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price........ 252 306 - ------------------------------------------------------------------------------------------- (d) Average number of common shares assumed outstanding during the period.................. 50,763 61,776 - ------------------------------------------------------------------------------------------- Basic Earnings per Share (a/c)................... $ .20 $ .16 Diluted Earnings per Share (b/d)................. $ .20 $ .16 - -------------------------------------------------------------------------------------------
Adjustments for convertible securities were antidilutive during the thirteen week periods ended May 1, 1999 and May 2, 1998 and therefore excluded from the computation of diluted EPS; however, these securities could potentially be dilutive in the future. Options to purchase 3,565,257 and 2,147,042 shares of common stock were outstanding at May 1, 1999 and May 2, 1998, respectively, but 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. 7 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES 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 May 1, 1999 May 2, 1998 Fiscal 1999 vs. (Fiscal 1999) (Fiscal 1998) Fiscal 1998 - ------------------------------------------------------ -------------- -------------- ----------------- Merchandise Sales..................................... 81.7% 82.8% 1.1% Service Revenue (1)................................... 18.3 17.2 9.0 ------ ------ ------ Total Revenues........................................ 100.0 100.0 2.4 Costs of Merchandise Sales (2)........................ 71.4 (3) 72.4 (3) (.2) Costs of Service Revenue (2).......................... 79.5 (3) 79.4 (3) 9.1 ------ ------ ------ Total Costs of Revenues............................... 72.9 73.6 1.5 Gross Profit from Merchandise Sales................... 28.6 (3) 27.6 (3) 4.4 Gross Profit from Service Revenue..................... 20.5 (3) 20.6 (3) 8.6 ------ ------ ------ Total Gross Profit.................................... 27.1 26.4 5.0 Selling, General and Administrative Expenses.......... 22.2 21.6 5.4 ------ ------ ------ Operating Profit...................................... 4.9 4.8 3.2 Nonoperating Income................................... .1 - 266.7 Interest Expense...................................... 2.3 2.1 8.5 ------ ------ ------ Earnings Before Income Taxes.......................... 2.7 2.7 .4 Income Taxes.......................................... 36.0 (4) 36.0 (4) .4 ------ ------ ------ Net Earnings.......................................... 1.7 1.7 .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 May 1, 1999 vs. Thirteen Weeks Ended May 2, 1998 - ------------------------------------------------------------------------ Total revenues for the first quarter increased 2.4% despite a lower store count (645 at May 1, 1999 compared with 709 at May 2, 1998). Comparable store revenues (revenues generated by stores in operation during the same months of each period) increased 6.0% in 1999. Comparable store merchandise sales increased 6.3% while comparable service revenue increased 4.5%. Gross profit from merchandise sales increased, as a percentage of merchandise sales, due primarily to slightly higher merchandise margins coupled with decreases in store occupancy costs and warehousing costs. Selling, general and administrative expenses increased, as a percentage of total revenues, due primarily to an increase in store and general office expenses offset, in part, by a decrease in media costs. Nonoperating income consisted of the following: (in thousands)
1999 1998 ------ ------ Net rental revenue $ 176 $ 37 Investment income 132 54 Other income - (7) ------ ------ Total $ 308 $ 84 ====== ======
Net earnings remained relatively stable, as a percentage of total revenues, due primarily to an increase in gross profit from merchandise sales, as a percentage of merchandise sales, offset by higher selling, general and administrative expenses, as a percentage of total revenues. 9 LIQUIDITY AND CAPITAL RESOURCES - May 1, 1999 - ---------------------------------------------- The Company's cash requirements arise principally from the need to finance the acquisition, construction and equipping of new stores and to purchase inventory. During the first quarter of 1999, the Company invested $27,706,000 in property and equipment while net inventory (net inventory includes the decrease in inventory less the change in accounts payable) increased $8,583,000. Working capital decreased from $241,738,000 at January 30, 1999 to $140,981,000 at May 1, 1999. At May 1, 1999, the Company had stockholders' equity of $635,813,000 and long-term debt of $769,307,000. The Company's long-term debt was 55% of its total capitalization at May 1, 1999 and 46% at January 30, 1999. As of May 1, 1999, the Company had available lines of credit totaling $270,000,000. On February 1, 1999, the Company repurchased 11,276,698 of its common shares outstanding. The Company financed the share repurchase with $110,427,000 in cash and with the $70,000,000 proceeds received in connection with a private placement of Senior Notes issued on February 1, 1999. The Senior Notes were issued in two series at par and pay interest semiannually on January 31 and July 31, commencing July 31, 1999. Series A Senior Notes, with an aggregate principal balance of $25,000,000, will mature in 2009 and bear interest at 7.80% per annum. Series B Senior Notes, with an aggregate principal balance of $45,000,000, will mature in 2011 and bear interest at 7.95% per annum. In addition, the interest rates on the Senior Notes are subject to a .50% increase for such time as the credit rating of the Company's long-term unsecured debt securities decreases below investment grade as rated by both Moody's and Standard & Poor's. The Company plans to open approximately 18 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 $98,000,000. In addition, the Company has additional cash requirements to repay its debt maturities totaling $72,422,000, of which $72,294,000 relates to Convertible Subordinated Notes due in September 1999. Funds required to finance the store expansion including related inventory requirements and to repay its debt maturities are expected to come primarily from operating activities. The Company was not in compliance with a financial covenant included in certain of its credit facilities as of May 1, 1999. The Company has obtained waivers for the event of non-compliance from the lenders. NEW ACCOUNTING STANDARDS - ------------------------ In June 1998, the 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. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999, although early adoption is encouraged. The Company is still in the process of analyzing the impact of the adoption of this statement on its consolidated financial position and results of operations. 10 INFORMATION SYSTEMS AND THE YEAR 2000 - ------------------------------------- During 1997, the Company initiated a project to assess the impact of Year 2000 issues on a corporate-wide basis. A Year 2000 Project Director, reporting directly to the Chief Information Officer, was assigned to lead the project and, in conjunction with senior management of the Company, has formulated a project plan to address Year 2000 compliance issues. The Project Director monitors and coordinates the project plan through regular meetings with operational managers who execute the specifics of the project plan. The Project Director regularly updates senior management, including the Company's Chief Financial Officer. In addition, the Board of Directors is periodically updated by the Company's senior management. The project plan is comprehensive and focuses on both information technology (IT) systems and non-IT systems. Execution of the project plan has been divided into five key phases: inventory, assessment, remediation, testing, and implementation. The Company is utilizing both internal and external resources to complete its Year 2000 project plan initiatives. IT systems include the Company's application software, both proprietary and third party, as well as the hardware infrastructure. Specifically, this includes all software and related hardware for the Company's systems, namely: mainframe, store, personal computer, local area network, and data communication. The inventory and assessment phases for the IT systems are substantially complete. Although the IT systems are currently in various stages of remediation, testing and implementation, the Company estimates that approximately 65% of its IT systems are currently Year 2000 compliant. The Company currently expects to substantially complete these processes with respect to its IT systems by mid-1999. The non-IT systems include equipment and systems that contain embedded computer chips, such as energy management, HVAC, telephone and the Company's service center equipment, which specifically includes its engine diagnostic, wheel alignment and emission testing equipment. The inventory and assessment phases for the non-IT systems are substantially complete. The Company currently expects to have substantially all of its non-IT systems Year 2000 compliant by October 1999. The Company's critical third party vendor relationships (other than those relating to IT and non-IT systems), such as relationships with critical merchandise, transportation, utility, financial institutions and other general service providers, are currently being reviewed for Year 2000 compliance. The Company will use the information obtained in its review of third party vendor relationships in its contingency plan development. The Company is in the process of developing contingency plans. These plans will identify what actions would need to be taken if a critical system or third party service provider were not Year 2000 compliant. The Company expects such plans to be completed by October 1999. 