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WASHINGTON, D.C. 20549 ___________ [X] Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended January 31, 2004 OR [ ] Transition
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ Commission file number 1-3381 The Pep BoysManny, Moe & Jack Securities registered pursuant to Section 12(g) of the
Act: None
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
FORM 10-K
___________
(Mark One)
(Exact name of
registrant as specified in its charter)
incorporation or organization)
identification no.)
Philadelphia, PA
Securities registered pursuant to Section 12(b) of the
Act:
DOCUMENTS INCORPORATED BY REFERENCE
PART I
ITEM 1 BUSINESS
GENERAL
2
NUMBER OF STORES AT END OF FISCAL YEARS 2000 THROUGH 2003
State |
2000 Year End |
Opened |
Closed |
2001 Year End |
Opened |
Closed |
2002 Year End |
Opened |
Closed |
2003 Year End |
||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Alabama |
1 | | | 1 | | | 1 | | | 1 | ||||||||||||||||||||||||||||||||
Arizona |
23 | | | 23 | | | 23 | | 1 | 22 | ||||||||||||||||||||||||||||||||
Arkansas |
1 | | | 1 | | | 1 | | | 1 | ||||||||||||||||||||||||||||||||
California |
135 | | | 135 | | 1 | 134 | | 12 | 122 | ||||||||||||||||||||||||||||||||
Colorado |
8 | | | 8 | | | 8 | | | 8 | ||||||||||||||||||||||||||||||||
Connecticut |
8 | | | 8 | | | 8 | | | 8 | ||||||||||||||||||||||||||||||||
Delaware |
6 | | | 6 | | | 6 | | | 6 | ||||||||||||||||||||||||||||||||
Florida |
47 | | | 47 | | | 47 | | 4 | 43 | ||||||||||||||||||||||||||||||||
Georgia |
26 | | | 26 | | | 26 | | 1 | 25 | ||||||||||||||||||||||||||||||||
Illinois |
24 | | | 24 | | | 24 | | 1 | 23 | ||||||||||||||||||||||||||||||||
Indiana |
9 | | | 9 | | | 9 | | | 9 | ||||||||||||||||||||||||||||||||
Kansas |
2 | | | 2 | | | 2 | | | 2 | ||||||||||||||||||||||||||||||||
Kentucky |
4 | | | 4 | | | 4 | | | 4 | ||||||||||||||||||||||||||||||||
Louisiana |
10 | | | 10 | | | 10 | | | 10 | ||||||||||||||||||||||||||||||||
Maine |
1 | | | 1 | | | 1 | | | 1 | ||||||||||||||||||||||||||||||||
Maryland |
19 | | | 19 | | | 19 | | | 19 | ||||||||||||||||||||||||||||||||
Massachusetts |
8 | | | 8 | | | 8 | | 1 | 7 | ||||||||||||||||||||||||||||||||
Michigan |
7 | | | 7 | | | 7 | | | 7 | ||||||||||||||||||||||||||||||||
Minnesota |
3 | | | 3 | | | 3 | | | 3 | ||||||||||||||||||||||||||||||||
Missouri |
1 | | | 1 | | | 1 | | | 1 | ||||||||||||||||||||||||||||||||
Nevada |
12 | | | 12 | | | 12 | | | 12 | ||||||||||||||||||||||||||||||||
New
Hampshire |
4 | | | 4 | | | 4 | | | 4 | ||||||||||||||||||||||||||||||||
New
Jersey |
28 | | | 28 | 1 | | 29 | | 1 | 28 | ||||||||||||||||||||||||||||||||
New
Mexico |
8 | | | 8 | | | 8 | | | 8 | ||||||||||||||||||||||||||||||||
New
York |
29 | 1 | | 30 | 1 | | 31 | | 2 | 29 | ||||||||||||||||||||||||||||||||
North
Carolina |
11 | | | 11 | | | 11 | | 1 | 10 | ||||||||||||||||||||||||||||||||
Ohio |
13 | | | 13 | | | 13 | | 1 | 12 | ||||||||||||||||||||||||||||||||
Oklahoma |
6 | | | 6 | | | 6 | | | 6 | ||||||||||||||||||||||||||||||||
Pennsylvania |
46 | | 1 | 45 | | | 45 | | 3 | 42 | ||||||||||||||||||||||||||||||||
Puerto
Rico |
27 | | | 27 | | | 27 | | | 27 | ||||||||||||||||||||||||||||||||
Rhode
Island |
3 | | | 3 | | | 3 | | | 3 | ||||||||||||||||||||||||||||||||
South
Carolina |
6 | | | 6 | | | 6 | | | 6 | ||||||||||||||||||||||||||||||||
Tennessee |
7 | | | 7 | | | 7 | | | 7 | ||||||||||||||||||||||||||||||||
Texas |
60 | | | 60 | | | 60 | | 5 | 55 | ||||||||||||||||||||||||||||||||
Utah |
6 | | | 6 | | | 6 | | | 6 | ||||||||||||||||||||||||||||||||
Virginia |
17 | | | 17 | | | 17 | | 1 | 16 | ||||||||||||||||||||||||||||||||
Washington |
2 | | | 2 | | | 2 | | | 2 | ||||||||||||||||||||||||||||||||
Total |
628 | 1 | 1 | 628 | 2 | 1 | 629 | | 34 | 595 |
3
DEVELOPMENT
PRODUCTS AND SERVICES
4
demand and allows more efficient management of inventories. On a weekly basis, the Company employs a promotional pricing strategy on select items to drive increased customer traffic.
STORE OPERATIONS AND MANAGEMENT
INVENTORY CONTROL AND DISTRIBUTION
SUPPLIERS
5
COMPETITION
REGULATION
EMPLOYEES
Description |
Full-time Numbers |
% |
Part-time Numbers |
% |
Total Numbers |
% |
||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Store
Sales |
6,049 | 43.8 | 5,293 | 70.5 | 11,342 | 53.2 | ||||||||||||||||||||
Store
Service |
6,014 | 43.5 | 2,060 | 27.4 | 8,074 | 37.8 | ||||||||||||||||||||
STORE
TOTAL |
12,063 | 87.3 | 7,353 | 97.9 | 19,416 | 91.0 | ||||||||||||||||||||
Warehouses |
717 | 5.2 | 140 | 1.9 | 857 | 4.0 | ||||||||||||||||||||
Offices |
1,039 | 7.5 | 19 | 0.2 | 1,058 | 5.0 | ||||||||||||||||||||
TOTAL
EMPLOYEES |
13,819 | 100.0 | 7,512 | 100.0 | 21,331 | 100.0 |
RISK FACTORS
Risks Related to Pep Boys
If we are unable to generate sufficient cash flows from our operations, our liquidity will suffer and we may be unable to satisfy our obligations.
6
consumer spending habits or the failure to maintain favorable vendor payment terms or our inability to successfully implement sales growth initiatives. We may be unsuccessful in securing alternative financing when needed, on terms that we consider acceptable, or at all.
|
our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired in the future; |
|
a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our debt, thereby reducing the funds available for other purposes; |
|
our failure to comply with the financial and other restrictive covenants governing our debt, which, among other things, require us to maintain financial ratios and limit our ability to incur additional debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse effect on our business or our prospects; and |
|
if we are substantially more leveraged than some of our competitors, we might be at a competitive disadvantage to those competitors that have lower debt service obligations and significantly greater operating and financial flexibility than we do. |
We depend on our relationships with our vendors and a disruption of these relationships or of our vendors operations could have a material adverse effect on our business and results of operations.
We depend on our senior management team and our other personnel, and we face substantial competition for qualified personnel.
We are subject to environmental laws and may be subject to environmental liabilities that could have a material adverse effect on us in the future.
7
We are developing a new point-of-sale information system that is currently behind schedule, and further delays in its introduction could lead to increased demands on capital and a competitive disadvantage relative to our competitors.
Risks Related to Our Industry
Our industry is highly competitive, and price competition in some categories of the automotive aftermarket or a loss of trust in our participation in the do-it-for-me market, could cause a material decline in our revenues and earnings.
Do-It-Yourself
|
automotive parts and accessories stores; |
|
automobile dealers that supply manufacturer replacement parts and accessories; and |
|
mass merchandisers and wholesale clubs that sell automotive products. |
Do-It-For-Me
|
regional and local full service automotive repair shops; |
|
automobile dealers that provide repair and maintenance services; |
|
national and regional (including franchised) tire retailers that provide additional automotive repair and maintenance services; and |
|
national and regional (including franchised) specialized automotive (such as exhaust, brake and transmission) repair facilities that provide additional automotive repair and maintenance services. |
|
national and regional (including franchised) tire retailers; and |
|
mass merchandisers and wholesale clubs that sell tires. |
8
Vehicle miles driven may decrease, resulting in a decline of our revenues and negatively affecting our results of operations.
|
the weatheras vehicle maintenance may be deferred during periods of inclement weather; |
|
the economyas during periods of poor economic conditions, customers may defer vehicle maintenance or repair, and during periods of good economic conditions, consumers may opt to purchase new vehicles rather than service the vehicles they currently own and replace worn or damaged parts; |
|
gas pricesas increases in gas prices may deter consumers from using their vehicles; and |
|
travel patternsas changes in travel patterns may cause consumers to rely more heavily on train and airplane transportation. |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
SEC REPORTING
9
EXECUTIVE OFFICERS OF THE COMPANY
Name |
Age |
Tenure with Company |
Position with the Company and Date of Election to Position |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lawrence N.
Stevenson |
47 |
8
months |
Chief
Executive Officer since May 2003 |
|||||||||||
George Babich,
Jr. |
52 |
7
years |
President since March 2002; Chief Financial Officer since March 2000 |
|||||||||||
Harold L.
Smith |
53 |
5
months |
Executive Vice PresidentMerchandising & Marketing since August 2003 |
|||||||||||
Don L.
Casey |
52 |
3
years |
Senior Vice PresidentSupply Chain & Logistics since July 2000 |
|||||||||||
Mark L.
Page |
47 |
28
years |
Senior Vice PresidentStore Operations since March 1993 |
|||||||||||
Harry F.
Yanowitz |
37 |
7
months |
Senior Vice PresidentStrategy & Business Development since June 2003 |
|||||||||||
Bernard K.
McElroy |
52 |
23
years |
Vice
PresidentChief Accounting Officer & Treasurer since April 2003 |
ITEM 2 | PROPERTIES |
10
approximately 4,000 square feet of space for administrative regional offices in each of Decatur, Georgia and Richardson, Texas. The Company owns a three-story, approximately 60,000 square foot structure in Los Angeles, California in which it occupies 7,200 square feet and sublets the remaining square footage to tenants.
Warehouse Location |
|
Products Warehoused |
|
Square Footage |
|
Owned or Leased |
|
Stores Serviced |
|
States Serviced |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Los Angeles,
CA |
All except tires |
216,000 | Owned |
151 | AZ, CA, NM, NV, UT, WA | |||||||||||||||||
Los Angeles,
CA |
Tires/parts | 73,000 | Leased |
151 | AZ, CA, NM, NV, UT, WA | |||||||||||||||||
Los Angeles,
CA |
All except tires |
137,000 | Leased |
151 | AZ, CA, NM, NV, UT, WA | |||||||||||||||||
Atlanta,
GA |
All | 392,000 | Owned |
133 | AL, FL, GA, LA, NC, PR, SC, TN, VA | |||||||||||||||||
Mesquite,
TX |
All | 244,000 | Owned |
91 | AR, AZ, CO, LA, NM, OK, TX | |||||||||||||||||
Plainfield,
IN |
All | 403,000 | Leased |
78 | IL, IN, KS, KY, MI, MN, MO, OH, OK, PA, TN, VA | |||||||||||||||||
Chester,
NY |
All | 400,400 | Leased |
142 | CT, DE, MA, MD, ME, NH, NJ, NY, PA, RI, VA | |||||||||||||||||
Total |
1,865,400 |
ITEM 3 LEGAL PROCEEDINGS
11
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5 | MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
MARKET PRICE PER SHARE
Market Price Per Share | Cash Dividends | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal year ended January 31, 2004 |
High |
Low |
Per Share |
||||||||||||
First
Quarter |
$ | 10.69 | $ | 6.00 | $ | 0.0675 | |||||||||
Second
Quarter |
15.90 | 8.54 | 0.0675 | ||||||||||||
Third
Quarter |
19.94 | 14.05 | 0.0675 | ||||||||||||
Fourth
Quarter |
23.99 | 18.53 | 0.0675 | ||||||||||||
Fiscal
year ended February 1, 2003 |
|||||||||||||||
First
Quarter |
$ | 19.38 | $ | 13.55 | $ | 0.0675 | |||||||||
Second
Quarter |
19.04 | 10.75 | 0.0675 | ||||||||||||
Third
Quarter |
15.23 | 8.75 | 0.0675 | ||||||||||||
Fourth
Quarter |
12.64 | 10.06 | 0.0675 |
EQUITY COMPENSATION PLANS
|
Equity compensation plans approved by shareholders |
|
Equity compensation plans not approved by shareholders |
|
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of
securities to be issued upon exercise of outstanding options |
6,736,070 | 174,540 | 1 | 6,910,610 | ||||||||||
Weighted average
exercise price of outstanding options |
$ | 16.51 | $ | 8.70 | $ | 16.31 | ||||||||
Number of securities remaining available for future issuance under equity compensation plans (excluding securities
reflected in top row) |
1,504,004 | | 1,504,004 |
1 | Inducement options granted to the current CEO in connection with his hire. |
12
ITEM 6 SELECTED FINANCIAL DATA
(dollar amounts are in thousands except per share
amounts) |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended |
|
Jan. 31, 2004 |
|
Feb. 1, 2003 |
|
Feb. 2, 2002 |
|
Feb. 3, 2001 |
|
Jan. 29, 2000 |
||||||||||||
STATEMENT
OF OPERATIONS DATA |
||||||||||||||||||||||
Merchandise
sales |
$ | 1,728,386 | $ | 1,697,628 | $ | 1,707,190 | $ | 1,891,046 | $ | 1,887,771 | ||||||||||||
Service
revenue |
405,884 | 400,149 | 403,505 | 444,233 | 424,717 | |||||||||||||||||
Total
revenues |
2,134,270 | 2,097,777 | 2,110,695 | 2,335,279 | 2,312,488 | |||||||||||||||||
Gross profit
from merchandise sales |
490,239 | 1 | 514,490 | 2 | 500,037 | 3 | 436,033 | 4 | 520,228 | |||||||||||||
Gross profit
from service revenue |
96,504 | 1 | 102,056 | 2 | 101,053 | 3 | 78,243 | 4 | 82,295 | |||||||||||||
Total gross
profit |
586,743 | 1 | 616,546 | 2 | 601,090 | 3 | 514,276 | 4 | 602,523 | |||||||||||||
Selling,
general and administrative expenses |
569,834 | 1 | 504,163 | 2 | 497,798 | 3 | 542,048 | 4 | 512,434 | |||||||||||||
Operating
profit (loss) |
16,909 | 1 | 112,383 | 2 | 103,292 | 3 | (27,772 | )4 | 90,089 | |||||||||||||
Non-operating
income |
3,339 | 3,097 | 4,623 | 7,314 | 2,327 | |||||||||||||||||
Interest
expense |
38,255 | 47,237 | 53,709 | 59,718 | 51,557 | |||||||||||||||||
(Loss) earnings
from continuing operations before income taxes and cumulative effect of change in accounting principle |
(18,007 | )1 | 68,243 | 2 | 54,206 | 3 | (80,176 | )4 | 40,859 | |||||||||||||
Net (loss)
earnings from continuing operations before cumulative effect of change in accounting principle |
(11,399 | )1 | 42,992 | 2 | 34,693 | 3 | (50,929 | )4 | 26,625 | |||||||||||||
(Loss) earnings
from discontinued operations, net of tax |
(18,263 | ) | 808 | 642 | (165 | ) | 2,678 | |||||||||||||||
Cumulative
effect of change in accounting principle, net of tax |
(2,484 | ) | | | | | ||||||||||||||||
Net (loss)
earnings |
(32,146 | )1 | 43,800 | 2 | 35,335 | 3 | (51,094 | )4 | 29,303 | |||||||||||||
BALANCE
SHEET DATA |
||||||||||||||||||||||
Working
capital |
$ | 76,227 | $ | 130,680 | $ | 115,201 | $ | 122,741 | $ | 185,206 | ||||||||||||
Current
ratio |
1.10 to
1 |
1.24 to
1 |
1.21 to
1 |
1.22 to
1 |
1.35 to
1 |
|||||||||||||||||
Merchandise
inventories |
$ | 553,562 | $ | 488,882 | $ | 519,473 | $ | 547,735 | $ | 582,898 | ||||||||||||
Property and
equipment-net |
986,186 | 1,030,486 | 1,058,842 | 1,134,164 | 1,273,446 | |||||||||||||||||
Total
assets |
1,841,023 | 1,799,910 | 1,806,135 | 1,898,084 | 2,064,948 | |||||||||||||||||
Long-term debt
(includes all convertible debt) |
408,016 | 525,577 | 544,418 | 654,194 | 784,024 | |||||||||||||||||
Total
stockholders equity |
615,594 | 649,992 | 617,790 | 594,766 | 658,284 | |||||||||||||||||
DATA PER
COMMON SHARE |
||||||||||||||||||||||
Basic (loss)
earnings from continuing operations before cumulative effect of change in accounting principle |
$ | (.22 | )1 | $ | .83 | 2 | $ | .68 | 3 | $ | (1.00 | )4 | $ | .53 | ||||||||
Basic (loss)
earnings |
(.62 | )1 | .85 | 2 | .69 | 3 | (1.00 | )4 | .58 | |||||||||||||
Diluted (loss)
earnings from continuing operations before cumulative effect of change in accounting principle |
(.22 | )1 | .80 | 2 | .67 | 3 | (1.00 | )4 | .53 | |||||||||||||
Diluted net
(loss) earnings |
(.62 | )1 | .82 | 2 | .68 | 3 | (1.00 | )4 | .58 | |||||||||||||
Cash
dividends |
.27 | .27 | .27 | .27 | .27 | |||||||||||||||||
Stockholders equity |
11.66 | 12.59 | 12.01 | 11.60 | 12.91 | |||||||||||||||||
Common share
price range: |
||||||||||||||||||||||
high |
23.99 | 19.38 | 18.48 | 7.69 | 21.63 | |||||||||||||||||
low |
6.00 | 8.75 | 4.40 | 3.31 | 7.13 | |||||||||||||||||
OTHER
STATISTICS |
||||||||||||||||||||||
Return on
average stockholders equity |
(5.1 | )% | 6.9 | % | 5.8 | % | (8.2 | )% | 4.0 | % | ||||||||||||
Common shares
issued and outstanding |
52,787,148 | 51,644,578 | 51,430,861 | 51,260,663 | 50,994,099 | |||||||||||||||||
Capital
expenditures |
$ | 43,262 | $ | 43,911 | $ | 25,375 | $ | 57,336 | $ | 104,446 | ||||||||||||
Number of
retail outlets |
595 | 629 | 628 | 628 | 662 | |||||||||||||||||
Number of service bays |
6,181 | 6,527 | 6,507 | 6,498 | 6,895 |
1 | Includes pretax charges of $89,730 related to corporate restructuring and other one-time events of which $30,058 reduced gross profit from merchandise sales, $3,278 reduced gross profit from service revenue and $56,394 was included in selling, general and administrative expenses. |
2 | Includes pretax charges of $2,529 related to the Profit Enhancement Plan of which $2,014 reduced the gross profit from merchandise sales, $491 reduced gross profit from service revenue and $24 was included in selling, general and administrative expenses. |
3 | Includes pretax charges of $5,197 related to the Profit Enhancement Plan of which $4,169 reduced the gross profit from merchandise sales, $813 reduced gross profit from service revenue and $215 was included in selling, general and administrative expenses. |
4 | Includes pretax charges of $74,945 related to the Profit Enhancement Plan of which $67,085 reduced the gross profit from merchandise sales, $5,232 reduced gross profit from service revenue and $2,628 was included in selling, general and administrative expenses. |
13
ITEM 7 | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |
OVERVIEW
Introduction
Business Strategy
|
Building Upon a Successful Restructuring. In July 2003, we initiated the final phase of our comprehensive Profit Enhancement Plan (PEP), which was launched in November 2000. The key elements of PEP included closing under-performing stores, closing and consolidating distribution centers, streamlining our corporate management structure, significantly reducing in-store, service and field management and eliminating certain unprofitable merchandise offerings. Following completion of the final phase of PEP, we estimate that the contribution to earnings resulting from PEP will be approximately $95 million per year ($84 million from the initial phase and $11 million from the final phase) as compared to fiscal 2000. |
|
Improving Our Merchandising Capabilities. We will continue to fill our stores with a new and flexible merchandising mix designed to increase customer traffic. We will take advantage of our industry-leading average retail square footage to improve and intensify our merchandise displays. We utilize product-specific advertising to highlight promotional items and pricing, primarily through weekly print advertising. |
|
Enhancing Our Stores. We have begun to reinvest in our existing stores to completely redesign their interiors and enhance their exterior appeal. We believe that this layout will provide customers with a clear and concise way of finding what they need and will promote cross-selling. |
14
|
Focusing Our Service Offering and Introducing Name Brand Tires. We continue to build upon the competitive advantage that our service offering provides over our parts-only competitors by sharpening our focus on the most profitable maintenance services and introducing name brand tires. By narrowing our service offering, we believe that we can improve our financial performance, both by eliminating less profitable heavy repair services and by better managing the skills of our staff. In addition, the introduction of name brand tires is expected to attract more customers and to help establish those customer relationships earlier in the post-warranty period of their cars life. |
|
New Store Growth. We expect new store growth to begin in fiscal 2006. This growth will focus primarily upon increasing penetration in our existing markets to further leverage our investments. We are likely to grow our total number of service bays through a combination of acquisitions and building new stores. The format of these new stores is likely to include both Supercenters and a service-only format that will utilize existing Supercenters for most of their inventory needs. |
CAPITAL & LIQUIDITY
Capital Resources and Needs
15
the sale of common stock offered in this offering to repay the outstanding balance under its revolving credit facility, which was used along with cash to repay the $57,000,000 aggregate principal amount of Medium-Term Notes that matured on March 3, 2004 and March 10, 2004, and to prepay the approximately $22,400,000 aggregate principal amount outstanding under the Companys Senior Secured Credit Facility, with the balance to be applied to store redesigns.
