10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

xQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 28, 2012

OR

oTransition 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

As of August 24, 2012, there were 52,994,685 shares of the registrant’s Common Stock outstanding.

Index

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets — July 28, 2012 and January 28, 2012	3
	Consolidated Statements of Operations and Comprehensive Income - Thirteen and Twenty-six Weeks Ended July 28, 2012 and July 30, 2011	4
	Consolidated Statements of Cash Flows — Twenty-six Weeks Ended July 28, 2012 and July 30, 2011	5
	Notes to the Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
SIGNATURES		33
INDEX TO EXHIBITS		34

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PART I - FINANCIAL INFORMATION

ITEM 1  CONSOLIDATED FINANCIAL STATEMENTS

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands, except share data)

(unaudited)

	July 28, 2012			January 28, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	150,833		$	58,244
Accounts receivable, less allowance for uncollectible accounts of $1,247 and $1,303	27,962			25,792
Merchandise inventories	626,555			614,136
Prepaid expenses	21,021			26,394
Other current assets	53,083			59,979
Total current assets	879,454			784,545
Property and equipment - net	682,619			696,339
Goodwill	46,917			46,917
Deferred income taxes	45,825			72,870
Other long-term assets	31,660			33,108
Total assets	$	1,686,475		$	1,633,779
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	246,522		$	243,712
Trade payable program liability	115,746			85,214
Accrued expenses	218,548			221,705
Deferred income taxes	61,231			66,208
Current maturities of long-term debt	1,254			1,079
Total current liabilities	643,301			617,918
Long-term debt less current maturities	293,504			294,043
Other long-term liabilities	72,290			77,216
Deferred gain from asset sales	133,971			140,273
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
Additional paid-in capital	295,536			296,462
Retained earnings	454,343			423,437
Accumulated other comprehensive loss	(15,011		)	(17,649		)
Treasury stock, at cost — 15,563,931 shares and 15,803,322 shares	(260,016		)	(266,478		)
Total stockholders’ equity	543,409			504,329
Total liabilities and stockholders’ equity	$	1,686,475		$	1,633,779

See notes to consolidated financial statements.

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THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 (dollar amounts in thousands, except per share amounts)

(unaudited)

	Thirteen weeks ended						Twenty-six weeks ended
	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
Merchandise sales	$	413,380		$	415,267		$	825,712		$	823,894
Service revenue	112,291			107,327			224,563			212,240
Total revenues	525,671			522,594			1,050,275			1,036,134
Costs of merchandise sales	288,051			287,721			578,907			573,050
Costs of service revenue	107,019			99,663			213,115			192,752
Total costs of revenues	395,070			387,384			792,022			765,802
Gross profit from merchandise sales	125,329			127,546			246,805			250,844
Gross profit from service revenue	5,272			7,664			11,448			19,488
Total gross profit	130,601			135,210			258,253			270,332
Selling, general and administrative expenses	114,277			113,268			233,987			222,168
Net (loss) gain from dispositions of assets	(9		)	(3		)	(11		)	86
Operating profit	16,315			21,939			24,255			48,250
Merger termination fees, net	42,955			—			42,955			—
Other income	521			569			991			1,156
Interest expense	6,427			6,444			12,943			12,941
Earnings from continuing operations before income taxes and discontinued operations	53,364			16,064			55,258			36,465
Income tax expense	20,330			2,173			21,090			10,169
Earnings from continuing operations before discontinued operations	33,034			13,891			34,168			26,296
Income (loss) from discontinued operations, net of tax	14			52			(58		)	15
Net earnings	33,048			13,943			34,110			26,311
Basic earnings per share:
Earnings from continuing operations before discontinued operations	$	0.62		$	0.26		$	0.64		$	0.49
Discontinued operations, net of tax	—			—			—			—
Basic earnings per share	$	0.62		$	0.26		$	0.64		$	0.49
Diluted earnings per share:
Earnings from continuing operations before discontinued operations	$	0.61		$	0.26		$	0.63		$	0.49
Discontinued operations, net of tax	—			—			—			—
Diluted earnings per share	$	0.61		$	0.26		$	0.63		$	0.49
Other comprehensive income:
Defined benefit plan adjustment, net of tax	354			253			708			473
Derivative financial instruments adjustment, net of tax	$	910		$	170		$	1,930		$	685
Other comprehensive income	1,264			423			2,638			1,158
Comprehensive income	$	34,312		$	14,366		$	36,748		$	27,469

See notes to consolidated financial statements.

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THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(unaudited)

Twenty-six weeks ended	July 28, 2012			July 30, 2011
Cash flows from operating activities:
Net earnings	$	34,110		$	26,311
Adjustments to reconcile net earnings to net cash provided by continuing operations:
Net loss (income) from discontinued operations, net of tax	58			(15		)
Depreciation and amortization	39,288			39,654
Amortization of deferred gain from asset sales	(6,302		)	(6,302		)
Stock compensation expense	1,043			1,908
Deferred income taxes	20,485			4,238
Net loss (gain) from disposition of assets	11			(86		)
Loss from asset impairment	—			389
Other	13			272
Changes in assets and liabilities, net of the effects of acquisitions:
Decrease in accounts receivable, prepaid expenses and other	11,448			21,816
Increase in merchandise inventories	(12,419		)	(12,917		)
Increase in accounts payable	2,810			12,043
Decrease in accrued expenses	(2,451		)	(33,202		)
Decrease in other long-term liabilities	(552		)	(2,831		)
Net cash provided by continuing operations	87,542			51,278
Net cash used in discontinued operations	(92		)	(44		)
Net cash provided by operating activities	87,450			51,234
Cash flows from investing activities:
Capital expenditures	(26,347		)	(30,636		)
Proceeds from dispositions of assets	—			89
Premiums paid on life insurance policies	—			(795		)
Collateral investment	—			(4,763		)
Acquisitions, net of cash acquired	—			(42,757		)
Net cash used in investing activities	(26,347		)	(78,862		)
Cash flows from financing activities:
Borrowings under line of credit agreements	1,106			5,045
Payments under line of credit agreements	(931		)	(5,045		)
Borrowings on trade payable program liability	80,836			59,097
Payments on trade payable program liability	(50,304		)	(53,944		)
Payment for finance issuance cost	—			(2,441		)
Debt payments	(539		)	(539		)
Dividends paid	—			(3,171		)
Proceeds from stock issuance	1,318			363
Net cash provided by (used in) financing activities	31,486			(635		)
Net increase (decrease) in cash and cash equivalents	92,589			(28,263		)
Cash and cash equivalents at beginning of period	58,244			90,240
Cash and cash equivalents at end of period	$	150,833		$	61,977
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,705		$	629
Cash paid for interest	$	11,449		$	11,523
Non-cash investing activities:
Accrued purchases of property and equipment	$	632		$	1,416

See notes to consolidated financial statements

5

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—BASIS OF PRESENTATION

The Pep Boys — Manny, Moe & Jack and subsidiaries (the “Company”) consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the Company’s financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, costs and expenses, as well as the disclosure of contingent assets and liabilities and other related disclosures. The Company bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of the Company’s assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and the Company includes any revisions to its estimates in the results for the period in which the actual amounts become known.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted, as permitted by Rule 10-01 of the Securities and Exchange Commission’s Regulation S-X, “Interim Financial Statements.” It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2012. The results of operations for the twenty-six weeks ended July 28, 2012 are not necessarily indicative of the operating results for the full fiscal year.

The consolidated financial statements presented herein are unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows as of July 28, 2012 and for all periods presented have been made.

The Company’s fiscal year ends on the Saturday nearest January 31. Accordingly, references to fiscal years 2012 and 2011 refer to the fiscal year ending February 2, 2013 and the fiscal year ended January 28, 2012, respectively.

The Company operated 742 store locations at July 28, 2012, of which 232 were owned and 510 were leased.

NOTE 2—NEW ACCOUNTING STANDARDS

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”), which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. The adoption of ASU 2011-04 did not have a material impact on the consolidated financial statements.

In June of 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 was issued to improve the comparability of financial reporting between U.S. GAAP and IFRS, and eliminates previous U.S. GAAP guidance that allowed an entity to present components of other comprehensive income (“OCI”) as part of its statement of changes in shareholders’ equity. With the issuance of ASU 2011-05, companies are now required to report all components of OCI either in a single continuous statement of total comprehensive income, which includes components of both OCI and net income, or in a separate statement appearing consecutively with the statement of income. ASU 2011-05 does not affect current guidance for the accounting of the components of OCI, or which items are included within total comprehensive income, and is effective for periods beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05 affected presentation only and therefore did not have an impact on the Company’s consolidated financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU 2011-08, “Intangibles — Goodwill and Other (Topic 350) —Testing Goodwill for Impairment” (“ASU 2011-08”). The new guidance provides entities with the option to perform a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before applying the quantitative two-step goodwill impairment test. If an entity concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the quantitative two-step goodwill impairment test. Entities also have the option to bypass the assessment of qualitative factors for any reporting unit in any period and proceed directly to performing the first step of the quantitative two-step goodwill impairment test, as was required prior to the issuance of this new guidance. The new guidance is

6

effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-08 will not have a material impact on the consolidated financial statements.

NOTE 3—ACQUISITIONS

During the twenty-six weeks ended July 30, 2011, the Company made three separate acquisitions. The Company acquired the assets related to seven service and tire centers located in the Seattle-Tacoma area, the assets related to seven service and tire centers located in the Houston, Texas area and all outstanding shares of capital stock of Tire Stores Group Holding Corporation which operated an 85-store chain in Florida, Georgia and Alabama under the name Big 10. Collectively, the acquired stores produced approximately $94.7 million (unaudited) in sales annually based on pre-acquisition historical information. The total purchase price of these stores was approximately $42.6 million in cash and the assumption of certain liabilities. The acquisitions were financed through cash flows provided by operations. The results of operations of these acquired stores are included in the Company’s results from their respective acquisition dates.

The Company expensed all costs related to these acquisitions during fiscal 2011. The total costs related to these acquisitions were $1.5 million and are included in the consolidated statement of operations within selling, general and administrative expenses.

As the Company’s acquisitions (including Big 10) were immaterial to the Company’s operating results both individually and in aggregate for the thirteen and twenty six week periods ended July 30, 2011, pro forma results of operations are not disclosed. Sales and net earnings for the fiscal 2011 acquired stores totaled $21.9 million and $0.7 million, respectively for the period from acquisition date through July 30, 2011.

NOTE 4—MERCHANDISE INVENTORIES

Merchandise inventories are valued at the lower of cost or market. Cost is determined by using the last-in, first-out (“LIFO”) method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on inventory and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected fiscal year-end inventory levels and costs. If the first-in, first-out (“FIFO”) method of costing inventory had been used by the Company, inventory would have been $553.9 million and $536.4 million as of July 28, 2012 and January 28, 2012, respectively.

The Company’s inventory, consisting primarily of auto parts and accessories, is used on vehicles typically having long lives. Because of this, and combined with the Company’s historical experience of returning excess inventory to the Company’s vendors for full credit, the risk of obsolescence is minimal. The Company establishes a reserve for excess inventory for instances where less than full credit will be received for such returns or where the Company anticipates items will be sold at retail prices that are less than recorded costs. The reserve is based on management’s judgment, including estimates and assumptions regarding marketability of products, the market value of inventory to be sold in future periods and on historical experiences where the Company received less than full credit from vendors for product returns. The Company also provides for estimated inventory shrinkage based upon historical levels and the results of its cycle counting program. The Company’s inventory adjustments for these matters were approximately $4.3 million at July 28, 2012 and $4.6 million at January 28, 2012.

NOTE 5—PROPERTY AND EQUIPMENT

The Company’s property and equipment as of July 28, 2012 and January 28, 2012 was as follows:

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
Property and equipment
Land	$	204,023		$	204,023
Buildings and improvements	885,485			875,999
Furniture, fixtures and equipment	738,815			723,938
Construction in progress	3,852			3,279
Accumulated depreciation and amortization	(1,149,556		)	(1,110,900		)
Property and equipment — net	$	682,619		$	696,339

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NOTE 6—WARRANTY RESERVE

The Company provides warranties for both its merchandise sales and service labor. Warranties for merchandise are generally covered by the respective vendors, with the Company covering any costs above the vendor’s stipulated allowance. Service labor is warranted in full by the Company for a limited specific time period. The Company establishes its warranty reserves based on historical experiences. These costs are included in either costs of merchandise sales or costs of service revenues in the consolidated statements of operations.

The reserve for warranty cost activity for the twenty-six weeks ended July 28, 2012 and the fifty-two weeks ended January 28, 2012 is as follows:

(dollar amounts in thousands)	July 28,2012			January 28, 2012
Beginning balance	$	673		$	673
Additions related to current period sales	5,410			12,122
Warranty costs incurred in current period	(5,410		)	(12,122		)
Ending balance	$	673		$	673

NOTE 7—DEBT AND FINANCING ARRANGEMENTS

The following are the components of debt and financing arrangements:

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
7.50% Senior Subordinated Notes, due December 2014	$	147,565		$	147,565
Senior Secured Term Loan, due October 2013	147,018			147,557
Revolving Credit Agreement, through January 2016	175			—
Long-term debt	294,758			295,122
Current maturities	(1,254		)	(1,079		)
Long-term debt less current maturities	$	293,504		$	294,043

As of July 28, 2012, 126 stores collateralized the Senior Secured Term Loan.

The Company’s ability to borrow under its Revolving Credit Agreement (the “Agreement”) is based on a specific borrowing base consisting of inventory and accounts receivable. The interest rate on this credit line is daily LIBOR plus 2.00% to 2.50% based upon the then current availability under the Agreement. As of July 28, 2012, there was $0.2 million outstanding under this agreement and $29.6 million of availability was utilized to support outstanding letters of credit. Taking this into account and the borrowing base requirements, as of July 28, 2012, there was $175.1 million of availability remaining.

Several of the Company’s debt agreements require compliance with covenants. The most restrictive of these covenants, an earnings before interest, taxes, depreciation and amortization (“EBITDA”) requirement, is triggered if the Company’s availability under its Revolving Credit Agreement drops below $50.0 million. As of July 28, 2012, the Company was in compliance with all financial covenants contained in its debt agreements.

Interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities are used to estimate fair value for debt issues that are not quoted on an exchange and are considered a level 2 measure under the fair value hierarchy. The estimated fair value of long-term debt including current maturities was $296.6 million and $293.6 million as of July 28, 2012 and January 28, 2012, respectively.

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NOTE 8—ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss are:

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
Defined benefit plan adjustment, net of tax	$	(8,988	)	$	(9,696	)
Derivative financial instrument adjustment, net of tax	(6,023		)	(7,953		)
Accumulated other comprehensive loss	$	(15,011	)	$	(17,649	)

NOTE 9—EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per share for earnings from continuing operations and net earnings:

		Thirteen Weeks Ended				Twenty-six Weeks Ended
(in thousands, except per share amounts)		July 28, 2012		July 30, 2011		July 28, 2012			July 30, 2011
(a)	Earnings from continuing operations	$	33,034	$	13,891	$	34,168		$	26,296
	Income (loss) from discontinued operations, net of tax	14		52		(58		)	15
	Net earnings	$	33,048	$	13,943	$	34,110		$	26,311
(b)	Basic average number of common shares outstanding during period	53,146		52,952		53,110			52,901
	Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price	651		697		765			691
(c)	Diluted average number of common shares assumed outstanding during period	53,797		53,649		53,875			53,592
	Basic earnings per share:
	Earnings from continuing operations (a/b)	$	0.62	$	0.26	$	0.64		$	0.49
	Discontinued operations, net of tax	—		—		—			—
	Basic earnings per share	$	0.62	$	0.26	$	0.64		$	0.49
	Diluted earnings per share:
	Earnings from continuing operations (a/c)	$	0.61	$	0.26	$	0.63		$	0.49
	Discontinued operations, net of tax	—		—		—			—
	Diluted earnings per share	$	0.61	$	0.26	$	0.63		$	0.49

At July 28, 2012 and July 30, 2011, respectively, there were 2,382,000 and 2,682,000 outstanding options and restricted stock units. Certain stock options were excluded from the calculation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares for the periods then ended and therefore would be anti-dilutive. The total number of such shares excluded from the diluted earnings per share calculation are 503,000 and 830,000 for the twenty-six weeks ended July 28, 2012 and July 30, 2011, respectively. The total number of such shares excluded from the diluted earnings per share calculation are 706,000 and 888,000 for the thirteen weeks ended July 28, 2012 and July 30, 2011, respectively.

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NOTE 10—BENEFIT PLANS

The Company has a qualified 401(k) savings plan and a separate plan for employees residing in Puerto Rico, which cover all full-time employees who are at least 21 years of age with one or more years of service. The Company also maintains a non-qualified defined contribution Supplemental Executive Retirement Plan (the “Account Plan”) for key employees designated by the Board of Directors. The Company’s contribution to these plans for fiscal 2012 is contingent upon meeting certain performance metrics. The Company did not record any contribution expense for these plans in the first half of 2012 or 2011.

The Company also has a frozen defined benefit pension plan covering the Company’s full-time employees hired on or before February 1, 1992. The Company’s expense for its pension plan follows:

	Thirteen Weeks Ended						Twenty-six Weeks Ended
(dollar amounts in thousands)	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
Interest cost	619			627			1,238			1,278
Expected return on plan assets	(704		)	(721		)	(1,408		)	(1,372		)
Amortization of net loss	566			405			1,133			756
Net periodic benefit cost	$	481		$	311		$	963		$	662

The defined benefit pension plan is subject to minimum funding requirements of the Employee Retirement Income Security Act of 1974 as amended. While the Company has no minimum funding requirement during fiscal 2011, it made a $3.0 million discretionary contribution to the defined benefit pension plan on April 28, 2011. There were no discretionary contributions made during the first half of 2012.

During the third quarter of fiscal 2011, the Company began the process of terminating the Plan. The termination of the Plan is expected to be completed by the end of fiscal 2012. In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, the Company is required to fully fund the Plan on a termination basis and will commit to contribute the additional assets necessary to do so. Plan participants will not be adversely affected by the Plan termination, but rather will have their benefits either converted into a lump sum cash payment or an annuity contract placed with an insurance carrier.

NOTE 11—FAIR VALUE MEASUREMENTS AND DERIVATIVES

The Company’s fair value measurements consist of (a) financial assets and liabilities that are recognized or disclosed at fair value in the Company’s financial statements on a recurring basis (at least annually) and (b) all non-recurring non-financial assets and liabilities.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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The following table provides information by level for assets and liabilities that are measured at fair value, on a recurring basis:

(dollar amounts in thousands)	Fair Value at		Fair Value Measurements Using Inputs Considered as
Description	July 28, 2012		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	150,833	$	150,833	$	—	$	—
Collateral investments (1)	17,276		17,276		—		—
Rabbi trust assets (1)	3,596		—		3,596		—
Liabilities:
Other liabilities
Derivative liability (2)	9,494		—		9,494		—

(dollar amounts in thousands)	Fair Value at		Fair Value Measurements Using Inputs Considered as
Description	January 28, 2012		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	58,244	$	58,244	$	—	$	—
Collateral investments (1)	17,276		17,276		—		—
Rabbi trust assets (1)	3,576		—		3,576		—
Liabilities:
Other liabilities
Derivative liability (2)	12,540		—		12,540		—

(1) included in other long-term assets

(2) included in other long-term liabilities

As of January 28, 2012 the Company invested $17.3 million in restricted accounts as collateral for its retained liabilities included within existing insurance programs in lieu of previously outstanding letters of credit, of which $4.8 million was invested during the first half of fiscal year 2011.

The Company has one interest rate swap designated as a cash flow hedge on $145.0 million of the Company’s Senior Secured Term Loan that is due in October 2013. The swap is used to minimize interest rate exposure and overall interest costs by converting the variable component of the total interest rate to a fixed rate of 5.036%. Since February 1, 2008, this swap was deemed to be fully effective and all adjustments in the interest rate swap’s fair value have been recorded to accumulated other comprehensive loss.

