11-K 1 a07-17487_111k.htm 11-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 11-K

(Mark One)

x

 

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the fiscal year ended December 31, 2006

 

 

 

 

 

 

or

 

 

 

 

o

 

TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from            to           

 

 

 

Commission File No. 1-3381

 


A.

 

Full title of the plan and the address of the plan, if different from that of the issuer named below:

 

The Pep Boys Savings Plan

 

B.

 

Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

 

The Pep Boys — Manny, Moe & Jack
3111 W. Allegheny Avenue
Philadelphia, PA  19132

Registrant’s telephone number, including area code (215) 430-9000

Notices and communications from the Securities and Exchange
Commission relating to this Report should be forwarded to:

Bernard K. McElroy
Vice President — Chief Accounting Officer & Treasurer
The Pep Boys — Manny, Moe & Jack
3111 West Allegheny Avenue
Philadelphia, PA  19132

 




 

THE PEP BOYS SAVINGS PLAN

TABLE OF CONTENTS

 

PAGE

 

 

 

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

 

3—4

 

 

 

FINANCIAL STATEMENTS:

 

 

 

 

 

Statements of Net Assets Available for Benefits

 

5

 

 

 

Statements of Changes in Net Assets Available for Benefits

 

6

 

 

 

Notes to Financial Statements

 

7—11

 

 

 

SUPPLEMENTAL SCHEDULE:

 

 

 

 

 

Form 5500, Schedule H, Part IV, Line 4i — Schedule of Assets (Held at End of Year)

 

12

 

 

 

SIGNATURES

 

13

 

 

 

EXHIBITS INDEX

 

14

 

All other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.

2




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Participants and the Administrative Committee of

The Pep Boys Savings Plan:

We have audited the accompanying statement of net assets available for benefits of The Pep Boys Savings Plan (the “Plan”) as of December 31, 2006, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2006, and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at year end) is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the Plan’s management. The supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ Parente Randolph, LLC

 

Philadelphia, Pennsylvania

June 27, 2007

 

3




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

The Administrative Committee

The Pep Boys Savings Plan

Philadelphia, Pennsylvania

We have audited the accompanying statement of net assets available for benefits of The Pep Boys Savings Plan (the “Plan”) as of December 31, 2005, and the related statement of changes in net assets available for benefits for the year then ended.  These financial statements are the responsibility of the Plan’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of The Pep Boys Savings Plan as of December 31, 2005, and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

 

Philadelphia, Pennsylvania

June 28, 2006

 

4




THE PEP BOYS SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2006 AND 2005

 

 

2006

 

2005

 

ASSETS

 

 

 

 

 

Investments

 

$

144,174,076

 

$

138,718,697

 

Cash

 

559,285

 

748,502

 

 

 

 

 

 

 

Total Assets

 

144,733,361

 

139,467,199

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Refundable contributions and earnings

 

249,484

 

307,750

 

 

 

 

 

 

 

Due to broker for securities purchased

 

 

403,364

 

 

 

 

 

 

 

Total Liabilities

 

249,484

 

711,114

 

 

 

 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS

 

$

144,483,877

 

$

138,756,085

 

 

See notes to financial statements.

5




THE PEP BOYS SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2006 AND 2005

 

 

2006

 

2005

 

ADDITIONS TO NET ASSETS ATTRIBUTED TO:

 

 

 

 

 

Investment income:

 

 

 

 

 

Dividends and interest

 

$

3,460,682

 

$

2,116,390

 

Net appreciation in fair value of investments

 

6,194,402

 

 

Interest on loans

 

622,959

 

579,811

 

Total investment income

 

10,278,043

 

2,696,201

 

Contributions:

 

 

 

 

 

Participants

 

8,395,845

 

8,402,741

 

Employer

 

3,127,465

 

3,095,932

 

Rollovers and other

 

436,466

 

 

Total contributions

 

11,959,776

 

11,498,673

 

Total Additions

 

22,237,819

 

14,194,874

 

 

 

 

 

 

 

DEDUCTIONS TO NET ASSETS ATTRIBUTED TO:

 

 

 

 

 

Net depreciation in fair value of investments

 

 

(3,399,953

)

Benefits paid to participants

 

(16,240,543

)

(17,874,282

)

Refundable contributions and earnings

 

(249,484

)

(10,777

)

Administrative (expense) income

 

(20,000

)

40,364

 

Total Deductions

 

(16,510,027

)

(21,244,648

)

 

 

 

 

 

 

NET INCREASE (DECREASE)

 

5,727,792

 

(7,049,774

)

 

 

 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS:

 

 

 

 

 

Beginning of year

 

138,756,085

 

145,805,859

 

End of year

 

$

144,483,877

 

$

138,756,085

 

 

See notes to financial statements.