11 Although the Company is making significant progress to ensure that its systems and facilities are Year 2000 compliant, the ability of third party service providers, merchandise vendors and certain other third parties, including communications and utility companies, to be Year 2000 compliant is beyond the Company's control. Therefore, the Company can offer no assurances that the systems of other entities on which the Company's systems may rely will be modified to be Year 2000 compliant or, if so modified, will be compatible with the Company's systems. The failure of these entities to achieve Year 2000 compliance on a timely basis could have a material adverse effect on the Company. At this time, the Company does not expect any Year 2000 issues to materially affect its operations, merchandise sales, service revenues, competitive position or financial performance. The Company estimates that total costs associated with the Year 2000 effort will range from approximately $9,000,000 to $13,000,000, of which approximately $6,400,000 has been incurred through May 1, 1999. The Company's Year 2000 costs have been and are expected to be funded out of cash flows from operating activities. The foregoing statements as to costs and dates relating to the Year 2000 effort are forward-looking and as a result involve risks and uncertainties. They are based on the Company's best estimates which may be updated as additional information becomes available. The Company's forward-looking statements are also based on assumptions about many important factors, including the technical skills of employees and independent contractors, the representations and preparedness of third parties, the failure of vendors to deliver merchandise or perform services required by the Company and the collateral effects of Year 2000 issues on the Company's business partners and customers. While the Company believes its assumptions are reasonable, it cautions that it is impossible to predict the impact of certain factors that could cause actual costs or timetables to differ materially from the expected results. FORWARD LOOKING STATEMENTS - -------------------------- Certain statements made herein are forward-looking which 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 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, product costs, and the ability to enhance the profitability of the commercial delivery program. 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 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 (10.49) Amendments to The Pep Boys Savings Plan (10.50) Amendments to The Pep Boys Savings Plan - Puerto Rico (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. 13 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, 1999 By: /s/ Michael J. Holden ----------------------- ------------------------- Michael J. Holden Executive Vice President & Chief Financial Officer 14 INDEX TO EXHIBITS - ----------------- (10.49) Amendments to The Pep Boys Savings Plan (10.50) Amendments to The Pep Boys Savings Plan - Puerto Rico (11) Computations of Earnings Per Share (27) Financial Data Schedule EX-10.49 2 Exhibit 10.49 Amendments to The Pep Boys Savings Plan 1. The Introduction to the Plan is hereby amended to read as follows: The Pep Boys Savings Plan was established by The Pep Boys -- Manny, Moe & Jack, a Pennsylvania corporation, effective September 1, 1987, for the benefit of certain of its salaried and hourly employees and its Participating Employers, and their beneficiaries. It is to be maintained according to the terms of this instrument. The Committee has the authority to manage the administration of this Plan. The assets of this Plan are held in trust by the Trustee in accordance with the terms of the Trust Agreement, which is considered to be an integral part of this Plan. The Committee shall direct the Trustee as to the investment of the assets in the Trust Fund in accordance with the terms of the Plan and Trust. The Plan is intended to be a discretionary "profit sharing" plan as defined in Section 401(a)(27) of the Code. The Plan is hereby amended effective January 1, 1989 to reflect various provisions of the Tax Reform Act of 1986, as amended, and other legislation (or such earlier date as required by law). The effective date of any other changes to the Plan shall be as noted herein. The Plan is further amended effective January 1, 1997 or as of such later date noted in the Plan to comply with the provisions of The Small Business Job Protection Act of 1996 and the Tax Payer Relief Act of 1997. The rights of those individuals (or their beneficiaries) who terminated employment prior to the effective date of any changes to the Plan, are governed by the terms and conditions of the Plan then in effect. 2. Section 2.1 of the Plan is hereby amended to add the following new definition of "Administrative Delegate" to read as follows: Administrative Delegate means one or more persons or institutions to which the Committee has delegated certain administration functions pursuant to a written agreement. 1 3."Section 2.1 of the Plan is further amended to add the following new definition of "Company Stock Fund" to read as follows and to change all references in the Plan to "Company Stock fund" to "Company Stock Fund": Company Stock Fund means a fund established by the Company for investment purposes which is comprised of Company Stock and a small amount of cash. 4. Section 2.1 of the Plan is further amended to change the definition of Highly Compensated Employee, to read as follows: Highly Compensated Employee, for plan years beginning prior to January 1, 1997, means the individuals described in (a) through (e): (a) Employees who were five percent owners, as defined in Section 416(i)(1)(iii) of the Code, at any time during the determination year or the look-back year; (b) Employees with compensation greater than $75,000 (as adjusted at the same time and in the same manner as Section 415(d) of the Code) during the look-back year; (c) Employees with compensation greater than $50,000 (as adjusted at the same time and in the same manner as Section 415(d) of the Code) during the look-back year and who are in the top-paid group for the look-back year; (d) Employees who are officers during the look-back year and who have compensation in the look-back year greater than 50% of the dollar limit in Section 415(b)(1)(A) of the Code; (e) Employees who are both described in paragraph (b), (c), or (d) above when these paragraphs are modified to substitute the determination year for the look-back year and one of the 100 Employees who receive the highest compensation from the Employer during the determination year. (f) The top-paid group shall consist of the top 20% of active Employees, ranked on the basis of compensation received from the Employer during the year excluding Employees with less than 6 months of service, part-time Employees (less than 17 1/2 hours per week or less than 6 months a year), Employees who are not yet age 21, and nonresident aliens without United States source income. These Employees shall not be excluded for purposes of identifying the particular Employees in the top-paid group. If the Plan being tested covers only non-collective bargaining Employees, and collective bargaining Employees constitute 90 percent or more of the Employer's Employees, then such collective bargaining Employees shall be excluded both from the total number of active