The table below shows the effect of the Company’s interest rate swap on the consolidated financial statements for the periods indicated:

(dollar amounts in thousands)	Amount of Gain in Other Comprehensive Income/ (Loss) (Effective Portion)		Earnings Statement Classification	Amount of Loss Recognized in Earnings (Effective Portion) (a)
Thirteen weeks ended July 28, 2012	$	897	Interest expense	$	(1,685	)
Thirteen weeks ended July 30, 2011	$	150	Interest expense	$	(1,772	)
Twenty-six weeks ended July 28, 2012	$	1,904	Interest expense	$	(3,339	)
Twenty-six weeks ended July 30, 2011	$	648	Interest expense	$	(3,491	)

(a) represents the effective portion of the loss reclassified from accumulated other comprehensive loss

The fair value of the derivative was $9.5 million and $12.5 million payable at July 28, 2012 and January 28, 2012, respectively. Of the $3.0 million decrease in the fair value during the twenty-six weeks ended July 28, 2012, $1.9 million net of tax was recorded to accumulated other comprehensive loss on the consolidated balance sheet.

Non-financial assets measured at fair value on a non-recurring basis:

Certain assets are measured at fair value on a non-recurring basis, that is, the assets are subject to fair value adjustments in certain circumstances such as when there is evidence of impairment. These measures of fair value, and related inputs, are considered level 2 or level 3 measures under the fair value hierarchy. During the second quarter of fiscal 2011, the Company recorded a $0.4 million

11

impairment charge related to stores classified as held and used. The Company used a probability-weighted approach and estimates of expected future cash flows to determine the fair value of the stores. Discount and growth rate assumptions were derived from current economic conditions, management’s expectations and projected trends of current operating results. The fair market value estimate is classified as a Level 3 measure within the fair value hierarchy.

NOTE 12—LEGAL MATTERS

The Company is party to various actions and claims arising in the normal course of business. The Company believes that amounts accrued for awards or assessments in connection with all such matters are adequate and that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position. However, there exists a reasonable possibility of loss in excess of the amounts accrued, the amount of which cannot currently be estimated. While the Company does not believe that the amount of such excess loss could be material to the Company’s financial position, any such loss could have a material adverse effect on the Company’s results of operations in the period(s) during which the underlying matters are resolved.

NOTE 13—MERGER UPDATE

On May 29, 2012, the Company, Auto Acquisition Company, LLC, a Delaware limited liability company (“Parent”), Auto Mergersub, Inc., a Delaware corporation (“Merger Sub”), and The Gores Group, LLC, a Delaware limited liability company (“Gores”), entered into a Settlement Agreement (the “Settlement Agreement”) relating to the previously announced Agreement and Plan of Merger, dated as of January 29, 2012, by and among the Company, Parent and Merger Sub (the “Merger Agreement”). The Settlement Agreement provided for, among other things: (i) the termination of the Merger Agreement and the related financing commitments from Gores Capital Partners II, L.P. and Gores Capital Partners III, L.P.; (ii) Parent’s payment of a $50.0 million fee to the Company and reimbursement to the Company for certain of its merger related expenses; and (iii) mutual releases of the parties. Such payments were made by Parent on June 8, 2012 and the Company recorded $43.0 million of merger termination fees, net of related expenses, on the consolidated statements of operations and comprehensive income which is presented within cash flows from operations on the consolidated statement of cash flows.

12

NOTE 14—SUPPLEMENTAL GUARANTOR INFORMATION

The Company’s Notes are fully and unconditionally and joint and severally guaranteed by certain of the Company’s direct and indirectly wholly-owned subsidiaries—namely, The Pep Boys Manny Moe & Jack of California, The Pep Boys—Manny Moe & Jack of Delaware, Inc. (the “Pep Boys of Delaware”); Pep Boys—Manny Moe & Jack of Puerto Rico, Inc.; Tire Stores Group Holding Corporation (on and after May 5, 2011); Big 10 Tire Stores, LLC (on and after May 5, 2011), (collectively, the “Subsidiary Guarantors”). The Notes are not guaranteed by the Company’s wholly owned subsidiary, Colchester Insurance Company.

The following consolidating information presents, in separate columns, the condensed consolidating balance sheets as of July 28, 2012 and January 28, 2012 and the related condensed consolidating statements of operations and comprehensive income for the thirteen and twenty-six weeks ended July 28, 2012 and July 30, 2011 and condensed consolidating statements of cash flows for the twenty-six weeks ended July 28, 2012 and July 30, 2011 for (i) the Company (“Pep Boys”) on a parent only basis, with its investment in subsidiaries recorded under the equity method, (ii) the Subsidiary Guarantors on a combined basis, (iii) the subsidiary of the Company that does not guarantee the Notes, and (iv) the Company on a consolidated basis.

13

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)

(unaudited)

As of July 28, 2012	Pep Boys		Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidation/ Elimination			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	92,508	$	47,160	$	11,165	$	—		$	150,833
Accounts receivable, net	14,546		13,416		—		—			27,962
Merchandise inventories	221,294		405,261		—		—			626,555
Prepaid expenses	8,929		12,577		7,102		(7,587		)	21,021
Other current assets	1,776		—		56,148		(4,841		)	53,083
Total current assets	339,053		478,414		74,415		(12,428		)	879,454
Property and equipment—net	240,096		431,087		29,835		(18,399		)	682,619
Investment in subsidiaries	2,204,475		—		—		(2,204,475		)	—
Intercompany receivables	—		1,412,350		68,966		(1,481,316		)	—
Goodwill	2,549		44,368		—		—			46,917
Deferred income taxes	3,083		42,742		—		—			45,825
Other long-term assets	29,868		1,792		—		—			31,660
Total assets	$	2,819,124	$	2,410,753	$	173,216	$	(3,716,618	)	$	1,686,475
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	246,522	$	—	$	—	$	—		$	246,522
Trade payable program liability	115,746		—		—		—			115,746
Accrued expenses	25,211		60,694		140,230		(7,587		)	218,548
Deferred income taxes	26,243		39,829		—		(4,841		)	61,231
Current maturities of long-term debt	1,254		—		—		—			1,254
Total current liabilities	414,976		100,523		140,230		(12,428		)	643,301
Long-term debt less current maturities	293,504		—		—		—			293,504
Other long-term liabilities	26,704		45,586		—		—			72,290
Deferred gain from asset sales	59,215		93,155		—		(18,399		)	133,971
Intercompany liabilities	1,481,316		—		—		(1,481,316		)	—
Total stockholders’ equity	543,409		2,171,489		32,986		(2,204,475		)	543,409
Total liabilities and stockholders’ equity	$	2,819,124	$	2,410,753	$	173,216	$	(3,716,618	)	$	1,686,475

14

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)

(unaudited)

As of January 28, 2012	Pep Boys		Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidation/ Elimination						Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	22,740	$	27,181	$	8,323	$		—				$	58,244
Accounts receivable, net	14,566		11,226		—		—						25,792
Merchandise inventories	214,584		399,552		—		—						614,136
Prepaid expenses	12,945		16,873		14,996		(18,420					)	26,394
Other current assets	606		—		64,214		(4,841					)	59,979
Total current assets	265,441		454,832		87,533		(23,261					)	784,545
Property and equipment—net	243,108		441,645		30,177		(18,591					)	696,339
Investment in subsidiaries	2,176,992		—		—		(2,176,992					)	—
Intercompany receivables	—		1,389,910		82,206		(1,472,116					)	—
Goodwill	2,549		44,368		—		—						46,917
Deferred income taxes	20,468		52,402		—		—						72,870
Other long-term assets	31,068		2,040		—		—						33,108
Total assets	$	2,739,626	$	2,385,197	$	199,916	$			(3,690,960		)	$	1,633,779
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	243,712	$	—	$	—	$				—		$	243,712
Trade payable program liability	85,214		—		—		—						85,214
Accrued expenses	17,887		55,527		166,711		(18,420					)	221,705
Deferred income taxes	29,383		41,666		—		(4,841					)	66,208
Current maturities of long-term debt	1,079		—		—		—						1,079
Total current liabilities	377,275		97,193		166,711		(23,261					)	617,918
Long-term debt less current maturities	294,043		—		—		—						294,043
Other long-term liabilities	30,540		46,676		—		—						77,216
Deferred gain from asset sales	61,323		97,541		—		(18,591					)	140,273
Intercompany liabilities	1,472,116		—		—		(1,472,116					)	—
Total stockholders’ equity	504,329		2,143,787		33,205		(2,176,992					)	504,329
Total liabilities and stockholders’ equity	$	2,739,626	$	2,385,197	$	199,916	$	(3,690,960				)	$	1,633,779

15

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Thirteen Weeks Ended July 28, 2012	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	135,439		$	277,941		$	—		$	—		$	413,380
Service revenue	37,703			74,588			—			—			112,291
Other revenue	—			—			6,161			(6,161		)	—
Total revenues	173,142			352,529			6,161			(6,161		)	525,671
Costs of merchandise sales	96,843			191,668			—			(460		)	288,051
Costs of service revenue	34,108			72,958			—			(47		)	107,019
Costs of other revenue	—			—			6,142			(6,142		)	—
Total costs of revenues	130,951			264,626			6,142			(6,649		)	395,070
Gross profit from merchandise sales	38,596			86,273			—			460			125,329
Gross profit from service revenue	3,595			1,630			—			47			5,272
Gross profit from other revenue	—			—			19			(19		)	—
Total gross profit	42,191			87,903			19			488			130,601
Selling, general and administrative expenses	36,323			78,061			83			(190		)	114,277
Net loss from dispositions of assets	(8		)	(1		)	—			—			(9		)
Operating profit	5,860			9,841			(64		)	678			16,315
Merger termination fees, net	42,955			—			—			—			42,955
Non-operating income (expense)	(4,059		)	16,911			679			(13,010		)	521
Interest expense (income)	18,129			1,151			(521		)	(12,332		)	6,427
Earnings from continuing operations before income taxes	26,627			25,601			1,136			—			53,364
Income tax expense	10,509			9,401			420			—			20,330
Equity in earnings of subsidiaries	16,949			—			—			(16,949		)	—
Net earnings from continuing operations	33,067			16,200			716			(16,949		)	33,034
Discontinued operations, net of tax	(19		)	33			—			—			14
Net earnings	$	33,048		$	16,233		$	716		$	(16,949	)	$	33,048
Other comprehensive income
Defined benefit plan adjustment	354			—			—			—			354
Derivative financial instruments adjustment	910			—			—			—			910
Other comprehensive income	1,264			—			—			—			1,264
Comprehensive income	$	34,312		$	16,233		$	716		$	(16,949	)	$	34,312

16

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Thirteen Weeks Ended July 30, 2011	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	137,881		$	277,386		$	—		$	—		$	415,267
Service revenue	37,113			70,214			—			—			107,327
Other revenue	—			—			5,732			(5,732		)	—
Total revenues	174,994			347,600			5,732			(5,732		)	522,594
Costs of merchandise sales	98,345			189,785			—			(409		)	287,721
Costs of service revenue	32,886			66,815			—			(38		)	99,663
Costs of other revenue	—			—			5,830			(5,830		)	—
Total costs of revenues	131,231			256,600			5,830			(6,277		)	387,384
Gross profit from merchandise sales	39,536			87,601			—			409			127,546
Gross profit from service revenue	4,227			3,399			—			38			7,664
Gross profit from other revenue	—			—			(98		)	98			—
Total gross profit	43,763			91,000			(98		)	545			135,210
Selling, general and administrative expenses	38,562			74,698			80			(72		)	113,268
Net gain from dispositions of assets	—			(3		)	—			—			(3		)
Operating profit	5,201			16,299			(178		)	617			21,939
Non-operating (expense) income	(4,216		)	15,852			618			(11,685		)	569
Interest expense (income)	17,534			499			(521		)	(11,068		)	6,444
(Loss) earnings from continuing operations before income taxes	(16,549		)	31,652			961			—			16,064
Income tax (benefit) expense	(3,100		)	5,114			159			—			2,173
Equity in earnings of subsidiaries	27,365			—			—			(27,365		)	—
Net earnings from continuing operations	13,916			26,538			802			(27,365		)	13,891
Discontinued operations, net of tax	27			25			—			—			52
Net earnings	$	13,943		$	26,563		$	802		$	(27,365	)	$	13,943
Other comprehensive income
Defined benefit plan adjustment	253			—			—			—			253
Derivative financial instruments adjustment	170			—			—			—			170
Other comprehensive income	423			—			—			—			423
Comprehensive income	$	14,366		$	26,563		$	802		$	(27,365	)	$	14,366

17

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Twenty-six Weeks Ended July 28, 2012	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	272,022		$	553,690		$	—		$	—		$	825,712
Service revenue	75,744			148,819			—			—			224,563
Other revenue	—			—			12,320			(12,320		)	—
Total revenues	347,766			702,509			12,320			(12,320		)	1,050,275
Costs of merchandise sales	194,553			385,274			—			(920		)	578,907
Costs of service revenue	68,394			144,815			—			(94		)	213,115
Costs of other revenue	—			—			12,714			(12,714		)	—
Total costs of revenues	262,947			530,089			12,714			(13,728		)	792,022
Gross profit from merchandise sales	77,469			168,416			—			920			246,805
Gross profit from service revenue	7,350			4,004			—			94			11,448
Gross profit from other revenue	—			—			(394		)	394			—
Total gross profit	84,819			172,420			(394		)	1,408			258,253
Selling, general and administrative expenses	75,260			158,508			167			52			233,987
Net loss from dispositions of assets	(8		)	(3		)	—			—			(11		)
Operating profit	9,551			13,909			(561		)	1,356			24,255
Merger termination fees	42,955			—			—			—			42,955
Non-operating income (expense)	(8,167		)	32,870			1,357			(25,069		)	991
Interest expense (income)	35,789			1,910			(1,043		)	(23,713		)	12,943
Earnings from continuing operations before income taxes	8,550			44,869			1,839			—			55,258
Income tax expense	3,265			17,123			702			—			21,090
Equity in earnings of subsidiaries	28,839			—			—			(28,839		)	—
Net earnings from continuing operations	34,124			27,746			1,137			(28,839		)	34,168
Discontinued operations, net of tax	(14		)	(44		)	—			—			(58		)
Net earnings	$	34,110		$	27,702		$	1,137		$	(28,839	)	$	34,110
Other comprehensive income
Defined benefit plan adjustment	708			—			—			—			708
Derivative financial instruments adjustment	1,930			—			—			—			1,930
Other comprehensive income	2,638			—			—			—			2,638
Comprehensive income	$	36,748		$	27,702		$	1,137		$	(28,839	)	$	36,748

18

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Twenty-six Weeks Ended July 30, 2011	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	279,262		$	544,632		$	—		$	—		$	823,894
Service revenue	75,648			136,592			—			—			212,240
Other revenue	—			—			11,466			(11,466		)	—
Total revenues	354,910			681,224			11,466			(11,466		)	1,036,134
Costs of merchandise sales	197,518			376,348			—			(816		)	573,050
Costs of service revenue	65,974			126,854			—			(76		)	192,752
Costs of other revenue	—			—			11,656			(11,656		)	—
Total costs of revenues	263,492			503,202			11,656			(12,548		)	765,802
Gross profit from merchandise sales	81,744			168,284			—			816			250,844
Gross profit from service revenue	9,674			9,738			—			76			19,488
Gross profit from other revenue	—			—			(190		)	190			—
Total gross profit	91,418			178,022			(190		)	1,082			270,332
Selling, general and administrative expenses	76,386			145,767			166			(151		)	222,168
Net gain from dispositions of assets	—			86			—			—			86
Operating profit	15,032			32,341			(356		)	1,233			48,250
Non-operating (expense) income	(8,491		)	31,921			1,234			(23,508		)	1,156
Interest expense (income)	34,859			1,400			(1,043		)	(22,275		)	12,941
(Loss) earnings from continuing operations before income taxes	(28,318		)	62,862			1,921			—			36,465
Income tax (benefit) expense	(7,714		)	17,347			536			—			10,169
Equity in earnings of subsidiaries	46,896			—			—			(46,896		)	—
Net earnings from continuing operations	26,292			45,515			1,385			(46,896		)	26,296
Discontinued operations, net of tax	19			(4		)	—			—			15
Net earnings	$	26,311		$	45,511		$	1,385		$	(46,896	)	$	26,311
Other comprehensive income
Defined benefit plan adjustment	473			—			—			—			473
Derivative financial instruments adjustment	685			—			—			—			685
Other comprehensive income	1,158			—			—			—			1,158
Comprehensive income	$	27,469		$	45,511		$	1,385		$	(46,896	)	$	27,469

19

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in thousands)

(unaudited)

Twenty-six Weeks Ended July 28, 2012	Pep Boys			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidation / Elimination			Consolidated
Net Cash Provided by (Used in) Operating Activities	$	41,640		$	56,208		$	(9,042	)	$	(1,356	)	$	87,450
Investing Activities:
Capital expenditures	(15,124		)	(11,223		)	—			—			(26,347		)
Net Cash (Used in) Investing Activities	(15,124		)	(11,223		)	—			—			(26,347		)
Financing Activities:
Borrowings under line of credit agreements	500			606			—			—			1,106
Payments under line of credit agreements	(325		)	(606		)	—			—			(931		)
Borrowings on trade payable program liability	80,836			—			—			—			80,836
Payments on trade payable program liability	(50,304		)	—			—			—			(50,304		)
Debt Payments	(539		)	—			—			—			(539		)
Dividends paid	—			—			(1,356		)	1,356			—
Intercompany (payments) borrowings	11,766			(25,006		)	13,240			—			—
Proceeds from stock issuance	1,318			—			—			—			1,318
Net Cash Provided by (Used in) Financing Activities	43,252			(25,006		)	11,884			1,356			31,486
Net increase in cash and cash equivalents	69,768			19,979			2,842			—			92,589
Cash and cash equivalents at beginning of period	22,740			27,181			8,323			—			58,244
Cash and cash equivalents at end of period	$	92,508		$	47,160		$	11,165		$	—		$	150,833

20

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in thousands)

(unaudited)

Twenty-six Weeks Ended July 30, 2011	Pep Boys			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidation / Elimination			Consolidated
Net Cash Provided by (Used in) Operating Activities	$	13,152		$	49,122		$	(9,807	)	$	(1,233	)	$	51,234
Investing Activities:
Capital expenditures	(15,555		)	(15,081		)	—			—			(30,636		)
Proceeds from dispositions of assets	—			89			—			—			89
Premiums paid on life insurance policies	(795		)	—			—			—			(795		)
Collateral investment	(4,763		)	—			—			—			(4,763		)
Acquisitions, net of cash acquired	(144		)	(42,613		)	—			—			(42,757		)
Net Cash Provided by (Used in) Investing Activities	(21,257		)	(57,605		)	—			—			(78,862		)
Financing Activities:
Borrowings under line of credit agreements	1,771			3,274			—			—			5,045
Payments under line of credit agreements	(1,771		)	(3,274		)	—			—			(5,045		)
Borrowings on trade payable program liability	59,097			—			—			—			59,097
Payments on trade payable program liability	(53,944		)	—			—			—			(53,944		)
Payment for finance issuance cost	(2,441		)	—			—			—			(2,441		)
Debt Payments	(539		)	—			—			—			(539		)
Dividends paid	(3,171		)	—			(1,233		)	1,233			(3,171		)
Intercompany (payments) borrowings	(8,985		)	(2,821		)	11,806			—			—
Proceeds from stock issuance	363			—			—			—			363
Net Cash (Used in) Provided by Financing Activities	(9,620		)	(2,821		)	10,573			1,233			(635		)
Net (decrease) increase in cash and cash equivalents	(17,725		)	(11,304		)	766			—			(28,263		)
Cash and cash equivalents at beginning of period	37,912			42,779			9,549			—			90,240
Cash and cash equivalents at end of period	$	20,187		$	31,475		$	10,315		$	—		$	61,977

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ITEM 2  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion and analysis explains the results of operations for the second fiscal quarter and first half of 2012 and 2011 and significant developments affecting our financial condition for the six months ended July 28, 2012. This discussion and analysis should be read in conjunction with the consolidated interim financial statements and the notes to such consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and the consolidated financial statements and the notes to such financial statements included in Item 8, “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

INTRODUCTION

The Pep Boys—Manny, Moe & Jack is the leading national chain offering automotive service, tires, parts and accessories. This positioning allows us to streamline the distribution channel and pass the savings on to our customers facilitating our vision to be the automotive solutions provider of choice for the value-oriented customer. The majority of our stores are in a Supercenter format, which serves both “do-it-for-me” (“DIFM”), which includes service labor, installed merchandise and tires, and “do-it-yourself” (“DIY”) customers with the highest quality service and merchandise offerings. Most of our Supercenters also have a commercial sales program that provides delivery of tires, parts and other products to automotive repair shops and dealers. In 2009, as part of our long-term strategy to lead with automotive service, we began complementing our existing Supercenter store base with Service & Tire Centers. These Service & Tire Centers are designed to capture market share and leverage our existing Supercenters and support infrastructure. This growth will occur both organically and through acquisitions. The growth is targeted at existing markets, but may include new markets opportunistically. The objective is to grow our market share and to leverage inventory, marketing, distribution and support costs. Acquisitions will be used to accelerate growth in markets where the Company is under-penetrated.