Contractual Obligations
(dollar amounts in thousands) |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Obligation |
|
Total |
|
Due in less than 1 year |
|
Due in 13 years |
|
Due in 35 years |
|
Due after 5 years |
||||||||||||
Long-term
debt (1) |
$ | 525,031 | $ | 117,015 | $ | 257,485 | $ | 150,306 | $ | 225 | ||||||||||||
Operating
leases |
475,132 | 51,266 | 89,299 | 76,076 | 258,491 | |||||||||||||||||
Capital
leases |
48 | 48 | | | | |||||||||||||||||
Unconditional purchase obligation |
15,569 | 8,112 | 7,457 | | | |||||||||||||||||
Total cash obligations |
$ | 1,015,780 | $ | 176,441 | $ | 354,241 | $ | 226,382 | $ | 258,716 |
(1) | Long-term debt includes current maturities. |
(dollar amounts in thousands) |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commercial Commitments |
|
Total |
|
Due in less than 1 year |
|
Due in 13 years |
|
Due in 35 years |
|
Due after 5 years |
||||||||||||
Import
letters of credit |
$1,682 | $ | 1,682 | $ | $ | $ | ||||||||||||||||
Standby
letters of credit |
39,204 | 39,204 | | | | |||||||||||||||||
Surety bonds |
7,724 | 7,724 | | | | |||||||||||||||||
Total commercial commitments |
$ | 48,610 | $48,610 | $ | | $ | | $ | |
Long-term Debt
16
Other Contractual Obligations
Off-balance Sheet Arrangements
17
Pension Plans
RESULTS OF OPERATIONS
Restructuring
Closure of 33 under-performing stores on July 31, 2003
18
third quarter of fiscal 2003. An additional $187,000 in accrued severance was reversed in the fourth quarter of fiscal 2003 due to a change in the estimate of severance payable. These reversals were recorded in discontinued operations on the consolidated statement of operations.
Discontinuation of certain merchandise offerings
Corporate realignment
Reserve summary
(Dollar amounts in thousands) |
|
Severance |
|
Lease Expenses |
|
Contractual Obligations |
|
Total |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Reserve
balance at Feb. 1, 2003 |
$ | | $ | | $ | | $ | | ||||||||||
Original
reserve |
4,050 | 2,332 | 887 | 7,269 | ||||||||||||||
Provision for
present value of liabilities |
| 92 | 25 | 117 | ||||||||||||||
Changes in
assumptions about future sublease income, lease termination, contractual obligations and severance |
(744 | ) | 2,098 | (44 | ) | 1,310 | ||||||||||||
Cash payments |
(2,933 | ) | (2,154 | ) | (405 | ) | (5,492 | ) | ||||||||||
Reserve balance at Jan. 31, 2004 |
$ | 373 | $ | 2,368 | $ | 463 | $ | 3,204 |
Discontinued Operations
(Dollar amounts in thousands) |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fifty-two weeks ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
Total
Revenues |
$ | 37,722 | $ | 74,711 | $ | 73,865 | ||||||||
Total Gross
(Loss) Profit |
(18,851 | ) | 17,565 | 17,151 | ||||||||||
Selling,
General, and Administrative Expenses |
9,981 | 16,283 | 16,148 | |||||||||||
(Loss)
Earnings from Discontinued Operations Before Income Taxes |
(28,832 | ) | 1,282 | 1,003 | ||||||||||
(Loss) Earnings from Discontinued Operations, Net of Tax |
$ | (18,263 | ) | $ | 808 | $ | 642 |
19
(Dollar amounts in thousands) |
|
January 31, 2004 |
|
February 1, 2003 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Land |
$ | (8,954 | ) | $ | (15,008 | ) | ||||
Building and
improvements |
(7,975 | ) | (45,872 | ) | ||||||
Furniture, fixtures and equipment |
| (23,785 | ) | |||||||
(16,929 | ) | (84,665 | ) | |||||||
Less accumulated depreciation and amortization |
| (27,114 | ) | |||||||
Property and EquipmentNet |
$ | (16,929 | ) | $ | (57,551 | ) | ||||
Assets held
for disposal |
$ | 16,929 | $ | | ||||||
Assets from discontinued operations |
$ | | $ | 57,551 |
Impairment Charges
20
Analysis of Statement of Operations
|
Percentage of Total Revenues |
|
Percentage Change |
||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year ended |
|
Jan. 31, 2004 (fiscal 2003) |
|
Feb. 1, 2003 (Fiscal 2002) |
|
Feb. 2, 2002 (Fiscal 2001) |
|
Fiscal 2003 vs. Fiscal 2002 |
|
Fiscal 2002 vs. Fiscal 2001 |
|
||||||||||||
Merchandise
Sales |
81.0 | % | 80.9 | % | 80.9 | % | 1.8 | % | (0.6 | )% | |||||||||||||
Service Revenue1 |
19.0 | 19.1 | 19.1 | 1.4 | (0.8 | ) | |||||||||||||||||
Total
Revenues |
100.0 | 100.0 | 100.0 | 1.7 | (0.6 | ) | |||||||||||||||||
Costs of
Merchandise Sales2 |
71.6 | 3 | 69.7 | 3 | 70.7 | 3 | 4.7 | (2.0 | ) | ||||||||||||||
Costs of Service Revenue2 |
76.2 | 3 | 74.5 | 3 | 75.0 | 3 | 3.8 | (1.4 | ) | ||||||||||||||
Total Costs
of Revenues |
72.5 | 70.6 | 71.5 | 4.5 | (1.9 | ) | |||||||||||||||||
Gross Profit
from Merchandise Sales |
28.4 | 3 | 30.3 | 3 | 29.3 | 3 | (4.7 | ) | 2.9 | ||||||||||||||
Gross Profit from Service Revenue |
23.8 | 3 | 25.5 | 3 | 25.0 | 3 | (5.4 | ) | 1.0 | ||||||||||||||
Total Gross
Profit |
27.5 | 29.4 | 28.5 | (4.8 | ) | 2.6 | |||||||||||||||||
Selling, General and Administrative Expenses |
26.7 | 24.0 | 23.6 | 13.0 | 1.3 | ||||||||||||||||||
Operating
Profit |
0.8 | 5.4 | 4.9 | (85.0 | ) | (8.8 | ) | ||||||||||||||||
Non-operating
Income |
0.2 | 0.1 | 0.2 | 7.8 | (33.0 | ) | |||||||||||||||||
Interest Expense |
1.8 | 2.2 | 2.5 | (19.0 | ) | (12.1 | ) | ||||||||||||||||
(Loss)
Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle |
(0.8 | ) | 3.3 | 2.6 | (126.4 | ) | 25.9 | ||||||||||||||||
Income Tax (Benefit) Expense |
36.7 | 4 | 37.0 | 4 | 36.0 | 4 | (126.2 | ) | 29.4 | ||||||||||||||
(Loss)
Earnings from Continuing Operations Before Cumulative Effect of Change in Accounting Principle |
(0.5 | ) | 2.0 | 1.6 | (126.5 | ) | 23.9 | ||||||||||||||||
(Loss)
Earnings from Discontinued Operations, Net of Tax |
(0.9 | ) | 0.1 | 0.1 | (2,360.3 | ) | 25.9 | ||||||||||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax |
(0.1 | ) | | | | | |||||||||||||||||
Net (Loss) Earnings |
(1.5 | ) | 2.1 | 1.7 | (173.4 | ) | 24.0 |
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, buying, warehousing and store occupancy costs. Costs of service revenue include service center payroll and related employee benefits and service center occupancy costs. Occupancy costs include utilities, rents, real estate and property taxes, repairs and maintenance and depreciation and amortization expenses. |
3 | As a percentage of related sales or revenue, as applicable. |
4 | As a percentage of (loss) earnings before income taxes. |
21
Fiscal 2003 vs. Fiscal 2002
Fiscal 2002 vs. Fiscal 2001
22
a decrease in television advertising expense and an increase in cooperative advertising. The decrease in store expenses, as a percentage of total revenues, was due primarily to decreases in store payroll, as a percentage of total revenues.
Effects of Inflation
Industry Comparison
(Dollar amounts in thousands) |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year-ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
Retail
Revenues |
$ | 1,195,757 | $ | 1,163,808 | $ | 1,092,192 | ||||||||
Service Business Revenues |
938,513 | 933,969 | 1,018,503 | |||||||||||
Total Revenues |
$ | 2,134,270 | $ | 2,097,777 | $ | 2,110,695 | ||||||||
Gross Profit
from Retail Revenues1 |
$ | 310,688 | $ | 327,852 | $ | 304,696 | ||||||||
Gross Profit from Service Business Revenues1 |
276,055 | 288,694 | 296,394 | |||||||||||
Total Gross Profit |
$ | 586,743 | $ | 616,546 | $ | 601,090 |
1 | Gross Profit from Retail Revenues includes the cost of products sold, buying, warehousing and store occupancy costs. Gross Profit from Service Business Revenues includes the cost of installed products sold, buying, 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. |
23
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
|
The Company evaluates whether inventory is stated at the lower of cost or market based on historical experience with the carrying value and life of inventory. The assumptions used in this evaluation are based on current market conditions and the Company believes inventory is stated at the lower of cost or market in the consolidated financial statements. In addition, historically the Company has been able to return excess items to vendors for credit. Future changes by vendors in their policies or willingness to accept returns of excess inventory could require a revision in the estimates. |
|
The Company has risk participation arrangements with respect to casualty and health care insurance. The amounts included in the Companys costs related to these arrangements are estimated and can vary based on changes in assumptions, claims experience or the providers included in the associated insurance programs. |
|
The Company records reserves for future product returns and warranty claims. The reserves are based on current sales of products and historical claim experience. If claims experience differs from historical levels, revisions in the Companys estimates may be required. |
|
The Company has significant pension costs and liabilities that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected return on plan assets, mortality rates and merit and promotion increases. The Company is required to consider current market conditions, including changes in interest rates in selecting these assumptions. Changes in the related pension costs or liabilities may occur in the future due to changes in the assumptions. |
|
The Company periodically evaluates its long-lived assets for indicators of impairment. Managements judgments are based on market and operational conditions at the time of evaluation. Future events could cause managements conclusion on impairment to change, requiring an adjustment of these assets to their then current fair market value. |
|
The Company provides estimates of fair value for real estate assets and lease liabilities related to store closures when appropriate to do so based on accounting principles generally accepted in the United States. Future circumstances may result in the Companys actual future costs or the amounts recognized upon the sale of the property to differ substantially from original estimates. |
24
RECENTLY ADOPTED ACCOUNTING STANDARDS
25
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(dollar amounts in thousands) |
|
Amount |
|
Average Interest Rate |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Fair value
at January 31, 2004 |
$ | 534,459 | ||||||||
Expected
maturities: |
||||||||||
2004 |
108,000 | 6.7 | % | |||||||
2005 |
100,000 | 7.0 | ||||||||
2006 |
143,000 | 6.9 | ||||||||
2007 |
150,215 | 4.3 | ||||||||
2008 |
| |
26
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
27
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS REPORT
Board of Directors and Stockholders
The Pep BoysManny, Moe &
Jack
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
April 9, 2004
28
CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands, except per share amounts) |
The Pep BoysManny, Moe & Jack and Subsidiaries |
|
January 31, 2004 |
|
February 1, 2003 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
||||||||||
Current
Assets: |
||||||||||
Cash and cash
equivalents |
$ | 60,984 | $ | 42,770 | ||||||
Accounts
receivable, less allowance for uncollectible accounts of $739 and $422 |
30,562 | 17,916 | ||||||||
Merchandise
inventories |
553,562 | 488,882 | ||||||||
Prepaid
expenses |
39,480 | 43,746 | ||||||||
Deferred
income taxes |
20,826 | 13,723 | ||||||||
Other |
81,096 | 56,687 | ||||||||
Assets held for disposal |
16,929 | 1,146 | ||||||||
Total Current Assets |
803,439 | 664,870 | ||||||||
Property and
Equipmentat cost: |
||||||||||
Land |
263,907 | 264,101 | ||||||||
Buildings and
improvements |
899,114 | 890,898 | ||||||||
Furniture,
fixtures and equipment |
586,607 | 580,746 | ||||||||
Construction in progress |
12,800 | 19,450 | ||||||||
1,762,428 | 1,755,195 | |||||||||
Less accumulated depreciation and amortization |
776,242 | 724,709 | ||||||||
Total Property and EquipmentNet |
986,186 | 1,030,486 | ||||||||
Other |
51,398 | 47,003 | ||||||||
Assets from discontinued operations |
| 57,551 | ||||||||
Total Assets |
$ | 1,841,023 | $ | 1,799,910 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||
Current
Liabilities: |
||||||||||
Accounts
payable |
$ | 342,584 | $ | 200,053 | ||||||
Accrued
expenses |
267,565 | 232,255 | ||||||||
Current maturities of long-term debt and obligations under capital lease |
117,063 | 101,882 | ||||||||
Total Current Liabilities |
727,212 | 534,190 | ||||||||
Long-term
debt and obligations under capital leases, less current maturities |
258,016 | 375,577 | ||||||||
Convertible
long-term debt |
150,000 | 150,000 | ||||||||
Other
long-term liabilities |
28,802 | 25,156 | ||||||||
Deferred
income taxes |
57,492 | 60,663 | ||||||||
Deferred gain
on sale leaseback |
3,907 | 4,332 | ||||||||
Commitments
and Contingencies |
||||||||||
Stockholders Equity: |
||||||||||
Common stock,
par value $1 per share: Authorized 500,000,000 shares; Issued 63,910,577 |
63,911 | 63,911 | ||||||||
Additional
paid-in capital |
177,317 | 177,244 | ||||||||
Retained
earnings |
577,793 | 630,847 | ||||||||
Accumulated other comprehensive loss |
(15 | ) | (151 | ) | ||||||
819,006 | 871,851 | |||||||||
Less cost of
shares in treasury8,928,159 and 10,070,729 shares |
144,148 | 162,595 | ||||||||
Less cost of shares in benefits trust2,195,270 shares |
59,264 | 59,264 | ||||||||
Total Stockholders Equity |
615,594 | 649,992 | ||||||||
Total Liabilities and Stockholders Equity |
$ | 1,841,023 | $ | 1,799,910 |
See notes to the consolidated financial statements
29
CONSOLIDATED
STATEMENTS OF OPERATIONS (dollar amounts in thousands, except per share amounts) |
The Pep
BoysManny, Moe & Jack and Subsidiaries |
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise
Sales |
$ | 1,728,386 | $ | 1,697,628 | $ | 1,707,190 | ||||||||
Service Revenue |
405,884 | 400,149 | 403,505 | |||||||||||
Total Revenues |
2,134,270 | 2,097,777 | 2,110,695 | |||||||||||
Costs of
Merchandise Sales |
1,238,147 | 1,183,138 | 1,207,153 | |||||||||||
Costs of Service Revenue |
309,380 | 298,093 | 302,452 | |||||||||||
Total Costs of Revenues |
1,547,527 | 1,481,231 | 1,509,605 | |||||||||||
Gross Profit
from Merchandise Sales |
490,239 | 514,490 | 500,037 | |||||||||||
Gross Profit from Service Revenue |
96,504 | 102,056 | 101,053 | |||||||||||
Total Gross Profit |
586,743 | 616,546 | 601,090 | |||||||||||
Selling, General and Administrative Expenses |
569,834 | 504,163 | 497,798 | |||||||||||
Operating
Profit |
16,909 | 112,383 | 103,292 | |||||||||||
Non-operating
Income |
3,339 | 3,097 | 4,623 | |||||||||||
Interest Expense |
38,255 | 47,237 | 53,709 | |||||||||||
(Loss)
Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle |
(18,007 | ) | 68,243 | 54,206 | ||||||||||
Income Tax (Benefit) Expense |
(6,608 | ) | 25,251 | 19,513 | ||||||||||
Net (Loss)
Earnings from Continuing Operations Before Cumulative Effect of Change in Accounting Principle |
(11,399 | ) | 42,992 | 34,693 | ||||||||||
(Loss)
Earnings from Discontinued Operations, Net of Tax of $(10,569), $475 and $361 |
(18,263 | ) | 808 | 642 | ||||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax |
(2,484 | ) | | | ||||||||||
