EX-99.2 3 a07-22281_1ex99d2.htm EX-99.2

 

Exhibit 99.2

 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share amounts)

 

 

 

Thirteen weeks ended

 

Twenty-six weeks ended

 

 

 

August 4, 2007

 

July 29, 2006

 

August 4, 2007

 

July 29, 2006

 

 

 

 

 

%

 

 

 

%

 

 

 

%

 

 

 

%

 

 

 

Amount

 

Sales

 

Amount

 

Sales

 

Amount

 

Sales

 

Amount

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise Sales

 

$

458,569

 

82.1

 

$

481,997

 

83.3

 

$

903,604

 

81.8

 

939,312

 

82.7

 

Service Revenue

 

100,320

 

17.9

 

96,568

 

16.7

 

201,298

 

18.2

 

195,854

 

17.3

 

Total Revenues

 

558,889

 

100.0

 

578,565

 

100.0

 

1,104,902

 

100.0

 

1,135,166

 

100.0

 

Costs of Merchandise Sales

 

319,800

 

69.7

 

342,874

 

71.1

 

635,110

 

70.3

 

672,422

 

71.6

 

Costs of Service Revenue

 

88,951

 

88.7

 

90,589

 

93.8

 

177,862

 

88.4

 

178,764

 

91.3

 

Total Costs of Revenues

 

408,751

 

73.1

 

433,463

 

74.9

 

812,972

 

73.6

 

851,186

 

75.0

 

Gross Profit from Merchandise Sales

 

138,769

 

30.3

 

139,123

 

28.9

 

268,494

 

29.7

 

266,890

 

28.4

 

Gross Profit from Service Revenue

 

11,369

 

11.3

 

5,979

 

6.2

 

23,436

 

11.6

 

17,090

 

8.7

 

Total Gross Profit

 

150,138

 

26.9

 

145,102

 

25.1

 

291,930

 

26.4

 

283,980

 

25.0

 

Selling, General and Administrative Expenses

 

132,845

 

23.8

 

139,544

 

24.1

 

260,917

 

23.6

 

270,765

 

23.9

 

Net Gain (Loss) from Dispositions of Assets

 

(15

)

 

6,431

 

1.1

 

2,344

 

0.2

 

6,016

 

0.5

 

Operating Profit

 

17,278

 

3.1

 

11,989

 

2.1

 

33,357

 

3.0

 

19,231

 

1.7

 

Non-operating Income

 

1,766

 

0.3

 

2,018

 

0.3

 

3,671

 

0.3

 

4,277

 

0.4

 

Interest Expense

 

12,331

 

2.2

 

11,968

 

2.1

 

24,987

 

2.3

 

22,305

 

2.0

 

Earnings From Continuing Operations Before Income Taxes and  Cumulative Effect of Change in Accounting Principle

 

6,713

 

1.2

 

2,039

 

0.4

 

12,041

 

1.1

 

1,203

 

0.1

 

Income Tax Expense

 

2,517

 

37.5

(1)

569

 

27.9

(1)

4,625

 

38.4

(1)

600

 

49.9

(1)

Net Earnings From Continuing Operations Before Cumulative Effect of Change in Accounting Principle

 

4,196

 

0.8

 

1,470

 

0.3

 

7,416

 

0.7

 

603

 

0.1

 

Discontinued Operations, Net of Tax

 

(17

)

 

(30

)

 

(62

)

 

(133

)

 

Cumulative Effect of Change in Accounting Principle, Net of Tax

 

 

 

(88

)

 

 

 

179

 

 

Net Earnings

 

4,179

 

0.7

 

1,352

 

0.2

 

7,354

 

0.7

 

649

 

0.1

 

Retained Earnings, beginning of period

 

462,757

 

 

 

477,438

 

 

 

463,797

 

 

 

481,926

 

 

 

Cumulative effect adjustment for adoption of FIN 48

 

 

 

 

 

 

 

(155

)

 

 

 

 

 

Cash Dividends

 

(3,539

)

 

 

(3,811

)

 

 

(7,120

)

 

 

(7,516

)

 

 

Effect of Stock Options

 

(782

)

 

 

(10

)

 

 

(1,261

)

 

 

(76

)

 

 

Dividend Reinvestment Plan

 

 

 

 

(111

)

 

 

 

 

 

(125

)

 