In the first half of fiscal 2012, we opened eight Service & Tire Centers and one Supercenter and closed five stores whose leases expired and were not renewed. We are targeting a total of 30 new Service & Tire Centers and 10 Supercenters in fiscal 2012. As of July 28, 2012, we operated 562 Supercenters and 173 Service & Tire Centers, as well as 7 legacy Pep Boys Express (retail only) stores throughout 35 states and Puerto Rico.

EXECUTIVE SUMMARY

Net earnings for the second quarter of 2012 were $33.0 million, a $19.1 million increase from the $13.9 million reported for the second quarter of 2011. In the second quarter of 2012, we terminated our proposed merger and recorded the settlement proceeds, net of merger related costs, of $43.0 million in the consolidated statement of operations and comprehensive income. Net earnings for the second quarter of 2012 also included, on a pre-tax basis, a $0.7 million charge for severance costs from a reduction in force at our Store Support Center. The prior year included, on a pre-tax basis, a $0.4 million asset impairment charge, $1.0 million of acquisition related expenses and a $3.4 million benefit from the release of state tax valuation allowances.

Our diluted earnings per share for the second quarter and the first six months of 2012 were $0.61 and $0.63, respectively, an improvement of $0.35 and $0.14 over the $0.26 and $0.49 recorded for the corresponding periods of 2011.

Total revenue increased for the second quarter of 2012 by 0.6%, or $3.1 million, as compared to the same period of the prior year as a result of our store growth. This increase in total revenues was comprised of a 4.6% increase in service revenue partially offset by a 0.5% decrease in merchandise sales. For the second quarter of 2012, comparable store sales (sales generated by locations in operation during the same period) were relatively flat and were comprised of a 3.1% increase in comparable store service revenue and a 0.9% decrease in comparable store merchandise sales.

We believe that the industry fundamentals of increasing vehicle complexity and customer preference for DIFM remain solid over the long-term resulting in consistent demand for maintenance and repair services. We are also encouraged that from January through June 2012, miles driven (which favorably impacts sales of our services and non-discretionary products) grew 1.1% after declining throughout 2011. However, we believe the tough macroeconomic environment, including continued high unemployment and negative consumer confidence in the overall U.S. economy, depressed our second quarter sales. In addition, we believe the recent spike in gasoline prices in August will continue to challenge consumer spending relative to discretionary and deferrable purchases in the short-term. However, given the nature of these macroeconomic factors, we cannot predict whether or for how long these trends will continue, nor can we predict to what degree these trends will affect us in the future.

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Our primary response to fluctuations in customer demand is to adjust our service and product assortment, store staffing and advertising messages. In addition, we continue to make it easy for customers to choose us to do it for them and to expand our online efforts to make Pep Boys the most convenient place to shop for all of their automotive needs. We believe that we are well positioned to help our customers save money and meet their needs in a challenging macroeconomic environment.

RESULTS OF OPERATIONS

The following discussion explains the material changes in our results of operations.

Analysis of Statement of Operations

Thirteen weeks ended July 28, 2012 vs. Thirteen weeks ended July 30, 2011

The following table presents for the periods indicated certain items in the consolidated statements of operations and comprehensive income as a percentage of total revenues (except as otherwise provided) and the percentage change in dollar amounts of such items compared to the indicated prior period.

	Percentage of Total Revenues				Percentage Change
Thirteen weeks ended	July 28, 2012 (Fiscal 2012)		July 30, 2011  (Fiscal 2011)		Favorable (Unfavorable)
Merchandise sales	78.6	%	79.5	%	(0.5	)%
Service revenue (1)	21.4		20.5		4.6
Total revenues	100.0		100.0		0.6
Costs of merchandise sales (2)	69.7	(3)	69.3	(3)	(0.1	)
Costs of service revenue (2)	95.3	(3)	92.9	(3)	(7.4	)
Total costs of revenues	75.2		74.1		(2.0	)
Gross profit from merchandise sales	30.3	(3)	30.7	(3)	(1.7	)
Gross profit from service revenue	4.7	(3)	7.1	(3)	(31.2	)
Total gross profit	24.8		25.9		(3.4	)
Selling, general and administrative expenses	21.7		21.7		(0.9	)
Net gain (loss) from dispositions of assets	—		—		—
Operating profit	3.1		4.2		(25.6	)
Merger termination fees, net	8.2		—		NA
Other income	0.1		0.1		(8.4	)
Interest expense	1.2		1.2		0.3
Earnings from continuing operations before income taxes	10.2		3.1		232.2
Income tax expense	38.1	(4)	13.5	(4)	(835.6	)
Earnings from continuing operations	6.3		2.7		137.8
Discontinued operations, net of tax	—		—		—
Net earnings	6.3		2.7		137.0

(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, purchasing, 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 from continuing operations before income taxes.

Total revenue for the second quarter of 2012 increased by $3.1 million to $525.7 million from $522.6 million in the second quarter of 2011, while comparable store sales for the second quarter of 2012 were relatively flat as compared to the second quarter of 2011. Our comparable store sales consisted of an increase of 3.1% in comparable store service revenue offset by a decrease of 0.9% in comparable store merchandise sales. Total comparable store sales were flat as a result of lower customer counts offset by an increase in the average transaction amount per customer. While our total revenue figures were favorably impacted by the opening or acquisition of new stores, a new store is not added to our comparable store sales until it reaches its 13th month of operation. Non-

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comparable stores contributed an additional $3.4 million of total revenue in the second quarter of 2012 as compared to the second quarter of 2011.

Total merchandise sales decreased 0.5%, or $1.9 million, to $413.4 million in the second quarter of fiscal 2012, compared to $415.3 million during the prior year quarter. The decrease in total merchandise sales was due to a decline in comparable store merchandise sales of 0.9%, or $3.6 million, partially offset by our non-comparable stores which contributed an additional $1.7 million of sales in the quarter. The decrease in comparable store merchandise sales was driven primarily by lower comparable store customer counts partially offset by a higher average transaction amount per customer. The decrease in comparable store merchandise sales was comprised of a 3.8% decline in our retail business, mostly offset by a 4.3% increase in merchandise sold through our service business. Total service revenue increased 4.6%, or $5.0 million, to $112.3 million in the second quarter of 2012 from the $107.3 million recorded in the prior year quarter. The increase in service revenue was comprised of a $3.3 million, or 3.1%, increase in comparable store service revenue and our new non-comparable stores contributed an additional $1.7 million of service revenues. The increase in comparable store service revenue was due to higher customer counts offset by a decrease in the average transaction amount per customer.

We believe that total comparable store customer counts decreased due to macroeconomic conditions, while the average transaction amount per customer increased due to selling price increases implemented to reflect the inflation in material costs. However, in our service business, we believe that comparable store service customer counts increased due to the strength in our maintenance business led by increased oil change transactions, which have a lower average transaction amount per customer. This shift in service sales mix towards oil changes reduced the average transaction amount per service customer. We believe that the current economic environment including continued high unemployment weighed heavily on consumer spending relative to discretionary and deferrable purchases and depressed our second quarter sales. Over the long-term, we believe that utilizing innovative marketing programs to communicate our value-priced, differentiated service and merchandise assortment will drive increased customer counts and that our continued focus on delivering a better customer experience than our competitors will convert those increased customer counts into sales improvements consistently over all lines of business.

Total gross profit decreased by $4.6 million, or 3.4%, to $130.6 million in the second quarter of 2012 from $135.2 million in the second quarter of 2011. Total gross profit margin decreased to 24.8% for the second quarter of 2012 from 25.9% for the second quarter of 2011. The decrease in total gross profit margin was primarily due to the shift in sales to lower margin tires and oil combined with decreased tire margin rates due to cost increases exceeding retail price increases (70 basis points) and higher occupancy and payroll and related expenses as a percent of total sales (35 basis points). The new Service & Tire Centers have a higher concentration of their sales in lower margin tires and have higher rent and payroll costs as a percent of total sales. While the new Service & Tire Centers have had a negative impact on total gross profit margin, these Service & Tire Centers positively contributed to total gross profit in both years.

Gross profit from merchandise sales decreased by $2.2 million, or 1.7%, to $125.3 million for the second quarter of 2012 from $127.5 million in the second quarter of 2011. Gross profit margin from merchandise sales decreased to 30.3% for the second quarter of 2012 from 30.7% in the second quarter of 2011. The decrease in gross profit from merchandise sales was due to the shift in sales mix to lower margin tires and oil, decreased tire margin rates due to cost increases exceeding retail price increases and higher warehousing costs partially offset by lower store occupancy costs (utilities, and depreciation) as a percent of merchandise sales.

Gross profit from service revenue decreased by $2.4 million, or 31.2%, to $5.3 million in the second quarter of 2012 from $7.7 million recorded in the second quarter of 2011. Gross profit margin from service revenue decreased to 4.7% for the second quarter of 2012 from 7.1% for the prior year quarter. In accordance with GAAP, service revenue is limited to labor sales (excludes any revenue from installed parts and materials) and costs of service revenues includes the fully loaded service center payroll and related employee benefits and service center occupancy costs. The decrease in service revenue gross profit margin was primarily due to the growth of our Service & Tire Centers, which lowered margins by 647 and 565 basis points in the first quarter of 2012 and 2011, respectively. Excluding the impact of Service & Tire Centers, gross profit from service revenue decreased to 11.2% for the second quarter of 2012 from 13.1% for the second quarter of 2011. The decrease in gross profit, exclusive of Service & Tire Centers, was mostly due to increased payroll and related benefit costs combined with higher store occupancy costs (utilities and depreciation).

Selling, general and administrative expenses as a percentage of total revenues were 21.7% for the second quarter of 2012 and 2011. Selling, general and administrative expenses increased $1.0 million, or 0.9%, to $114.3 million from $113.3 million in the prior year quarter. Higher media expense of $3.5 million, higher store payroll expense of $1.2 million and severance costs for a reduction in force at our Store Support Center of $0.7 million were partially offset by lower acquisition costs of $2.2 million, lower credit card transaction fees of $1.7 million and lower Store Support Center payroll expense of $0.7 million. Selling, general and administrative expenses further benefited from a $1.6 million reclassification of merger costs to merger termination fees, net.

In the second quarter of 2012, we terminated our proposed merger and recorded the settlement proceeds, net of merger related costs of $43.0 million in the consolidated statement of operations and comprehensive income.

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Interest expense remained relatively flat at $6.4 million in the second quarter of 2012 and 2011.

Our income tax expense for the second quarter of 2012 was $20.3 million, or an effective rate of 38.1%, as compared to an expense of $2.2 million, or an effective rate of 13.5%, for the second quarter of 2011. The second quarter 2011 income tax expense includes the benefit of the release of $3.4 million (net of federal tax) of valuation allowance relating primarily to certain unitary state net operating loss carryforwards and credits. The annual rate depends on a number of factors, including the jurisdiction in which operating profit is earned and the timing and nature of discrete items.

As a result of the foregoing, we reported net earnings of $33.0 million in the second quarter of 2012 as compared to net earnings of $13.9 million in the prior year period. Our diluted earnings per share were $0.61 as compared to $0.26 in the prior year period.

Twenty-six weeks ended July 28, 2012 vs. Twenty-six weeks ended July 30, 2011

The following table presents for the periods indicated certain items in the consolidated statements of operations and comprehensive income as a percentage of total revenues (except as otherwise provided) and the percentage change in dollar amounts of such items compared to the indicated prior period.

	Percentage of Total Revenues				Percentage Change
Twenty-six  weeks ended	July 28, 2012 (Fiscal 2012)		July 30, 2011  (Fiscal 2011)		Favorable (Unfavorable)
Merchandise sales	78.6	%	79.5	%	0.2	%
Service revenue (1)	21.4		20.5		5.8
Total revenues	100.0		100.0		1.4
Costs of merchandise sales (2)	70.1	(3)	69.6	(3)	(1.0	)
Costs of service revenue (2)	94.9	(3)	90.8	(3)	(10.6	)
Total costs of revenues	75.4		73.9		(3.4	)
Gross profit from merchandise sales	29.9	(3)	30.5	(3)	(1.6	)
Gross profit from service revenue	5.1	(3)	9.2	(3)	(41.3	)
Total gross profit	24.6		26.1		(4.5	)
Selling, general and administrative expenses	22.3		21.4		(5.3	)
Net gain (loss) from dispositions of assets	—		—		—
Operating profit	2.3		4.7		(49.7	)
Merger termination fees, net	4.1		—		NA
Non-operating income	0.1		0.1		(14.3	)
Interest expense	1.2		1.3		—
Earnings from continuing operations before income taxes	5.3		3.5		51.5
Income tax expense	38.2	(4)	27.9	(4)	(107.4	)
Earnings from continuing operations	3.3		2.5		29.9
Discontinued operations, net of tax	—		—		—
Net earnings	3.3		2.5		29.6

(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, purchasing, 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 from continuing operations before income taxes.

Total revenue for the first half of 2012 increased by $14.1 million to $1,050.3 million from $1,036.1 million in the first half of 2011, while comparable store sales for the first half of 2012 decreased by $14.3 million, or 1.4%, as compared to the first half of 2011. The decrease in comparable store sales consisted of a decrease of 2.0% in comparable store merchandise revenue partially offset by an increase of 1.0% in comparable store service sales. Comparable store merchandise sales consisted of a decrease in customer counts, partially offset by an increase in the average transaction amount per customer. Comparable store service revenue was characterized by an increase in customer counts, partially offset by a decrease in the average transaction amount per customer. While our total

25

revenue figures were favorably impacted by the opening of the new stores, a new store is not added to our comparable store sales until it reaches its 13th month of operation. Non-comparable stores contributed an additional $28.5 million of total revenue in the first half of 2012 as compared to the prior year period.

Total gross profit decreased by $12.1 million, or 4.5%, to $258.3 million in the first half of 2012 from $270.3 million in the first half of 2011. Total gross profit margin decreased to 24.6% for the first half of 2012 from 26.1% for the first half of 2011. The decrease in total gross profit margin was primarily due to the shift in sales to lower margin tires and oil combined with decreased tire margin rates due to cost increases exceeding retail price increases (90 basis points) combined with higher occupancy and payroll and related expenses as a percent to total sales (80 basis points). The new Service & Tire Centers have a higher concentration of their sales in lower margin tires and have higher rent and payroll costs as a percent of total sales. While the new Service & Tire Centers have had a negative impact on total gross profit margin, these Service & Tire Centers positively contributed to total gross profit in both years.

Gross profit from merchandise sales decreased by $4.0 million, or 1.6%, to $246.8 million for the first half of 2012 from $250.8 million in the first half of 2011. Gross profit margin from merchandise sales decreased to 29.9% from 30.5% for the prior year period. The decrease in gross profit from merchandise sales was due to shift in sales mix to lower margin tires and oil, combined with a decline in tire margins due to cost increases exceeding retail price increases and higher warehousing costs partially offset by lower store occupancy costs (utilities and depreciation) as a percent of merchandise sales.

Gross profit from service revenue decreased by $8.0 million, or 41.3%, to $11.4 million for the first half of 2012 from $19.5 million in the first half of 2011. Gross profit margin from service revenue decreased to 5.1% for the first half of 2012 from 9.2% in the first half of 2011. In accordance with GAAP, service revenue is limited to labor sales (excludes any revenue from installed parts and materials) and costs of service revenues includes the fully loaded service center payroll and related employee benefits and service center occupancy costs. The decrease in service revenue gross profit margin was primarily due to the growth of our Service & Tire Centers, which lowered margins by 654 and 420 basis points in the first half of 2012 and 2011, respectively. Excluding the impact of Service & Tire Centers, gross profit from service revenue decreased to 11.6% for the first half of 2012 from 13.5% for the first half of 2011. The decrease in gross profit, exclusive of Service & Tire Centers, was mostly due to increased payroll and related benefit costs combined with higher store occupancy costs (utilities and depreciation).

Selling, general and administrative expenses, as a percentage of total revenues increased to 22.3% for the first half of 2012 as compared to 21.4% the prior year period. Selling, general and administrative expenses increased $11.8 million, or 5.3%, compared to the first half of 2011 due to higher media expense of $7.0 million, higher store and Store Support Center payroll and related expenses of $6.4 million, severance costs for a reduction in force at our Store Support Center of $0.7 million, and higher legal and professional services costs of $1.0 million, partially offset by lower credit card fees of $2.9 million and lower acquisition related costs of $1.0 million.

In the second quarter of 2012, we terminated our proposed merger and recorded the settlement proceeds, net of merger related costs of $43.0 million in the consolidated statement of operations and comprehensive income.

Interest expense remained relatively flat at $12.9 million in the first half of 2012 and 2011.

Our income tax expense for the first half of 2012 was $21.1 million, or an effective rate of 38.2%, as compared to an expense of $10.2 million, or an effective rate of 27.9%, for the first half of 2011. The change was primarily due to the release of valuation allowances on state net operating loss carry forwards and credits in the first half of 2011. The annual rate is dependent on a number of factors, including the jurisdiction in which operating profit is earned and the timing and nature of discrete items.

As a result of the foregoing, we reported net earnings of $34.1 million for the first half of 2012 as compared to net earnings of $26.3 million in the prior year period. Our diluted earnings per share were $0.63 as compared to $0.49 in the prior year period.

INDUSTRY COMPARISON

We operate in the U.S. automotive aftermarket, which has two general lines of business: (1) the Service business, defined as Do-It-For-Me (service labor, installed merchandise and tires) and (2) the Retail business, defined as Do-It-Yourself (retail merchandise) and commercial. Generally, specialized automotive retailers focus on either the Retail or Service area of the business. We believe that operation in both the Retail and Service areas of the business positively differentiates us from most of our competitors. Although we manage our store performance at a store level in aggregation, we believe that the following presentation, which includes the reclassification of revenue from installed products from retail sales to service center revenue, shows an accurate comparison against competitors within the two sales arenas. We compete in the Retail area of the business through our retail sales floor and commercial sales business. Our Service Center business competes in the Service area of the industry.

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The following table presents the revenues and gross profit for each area of our business:

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	July 28,		July 30,		July 28,		July 30,
(Dollar amounts in thousands)	2012		2011		2012		2011
Service Center Revenue (1)	$	274,257	$	260,835	$	545,346	$	508,165
Retail Sales (2)	251,414		261,759		504,929		527,969
Total revenues	$	525,671	$	522,594	$	1,050,275	$	1,036,134
Gross profit from Service Center Revenue (3)	$	55,868	$	60,669	$	109,756	$	119,631
Gross profit from Retail Sales (3)	74,733		74,541		148,497		150,701
Total gross profit	$	130,601	$	135,210	$	258,253	$	270,332

(1)Includes revenues from installed products.

(2)Excludes revenues from installed products.