6




THE PEP BOYS SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS

1.  DESCRIPTION OF THE PLAN

The information in these notes regarding The Pep Boys Savings Plan (the “Plan”) is provided for general purposes only. Participants should refer to the Plan document for a more complete description of the Plan provisions.

General

The Plan was established  September 1, 1987. The Plan provides a vehicle for participating Company employees to increase savings. The Plan is a defined contribution plan structured to comply with the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Participation

All employees of The Pep Boys—Manny, Moe & Jack and subsidiaries (other than Pep Boys—Manny Moe & Jack of Puerto Rico, Inc.; the “Company”) who have attained both the age of 21 and completed one year of service as defined by the Plan, other than those employees whose terms and conditions of employment are determined by a collective bargaining agreement unless such collective bargaining agreement provides to the contrary, may join the Plan any time on or after the start of the quarter, which immediately follows the employee’s anniversary date. These quarter dates are January 1, April 1, July 1, or October 1.

Contributions

Each year, participants may contribute any half percentage from 0.5% to 50% of pretax annual compensation, up to the Internal Revenue Service (IRS) limit as defined by the Plan. Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans. Participants direct the investment of their contributions into various investment options offered by the Plan. Participants may at any time elect to rollover amounts from other qualified plans or individual retirement accounts into the Plan. Participants do not have to satisfy the eligibility requirements to make a rollover.

The Company contributes the lesser of 50% of the first 6% of the participant’s pre-tax contributions or a maximum 3% of the participant’s compensation. The Company’s matching contributions are invested in the same fund(s) and in the same proportion chosen by the participants for their contributions.

Participant contributions to the Plan, up to maximums of $15,000 and $14,000 during 2006 and 2005 respectively, are not subject to income tax until their withdrawal from the Plan. Additionally, participants are not subject to tax on the Company’s contributions to the Plan, appreciation in Plan assets or income earned thereon until withdrawn from the Plan.

Participant Accounts

Each participant’s account is credited with the participant’s contribution and allocation of (a) the Company’s contribution and (b) Plan earnings, and (c) charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

7




 

Payment of Benefits

Lump sum distributions from the Plan equal to the value of the participants’ vested interest may be made to a participant upon attaining the age of 59-1/2, death, total disability, financial hardship or termination of employment. Distributions and withdrawals are processed on a daily basis.

Forfeited Accounts

Forfeitures of non-vested employer contributions are used to reduce future company contributions. At December 31, 2006 and 2005, forfeited non-vested accounts totaled $17,600 and $7,600, respectively. Forfeited amounts of $326,000 and  $312,000 were used to reduce company contributions in 2006 and 2005, respectively.

Vesting

Participants are vested immediately in their contributions plus actual earnings thereon. Participants vest in the Company’s contributions for a particular year if the participant is actively employed on the last business day of the Plan year (which ends December 31) or if the participant’s employment terminated due to death, disability or retirement prior to December 31.

Participant Loans

Loans are made available to all Plan participant’s whose account value is $1,000 or more. Participants may borrow up to 50% of their account balance subject to a minimum of $500 and a maximum of $50,000. The $50,000 maximum may be reduced if the participant has another loan within one year of the date that such participant takes out the loan. The maximum duration of a loan is five years unless the loan is used to purchase a primary residence. In such a case, the loan term is permitted for up to a 30 year duration. The interest rate is commensurate with current fixed rates charged by institutions in the business of lending money for similar types of loans. Interest rates at December 31, 2006, range from 5.0% to 10.5%. Participants may have up to two loans at one time and prepay loans in full at any time. Principal and interest is paid ratably through payroll deductions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

New Accounting Standard

As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the “FSP’), investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. The River Source Stable Capital Fund II, held by the Plan, holds contracts which are subject to the FSP.  Adoption of the FSP, effective December 31, 2006, did not have a material impact on the financial statements as the contract values approximate estimated fair values.

8




 

Basis of Presentation

The financial statements of the Plan have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results may differ from those estimates and assumptions.