Employees and the identification of particular Employees in the top-paid group. The top-paid group shall not include Employees who perform no service during the year. 2 (g) For purposes of determining whether an Employee is highly compensated, the determination year is the Plan Year for which the determination is being made. The look-back year is the twelve month period preceding the determination year. For Plan Years beginning prior to January 1, 1997, the Committee shall have the authority to change the look-back year to be the calendar year ending with or within the current Plan Year. If the Committee makes this election, it shall apply to all plans of the Employer and Affiliates. (h) The number of officers shall be limited to the lesser of (a) 50, or (b) the greater of 3 individuals or 10 percent of all Employees. If the Employer does not have at least one officer whose compensation is in excess of 150% of the limit in Section 415(c) of the Code, then the highest paid officer of the Employer shall be treated as a Highly Compensated Employee. (i) For purposes of defining Highly Compensated Employees, compensation means compensation as defined in Section 415(c)(3) of the Code, including elective contributions. The dollar limits are those for the calendar year in which the determination or look-back year begins. (j) The Plan shall take into account employees of all employers aggregated under Sections 414(b), (c), (m) and (o) of the Code, in determining who is highly compensated. Also, for this purpose, the term "Employee" shall include Leased Employees unless such Employees are covered under a safe-harbor plan of the leasing organization and not covered under a qualified plan of the employer. Notwithstanding the foregoing, the Employer, by action of the Committee, may elect for any Plan Year, to define Highly Compensated Employee by substituting $50,000 for $75,000 in Section 414(q)(1)(B) of the Code and by disregarding Section 414(q)(1)(C) of the Code. Highly Compensated Employees, for Plan Years beginning on or after January 1, 1997, means any individual described in (a) above and any Employee who had compensation in excess of $80,000 for the look-back year as defined in (g). The Company hereby elects to limit the group of Highly Compensated Employees with Compensation in excess of $80,000 (as indexed) to those who are in the top-paid group, as defined in (f), during the look-back year, as defined in (g) above. 3 The provisions of subsections (i) and (j) shall continue to apply. 5. Section 2.1 of the Plan is further amended to add the following new provisions to the end of the definition of "Valuation Date" to read as follows: Effective October 1, 1998, Valuation Date means any business day that the New York Stock Exchange is open for business and any other date chosen by the Committee. 6. Section 3.2 of the Plan is hereby amended to add the following new paragraph to the end thereof to read as follows: Effective October 1, 1998, an Eligible Participant who does not elect to make Pre-Tax Contributions to the Plan as of the first Entry Date that is coincident with or next following the date he has met the eligibility requirements of Section 3.1, may elect to commence to make Pre-Tax Contributions to the Plan, as soon as practicable following any subsequent payroll period. 7. Section 3.7 of the Plan is hereby amended to change the first paragraph to read as follows: Any Employee who transfers to the Employer from an Affiliate or who becomes an Eligible Employee eligible for participation in the Plan, shall be eligible to participate in the Plan and to make Pre-Tax Contributions to the Plan on the later of the first Entry Date coincident with or next following his satisfaction of the eligibility requirements of Section 3.1 or as soon as practicable following the next payroll period that he elects to contribute that is coincident with or next following his change in status. 8. Section 4.1(a)(i) of the Plan is hereby amended to add the following new sentence immediately following the first sentence to read as follows: Effective October 1, 1998, the foregoing limitation of twelve percent (12%) is increased to fifteen percent (15%). 9. Section 4.1(a)(i) of the Plan is further amended to insert "the date the Participant" immediately before, "elects to make" in the fourth sentence. 10. Section 4.1(b) of the Plan is hereby amended to add the following new sentence immediately following the first sentence to read as follows: Effective October 1, 1998, a Participant may change the amount of Pre-Tax Contributions he has authorized to have contributed to the Plan on his behalf as of any subsequent payroll period to be effective as soon as practicable thereafter. 4 11. Section 4.1(b) of the Plan is further amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, a Participant who has ceased making Pre-Tax Contributions may again authorize Pre-Tax Contributions to be made to the Plan on his behalf as of any subsequent payroll period to be effective as soon as practicable thereafter. 12. Section 4.1(c) of the Plan is hereby amended to add the following new sentence immediately following the first sentence in the second paragraph to read: Effective October 1, 1998, the Employer's contribution shall be equal to the lesser of (i) 50% of the Participant's Pre-Tax Contributions for the payroll period in which he contributed; or (ii) three percent (3%) of the Participant's Compensation for the payroll period. 13. Section 4.1(c) of the Plan is further amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the Matching Contribution shall be allocated once each Plan Year, but based on the Pre-Tax Contributions that are made in each payroll period by those Participants eligible to share in the allocation of the Matching Contribution. 14. Section 4.1(d) of the Plan is hereby amended to add the following new provision to the end of the last paragraph to read as follows: Effective October 1, 1998, the additional contribution shall be made in cash. The amount of the additional contribution to be allocated to each Eligible Participant's Matching Contribution Account shall be equal to $500.00 in cash, which amount shall be allocated immediately to the purchase of units on behalf of each such Eligible Participant in the Company Stock Fund. 15. Section 4.5 of the Plan is hereby amended and restated in its entirety to read: 4.5 Limitations on Pre-Tax Contributions. Effective January 1, 1997, the amount of Pre-Tax Contributions made in each Plan Year on behalf of all Eligible Participants under the Plan shall comply with either (a) or (b) and (c), if applicable, below. 5 (a) The average deferral percentage for the Highly Compensated Eligible Participants for the current Plan Year shall not exceed the average deferral percentage of all other Eligible Participants for the immediately preceding Plan Year multiplied by 125%; or (b) The average deferral percentage for Highly Compensated Eligible Participants for the current Plan Year shall not be greater than the average deferral percentage of all other Eligible Participants for the immediately preceding Plan Year multiplied by 200% and the excess of the average deferral percentage for Highly Compensated Eligible Participants for the current Plan Year over all other Eligible Participants for the immediately preceding Plan Year shall not exceed two percentage points. Compliance with (a) and (b) above, shall be determined in accordance with the rules set forth in Section 401(k)(3) of the Code and Treas. Reg. Section 1.401(k)-1(b), or any successors thereto. (c) Notwithstanding the foregoing, if this Section 4.5 and Section 4.7 are both satisfied by use of the limitation set forth in subsection (b) above, the average deferral percentages for the Highly Compensated Eligible Participants and the average contribution percentages for the Highly Compensated Eligible Participants, as defined in Section 4.7, also must satisfy the aggregate limit test set forth in Treas. Reg. 1.401(m)-2(b)(3). Notwithstanding any other provision of this Section 4.5, pursuant to IRS Notices 97-2 and 98-1, for the Plan Year commencing January 1, 1997 and for each successive Plan Year thereafter (unless and until changed by the Committee), the Committee hereby elects to perform the average deferral percentage test outlined above for the current Plan Year and not the preceding Plan Year, based on the average deferral percentage of all Eligible Participants who are not Highly Compensated Eligible Participants. The average deferral percentage shall equal the sum of the individual deferral percentages for Participants in the applicable Highly Compensated or Non-Highly