(3)Gross profit from Service Center Revenue includes the cost of installed products sold, purchasing, warehousing, 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. Gross profit from Retail Sales includes the cost of products sold, purchasing, warehousing and store occupancy costs.

CAPITAL AND LIQUIDITY

Our cash requirements arise principally from (1) the purchase of inventory and capital expenditures related to existing and new stores, offices and distribution centers, (2) debt service and (3) contractual obligations. Cash flows realized through the sales of automotive services, tires, parts and accessories are our primary source of liquidity. Net cash provided by operating activities was $87.5 million in the first half of 2012, as compared to $51.2 million in the prior year period. The $36.2 million increase from the prior year period was due to increased net earnings (including on a pre-tax basis, $43.0 million of net, merger termination fees), net of non-cash adjustments of $22.3 million and a favorable change in operating assets and liabilities of $13.9 million. The change in operating assets and liabilities was primarily due to favorable changes in accrued expenses and other current assets of $20.4 million and other long-term liabilities of $2.3 million, offset by unfavorable changes in inventory, net of accounts payable of $8.7 million.

In both fiscal 2012 and 2011, the increased investment in inventory of $12.4 and $12.9 million, respectively, was funded entirely by the improvement in our trade vendor payment terms. Taking into consideration changes in our trade payable program liability (shown as cash flows from financing activities on the consolidated statements of cash flows), cash generated from accounts payable was $33.3 million and $17.2 million for the first half of 2012 and 2011, respectively. The ratio of accounts payable, including our trade payable program, to inventory was 57.8% at July 28, 2012, 53.6% at January 28, 2012 and 50.0% at July 30, 2011, respectively. The $12.4 million increase in inventory from January 28, 2012 was primarily due to an expanded inventory assortment in certain hard part categories, seasonal purchases and increased investment in our new stores of $1.3 million.

The change in accrued expenses and other current assets was primarily due to a reduction in sales tax and employee payroll tax accruals of $8.9 million due to the timing of payments to taxing authorities and a reduction in the amount of payments for 401(k) employer match, supplemental executive retirement plan pension and management incentive compensation of $9.4 million in 2012 as compared to 2011. The change in other long-term liabilities was primarily due to a voluntary pension contribution of $3.0 million in the prior year.

Cash used in investing activities was $26.3 million in the first half of 2012 as compared to $78.9 million in the prior year period. Capital expenditures were $26.3 million and $30.6 million in the first half of 2012 and 2011, respectively. Capital expenditures for the first half of 2012, in addition to our regularly scheduled store and distribution center improvements and information technology enhancements, included the addition of eight new Service & Tire Centers and one new Supercenter. Capital expenditures for the first half of 2011 included the addition of four new Service & Tire Centers and one new Supercenter. During the first half of 2011, we acquired 99 Service & Tire Centers through three separate transactions, including 85 stores in Florida, Georgia and Alabama, seven stores in Houston and seven stores in the Seattle/Tacoma market for $42.8 million, net of cash acquired. During the first half of 2011 we invested $4.8 million in a restricted account as collateral for retained liabilities included within existing insurance programs in lieu of previously outstanding letters of credit.

27

Our targeted capital expenditures for fiscal 2012 are $60.0 million. Our fiscal year 2012 capital expenditures include the addition of approximately 40 new locations, the conversion of 15 Supercenters into Superhubs, and required expenditures for our existing stores, offices and distribution centers. These expenditures are expected to be funded by cash on hand and net cash generated from operating activities. Additional capacity, if needed, exists under our existing line of credit.

In the first half of 2012, cash provided by financing activities was $31.5 million, as compared to cash used in financing activities of $0.6 million in the prior year period, primarily due to increased net borrowings on our trade payable program of $25.4 million. The trade payable program is funded by various bank participants who have the ability, but not the obligation, to purchase, directly from our vendors, account receivables owed by Pep Boys. As of July 28, 2012 and January 28, 2012, we had an outstanding balance of $115.7 million and $85.2 million, respectively (classified as trade payable program liability on the consolidated balance sheet). In the first half of 2011, we paid $2.4 million in financing costs to amend and restate our revolving credit agreement to reduce its interest rate by 75 basis points and to extend its maturity to July 2016 and paid a cash dividend of $3.2 million.

We anticipate that cash on hand and cash generated by operating activities will exceed our expected cash requirements in fiscal year 2012. In addition, we expect to have excess availability under our existing revolving credit agreement during the entirety of fiscal year 2012. As of July 28, 2012, we had undrawn availability on our revolving credit facility of $175.1 million. As of July 28, 2012, we had $150.8 million of cash and cash equivalents on hand. Our current intention is to use our cash on hand together with proceeds from a new debt facility to retire our term loan and senior subordinated notes, both in advance of their respective 2013 and 2014 maturities. This contemplated refinancing will reduce our overall long-term debt by approximately $100.0 million, extend our maturities and reduce our overall interest expense, while maintaining flexibility for accelerated growth and/or returning capital to our shareholders.

During fiscal 2011, the Company began the process of terminating its defined benefit pension plan (the “Plan”), which covered full-time employees hired on or before February 1, 1992. The termination of the Plan, which has been frozen since December 31, 1996, is expected to be completed by the end of fiscal 2012. In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, the Company is required to fully fund the Plan on a termination basis and will commit to contribute the additional assets necessary to do so with cash on hand. The amount necessary to do so is not yet known, but is currently estimated to be between $13.0 and $18.0 million. Plan participants will not be adversely affected by the Plan termination, but rather will have their benefits either converted into a lump sum cash payment or an annuity contract placed with an insurance carrier.

Our working capital was $236.2 million and $166.6 million at July 28, 2012 and January 28, 2012, respectively. Our total debt, net of cash on hand, as a percentage of our total capitalization, was 17.2% and 29.6% at July 28, 2012 and January 28, 2012, respectively.

Contractual Obligations

For a discussion of our other contractual obligations, see a discussion of future commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Form 10-K for the fiscal year ended January 28, 2012. There have been no other significant developments with respect to our contractual obligations since January 28, 2012.

NEW ACCOUNTING STANDARDS

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”), which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. The adoption of ASU 2011-04 did not have a material impact on the consolidated financial statements.

In June of 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 was issued to improve the comparability of financial reporting between U.S. GAAP and IFRS, and eliminates previous U.S. GAAP guidance that allowed an entity to present components of other comprehensive income (“OCI”) as part of its statement of changes in shareholders’ equity. With the issuance of ASU 2011-05, companies are now required to report all components of OCI either in a single continuous statement of total comprehensive income, which includes components of both OCI and net income, or in a separate statement appearing consecutively with the statement of income. ASU 2011-05 does not affect current guidance for the accounting of the components of OCI, or which items are included within total comprehensive income, and is effective for periods beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05 affected presentation only and therefore did not have an impact on the Company’s consolidated financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU 2011-08, “Intangibles — Goodwill and Other (Topic 350) —Testing Goodwill for Impairment” (“ASU 2011-08”). The new guidance provides entities with the option to perform a qualitative assessment of whether it

28

is more likely than not that the fair value of a reporting unit is less than its carrying amount before applying the quantitative two-step goodwill impairment test. If an entity concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the quantitative two-step goodwill impairment test. Entities also have the option to bypass the assessment of qualitative factors for any reporting unit in any period and proceed directly to performing the first step of the quantitative two-step goodwill impairment test, as was required prior to the issuance of this new guidance. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-08 will not have a material impact on the consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to customer incentives, product returns and warranty obligations, bad debts, inventories, income taxes, financing operations, restructuring costs, retirement benefits, share-based compensation, risk participation agreements, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a detailed discussion of significant accounting policies that may involve a higher degree of judgment or complexity, refer to “Critical Accounting Policies and Estimates” as reported in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. The words “guidance,” “expect,” “anticipate,” “estimates,” “forecasts” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include management’s expectations regarding implementation of its long-term strategic plan, future financial performance, automotive aftermarket trends, levels of competition, business development activities, future capital expenditures, financing sources and availability and the effects of regulation and litigation. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. Our actual results may differ materially from the results discussed in the forward-looking statements due to factors beyond our control, including the strength of the national and regional economies, retail and commercial consumers’ ability to spend, the health of the various sectors of the automotive aftermarket, the weather in geographical regions with a high concentration of our stores, competitive pricing, the location and number of competitors’ stores, product and labor costs and the additional factors described in our filings with the Securities and Exchange Commission (SEC). We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

ITEM 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposure with regard to financial instruments is due to changes in interest rates. Pursuant to the terms of our Revolving Credit Agreement, changes in LIBOR or the Prime Rate could affect the rates at which we could borrow funds thereunder. At July 28, 2012, we had $0.2 million of borrowings under this facility. Additionally, we have a $147.0 million Senior Secured Term Loan that bears interest at three month LIBOR plus 2.0%.

We have an interest rate swap for a notional amount of $145.0 million, which is designated as a cash flow hedge on our Senior Secured Term Loan. We record the effective portion of the change in fair value through accumulated other comprehensive loss.

The fair value of the derivative was $9.5 million and $12.5 million payable at July 28, 2012 and January 28, 2012, respectively. Of the $3.0 million decrease in the liabilities during the twenty-six weeks ended July 28, 2012, $1.9 million net of tax was recorded to accumulated other comprehensive loss on the consolidated balance sheet.

29

ITEM 4  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonable assurance that the information required to be disclosed is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. The term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in providing reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No change in the Company’s internal control over financial reporting occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1   LEGAL PROCEEDINGS

The Company is party to various actions and claims arising in the normal course of business. The Company believes that amounts accrued for awards or assessments in connection with all such matters are adequate and that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position. However, there exists a reasonable possibility of loss in excess of the amounts accrued, the amount of which cannot currently be estimated. While the Company does not believe that the amount of such excess loss could be material to the Company’s financial position, any such loss could have a material adverse effect on the Company’s results of operations in the period(s) during which the underlying matters are resolved.

ITEM 1A  RISK FACTORS

There have been no changes to the risks described in the Company’s previously filed Annual Report on Form 10-K for the fiscal year ended January 28, 2012, except that the Risk Factor entitled “Failure to complete the proposed Merger could adversely affect our business.” is no longer applicable.

ITEM 2    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3    DEFAULTS UPON SENIOR SECURITIES

None.

30

ITEM 4  MINE SAFETY DISCLOSURES

None.

ITEM 5  OTHER INFORMATION

None.

31

ITEM 6  EXHIBITS

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS (1)	XBRL Instance Document
101.SCH(1)	XBRL Taxonomy Extension Schema Document
101.CAL(1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB(1)	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE(1)	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF(1)	XBRL Taxonomy Extension Definition Linkbase Document

(1)In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except to the extent expressly set forth by specific reference in such filing.

32

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		THE PEP BOYS - MANNY, MOE & JACK
		(Registrant)
Date:	September 6, 2012	by:	/s/ Sanjay Sood
		Sanjay Sood
		Vice President — Controller and Chief Accounting Officer (Principal Financial Officer)

33

INDEX TO EXHIBITS

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS (1)	XBRL Instance Document
101.SCH(1)	XBRL Taxonomy Extension Schema Document
101.CAL(1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB(1)	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE(1)	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF(1)	XBRL Taxonomy Extension Definition Linkbase Document

(1)In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except to the extent expressly set forth by specific reference in such filing.

34

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael R. Odell, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Pep Boys - Manny, Moe & Jack;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 6, 2012
by:	/s/ Michael R. Odell
Michael R. Odell
President and Chief Executive Officer
(Principal Executive Officer)

1

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sanjay Sood, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Pep Boys - Manny, Moe & Jack;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this report based on such evaluation; and

(d) Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 6, 2012
by	/s/ Sanjay Sood
Sanjay Sood
Vice President — Controller and Chief Accounting Officer
(Principal Financial Officer)

1

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report on Form 10-Q of The Pep Boys - Manny, Moe & Jack (the “Company”) for the quarterly period ending July 28, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),

I, Michael R. Odell, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(i)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: September 6, 2012	by:	/s/ Michael R. Odell
	Michael R. Odell
	President and Chief Executive Officer
	(Principal Executive Officer)

1

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report on Form 10-Q of The Pep Boys - Manny, Moe & Jack (the “Company”) for the quarterly period ending July 28, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),

I, Sanjay Sood, Vice President — Controller and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(i)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: September 6, 2012	by:	/s/ Sanjay Sood
	Sanjay Sood
	Vice President — Controller and Chief Accounting Officer
	(Principal Financial Officer)

1

XML

MERGER UPDATE (Details) (USD $)	3 Months Ended	6 Months Ended
	Jul. 28, 2012	Jul. 28, 2012	May 29, 2012 Parent
MERGER UPDATE
Fees due related to merger settlement agreement			$ 50,000,000
Merger termination fees, net	$ 42,955,000	$ 42,955,000

XML

DEBT AND FINANCING ARRANGEMENTS (Details) (USD $)							6 Months Ended
	Jul. 28, 2012 item	Jan. 28, 2012	Jul. 28, 2012 7.50% Senior Subordinated Notes, due December 2014	Jan. 28, 2012 7.50% Senior Subordinated Notes, due December 2014	Jul. 28, 2012 Senior Secured Term Loan, due October 2013 item	Jan. 28, 2012 Senior Secured Term Loan, due October 2013	Jul. 28, 2012 Revolving Credit Agreement, through January 2016	Jul. 28, 2012 Revolving Credit Agreement, through January 2016 Minimum	Jul. 28, 2012 Revolving Credit Agreement, through January 2016 Maximum	Jul. 28, 2012 Letters of credit
Debt and financing arrangements
Long-term debt	$ 294,758,000	$ 295,122,000	$ 147,565,000	$ 147,565,000	$ 147,018,000	$ 147,557,000	$ 175,000
Current maturities	(1,254,000)	(1,079,000)
Long-term debt less current maturities	293,504,000	294,043,000
Interest rate on debt instrument (as a percent)			7.50%	7.50%
Number of stores collateralized	742				126
LIBOR							LIBOR
Margin added to derive interest rate (as a percent)								2.00%	2.50%
Amount outstanding under agreement							200,000
Amount of availability utilized to support outstanding leters of credit							29,600,000
Outstanding letters of credit										29,600,000
Available borrowing capacity remaining							175,100,000
Minimum borrowing availability required to prevent the triggering of an EBITDA requirement covenant							50,000,000
Long-term debt estimated fair value	$ 296,600,000	$ 293,600,000

XML

BENEFIT PLANS (Tables)

6 Months Ended

Jul. 28, 2012

BENEFIT PLANS

Schedule of expense for pension plan

	Thirteen Weeks Ended						Twenty-six Weeks Ended
(dollar amounts in thousands)	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
Interest cost	619			627			1,238			1,278
Expected return on plan assets	(704		)	(721		)	(1,408		)	(1,372		)
Amortization of net loss	566			405			1,133			756
Net periodic benefit cost	$	481		$	311		$	963		$	662

XML

SUPPLEMENTAL GUARANTOR INFORMATION (Details 3) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 28, 2012	Jul. 30, 2011
SUPPLEMENTAL GUARANTOR INFORMATION
Net cash provided by operating activities	$ 87,450	$ 51,234
Investing Activities:
Capital expenditures	(26,347)	(30,636)
Proceeds from dispositions of assets		89
Premiums paid on life insurance policies		(795)
Collateral investment		(4,763)
Acquisitions, net of cash acquired		(42,757)
Net cash used in investing activities	(26,347)	(78,862)
Financing Activities:
Borrowings under line of credit agreements	1,106	5,045
Payments under line of credit agreements	(931)	(5,045)
Borrowings on trade payable program liability	80,836	59,097
Payments on trade payable program liability	(50,304)	(53,944)
Payment for finance issuance cost		(2,441)
Debt Payments	(539)	(539)
Dividends paid		(3,171)
Proceeds from stock issuance	1,318	363
Net cash provided by (used in) financing activities	31,486	(635)
Net increase (decrease) in cash and cash equivalents	92,589	(28,263)
Cash and cash equivalents at beginning of period	58,244	90,240
Cash and cash equivalents at end of period	150,833	61,977
Pep Boys
SUPPLEMENTAL GUARANTOR INFORMATION
Net cash provided by operating activities	41,640	13,152
Investing Activities:
Capital expenditures	(15,124)	(15,555)
Premiums paid on life insurance policies		(795)
Collateral investment		(4,763)
Acquisitions, net of cash acquired		(144)
Net cash used in investing activities	(15,124)	(21,257)
Financing Activities:
Borrowings under line of credit agreements	500	1,771
Payments under line of credit agreements	(325)	(1,771)
Borrowings on trade payable program liability	80,836	59,097
Payments on trade payable program liability	(50,304)	(53,944)
Payment for finance issuance cost		(2,441)
Debt Payments	(539)	(539)
Dividends paid		(3,171)
Intercompany (payments) borrowings	11,766	(8,985)
Proceeds from stock issuance	1,318	363
Net cash provided by (used in) financing activities	43,252	(9,620)
Net increase (decrease) in cash and cash equivalents	69,768	(17,725)
Cash and cash equivalents at beginning of period	22,740	37,912
Cash and cash equivalents at end of period	92,508	20,187
Subsidiary Guarantors
SUPPLEMENTAL GUARANTOR INFORMATION
Net cash provided by operating activities	56,208	49,122
Investing Activities:
Capital expenditures	(11,223)	(15,081)
Proceeds from dispositions of assets		89
Acquisitions, net of cash acquired		(42,613)
Net cash used in investing activities	(11,223)	(57,605)
Financing Activities:
Borrowings under line of credit agreements	606	3,274
Payments under line of credit agreements	(606)	(3,274)
Intercompany (payments) borrowings	(25,006)	(2,821)
Net cash provided by (used in) financing activities	(25,006)	(2,821)
Net increase (decrease) in cash and cash equivalents	19,979	(11,304)
Cash and cash equivalents at beginning of period	27,181	42,779
Cash and cash equivalents at end of period	47,160	31,475
Subsidiary Non-Guarantors
SUPPLEMENTAL GUARANTOR INFORMATION
Net cash provided by operating activities	(9,042)	(9,807)
Financing Activities:
Dividends paid	(1,356)	(1,233)
Intercompany (payments) borrowings	13,240	11,806
Net cash provided by (used in) financing activities	11,884	10,573
Net increase (decrease) in cash and cash equivalents	2,842	766
Cash and cash equivalents at beginning of period	8,323	9,549
Cash and cash equivalents at end of period	11,165	10,315
Consolidation/Elimination
SUPPLEMENTAL GUARANTOR INFORMATION
Net cash provided by operating activities	(1,356)	(1,233)
Financing Activities:
Dividends paid	1,356	1,233
Net cash provided by (used in) financing activities	$ 1,356	$ 1,233

XML

FAIR VALUE MEASUREMENTS AND DERIVATIVES (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 30, 2011	Jul. 28, 2012	Jan. 28, 2012
Other liabilities
Derivative liability		$ 9,500	$ 12,500
Additional investment in restricted accounts as collateral	4,763
Recurring basis | Fair Value
Other liabilities
Derivative liability		9,494	12,540
Recurring basis | Fair Value | Cash and cash equivalents
Assets:
Assets		150,833	58,244
Recurring basis | Fair Value | Collateral investments
Assets:
Assets		17,276	17,276
Recurring basis | Fair Value | Rabbi trust assets
Assets:
Assets		3,596	3,576
Recurring basis | Fair Value Measurements Using Inputs Considered as Level 1 | Cash and cash equivalents
Assets:
Assets		150,833	58,244
Recurring basis | Fair Value Measurements Using Inputs Considered as Level 1 | Collateral investments
Assets:
Assets		17,276	17,276
Recurring basis | Fair Value Measurements Using Inputs Considered as Level 2
Other liabilities
Derivative liability		9,494	12,540
Recurring basis | Fair Value Measurements Using Inputs Considered as Level 2 | Rabbi trust assets
Assets:
Assets		$ 3,596	$ 3,576

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MERCHANDISE INVENTORIES

6 Months Ended

Jul. 28, 2012

MERCHANDISE INVENTORIES

MERCHANDISE INVENTORIES

NOTE 4—MERCHANDISE INVENTORIES

Merchandise inventories are valued at the lower of cost or market. Cost is determined by using the last-in, first-out (“LIFO”) method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on inventory and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected fiscal year-end inventory levels and costs. If the first-in, first-out (“FIFO”) method of costing inventory had been used by the Company, inventory would have been $553.9 million and $536.4 million as of July 28, 2012 and January 28, 2012, respectively.