Risks and Uncertainties

The Plan provides for investment options in mutual funds, common/collective trusts and common stock of the Company. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in the value of investment securities will occur in the near term and that such changes could  materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits.

Payment of Benefits

Benefits are recorded when paid.

Investment Valuation and Income Recognition

Investments are stated at fair value.  Mutual funds are valued at quoted market prices that represent the net asset value of shares held by the Plan at year-end.  The common/collective trust, River Source Stable Capital Fund II, is valued at its net unit value that is based upon the value of the underlying securities stated at contract value which approximates fair value at year-end as determined by the Trustee.  The common/collective trust, River Source Stable Equity Index Fund II, is valued at its net unit value based on the fair value of the underlying securities at year-end as determined by the Trustee.  The fair value of the Pep Boys Stock Fund is valued at the year-end unit value as determined by the Trustee and is based upon the value of the underlying Pep Boys stock and short-term money market investments.

The loan fund is stated at cost plus accrued interest. Investments in all other funds are stated at fair value. Fair value represents the closing prices for those securities having readily available market quotations, and fair value as determined by the Plan trustee with respect to other securities.

Purchases and sales of securities are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis.

Management fees and operating expenses charged to the Plan for investments in mutual funds are deducted from income earned and are not separately reflected. Therefore, management fees and operating expenses are reflected as a reduction of investment return on such investments.

Reclassifications

Certain prior year amounts were reclassified to conform with current presentation.

9




 

3. INVESTMENTS

The following presents investments that represent 5 percent or more of the Plan’s net assets.

 

 

December 31,

 

 

 

2006

 

2005

 

RVST Stable Capital Fund II

 

$

37,336,767

 

$

35,939,633

 

RVST Equity Index Fund II

 

27,590,636

 

25,516,712

 

The Pep Boys Stock Fund

 

37,301,026

 

38,083,795

 

Fidelity Freedom 2010 Fund

 

 

8,096,452

 

Fidelity Freedom 2020 Fund

 

8,777,129

 

 

RVST Small Company Index Fund (Class R4)

 

7,966,560

 

 

RVST Small Company Index Fund (Class Y)

 

 

8,716,974

 

Loans to participants

 

9,777,465

 

10,451,181

 

 

During 2006 and 2005, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:

 

 

2006

 

2005

 

Pep Boys Stock Fund

 

$

34,222

 

$

(6,337,719

)

Mutual Funds

 

827,054

 

477,312

 

Common/Collective Trust

 

5,333,126

 

2,460,454

 

 

 

$

6,194,402

 

$

(3,399,953

)

 

4. PLAN TERMINATION

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.

In the event of termination of the Plan, the interest of the participants or their beneficiaries will remain fully vested and not be subject to forfeiture in whole or in part and distributions shall be made to them in cash and/or stock as applicable.

5. RELATED PARTY TRANSACTIONS

Certain Plan investments are shares of common/collective trusts managed by Ameriprise Trust Company.  Ameriprise Trust Company serves as the trustee and recordkeeper of the Plan, and therefore, Plan transactions involving these investment securities qualify as party-in-interest transactions.  Additionally, loans to participants qualify as party-in-interest transactions.  All of these transactions are exempt from the prohibited transactions rules of ERISA.

The Plan held 2,476,708 and 2,516,607 shares Pep Boys common stock with a current value of $36,803,881 and $37,474,055 as of December 31, 2006 and 2005, respectively.

The Company pays all costs associated with administering the Plan, except loan administration fees and certain investment-related fees.

Certain administrative functions of the Plan are performed by members of the Administrative Committee who are employees of the Company.  No such employee receives compensation from the Plan.

10




 

6. TAX STATUS

The Internal Revenue Service  has determined and informed the Company by a letter dated April 30, 2002 indicating that the Plan is designed in accordance with the applicable sections of  the Internal Revenue Code (the “Code”). Accordingly, the Plan’s related trust is exempt from federal taxation under Section 501(a) of the Code. Although the Plan has been amended since receiving the determination letter, the Administrative Committee believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.