Compensated Eligible Employee category, divided by the total number of Eligible Employees in such group. The individual deferral percentage shall be equal to the amount of the Participant's Pre-Tax Contributions for the Plan Year, divided by his Compensation for such Plan Year. 6 If the Committee determines, in its sole discretion, with respect to any Plan Year, that the Plan will (or may) fail (a), (b) or (c) above, the Committee shall take any action that it deems appropriate, including imposing a uniform limitation on Pre-Tax Contributions made by Highly Compensated Eligible Participants, for the Plan to satisfy (a), (b) or (c) above. If the amount of Pre-Tax Contributions authorized by Highly Compensated Eligible Participants in a Plan Year would not comply with either (a), (b) or (c) above, then by the last day of the following Plan Year, the Committee may determine that the Excess Contributions for such Plan Year (including any Income attributable to such contributions, as determined by the Committee) shall be distributed to the Highly Compensated Eligible Participant who authorized the highest dollar amount of Pre-Tax Contributions. The amount of Excess Contributions to be reduced shall be reduced by excess deferrals, as defined in Section 4.1(b), previously distributed for the taxable year ending in the same Plan Year. The Excess Contributions to be distributed shall equal the amount necessary so that such highest dollar amount of Pre-Tax Contributions is reduced to equal the next highest dollar amount of Pre-Tax Contributions (or a lesser amount if a lesser amount may be distributed in order to comply with (a) or (b) above) authorized by the Highly Compensated Eligible Participant with the next highest dollar amount of Pre-Tax Contributions. The foregoing steps shall be repeated until the total amount of Excess Contributions have been distributed. Recalculation of the average deferral percentage test following the distribution of Excess Contributions, shall not be required. Alternatively, the Committee may take such other actions as may be permissible under the Code to ensure the Plan's compliance with the requirements of Section 401(k) of the Code, including, without limitation the allocation of the Employer's contribution to some or all Eligible Participants who are not Highly Compensated Eligible Participants in accordance with Section 4.1(c). 16. Section 4.7 of the Plan is hereby amended and restated in its entirety to read: 4.7 Limitations on Matching Contributions. Effective January 1, 1997, the amount of Matching Contributions made in each Plan Year on behalf of all Eligible Participants under the Plan shall comply with either (a) or (b) and (c), if applicable, below. 7 (a) The average contribution percentage for the Highly Compensated Eligible Participants for the current Plan Year shall not exceed the average contribution percentage of all other Eligible Participants for the immediately preceding Plan Year multiplied by 125%; or (b) The average contribution percentage for Highly Compensated Eligible Participants for the current Plan Year shall not be greater than the average contribution percentage of all other Eligible Participants for the immediately preceding Plan Year multiplied by 200% and the excess of the average contribution percentage for Highly Compensated Eligible Participants for the current Plan Year over all other Eligible Participants for the immediately preceding Plan Year shall not exceed two percentage points. Compliance with (a) and (b) above, shall be determined in accordance with the rules set forth in Section 401(m)(2) of the Code and Treas. Reg. 1.401(m)-1(b), or any successors thereto. (c) Notwithstanding the foregoing, if this Section 4.7 and Section 4.5 are both satisfied by use of the limitation set forth in subsection (b) above, the average contribution percentages for the Highly Compensated Eligible Participants and the average deferral percentages for the Highly Compensated Eligible Participants, as defined in Section 4.5, also must satisfy the aggregate limit test set forth in Treas. Reg. 1.401(m)-2(b)(3). Notwithstanding any other provision of this Section 4.7, pursuant to IRS Notices 97-2 and 98-1, for the Plan Year commencing January 1, 1997 and for each successive Plan Year thereafter (unless and until changed by the Committee), the Committee hereby elects to perform the average contribution percentage test outlined above for the current Plan Year and not the preceding Plan Year, based on the average contribution percentage of all Eligible Participants who are not Highly Compensated Eligible Participants. The average contribution percentage shall equal the sum of the individual contribution percentages for Participants in the applicable Highly Compensated or Non-Highly Compensated Eligible Employee category, divided by the total number of Eligible Employees in such group. The individual contribution percentage shall be equal to the amount of the Participant's Matching Contributions for the Plan Year, divided by his Compensation for such Plan Year. 8 If the Committee determines, in its sole discretion, with respect to any Plan Year, that the Plan will (or may) fail (a), (b) or (c) above, the Committee shall take any action that it deems appropriate for the Plan to satisfy (a), (b) or (c) above. If the amount of Matching Contributions authorized by Highly Compensated Eligible Participants in a Plan Year would not comply with either (a), (b) or (c) above, then by the last day of the following Plan Year, the Committee may determine that the Excess Aggregate Contributions for such Plan Year (including any Income attributable to such contributions, as determined by the Committee) shall be distributed or forfeited (if otherwise not vested) on behalf of the Highly Compensated Eligible Participant who received the highest dollar amount of Matching Contributions. The Excess Aggregate Contributions to be distributed (or forfeited if otherwise not vested) shall equal the amount necessary so that such highest dollar amount of Matching Contributions is reduced to equal the next highest dollar amount of Matching Contributions (or a lesser amount if a lesser amount may be distributed in order to comply with (a), (b) or (c) above) authorized by the Highly Compensated Eligible Participant with the next highest dollar amount of Matching Contributions. The foregoing steps shall be repeated until the total amount of Excess Aggregate Contributions have been distributed. Recalculation of the average contribution percentage test following the distribution of Excess Aggregate Contributions, shall not be required. Alternatively, the Committee may take such other actions as may be permissible under the Code to ensure the Plan's compliance with the requirements of Section 401(m) of the Code, including, without limitation the allocation of the Employer's Discretionary QNEC to some or all Eligible Participants who are not Highly Compensated Eligible Participants in accordance with Section 4.1(d). 17. Section 4.12 of the Plan is hereby amended to read as follows: 4.12 In Writing Requirement. Notwithstanding any provision in this Plan to the contrary, salary reduction agreements and cancellations or amendments thereto, investment elections, changes or transfers, loans, withdrawal decisions, and any other decision or election by a Participant (or Beneficiary) under this Plan may be accomplished by electronic or telephonic means which are not otherwise prohibited by law and which are in accordance with procedures and/or systems approved or arranged by the Committee or its delegates. 9 18. Section 5.2(a) of the Plan is hereby amended to add the following new provisions to the end thereof to read as follows: Effective October 1, 1998, the Accounts of Participants, Former Participants and Beneficiaries shall be adjusted in accordance with the procedures that are set forth in Appendix C to the Plan, attached hereto. The Committee may, for administrative purposes, establish unit values for one or more investment fund(s) (or any portion thereof) and maintain the accounts setting forth each Participant's interest in such investment fund(s) (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as the Committee shall deem to be fair, equitable and administratively practicable. In the event that unit accounting is thus established for any investment fund (or any portion thereof) the value of a Participant's interest in that investment fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such investment fund (or any portion thereof) multiplied by the number of units then credited to the Participant. 