Net (Loss) Earnings |
$ | (32,146 | ) | $ | 43,800 | $ | 35,335 | |||||||
Basic
(Loss) Earnings per Share: |
||||||||||||||
Net (Loss)
Earnings from Continuing Operations Before Cumulative Effect of Change in Accounting Principle |
$ | (0.22 | ) | $ | .83 | $ | .68 | |||||||
(Loss)
Earnings from Discontinued Operations, Net of Tax |
(0.35 | ) | .02 | .01 | ||||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax |
(0.05 | ) | | | ||||||||||
Basic (Loss) Earnings per Share |
$ | (0.62 | ) | $ | .85 | $ | .69 | |||||||
Diluted
(Loss) Earnings per Share: |
||||||||||||||
Net (Loss)
Earnings from Continuing Operations Before Cumulative Effect of Change in Accounting Principle |
$ | (0.22 | ) | $ | .80 | $ | .67 | |||||||
(Loss)
Earnings from Discontinued Operations, Net of Tax |
(0.35 | ) | .02 | .01 | ||||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax |
(0.05 | ) | | | ||||||||||
Diluted (Loss) Earnings per Share |
$ | (0.62 | ) | $ | .82 | $ | .68 |
See notes to the consolidated financial statements
30
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY (dollar amounts in thousands, except per share amounts) |
The Pep BoysManny, Moe & Jack and Subsidiaries |
Accumulated | ||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Common Stock | Additional | Treasury Stock | Other | Total | ||||||||||||||||||||||||||||||||||
Paid-in | Retained | Comprehensive | Benefits | Stockholders | ||||||||||||||||||||||||||||||||||
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Shares |
|
Amount |
|
Income (Loss) |
|
Trust |
|
Equity |
|||||||||||||||||||||
Balance,
February 3, 2001 |
63,910,577 | $ | 63,911 | $ | 177,244 | $ | 581,668 | (10,454,644 | ) | $ | (168,793 | ) | $ | | $ | (59,264 | ) | $ | 594,766 | |||||||||||||||||||
Comprehensive
income |
||||||||||||||||||||||||||||||||||||||
Net
earnings |
35,335 | |||||||||||||||||||||||||||||||||||||
Total
comprehensive income |
35,335 | |||||||||||||||||||||||||||||||||||||
Cash dividends
($.27 per share) |
(13,864 | ) | (13,864 | ) | ||||||||||||||||||||||||||||||||||
Effect of stock
options and related tax benefits |
(94 | ) | 17,000 | 275 | 181 | |||||||||||||||||||||||||||||||||
Dividend reinvestment plan |
(1,101 | ) | 153,198 | 2,473 | 1,372 | |||||||||||||||||||||||||||||||||
Balance,
February 2, 2002 |
63,910,577 | 63,911 | 177,244 | 601,944 | (10,284,446 | ) | (166,045 | ) | | (59,264 | ) | 617,790 | ||||||||||||||||||||||||||
Comprehensive
income |
||||||||||||||||||||||||||||||||||||||
Net
earnings |
43,800 | |||||||||||||||||||||||||||||||||||||
Minimum
pension liability adjustment, net of tax |
(151 | ) | ||||||||||||||||||||||||||||||||||||
Total
Comprehensive Income |
43,649 | |||||||||||||||||||||||||||||||||||||
Cash dividends
($.27 per share) |
(13,911 | ) | (13,911 | ) | ||||||||||||||||||||||||||||||||||
Effect of stock
options and related tax benefits |
(21 | ) | (632 | ) | 111,000 | 1,792 | 1,139 | |||||||||||||||||||||||||||||||
Dividend reinvestment plan |
21 | (354 | ) | 102,717 | 1,658 | 1,325 | ||||||||||||||||||||||||||||||||
Balance,
February 1, 2003 |
63,910,577 | 63,911 | 177,244 | 630,847 | (10,070,729 | ) | (162,595 | ) | (151 | ) | (59,264 | ) | 649,992 | |||||||||||||||||||||||||
Comprehensive
loss: |
||||||||||||||||||||||||||||||||||||||
Net
loss |
(32,146 | ) | ||||||||||||||||||||||||||||||||||||
Minimum
pension liability adjustment, net of tax |
(1,253 | ) | ||||||||||||||||||||||||||||||||||||
Fair market
value adjustment on derivatives, net of tax |
1,389 | |||||||||||||||||||||||||||||||||||||
Total
Comprehensive Loss |
(32,010 | ) | ||||||||||||||||||||||||||||||||||||
Cash dividends
($.27 per share) |
(14,089 | ) | (14,089 | ) | ||||||||||||||||||||||||||||||||||
Effect of stock
options and related tax benefits |
(39 | ) | (6,499 | ) | 1,054,250 | 17,021 | 10,483 | |||||||||||||||||||||||||||||||
Dividend reinvestment plan |
112 | (320 | ) | 88,320 | 1,426 | 1,218 | ||||||||||||||||||||||||||||||||
Balance, January 31, 2004 |
63,910,577 | $ | 63,911 | $ | 177,317 | $ | 577,793 | (8,928,159 | ) | $ | (144,148 | ) | $ | (15 | ) | $ | (59,264 | ) | $ | 615,594 |
See notes to the consolidated financial statements
31
CONSOLIDATED
STATEMENTS OF CASH FLOWS (dollar amounts in thousands, except per share amounts) |
The Pep BoysManny, Moe & Jack and
Subsidiaries |
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows
from Operating Activities: |
||||||||||||||
Net (Loss)
Earnings |
$ | (32,146 | ) | $ | 43,800 | $ | 35,335 | |||||||
Net (Loss) Earnings from discontinued operations |
(18,263 | ) | 808 | 642 | ||||||||||
Net (Loss)
Earnings from continuing operations |
(13,883 | ) | 42,992 | 34,693 | ||||||||||
Adjustments
to Reconcile Net (Loss) Earnings From Continuing Operations to Net Cash Provided by Continuing Operations: |
||||||||||||||
Depreciation
and amortization |
69,611 | 75,933 | 80,990 | |||||||||||
Cumulative
effect of change in accounting principle, net of tax |
2,484 | | | |||||||||||
Accretion of
asset disposal obligation |
163 | | | |||||||||||
Deferred
income taxes |
(355 | ) | (1,176 | ) | 7,424 | |||||||||
Deferred gain
on sale leaseback |
(425 | ) | (112 | ) | (26 | ) | ||||||||
Accretion of
bond discount |
| | 3,256 | |||||||||||
Loss on
assets held for disposal |
| 826 | 2,349 | |||||||||||
Loss on asset
impairments |
15,285 | | | |||||||||||
Loss (gain)
from sale of assets |
162 | (1,909 | ) | (1,096 | ) | |||||||||
Gain from
extinguishment of debt |
| | (755 | ) | ||||||||||
Changes in
operating assets and liabilities: |
||||||||||||||
Increase in
accounts receivable, prepaid expenses and other |
(32,050 | ) | (13,031 | ) | (17,206 | ) | ||||||||
(Increase)
decrease in merchandise inventories |
(64,680 | ) | 30,591 | 28,262 | ||||||||||
Increase
(decrease) in accounts payable |
142,531 | (16,032 | ) | 11,330 | ||||||||||
Increase in
accrued expenses |
27,180 | 14,145 | 11,734 | |||||||||||
Increase in other long-term liabilities |
3,646 | 1,276 | 2,226 | |||||||||||
Net Cash
Provided by Continuing Operations |
149,669 | 133,503 | 163,181 | |||||||||||
Net Cash Provided by Discontinued Operations |
2,401 | 4,897 | 4,712 | |||||||||||
Net Cash Provided by Operating Activities |
152,070 | 138,400 | 167,893 | |||||||||||
Cash Flows
from Investing Activities: |
||||||||||||||
Capital
expenditures from continuing operations |
(43,262 | ) | (41,889 | ) | (23,361 | ) | ||||||||
Capital
expenditures from discontinued operations |
| (2,022 | ) | (2,014 | ) | |||||||||
Proceeds from
sales of assets |
3,316 | 2,636 | 22,489 | |||||||||||
Proceeds from sales of assets held for disposal |
13,214 | 8,422 | 4,271 | |||||||||||
Net Cash (Used in) Provided by Investing Activities |
(26,732 | ) | (32,853 | ) | 1,385 | |||||||||
Cash Flows
from Financing Activities: |
||||||||||||||
Net payments
under line of credit agreements |
(497 | ) | (70,295 | ) | (56,876 | ) | ||||||||
Repayment of
life insurance policy loan |
| (20,686 | ) | | ||||||||||
Payments for
finance issuance costs |
(2,356 | ) | | | ||||||||||
Payments on
capital lease obligations |
(700 | ) | (642 | ) | | |||||||||
Reduction of
long-term debt |
(101,183 | ) | (121,938 | ) | (18,571 | ) | ||||||||
Reduction of
convertible debt |
| | (161,056 | ) | ||||||||||
Net proceeds
from issuance of notes |
| 146,250 | 87,522 | |||||||||||
Dividends
paid |
(14,089 | ) | (13,911 | ) | (13,864 | ) | ||||||||
Proceeds from
exercise of stock options |
10,483 | 1,139 | 181 | |||||||||||
Proceeds from dividend reinvestment plan |
1,218 | 1,325 | 1,372 | |||||||||||
Net Cash Used in Financing Activities |
(107,124 | ) | (78,758 | ) | (161,292 | ) | ||||||||
Net Increase
in Cash |
18,214 | 26,789 | 7,986 | |||||||||||
Cash and Cash Equivalents at Beginning of Year |
42,770 | 15,981 | 7,995 | |||||||||||
Cash and Cash Equivalents at End of Year |
$ | 60,984 | $ | 42,770 | $ | 15,981 | ||||||||
Supplemental
Disclosure of Cash Flow Information: |
||||||||||||||
Cash Paid
during the year for: |
||||||||||||||
Income
taxes |
$ | 6,553 | $ | 22,856 | $ | 6,570 | ||||||||
Interest, net
of amounts capitalized |
35,048 | 44,840 | 47,081 | |||||||||||
Non-cash
financing activities: |
||||||||||||||
Equipment capital leases |
| 1,301 | 88 |
See notes to the consolidated financial statements
32
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands, except per
share amounts)
NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
33
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Certain vendor allowances are used exclusively for promotions and to partially or fully offset certain other direct expenses. These allowances are netted against the appropriate expense it offsets.
|
||||||
Beginning
balance at February 2, 2002 |
$ | 2,277 | ||||
Additions
related to current year sales |
8,813 | |||||
Warranty
costs incurred in current year |
(10,179 | ) | ||||
Adjustments to accruals related to prior year sales |
| |||||
Ending
Balance at February 1, 2003 |
911 | |||||
Additions
related to current year sales |
6,677 | |||||
Warranty
costs incurred in current year |
(6,974 | ) | ||||
Adjustments to accruals related to prior year sales |
| |||||
Ending Balance at January 31, 2004 |
$ | 614 |
34
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
events or circumstances indicate that the carrying value of the asset may not be recoverable. In the event assets are impaired, losses are recognized to the extent the carrying value exceeds the fair value. In addition, the Company reports assets to be disposed of at the lower of the carrying amount or the fair market value less selling costs.
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net (loss)
earnings: |
||||||||||||||
As
reported |
$ | (32,146 | ) | $ | 43,800 | $ | 35,335 | |||||||
Less: Total stock-based compensation expense determined under fair value-based method, net of tax |
(2,839 | ) | (3,510 | ) | (3,892 | ) | ||||||||
Pro
forma |
$ | (34,985 | ) | $ | 40,290 | $ | 31,443 | |||||||
Net (loss)
earnings per share: |
||||||||||||||
Basic: |
||||||||||||||
As
reported |
$ | (.62 | ) | $ | .85 | $ | .69 | |||||||
Pro forma |
$ | (.67 | ) | $ | .78 | $ | .62 | |||||||
Diluted: |
||||||||||||||
As
reported |
$ | (.62 | ) | $ | .82 | $ | .68 | |||||||
Pro forma |
$ | (.67 | ) | $ | .75 | $ | .61 |
35
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dividend
yield |
1.57 | % | 1.44 | % | 1.29 | % | ||||||||
Expected
volatility |
41 | % | 41 | % | 39 | % | ||||||||
Risk-free
interest rate range: |
||||||||||||||
High |
4.6 | % | 5.4 | % | 5.5 | % | ||||||||
Low |
1.5 | % | 2.3 | % | 2.8 | % | ||||||||
Ranges of expected lives in years |
4-8 | 4-8 | 4-8 |
Year ended |
|
Jan. 31, 2004 |
|
Feb. 1, 2003 |
|
Feb. 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Parts and
Accessories |
$ | 1,392,179 | $ | 1,362,112 | $ | 1,357,603 | ||||||||
Tires |
336,207 | 335,516 | 349,587 | |||||||||||
Total Merchandise Sales |
1,728,386 | 1,697,628 | 1,707,190 | |||||||||||
Service |
405,884 | 400,149 | 403,505 | |||||||||||
Total Revenues |
$ | 2,134,270 | $ | 2,097,777 | $ | 2,110,695 |
36
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
RECENTLY ADOPTED ACCOUNTING STANDARDS
37
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
38
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 2DEBT
LONG-TERM DEBT
|
January 31, 2004 |
|
February 1, 2003 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Medium-Term
Notes, 6.7% to 6.9%, due March 2004 through March 2006 |
$ | 100,000 | $ | 100,000 | ||||||
7% Notes due
June 2005 |
100,000 | 100,000 | ||||||||
6.92% Term
Enhanced ReMarketable Securities, due July 2016 |
100,000 | 100,000 | ||||||||
6.625% Notes
due May 2003 |
| 75,000 | ||||||||
Medium-Term
Notes, 6.4% to 6.7%, due November 2004 through September 2007 |
51,215 | 51,215 | ||||||||
Senior
Secured Credit Facility, payable through July 2006 |
22,419 | 42,588 | ||||||||
Other notes
payable, 3.8% to 8% |
1,347 | 7,361 | ||||||||
Capital lease
obligations, payable through July 2004 |
48 | 748 | ||||||||
Revolving credit agreement |
50 | 547 | ||||||||
375,079 | 477,459 | |||||||||
Less current maturities |
117,063 | 101,882 | ||||||||
Total Long-term Debt |
$ | 258,016 | $ | 375,577 |
39
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 2DEBT (Continued)
CONVERTIBLE DEBT
|
January 31, 2004 |
|
February 1, 2003 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
4.25% Senior convertible notes, due June 2007 |
$ | 150,000 | $ | 150,000 | ||||||
Subtotal |
150,000 | 150,000 | ||||||||
Less current maturities |
| | ||||||||
Total Long-term Convertible Debt |
$ | 150,000 | $ | 150,000 |
40
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 2DEBT (Continued)
Year |
|
Long-Term Debt |
|
Capital Leases |
|
Total |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 |
$ | 117,015 | $ | 48 | $ | 117,063 | ||||||||
2005 |
109,017 | | 109,017 | |||||||||||
2006 |
148,468 | | 148,468 | |||||||||||
2007 |
150,235 | | 150,235 | |||||||||||
2008 |
71 | | 21 | |||||||||||
Thereafter |
225 | | 275 | |||||||||||
Total |
$ | 525,031 | $ | 48 | $ | 525,079 |
NOTE 3ACCRUED EXPENSES
|
January 31, 2004 |
|
February 1, 2003 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Medical and
casualty risk insurance |
$ | 136,599 | $ | 124,571 | ||||||
Accrued
compensation and related taxes |
51,043 | 49,923 | ||||||||
Legal
reserves |
26,576 | 6,054 | ||||||||
Other |
53,347 | 51,707 | ||||||||
Total |
$ | 267,565 | $ | 232,255 |
NOTE 4OTHER CURRENT ASSETS
|
January 31, 2004 |
|
February 1, 2003 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Reinsurance
premiums receivable |
$ | 67,326 | $ | 56,445 | ||||||
Income taxes
receivable |
13,517 | | ||||||||
Other |
253 | 242 | ||||||||
Total |
$ | 81,096 | $ | 56,687 |
NOTE 5LEASE AND OTHER COMMITMENTS
41
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 5LEASE AND OTHER COMMITMENTS (Continued)
Year |
|
Operating Leases |
|
Capital Leases |
||||||
---|---|---|---|---|---|---|---|---|---|---|
2004 |
$ | 51,266 | $ | 48 | ||||||
2005 |
45,629 | | ||||||||
2006 |
43,670 | | ||||||||
2007 |
41,442 | | ||||||||
2008 |
34,634 | | ||||||||
Thereafter |
258,491 | | ||||||||
Aggregate minimum lease commitments |
$ | 475,132 | 48 | |||||||
Less: interest on capital leases |
| |||||||||
Present Value of Net Minimum Lease Commitments |
$ | 48 |
NOTE 6STOCKHOLDERS EQUITY
42
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 6STOCKHOLDERS EQUITY (Continued)
NOTE 7RESTRUCTURING
Closure of 33 under-performing stores on July 31, 2003
43
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 7RESTRUCTURING (Continued)
accrued severance of $557 related to employees that accepted other positions was reversed in the third quarter of fiscal 2003. An additional $187 in accrued severance was reversed in the fourth quarter of fiscal 2003 for a change in the estimate of severance payable. These reversals were recorded in discontinued operations on the consolidated statement of operations.