The Company’s inventory, consisting primarily of auto parts and accessories, is used on vehicles typically having long lives. Because of this, and combined with the Company’s historical experience of returning excess inventory to the Company’s vendors for full credit, the risk of obsolescence is minimal. The Company establishes a reserve for excess inventory for instances where less than full credit will be received for such returns or where the Company anticipates items will be sold at retail prices that are less than recorded costs. The reserve is based on management’s judgment, including estimates and assumptions regarding marketability of products, the market value of inventory to be sold in future periods and on historical experiences where the Company received less than full credit from vendors for product returns. The Company also provides for estimated inventory shrinkage based upon historical levels and the results of its cycle counting program. The Company’s inventory adjustments for these matters were approximately $4.3 million at July 28, 2012 and $4.6 million at January 28, 2012.

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ACQUISITIONS (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended	6 Months Ended			12 Months Ended	18 Months Ended	6 Months Ended
	Jul. 28, 2012	Jul. 30, 2011	Jul. 28, 2012	Jul. 30, 2011	Jan. 28, 2012 item	Jul. 30, 2011 Seattle-Tacoma Washington item	Jul. 30, 2011 Houston, Texas item	Jul. 30, 2011 Acquisitions	Jan. 28, 2012 Acquisitions	Jul. 28, 2012 Acquisitions	Jul. 30, 2011 Tire Stores Group Holding Corporation item
ACQUISITIONS
Number of acquisitions					3
ACQUISITIONS
Number of service and tire centers acquired						7	7				85
Sales	$ 525,671,000	$ 522,594,000	$ 1,050,275,000	$ 1,036,134,000				$ 94,700,000
Costs related to acquisitions									1,500,000
Sales from acquisition date										21,900,000
Net earnings from acquisition date										700,000
Purchase price recognized								$ 42,600,000

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BASIS OF PRESENTATION (Details)	Jul. 28, 2012 item
BASIS OF PRESENTATION
Number of operated stores	742
Number of operated stores owned	232
Number of operated stores leased	510

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MERCHANDISE INVENTORIES (Details) (USD $) In Millions, unless otherwise specified	Jul. 28, 2012	Jan. 28, 2012
MERCHANDISE INVENTORIES
Value of inventory under FIFO method	$ 553.9	$ 536.4
Inventory adjustments	$ 4.3	$ 4.6

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PROPERTY AND EQUIPMENT (Details) (USD $) In Thousands, unless otherwise specified	Jul. 28, 2012	Jan. 28, 2012
Property and equipment
Accumulated depreciation and amortization	$ (1,149,556)	$ (1,110,900)
Property and equipment - net	682,619	696,339
Land
Property and equipment
Property and equipment, gross	204,023	204,023
Buildings and improvements
Property and equipment
Property and equipment, gross	885,485	875,999
Furniture, fixtures and equipment
Property and equipment
Property and equipment, gross	738,815	723,938
Construction in progress
Property and equipment
Property and equipment, gross	$ 3,852	$ 3,279

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ACQUISITIONS

6 Months Ended

Jul. 28, 2012

ACQUISITIONS

ACQUISITIONS

NOTE 3—ACQUISITIONS

During the twenty-six weeks ended July 30, 2011, the Company made three separate acquisitions. The Company acquired the assets related to seven service and tire centers located in the Seattle-Tacoma area, the assets related to seven service and tire centers located in the Houston, Texas area and all outstanding shares of capital stock of Tire Stores Group Holding Corporation which operated an 85-store chain in Florida, Georgia and Alabama under the name Big 10. Collectively, the acquired stores produced approximately $94.7 million (unaudited) in sales annually based on pre-acquisition historical information. The total purchase price of these stores was approximately $42.6 million in cash and the assumption of certain liabilities. The acquisitions were financed through cash flows provided by operations. The results of operations of these acquired stores are included in the Company’s results from their respective acquisition dates.

The Company expensed all costs related to these acquisitions during fiscal 2011. The total costs related to these acquisitions were $1.5 million and are included in the consolidated statement of operations within selling, general and administrative expenses.

As the Company’s acquisitions (including Big 10) were immaterial to the Company’s operating results both individually and in aggregate for the thirteen and twenty six week periods ended July 30, 2011, pro forma results of operations are not disclosed. Sales and net earnings for the fiscal 2011 acquired stores totaled $21.9 million and $0.7 million, respectively for the period from acquisition date through July 30, 2011.

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WARRANTY RESERVE (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jul. 28, 2012	Jan. 28, 2012
Warranty reserve
Beginning balance	$ 673	$ 673
Additions related to current period sales	5,410	12,122
Warranty costs incurred in current period	(5,410)	(12,122)
Ending balance	$ 673	$ 673

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SUPPLEMENTAL GUARANTOR INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	Jul. 28, 2012	Jan. 28, 2012	Jul. 30, 2011	Jan. 29, 2011
Current assets:
Cash and cash equivalents	$ 150,833	$ 58,244	$ 61,977	$ 90,240
Accounts receivable, net	27,962	25,792
Merchandise inventories	626,555	614,136
Prepaid expenses	21,021	26,394
Other current assets	53,083	59,979
Total current assets	879,454	784,545
Property and equipment - net	682,619	696,339
Goodwill	46,917	46,917
Deferred income taxes	45,825	72,870
Other long-term assets	31,660	33,108
Total assets	1,686,475	1,633,779
Current liabilities:
Accounts payable	246,522	243,712
Trade payable program liability	115,746	85,214
Accrued expenses	218,548	221,705
Deferred income taxes	61,231	66,208
Current maturities of long-term debt	1,254	1,079
Total current liabilities	643,301	617,918
Long-term debt less current maturities	293,504	294,043
Other long-term liabilities	72,290	77,216
Deferred gain from asset sales	133,971	140,273
Total stockholders' equity	543,409	504,329
Total liabilities and stockholders' equity	1,686,475	1,633,779
Pep Boys
Current assets:
Cash and cash equivalents	92,508	22,740	20,187	37,912
Accounts receivable, net	14,546	14,566
Merchandise inventories	221,294	214,584
Prepaid expenses	8,929	12,945
Other current assets	1,776	606
Total current assets	339,053	265,441
Property and equipment - net	240,096	243,108
Investment in subsidiaries	2,204,475	2,176,992
Goodwill	2,549	2,549
Deferred income taxes	3,083	20,468
Other long-term assets	29,868	31,068
Total assets	2,819,124	2,739,626
Current liabilities:
Accounts payable	246,522	243,712
Trade payable program liability	115,746	85,214
Accrued expenses	25,211	17,887
Deferred income taxes	26,243	29,383
Current maturities of long-term debt	1,254	1,079
Total current liabilities	414,976	377,275
Long-term debt less current maturities	293,504	294,043
Other long-term liabilities	26,704	30,540
Deferred gain from asset sales	59,215	61,323
Intercompany liabilities	1,481,316	1,472,116
Total stockholders' equity	543,409	504,329
Total liabilities and stockholders' equity	2,819,124	2,739,626
Subsidiary Guarantors
Current assets:
Cash and cash equivalents	47,160	27,181	31,475	42,779
Accounts receivable, net	13,416	11,226
Merchandise inventories	405,261	399,552
Prepaid expenses	12,577	16,873
Total current assets	478,414	454,832
Property and equipment - net	431,087	441,645
Intercompany receivables	1,412,350	1,389,910
Goodwill	44,368	44,368
Deferred income taxes	42,742	52,402
Other long-term assets	1,792	2,040
Total assets	2,410,753	2,385,197
Current liabilities:
Accrued expenses	60,694	55,527
Deferred income taxes	39,829	41,666
Total current liabilities	100,523	97,193
Other long-term liabilities	45,586	46,676
Deferred gain from asset sales	93,155	97,541
Total stockholders' equity	2,171,489	2,143,787
Total liabilities and stockholders' equity	2,410,753	2,385,197
Subsidiary Non-Guarantors
Current assets:
Cash and cash equivalents	11,165	8,323	10,315	9,549
Prepaid expenses	7,102	14,996
Other current assets	56,148	64,214
Total current assets	74,415	87,533
Property and equipment - net	29,835	30,177
Intercompany receivables	68,966	82,206
Total assets	173,216	199,916
Current liabilities:
Accrued expenses	140,230	166,711
Total current liabilities	140,230	166,711
Total stockholders' equity	32,986	33,205
Total liabilities and stockholders' equity	173,216	199,916
Consolidation/Elimination
Current assets:
Prepaid expenses	(7,587)	(18,420)
Other current assets	(4,841)	(4,841)
Total current assets	(12,428)	(23,261)
Property and equipment - net	(18,399)	(18,591)
Investment in subsidiaries	(2,204,475)	(2,176,992)
Intercompany receivables	(1,481,316)	(1,472,116)
Total assets	(3,716,618)	(3,690,960)
Current liabilities:
Accrued expenses	(7,587)	(18,420)
Deferred income taxes	(4,841)	(4,841)
Total current liabilities	(12,428)	(23,261)
Deferred gain from asset sales	(18,399)	(18,591)
Intercompany liabilities	(1,481,316)	(1,472,116)
Total stockholders' equity	(2,204,475)	(2,176,992)
Total liabilities and stockholders' equity	$ (3,716,618)	$ (3,690,960)

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jul. 28, 2012	Jan. 28, 2012
Current assets:
Cash and cash equivalents	$ 150,833	$ 58,244
Accounts receivable, less allowance for uncollectible accounts of $1,247 and $1,303	27,962	25,792
Merchandise inventories	626,555	614,136
Prepaid expenses	21,021	26,394
Other current assets	53,083	59,979
Total current assets	879,454	784,545
Property and equipment - net	682,619	696,339
Goodwill	46,917	46,917
Deferred income taxes	45,825	72,870
Other long-term assets	31,660	33,108
Total assets	1,686,475	1,633,779
Current liabilities:
Accounts payable	246,522	243,712
Trade payable program liability	115,746	85,214
Accrued expenses	218,548	221,705
Deferred income taxes	61,231	66,208
Current maturities of long-term debt	1,254	1,079
Total current liabilities	643,301	617,918
Long-term debt less current maturities	293,504	294,043
Other long-term liabilities	72,290	77,216
Deferred gain from asset sales	133,971	140,273
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
Additional paid-in capital	295,536	296,462
Retained earnings	454,343	423,437
Accumulated other comprehensive loss	(15,011)	(17,649)
Treasury stock, at cost - 15,563,931 shares and 15,803,322 shares	(260,016)	(266,478)
Total stockholders' equity	543,409	504,329
Total liabilities and stockholders' equity	$ 1,686,475	$ 1,633,779

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BASIS OF PRESENTATION

6 Months Ended

Jul. 28, 2012

BASIS OF PRESENTATION

BASIS OF PRESENTATION

NOTE 1—BASIS OF PRESENTATION

The Pep Boys — Manny, Moe & Jack and subsidiaries (the “Company”) consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the Company’s financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, costs and expenses, as well as the disclosure of contingent assets and liabilities and other related disclosures. The Company bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of the Company’s assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and the Company includes any revisions to its estimates in the results for the period in which the actual amounts become known.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted, as permitted by Rule 10-01 of the Securities and Exchange Commission’s Regulation S-X, “Interim Financial Statements.” It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2012. The results of operations for the twenty-six weeks ended July 28, 2012 are not necessarily indicative of the operating results for the full fiscal year.

The consolidated financial statements presented herein are unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows as of July 28, 2012 and for all periods presented have been made.

The Company’s fiscal year ends on the Saturday nearest January 31. Accordingly, references to fiscal years 2012 and 2011 refer to the fiscal year ending February 2, 2013 and the fiscal year ended January 28, 2012, respectively.

The Company operated 742 store locations at July 28, 2012, of which 232 were owned and 510 were leased.

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EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 28, 2012	Jul. 30, 2011	Jul. 28, 2012	Jul. 30, 2011
EARNINGS PER SHARE
Earnings from continuing operations	$ 33,034	$ 13,891	$ 34,168	$ 26,296
Income (loss) from discontinued operations, net of tax	14	52	(58)	15
Net earnings	$ 33,048	$ 13,943	$ 34,110	$ 26,311
Basic average number of common shares outstanding during period	53,146,000	52,952,000	53,110,000	52,901,000
Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price	651,000	697,000	765,000	691,000
Diluted average number of common shares assumed outstanding during period	53,797,000	53,649,000	53,875,000	53,592,000
Basic earnings per share:
Earnings from continuing operations (in dollars per share)	$ 0.62	$ 0.26	$ 0.64	$ 0.49
Basic earnings per share (in dollars per share)	$ 0.62	$ 0.26	$ 0.64	$ 0.49
Diluted earnings per share:
Earnings from continuing operations (in dollars per share)	$ 0.61	$ 0.26	$ 0.63	$ 0.49
Diluted earnings per share (in dollars per share)	$ 0.61	$ 0.26	$ 0.63	$ 0.49
Additional disclosures
Outstanding options and restricted stock units (in shares)	2,382,000	2,682,000	2,382,000	2,682,000
Anti-dilutive stock options excluded from computation of diluted earnings per share (in shares)	706,000	888,000	503,000	830,000

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DEBT AND FINANCING ARRANGEMENTS (Tables)

6 Months Ended

Jul. 28, 2012

DEBT AND FINANCING ARRANGEMENTS

Schedule of debt and financing arrangements

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
7.50% Senior Subordinated Notes, due December 2014	$	147,565		$	147,565
Senior Secured Term Loan, due October 2013	147,018			147,557
Revolving Credit Agreement, through January 2016	175			—
Long-term debt	294,758			295,122
Current maturities	(1,254		)	(1,079		)
Long-term debt less current maturities	$	293,504		$	294,043

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BENEFIT PLANS (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2011	Jul. 28, 2012	Jul. 30, 2011	Jul. 28, 2012	Jul. 30, 2011
BENEFIT PLANS
Minimum age of employee to qualify for qualified savings plan				21 years
Minimum service period of employee to qualify for qualified savings plan				1 year
Pension plan expense
Interest cost		$ 619,000	$ 627,000	$ 1,238,000	$ 1,278,000
Expected return on plan assets		(704,000)	(721,000)	(1,408,000)	(1,372,000)
Amortization of net loss		566,000	405,000	1,133,000	756,000
Net periodic benefit cost		481,000	311,000	963,000	662,000
Discretionary contribution to defined benefit pension plan	$ 3,000,000

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jul. 28, 2012

EARNINGS PER SHARE

Schedule of calculation of basic and diluted earnings per share

		Thirteen Weeks Ended				Twenty-six Weeks Ended
(in thousands, except per share amounts)		July 28, 2012		July 30, 2011		July 28, 2012			July 30, 2011
(a)	Earnings from continuing operations	$	33,034	$	13,891	$	34,168		$	26,296
	Income (loss) from discontinued operations, net of tax	14		52		(58		)	15
	Net earnings	$	33,048	$	13,943	$	34,110		$	26,311
(b)	Basic average number of common shares outstanding during period	53,146		52,952		53,110			52,901
	Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price	651		697		765			691
(c)	Diluted average number of common shares assumed outstanding during period	53,797		53,649		53,875			53,592
	Basic earnings per share:
	Earnings from continuing operations (a/b)	$	0.62	$	0.26	$	0.64		$	0.49
	Discontinued operations, net of tax	—		—		—			—
	Basic earnings per share	$	0.62	$	0.26	$	0.64		$	0.49
	Diluted earnings per share:
	Earnings from continuing operations (a/c)	$	0.61	$	0.26	$	0.63		$	0.49
	Discontinued operations, net of tax	—		—		—			—
	Diluted earnings per share	$	0.61	$	0.26	$	0.63		$	0.49

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NEW ACCOUNTING STANDARDS

6 Months Ended

Jul. 28, 2012

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

NOTE 2—NEW ACCOUNTING STANDARDS

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”), which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. The adoption of ASU 2011-04 did not have a material impact on the consolidated financial statements.

In June of 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 was issued to improve the comparability of financial reporting between U.S. GAAP and IFRS, and eliminates previous U.S. GAAP guidance that allowed an entity to present components of other comprehensive income (“OCI”) as part of its statement of changes in shareholders’ equity. With the issuance of ASU 2011-05, companies are now required to report all components of OCI either in a single continuous statement of total comprehensive income, which includes components of both OCI and net income, or in a separate statement appearing consecutively with the statement of income. ASU 2011-05 does not affect current guidance for the accounting of the components of OCI, or which items are included within total comprehensive income, and is effective for periods beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05 affected presentation only and therefore did not have an impact on the Company’s consolidated financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU 2011-08, “Intangibles — Goodwill and Other (Topic 350) —Testing Goodwill for Impairment” (“ASU 2011-08”). The new guidance provides entities with the option to perform a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before applying the quantitative two-step goodwill impairment test. If an entity concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the quantitative two-step goodwill impairment test. Entities also have the option to bypass the assessment of qualitative factors for any reporting unit in any period and proceed directly to performing the first step of the quantitative two-step goodwill impairment test, as was required prior to the issuance of this new guidance. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-08 will not have a material impact on the consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jul. 28, 2012	Jan. 28, 2012
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for uncollectible accounts (in dollars)	$ 1,247	$ 1,303
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, authorized shares	500,000,000	500,000,000
Common stock, issued shares	68,557,041	68,557,041
Treasury stock, shares	15,563,931	15,803,322

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LEGAL MATTERS

6 Months Ended

Jul. 28, 2012

LEGAL MATTERS

LEGAL MATTERS

NOTE 12—LEGAL MATTERS

The Company is party to various actions and claims arising in the normal course of business. The Company believes that amounts accrued for awards or assessments in connection with all such matters are adequate and that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position. However, there exists a reasonable possibility of loss in excess of the amounts accrued, the amount of which cannot currently be estimated. While the Company does not believe that the amount of such excess loss could be material to the Company’s financial position, any such loss could have a material adverse effect on the Company’s results of operations in the period(s) during which the underlying matters are resolved.