19. Section 6.4(c) of the Plan is hereby amended to substitute, "the first day of the Calendar Quarter" for "the next Valuation Date" in the second sentence. 20. Section 6.4(f) of the Plan is hereby amended to change the last paragraph to read as follows: Distribution to a five percent owner, as described in the preceding sentence, or to a Terminated Participant, must continue to commence no later than April 1 of the calendar year following the calendar year in which he attained age 70 1/2. 21. Section 6.4(h) of the Plan is hereby amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the value of Company Stock or the value of other investment funds shall be determined as of the Valuation Date that the payment is processed. 22. Section 6.8(a) of the Plan is hereby amended to read as follows: (1) A Participant or Eligible Employee may elect to withdraw an amount equal to all or any part of his interest in his Rollover Account, including earnings, for any reason. 10 (2) Upon attainment of age 59 1/2, a Participant may elect to withdraw an amount equal to all or any portion of his interest in his Pre-Tax Contribution Account including earnings, for any reason, and (3) Upon attainment of age 70 1/2, a Participant may also elect to withdraw an amount equal to all or any portion of his interest in his Matching Contribution Account including earnings, for any reason. 23. Section 6.8(c)(1) of the Plan is hereby amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the amount available shall be determined as of the Valuation Date that the withdrawal is processed. 24. Section 6.8(c)(4) of the Plan is hereby amended to insert the following new sentence immediately following the second sentence to read: Effective October 1, 1998, a Participant may reenroll in the Plan as soon as practicable following the suspension period. 25. Section 6.9 of the Plan is hereby amended to change the first full paragraph to read as follows: 6.9 Loans to Participants. The Committee may direct the Trustee to lend a Participant or an Eligible Employee an amount not in excess of the lesser of (i) 50% of his vested Accounts, determined as of the most recently completed monthly valuation which as of October 1, 1998 shall be determined as of any Valuation Date (prior to October 1, 1998, the amount was determined as of the most recently completed Valuation); or (ii) $50,000 (reduced by the excess, if any, of the highest outstanding balances of all other loans from the Plan during the one-year period ending on the day before the loan was made over the outstanding balance of loans from the Plan on the date on which such loan was made). Notwithstanding the preceding sentence, the actual amount available for the loan to a Participant shall be 95% of the amount determined in accordance with the preceding sentence as of the Valuation Date that the Participant applied for the loan. A Participant may have only one loan outstanding at any time. Effective October 1, 1998, a Participant may have two loans outstanding at any time. Subject to the rules of the Committee set forth below, the Trustee, upon application by a Participant, may make a loan to such Participant for any reason. In addition to such rules as the Committee may adopt, all loans shall comply with the following terms and conditions: 11 26. Section 6.9(b) of the Plan is hereby amended to add the following new sentence immediately following the first sentence to read: Effective October 1, 1998, a Participant may have a loan for up to 30 years to purchase a dwelling unit which shall be used as the Participant's principal residence. 27. Section 6.9(b) of the Plan is further amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, a Participant may elect to prepay the balance of his loan at any time regardless of the number of repayments made. 28. Section 6.9(h) of the Plan is hereby amended to add the following new sentence to the end thereof to read as follows: Effective with respect to any Participant who Terminates employment or defaults on his loan on or after October 1, 1998, the Participant or Former Participant shall have the option to repay the loan in full within a reasonable time period determined by the Committee. A Former Participant shall not have the option to continue to repay the loan on an ongoing basis. If repayment is not made in full within the applicable time period, then there shall be distributed to the Former Participant (i) the promissory note; plus (ii) the value of his Accounts without regard to the amount of any outstanding loan (including any accrued interest thereon). 29. Section 6.9(i) of the Plan is hereby amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the amount charged against a Participant's Accounts shall be determined as of the Valuation Date that the loan is paid to the Participant. 30. Section 6.9 of the Plan is hereby amended to add the following new subsections (m) and (n) to the end thereof to read: (m) Effective October 1, 1998, a loan initiation fee shall be charged against the loan amount requested by the Participant. 12 (n) A Participant who takes an approved leave of absence may discontinue payments on a loan for the period of absence for up to 12 months. Upon return to employment, the Participant must repay the missed payments within the original loan term. 31. Section 7.2 of the Plan is hereby amended and restated in its entirety to read as follows: 7.2 Investment Directions by Participants. A Participant or Former Participant may direct the investment of amounts held under his Pre-Tax Contribution Account and Rollover Account in multiples of ten percent (10%) and in accordance with the terms, conditions and procedures established by the Committee. Effective October 1, 1998, investments of a Participant's or Former Participant's Pre-Tax Contribution Account and Rollover Account may be made in multiples of one percent (1%) or in specific dollar amounts. Notwithstanding Sections 5.2(a) and 8.4, all earnings and expenses, including commissions and transfer taxes, realized or incurred in connection with any investments pursuant to a Participant's or Former Participant's directions shall be credited or charged to the Participant's or Former Participant's Account for which the investment is made. A Participant or Former Participant who fails to designate an investment option for his Pre-Tax Contribution Account and Rollover Account shall be deemed to have elected to have such Accounts invested in the Stable Value Fund. If a Participant or Former Participant exercises his option to direct the investment of his Pre-Tax Contribution Account and Rollover Account, then to the extent permitted by ERISA no person who is otherwise a fiduciary under the Plan shall be liable under ERISA for any loss, or by reason of any breach which results from such Participant's exercise of such option. The funds available for this purpose shall include the Company Stock Fund and at least three other additional funds. A Participant may elect to change the investment (both future and existing contributions) of his Pre-Tax Contribution Account and Rollover Account effective as of the first day of any Calendar Quarter following written notification to the Committee (using the value of Accounts determined as of the last business day of the immediately preceding Calendar Quarter). (Prior to January 1, 1993, investment changes were as of any semi- annual Valuation Date.) Effective October 1, 1998, a Participant or Former Participant may elect to change the investment (both future and existing contributions) of his Pre-Tax Contribution Account and Rollover Account effective as of any Valuation Date. 32. Section 7.3(d) of the Plan is hereby amended to add the following new provisions to the end thereof to read: 13 Effective October 1, 1998, a Participant or Former Participant who has satisfied the age requirement for Early Retirement Date, may elect as of any Valuation Date, that all or any portion of the Participant's or Former Participant's Matching Contribution Account, allocated to him as of any Valuation Date, that is invested in Company Stock, be invested in any investment category available for investment. 