 

Retained Earnings, end of period

 

$

462,615

 

 

 

$

474,858

 

 

 

$

462,615

 

 

 

$

474,858

 

 

 

Basic and Diluted Earnings per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Earnings From Continuing Operations Before Cumulative Effect of Change in Accounting Principle

 

$

0.08

 

 

 

$

0.03

 

 

 

$

0.14

 

 

 

$

0.01

 

 

 

Discontinued Operations, Net of Tax

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative Effect of Change in Accounting Principle, Net of Tax

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share

 

$

0.08

 

 

 

$

0.03

 

 

 

$

0.14

 

 

 

$

0.01

 

 

 

Cash Dividends per Share

 

$

0.0675

 

 

 

$

0.0675

 

 

 

$

0.1350

 

 

 

$

0.1350

 

 

 

 


(1)  As a percentage of earnings from continuing operations before income taxes and cumulative effect of change in accounting principle.




 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

 

 

 

CONSOLIDATED BALANCE SHEETS

 

(dollar amounts in thousands, except per share amounts)

 

 

 

August 4, 2007

 

February 3, 2007

 

July 29, 2006

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,575

 

$

21,884

 

$

55,295

 

Accounts receivable, net

 

26,062

 

29,582

 

33,821

 

Merchandise inventories

 

615,085

 

607,042

 

612,681

 

Prepaid expenses

 

31,275

 

39,264

 

32,770

 

Other

 

55,065

 

70,368

 

64,346

 

Assets held for disposal

 

 

 

881

 

Total Current Assets

 

754,062

 

768,140

 

799,794

 

Property and Equipment - at cost:

 

 

 

 

 

 

 

Land

 

251,705

 

251,705

 

256,717

 

Buildings and improvements

 

932,300

 

929,225

 

918,266

 

Furniture, fixtures and equipment

 

697,561

 

684,042

 

658,765

 

Construction in progress

 

4,669

 

3,464

 

18,225

 

 

 

1,886,235

 

1,868,436

 

1,851,973

 

Less accumulated depreciation and amortization

 

1,002,929

 

962,189

 

932,217

 

Property and Equipment - net

 

883,306

 

906,247

 

919,756

 

Deferred income taxes

 

24,604

 

24,828

 

4,583

 

Other

 

39,128

 

67,984

 

45,511

 

Total Assets

 

$

1,701,100

 

$

1,767,199

 

$

1,769,644

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

243,615

 

$

265,489

 

$

295,041

 

Trade payable program liability

 

13,016

 

13,990

 

7,223

 

Accrued expenses

 

265,506

 

292,280

 

275,879

 

Deferred income taxes

 

31,020

 

28,931

 

17,780

 

Current maturities of long-term debt and obligations under capital leases

 

3,469

 

3,490

 

2,258

 

Convertible short-term debt

 

 

 

119,000

 

Total Current Liabilities

 

556,626

 

604,180

 

717,181

 

 

 

 

 

 

 

 

 

Long-term debt and obligations under capital leases, less current maturities

 

548,882

 

535,031

 

404,884

 

Other long-term liabilities

 

66,259

 

60,233

 

59,168

 

Commitments and Contingencies

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

Common Stock, par value $1 per share:

 

 

 

 

 

 

 

Authorized 500,000,000 shares; Issued 68,557,041 shares

 

68,557

 

68,557

 

68,557

 

Additional paid-in capital

 

294,255

 

289,384

 

287,583

 

Retained earnings

 

462,615

 

463,797

 

474,858

 

Accumulated other comprehensive loss

 

(7,424

)

(9,380

)

(3,441

)

Less cost of shares in treasury - 14,691,165 shares, 12,427,687 shares and 12,060,582 shares

 

229,406

 

185,339

 

179,882

 

Less cost of shares in benefits trust - 2,195,270 shares

 

59,264

 

59,264

 

59,264

 

Total Stockholders’ Equity

 

529,333

 

567,755

 

588,411

 

Total Liabilities and Stockholders’ Equity

 

$

1,701,100

 

$

1,767,199

 

$

1,769,644

 

 




 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

 

(UNAUDITED)

 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(dollar amounts in thousands)

 

Twenty-six weeks ended

 

August 4, 2007

 

July 29, 2006

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net Earnings

 

$

7,354

 

$

649

 