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Document and Entity Information	6 Months Ended
	Jul. 28, 2012	Aug. 24, 2012
Document and Entity Information
Entity Registrant Name	PEP BOYS MANNY MOE & JACK
Entity Central Index Key	0000077449
Document Type	10-Q
Document Period End Date	Jul. 28, 2012
Amendment Flag	false
Current Fiscal Year End Date	--02-02
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		52,994,685
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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MERGER UPDATE

6 Months Ended

Jul. 28, 2012

MERGER UPDATE

MERGER UPDATE

NOTE 13—MERGER UPDATE

On May 29, 2012, the Company, Auto Acquisition Company, LLC, a Delaware limited liability company (“Parent”), Auto Mergersub, Inc., a Delaware corporation (“Merger Sub”), and The Gores Group, LLC, a Delaware limited liability company (“Gores”), entered into a Settlement Agreement (the “Settlement Agreement”) relating to the previously announced Agreement and Plan of Merger, dated as of January 29, 2012, by and among the Company, Parent and Merger Sub (the “Merger Agreement”). The Settlement Agreement provided for, among other things: (i) the termination of the Merger Agreement and the related financing commitments from Gores Capital Partners II, L.P. and Gores Capital Partners III, L.P.; (ii) Parent’s payment of a $50.0 million fee to the Company and reimbursement to the Company for certain of its merger related expenses; and (iii) mutual releases of the parties. Such payments were made by Parent on June 8, 2012 and the Company recorded $43.0 million of merger termination fees, net of related expenses, on the consolidated statements of operations and comprehensive income which is presented within cash flows from operations on the consolidated statement of cash flows.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 28, 2012	Jul. 30, 2011	Jul. 28, 2012	Jul. 30, 2011
Merchandise sales	$ 413,380	$ 415,267	$ 825,712	$ 823,894
Service revenue	112,291	107,327	224,563	212,240
Total revenues	525,671	522,594	1,050,275	1,036,134
Costs of merchandise sales	288,051	287,721	578,907	573,050
Costs of service revenue	107,019	99,663	213,115	192,752
Total costs of revenues	395,070	387,384	792,022	765,802
Gross profit from merchandise sales	125,329	127,546	246,805	250,844
Gross profit from service revenue	5,272	7,664	11,448	19,488
Total gross profit	130,601	135,210	258,253	270,332
Selling, general and administrative expenses	114,277	113,268	233,987	222,168
Net (loss) gain from dispositions of assets	(9)	(3)	(11)	86
Operating profit	16,315	21,939	24,255	48,250
Merger termination fees, net	42,955		42,955
Other income	521	569	991	1,156
Interest expense	6,427	6,444	12,943	12,941
Earnings from continuing operations before income taxes and discontinued operations	53,364	16,064	55,258	36,465
Income tax expense	20,330	2,173	21,090	10,169
Earnings from continuing operations before discontinued operations	33,034	13,891	34,168	26,296
Income (loss) from discontinued operations, net of tax	14	52	(58)	15
Net earnings	33,048	13,943	34,110	26,311
Basic earnings per share:
Earnings from continuing operations before discontinued operations (in dollars per share)	$ 0.62	$ 0.26	$ 0.64	$ 0.49
Basic earnings per share (in dollars per share)	$ 0.62	$ 0.26	$ 0.64	$ 0.49
Diluted earnings per share:
Earnings from continuing operations before discontinued operations (in dollars per share)	$ 0.61	$ 0.26	$ 0.63	$ 0.49
Diluted earnings per share (in dollars per share)	$ 0.61	$ 0.26	$ 0.63	$ 0.49
Other comprehensive income:
Defined benefit plan adjustment, net of tax	354	253	708	473
Derivative financial instruments adjustment, net of tax	910	170	1,930	685
Other comprehensive income	1,264	423	2,638	1,158
Comprehensive income	$ 34,312	$ 14,366	$ 36,748	$ 27,469

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DEBT AND FINANCING ARRANGEMENTS

6 Months Ended

Jul. 28, 2012

DEBT AND FINANCING ARRANGEMENTS

DEBT AND FINANCING ARRANGEMENTS

NOTE 7—DEBT AND FINANCING ARRANGEMENTS

The following are the components of debt and financing arrangements:

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
7.50% Senior Subordinated Notes, due December 2014	$	147,565		$	147,565
Senior Secured Term Loan, due October 2013	147,018			147,557
Revolving Credit Agreement, through January 2016	175			—
Long-term debt	294,758			295,122
Current maturities	(1,254		)	(1,079		)
Long-term debt less current maturities	$	293,504		$	294,043

As of July 28, 2012, 126 stores collateralized the Senior Secured Term Loan.

The Company’s ability to borrow under its Revolving Credit Agreement (the “Agreement”) is based on a specific borrowing base consisting of inventory and accounts receivable. The interest rate on this credit line is daily LIBOR plus 2.00% to 2.50% based upon the then current availability under the Agreement. As of July 28, 2012, there was $0.2 million outstanding under this agreement and $29.6 million of availability was utilized to support outstanding letters of credit. Taking this into account and the borrowing base requirements, as of July 28, 2012, there was $175.1 million of availability remaining.

Several of the Company’s debt agreements require compliance with covenants. The most restrictive of these covenants, an earnings before interest, taxes, depreciation and amortization (“EBITDA”) requirement, is triggered if the Company’s availability under its Revolving Credit Agreement drops below $50.0 million. As of July 28, 2012, the Company was in compliance with all financial covenants contained in its debt agreements.

Interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities are used to estimate fair value for debt issues that are not quoted on an exchange and are considered a level 2 measure under the fair value hierarchy. The estimated fair value of long-term debt including current maturities was $296.6 million and $293.6 million as of July 28, 2012 and January 28, 2012, respectively.

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WARRANTY RESERVE

6 Months Ended

Jul. 28, 2012

WARRANTY RESERVE

WARRANTY RESERVE

NOTE 6—WARRANTY RESERVE

The Company provides warranties for both its merchandise sales and service labor. Warranties for merchandise are generally covered by the respective vendors, with the Company covering any costs above the vendor’s stipulated allowance. Service labor is warranted in full by the Company for a limited specific time period. The Company establishes its warranty reserves based on historical experiences. These costs are included in either costs of merchandise sales or costs of service revenues in the consolidated statements of operations.

The reserve for warranty cost activity for the twenty-six weeks ended July 28, 2012 and the fifty-two weeks ended January 28, 2012 is as follows:

(dollar amounts in thousands)	July 28,2012			January 28, 2012
Beginning balance	$	673		$	673
Additions related to current period sales	5,410			12,122
Warranty costs incurred in current period	(5,410		)	(12,122		)
Ending balance	$	673		$	673

XML

ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

6 Months Ended

Jul. 28, 2012

ACCUMULATED OTHER COMPREHENSIVE LOSS

Schedule of accumulated other comprehensive loss

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
Defined benefit plan adjustment, net of tax	$	(8,988	)	$	(9,696	)
Derivative financial instrument adjustment, net of tax	(6,023		)	(7,953		)
Accumulated other comprehensive loss	$	(15,011	)	$	(17,649	)

XML

SUPPLEMENTAL GUARANTOR INFORMATION

6 Months Ended

Jul. 28, 2012

SUPPLEMENTAL GUARANTOR INFORMATION

SUPPLEMENTAL GUARANTOR INFORMATION

NOTE 14—SUPPLEMENTAL GUARANTOR INFORMATION

The Company’s Notes are fully and unconditionally and joint and severally guaranteed by certain of the Company’s direct and indirectly wholly-owned subsidiaries—namely, The Pep Boys Manny Moe & Jack of California, The Pep Boys—Manny Moe & Jack of Delaware, Inc. (the “Pep Boys of Delaware”); Pep Boys—Manny Moe & Jack of Puerto Rico, Inc.; Tire Stores Group Holding Corporation (on and after May 5, 2011); Big 10 Tire Stores, LLC (on and after May 5, 2011), (collectively, the “Subsidiary Guarantors”). The Notes are not guaranteed by the Company’s wholly owned subsidiary, Colchester Insurance Company.

The following consolidating information presents, in separate columns, the condensed consolidating balance sheets as of July 28, 2012 and January 28, 2012 and the related condensed consolidating statements of operations and comprehensive income for the thirteen and twenty-six weeks ended July 28, 2012 and July 30, 2011 and condensed consolidating statements of cash flows for the twenty-six weeks ended July 28, 2012 and July 30, 2011 for (i) the Company (“Pep Boys”) on a parent only basis, with its investment in subsidiaries recorded under the equity method, (ii) the Subsidiary Guarantors on a combined basis, (iii) the subsidiary of the Company that does not guarantee the Notes, and (iv) the Company on a consolidated basis.

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)

(unaudited)

As of July 28, 2012	Pep Boys		Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidation/ Elimination			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	92,508	$	47,160	$	11,165	$	—		$	150,833
Accounts receivable, net	14,546		13,416		—		—			27,962
Merchandise inventories	221,294		405,261		—		—			626,555
Prepaid expenses	8,929		12,577		7,102		(7,587		)	21,021
Other current assets	1,776		—		56,148		(4,841		)	53,083
Total current assets	339,053		478,414		74,415		(12,428		)	879,454
Property and equipment—net	240,096		431,087		29,835		(18,399		)	682,619
Investment in subsidiaries	2,204,475		—		—		(2,204,475		)	—
Intercompany receivables	—		1,412,350		68,966		(1,481,316		)	—
Goodwill	2,549		44,368		—		—			46,917
Deferred income taxes	3,083		42,742		—		—			45,825
Other long-term assets	29,868		1,792		—		—			31,660
Total assets	$	2,819,124	$	2,410,753	$	173,216	$	(3,716,618	)	$	1,686,475
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	246,522	$	—	$	—	$	—		$	246,522
Trade payable program liability	115,746		—		—		—			115,746
Accrued expenses	25,211		60,694		140,230		(7,587		)	218,548
Deferred income taxes	26,243		39,829		—		(4,841		)	61,231
Current maturities of long-term debt	1,254		—		—		—			1,254
Total current liabilities	414,976		100,523		140,230		(12,428		)	643,301
Long-term debt less current maturities	293,504		—		—		—			293,504
Other long-term liabilities	26,704		45,586		—		—			72,290
Deferred gain from asset sales	59,215		93,155		—		(18,399		)	133,971
Intercompany liabilities	1,481,316		—		—		(1,481,316		)	—
Total stockholders’ equity	543,409		2,171,489		32,986		(2,204,475		)	543,409
Total liabilities and stockholders’ equity	$	2,819,124	$	2,410,753	$	173,216	$	(3,716,618	)	$	1,686,475

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)

(unaudited)

As of January 28, 2012	Pep Boys		Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidation/ Elimination						Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	22,740	$	27,181	$	8,323	$		—				$	58,244
Accounts receivable, net	14,566		11,226		—		—						25,792
Merchandise inventories	214,584		399,552		—		—						614,136
Prepaid expenses	12,945		16,873		14,996		(18,420					)	26,394
Other current assets	606		—		64,214		(4,841					)	59,979
Total current assets	265,441		454,832		87,533		(23,261					)	784,545
Property and equipment—net	243,108		441,645		30,177		(18,591					)	696,339
Investment in subsidiaries	2,176,992		—		—		(2,176,992					)	—
Intercompany receivables	—		1,389,910		82,206		(1,472,116					)	—
Goodwill	2,549		44,368		—		—						46,917
Deferred income taxes	20,468		52,402		—		—						72,870
Other long-term assets	31,068		2,040		—		—						33,108
Total assets	$	2,739,626	$	2,385,197	$	199,916	$			(3,690,960		)	$	1,633,779
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	243,712	$	—	$	—	$				—		$	243,712
Trade payable program liability	85,214		—		—		—						85,214
Accrued expenses	17,887		55,527		166,711		(18,420					)	221,705
Deferred income taxes	29,383		41,666		—		(4,841					)	66,208
Current maturities of long-term debt	1,079		—		—		—						1,079
Total current liabilities	377,275		97,193		166,711		(23,261					)	617,918
Long-term debt less current maturities	294,043		—		—		—						294,043
Other long-term liabilities	30,540		46,676		—		—						77,216
Deferred gain from asset sales	61,323		97,541		—		(18,591					)	140,273
Intercompany liabilities	1,472,116		—		—		(1,472,116					)	—
Total stockholders’ equity	504,329		2,143,787		33,205		(2,176,992					)	504,329
Total liabilities and stockholders’ equity	$	2,739,626	$	2,385,197	$	199,916	$	(3,690,960				)	$	1,633,779

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Thirteen Weeks Ended July 28, 2012	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	135,439		$	277,941		$	—		$	—		$	413,380
Service revenue	37,703			74,588			—			—			112,291
Other revenue	—			—			6,161			(6,161		)	—
Total revenues	173,142			352,529			6,161			(6,161		)	525,671
Costs of merchandise sales	96,843			191,668			—			(460		)	288,051
Costs of service revenue	34,108			72,958			—			(47		)	107,019
Costs of other revenue	—			—			6,142			(6,142		)	—
Total costs of revenues	130,951			264,626			6,142			(6,649		)	395,070
Gross profit from merchandise sales	38,596			86,273			—			460			125,329
Gross profit from service revenue	3,595			1,630			—			47			5,272
Gross profit from other revenue	—			—			19			(19		)	—
Total gross profit	42,191			87,903			19			488			130,601
Selling, general and administrative expenses	36,323			78,061			83			(190		)	114,277
Net loss from dispositions of assets	(8		)	(1		)	—			—			(9		)
Operating profit	5,860			9,841			(64		)	678			16,315
Merger termination fees, net	42,955			—			—			—			42,955
Non-operating income (expense)	(4,059		)	16,911			679			(13,010		)	521
Interest expense (income)	18,129			1,151			(521		)	(12,332		)	6,427
Earnings from continuing operations before income taxes	26,627			25,601			1,136			—			53,364
Income tax expense	10,509			9,401			420			—			20,330
Equity in earnings of subsidiaries	16,949			—			—			(16,949		)	—
Net earnings from continuing operations	33,067			16,200			716			(16,949		)	33,034
Discontinued operations, net of tax	(19		)	33			—			—			14
Net earnings	$	33,048		$	16,233		$	716		$	(16,949	)	$	33,048
Other comprehensive income
Defined benefit plan adjustment	354			—			—			—			354
Derivative financial instruments adjustment	910			—			—			—			910
Other comprehensive income	1,264			—			—			—			1,264
Comprehensive income	$	34,312		$	16,233		$	716		$	(16,949	)	$	34,312

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Thirteen Weeks Ended July 30, 2011	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	137,881		$	277,386		$	—		$	—		$	415,267
Service revenue	37,113			70,214			—			—			107,327
Other revenue	—			—			5,732			(5,732		)	—
Total revenues	174,994			347,600			5,732			(5,732		)	522,594
Costs of merchandise sales	98,345			189,785			—			(409		)	287,721
Costs of service revenue	32,886			66,815			—			(38		)	99,663
Costs of other revenue	—			—			5,830			(5,830		)	—
Total costs of revenues	131,231			256,600			5,830			(6,277		)	387,384
Gross profit from merchandise sales	39,536			87,601			—			409			127,546
Gross profit from service revenue	4,227			3,399			—			38			7,664
Gross profit from other revenue	—			—			(98		)	98			—
Total gross profit	43,763			91,000			(98		)	545			135,210
Selling, general and administrative expenses	38,562			74,698			80			(72		)	113,268
Net gain from dispositions of assets	—			(3		)	—			—			(3		)
Operating profit	5,201			16,299			(178		)	617			21,939
Non-operating (expense) income	(4,216		)	15,852			618			(11,685		)	569
Interest expense (income)	17,534			499			(521		)	(11,068		)	6,444
(Loss) earnings from continuing operations before income taxes	(16,549		)	31,652			961			—			16,064
Income tax (benefit) expense	(3,100		)	5,114			159			—			2,173
Equity in earnings of subsidiaries	27,365			—			—			(27,365		)	—
Net earnings from continuing operations	13,916			26,538			802			(27,365		)	13,891
Discontinued operations, net of tax	27			25			—			—			52
Net earnings	$	13,943		$	26,563		$	802		$	(27,365	)	$	13,943
Other comprehensive income
Defined benefit plan adjustment	253			—			—			—			253
Derivative financial instruments adjustment	170			—			—			—			170
Other comprehensive income	423			—			—			—			423
Comprehensive income	$	14,366		$	26,563		$	802		$	(27,365	)	$	14,366

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Twenty-six Weeks Ended July 28, 2012	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	272,022		$	553,690		$	—		$	—		$	825,712
Service revenue	75,744			148,819			—			—			224,563
Other revenue	—			—			12,320			(12,320		)	—
Total revenues	347,766			702,509			12,320			(12,320		)	1,050,275
Costs of merchandise sales	194,553			385,274			—			(920		)	578,907
Costs of service revenue	68,394			144,815			—			(94		)	213,115
Costs of other revenue	—			—			12,714			(12,714		)	—
Total costs of revenues	262,947			530,089			12,714			(13,728		)	792,022
Gross profit from merchandise sales	77,469			168,416			—			920			246,805
Gross profit from service revenue	7,350			4,004			—			94			11,448
Gross profit from other revenue	—			—			(394		)	394			—
Total gross profit	84,819			172,420			(394		)	1,408			258,253
Selling, general and administrative expenses	75,260			158,508			167			52			233,987
Net loss from dispositions of assets	(8		)	(3		)	—			—			(11		)
Operating profit	9,551			13,909			(561		)	1,356			24,255
Merger termination fees	42,955			—			—			—			42,955
Non-operating income (expense)	(8,167		)	32,870			1,357			(25,069		)	991
Interest expense (income)	35,789			1,910			(1,043		)	(23,713		)	12,943
Earnings from continuing operations before income taxes	8,550			44,869			1,839			—			55,258
Income tax expense	3,265			17,123			702			—			21,090
Equity in earnings of subsidiaries	28,839			—			—			(28,839		)	—
Net earnings from continuing operations	34,124			27,746			1,137			(28,839		)	34,168
Discontinued operations, net of tax	(14		)	(44		)	—			—			(58		)
Net earnings	$	34,110		$	27,702		$	1,137		$	(28,839	)	$	34,110
Other comprehensive income
Defined benefit plan adjustment	708			—			—			—			708
Derivative financial instruments adjustment	1,930			—			—			—			1,930
Other comprehensive income	2,638			—			—			—			2,638
Comprehensive income	$	36,748		$	27,702		$	1,137		$	(28,839	)	$	36,748

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Twenty-six Weeks Ended July 30, 2011	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	279,262		$	544,632		$	—		$	—		$	823,894
Service revenue	75,648			136,592			—			—			212,240
Other revenue	—			—			11,466			(11,466		)	—
Total revenues	354,910			681,224			11,466			(11,466		)	1,036,134
Costs of merchandise sales	197,518			376,348			—			(816		)	573,050
Costs of service revenue	65,974			126,854			—			(76		)	192,752
Costs of other revenue	—			—			11,656			(11,656		)	—
Total costs of revenues	263,492			503,202			11,656			(12,548		)	765,802
Gross profit from merchandise sales	81,744			168,284			—			816			250,844
Gross profit from service revenue	9,674			9,738			—			76			19,488
Gross profit from other revenue	—			—			(190		)	190			—
Total gross profit	91,418			178,022			(190		)	1,082			270,332
Selling, general and administrative expenses	76,386			145,767			166			(151		)	222,168
Net gain from dispositions of assets	—			86			—			—			86
Operating profit	15,032			32,341			(356		)	1,233			48,250
Non-operating (expense) income	(8,491		)	31,921			1,234			(23,508		)	1,156
Interest expense (income)	34,859			1,400			(1,043		)	(22,275		)	12,941
(Loss) earnings from continuing operations before income taxes	(28,318		)	62,862			1,921			—			36,465
Income tax (benefit) expense	(7,714		)	17,347			536			—			10,169
Equity in earnings of subsidiaries	46,896			—			—			(46,896		)	—
Net earnings from continuing operations	26,292			45,515			1,385			(46,896		)	26,296
Discontinued operations, net of tax	19			(4		)	—			—			15
Net earnings	$	26,311		$	45,511		$	1,385		$	(46,896	)	$	26,311
Other comprehensive income
Defined benefit plan adjustment	473			—			—			—			473
Derivative financial instruments adjustment	685			—			—			—			685
Other comprehensive income	1,158			—			—			—			1,158
Comprehensive income	$	27,469		$	45,511		$	1,385		$	(46,896	)	$	27,469

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in thousands)

(unaudited)

Twenty-six Weeks Ended July 28, 2012	Pep Boys			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidation / Elimination			Consolidated
Net Cash Provided by (Used in) Operating Activities	$	41,640		$	56,208		$	(9,042	)	$	(1,356	)	$	87,450
Investing Activities:
Capital expenditures	(15,124		)	(11,223		)	—			—			(26,347		)
Net Cash (Used in) Investing Activities	(15,124		)	(11,223		)	—			—			(26,347		)
Financing Activities:
Borrowings under line of credit agreements	500			606			—			—			1,106
Payments under line of credit agreements	(325		)	(606		)	—			—			(931		)
Borrowings on trade payable program liability	80,836			—			—			—			80,836
Payments on trade payable program liability	(50,304		)	—			—			—			(50,304		)
Debt Payments	(539		)	—			—			—			(539		)
Dividends paid	—			—			(1,356		)	1,356			—
Intercompany (payments) borrowings	11,766			(25,006		)	13,240			—			—
Proceeds from stock issuance	1,318			—			—			—			1,318
Net Cash Provided by (Used in) Financing Activities	43,252			(25,006		)	11,884			1,356			31,486
Net increase in cash and cash equivalents	69,768			19,979			2,842			—			92,589
Cash and cash equivalents at beginning of period	22,740			27,181			8,323			—			58,244
Cash and cash equivalents at end of period	$	92,508		$	47,160		$	11,165		$	—		$	150,833

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in thousands)

(unaudited)

Twenty-six Weeks Ended July 30, 2011	Pep Boys			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidation / Elimination			Consolidated
Net Cash Provided by (Used in) Operating Activities	$	13,152		$	49,122		$	(9,807	)	$	(1,233	)	$	51,234
Investing Activities:
Capital expenditures	(15,555		)	(15,081		)	—			—			(30,636		)
Proceeds from dispositions of assets	—			89			—			—			89
Premiums paid on life insurance policies	(795		)	—			—			—			(795		)
Collateral investment	(4,763		)	—			—			—			(4,763		)
Acquisitions, net of cash acquired	(144		)	(42,613		)	—			—			(42,757		)
Net Cash Provided by (Used in) Investing Activities	(21,257		)	(57,605		)	—			—			(78,862		)
Financing Activities:
Borrowings under line of credit agreements	1,771			3,274			—			—			5,045
Payments under line of credit agreements	(1,771		)	(3,274		)	—			—			(5,045		)
Borrowings on trade payable program liability	59,097			—			—			—			59,097
Payments on trade payable program liability	(53,944		)	—			—			—			(53,944		)
Payment for finance issuance cost	(2,441		)	—			—			—			(2,441		)
Debt Payments	(539		)	—			—			—			(539		)
Dividends paid	(3,171		)	—			(1,233		)	1,233			(3,171		)
Intercompany (payments) borrowings	(8,985		)	(2,821		)	11,806			—			—
Proceeds from stock issuance	363			—			—			—			363
Net Cash (Used in) Provided by Financing Activities	(9,620		)	(2,821		)	10,573			1,233			(635		)
Net (decrease) increase in cash and cash equivalents	(17,725		)	(11,304		)	766			—			(28,263		)
Cash and cash equivalents at beginning of period	37,912			42,779			9,549			—			90,240
Cash and cash equivalents at end of period	$	20,187		$	31,475		$	10,315		$	—		$	61,977

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BENEFIT PLANS

6 Months Ended

Jul. 28, 2012

BENEFIT PLANS

BENEFIT PLANS

NOTE 10—BENEFIT PLANS

The Company has a qualified 401(k) savings plan and a separate plan for employees residing in Puerto Rico, which cover all full-time employees who are at least 21 years of age with one or more years of service. The Company also maintains a non-qualified defined contribution Supplemental Executive Retirement Plan (the “Account Plan”) for key employees designated by the Board of Directors. The Company’s contribution to these plans for fiscal 2012 is contingent upon meeting certain performance metrics. The Company did not record any contribution expense for these plans in the first half of 2012 or 2011.