33. Section 7.3(e) of the Plan is hereby amended to add the following new provisions to the end thereof to read: Pursuant to Section 4.1(c), a Participant must be employed on the last day of the Plan Year to share in the allocation of the Company's Matching Contribution for the applicable payroll period (or meet one of the exceptions noted in Section 4.1(c)). Effective September 30, 1998, the Company shall make the Company's Matching Contribution attributable to the first three Calendar Quarters of 1998 and for each payroll period thereafter, to the Company Stock Fund in cash. Each Participant shall be assigned a unit value in the Company Stock Fund as of September 30, 1998 in accordance with Section 5.2 of the Plan. The Company's Matching Contribution shall no longer be determined based on a specific number of shares and their corresponding value. The Company's Matching Contribution shall be applied immediately to purchase units on behalf of each such eligible Participant in the Company Stock Fund as of that Valuation Date. 34. Section 8.1 of the Plan is hereby amended to delete the fifth sentence in its entirety and to insert in lieu thereof the following new sentence: The Committee shall direct the Trustee as to the investment of the assets in the Trust Fund in accordance with the terms of the Plan and Trust. 35. Section 8.7 of the Plan is hereby amended to add the following new subsection (i) to read as follows: (i) to engage an Administrative Delegate who shall perform, without discretionary authority or control, administrative functions within the framework of policies, interpretations, rules, practices, and procedures made by the Committee. Any action made or taken by the Administrative Delegate may be appealed by an affected Participant to the Committee in accordance with the claims review procedures provided in Section 8.5. Any decisions which call for interpretations of Plan provisions not previously made by the Committee shall be made only by the Committee. The Administrative Delegate shall not be considered a fiduciary with respect to the services it provides. 14 36. Article IX of the Plan is hereby amended to add the following new Section 9.5 to the end thereof to read as follows: 9.5 Lost Participants. If, after reasonable efforts of the Committee to locate a Participant or Beneficiary, including sending a registered letter, returned receipt requested to the last known address, the Committee is unable to locate the Participant or Beneficiary, then the amounts distributable to such Participant or Beneficiary shall, pursuant to applicable state or Federal laws, either (1) be treated as a forfeiture under the Plan and used to reduce the Company's contribution to the Plan (if a Participant or Beneficiary is located subsequent to a forfeiture, the benefits shall be reinstated by the Committee and shall not count as an Annual Addition under Section 415 of the Code), or (2) if the Plan is joined as a party to any escheat proceedings involving the unclaimed benefits, be paid in accordance with the final judgment as if the final judgment were a claim filed by the Former Participant or Beneficiary. 37. The Plan is further amended to add the following new Appendix C to the end thereof to read as follows: Appendix C The Trustee shall, following the end of each Valuation Date, value all assets of the Trust Fund, allocate net gains or losses, and process additions to and withdrawals from Account balances in the following manner: 1. The Trustee shall first compute the fair market value of securities and/or the other assets comprising each investment fund designated by the Committee for direction of investment by the Participants and Former Participants of this Plan. Each Account balance shall be adjusted each business day by applying the closing market price of the investment fund on the current business day to the share/unit balance of the investment fund as of the close of business on the current business day. 15 2. The Trustee shall then account for any requests for additions or withdrawals made to or from a specific designated investment fund by any Participant or Former Participant, including allocations of contributions and forfeitures. In completing the valuation procedure described above, such adjustments in the amounts credited to such Accounts shall be made on the business day to which the investment activity relates. Contributions received by the Trustee pursuant to this Plan shall not be taken into account until the Valuation Date coinciding with or next following the date such contribution was both actually paid to the Trustee and allocated among the Accounts of Participants and Former Participants. 3. Notwithstanding paragraphs 1 and 2 above, in the event a pooled investment fund is created as a designated fund for Participant or Former Participant investment election in this Plan, valuation of the pooled investment fund and allocation of earnings of the pooled investment fund shall be governed by the Administrative Services Agreement for such pooled investment fund. It is intended that this section operate to distribute among each Participant Account in the Trust Fund, all income of the Trust Fund and changes in the value of the assets of the Trust Fund. 16 EX-10.50 3 Exhibit 10.50 Amendments to The Pep Boys Savings Plan -- Puerto Rico 1. The Introduction to the Plan is hereby amended to add the following new provisions to the end thereof to read as follows: The Plan is hereby amended effective January 1, 1997 or as of such later date noted in the Plan to comply with the provisions of The Small Business Job Protection Act of 1996 and the Tax Payer Relief Act of 1997. The rights of those individuals (or their beneficiaries) who terminated employment prior to the effective date of any changes to the Plan, are governed by the terms and conditions of the Plan then in effect. 2. Section 2.1 of the Plan is hereby amended to add the following new definition of "Administrative Delegate" to read as follows: Administrative Delegate means one or more persons or institutions to which the Committee has delegated certain administration functions pursuant to a written agreement. 3. Section 2.1 of the Plan is further amended to add the following new definition of "Company Stock Fund" to read as follows and to change all references in the Plan to "Company Stock fund" to "Company Stock Fund": Company Stock Fund means a fund established by the Company for investment purposes which is comprised of Company Stock and a small amount of cash. 4. Section 2.1 of the Plan is further amended to add the following new provisions to the end of the definition of "Valuation Date" to read as follows: Effective October 1, 1998, Valuation Date means any business day that the New York Stock Exchange is open for business and any other date chosen by the Committee. 5. Section 3.2 of the Plan is hereby amended to add the following new paragraph to the end thereof to read as follows: Effective October 1, 1998, an Eligible Participant who does not elect to make Pre-Tax Contributions to the Plan as of the first Entry Date that is coincident with or next following the date he has met the eligibility requirements of Section 3.1, may elect to commence to make Pre-Tax Contributions to the Plan, as soon as practicable following any subsequent payroll period. 6. Section 3.7 of the Plan is hereby amended to change the first paragraph to read as follows: 1 Any Employee who transfers to the Employer from an Affiliate including The Pep Boys -- Manny, Moe & Jack or who becomes an Eligible Employee eligible for participation in the Plan, shall be eligible to participate in the Plan and to make Pre-Tax Contributions to the Plan on the later of the first Entry Date coincident with or next following his satisfaction of the eligibility requirements of Section 3.1 or as soon as practicable following the next payroll period that he elects to contribute that is coincident with or next following his change in status. 7. Section 4.1(a)(i) of the Plan is hereby amended to insert "the date the Participant" immediately before, "elects to make" in the third sentence. 8. Section 4.1(b) of the Plan is hereby amended to add the following new sentence immediately following the first sentence to read as follows: Effective October 1, 1998, a Participant may change the amount of Pre-Tax Contributions he has authorized to have contributed to the Plan on his behalf as of any subsequent payroll period to be effective as soon as practicable thereafter.. 9. Section 4.1(b) of the Plan is further amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, a Participant who has ceased making Pre-Tax Contributions may again authorize Pre-Tax Contributions to be made to the Plan on his behalf as of any subsequent payroll period to be effective as soon as practicable thereafter. 10. Section 4.1(c) of the Plan is hereby amended to add the following new sentence immediately following the first sentence in the second paragraph to read: Effective October 1, 1998, the Employer's contribution shall be equal to the lesser of (i) 50% of the Participant's Pre-Tax Contributions for the payroll period in which he contributed; or (ii) three percent (3%) of the Participant's Compensation for the payroll period. 