Discontinuation of certain merchandise offerings
Corporate realignment
Reserve Summary
|
Severance |
|
Lease Expenses |
|
Contractual Obligations |
|
Total |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Reserve
balance at Feb. 1, 2003 |
$ | | $ | | $ | | $ | | ||||||||||
Original
reserve |
4,050 | 2,332 | 887 | 7,269 | ||||||||||||||
Provision for
present value of liabilities |
| 92 | 25 | 117 | ||||||||||||||
Changes in
assumptions about future sublease income, lease termination, contractual obligations and severance |
(744 | ) | 2,098 | (44 | ) | 1,310 | ||||||||||||
Cash payments |
(2,933 | ) | (2,154 | ) | (405 | ) | (5,492 | ) | ||||||||||
Reserve balance at Jan. 31, 2004 |
$ | 373 | $ | 2,368 | $ | 463 | $ | 3,204 |
44
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 8DISCONTINUED OPERATIONS
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total
Revenues |
$ | 37,722 | $ | 74,711 | $ | 73,865 | ||||||||
Total Gross
(Loss) Profit |
(18,851 | ) | 17,565 | 17,151 | ||||||||||
Selling,
General, and Administrative Expenses |
9,981 | 16,283 | 16,148 | |||||||||||
(Loss)
Earnings from Discontinued Operations Before Income Taxes |
(28,832 | ) | 1,282 | 1,003 | ||||||||||
(Loss) Earnings from Discontinued Operations, Net of Tax |
$ | (18,263 | ) | $ | 808 | $ | 642 |
|
January 31, 2004 |
|
February 1, 2003 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Land |
$ | (8,954 | ) | $ | (15,008 | ) | ||||
Building and
improvements |
(7,975 | ) | (45,872 | ) | ||||||
Furniture, fixtures and equipment |
| (23,785 | ) | |||||||
(16,929 | ) | (84,665 | ) | |||||||
Less accumulated depreciation and amortization |
| (27,114 | ) | |||||||
Property and EquipmentNet |
$ | (16,929 | ) | $ | (57,551 | ) | ||||
Assets held
for disposal |
$ | 16,929 | $ | | ||||||
Assets from discontinued operations |
$ | | $ | 57,551 |
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
45
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATING BALANCE SHEET
As of January 31, 2004 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
||||||||||||||||||||||
Current
Assets: |
||||||||||||||||||||||
Cash and cash
equivalents |
$ | 43,929 | $ | 9,070 | $ | 7,985 | $ | | $ | 60,984 | ||||||||||||
Accounts
receivable, net |
14,573 | 15,989 | | | 30,562 | |||||||||||||||||
Merchandise
inventories |
191,111 | 362,451 | | | 553,562 | |||||||||||||||||
Prepaid
expenses |
25,860 | 16,714 | 17,656 | (20,750 | ) | 39,480 | ||||||||||||||||
Deferred
income taxes |
7,224 | 8,354 | 5,248 | | 20,826 | |||||||||||||||||
Other |
17,891 | 7,457 | 55,748 | | 81,096 | |||||||||||||||||
Assets held for disposal |
8,083 | 8,846 | | | 16,929 | |||||||||||||||||
Total Current Assets |
308,671 | 428,881 | 86,637 | (20,750 | ) | 803,439 | ||||||||||||||||
Property and
Equipmentat cost: |
||||||||||||||||||||||
Land |
87,484 | 176,423 | | | 263,907 | |||||||||||||||||
Buildings and
improvements |
308,066 | 591,048 | | | 899,114 | |||||||||||||||||
Furniture,
fixtures and equipment |
286,472 | 300,135 | | | 586,607 | |||||||||||||||||
Construction in progress |
12,800 | | | | 12,800 | |||||||||||||||||
694,822 | 1,067,606 | | | 1,762,428 | ||||||||||||||||||
Less accumulated depreciation and amortization |
344,773 | 431,469 | | | 776,242 | |||||||||||||||||
Total Property and EquipmentNet |
350,049 | 636,137 | | | 986,186 | |||||||||||||||||
Investment in
subsidiaries |
1,473,013 | | 1,162,965 | (2,635,978 | ) | |||||||||||||||||
Intercompany
receivable |
| 410,107 | 356,382 | (766,489 | ) | | ||||||||||||||||
Other |
48,240 | 3,158 | | | 51,398 | |||||||||||||||||
Total Assets |
$ | 2,179,973 | $ | 1,478,283 | $ | 1,605,984 | $ | (3,423,217 | ) | $ | 1,841,023 | |||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||||||
Current
Liabilities: |
||||||||||||||||||||||
Accounts
payable |
$ | 342,575 | $ | 9 | $ | | $ | | $ | 342,584 | ||||||||||||
Accrued
expenses |
43,670 | 85,790 | 158,855 | (20,750 | ) | 267,565 | ||||||||||||||||
Current maturities of long-term debt and obligations under capital leases |
117,063 | | | | 117,063 | |||||||||||||||||
Total Current Liabilities |
503,308 | 85,799 | 158,855 | (20,750 | ) | 727,212 | ||||||||||||||||
Long-term
debt and obligations under capital leases, less current maturities |
257,983 | 33 | | | 258,016 | |||||||||||||||||
Convertible
long-term debt, less current maturities |
150,000 | | | | 150,000 | |||||||||||||||||
Other
long-term liabilities |
9,952 | 18,850 | | | 28,802 | |||||||||||||||||
Intercompany
liabilities |
607,168 | 159,321 | | (766,489 | ) | | ||||||||||||||||
Deferred
income taxes |
34,811 | 22,681 | | | 57,492 | |||||||||||||||||
Deferred gain
on sale leaseback |
1,157 | 2,750 | | | 3,907 | |||||||||||||||||
Stockholders Equity: |
||||||||||||||||||||||
Common
stock |
63,911 | 1,501 | 101 | (1,602 | ) | 63,911 | ||||||||||||||||
Additional
paid-in capital |
177,317 | 240,359 | 200,398 | (440,757 | ) | 177,317 | ||||||||||||||||
Retained
earnings |
577,793 | 946,989 | 1,246,630 | (2,193,619 | ) | 577,793 | ||||||||||||||||
Accumulated other comprehensive loss |
(15 | ) | | | | (15 | ) | |||||||||||||||
819,006 | 1,188,849 | 1,447,129 | (2,635,978 | ) | 819,006 | |||||||||||||||||
Less: |
||||||||||||||||||||||
Cost of
shares in treasury |
144,148 | | | | 144,148 | |||||||||||||||||
Cost of shares in benefits trust |
59,264 | | | | 59,264 | |||||||||||||||||
Total Stockholders Equity |
615,594 | 1,188,849 | 1,447,129 | (2,635,978 | ) | 615,594 | ||||||||||||||||
Total Liabilities and Stockholders Equity |
$ | 2,179,973 | $ | 1,478,283 | $ | 1,605,984 | $ | (3,423,217 | ) | $ | 1,841,023 |
46
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATING BALANCE SHEET
As of February 1, 2003 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
||||||||||||||||||||||
Current
Assets: |
||||||||||||||||||||||
Cash and cash
equivalents |
$ | 32,654 | $ | 9,714 | $ | 402 | $ | | $ | 42,770 | ||||||||||||
Accounts
receivable, net |
8,122 | 9,794 | | | 17,916 | |||||||||||||||||
Merchandise
inventories |
166,166 | 322,716 | | | 488,882 | |||||||||||||||||
Prepaid
expenses |
29,176 | 16,308 | 17,637 | (19,375 | ) | 43,746 | ||||||||||||||||
Deferred
income taxes |
6,812 | (819 | ) | 7,730 | | 13,723 | ||||||||||||||||
Other |
107 | | 56,580 | | 56,687 | |||||||||||||||||
Assets held for disposal |
| 1,146 | | | 1,146 | |||||||||||||||||
Total Current Assets |
243,037 | 358,859 | 82,349 | (19,375 | ) | 664,870 | ||||||||||||||||
Property and
Equipmentat cost: |
||||||||||||||||||||||
Land |
88,271 | 175,830 | | | 264,101 | |||||||||||||||||
Buildings and
improvements |
303,200 | 587,698 | | | 890,898 | |||||||||||||||||
Furniture,
fixtures and equipment |
279,884 | 300,862 | | | 580,746 | |||||||||||||||||
Construction in progress |
14,764 | 4,686 | | | 19,450 | |||||||||||||||||
686,119 | 1,069,076 | | | 1,755,195 | ||||||||||||||||||
Less accumulated depreciation and amortization |
319,005 | 405,704 | | | 724,709 | |||||||||||||||||
Total Property and EquipmentNet |
367,114 | 663,372 | | | 1,030,486 | |||||||||||||||||
Investment in
subsidiaries |
1,455,877 | | 1,121,299 | (2,577,176 | ) | | ||||||||||||||||
Intercompany
receivable |
| 631,438 | 335,640 | (967,078 | ) | | ||||||||||||||||
Other |
41,972 | 5,031 | | | 47,003 | |||||||||||||||||
Assets from discontinued operations |
14,219 | 43,332 | | | 57,551 | |||||||||||||||||
Total Assets |
$ | 2,122,219 | $ | 1,702,032 | $ | 1,539,288 | $ | (3,563,629 | ) | $ | 1,799,910 | |||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||||||
Current
Liabilities: |
||||||||||||||||||||||
Accounts
payable |
$ | 200,044 | $ | 9 | $ | | $ | | $ | 200,053 | ||||||||||||
Accrued
expenses |
59,625 | 48,567 | 143,438 | (19,375 | ) | 232,255 | ||||||||||||||||
Current maturities of long-term debt and obligations under capital leases |
101,882 | | | | 101,882 | |||||||||||||||||
Total Current Liabilities |
361,551 | 48,576 | 143,438 | (19,375 | ) | 534,190 | ||||||||||||||||
Longterm debt and obligations under capital leases, less current maturities |
375,216 | 361 | | | 375,577 | |||||||||||||||||
Convertible
long-term debt, less current maturities |
150,000 | | | | 150,000 | |||||||||||||||||
Other
long-term liabilities |
5,955 | 19,201 | | | 25,156 | |||||||||||||||||
Intercompany
liabilities |
544,877 | 422,201 | | (967,078 | ) | | ||||||||||||||||
Deferred
income taxes |
33,322 | 27,341 | | | 60,663 | |||||||||||||||||
Deferred gain
on sale leaseback |
1,306 | 3,026 | | | 4,332 | |||||||||||||||||
Stockholders Equity: |
||||||||||||||||||||||
Common
stock |
63,911 | 1,501 | 101 | (1,602 | ) | 63,911 | ||||||||||||||||
Additional
paid-in capital |
177,244 | 240,359 | 200,398 | (440,757 | ) | 177,244 | ||||||||||||||||
Retained
earnings |
630,847 | 939,466 | 1,195,351 | (2,134,817 | ) | 630,847 | ||||||||||||||||
Accumulated other comprehensive loss |
(151 | ) | | | | (151 | ) | |||||||||||||||
871,851 | 1,181,326 | 1,395,850 | (2,577,176 | ) | 871,851 | |||||||||||||||||
Less: |
||||||||||||||||||||||
Cost of
shares in treasury |
162,595 | | | | 162,595 | |||||||||||||||||
Cost of shares in benefits trust |
59,264 | | | | 59,264 | |||||||||||||||||
Total Stockholders Equity |
649,992 | 1,181,326 | 1,395,850 | (2,577,176 | ) | 649,992 | ||||||||||||||||
Total Liabilities and Stockholders Equity |
$ | 2,122,219 | $ | 1,702,032 | $ | 1,539,288 | $ | (3,563,629 | ) | $ | 1,799,910 |
47
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended January 31, 2004 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise
Sales |
$ | 591,505 | $ | 1,136,881 | $ | | $ | | $ | 1,728,386 | ||||||||||||
Service
Revenue |
141,304 | 264,580 | | | 405,884 | |||||||||||||||||
Other Revenue |
| | 26,825 | (26,825 | ) | | ||||||||||||||||
Total Revenues |
732,809 | 1,401,461 | 26,825 | (26,825 | ) | 2,134,270 | ||||||||||||||||
Costs of
Merchandise Sales |
424,858 | 813,289 | | | 1,238,147 | |||||||||||||||||
Costs of
Service Revenue |
105,473 | 203,907 | | | 309,380 | |||||||||||||||||
Costs of Other Revenue |
| | 31,636 | (31,636 | ) | | ||||||||||||||||
Total Costs of Revenues |
530,331 | 1,017,196 | 31,636 | (31,636 | ) | 1,547,527 | ||||||||||||||||
Gross Profit
from Merchandise Sales |
166,647 | 323,592 | | | 490,239 | |||||||||||||||||
Gross Profit
from Service Revenue |
35,831 | 60,673 | | | 96,504 | |||||||||||||||||
Gross Loss from Other Revenue |
| | (4,811 | ) | 4,811 | | ||||||||||||||||
Total Gross Profit (Loss) |
202,478 | 384,265 | (4,811 | ) | 4,811 | 586,743 | ||||||||||||||||
Selling, General and Administrative Expenses |
192,228 | 372,454 | 341 | 4,811 | 569,834 | |||||||||||||||||
Operating
Profit (Loss) |
10,250 | 11,811 | (5,152 | ) | | 16,909 | ||||||||||||||||
Equity in
Earnings of Subsidiaries |
17,136 | | 41,666 | (58,802 | ) | | ||||||||||||||||
Non-Operating
(Expense) Income |
(17,056 | ) | 48,550 | 19,915 | (48,070 | ) | 3,339 | |||||||||||||||
Interest Expense |
61,675 | 24,650 | | (48,070 | ) | 38,255 | ||||||||||||||||
(Loss)
Earnings from Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle |
(51,345 | ) | 35,711 | 56,429 | (58,802 | ) | (18,007 | ) | ||||||||||||||
Income Tax (Benefit) Expense |
(24,225 | ) | 12,467 | 5,150 | | (6,608 | ) | |||||||||||||||
Net (Loss)
Earnings from Continuing Operations Before Cumulative Effect of Change in Accounting Principle |
(27,120 | ) | 23,244 | 51,279 | (58,802 | ) | (11,399 | ) | ||||||||||||||
Loss from
Discontinued Operations, Net of Tax |
(4,127 | ) | (14,136 | ) | | | (18,263 | ) | ||||||||||||||
Cumulative Effect of Change in Accounting Principle, Net of Tax |
(899 | ) | (1,585 | ) | | | (2,484 | ) | ||||||||||||||
Net (Loss) Earnings |
$ | (32,146 | ) | $ | 7,523 | $ | 51,279 | $ | (58,802 | ) | $ | (32,146 | ) |
48
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended February 1, 2003 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise
Sales |
$ | 585,819 | $ | 1,111,809 | $ | | $ | | $ | 1,697,628 | ||||||||||||
Service
Revenue |
140,419 | 259,730 | | | 400,149 | |||||||||||||||||
Other Revenue |
| | 26,075 | (26,075 | ) | | ||||||||||||||||
Total Revenues |
726,238 | 1,371,539 | 26,075 | (26,075 | ) | 2,097,777 | ||||||||||||||||
Costs of
Merchandise Sales |
406,192 | 776,946 | | | 1,183,138 | |||||||||||||||||
Costs of
Service Revenue |
101,443 | 196,650 | | | 298,093 | |||||||||||||||||
Costs of Other Revenue |
| | 29,498 | (29,498 | ) | | ||||||||||||||||
Total Costs of Revenues |
507,635 | 973,596 | 29,498 | (29,498 | ) | 1,481,231 | ||||||||||||||||
Gross Profit
from Merchandise Sales |
179,627 | 334,863 | | | 514,490 | |||||||||||||||||
Gross Profit
from Service Revenue |
38,976 | 63,080 | | | 102,056 | |||||||||||||||||
Gross Loss from Other Revenue |
| | (3,423 | ) | 3,423 | | ||||||||||||||||
Total Gross Profit (Loss) |
218,603 | 397,943 | (3,423 | ) | 3,423 | 616,546 | ||||||||||||||||
Selling, General and Administrative Expenses |
168,327 | 332,096 | 317 | 3,423 | 504,163 | |||||||||||||||||
Operating
Profit (Loss) |
50,276 | 65,847 | (3,740 | ) | | 112,383 | ||||||||||||||||
Equity in
Earnings of Subsidiaries |
67,153 | | 70,805 | (137,958 | ) | | ||||||||||||||||
Non-Operating
(Expense) Income |
(16,977 | ) | 47,332 | 21,113 | (48,371 | ) | 3,097 | |||||||||||||||
Interest Expense |
70,099 | 25,509 | | (48,371 | ) | 47,237 | ||||||||||||||||
Earnings from
Continuing Operations Before Income Taxes |
30,353 | 87,670 | 88,178 | (137,958 | ) | 68,243 | ||||||||||||||||
Income Tax (Benefit) Expense |
(12,828 | ) | 32,013 | 6,066 | | 25,251 | ||||||||||||||||
Net Earnings
from Continuing Operations |
43,181 | 55,657 | 82,112 | (137,958 | ) | 42,992 | ||||||||||||||||
Earnings from Discontinued Operations, Net of Tax |
619 | 189 | | | 808 | |||||||||||||||||
Net Earnings |
$ | 43,800 | $ | 55,846 | $ | 82,112 | $ | (137,958 | ) | $ | 43,800 |
49
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended February 2, 2002 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Merchandise
Sales |
$ | 587,319 | $ | 1,119,871 | $ | | $ | | $ | 1,707,190 | ||||||||||||
Service
Revenue |
143,267 | 260,238 | | | 403,505 | |||||||||||||||||
Other Revenue |
| | 22,588 | (22,588 | ) | | ||||||||||||||||
Total Revenues |
730,586 | 1,380,109 | 22,588 | (22,588 | ) | 2,110,695 | ||||||||||||||||
Costs of
Merchandise Sales |
415,805 | 791,348 | | | 1,207,153 | |||||||||||||||||
Costs of
Service Revenue |
105,848 | 196,604 | | | 302,452 | |||||||||||||||||
Costs of Other Revenue |
| | 26,118 | (26,118 | ) | | ||||||||||||||||
Total Costs of Revenues |
521,653 | 987,952 | 26,118 | (26,118 | ) | 1,509,605 | ||||||||||||||||
Gross Profit
from Merchandise Sales |
171,514 | 328,523 | | | 500,037 | |||||||||||||||||
Gross Profit
from Service Revenue |
37,419 | 63,634 | | | 101,053 | |||||||||||||||||
Gross Loss from Other Revenue |
| | (3,530 | ) | 3,530 | | ||||||||||||||||
Total Gross Profit (Loss) |
208,933 | 392,157 | (3,530 | ) | 3,530 | 601,090 | ||||||||||||||||
Selling, General and Administrative Expenses |
167,733 | 326,231 | 304 | 3,530 | 497,798 | |||||||||||||||||
Operating
Profit (Loss) |
41,200 | 65,926 | (3,834 | ) | | 103,292 | ||||||||||||||||
Equity in
Earnings of Subsidiaries |
65,109 | | 73,910 | (139,019 | ) | | ||||||||||||||||
Non-Operating
(Expense) Income |
(15,616 | ) | 49,962 | 22,979 | (52,702 | ) | 4,623 | |||||||||||||||
Interest Expense |
74,617 | 31,794 | | (52,702 | ) | 53,709 | ||||||||||||||||
Earnings from
Continuing Operations Before Income Taxes |
16,076 | 84,094 | 93,055 | (139,019 | ) | 54,206 | ||||||||||||||||
Income Tax (Benefit) Expense |
(18,754 | ) | 31,566 | 6,701 | | 19,513 | ||||||||||||||||
Net Earnings
from Continuing Operations |
34,830 | 52,528 | 86,354 | (139,019 | ) | 34,693 | ||||||||||||||||
Earnings from Discontinued Operations, Net of Tax |
505 | 137 | | | 642 | |||||||||||||||||
Net Earnings |
$ | 35,335 | $ | 52,665 | $ | 86,354 | $ | (139,019 | ) | $ | 35,335 |
50
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
Year ended January 31, 2004 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows
from Operating Activities: |
||||||||||||||||||||||
Net (Loss)
Earnings |
$ | (32,146 | ) | $ | 7,523 | $ | 51,279 | $ | (58,802 | ) | $ | (32,146 | ) | |||||||||
Net Loss from Discontinued Operations |
(4,127 | ) | (14,136 | ) | | | (18,263 | ) | ||||||||||||||
Net (Loss)
Earnings from Continuing Operations |
(28,019 | ) | 21,659 | 51,279 | (58,802 | ) | (13,883 | ) | ||||||||||||||
Adjustments
to Reconcile Net (Loss) Earnings to Net Cash Provided By Continuing Operations: |
||||||||||||||||||||||
Depreciation
and amortization |
29,171 | 40,440 | | | 69,611 | |||||||||||||||||
Cumulative
effect of change in accounting principle, net of tax |
899 | 1,585 | | | 2,484 | |||||||||||||||||
Accretion of
asset disposal obligation |
38 | 125 | | | 163 | |||||||||||||||||
Equity in
earnings of subsidiaries |
(17,136 | ) | | (41,666 | ) | 58,802 | | |||||||||||||||
Deferred
income taxes |
3,248 | (6,085 | ) | 2,482 | | (355 | ) | |||||||||||||||
Deferred gain
on sale leaseback |
(149 | ) | (276 | ) | | | (425 | ) | ||||||||||||||
Loss on asset
impairments |
13,164 | 2,121 | | | 15,285 | |||||||||||||||||
(Gain) loss
from sale of assets |
(7 | ) | 169 | | | 162 | ||||||||||||||||
Changes in
operating assets and liabilities: (Increase) decrease in accounts receivable, prepaid expenses and other |