7. RECONCILIATION TO THE FORM 5500

Certain items in the Plan’s financial statements are treated differently for tax purposes and reporting under the Plan’s Annual Return/Report of Employee Benefit Plan (“Form 5500”). At December 31, 2006, the following differences exist between financial and tax reporting:

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

Net assets available for benefits per the financial statements at the end of the year

 

$

144,483,877

 

Deemed distribution loan balance at the end of the year

 

(244,304

)

Net assets available for benefits per the Form 5500 at the end of the year

 

$

144,239,573

 

 

The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500:

Benefits paid to participant per the financial statements

 

$

16,240,543

 

Deemed distributions

 

(79,356

)

Benefits paid to participants per the Form 5500

 

$

16,161,187

 

 

The following is a reconciliation of the beginning balance per the financial statements to the Form 5500:

Net assets available for benefits at the beginning of the year per the financial statements

 

$

138,756,085

 

Deemed distribution loan balance at the beginning of the year

 

(323,660

)

Net assets available for benefits at the beginning of the year per the Form 5500

 

$

138,432,425

 

 

At December 31, 2005, the following differences exist between financial and tax reporting:

 

 

Plan Financial
Statements

 

Plan Form
5500

 

Loans to participants

 

$

10,451,181

 

$

10,127,521

 

Dividend and interest income

 

2,116,390

 

658,437

 

Interest on loans

 

579,811

 

589,783

 

Net realized and unrealized loss

 

(3,399,953

)

(1,942,000

)

Earnings refund

 

(10,777

)

 

Distributions paid to participants

 

(17,874,282

)

(17,575,073

)

Corrective distributions

 

 

(297,186

)

Certain deemed distributions

 

 

(304,197

)

Administrative income (expense)

 

40,364

 

 

Other income

 

 

40,364

 

 

8. SUBSEQUENT EVENTS

Wachovia Bank, N.A.’s acquisition of Ameriprise Trust Company’s 401(k) trustee and  recordkeeping business closed on June 1, 2006. As a result, trustee, recordkeeping and administrative services for the Plan transitioned from Ameriprise Retirement Services to Wachovia Retirement Services on April 2, 2007.

11




THE PEP BOYS SAVINGS PLAN

FORM 5500, SCHEDULE H, PART IV

LINE 4i — SCHEDULE OF ASSETS (HELD AT END OF YEAR)

EIN #23-0962915, Plan #002

DECEMBER 31, 2006

 

 

Identity of Issue

 

Description

 

Current Value

*

 

RVST Stable Capital Fund II

 

Common / Collective Trust

 

$

37,336,767

 

 

 

 

 

 

 

*

 

RVST Equity Index Fund II

 

Common / Collective Trust

 

27,590,636

 

 

 

 

 

 

 

 

Pep Boys Stock Fund

 

 

 

 

 

 

 

 

 

 

 

*

 

The Pep Boys — Manny, Moe
& Jack Common Stock

 

 

 

36,803,881

 

 

 

 

 

 

 

*

 

RVST Money Market I

 

 

 

497,145

 

 

 

 

 

 

 

 

Fidelity Freedom 2010 Fund

 

Mutual Fund

 

8,777,129

 

 

 

 

 

 

 

 

Fidelity Freedom 2020 Fund

 

Mutual Fund

 

2,195,963

 

 

 

 

 

 

 

 

Fidelity Freedom 2030 Fund

 

Mutual Fund

 

2,283,673

 

 

 

 

 

 

 

 

Fidelity Freedom 2040 Fund

 

Mutual Fund

 

1,595,870

 

 

 

 

 

 

 

 

PIMCO Total Return Fund
(Institutional Shares)

 

Mutual Fund

 

3,213,563

 

 

 

 

 

 

 

*

 

RVS Small Company Index Fund(Class R4)

 

Mutual Fund

 

7,966,560

 

 

 

 

 

 

 

 

Templeton Foreign Fund (Class A)

 

Mutual Fund

 

6,135,424

 

 

 

 

 

 

 

 

 

 

 

Interest rates of 5.00% to 10.50%,

 

 

*

 

Loans to participants

 

maturing from 2006-2036

 

9,777,465

 

 

 

 

 

$

144,174,076


*                    Indicates party-in-interest to the plan.

12




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Trustees (or other persons who administer the Plan) have duly caused this Annual Report to be signed by the undersigned hereunto duly authorized.

THE PEP BOYS SAVINGS PLAN

 

 

 

 

 

 

 

DATE: June 27, 2007

BY:

/s/ Bernard K. McElroy

 

 

Bernard K. McElroy

 

 

Chairman—

 

 

Administrative Committee

 

 

13




EXHIBITS INDEX

(23.1)**

 

Consent of Independent Registered Public Accounting Firm

 

 

 

(23.2)**

 

Consent of Independent Registered Public Accounting Firm


**             Filed herewith

14