11. Section 4.1(c) of the Plan is further amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the Matching Contribution shall be allocated once each Plan Year, but based on the Pre-Tax Contributions that are made in each payroll period by those Participants eligible to share in the allocation of the Matching Contribution. 12. Section 4.9 of the Plan is hereby amended to read as follows: 2 4.9 In Writing Requirement. Notwithstanding any provision in this Plan to the contrary, salary reduction agreements and cancellations or amendments thereto, investment elections, changes or transfers, loans, withdrawal decisions, and any other decision or election by a Participant (or Beneficiary) under this Plan may be accomplished by electronic or telephonic means which are not otherwise prohibited by law and which are in accordance with procedures and/or systems approved or arranged by the Committee or its delegates. 13. Section 5.2(a) of the Plan is hereby amended to add the following new provisions to the end thereof to read as follows: Effective October 1, 1998, the Accounts of Participants, Former Participants and Beneficiaries shall be adjusted in accordance with the procedures that are set forth in Appendix A to the Plan, attached hereto. The Committee may, for administrative purposes, establish unit values for one or more investment fund(s) (or any portion thereof) and maintain the accounts setting forth each Participant's interest in such investment fund(s) (or any portion thereof) in terms of such units, all in accordance with such rules and procedures as the Committee shall deem to be fair, equitable and administratively practicable. In the event that unit accounting is thus established for any investment fund (or any portion thereof) the value of a Participant's interest in that investment fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such investment fund (or any portion thereof) multiplied by the number of units then credited to the Participant. 14. Section 6.4(c) of the Plan is hereby amended to substitute, "the first day of the Calendar Quarter" for "the next Valuation Date" in the second sentence. 15. Section 6.4(f) of the Plan is hereby amended to add the following new paragraph to the end thereof to read as follows: Distribution to a five percent owner, as described in the preceding sentence, or to a Terminated Participant, must continue to commence no later than April 1 of the calendar year following the calendar year in which he attained age 70 1/2. 16. Section 6.4(h) of the Plan is hereby amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the value of Company Stock or the value of other investment funds shall be determined as of the Valuation Date that the payment is processed. 17. Section 6.8(a) of the Plan is hereby amended to read as follows: (1) A Participant or Eligible Employee may elect to withdraw an amount equal to all or any part of his interest in his Rollover Account, including earnings, for any reason. 3 (2) Upon attainment of age 59 1/2, a Participant may elect to withdraw an amount equal to all or any portion of his interest in his Pre-Tax Contribution Account including earnings, for any reason, and (3) Upon attainment of age 70 1/2, a Participant may also elect to withdraw an amount equal to all or any portion of his interest in his Matching Contribution Account including earnings, for any reason. 18. Section 6.8(c)(1) of the Plan is hereby amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the amount available shall be determined as of the Valuation Date that the withdrawal is processed. 19. Section 6.8(c)(4) of the Plan is hereby amended to insert the following new sentence immediately following the second sentence to read: Effective October 1, 1998, a Participant may reenroll in the Plan as soon as practicable following the suspension period. 20. Section 6.9 of the Plan is hereby amended to change the first full paragraph to read as follows: 6.9 Loans to Participants. The Committee may direct the Trustee to lend a Participant or an Eligible Employee an amount not in excess of the lesser of (i) 50% of his vested Accounts, determined as of the most recently completed monthly valuation which as of October 1, 1998 shall be determined as of any Valuation Date (prior to October 1, 1998, the amount was determined as of the most recently completed Valuation); or (ii) $50,000 (reduced by the excess, if any, of the highest outstanding balances of all other loans from the Plan during the one-year period ending on the day before the loan was made over the outstanding balance of loans from the Plan on the date on which such loan was made). Notwithstanding the preceding sentence, the actual amount available for the loan to a Participant shall be 95% of the amount determined in accordance with the preceding sentence as of the Valuation Date that the Participant applied for the loan. A Participant may have only one loan outstanding at any time. Effective October 1, 1998, a Participant may have two loans outstanding at any time. Subject to the rules of the Committee set forth below, the Trustee, upon application by a Participant, may make a loan to such Participant for any reason. In addition to such rules as the Committee may adopt, all loans shall comply with the following terms and conditions: 4 21. Section 6.9(b) of the Plan is hereby amended to add the following new sentence immediately following the first sentence to read: Effective October 1, 1998, a Participant may have a loan for up to 30 years to purchase a dwelling unit which shall be used as the Participant's principal residence. 22. Section 6.9(b) of the Plan is further amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, a Participant may elect to prepay the balance of his loan at any time regardless of the number of repayments made. 23. Section 6.9(h) of the Plan is hereby amended to add the following new sentence to the end thereof to read as follows: Effective with respect to any Participant who Terminates employment or defaults on his loan on or after October 1, 1998, the Participant or Former Participant shall have the option to repay the loan in full within a reasonable time period determined by the Committee. A Former Participant shall not have the option to continue to repay the loan on an ongoing basis. If repayment is not made in full within the applicable time period, then there shall be distributed to the Former Participant (i) the promissory note; plus (ii) the value of his Accounts without regard to the amount of any outstanding loan (including any accrued interest thereon). 24. Section 6.9(i) of the Plan is hereby amended to add the following new sentence to the end thereof to read: Effective October 1, 1998, the amount charged against a Participant's Accounts shall be determined as of the Valuation Date that the loan is paid to the Participant. 25. Section 6.9 of the Plan is hereby amended to add the following new subsections (m) and (n) to the end thereof to read: (m) Effective October 1, 1998, a loan initiation fee shall be charged against the loan amount requested by the Participant. 5 (n) A Participant who takes an approved leave of absence may discontinue payments on a loan for the period of absence for up to 12 months. Upon return to employment, the Participant must repay the missed payments within the original loan term. 26. Section 7.2 of the Plan is hereby amended and restated in its entirety to read as follows: 7.2 Investment Directions by Participants. A Participant or Former Participant may direct the investment of amounts held under his Pre-Tax Contribution Account and Rollover Account in multiples of ten percent (10%) and in accordance with the terms, conditions and procedures established by the Committee. Effective October 1, 1998, investments of a Participant's or Former Participant's Pre-Tax Contribution Account and Rollover Account may be made in multiples of one percent (1%) or in specific dollar amounts. Notwithstanding Sections 5.2(a) and 8.4, all earnings and expenses, including commissions and transfer taxes, realized or incurred in connection with any investments pursuant to a Participant's or Former Participant's directions shall be credited or charged to the Participant's or Former Participant's Account for which the investment is made. A Participant or Former Participant who fails to designate an investment option for his Pre-Tax Contribution Account and Rollover Account shall be deemed to have elected to have such Accounts invested in the Stable Value Fund. If a Participant or Former Participant exercises his option to direct the investment of