Adjustments to reconcile net earnings to net cash provided by continuing operations:

 

 

 

 

 

Net loss from discontinued operations

 

62

 

133

 

Depreciation and amortization

 

41,689

 

41,419

 

Cumulative effect of change in accounting principle, net of tax

 

 

(179

)

Accretion of asset disposal obligation

 

149

 

135

 

Stock compensation expense

 

6,053

 

1,718

 

Deferred income taxes

 

6,283

 

(5,252

)

Gain from dispositions of assets

 

(2,344

)

(6,016

)

Loss from derivative valuation

 

2,622

 

 

Loss from asset impairment

 

 

550

 

Excess tax benefits from stock based awards

 

(609

)

(33

)

Increase in cash surrender value of life insurance policies

 

(846

)

(1,167

)

Changes in Operating Assets and Liabilities:

 

 

 

 

 

Decrease in accounts receivable, prepaid expenses and other

 

28,556

 

34,084

 

(Increase) decrease in merchandise inventories

 

(8,043

)

3,611

 

(Decrease) increase in accounts payable

 

(21,874

)

33,101

 

Decrease in accrued expenses

 

(17,112

)

(18,136

)

Increase in other long-term liabilities

 

2,588

 

1,687

 

Net cash provided by continuing operations

 

44,528

 

86,304

 

Net cash used in discontinued operations

 

(124

)

(245

)

Net Cash Provided by Operating Activities

 

44,404

 

86,059

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Cash paid for property and equipment

 

(19,960

)

(14,364

)

Proceeds from dispositions of assets

 

2,376

 

687

 

Proceeds from life insurance policies

 

26,129

 

 

Proceeds from sales of assets held for disposal

 

 

6,981

 

Net Cash Provided by (Used in) Investing Activities

 

8,545

 

(6,696

)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Net borrowings (payments) under line of credit agreements

 

15,587

 

(60,266

)

Excess tax benefits from stock based awards

 

609

 

33

 

Net payments on trade payable program liability

 

(974

)

(3,933

)

Reduction of long-term debt

 

(1,628

)

(1,041

)

Payments on capital lease obligations

 

(129

)

(131

)

Dividends paid

 

(7,121

)

(7,516

)

Repurchase of common stock

 

(58,152

)

 

Proceeds from exercise of stock options

 

3,155

 

56

 

Proceeds from dividend reinvestment plan

 

395

 

449

 

Net Cash Used in Financing Activities

 

(48,258

)

(72,349

)

Net Increase in Cash

 

4,691

 

7,014

 

Cash and Cash Equivalents at Beginning of Period

 

21,884

 

48,281

 

Cash and Cash Equivalents at End of Period

 

$

26,575

 

$

55,295

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

Non-cash operating activities:

 

 

 

 

 

Accrued payment of stock option settlement

 

$

 

$

1,056

 

Non-cash investing activities:

 

 

 

 

 

Accrued purchases of property and equipment

 

$

2,346

 

$

1,759

 

Non-cash financing activities:

 

 

 

 

 

Equipment capital leases

 

$

 

$

84

 

 




 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

 

 

COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

(in thousands, except per share data)

 

 

 

Thirteen weeks ended

 

Twenty-six weeks ended

 

 

 

August 4,
2007

 

July 29,
2006

 

August 4,
2007

 

July 29,
2006

 

 

 

 

 

 

 

 

 

 

 

(a)   Net earnings from continuing operations Before Cumulative Effect of Change in Accounting Principle

 

4,196

 

1,470

 

7,416

 

603

 

 

 

 

 

 

 

 

 

 

 

Discontinued Operations, Net of Tax

 

(17

)

(30

)

(62

)

(133

)

 

 

 

 

 

 

 

 

 

 

Cumulative Effect of Change in Accounting Principle, Net of Tax

 

 

(88

)

 

179

 

 

 

 

 

 

 

 

 

 

 

Net Earnings

 

$

4,179

 

$

1,352

 

$

7,354

 

$

649

 

 

 

 

 

 

 

 

 

 

 

(b)   Average number of common shares outstanding  during period

 

51,652

 

54,254

 

52,387

 

54,239

 

 

 

 

 

 

 

 

 

 

 

Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price

 

612

 

936

 

562

 

967

 

 

 

 

 

 

 

 

 

 

 

(c)   Average number of common shares assumed outstanding during period

 