(22,501 | ) | (11,737 | ) | 813 | 1,375 | (32,050 | ) | ||||||||||||||
Increase in
merchandise inventories |
(24,945 | ) | (39,735 | ) | | | (64,680 | ) | ||||||||||||||
Increase in
accounts payable |
142,531 | | | | 142,531 | |||||||||||||||||
(Decrease)
increase in accrued expenses |
(19,689 | ) | 32,827 | 15,417 | (1,375 | ) | 27,180 | |||||||||||||||
Increase (decrease) in other long-term liabilities |
3,997 | (351 | ) | | | 3,646 | ||||||||||||||||
Net Cash
Provided by Continuing Operations |
80,602 | 40,742 | 28,325 | | 149,669 | |||||||||||||||||
Net Cash Provided by Discontinued Operations |
367 | 2,034 | | | 2,401 | |||||||||||||||||
Net Cash Provided by Operating Activities |
80,969 | 42,776 | 28,325 | | 152,070 | |||||||||||||||||
Cash Flows
from Investing Activities: |
||||||||||||||||||||||
Capital
expenditures from continuing operations |
(27,724 | ) | (15,538 | ) | | | (43,262 | ) | ||||||||||||||
Proceeds from
sales of assets |
870 | 2,446 | | | 3,316 | |||||||||||||||||
Proceeds from sales of assets held for disposal |
| 13,214 | | | 13,214 | |||||||||||||||||
Net Cash (Used in) Provided by Investing Activities |
(26,854 | ) | 122 | | | (26,732 | ) | |||||||||||||||
Cash Flows
from Financing Activities: |
||||||||||||||||||||||
Net payments
under line of credit agreements |
(169 | ) | (328 | ) | | | (497 | ) | ||||||||||||||
Payments for
finance issuance costs |
(2,356 | ) | | | | (2,356 | ) | |||||||||||||||
Payments on
capital lease obligations |
(700 | ) | | | | (700 | ) | |||||||||||||||
Reduction of
long-term debt |
(101,183 | ) | | | | (101,183 | ) | |||||||||||||||
Intercompany
loan |
63,956 | (43,214 | ) | (20,742 | ) | | | |||||||||||||||
Dividends
paid |
(14,089 | ) | | | | (14,089 | ) | |||||||||||||||
Proceeds from
exercise of stock options |
10,483 | | | | 10,483 | |||||||||||||||||
Proceeds from dividend reinvestment plan |
1,218 | | | | 1,218 | |||||||||||||||||
Net Cash Used In Financing Activities |
(42,840 | ) | (43,542 | ) | (20,742 | ) | | (107,124 | ) | |||||||||||||
Net Increase
(Decrease) in Cash |
11,275 | (644 | ) | 7,583 | | 18,214 | ||||||||||||||||
Cash and Cash Equivalents at Beginning of Year |
32,654 | 9,714 | 402 | | 42,770 | |||||||||||||||||
Cash and Cash Equivalents at End of Year |
$ | 43,929 | $ | 9,070 | $ | 7,985 | $ | | $ | 60,984 |
51
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
Year ended February 1, 2003 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows
from Operating Activities: |
||||||||||||||||||||||
Net
Earnings |
$ | 43,800 | $ | 55,846 | $ | 82,112 | $ | (137,958 | ) | $ | 43,800 | |||||||||||
Net Earnings from Discontinued Operations |
619 | 189 | | | 808 | |||||||||||||||||
Net Earnings
from Continuing Operations |
43,181 | 55,657 | 82,112 | (137,958 | ) | 42,992 | ||||||||||||||||
Adjustments
to Reconcile Net Earnings to Net Cash Provided By Continuing Operations: |
||||||||||||||||||||||
Depreciation
and amortization |
32,928 | 43,005 | | | 75,933 | |||||||||||||||||
Deferred
income taxes |
2,823 | (3,211 | ) | (788 | ) | | (1,176 | ) | ||||||||||||||
Deferred gain
on sale leaseback |
(11 | ) | (101 | ) | | | (112 | ) | ||||||||||||||
Equity in
earnings of subsidiaries |
(67,153 | | (70,805 | ) | 137,958 | | ||||||||||||||||
Loss on
assets held for disposal |
11 | 815 | | | 826 | |||||||||||||||||
Gain from
sale of assets |
(216 | ) | (1,693 | ) | | | (1,909 | ) | ||||||||||||||
Changes in
operating assets and liabilities: |
||||||||||||||||||||||
Decrease
(increase) in accounts receivable, prepaid expenses and other |
15,147 | (41,241 | ) | 10,938 | 2,125 | (13,031 | ) | |||||||||||||||
Decrease in
merchandise inventories |
10,530 | 20,061 | | | 30,591 | |||||||||||||||||
Decrease in
accounts payable |
(16,032 | ) | | | | (16,032 | ) | |||||||||||||||
Increase in
accrued expenses |
2,956 | 361 | 12,953 | (2,125 | ) | 14,145 | ||||||||||||||||
(Decrease) increase in other long-term liabilities |
(384 | ) | 1,660 | | | 1,276 | ||||||||||||||||
Net Cash
Provided by Continuing Operations |
23,780 | 75,313 | 34,410 | | 133,503 | |||||||||||||||||
Net Cash Provided by Discontinued Operations |
1,911 | 2,986 | | | 4,897 | |||||||||||||||||
Net Cash Provided by Operating Activities |
25,691 | 78,299 | 34,410 | | 138,400 | |||||||||||||||||
Cash Flows
from Investing Activities: |
||||||||||||||||||||||
Capital
expenditures from continuing operations |
(27,005 | ) | (14,884 | ) | | | (41,889 | ) | ||||||||||||||
Capital
expenditures from discontinued operations |
(163 | ) | (1,859 | ) | | | (2,022 | ) | ||||||||||||||
Proceeds from
sales of assets |
816 | 1,820 | | | 2,636 | |||||||||||||||||
Proceeds from assets held for disposal |
1,234 | 7,188 | | | 8,422 | |||||||||||||||||
Net Cash Used in Investing Activities |
(25,118 | ) | (7,735 | ) | | | (32,853 | ) | ||||||||||||||
Cash Flows
from Financing Activities: |
||||||||||||||||||||||
Net payments
under line of credit agreements |
(23,841 | ) | (46,454 | ) | | | (70,295 | ) | ||||||||||||||
Repayment of
life insurance policy loan |
(17,908 | ) | (2,778 | ) | | | (20,686 | ) | ||||||||||||||
Payments on
capital lease obligations |
(642 | ) | | | | (642 | ) | |||||||||||||||
Reduction of
long-term debt |
(121,938 | ) | | | | (121,938 | ) | |||||||||||||||
Net proceeds
from issuance of notes |
146,250 | | | | 146,250 | |||||||||||||||||
Intercompany
loan |
56,811 | (22,492 | ) | (34,319 | ) | | | |||||||||||||||
Dividends
paid |
(13,911 | ) | | | | (13,911 | ) | |||||||||||||||
Proceeds from
exercise of stock options |
1,139 | | | | 1,139 | |||||||||||||||||
Proceeds from dividend reinvestment plan |
1,325 | | | | 1,325 | |||||||||||||||||
Net Cash Provided by (Used in) Financing Activities |
27,285 | (71,724 | ) | (34,319 | ) | | (78,758 | ) | ||||||||||||||
Net Increase
(Decrease) in Cash |
27,858 | (1,160 | ) | 91 | | 26,789 | ||||||||||||||||
Cash and Cash Equivalents at Beginning of Year |
4,796 | 10,874 | 311 | | 15,981 | |||||||||||||||||
Cash and Cash Equivalents at End of Year |
$ | 32,654 | $ | 9,714 | $ | 402 | $ | | $ | 42,770 |
52
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 9SUPPLEMENTAL GUARANTOR INFORMATIONCONVERTIBLE SENIOR NOTES
(Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
Year ended February 2, 2002 |
|
Pep Boys |
|
Subsidiary Guarantors |
|
Non- Guarantor Subsidiaries |
|
Elimination |
|
Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Flows
from Operating Activities: |
||||||||||||||||||||||
Net
Earnings |
$ | 35,335 | $ | 52,665 | $ | 86,354 | $ | (139,019 | ) | $ | 35,335 | |||||||||||
Net Earnings from Discontinued Operations |
505 | 137 | | | 642 | |||||||||||||||||
Net Earnings
from Continuing Operations |
34,830 | 52,528 | 86,354 | (139,019 | ) | 34,693 | ||||||||||||||||
Adjustments
to Reconcile Net Earnings to Net Cash (Used in) Provided By Continuing Operations: |
||||||||||||||||||||||
Depreciation
and amortization |
35,657 | 45,333 | | | 80,990 | |||||||||||||||||
Deferred
income taxes |
1,110 | 6,730 | (416 | ) | | 7,424 | ||||||||||||||||
Deferred gain
on sale leaseback |
(12 | ) | (14 | ) | | | (26 | ) | ||||||||||||||
Equity in
earnings of subsidiaries |
(65,109 | ) | | (73,910 | ) | 139,019 | | |||||||||||||||
Loss on
assets held for disposal |
3,256 | | | | 3,256 | |||||||||||||||||
Gain from
sale of assets |
24 | 2,325 | | | 2,349 | |||||||||||||||||
Gain from
extinguishment of debt |
(47 | ) | (1,049 | ) | | | (1,096 | ) | ||||||||||||||
Changes in
operating assets and liabilities: |
(755 | ) | | | | (755 | ) | |||||||||||||||
(Increase)
decrease in accounts receivable, prepaid expenses and other |
(33,052 | ) | 35,258 | (18,087 | ) | (1,325 | ) | (17,206 | ) | |||||||||||||
Decrease in
merchandise inventories |
9,674 | 18,588 | | | 28,262 | |||||||||||||||||
Increase in
accounts payable |
11,330 | | | | 11,330 | |||||||||||||||||
(Decrease)
increase in accrued expenses |
(16,831 | ) | 18,176 | 9,064 | 1,325 | 11,734 | ||||||||||||||||
Increase in other long-term liabilities |
219 | 2,007 | | | 2,226 | |||||||||||||||||
Net Cash
(Used in) Provided by Continuing Operations |
(19,706 | ) | 179,882 | 3,005 | | 163,181 | ||||||||||||||||
Net Cash Provided by Discontinued Operations |
1,808 | 2,904 | | | 4,712 | |||||||||||||||||
Net Cash (Used in) Provided by Operating Activities |
(17,898 | ) | 182,786 | 3,005 | | 167,893 | ||||||||||||||||
Cash Flows
from Investing Activities: |
||||||||||||||||||||||
Capital
expenditures from continuing operations |
(14,133 | ) | (9,228 | ) | | | (23,361 | ) | ||||||||||||||
Capital
expenditures from discontinued operations |
(259 | ) | (1,755 | ) | | | (2,014 | ) | ||||||||||||||
Proceeds from
sales of assets |
5,181 | 17,308 | | | 22,489 | |||||||||||||||||
Proceeds from sales of assets held for disposal |
2,024 | 2,247 | | | 4,271 | |||||||||||||||||
Net Cash (Used in) Provided by Investing Activities |
(7,187 | ) | 8,572 | | | 1,385 | ||||||||||||||||
Cash Flows
from Financing Activities: |
||||||||||||||||||||||
Net payments
under line of credit agreements |
(19,147 | ) | (37,729 | ) | | | (56,876 | ) | ||||||||||||||
Reduction of
long-term debt |
(18,571 | ) | | | | (18,571 | ) | |||||||||||||||
Reduction of
convertible debt |
(161,056 | ) | | | | (161,056 | ) | |||||||||||||||
Net proceeds
from issuance of notes |
87,522 | | | | 87,522 | |||||||||||||||||
Intercompany
loan |
152,962 | (149,793 | ) | (3,169 | ) | | | |||||||||||||||
Dividends
paid |
(13,864 | ) | | | | (13,864 | ) | |||||||||||||||
Proceeds from
exercise of stock options |
181 | | | | 181 | |||||||||||||||||
Proceeds from dividend reinvestment plan |
1,372 | | | | 1,372 | |||||||||||||||||
Net Cash Provided by (Used in) Financing Activities |
29,399 | (187,522 | ) | (3,169 | ) | | (161,292 | ) | ||||||||||||||
Net Increase
(Decrease) in Cash |
4,314 | 3,836 | (164 | ) | | 7,986 | ||||||||||||||||
Cash and Cash Equivalents at Beginning of Year |
482 | 7,038 | 475 | | 7,995 | |||||||||||||||||
Cash and Cash Equivalents at End of Year |
$ | 4,796 | $ | 10,874 | $ | 311 | $ | | $ | 15,981 |
53
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 10PENSION AND SAVINGS PLANS
Year ended |
|
Jan. 31, 2004 |
|
Feb. 1, 2003 |
|
Feb. 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Service
cost |
$ | 611 | $ | 587 | $ | 328 | ||||||||
Interest
cost |
3,056 | 2,934 | 2,526 | |||||||||||
Expected
return on plan assets |
(2,064 | ) | (2,300 | ) | (2,162 | ) | ||||||||
Amortization
of transitional obligation |
274 | 274 | 60 | |||||||||||
Amortization
of prior service cost |
615 | 297 | 10 | |||||||||||
Recognized actuarial loss |
1,723 | 1,451 | 992 | |||||||||||
Net periodic
benefit cost |
4,215 | 3,243 | 1,754 | |||||||||||
FAS 88
curtailment charge |
2,191 | | | |||||||||||
FAS 88
settlement charge |
5,231 | | | |||||||||||
FAS 88 special termination benefits |
300 | | | |||||||||||
Total Pension Expense |
$ | 11,937 | $ | 3,243 | $ | 1,754 |
54
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 10PENSION AND SAVINGS PLANS (Continued)
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Change in
Benefit Obligation: |
||||||||||
Benefit
obligation at beginning of year |
$ | 46,587 | $ | 37,098 | ||||||
Service
cost |
611 | 587 | ||||||||
Interest
cost |
3,056 | 2,934 | ||||||||
Plan
amendments |
2,282 | 2,101 | ||||||||
Curtailment
gain |
(505 | ) | | |||||||
Settlement
loss |
5,576 | | ||||||||
Special
termination benefits |
300 | | ||||||||
Liability
transfer |
(671 | ) | | |||||||
Actuarial
loss |
4,201 | 5,202 | ||||||||
Benefits paid |
(14,240 | ) | (1,335 | ) | ||||||
Benefit Obligation at End of Year |
$ | 47,197 | $ | 46,587 | ||||||
Change in
Plan Assets: |
||||||||||
Fair value of
plan assets at beginning of year |
$ | 31,087 | $ | 27,314 | ||||||
Actual return
on plan assets (net of expenses) |
4,732 | (1,867 | ) | |||||||
Employer
contributions |
13,151 | 6,975 | ||||||||
Benefits paid |
(14,240 | ) | (1,335 | ) | ||||||
Fair Value of Plan Assets at End of Year |
$ | 34,730 | $ | 31,087 | ||||||
Reconciliation of the Funded Status: |
||||||||||
Funded
status |
$ | (12,468 | ) | $ | (15,500 | ) | ||||
Unrecognized
transition obligation |
1,143 | 2,194 | ||||||||
Unrecognized
prior service cost |
2,083 | 1,829 | ||||||||
Unrecognized
actuarial loss |
10,937 | 11,857 | ||||||||
Amount contributed after measurement date |
897 | 5 | ||||||||
Net Amount Recognized at Year-End |
$ | 2,592 | $ | 385 | ||||||
Amounts
Recognized on Consolidated Balance Sheets Consist of: |
||||||||||
Prepaid
benefit cost |
$ | 8,411 | $ | 9,438 | ||||||
Accrued
benefit liability |
(11,266 | ) | (13,318 | ) | ||||||
Intangible
asset |
3,226 | 4,023 | ||||||||
Accumulated other comprehensive income |
2,221 | 242 | ||||||||
Net Amount Recognized at Year End |
$ | 2,592 | $ | 385 | ||||||
Other
comprehensive income attributable to change in additional minimum liability recognition |
$ | 1,979 | $ | 242 | ||||||
Accumulated Benefit Obligation at End of Year |
$ | 44,112 | $ | 44,153 | ||||||
Cash
Flows |
||||||||||
Employer contributions expected during fiscal 2004 |
$ | 1,055 |
55
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 10PENSION AND SAVINGS PLANS (Continued)
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Projected
benefit obligation |
$ | 14,352 | $ | 15,752 | ||||||
Accumulated
benefit obligation |
11,266 | 13,318 | ||||||||
Fair value of plan assets |
| |
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Weighted-Average Assumptions as of December 31: |
||||||||||
Discount
rate |
6.25 | % | 6.75 | % | ||||||
Rate of
compensation expense1 |
N/A | 1 | N/A | 2 | ||||||
Weighted-Average Assumptions for Net Periodic Benefit Cost Development: |
||||||||||
Discount
rate |
6.75 | % | 7.25 | % | ||||||
Expected
return on plan assets |
6.75 | % | 8.50 | % | ||||||
Rate of
compensation expense |
N/A | 1 | N/A | 2 | ||||||
Measurement Date |
December 31 |
December 31 |
1 | Rate of compensation increase assumption is 4.0% for the executive supplemental plan (bonuses are assumed to be a fixed percentage of base pay depending upon officer level). |
2 | Rate of compensation increase assumption is 4.0% for the executive supplemental plan. |
Plan Assets |
|
As of 12/31/2003 |
|
As of 12/31/2002 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity
securities |
53 | % | 44 | % | ||||||
Debt
securities |
0 | % | 0 | % | ||||||
Fixed income |
47 | % | 56 | % |
56
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 11NET EARNINGS PER SHARE
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Loss)
Earnings from Continuing Operations: |
||||||||||||||
Basic (loss)
earnings from continuing operations available to common stockholders |
$ | (11,399 | ) | $ | 42,992 | $ | 34,693 | |||||||
Adjustment for interest on convertible senior notes, net of tax |
| 2,807 | | |||||||||||
Diluted (loss) earnings from continuing operations available to common stockholders |
$ | (11,399 | ) | $ | 45,799 | $ | 34,693 | |||||||
Shares: |
||||||||||||||
Basic average
number of common shares outstanding |
52,185 | 51,517 | 51,348 | |||||||||||
Common shares
assumed issued upon conversion of convertible senior notes |
| 4,729 | | |||||||||||
Common shares assumed issued upon exercise of dilutive stock options |
| 953 | 687 | |||||||||||
Diluted average number of common shares outstanding assuming conversion |
52,185 | 57,199 | 52,035 | |||||||||||
Per
Share: |
||||||||||||||
Basic (loss)
earnings from continuing operations per share |
$ | (0.22 | ) | $ | 0.83 | $ | 0.68 | |||||||
Diluted (loss) earnings from continuing operations per share |
$ | (0.22 | ) | $ | 0.80 | $ | 0.67 |
57
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 12STOCK OPTION PLANS
|
Equity compensation plans approved by shareholders |
|
Equity compensation plans not approved by shareholders |
|
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of
securities to be issued upon exercise of outstanding options |
6,736,070 | 174,540 | 1 | 6,910,610 | ||||||||||
Weighted
average exercise price of outstanding options |
$ | 16.51 | $ | 8.70 | $ | 16.31 | ||||||||
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in top row) |
1,504,004 | | 1,504,004 |
1 | Inducement options granted to the current CEO in connection with his hire. |
58
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 12STOCK OPTION PLANS (Continued)
Fiscal 2003 |
Fiscal 2002 |
Fiscal 2001 |
||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Shares |
|
Weighted Average Exercise Price |
|
Shares |
|
Weighted Average Exercise Price |
|
Shares |
|
Weighted Average Exercise Price |
|||||||||||||||
Outstandingbeginning of year |
6,898,170 | $ | 16.57 | 6,316,787 | $ | 16.48 | 5,039,772 | $ | 19.63 | |||||||||||||||||
Granted |
1,624,790 | 10.38 | 1,213,300 | 16.27 | 1,757,000 | 6.75 | ||||||||||||||||||||
Exercised |
(1,048,200 | ) | 7.52 | (108,880 | ) | 8.10 | (19,400 | ) | 8.77 | |||||||||||||||||
Canceled |
(564,150 | ) | 18.79 | (523,037 | ) | 16.45 | (460,585 | ) | 14.26 | |||||||||||||||||
Outstandingend of year |
6,910,610 | $ | 16.31 | 6,898,170 | $ | 16.57 | 6,316,787 | $ | 16.48 | |||||||||||||||||
Options
exercisable at year end |
4,210,678 | 19.55 | 4,148,570 | 20.54 | 3,422,187 | 22.29 | ||||||||||||||||||||
Weighted
average estimated fair value of options granted |
4.17 | 7.20 | 2.85 |
Options Outstanding |
Options Exercisable |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of Exercise Prices |