The Company also has a frozen defined benefit pension plan covering the Company’s full-time employees hired on or before February 1, 1992. The Company’s expense for its pension plan follows:

	Thirteen Weeks Ended						Twenty-six Weeks Ended
(dollar amounts in thousands)	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
Interest cost	619			627			1,238			1,278
Expected return on plan assets	(704		)	(721		)	(1,408		)	(1,372		)
Amortization of net loss	566			405			1,133			756
Net periodic benefit cost	$	481		$	311		$	963		$	662

The defined benefit pension plan is subject to minimum funding requirements of the Employee Retirement Income Security Act of 1974 as amended. While the Company has no minimum funding requirement during fiscal 2011, it made a $3.0 million discretionary contribution to the defined benefit pension plan on April 28, 2011. There were no discretionary contributions made during the first half of 2012.

During the third quarter of fiscal 2011, the Company began the process of terminating the Plan. The termination of the Plan is expected to be completed by the end of fiscal 2012. In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, the Company is required to fully fund the Plan on a termination basis and will commit to contribute the additional assets necessary to do so. Plan participants will not be adversely affected by the Plan termination, but rather will have their benefits either converted into a lump sum cash payment or an annuity contract placed with an insurance carrier.

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ACCUMULATED OTHER COMPREHENSIVE LOSS

6 Months Ended

Jul. 28, 2012

ACCUMULATED OTHER COMPREHENSIVE LOSS

ACCUMULATED OTHER COMPREHENSIVE LOSS

NOTE 8—ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss are:

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
Defined benefit plan adjustment, net of tax	$	(8,988	)	$	(9,696	)
Derivative financial instrument adjustment, net of tax	(6,023		)	(7,953		)
Accumulated other comprehensive loss	$	(15,011	)	$	(17,649	)

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EARNINGS PER SHARE

6 Months Ended

Jul. 28, 2012

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 9—EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per share for earnings from continuing operations and net earnings:

		Thirteen Weeks Ended				Twenty-six Weeks Ended
(in thousands, except per share amounts)		July 28, 2012		July 30, 2011		July 28, 2012			July 30, 2011
(a)	Earnings from continuing operations	$	33,034	$	13,891	$	34,168		$	26,296
	Income (loss) from discontinued operations, net of tax	14		52		(58		)	15
	Net earnings	$	33,048	$	13,943	$	34,110		$	26,311
(b)	Basic average number of common shares outstanding during period	53,146		52,952		53,110			52,901
	Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price	651		697		765			691
(c)	Diluted average number of common shares assumed outstanding during period	53,797		53,649		53,875			53,592
	Basic earnings per share:
	Earnings from continuing operations (a/b)	$	0.62	$	0.26	$	0.64		$	0.49
	Discontinued operations, net of tax	—		—		—			—
	Basic earnings per share	$	0.62	$	0.26	$	0.64		$	0.49
	Diluted earnings per share:
	Earnings from continuing operations (a/c)	$	0.61	$	0.26	$	0.63		$	0.49
	Discontinued operations, net of tax	—		—		—			—
	Diluted earnings per share	$	0.61	$	0.26	$	0.63		$	0.49

At July 28, 2012 and July 30, 2011, respectively, there were 2,382,000 and 2,682,000 outstanding options and restricted stock units. Certain stock options were excluded from the calculation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares for the periods then ended and therefore would be anti-dilutive. The total number of such shares excluded from the diluted earnings per share calculation are 503,000 and 830,000 for the twenty-six weeks ended July 28, 2012 and July 30, 2011, respectively. The total number of such shares excluded from the diluted earnings per share calculation are 706,000 and 888,000 for the thirteen weeks ended July 28, 2012 and July 30, 2011, respectively.

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FAIR VALUE MEASUREMENTS AND DERIVATIVES

6 Months Ended

Jul. 28, 2012

FAIR VALUE MEASUREMENTS AND DERIVATIVES

FAIR VALUE MEASUREMENTS AND DERIVATIVES

NOTE 11—FAIR VALUE MEASUREMENTS AND DERIVATIVES

The Company’s fair value measurements consist of (a) financial assets and liabilities that are recognized or disclosed at fair value in the Company’s financial statements on a recurring basis (at least annually) and (b) all non-recurring non-financial assets and liabilities.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following table provides information by level for assets and liabilities that are measured at fair value, on a recurring basis:

(dollar amounts in thousands)	Fair Value at		Fair Value Measurements Using Inputs Considered as
Description	July 28, 2012		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	150,833	$	150,833	$	—	$	—
Collateral investments (1)	17,276		17,276		—		—
Rabbi trust assets (1)	3,596		—		3,596		—
Liabilities:
Other liabilities
Derivative liability (2)	9,494		—		9,494		—

(dollar amounts in thousands)	Fair Value at		Fair Value Measurements Using Inputs Considered as
Description	January 28, 2012		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	58,244	$	58,244	$	—	$	—
Collateral investments (1)	17,276		17,276		—		—
Rabbi trust assets (1)	3,576		—		3,576		—
Liabilities:
Other liabilities
Derivative liability (2)	12,540		—		12,540		—

(1) included in other long-term assets

(2) included in other long-term liabilities

As of January 28, 2012 the Company invested $17.3 million in restricted accounts as collateral for its retained liabilities included within existing insurance programs in lieu of previously outstanding letters of credit, of which $4.8 million was invested during the first half of fiscal year 2011.

The Company has one interest rate swap designated as a cash flow hedge on $145.0 million of the Company’s Senior Secured Term Loan that is due in October 2013. The swap is used to minimize interest rate exposure and overall interest costs by converting the variable component of the total interest rate to a fixed rate of 5.036%. Since February 1, 2008, this swap was deemed to be fully effective and all adjustments in the interest rate swap’s fair value have been recorded to accumulated other comprehensive loss.

The table below shows the effect of the Company’s interest rate swap on the consolidated financial statements for the periods indicated:

(dollar amounts in thousands)	Amount of Gain in Other Comprehensive Income/ (Loss) (Effective Portion)		Earnings Statement Classification	Amount of Loss Recognized in Earnings (Effective Portion) (a)
Thirteen weeks ended July 28, 2012	$	897	Interest expense	$	(1,685	)
Thirteen weeks ended July 30, 2011	$	150	Interest expense	$	(1,772	)
Twenty-six weeks ended July 28, 2012	$	1,904	Interest expense	$	(3,339	)
Twenty-six weeks ended July 30, 2011	$	648	Interest expense	$	(3,491	)

(a) represents the effective portion of the loss reclassified from accumulated other comprehensive loss

The fair value of the derivative was $9.5 million and $12.5 million payable at July 28, 2012 and January 28, 2012, respectively. Of the $3.0 million decrease in the fair value during the twenty-six weeks ended July 28, 2012, $1.9 million net of tax was recorded to accumulated other comprehensive loss on the consolidated balance sheet.

Non-financial assets measured at fair value on a non-recurring basis:

Certain assets are measured at fair value on a non-recurring basis, that is, the assets are subject to fair value adjustments in certain circumstances such as when there is evidence of impairment. These measures of fair value, and related inputs, are considered level 2 or level 3 measures under the fair value hierarchy. During the second quarter of fiscal 2011, the Company recorded a $0.4 million impairment charge related to stores classified as held and used. The Company used a probability-weighted approach and estimates of expected future cash flows to determine the fair value of the stores. Discount and growth rate assumptions were derived from current economic conditions, management’s expectations and projected trends of current operating results. The fair market value estimate is classified as a Level 3 measure within the fair value hierarchy.

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) (USD $) In Thousands, unless otherwise specified	Jul. 28, 2012	Jan. 28, 2012
ACCUMULATED OTHER COMPREHENSIVE LOSS
Defined benefit plan adjustment, net of tax	$ (8,988)	$ (9,696)
Derivative financial instrument adjustment, net of tax	(6,023)	(7,953)
Accumulated other comprehensive loss	$ (15,011)	$ (17,649)

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WARRANTY RESERVE (Tables)

6 Months Ended

Jul. 28, 2012

WARRANTY RESERVE

Schedule of reserve for warranty cost activity

(dollar amounts in thousands)	July 28,2012			January 28, 2012
Beginning balance	$	673		$	673
Additions related to current period sales	5,410			12,122
Warranty costs incurred in current period	(5,410		)	(12,122		)
Ending balance	$	673		$	673

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FAIR VALUE MEASUREMENTS AND DERIVATIVES (Tables)

6 Months Ended

Jul. 28, 2012

FAIR VALUE MEASUREMENTS AND DERIVATIVES

Schedule of assets and liabilities measured at fair value on recurring basis

(dollar amounts in thousands)	Fair Value at		Fair Value Measurements Using Inputs Considered as
Description	July 28, 2012		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	150,833	$	150,833	$	—	$	—
Collateral investments (1)	17,276		17,276		—		—
Rabbi trust assets (1)	3,596		—		3,596		—
Liabilities:
Other liabilities
Derivative liability (2)	9,494		—		9,494		—

(dollar amounts in thousands)	Fair Value at		Fair Value Measurements Using Inputs Considered as
Description	January 28, 2012		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	58,244	$	58,244	$	—	$	—
Collateral investments (1)	17,276		17,276		—		—
Rabbi trust assets (1)	3,576		—		3,576		—
Liabilities:
Other liabilities
Derivative liability (2)	12,540		—		12,540		—

(1) included in other long-term assets

(2) included in other long-term liabilities

Schedule of effect of interest rate swap on the consolidated financial statements

(dollar amounts in thousands)	Amount of Gain in Other Comprehensive Income/ (Loss) (Effective Portion)		Earnings Statement Classification	Amount of Loss Recognized in Earnings (Effective Portion) (a)
Thirteen weeks ended July 28, 2012	$	897	Interest expense	$	(1,685	)
Thirteen weeks ended July 30, 2011	$	150	Interest expense	$	(1,772	)
Twenty-six weeks ended July 28, 2012	$	1,904	Interest expense	$	(3,339	)
Twenty-six weeks ended July 30, 2011	$	648	Interest expense	$	(3,491	)

(a) represents the effective portion of the loss reclassified from accumulated other comprehensive loss

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SUPPLEMENTAL GUARANTOR INFORMATION (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 28, 2012	Jul. 30, 2011	Jul. 28, 2012	Jul. 30, 2011
SUPPLEMENTAL GUARANTOR INFORMATION
Merchandise sales	$ 413,380	$ 415,267	$ 825,712	$ 823,894
Service revenue	112,291	107,327	224,563	212,240
Total revenues	525,671	522,594	1,050,275	1,036,134
Costs of merchandise sales	288,051	287,721	578,907	573,050
Costs of service revenue	107,019	99,663	213,115	192,752
Total costs of revenues	395,070	387,384	792,022	765,802
Gross profit from merchandise sales	125,329	127,546	246,805	250,844
Gross profit from service revenue	5,272	7,664	11,448	19,488
Total gross profit	130,601	135,210	258,253	270,332
Selling, general and administrative expenses	114,277	113,268	233,987	222,168
Net (loss) gain from dispositions of assets	(9)	(3)	(11)	86
Operating profit	16,315	21,939	24,255	48,250
Merger termination fees, net	42,955		42,955
Non-operating income (expense)	521	569	991	1,156
Interest expense (income)	6,427	6,444	12,943	12,941
Earnings from continuing operations before income taxes and discontinued operations	53,364	16,064	55,258	36,465
Income tax expense (benefit)	20,330	2,173	21,090	10,169
Earnings from continuing operations before discontinued operations	33,034	13,891	34,168	26,296
Discontinued operations, net of tax	14	52	(58)	15
Net earnings	33,048	13,943	34,110	26,311
Other comprehensive income:
Defined benefit plan adjustment	354	253	708	473
Derivative financial instruments adjustment	910	170	1,930	685
Other comprehensive income	1,264	423	2,638	1,158
Comprehensive income	34,312	14,366	36,748	27,469
Pep Boys
SUPPLEMENTAL GUARANTOR INFORMATION
Merchandise sales	135,439	137,881	272,022	279,262
Service revenue	37,703	37,113	75,744	75,648
Total revenues	173,142	174,994	347,766	354,910
Costs of merchandise sales	96,843	98,345	194,553	197,518
Costs of service revenue	34,108	32,886	68,394	65,974
Total costs of revenues	130,951	131,231	262,947	263,492
Gross profit from merchandise sales	38,596	39,536	77,469	81,744
Gross profit from service revenue	3,595	4,227	7,350	9,674
Total gross profit	42,191	43,763	84,819	91,418
Selling, general and administrative expenses	36,323	38,562	75,260	76,386
Net (loss) gain from dispositions of assets	(8)		(8)
Operating profit	5,860	5,201	9,551	15,032
Merger termination fees, net	42,955		42,955
Non-operating income (expense)	(4,059)	(4,216)	(8,167)	(8,491)
Interest expense (income)	18,129	17,534	35,789	34,859
Earnings from continuing operations before income taxes and discontinued operations	26,627	(16,549)	8,550	(28,318)
Income tax expense (benefit)	10,509	(3,100)	3,265	(7,714)
Equity in earnings of subsidiaries	16,949	27,365	28,839	46,896
Earnings from continuing operations before discontinued operations	33,067	13,916	34,124	26,292
Discontinued operations, net of tax	(19)	27	(14)	19
Net earnings	33,048	13,943	34,110	26,311
Other comprehensive income:
Defined benefit plan adjustment	354	253	708	473
Derivative financial instruments adjustment	910	170	1,930	685
Other comprehensive income	1,264	423	2,638	1,158
Comprehensive income	34,312	14,366	36,748	27,469
Subsidiary Guarantors
SUPPLEMENTAL GUARANTOR INFORMATION
Merchandise sales	277,941	277,386	553,690	544,632
Service revenue	74,588	70,214	148,819	136,592
Total revenues	352,529	347,600	702,509	681,224
Costs of merchandise sales	191,668	189,785	385,274	376,348
Costs of service revenue	72,958	66,815	144,815	126,854
Total costs of revenues	264,626	256,600	530,089	503,202
Gross profit from merchandise sales	86,273	87,601	168,416	168,284
Gross profit from service revenue	1,630	3,399	4,004	9,738
Total gross profit	87,903	91,000	172,420	178,022
Selling, general and administrative expenses	78,061	74,698	158,508	145,767
Net (loss) gain from dispositions of assets	(1)	(3)	(3)	86
Operating profit	9,841	16,299	13,909	32,341
Non-operating income (expense)	16,911	15,852	32,870	31,921
Interest expense (income)	1,151	499	1,910	1,400
Earnings from continuing operations before income taxes and discontinued operations	25,601	31,652	44,869	62,862
Income tax expense (benefit)	9,401	5,114	17,123	17,347
Earnings from continuing operations before discontinued operations	16,200	26,538	27,746	45,515
Discontinued operations, net of tax	33	25	(44)	(4)
Net earnings	16,233	26,563	27,702	45,511
Other comprehensive income:
Comprehensive income	16,233	26,563	27,702	45,511
Subsidiary Non-Guarantors
SUPPLEMENTAL GUARANTOR INFORMATION
Other revenue	6,161	5,732	12,320	11,466
Total revenues	6,161	5,732	12,320	11,466
Costs of other revenue	6,142	5,830	12,714	11,656
Total costs of revenues	6,142	5,830	12,714	11,656
Gross profit from other revenue	19	(98)	(394)	(190)
Total gross profit	19	(98)	(394)	(190)
Selling, general and administrative expenses	83	80	167	166
Operating profit	(64)	(178)	(561)	(356)
Non-operating income (expense)	679	618	1,357	1,234
Interest expense (income)	(521)	(521)	(1,043)	(1,043)
Earnings from continuing operations before income taxes and discontinued operations	1,136	961	1,839	1,921
Income tax expense (benefit)	420	159	702	536
Earnings from continuing operations before discontinued operations	716	802	1,137	1,385
Net earnings	716	802	1,137	1,385
Other comprehensive income:
Comprehensive income	716	802	1,137	1,385
Consolidation/Elimination
SUPPLEMENTAL GUARANTOR INFORMATION
Other revenue	(6,161)	(5,732)	(12,320)	(11,466)
Total revenues	(6,161)	(5,732)	(12,320)	(11,466)
Costs of merchandise sales	(460)	(409)	(920)	(816)
Costs of service revenue	(47)	(38)	(94)	(76)
Costs of other revenue	(6,142)	(5,830)	(12,714)	(11,656)
Total costs of revenues	(6,649)	(6,277)	(13,728)	(12,548)
Gross profit from merchandise sales	460	409	920	816
Gross profit from service revenue	47	38	94	76
Gross profit from other revenue	(19)	98	394	190
Total gross profit	488	545	1,408	1,082
Selling, general and administrative expenses	(190)	(72)	52	(151)
Operating profit	678	617	1,356	1,233
Non-operating income (expense)	(13,010)	(11,685)	(25,069)	(23,508)
Interest expense (income)	(12,332)	(11,068)	(23,713)	(22,275)
Equity in earnings of subsidiaries	(16,949)	(27,365)	(28,839)	(46,896)
Earnings from continuing operations before discontinued operations	(16,949)	(27,365)	(28,839)	(46,896)
Net earnings	(16,949)	(27,365)	(28,839)	(46,896)
Other comprehensive income:
Comprehensive income	$ (16,949)	$ (27,365)	$ (28,839)	$ (46,896)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 28, 2012	Jul. 30, 2011
Cash flows from operating activities:
Net earnings	$ 34,110	$ 26,311
Adjustments to reconcile net earnings to net cash provided by continuing operations:
Net loss (income) from discontinued operations, net of tax	58	(15)
Depreciation and amortization	39,288	39,654
Amortization of deferred gain from asset sales	(6,302)	(6,302)
Stock compensation expense	1,043	1,908
Deferred income taxes	20,485	4,238
Net loss (gain) from disposition of assets	11	(86)
Loss from asset impairment		389
Other	13	272
Changes in assets and liabilities, net of the effects of acquisitions:
Decrease in accounts receivable, prepaid expenses and other	11,448	21,816
Increase in merchandise inventories	(12,419)	(12,917)
Increase in accounts payable	2,810	12,043
Decrease in accrued expenses	(2,451)	(33,202)
Decrease in other long-term liabilities	(552)	(2,831)
Net cash provided by continuing operations	87,542	51,278
Net cash used in discontinued operations	(92)	(44)
Net cash provided by operating activities	87,450	51,234
Cash flows from investing activities:
Capital expenditures	(26,347)	(30,636)
Proceeds from dispositions of assets		89
Premiums paid on life insurance policies		(795)
Collateral investment		(4,763)
Acquisitions, net of cash acquired		(42,757)
Net cash used in investing activities	(26,347)	(78,862)
Cash flows from financing activities:
Borrowings under line of credit agreements	1,106	5,045
Payments under line of credit agreements	(931)	(5,045)
Borrowings on trade payable program liability	80,836	59,097
Payments on trade payable program liability	(50,304)	(53,944)
Payment for finance issuance cost		(2,441)
Debt payments	(539)	(539)
Dividends paid		(3,171)
Proceeds from stock issuance	1,318	363
Net cash provided by (used in) financing activities	31,486	(635)
Net increase (decrease) in cash and cash equivalents	92,589	(28,263)
Cash and cash equivalents at beginning of period	58,244	90,240
Cash and cash equivalents at end of period	150,833	61,977
Supplemental disclosure of cash flow information:
Cash paid for income taxes	1,705	629
Cash paid for interest	11,449	11,523
Non-cash investing activities:
Accrued purchases of property and equipment	$ 632	$ 1,416