his Pre-Tax Contribution Account and Rollover Account, then to the extent permitted by ERISA no person who is otherwise a fiduciary under the Plan shall be liable under ERISA for any loss, or by reason of any breach which results from such Participant's exercise of such option. The funds available for this purpose shall include the Company Stock Fund and at least three other additional funds. A Participant may elect to change the investment (both future and existing contributions) of his Pre-Tax Contribution Account and Rollover Account effective as of the first day of any Calendar Quarter following written notification to the Committee (using the value of Accounts determined as of the last business day of the immediately preceding Calendar Quarter). Effective October 1, 1998, a Participant or Former Participant may elect to change the investment (both future and existing contributions) of his Pre-Tax Contribution Account and Rollover Account effective as of any Valuation Date. 27. Section 7.3(d) of the Plan is hereby amended to add the following new provisions to the end thereof to read: 6 Effective October 1, 1998, a Participant or Former Participant who has satisfied the age requirement for Early Retirement Date, may elect as of any Valuation Date, that all or any portion of the Participant's or Former Participant's Matching Contribution Account, allocated to him as of any Valuation Date, that is invested in Company Stock, be invested in any investment category available for investment. 28. Section 7.3(e) of the Plan is hereby amended to add the following new provisions to the end thereof to read: Pursuant to Section 4.1(c), a Participant must be employed on the last day of the Plan Year to share in the allocation of the Company's Matching Contribution for the applicable payroll period (or meet one of the exceptions noted in Section 4.1(c)). Effective September 30, 1998, the Company shall make the Company's Matching Contribution attributable to the first three Calendar Quarters of 1998 and for each payroll period thereafter, to the Company Stock Fund in cash. Each Participant shall be assigned a unit value in the Company Stock Fund as of September 30, 1998 in accordance with Section 5.2 of the Plan. The Company's Matching Contribution shall no longer be determined based on a specific number of shares and their corresponding value. The Company's Matching Contribution shall be applied immediately to purchase units on behalf of each such eligible Participant in the Company Stock Fund as of that Valuation Date. 29. Section 8.1 of the Plan is hereby amended to delete the fifth sentence in its entirety and to insert in lieu thereof the following new sentence: The Committee shall direct the Trustee as to the investment of the assets in the Trust Fund in accordance with the terms of the Plan and Trust. 30. Section 8.7 of the Plan is hereby amended to add the following new subsection (i) to read as follows: (i) to engage an Administrative Delegate who shall perform, without discretionary authority or control, administrative functions within the framework of policies, interpretations, rules, practices, and procedures made by the Committee. Any action made or taken by the Administrative Delegate may be appealed by an affected Participant to the Committee in accordance with the claims review procedures provided in Section 8.5. Any decisions which call for interpretations of Plan provisions not previously made by the Committee shall be made only by the Committee. The Administrative Delegate shall not be considered a fiduciary with respect to the services it provides. 31. Article IX of the Plan is hereby amended to add the following new Section 9.5 to the end thereof to read as follows: 7 9.5 Lost Participants. If, after reasonable efforts of the Committee to locate a Participant or Beneficiary, including sending a registered letter, returned receipt requested to the last known address, the Committee is unable to locate the Participant or Beneficiary, then the amounts distributable to such Participant or Beneficiary shall, pursuant to applicable state or Federal laws, either (1) be treated as a forfeiture under the Plan and used to reduce the Company's contribution to the Plan, or (2) if the Plan is joined as a party to any escheat proceedings involving the unclaimed benefits, be paid in accordance with the final judgment as if the final judgment were a claim filed by the Former Participant or Beneficiary. 32. The Plan is further amended to add the following new Appendix A to the end thereof to read as follows: Appendix A The custodian shall, following the end of each Valuation Date, value all assets of the Trust Fund, allocate net gains or losses, and process additions to and withdrawals from Account balances in the following manner: 1. The custodian shall first compute the fair market value of securities and/or the other assets comprising each investment fund designated by the Committee for direction of investment by the Participants and Former Participants of this Plan. Each Account balance shall be adjusted each business day by applying the closing market price of the investment fund on the current business day to the share/unit balance of the investment fund as of the close of business on the current business day. 2. The custodian shall then account for any requests for additions or withdrawals made to or from a specific designated investment fund by any Participant or Former Participant, including allocations of contributions and forfeitures. In completing the valuation procedure described above, such adjustments in the amounts credited to such Accounts shall be made on the business day to which the investment activity relates. Contributions received by the custodian pursuant to this Plan shall not be taken into account until the Valuation Date coinciding with or next following the date such contribution was both actually paid to the custodian and allocated among the Accounts of Participants and Former Participants. 8 3. Notwithstanding paragraphs 1 and 2 above, in the event a pooled investment fund is created as a designated fund for Participant or Former Participant investment election in this Plan, valuation of the pooled investment fund and allocation of earnings of the pooled investment fund shall be governed by the Administrative Services Agreement for such pooled investment fund. It is intended that this section operate to distribute among each Participant Account in the Trust Fund, all income of the Trust Fund and changes in the value of the assets of the Trust Fund. For purposes of this Appendix A, custodian shall mean the American Express Trust Company. 9 EX-11 4 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 ---------------------------------- May 1, 1999 May 2, 1998 -------------- -------------- (a) Net earnings..................................... $10,093 $10,058 Adjustment for interest on 4% convertible subordinated notes, net of income tax effect... - - Adjustment for interest on zero coupon convertible subordinated notes, net of income tax effect... - - - ------------------------------------------------------------------------------------------- (b) Adjusted net earnings $10,093 $10,058 - ------------------------------------------------------------------------------------------- (c) Average number of common shares outstanding during the period.............................. 50,511 61,470 Common shares assumed issued upon conversion of 4% convertible subordinated notes.............. - - Common shares assumed issued upon conversion of zero coupon convertible subordinated notes..... - - Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price........ 252 306 - ------------------------------------------------------------------------------------------- (d) Average number of common shares assumed outstanding during the period.................. 50,763 61,776 - ------------------------------------------------------------------------------------------- Basic Earnings per Share (a/c)................... $ .20 $ .16 Diluted Earnings per Share (b/d)................. $ .20 $ .16 - -------------------------------------------------------------------------------------------
EX-27 5 ART 5. FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF MAY 1, 1999 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE THIRTEEN WEEK PERIOD ENDED MAY 1, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-29-2000 MAY-1-1999 30,395 0 22,260 1,095 526,434 656,157 1,841,388 509,395 2,000,504 515,176 769,307 0 0 63,885 571,928 2,000,504 488,698 598,316 349,173 436,289 0 0 13,578 15,770 5,677 10,093 0 0 0 10,093 .20 .20 -----END PRIVACY-ENHANCED MESSAGE-----