52,264

 

55,190

 

52,949

 

55,206

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Share:

 

 

 

 

 

 

 

 

 

Net Earnings From Continuing Operations Before Cumulative Effect of Change in Accounting Principle

 

0.08

 

0.03

 

0.14

 

0.01

 

Discontinued Operations, Net of Tax

 

 

 

 

 

Cumulative Effect of Change in Accounting Principle, Net of Tax

 

 

 

 

 

Basic Earnings per Share

 

$

0.08

 

$

0.03

 

$

0.14

 

$

0.01

 

Diluted Earnings per Share:

 

 

 

 

 

 

 

 

 

Net Earnings From Continuing Operations Before Cumulative Effect of Change in Accounting Principle

 

0.08

 

0.03

 

0.14

 

0.01

 

Discontinued Operations, Net of Tax

 

 

 

 

 

Cumulative Effect of Change in Accounting Principle, Net of Tax

 

 

 

 

 

Diluted Earnings per Share

 

$

0.08

 

$

0.03

 

$

0.14

 

$

0.01

 

 




 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

 

(UNAUDITED)

 

 

 

ADDITIONAL INFORMATION

 

(dollar amounts in thousands)

 

 

 

Thirteen weeks ended

 

Twenty-six weeks ended

 

 

 

August 4, 2007

 

July 29, 2006

 

August 4, 2007

 

July 29, 2006

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

7,892

 

$

9,823

 

$

18,345

 

$

16,123

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

$

20,578

 

$

20,696

 

$

41,689

 

$

41,419

 

 

 

 

 

 

 

 

 

 

 

Non-operating income:

 

 

 

 

 

 

 

 

 

Net rental revenue

 

$

327

 

$

497

 

$

1,125

 

$

1,170

 

Investment income

 

1,444

 

1,572

 

2,577

 

3,279

 

Other (expense) income

 

(5

)

(51

)

(31

)

(172

)

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,766

 

$

2,018

 

$

3,671

 

$

4,277

 

 

 

 

 

 

 

 

 

 

 

Comparable sales percentages:

 

 

 

 

 

 

 

 

 

Merchandise

 

-5.1

%

0.4

%

-4.1

%

-0.3

%

Service

 

3.8

%

0.0

%

2.6

%

-0.3

%

Total

 

-3.6

%

0.4

%

-3.0

%

-0.3

%

 

 

 

 

 

 

 

 

 

 

Total square feet of retail space (including service centers)

 

 

 

 

 

12,142,100

 

12,167,089

 

 

 

 

 

 

 

 

 

 

 

Total Store Count

 

 

 

 

 

592

 

593

 

 

 

 

 

 

 

 

 

 

 

Sales and Gross Profit by Line of Business (A):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail Sales

 

$

322,464

 

$

353,554

 

$

637,167

 

$

681,511

 

Service Center Revenue

 

236,425

 

225,011

 

467,735

 

453,655

 

Total Revenues

 

$

558,889

 

$

578,565

 

$

1,104,902

 

$

1,135,166

 

 

 

 

 

 

 

 

 

 

 

Gross Profit from Retail Sales

 

$

93,141

 

$

100,179

 

$

182,885

 

$

189,768

 

Gross Profit from Service Center Revenue

 

56,997

 

44,923

 

109,045

 

94,212

 

Total Gross Profit

 

$

150,138

 

$

145,102

 

$

291,930

 

$

283,980

 

 

 

 

 

 

 

 

 

 

 

Comparable Sales Percentages (A):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail Sales

 

-9.0

%

-0.5

%

-6.9

%

-1.7

%

Service Center Revenue

 

4.9

%

1.7

%

2.9

%

2.0

%

Total Revenues

 

-3.6

%

0.4

%

-3.0

%

-0.3

%

 

 

 

 

 

 

 

 

 

 

Gross Profit Percentage by Line of Business (A):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Percentage from Retail Sales

 

28.9

%

28.3

%

28.7

%

27.8

%

Gross Profit Percentage from Service Center Revenue

 

24.1

%

20.0

%

23.3

%

20.8

%

Total Gross Profit Percentage

 

26.9

%

25.1

%

26.4

%

25.0

%

 


(A)  Retail Sales include DIY and Commercial sales. Service Center Revenue includes revenue from labor and installed parts and tires.