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PROPERTY AND EQUIPMENT

6 Months Ended

Jul. 28, 2012

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

NOTE 5—PROPERTY AND EQUIPMENT

The Company’s property and equipment as of July 28, 2012 and January 28, 2012 was as follows:

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
Property and equipment
Land	$	204,023		$	204,023
Buildings and improvements	885,485			875,999
Furniture, fixtures and equipment	738,815			723,938
Construction in progress	3,852			3,279
Accumulated depreciation and amortization	(1,149,556		)	(1,110,900		)
Property and equipment — net	$	682,619		$	696,339

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SUPPLEMENTAL GUARANTOR INFORMATION (Tables)

6 Months Ended

Jul. 28, 2012

SUPPLEMENTAL GUARANTOR INFORMATION

CONDENSED CONSOLIDATING BALANCE SHEET

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)

(unaudited)

As of July 28, 2012	Pep Boys		Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidation/ Elimination			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	92,508	$	47,160	$	11,165	$	—		$	150,833
Accounts receivable, net	14,546		13,416		—		—			27,962
Merchandise inventories	221,294		405,261		—		—			626,555
Prepaid expenses	8,929		12,577		7,102		(7,587		)	21,021
Other current assets	1,776		—		56,148		(4,841		)	53,083
Total current assets	339,053		478,414		74,415		(12,428		)	879,454
Property and equipment—net	240,096		431,087		29,835		(18,399		)	682,619
Investment in subsidiaries	2,204,475		—		—		(2,204,475		)	—
Intercompany receivables	—		1,412,350		68,966		(1,481,316		)	—
Goodwill	2,549		44,368		—		—			46,917
Deferred income taxes	3,083		42,742		—		—			45,825
Other long-term assets	29,868		1,792		—		—			31,660
Total assets	$	2,819,124	$	2,410,753	$	173,216	$	(3,716,618	)	$	1,686,475
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	246,522	$	—	$	—	$	—		$	246,522
Trade payable program liability	115,746		—		—		—			115,746
Accrued expenses	25,211		60,694		140,230		(7,587		)	218,548
Deferred income taxes	26,243		39,829		—		(4,841		)	61,231
Current maturities of long-term debt	1,254		—		—		—			1,254
Total current liabilities	414,976		100,523		140,230		(12,428		)	643,301
Long-term debt less current maturities	293,504		—		—		—			293,504
Other long-term liabilities	26,704		45,586		—		—			72,290
Deferred gain from asset sales	59,215		93,155		—		(18,399		)	133,971
Intercompany liabilities	1,481,316		—		—		(1,481,316		)	—
Total stockholders’ equity	543,409		2,171,489		32,986		(2,204,475		)	543,409
Total liabilities and stockholders’ equity	$	2,819,124	$	2,410,753	$	173,216	$	(3,716,618	)	$	1,686,475

As of January 28, 2012	Pep Boys		Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidation/ Elimination						Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	22,740	$	27,181	$	8,323	$		—				$	58,244
Accounts receivable, net	14,566		11,226		—		—						25,792
Merchandise inventories	214,584		399,552		—		—						614,136
Prepaid expenses	12,945		16,873		14,996		(18,420					)	26,394
Other current assets	606		—		64,214		(4,841					)	59,979
Total current assets	265,441		454,832		87,533		(23,261					)	784,545
Property and equipment—net	243,108		441,645		30,177		(18,591					)	696,339
Investment in subsidiaries	2,176,992		—		—		(2,176,992					)	—
Intercompany receivables	—		1,389,910		82,206		(1,472,116					)	—
Goodwill	2,549		44,368		—		—						46,917
Deferred income taxes	20,468		52,402		—		—						72,870
Other long-term assets	31,068		2,040		—		—						33,108
Total assets	$	2,739,626	$	2,385,197	$	199,916	$			(3,690,960		)	$	1,633,779
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	243,712	$	—	$	—	$				—		$	243,712
Trade payable program liability	85,214		—		—		—						85,214
Accrued expenses	17,887		55,527		166,711		(18,420					)	221,705
Deferred income taxes	29,383		41,666		—		(4,841					)	66,208
Current maturities of long-term debt	1,079		—		—		—						1,079
Total current liabilities	377,275		97,193		166,711		(23,261					)	617,918
Long-term debt less current maturities	294,043		—		—		—						294,043
Other long-term liabilities	30,540		46,676		—		—						77,216
Deferred gain from asset sales	61,323		97,541		—		(18,591					)	140,273
Intercompany liabilities	1,472,116		—		—		(1,472,116					)	—
Total stockholders’ equity	504,329		2,143,787		33,205		(2,176,992					)	504,329
Total liabilities and stockholders’ equity	$	2,739,626	$	2,385,197	$	199,916	$	(3,690,960				)	$	1,633,779

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

				Subsidiary			Subsidiary Non-			Consolidation /
Thirteen Weeks Ended July 28, 2012	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	135,439		$	277,941		$	—		$	—		$	413,380
Service revenue	37,703			74,588			—			—			112,291
Other revenue	—			—			6,161			(6,161		)	—
Total revenues	173,142			352,529			6,161			(6,161		)	525,671
Costs of merchandise sales	96,843			191,668			—			(460		)	288,051
Costs of service revenue	34,108			72,958			—			(47		)	107,019
Costs of other revenue	—			—			6,142			(6,142		)	—
Total costs of revenues	130,951			264,626			6,142			(6,649		)	395,070
Gross profit from merchandise sales	38,596			86,273			—			460			125,329
Gross profit from service revenue	3,595			1,630			—			47			5,272
Gross profit from other revenue	—			—			19			(19		)	—
Total gross profit	42,191			87,903			19			488			130,601
Selling, general and administrative expenses	36,323			78,061			83			(190		)	114,277
Net loss from dispositions of assets	(8		)	(1		)	—			—			(9		)
Operating profit	5,860			9,841			(64		)	678			16,315
Merger termination fees, net	42,955			—			—			—			42,955
Non-operating income (expense)	(4,059		)	16,911			679			(13,010		)	521
Interest expense (income)	18,129			1,151			(521		)	(12,332		)	6,427
Earnings from continuing operations before income taxes	26,627			25,601			1,136			—			53,364
Income tax expense	10,509			9,401			420			—			20,330
Equity in earnings of subsidiaries	16,949			—			—			(16,949		)	—
Net earnings from continuing operations	33,067			16,200			716			(16,949		)	33,034
Discontinued operations, net of tax	(19		)	33			—			—			14
Net earnings	$	33,048		$	16,233		$	716		$	(16,949	)	$	33,048
Other comprehensive income
Defined benefit plan adjustment	354			—			—			—			354
Derivative financial instruments adjustment	910			—			—			—			910
Other comprehensive income	1,264			—			—			—			1,264
Comprehensive income	$	34,312		$	16,233		$	716		$	(16,949	)	$	34,312

				Subsidiary			Subsidiary Non-			Consolidation /
Thirteen Weeks Ended July 30, 2011	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	137,881		$	277,386		$	—		$	—		$	415,267
Service revenue	37,113			70,214			—			—			107,327
Other revenue	—			—			5,732			(5,732		)	—
Total revenues	174,994			347,600			5,732			(5,732		)	522,594
Costs of merchandise sales	98,345			189,785			—			(409		)	287,721
Costs of service revenue	32,886			66,815			—			(38		)	99,663
Costs of other revenue	—			—			5,830			(5,830		)	—
Total costs of revenues	131,231			256,600			5,830			(6,277		)	387,384
Gross profit from merchandise sales	39,536			87,601			—			409			127,546
Gross profit from service revenue	4,227			3,399			—			38			7,664
Gross profit from other revenue	—			—			(98		)	98			—
Total gross profit	43,763			91,000			(98		)	545			135,210
Selling, general and administrative expenses	38,562			74,698			80			(72		)	113,268
Net gain from dispositions of assets	—			(3		)	—			—			(3		)
Operating profit	5,201			16,299			(178		)	617			21,939
Non-operating (expense) income	(4,216		)	15,852			618			(11,685		)	569
Interest expense (income)	17,534			499			(521		)	(11,068		)	6,444
(Loss) earnings from continuing operations before income taxes	(16,549		)	31,652			961			—			16,064
Income tax (benefit) expense	(3,100		)	5,114			159			—			2,173
Equity in earnings of subsidiaries	27,365			—			—			(27,365		)	—
Net earnings from continuing operations	13,916			26,538			802			(27,365		)	13,891
Discontinued operations, net of tax	27			25			—			—			52
Net earnings	$	13,943		$	26,563		$	802		$	(27,365	)	$	13,943
Other comprehensive income
Defined benefit plan adjustment	253			—			—			—			253
Derivative financial instruments adjustment	170			—			—			—			170
Other comprehensive income	423			—			—			—			423
Comprehensive income	$	14,366		$	26,563		$	802		$	(27,365	)	$	14,366

				Subsidiary			Subsidiary Non-			Consolidation /
Twenty-six Weeks Ended July 28, 2012	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	272,022		$	553,690		$	—		$	—		$	825,712
Service revenue	75,744			148,819			—			—			224,563
Other revenue	—			—			12,320			(12,320		)	—
Total revenues	347,766			702,509			12,320			(12,320		)	1,050,275
Costs of merchandise sales	194,553			385,274			—			(920		)	578,907
Costs of service revenue	68,394			144,815			—			(94		)	213,115
Costs of other revenue	—			—			12,714			(12,714		)	—
Total costs of revenues	262,947			530,089			12,714			(13,728		)	792,022
Gross profit from merchandise sales	77,469			168,416			—			920			246,805
Gross profit from service revenue	7,350			4,004			—			94			11,448
Gross profit from other revenue	—			—			(394		)	394			—
Total gross profit	84,819			172,420			(394		)	1,408			258,253
Selling, general and administrative expenses	75,260			158,508			167			52			233,987
Net loss from dispositions of assets	(8		)	(3		)	—			—			(11		)
Operating profit	9,551			13,909			(561		)	1,356			24,255
Merger termination fees	42,955			—			—			—			42,955
Non-operating income (expense)	(8,167		)	32,870			1,357			(25,069		)	991
Interest expense (income)	35,789			1,910			(1,043		)	(23,713		)	12,943
Earnings from continuing operations before income taxes	8,550			44,869			1,839			—			55,258
Income tax expense	3,265			17,123			702			—			21,090
Equity in earnings of subsidiaries	28,839			—			—			(28,839		)	—
Net earnings from continuing operations	34,124			27,746			1,137			(28,839		)	34,168
Discontinued operations, net of tax	(14		)	(44		)	—			—			(58		)
Net earnings	$	34,110		$	27,702		$	1,137		$	(28,839	)	$	34,110
Other comprehensive income
Defined benefit plan adjustment	708			—			—			—			708
Derivative financial instruments adjustment	1,930			—			—			—			1,930
Other comprehensive income	2,638			—			—			—			2,638
Comprehensive income	$	36,748		$	27,702		$	1,137		$	(28,839	)	$	36,748

				Subsidiary			Subsidiary Non-			Consolidation /
Twenty-six Weeks Ended July 30, 2011	Pep Boys			Guarantors			Guarantors			Elimination			Consolidated
Merchandise sales	$	279,262		$	544,632		$	—		$	—		$	823,894
Service revenue	75,648			136,592			—			—			212,240
Other revenue	—			—			11,466			(11,466		)	—
Total revenues	354,910			681,224			11,466			(11,466		)	1,036,134
Costs of merchandise sales	197,518			376,348			—			(816		)	573,050
Costs of service revenue	65,974			126,854			—			(76		)	192,752
Costs of other revenue	—			—			11,656			(11,656		)	—
Total costs of revenues	263,492			503,202			11,656			(12,548		)	765,802
Gross profit from merchandise sales	81,744			168,284			—			816			250,844
Gross profit from service revenue	9,674			9,738			—			76			19,488
Gross profit from other revenue	—			—			(190		)	190			—
Total gross profit	91,418			178,022			(190		)	1,082			270,332
Selling, general and administrative expenses	76,386			145,767			166			(151		)	222,168
Net gain from dispositions of assets	—			86			—			—			86
Operating profit	15,032			32,341			(356		)	1,233			48,250
Non-operating (expense) income	(8,491		)	31,921			1,234			(23,508		)	1,156
Interest expense (income)	34,859			1,400			(1,043		)	(22,275		)	12,941
(Loss) earnings from continuing operations before income taxes	(28,318		)	62,862			1,921			—			36,465
Income tax (benefit) expense	(7,714		)	17,347			536			—			10,169
Equity in earnings of subsidiaries	46,896			—			—			(46,896		)	—
Net earnings from continuing operations	26,292			45,515			1,385			(46,896		)	26,296
Discontinued operations, net of tax	19			(4		)	—			—			15
Net earnings	$	26,311		$	45,511		$	1,385		$	(46,896	)	$	26,311
Other comprehensive income
Defined benefit plan adjustment	473			—			—			—			473
Derivative financial instruments adjustment	685			—			—			—			685
Other comprehensive income	1,158			—			—			—			1,158
Comprehensive income	$	27,469		$	45,511		$	1,385		$	(46,896	)	$	27,469

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in thousands)

(unaudited)

Twenty-six Weeks Ended July 28, 2012	Pep Boys			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidation / Elimination			Consolidated
Net Cash Provided by (Used in) Operating Activities	$	41,640		$	56,208		$	(9,042	)	$	(1,356	)	$	87,450
Investing Activities:
Capital expenditures	(15,124		)	(11,223		)	—			—			(26,347		)
Net Cash (Used in) Investing Activities	(15,124		)	(11,223		)	—			—			(26,347		)
Financing Activities:
Borrowings under line of credit agreements	500			606			—			—			1,106
Payments under line of credit agreements	(325		)	(606		)	—			—			(931		)
Borrowings on trade payable program liability	80,836			—			—			—			80,836
Payments on trade payable program liability	(50,304		)	—			—			—			(50,304		)
Debt Payments	(539		)	—			—			—			(539		)
Dividends paid	—			—			(1,356		)	1,356			—
Intercompany (payments) borrowings	11,766			(25,006		)	13,240			—			—
Proceeds from stock issuance	1,318			—			—			—			1,318
Net Cash Provided by (Used in) Financing Activities	43,252			(25,006		)	11,884			1,356			31,486
Net increase in cash and cash equivalents	69,768			19,979			2,842			—			92,589
Cash and cash equivalents at beginning of period	22,740			27,181			8,323			—			58,244
Cash and cash equivalents at end of period	$	92,508		$	47,160		$	11,165		$	—		$	150,833

Twenty-six Weeks Ended July 30, 2011	Pep Boys			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidation / Elimination			Consolidated
Net Cash Provided by (Used in) Operating Activities	$	13,152		$	49,122		$	(9,807	)	$	(1,233	)	$	51,234
Investing Activities:
Capital expenditures	(15,555		)	(15,081		)	—			—			(30,636		)
Proceeds from dispositions of assets	—			89			—			—			89
Premiums paid on life insurance policies	(795		)	—			—			—			(795		)
Collateral investment	(4,763		)	—			—			—			(4,763		)
Acquisitions, net of cash acquired	(144		)	(42,613		)	—			—			(42,757		)
Net Cash Provided by (Used in) Investing Activities	(21,257		)	(57,605		)	—			—			(78,862		)
Financing Activities:
Borrowings under line of credit agreements	1,771			3,274			—			—			5,045
Payments under line of credit agreements	(1,771		)	(3,274		)	—			—			(5,045		)
Borrowings on trade payable program liability	59,097			—			—			—			59,097
Payments on trade payable program liability	(53,944		)	—			—			—			(53,944		)
Payment for finance issuance cost	(2,441		)	—			—			—			(2,441		)
Debt Payments	(539		)	—			—			—			(539		)
Dividends paid	(3,171		)	—			(1,233		)	1,233			(3,171		)
Intercompany (payments) borrowings	(8,985		)	(2,821		)	11,806			—			—
Proceeds from stock issuance	363			—			—			—			363
Net Cash (Used in) Provided by Financing Activities	(9,620		)	(2,821		)	10,573			1,233			(635		)
Net (decrease) increase in cash and cash equivalents	(17,725		)	(11,304		)	766			—			(28,263		)
Cash and cash equivalents at beginning of period	37,912			42,779			9,549			—			90,240
Cash and cash equivalents at end of period	$	20,187		$	31,475		$	10,315		$	—		$	61,977

XML

FAIR VALUE MEASUREMENTS AND DERIVATIVES (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Jul. 28, 2012 item	Jul. 30, 2011	Jul. 28, 2012 item	Jul. 30, 2011	Jan. 28, 2012
FAIR VALUE MEASUREMENTS AND DERIVATIVES
Number of interest rate swaps designated as cash flow hedge	1		1
Value of Senior Secured Term Loan	$ 145,000,000		$ 145,000,000
Fixed percentage to be paid under hedge	5.036%		5.036%
Effect of interest rate swap on the consolidated financial statements
Amount of Gain in Other Comprehensive Income/ (Loss) (Effective Portion)	897,000	150,000	1,904,000	648,000
Amount of Loss Recognized in Earnings (Effective Portion)	(1,685,000)	(1,772,000)	(3,339,000)	(3,491,000)
Fair value of derivative payable	9,500,000		9,500,000		12,500,000
Increase (decrease) in fair value of derivative			(3,000,000)
Derivative loss net of tax recorded to accumulated other comprehensive loss			1,900,000
Non-financial assets measured at fair value on a non-recurring basis:
Impairment charge related to stores classified as held and used		$ 400,000

XML

PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jul. 28, 2012

PROPERTY AND EQUIPMENT

Schedule of property and equipment

(dollar amounts in thousands)	July 28, 2012			January 28, 2012
Property and equipment
Land	$	204,023		$	204,023
Buildings and improvements	885,485			875,999
Furniture, fixtures and equipment	738,815			723,938
Construction in progress	3,852			3,279
Accumulated depreciation and amortization	(1,149,556		)	(1,110,900		)
Property and equipment — net	$	682,619		$	696,339