|
Number Outstanding at Jan. 31, 2004 |
|
|
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
|
Number Exercisable at Jan. 31, 2004 |
|
Weighted Average Exercise Price |
||||||||||||
$4.49 to
$13.00 |
2,384,190 | 8 | years | $ | 7.63 | 788,258 | $ | 7.12 | ||||||||||||||
$13.01 to
$21.00 |
2,548,600 | 7 | years | 15.92 | 1,444,600 | 15.75 | ||||||||||||||||
$21.01 to
$29.00 |
1,042,117 | 3 | years | 23.37 | 1,042,117 | 23.37 | ||||||||||||||||
$29.01 to $37.38 |
935,703 | 2 | years | 31.62 | 935,703 | 31.62 | ||||||||||||||||
$4.49 to $37.38 |
6,910,610 | 4,210,678 |
59
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 13ASSET RETIREMENT OBLIGATION
|
||||||
Asset
retirement obligation, February 1, 2003 |
$ | | ||||
Asset
retirement obligation recognized upon adoption |
4,540 | |||||
Asset
retirement obligation incurred during the period |
246 | |||||
Asset
retirement obligation settled during the period |
(89 | ) | ||||
Accretion expense |
204 | |||||
Asset retirement obligation, January 31, 2004 |
$ | 4,901 |
Asset
retirement obligation, February 2, 2002 |
$ | 4,156 | ||||
Asset retirement obligation, February 1, 2003 |
$ | 4,540 |
Year ended |
|
February 1, 2003 |
|
February 2, 2002 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Net
Earnings: |
||||||||||
As
reported |
$ | 43,800 | $ | 35,335 | ||||||
Pro Forma |
$ | 43,190 | $ | 35,075 | ||||||
Net earnings
per share: |
||||||||||
Basic: |
||||||||||
As
reported |
$ | 0.85 | $ | 0.69 | ||||||
Pro
Forma |
$ | 0.84 | $ | 0.68 | ||||||
Diluted: |
||||||||||
As
reported |
$ | 0.82 | $ | 0.68 | ||||||
Pro Forma |
$ | 0.80 | $ | 0.67 |
60
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 14INCOME TAXES
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current: |
||||||||||||||
Federal |
$ | (8,109 | ) | $ | 24,502 | $ | 11,985 | |||||||
State |
1,856 | 1,903 | 236 | |||||||||||
Deferred: |
||||||||||||||
Federal |
1,809 | (1,189 | ) | 6,561 | ||||||||||
State |
(2,164 | ) | 35 | 731 | ||||||||||
$ | (6,608 | ) | $ | 25,251 | $ | 19,513 |
Year ended |
|
January 31, 2004 |
|
February 1, 2003 |
|
February 2, 2002 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Statutory tax
rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||||
State income
taxes, net of federal tax benefits |
0.7 | 1.9 | 1.2 | |||||||||||
Job
credits |
0.5 | (0.3 | ) | (0.3 | ) | |||||||||
Other, net |
0.5 | 0.4 | 0.1 | |||||||||||
36.7 | % | 37.0 | % | 36.0 | % |
|
January 31, 2004 |
|
February 1, 2003 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Deferred tax
assets: |
||||||||||
Inventories |
$ | 5,380 | $ | 4,456 | ||||||
Employee
compensation |
4,919 | 7,209 | ||||||||
Store closing
reserves |
1,508 | 750 | ||||||||
Legal |
10,491 | 2,270 | ||||||||
Real estate
tax |
(2,366 | ) | (2,188 | ) | ||||||
Insurance |
5,146 | 6,128 | ||||||||
Benefit
accruals |
(5,418 | ) | (5,860 | ) | ||||||
Carryforward
credits |
257 | | ||||||||
State tax
credit |
902 | 419 | ||||||||
Valuation
allowance |
(902 | ) | (419 | ) | ||||||
Other |
909 | 958 | ||||||||
$ | 20,826 | $ | 13,723 | |||||||
Deferred tax
liabilities: |
||||||||||
Depreciation |
$ | 68,082 | $ | 72,944 | ||||||
State
taxes |
(1,590 | ) | (3,046 | ) | ||||||
Accrued
leases |
(8,771 | ) | (9,435 | ) | ||||||
Other |
(229 | ) | 200 | |||||||
$ | 57,492 | $ | 60,663 | |||||||
Net deferred tax liability |
$ | 36,666 | $ | 46,940 |
61
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 15CONTINGENCIES
NOTE 16INTEREST RATE SWAP AGREEMENT
NOTE 17FAIR VALUE OF FINANCIAL INSTRUMENTS
January 31, 2004 |
February 1, 2003 |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Carrying Amount |
|
Estimated Fair Value |
|
Carrying Amount |
|
Estimated Fair Value |
|||||||||||
Assets: |
||||||||||||||||||
Cash and cash
equivalents |
$ | 60,984 | $ | 60,984 | $ | 42,770 | $ | 42,770 | ||||||||||
Accounts
receivable |
30,562 | 30,562 | 17,916 | 17,916 | ||||||||||||||
Cash flow
hedge derivative |
2,195 | 2,195 | | | ||||||||||||||
Liabilities: |
||||||||||||||||||
Accounts
payable |
342,584 | 342,584 | 200,053 | 200,053 | ||||||||||||||
Long-term
debt including current maturities |
375,079 | 383,723 | 477,459 | 462,609 | ||||||||||||||
Senior convertible notes |
150,000 | 174,600 | 150,000 | 133,125 |
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
CASH FLOW HEDGE DERIVATIVE
62
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
NOTE 17FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
LONG-TERM DEBT INCLUDING CURRENT MATURITIES AND SENIOR CONVERTIBLE NOTES
NOTE 18SUBSEQUENT EVENT
63
THE PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2004, February 1, 2003 and February 2, 2002
(dollar amounts in thousands,
except per share amounts)
QUARTERLY FINANCIAL DATA (UNAUDITED) |
The
Pep BoysManny, Moe & Jack and Subsidiaries |
Year Ended Jan. 31, 2004 |
Total Revenues |
Gross Profit |
Operating (Loss) Profit |
Net (Loss) Earnings From Continuing Operations Before Cumulative Effect of Change in Accounting Principle |
Net (Loss) Earnings |
Net
(Loss) Earnings Per Share From Continuing Operations Before Cumulative Effect of Change in Accounting Principle |
Net (Loss) Earnings Per Share |
Cash Dividends Per Share |
Market
Price Per Share |
|||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
|
|
Basic
|
Diluted
|
|
Basic
|
|
Diluted
|
|
|
|
|
High
|
|
|
Low
|
|
|||||||||||||||||||||||||||
1st
Quarter |
$ | 510,910 | $ | 145,798 | $ | (1,979 | ) | $ | (7,327 | ) | $ | (9,217 | ) | $ | (0.14 | ) | $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.18 | ) | $ | 0.0675 | $ | 10.69 | $ | 6.00 | |||||||||||||||||||
2nd
Quarter |
556,030 | 130,246 | (12,803 | ) | (13,579 | ) | (36,381 | ) | (0.26 | ) | (0.26 | ) | (0.70 | ) | (0.70 | ) | 0.0675 | 15.90 | 8.54 | |||||||||||||||||||||||||||||||
3rd
Quarter |
537,691 | 159,487 | 29,453 | 13,406 | 14,700 | 0.26 | 0.24 | 0.28 | 0.26 | 0.0675 | 19.94 | 14.05 | ||||||||||||||||||||||||||||||||||||||
4th Quarter |
529,639 | 151,212 | 2,238 | (3,899 | ) | (1,248 | ) | (0.07 | ) | (0.07 | ) | (0.02 | ) | (0.02 | ) | 0.0675 | 23.99 | 18.53 | ||||||||||||||||||||||||||||||||
Year Ended Feb. 1, 2003 |
||||||||||||||||||||||||||||||||||||||||||||||||||
1st
Quarter |
$ | 539,656 | $ | 157,097 | $ | 31,407 | $ | 13,089 | $ | 13,565 | $ | 0.25 | $ | 0.25 | $ | 0.26 | $ | 0.26 | $ | 0.0675 | $ | 19.38 | $ | 13.55 | ||||||||||||||||||||||||||
2nd
Quarter |
565,631 | 166,574 | 37,526 | 16,110 | 16,554 | 0.31 | 0.29 | 0.32 | 0.30 | 0.0675 | 19.04 | 10.75 | ||||||||||||||||||||||||||||||||||||||
3rd
Quarter |
526,298 | 158,758 | 35,067 | 15,419 | 15,515 | 0.30 | 0.28 | 0.30 | 0.28 | 0.0675 | 15.23 | 8.75 | ||||||||||||||||||||||||||||||||||||||
4th Quarter |
466,192 | 134,117 | 8,383 | (1,626 | ) | (1,834 | ) | (0.03 | ) | (0.03 | ) | (0.04 | ) | (0.04 | ) | 0.0675 | 12.64 | 10.06 |
Under the Companys present accounting system, actual gross profit from merchandise sales can be determined only at the time of physical inventory, which is taken at the end of the fiscal year. Gross profit from merchandise sales for the first, second and third quarters is estimated by the Company based upon recent historical gross profit experience and other appropriate factors. Any variation between estimated and actual gross profit from merchandise sales for the first three quarters is reflected in the fourth quarters results.
64
ITEM 9 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Changes in Internal Controls
PART III
ITEM 10 | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
ITEM 11 | EXECUTIVE COMPENSATION |
ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
ITEM 13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
65
ITEM 14 | PRINCIPAL ACCOUNTING FEES AND SERVICES |
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) |
Page |
|||||||||||||
1. |
The
following consolidated financial statements of The Pep BoysManny, Moe & Jack are included in Item 8. |
|||||||||||||
Independent Auditors Report |
28 | |||||||||||||
Consolidated Balance SheetsJanuary 31, 2004 and February 1, 2003 |
29 | |||||||||||||
Consolidated Statements of OperationsYears ended January 31, 2004, February 1, 2003 and February 2, 2002 |
30 | |||||||||||||
Consolidated Statements of Stockholders EquityYears ended January 31, 2004 February 1, 2003 and February 2, 2002 |
31 | |||||||||||||
Consolidated Statements of Cash FlowsYears ended January 31, 2004, February 1, 2003, and February 2, 2002 |
32 | |||||||||||||
Notes to Consolidated Financial Statements |
33 | |||||||||||||
2. |
The
following consolidated financial statement schedule of The Pep BoysManny, Moe & Jack is included. |
|||||||||||||
Schedule II Valuation and Qualifying Accounts and Reserves |
72 | |||||||||||||
All
other schedules have been omitted because they are not applicable or not required or the required information is included in the consolidated financial
statements or notes thereto. |
||||||||||||||
3. |
Exhibits |
(3.1) |
Articles of Incorporation, as amended |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended January 30, 1988. |
||||||||||||
(3.2) |
By-Laws, as amended |
Incorporated by reference from the Registration Statement on Form S-3 (File No. 33-39225). |
||||||||||||
(3.3) |
Amendment to By-Laws (Declassification of Board of Directors) |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended January 29, 2000. |
||||||||||||
(4.1) |
Indenture, dated as of March 22, 1991 between the Company and Bank America Trust Company of New York as Trustee, including Form of Debt
Security |
Incorporated by reference from the Registration Statement on Form S-3 (File No. 33-39225). |
||||||||||||
(4.2) |
Indenture, dated as of June 12, 1995, between the Company and First Fidelity Bank, National Association as Trustee, including Form of
Debenture |
Incorporated by reference from the Registration Statement on Form S-3 (File No. 33-59859). |
66
(4.3) |
Indenture, dated as of July 15, 1997, between the Company and PNC Bank, National Association, as Trustee, providing for the issuance of Senior
Debt Securities, and form of security |
Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-30295). |
||||||||||||
(4.4) |
Indenture, dated as of February 18, 1998 between the Company and PNC Bank, National Association, as Trustee, providing for the issuance of
Senior Debt Securities, and form of security |
Incorporated by reference from the Registration Statement on Form S-3/A (File No. 333-45793). |
||||||||||||
(4.5) |
Indenture dated May 21, 2002, by and among The Pep BoysManny, Moe and Jack, as issuer, The Pep BoysManny, Moe, and
Jack of California, Pep BoysManny, Moe and Jack of Delaware, Inc., and Pep BoysManny, Moe & Jack of Puerto Rico, Inc. as
Guarantors, and Wachovia Bank, National Association, as Trustee. |
Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-98255). |
||||||||||||
(10.1)* |
Medical Reimbursement Plan of the Company |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended January 31, 1982. |
||||||||||||
(10.2) |
Rights Agreement dated as of December 5, 1997 between the Company and First Union National Bank |
Incorporated by reference from the Companys Form 8-K dated December 8, 1997. |
||||||||||||
(10.3)* |
Directors Deferred Compensation Plan, as amended |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended January 30, 1988. |
||||||||||||
(10.4) |
Dividend Reinvestment and Stock Purchase Plan dated January 4, 1990 |
Incorporated by reference from the Registration Statement on Form S-3 (File No. 33-32857). |
||||||||||||
(10.5) |
Flexible Employee Benefits Trust |
Incorporated by reference from the Companys Form 8-K dated May 6, 1994. |
||||||||||||
(10.6)* |
Form
of Employment Agreement dated as of June 1998 between the Company and certain officers of the Company. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended October 31, 1998. |
||||||||||||
(10.7)* |
The
Pep BoysManny, Moe and Jack 1999 Stock Incentive Planamended and restated as of August 31, 1999. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended October 30, 1999. |
||||||||||||
(10.8) |
Participation Agreement between the Company and The State Street Bank and Trust (Trustee) dated September 22,
2000. |
Incorporated by reference from the Companys Form 8-K filed October 18, 2000. |
||||||||||||
(10.9)* |
The
Pep BoysManny, Moe and Jack 1990 Stock Incentive PlanAmended and Restated as of March 26, 2001. |
Incorporated by reference from the Companys Form 10-K for the year ended February 1, 2003. |
||||||||||||
(10.10)* |
The
Pep BoysManny, Moe & Jack Pension PlanAmended and Restated as of September 10, 2001. |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended February 1, 2003 |
67
(10.11)* |
Amendment and restatement as of September 3, 2002 of The Pep Boys Savings Plan. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended November 2, 2002. |
||||||||||||
(10.12)* |
Amendment and restatement as of September 3, 2002 of The Pep Boys Savings PlanPuerto Rico. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended November 2, 2002. |
||||||||||||
(10.13) |
Amendment Number One to The Pep BoysManny, Moe & Jack 1999 Stock Incentive Plan. |
Incorporated by reference from the Companys Form 10-Q for the Quarter ended November 2, 2002. |
||||||||||||
(10.14)* |
Long-Term Disability Salary Continuation Plan amended and restated as of March 26, 2002. |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended February 1, 2003. |
||||||||||||
(10.15)* |
Amendment to and restatement of the Executive Supplemental Pension Plan, effective as of March 26, 2002. |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended February 1, 2003. |
||||||||||||
(10.16)* |
Employment agreement between George Babich and the Company dated as of February 28, 2003. |
Incorporated by reference from the Companys Form 10-K for the fiscal year ended February 1, 2003. |
||||||||||||
(10.17)* |
Employment Agreement between Lawrence N. Stevenson and the Company dated as of April 28, 2003. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended May 3, 2003. |
||||||||||||
(10.18) |
Amended and Restated Loan and Security Agreement, dated August 1, 2003, by and among the Company, Congress Financial Corporation, as Agent,
The CIT Group/Business Credit, Inc. and General Electric Capital Corporation, as Co-Documentation Agents, and the Lenders from time to time party
thereto. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended August 2, 2003. |
||||||||||||
(10.19) |
Participation Agreement, dated as of August 1, 2003, among the Company, Wachovia Development Corporation, as the Borrower and
the Lessor, the Lenders and Wachovia Bank, National Association, as Agent for the Lenders and the Secured Parties. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended August 2, 2003. |
||||||||||||
(10.20) |
Amended and Restated Lease Agreement, dated as of August 1, 2003, between Wachovia Development Corporation, as Lessor, and
the Company. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended August 2, 2003. |
||||||||||||
(10.21)* |
Amendment number Two to The Pep Boys Manny, Moe & Jack 1999 Stock Incentive Plan. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended August 2, 2003. |
||||||||||||
(10.22) |
Amendment No. 1, dated October 24, 2003, to the Amended and Restated Loan and Security Agreement, by and among the Company, Congress Financial
Corporation, as Agent, and the other parties thereto. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended November 1, 2003. |
68
(10.23) |
Consent, dated October 24, 2003, of Wachovia Development Corporation to Amendment No. 1 To the Amended and Restated Loan and
Security Agreement, by and among the Company, Congress Financial Corporation, as agent, and the other parties thereto. |
Incorporated by reference from the Companys Form 10-Q for the quarter ended November 1, 2003. |
||||||||||||
(10.24)* |
Employment Agreement, dated June 1, 2003, between the Company and Harry Yanowitz. |
Incorporated by reference from The Companys Form 10-Q for the quarter ended November 1, 2003. |
||||||||||||
(10.25)* |
The
Pep Boys Savings Plan Amendment 2004-1 |
|||||||||||||
(10.26)* |
The
Pep Boys Deferred Compensation Plan |
|||||||||||||
(10.27)* |
The
Pep Boys Annual Incentive Bonus Plan (amended and restated as of December 9, 2003) |
|||||||||||||
(12) |
Computation of Ratio of Earnings to Fixed Charges |
|||||||||||||
(21) |
Subsidiaries of the Company |
|||||||||||||
(23) |
Independent Auditors Consent |
|||||||||||||
(31.1) |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||||||||||||
(31.2) |
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||||||||||||
(32.1) |
Chief
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) |
Chief
Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
(b) | None |
* | Management contract or compensatory plan or arrangement. |
69
SIGNATURES
THE PEP
BOYSMANNY, MOE & JACK (Registrant) |
|
Dated: April
15, 2004 |
by: /s/ George
Babich, Jr. George Babich, Jr., President and Chief Financial Officer |
70
SIGNATURE |
CAPACITY |
DATE |
||||||||
/s/ Lawrence
N. Stevenson Lawrence N. Stevenson |
Chief Executive Officer (Principal Executive Officer) |
April
15, 2004 |
||||||||
/s/ George
Babich, Jr. George Babich, Jr. |
President and Chief Financial Officer (Principal Financial Officer) |
April
15, 2004 |
||||||||
/s/ Bernard K.
McElroy Bernard K. McElroy |
Chief Accounting Officer and Treasurer (Principal Accounting Officer) |
April
15, 2004 |
||||||||
/s/ Bernard J.
Korman Bernard J. Korman |
Chairman of the Board |
April
15, 2004 |
||||||||
/s/ Peter A.
Bassi Peter A. Bassi |
Director |
April
15, 2004 |
||||||||
/s/ J. Richard
Leaman, Jr. J. Richard Leaman, Jr. |
Director |
April
15, 2004 |
||||||||
/s/ William
Leonard William Leonard |
Director |
April
15, 2004 |
||||||||
/s/ Malcolmn
D. Pryor Malcolmn D. Pryor |
Director |
April
15, 2004 |
||||||||
/s/ Lester
Rosenfeld Lester Rosenfeld |
Director |
April
15, 2004 |
||||||||
/s/ Jane
Scaccetti Jane Scaccetti |
Director |
April
15, 2004 |
||||||||
/s/ Benjamin
Strauss Benjamin Strauss |
Director |
April
15, 2004 |
||||||||
/s/ John T.
Sweetwood John T. Sweetwood |
Director |
April
15, 2004 |
71
FINANCIAL STATEMENT SCHEDULES FURNISHED PURSUANT TO THE REQUIREMENTS OF FORM 10-K
THE
PEP BOYSMANNY, MOE & JACK AND SUBSIDIARIES |
SCHEDULE
IIVALUATION AND QUALIFYING ACCOUNTS AND RESERVES |
(in thousands) |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Column A |
|
Column B |
|
Column C |
|
Column D |
|
Column E |
|
||||||||||||||
Description |
|
Balance at Beginning of Period |
|
Additions Charged to Costs and Expenses |
|
Additions Charged to Other Accounts |
|
Deductions* |
|
Balance at End of Period |
|||||||||||||
ALLOWANCE FOR DOUBTFUL ACCOUNTS: |
|||||||||||||||||||||||
Year Ended January 31, 2004 |
$ | 422 | $ | 1,768 | $ | | $ | 1,451 | $ | 739 | |||||||||||||
Year Ended February 1, 2003 |
$ | 725 | $ | 1,643 | $ | | $ | 1,946 | $ | 422 | |||||||||||||
Year Ended February 2, 2002 |
$ | 639 | $ | 1,674 | $ | | $ | 1,588 | $ | 725 |
* | Uncollectible accounts written off. |
72
INDEX TO EXHIBITS
|
|
Page |
||||||
1. |
The
following consolidated financial statements of The Pep BoysManny, Moe & Jack are included in Item 8. |
|||||||
|
Independent Auditors Report |
28 |
||||||
|
Consolidated Balance SheetsJanuary 31, 2004 and February 1, 2003 |
29 |
||||||
|
Consolidated Statements of OperationsYears ended January 31, 2004, February 1, 2003 and February 2, 2002 |
30 |
||||||
|
Consolidated Statements of Stockholders EquityYears ended January 31, 2004, February 1, 2003 and February 2, 2002 |
31 |
||||||
|
Consolidated Statements of Cash FlowsYears ended January 31, 2004, February 1, 2003 and February 2, 2002 |
32 |
||||||
|
Notes to Consolidated Financial Statements |
33 |
||||||
2. |
The
following consolidated financial statement schedule of The Pep BoysManny, Moe & Jack is included. |
|||||||
|
Schedule II Valuation and Qualifying Accounts and Reserves | 72 |
||||||
|
All
other schedules have been omitted because they are not applicable or not
required or the required information is included in the consolidated financial
statements or notes thereto. |
|||||||
3. |
Exhibits |
|||||||
(10.25) |
The
Pep Boys Savings Plan Amendment 2004-1 |
|||||||
(10.26) |
The
Pep Boys Deferred Compensation Plan |
|||||||
(10.27) |
The
Pep Boys Annual Incentive Bonus Plan (amended and restated as of December 9, 2003) |
|||||||
(12) |
Computation of Ratio of Earnings to Fixed Charges |
|||||||
(21) |
Subsidiaries of the Company |
|||||||
(23) |
Independent Auditors Consent |
|||||||
(31.1) |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||||||
(31.2) |
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|||||||
(32.1) |
Chief 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) |
Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
73
EXHIBIT 10.25 - THE PEP BOYS SAVINGS PLAN AMENDMENT 2004-1
THE
PEP BOYS SAVINGS PLAN
AMENDMENT 2004-1
Pursuant to the authority reserved to it under Section 10.1 of The Pep Boys Savings Plan (the Plan), The Pep Boys - Manny, Moe & Jack (the Company) hereby amends the Plan as follows:
1. Effective January 16, 2004, the first sentence of the definition of Annual Additions under Section 2.1 of the Plan immediately following the definition of Affiliate is hereby deleted in its entirety and the following language is hereby substituted therefor:
|
Annual Additions means, with respect to each Limitation Year, the total of the Employer contributions and forfeitures allocated to a Participants Accounts pursuant to the provisions of the Plan (other than Pre-Tax Contributions made pursuant to Section 4.1(a)(ii) of the Plan), plus the total of any Participant contributions for such Limitation Year, plus amounts described in Sections 415(l)(1) and 419A(d)(2) of the Code, if any. |
2. Effective January 16, 2004, the introductory clause of the third paragraph of the definition of Compensation under Section 2.1 of the Plan is hereby deleted in its entirety and the following language is hereby substituted therefore:
For purposes of Sections 4.5 and 4.7,.
3. Effective January 16, 2004, Section 4.1(a) is hereby deleted in its entirety and the following language is hereby substituted therefor:
|
(a) |
Pre-Tax Contributions |
|
|
|
|
|
|
(i) Subject to the limitations of Sections 4.5 and 5.4, each Participant shall have the option to authorize the Employer, in writing and in accordance with procedures established by the Committee, to contribute to the Plan for a Plan Year on his behalf, an amount equal to any one half of a percentage of his Compensation from one half of a percent (0.5%) up to twelve percent (12%) (as determined without regard to this Section 4.1(a)) for such Plan Year. Effective October 1, 1998, the foregoing limitation of twelve percent (12%) is increased to fifteen percent (15%). Effective January 1, 2003, the foregoing limitation of fifteen percent (15%) is increased to fifty percent (50%). The Committee shall have the discretion to apply a lower limitation to Highly Compensated Employees. Such authorization shall be in the form of an election by the Participant to have his Compensation reduced by payroll withholding. Payroll deduction shall commence as soon as practicable following the Entry Date on which an Eligible Employee becomes a Participant or the date the Participant |
|
elects to make Pre-Tax Contributions to the Plan. Such withheld amounts are to be transmitted by the Employer to the Trustee as of the earliest date on which such amounts can reasonably be segregated from the Employers general assets. Effective February 3, 1997, such withheld amounts are to be transmitted by the Employer to the Trustee no later than the date required by DOL Reg. Section 2510.3-102(b). The amount of such contributions, together with contributions under Sections 4.1(c) and (d), shall not exceed the maximum amount allowable as a deduction under the Code for the Plan Year. |
|
|
|
(ii) Effective January 16, 2004, in addition to the amount of Pre-Tax Contributions made pursuant to subsection (a)(i), the Employer shall make a Pre-Tax Contribution for the Plan Year to the Pre-Tax Contribution Account of each Participant who attains age 50 prior to the end of a Plan Year who, with respect to that Plan Year, has executed a salary reduction agreement between the Participant and the Employer that provides for an additional reduction in the amount of Compensation otherwise payable to the Participant in an amount not to exceed the dollar maximum in effect under section 414(v) of the Code, as in effect for the Plan Year (reduced by, to the extent required by the Code and applicable Treasury regulations, any other elective deferrals contributed on the Participants behalf pursuant to section 414(v) of the Code for the Plan Year); provided, however, that Pre-Tax Contributions shall be treated for all Plan purposes as contributed under subsection (a)(i) above in lieu of this subsection, unless the Participant is unable to make additional Pre-Tax Contributions under subsection (a)(i) above for the Plan Year due to limitations imposed by the Plan or applicable federal law. Pre-Tax Contributions made pursuant to this subsection (a)(ii) shall not be taken into account for purposes of Sections 4.5 and 4.7 and the applicable limits under Section 402(g) of the Code. |
|
|
|
(iii) Notwithstanding the foregoing, the Participant shall be prohibited from authorizing any Pre-Tax Contributions to be made on his behalf under this Plan and elective contributions under any other plan, in excess of the applicable limit under Section 402(g) of the Code in effect for the Plan Year to which such Pre-Tax Contributions relate. In the event a Participant has made excess deferrals under the Plan (or, if not, has determined that excess deferrals will be considered to exist under this Plan), then not later than the first day of April following the close of the Participants taxable year, the Participant may notify the Plan of the amount of the excess deferrals hereunder. The Participant shall be deemed to have notified the Plan of excess deferrals to the extent he has excess deferrals for the taxable year calculated by taking into account only elective deferrals under the Plan and other plans of the Employer or Affiliate. The Employer may notify the Plan on behalf of the Participant under these circumstances. |
|
|
|
In the event the dollar limit described in the preceding paragraph is exceeded for a Participant, the Committee shall direct the Trustee (1) to the extent the Participant is eligible to make Pre-Tax Contributions pursuant to Section 4.1(a)(ii) for the Plan Year (subject to the dollar maximum applicable to such |
2
|
section), recharacterize the excess contributions as made pursuant to Section 4.1(a)(ii), and (2) to the extent the excess cannot be recharacterized in accordance with clause (1), distribute the amount designated above including any Income allocated thereto to the Participant by the April 15 following the end of the calendar year with respect to which the excess occurred. The Income attributable to a Participants excess deferral pursuant to this Section 4.1(a)(iii) for the Plan Year during which such excess deferral arose shall be determined in accordance with Treas. Reg. §1.402(g)-1(e)(5)(ii). Unless provided for by the Committee, any Income attributable to a Participants excess deferrals for the period between the end of the Plan Year and the date of distribution shall be disregarded. Excess deferrals to be distributed for a Plan Year shall be reduced by Excess Contributions previously distributed for the Plan Year beginning in such taxable year as set forth in Section 4.5. Matching Contributions allocated by reason of any excess deferral distributed pursuant to this Section, together with any income allocated thereto for the calendar year to which the excess deferral relates, shall be forfeited at the time such distribution is made. For this purpose, however, the excess deferrals that are returned to the Participant shall be deemed to be first those Pre-Tax Contributions for which no Matching Contribution was made and second those Pre-Tax Contributions for which a Matching Contribution was made. Accordingly, if the Pre-Tax Contributions that are returned to the Participant as excess deferrals were not matched, no Matching Contributions will be forfeited. |
|
|
|
A Participant who has excess deferrals for a taxable year may receive a corrective distribution of excess deferrals during the same year. This corrective distribution shall be made only if: |
|
|
|
(A) The Participant designates the distribution as an excess deferral. The Participant shall be deemed to have designated the distribution to the extent the Participant has excess deferrals for the taxable year calculated by taking into account only elective deferrals under the Plan and other plans of the Employer and Affiliate. The Employer may make the designation on behalf of the individual under these circumstances. |
|
|
|
(B) The correcting distribution is made after the date on which the Plan received the excess deferral. |
|
|
|
(C) The Plan designates the distribution as a distribution of excess deferrals. |
|
|
|
The term excess deferrals means the excess of an individuals elective deferrals for any taxable year, as defined in Treas. Reg. §1.402(g)-1(b), over the applicable limit under Section 402(g)(1) for the taxable year. |
|
|
|
Notwithstanding the foregoing, the Committee may further limit a Participants right to make Pre-Tax Contributions to the Plan if in the sole |
3
|
judgment and discretion of the Committee, such limits are necessary to ensure the Plans compliance with the requirements of Sections 401(k) and (m) of the Code. |
|
|
|
(iv) No Participant shall be permitted to have Pre-Tax Contributions made under this Plan, or any other qualified plan maintained by the Employer during any taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Section 414(v) of the Code, if applicable. |
4. Effective January 16, 2004, the following sentence is hereby added to the third paragraph of Section 4.1(c):
|
Matching Contributions shall not be made with respect to Pre-Tax Contributions made pursuant to Section 4.1(a)(ii). |
5. Effective January 16, 2004, the first sentence of the next to last paragraph of Section 5.4 of the Plan is hereby deleted in its entirety and the following language is hereby substituted therefor:
|
If the total Annual Additions on behalf of a Participant for a Limitation Year would exceed the limitations described herein as a result of a reasonable error in determining the amount of Pre-Tax Contributions that a Participant may make to comply with this Section 5.4, as a result of the allocation of forfeitures or as a result of a reasonable error in estimating a Participants Compensation for purposes of this Section, such excess Pre-Tax Contributions shall be recharacterized as a Pre-Tax Contribution under Section 4.1(a)(ii) to the extent permitted under Section 414(v) of the Code and Treasury regulations issued thereunder. If there is an excess after the foregoing recharacterization, such excess Pre-Tax Contribution may be distributed to the Participant to the extent that such distribution would reduce the excess Annual Additions as permitted under Section 415 of the Code. |
IN WITNESS WHEREOF, and as evidence of the adoption of the amendment set forth herein, the Company has caused this instrument to be executed this 16th day of January, 2004.
Attest: |
THE PEP BOYS - MANNY, MOE & JACK |
|
|
|
|
|
|
|
/s/Brian d. Zuckerman |
/s/ Lawrence N. Stevenson |
|
|
Chief Executive Officer |
4
EXHIBIT 10.26 - THE PEP BOYS DEFERRED COMPENSATION PLAN
THE
PEP BOYS
DEFERRED COMPENSATION PLAN
Effective
March 19, 2004
ARTICLE
1
PURPOSE
In recognition of the services provided by certain key employees, the Board of Directors of THE PEP BOYS MANNY, MOE & JACK wishes to adopt a deferred compensation plan (the Plan) to make additional retirement benefits and increased financial security, on a tax-favored basis, available to those individuals effective March 19, 2004. The Plan reads as follows:
ARTICLE
2
DEFINITIONS
2.1 Definitions. The following words and phrases, when used in this Plan, shall have the following meanings:
Affiliate means any firm, partnership, or corporation that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Affiliate also includes any other organization related to the Company that is designated as such by the Board.
Associate means any individual employed by the Company on a regular, full-time basis at the manager level or above (determined in accordance with the personnel policies and practices of the Company) as designated by the Company, including citizens of the United States employed outside of their home country and resident aliens employed in the United States; provided, however, that to qualify as an Associate for purposes of the Plan, the individual must be a member of a group of key management or other highly compensated employees within the meaning of Sections 201, 301 and 401 of ERISA whose Compensation is within the top 5% of all Associates of the Company ranked by Compensation.
Base Salary means the amount of base salary paid to each Associate before any reduction for amounts deferred by the Participant pursuant to any Code section 401(k) plan or Code section 125 plan, or pursuant to this Plan or any other non-qualified plan that permits deferrals of compensation.
Base Salary Deferral means that portion of Base Salary as to which a Participant has made an annual irrevocable election to defer receipt until the date specified under the In-Service Distribution Option or the Retirement Distribution Option.
Beneficiary means the person or persons (natural or otherwise) designated by the Participant in accordance with Section 11.3.
Board means the Board of Directors of the Company.
Bonus means the amount earned by an Associate under any annual incentive plan maintained by the Company.
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Cause means (i) the continued failure of the Associate to perform substantially his duties with the Company (other than such failure resulting from an Associates Disability), (ii) any act by the Associate of illegality, dishonesty or fraud in connection with the Associates employment, (iii) the willful engaging by the Associate in gross misconduct which is demonstrably and materially injurious to the Company or its affiliates, (iv) the Associates conviction of or pleading guilty or no contest to a felony, or (v) a violation of the Associates employment agreement or non-competition agreement with the Company.
Change of Control means:
(a) individuals who, on the Effective Date, constitute the Board of Directors (the Incumbent Directors) cease for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board of Directors (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors shall be deemed to be an Incumbent Director;
(b) any Person (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the Exchange Act) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Companys then outstanding securities eligible to vote for the election of the Board of Directors (the Voting Securities); provided, however, that the event described in this paragraph (b) shall not be deemed to be a Change of Control by virtue of any of the following acquisitions: (i) by the Company or any subsidiary of the Company in which the Company owns more than 50% of the combined voting power of such entity (a Subsidiary), (ii) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (iii) by any underwriter temporarily holding the Companys Voting Securities pursuant to an offering of such Voting Securities, or (iv) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c));
(c) a merger, consolidation, statutory share exchange or similar form of corporate transaction is consummated involving the Company or any of its Subsidiaries that requires the approval of the Companys stockholders, whether for such transaction or the issuance of securities in the transaction (a Business Combination), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (A) the corporation resulting from such Business Combination (the Surviving Corporation), or (B) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the Parent Corporation), is represented by the Companys Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Companys Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the
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voting power of the Companys Voting Securities among the holders thereof immediately prior to the Business Combination, (ii) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board of Directors approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (i), (ii) and (iii) above shall be deemed to be a Non-Qualifying Transaction);
(d) a sale of all or substantially all of the Companys assets is consummated;
(e) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company; or
(f) there occur such other events as the Board of Directors may designate.
Notwithstanding the foregoing, a Change of Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Companys Voting Securities as a result of the acquisition of the Companys Voting Securities by the Company which reduces the number of the Companys Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change of Control of the Company shall then occur.
Code means the Internal Revenue Code of 1986, as amended from time to time and includes any regulations issued thereunder.
Company means The Pep Boys Manny, Moe & Jack.
Company Stock Fund means the Deemed Investment Option under the Plan for which the rate of return credited to a Participants Distribution Accounts shall be based on the actual performance of the common stock of the Company.
Compensation means the sum of Base Salary and Bonus paid to an Associate.
Deemed Investment Options means the deemed investment options selected by the Participant from time to time pursuant to which deemed earnings are credited to the Participants Distribution Accounts.
Disability or Disabled means a medically determinable physical or mental impairment of a permanent nature which prevents a Participant from performing his customary employment duties without endangering his health and which would qualify the Participant for
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Social Security disability benefits or a benefit under the Pep Boys Manny, Moe & Jack Long Term Disability Salary Continuation Plan.
Distribution Option means the two distribution options which are available under the Plan, consisting of the Retirement Distribution Option and the In-Service Distribution Option.
Distribution Account or Accounts means, with respect to a Participant, the Retirement Distribution Account and/or the In-Service Distribution Account established on the books of the Employer, pursuant to Section 5.1, which is used solely to calculate the amount payable to each Participant as well as the Accounts to which are credited the Mandatory Bonus Deferrals and the Matching Contributions under Sections 4.2 and 4.4(a), respectively.
Distribution Option Period. Distribution Option Period means a period of Plan Years for which an Eligible Associate elects, in the Enrollment Agreement, the time and manner of payment of amounts credited to the Eligible Associates In-Service Distribution Option Account for such Plan Years. As required by Section 6.3, the Distribution Option Period must end at least two Plan Years prior to the Plan Year selected for the initial distribution for that Distribution Option Period.
Effective Date means the effective date of the Plan, which is March 19, 2004.
Eligible Associate means any Associate who is designated by the Board as eligible to participate in the Plan.
Employer means the Company and any Affiliate which is authorized by the Company to adopt the Plan and cover its Eligible Associates and whose designation as such has become effective upon acceptance of such status by the Affiliate. An Affiliate may revoke its acceptance of such designation at any time, but until such acceptance has been revoked, all the provisions of the Plan and amendments thereto shall apply to the Eligible Associates of the Affiliate. In the event the designation is revoked by an Affiliate, the Plan shall be deemed terminated only with respect to such Affiliate.
Enrollment Agreement means the authorization form which an Eligible Associate files with the Plan Administrator to participate in the Plan.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
In-Service Distribution Account means the Account maintained for a Participant for each Distribution Option Period to which Base Salary Deferrals and Voluntary Bonus Deferrals are credited pursuant to the In-Service Distribution Option.
In-Service Distribution Option means the Distribution Option pursuant to which benefits are payable in accordance with Section 6.3.
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Mandatory Bonus Deferral means the portion of the Tier I Participants Bonus which is in excess of 150% of the Tier I Participants target bonus.
Matching Contributions are those credits made to the Participants Retirement Distribution Account by the Employer pursuant to Section 4.4.
Normal Retirement Age means age 62.
Participant means an Eligible Associate who has filed a completed and executed Enrollment Agreement with the Plan Administrator or its designee and is participating in the Plan in accordance with the provisions of Article 4 or an Eligible Associate who is employed as an officer of the Company and is eligible to receive a Bonus in any Plan Year in excess of 150% of the Eligible Associates target bonus. In the event of the death or incompetency of a Participant, the term shall mean the Participants personal representative or guardian. An individual shall remain a Participant until that individual has received full distribution of any amount credited to the Participants Distribution Account(s).
Plan means this plan, called The Pep Boys Deferred Compensation Plan, as amended from time to time.
Plan Administrator means the committee appointed by the Board to act as the administrator of the Plan.
Plan Year means the 12 month period beginning on each January 1 and ending on the following December 31.
Retirement means the termination of the Participants Service with the Employer (for reasons other than death) at or after age 55.
Retirement Distribution Account means the Account maintained for a Participant to which Base Salary Deferrals, Voluntary Bonus Deferrals and Matching Contributions are credited pursuant to the Retirement Distribution Option.
Retirement Distribution Option means the Distribution Option pursuant to which benefits are payable in accordance with Section 6.1.
Service means the period of time during which an employment relationship exists between an Associate and the Employer, including any period during which the Associate is on an approved leave of absence, whether paid or unpaid. Service also includes employment with a non-participating Affiliate if an Associate transfers directly between the Employer and the Affiliate.
Tier I Participant means a Participant who is employed as an officer of the Company.
Tier II Participant means a Participant other than a Tier I Participant.
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Termination Date means the date of termination of a Participants Service with the Employer and its Affiliates, including termination resulting from a Participants Disability, and shall be determined without reference to any compensation continuation arrangement or severance benefit arrangement that may be applicable.
Voluntary Bonus Deferral means the portion of the Participants Bonus earned in a Plan Year, which in the case of a Tier I Participant, is equal to or less than 150% of the Tier I Participants target bonus, as to which a Participant has made an annual irrevocable election to defer receipt until the date specified under the In-Service Distribution Option or the Retirement Distribution Option.
2.2 Construction. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, unless the context clearly indicates to the contrary.
ARTICLE
3
ADMINISTRATION OF THE PLAN AND DISCRETION
3.1 The Plan Administrator shall have full power and authority to interpret the Plan, to prescribe, amend and rescind any rules, forms and procedures as it deems necessary or appropriate for the proper administration of the Plan and to make any other determinations and to take any other such actions as it deems necessary or advisable in carrying out its duties under the Plan. All action taken by the Plan Administrator arising out of, or in connection with, the administration of the Plan or any rules adopted thereunder, shall, in each case, lie within its sole discretion, and shall be final, conclusive and binding upon the Employer, the Board, all Employees, all Beneficiaries of Employees and all persons and entities having an interest therein and the Enrollment Agreement of each Participant shall constitute that Participants acknowledgement and acceptance of the Plan Administrators authority and discretion.
3.2 The Plan Administrator shall serve without compensation for their services unless otherwise determined by the Board. All expenses of administering the Plan shall be paid by the Company.
3.3 The Company shall indemnify, defend and hold the Plan Administrator harmless from any and all claims, losses, damages, expenses (including counsel fees) and liability (including any amounts paid in settlement of any claim or any other matter with the consent of the Board) arising from any act or omission of such member, except when the same is due to gross negligence or willful misconduct.
3.4 Any decisions, actions or interpretations to be made under the Plan by the Company, the Employer, the Board or Plan Administrator shall be made in its respective sole discretion, not as a fiduciary and need not be uniformly applied to similarly situated individuals and shall be final, binding and conclusive on all persons interested in the Plan.
ARTICLE
4
PARTICIPATION
4.1 Election to Participate. Annually, all Eligible Associates will be offered the opportunity to make a Base Salary Deferral and a Voluntary Bonus Deferral with respect to Base
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Salary and Bonus to be earned in the following Plan Year. Any Eligible Associate may enroll in the Plan effective as of the first day of a Plan Year by filing a completed and fully executed Enrollment Agreement with the Plan Administrator by a date set by the Plan Administrator but in any event prior to the last day of the preceding Plan Year. Pursuant to said Enrollment Agreement, the Eligible Associate shall irrevocably elect, except as provided below, (a) the percentages, in whole percentages, by which (as a result of payroll reduction) an amount equal to any whole percentage of the Participants Base Salary or Bonus to be earned during that Plan Year, in each case after required nondeferrable payroll tax and other authorized or required deductions, will be deferred, (b) the Distribution Accounts to which such amounts will be credited and (c) the time and manner of distribution from the Retirement Distribution Account and shall provide such other information as the Plan Administrator shall require. The first Enrollment Agreement filed by an Eligible Associate during any Distribution Option Period must also set forth the Participants election as to the time and manner of distribution of amounts credited to the Participants In-Service Distribution Account, and earnings credited to such amounts, during such Distribution Option Period. The Company may establish minimum or maximum amounts of Base Salary Deferrals and Voluntary Bonus Deferrals that may be elected under this Section and may change such standards from time to time. Any such limits shall be communicated by the Company to the Plan Administrator and by the Plan Administrator to the Participants prior to the commencement of a Plan Year. Notwithstanding anything herein to the contrary, a Participant may elect to cease the Base Salary Deferrals or Voluntary Bonus Deferrals, being made in the current Plan Year on the Participants behalf by giving the Plan Administrator at least 30 days advance written notice of such election and agreeing not to make any further Base Salary Deferrals and Voluntary Bonus Deferrals under the Plan for the balance of the current Plan Year and all of the next Plan Year.
4.2 Mandatory Participation. Each Tier I Participant who is eligible to receive a Bonus in any Plan Year in excess of 150% of the Tier I Participants target bonus will automatically be enrolled in the Plan with such sum credited to an Account for the Tier I Participant. The Deemed Investment Option for a Mandatory Bonus Deferral shall be a money market fund selected by the Company. The Mandatory Bonus Deferral shall vest according to the following schedule provided that the Participant does not have a Termination Date prior thereto:
|
Plan Years following Year Earned |
|
Vested Percentage |
|
|
|
|
|
|
|
One year, but less than two |
|
33.33% |
|
|
Two years, but less then three |
|
66.66% |
|
|
Three or more years |
|
100% |
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Notwithstanding the foregoing, if the Tier I Participant dies or becomes Disabled while employed by the Employer, or terminates employment on or after attaining Normal Retirement Age, the Mandatory Bonus Deferral shall vest immediately on the Termination Date.
4.3 New Eligible Associates. The Plan Administrator, acting on behalf of the Employer, may, in its discretion, permit employees who first become Eligible Associates after the beginning of a Plan Year to enroll in the Plan for that Plan Year by filing a completed and fully executed Enrollment Agreement, in accordance with Section 4.1, as soon as practicable following the date the Associate becomes an Eligible Associate but, in any event, within 30 days
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after such date. Notwithstanding the foregoing, however, any election by an Eligible Associate, pursuant to this section, to make a Base Salary Deferral or Voluntary Bonus Deferral shall apply only to such amounts as are earned by the Eligible Associate after the date on which such Enrollment Agreement is filed.
4.4 Matching Contributions.
(a) If a Tier I Participant elects to direct a portion of his Voluntary Bonus Deferral to the Company Stock Fund, the Employer shall credit to such Tier I Participants Account a Matching Contribution equal to 100% of the Voluntary Bonus Deferral which the Tier I Participant elected to direct to the Company Stock Fund, up to 20% of the Tier I Participants Bonus. The Deemed Investment Option for the Matching Contribution shall be the Company Stock Fund until such time as the Matching Contribution is vested and distributed. After such Matching Contribution is fully vested it shall be paid as soon as practicable in shares of Company common stock unless the Participant has elected, at the time and in the form specified by the Plan Administrator, to credit the then value of such Matching Contribution to the Participants In-Service or Retirement Account. The Matching Contribution under this Section 4.4(a) shall vest according to the following schedule provided that the Participant does not have a Termination Date prior thereto:
|
Plan Years following Credit |
|
Vested Percentage |
|
|
|
|
|
|
|
One year, but less than two |
|
33.33% |
|
|
Two years, but less then three |
|
66.66% |
|
|
Three or more years |
|
100% |
|
If the Tier I Participant dies or becomes Disabled while employed by the Employer, or terminates employment on or after attaining Normal Retirement Age, the Matching Contribution shall vest immediately on the Termination Date.
(b) The Company may credit an additional Matching Contribution to a Tier I Participants and/or a Tier II Participants Distribution Account for any Plan Year, as determined by the Company. Any such Matching Contribution shall be communicated by the Company to the Plan Administrator and by the Plan Administrator to the Participants. The Company shall also specify at the time of the credit whether such additional Matching Contribution shall be distributed at the same time as the underlying Participant contributions or earlier.
(c) Notwithstanding the foregoing, if a Participant is terminated for Cause, the Plan Administrator, acting on behalf of the Company, shall have the discretion to forfeit the vested portion of the Matching Contribution credited to such Participants Retirement Distribution Account.
(d) Matching Contributions will be credited as frequently as determined by the Plan Administrator, acting on behalf of the Employer, but in any event at least annually.
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ARTICLE
5
DISTRIBUTION ACCOUNTS
5.1 Distribution Accounts. The Plan Administrator shall establish and maintain separate Distribution Accounts with respect to each Participant for each Distribution Option Period and for the Retirement Account. A Participants Distribution Accounts shall consist of the Retirement Distribution Account and/or one or more In-Service Distribution Accounts. The amount of Base Salary Deferrals, Voluntary Bonus Deferrals and Mandatory Bonus Deferrals pursuant to Section 4.1 and Section 4.2 shall be credited by the Employer to the Participants Distribution Option Accounts no later than the first day of the month following the month in which such Base Salary or Bonus would otherwise have been paid, in accordance with the Distribution Option irrevocably elected by the Participant in the Enrollment Agreement, or in the case of Mandatory Bonus Deferrals, to the Tier I Participants Account and distributed in accordance with Section 7.2(c). Any amount once taken into account as Base Salary or Bonus for purposes of this Plan shall not be taken into account thereafter. The Participants Distribution Accounts shall be reduced by the amount of payments made by the Employer to the Participant or the Participants Beneficiary pursuant to this Plan.
5.2 Returns on Distribution Option Accounts. A Participants Distribution Accounts shall be credited with returns in accordance with the Deemed Investment Options elected by the Participant from time to time. Unless otherwise provided under this Plan, Participants may allocate their Retirement Distribution Account and/or each of their In-Service Distribution Accounts among the Deemed Investment Options available under the Plan only in whole percentages of not less than five percent. The rate of return, positive or negative, credited under each Deemed Investment Option is based upon the actual investment performance of the investment fund(s) designated by the Plan Administrator from time to time, and shall equal the total return of such investment fund net of asset based charges, including, without limitation, money management fees, fund expenses and mortality and expense risk insurance contract charges. The Plan Administrator reserves the right, on a prospective basis, to add or delete Deemed Investment Options.
5.3 Deemed Investment Options. Except as otherwise provided pursuant to Section 5.2, the Deemed Investment Options available under the Plan shall consist of the Company Stock Fund and such other investments funds as the Plan Administrator designates. Notwithstanding that the rates of return credited to Participants Distribution Accounts under the Deemed Investment Options are based upon the actual performance of the investment funds designated by the Plan Administrator, the Company shall not be obligated to invest any Base Salary Deferral by Participants under this Plan, or any other amounts, in such portfolios or in any other investment funds. Investments in the Company Stock Fund are limited to elections under Section 4.4 only.
5.4 Changes in Deemed Investment Options. A Participant may change the Deemed Investment Options to which the Participants Distribution Accounts are deemed to be allocated with whatever frequency is determined by the Plan Administrator which shall not be less than four times per Plan Year; provided, however, a Tier I Participant who has elected to invest a portion of his Voluntary Bonus Deferral in the Company Stock Fund may not change such investment option (for such Voluntary Bonus Deferrals or for the related Matching Contributions). Each such change may include (a) reallocation of the Participants existing Accounts in whole percentages of not less than five percent, and/or (b) change in investment
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allocation of amounts to be credited to the Participants Accounts in the future, as the Participant may elect.
5.5 Valuation of Accounts. The value of a Participants Distribution Accounts as of any date shall equal the amounts theretofore credited to such Accounts, including any earnings (positive or negative) deemed to be earned on such Accounts in accordance with Section 5.2 through the day preceding such date, less the amounts theretofore deducted from such Accounts.
5.6 Statement of Accounts. The Plan Administrator shall provide to each Participant, not less frequently than quarterly, a statement in such form as the Plan Administrator deems desirable setting forth the balance standing to the credit of each Participant in each of his Distribution Accounts.
5.7 Distributions from Accounts. Any distribution made to or on behalf of a Participant from one or more of his Distribution Accounts in an amount which is less than the entire balance of any such Account shall be made pro rata from each of the Deemed Investment Options to which such Account is then allocated.
ARTICLE
6
DISTRIBUTION OPTIONS
6.1 Election of Distribution Option. In the Enrollment Agreement filed with the Plan Administrator for each Distribution Option Period and for the Retirement Account, the Participant shall allocate his or her deferrals between the Distribution Options in increments of ten percent and elect the time and manner of distributions from such Distribution Accounts. A Participants execution of the Enrollment Agreement shall also constitute acknowledgment that all decisions, interpretations and determinations by the Plan Administrator shall be final and binding on the Company, the Employer, Participants, Beneficiaries and any other persons having or claiming an interest hereunder.
6.2 Retirement Distribution Option. Subject to Section 7.1, distribution of the Participants Retirement Distribution Account, if any, shall be made or commence on the first day of the 13th month immediately following the Participants Retirement.
6.3 In-Service Distribution Option. Subject to Section 7.2, the Participants In-Service Distribution Account for any Distribution Option Period shall be distributed commencing in, and no later than, January of the Plan Year elected by the Participant in the Enrollment Agreement pursuant to which such In-Service Distribution Account was established. Notwithstanding the foregoing, a Participant shall not be entitled to allocate any Compensation deferrals to an In-Service Distribution Account for a Distribution Option Period for the two Plan Years preceding the Plan Year which includes the date on which such Account is to be distributed and any such deferrals shall instead be allocated to the Retirement Distribution Account or to a subsequent In-Service Distribution Account if selected.
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ARTICLE
7
BENEFITS TO PARTICIPANTS
7.1 Benefits Under the Retirement Distribution Option. Benefits under the Retirement Distribution Option shall be paid to a Participant as follows:
(a) Distribution of Benefits Upon Retirement. In the case of a Participant whose Service with the Employer terminates on account of Retirement and whose Retirement Distribution Account balance exceeds $25,000, the Participants Retirement Distribution Account shall be distributed in one of the following methods, as elected by the Participant in writing either in the Enrollment Agreement or in a separate election made prior to the date of the Participants Retirement: (i) in a lump sum; (ii) in annual installments over a 5, 10, 15 or 20 year period or (iii) by any other formula that is mathematically derived and is acceptable to the Plan Administrator. The first annual installment payments are equal to (i) the value of such Retirement Distribution Account as of the last business day of the Plan Year preceding the date of payment, divided by (ii) the number of annual installment payments elected by the Participant in the Enrollment Agreement pursuant to which such Retirement Distribution Account was established. The remaining annual installments shall be paid not later than January 31 of each succeeding Plan Year in an amount equal to (i) the value of such Retirement Distribution Account as of the last business day of the immediately preceding Plan Year divided by (ii) the number of installments remaining. A Participant may change the election regarding the manner of payment of the Participants Account, as described in Section 6.1, at any time prior to the Participants Retirement.
(b) Distribution of Benefits Upon Termination of Employment. In the case of a Participant whose Service with the Employer terminates prior to the earliest date on which the Participant is eligible for Retirement, or whose Retirement Distribution Account balance does not exceed $25,000, the Participants Retirement Distribution Account shall be distributed in a lump sum payment as soon as administratively practicable following the Participants Termination Date notwithstanding any other election by the Participant.
7.2 Benefits Under the In-Service Distribution Option. Benefits under the In-Service Distribution Option shall be paid to a Participant as follows:
(a) In-Service Distributions. Benefits under the In-Service Distribution Account shall be distributed to the Participant for any Distribution Option Period beginning on the date chosen by the Participant in the first Enrollment Agreement that designated all or a portion of the Base Salary or Bonus deferred to be allocated to the In-Service Distribution Account. In no event shall the date selected be earlier than the first day of the third Plan Year following the Plan Year in which the initial filing of the Enrollment Agreement was made with respect to that In-Service Distribution Account. The Participant may, subsequently amend the intended date of payment to a date later than that date initially chosen, by filing such amendment with the Plan Administrator no later than 12 months prior to the date of the first payment originally chosen. The Participant may file this amendment to defer the receipt of benefits under this Section only twice, and each amendment must provide for a payout under this Section at a date later than the election in force immediately prior to a filing of such amendment. The Participants In-Service Distribution Account shall be paid to the Participant in either: (i) a lump sum payment commencing no later than January 31 of the Plan Year elected by the Participant in
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the Enrollment Agreement pursuant to which such In-Service Distribution Account was established as it may have been amended in accordance with the preceding paragraph; or (ii) annual installments payable over a 2, 3, 4 or 5 year period. Annual installment payments, if any, equal to (i) the value of such In-Service Distribution Account as of the last business day of the Plan Year preceding the date of payment, divided by (ii) the number of annual installment payments elected by the Participant in the Enrollment Agreement pursuant to which such In-Service Distribution Account was established. The remaining annual installments shall be paid not later than January 31 of each succeeding year in an amount equal to (i) the value of such In-Service Distribution Account as of the last business day of the immediately preceding Plan Year divided by (ii) the number of installments remaining.
(b) Benefits Upon Termination of Employment. In the case of a Participant whose Service with the Employer terminates prior to the date on which the Participants In-Service Distribution Account would otherwise be distributed, such In-Service Distribution Account shall be paid in a lump sum as soon as administratively practicable following the Participants Termination Date.
(c) Distribution of Mandatory Bonus Deferral. Notwithstanding the foregoing, the vested portion of the Mandatory Bonus Deferral credited to a Tier I Participants Account, and related earnings, shall be distributed to the Tier I Participant in April of each of the three Plan Years following the Plan Year in which the Mandatory Bonus Deferral was credited to the Tier I Participants Account. If the Tier I Participant terminates employment on or after attaining Normal Retirement Age, dies or becomes Disabled prior to the end of this three year period, the entire balance shall be distributed to the Tier I Participant or his Beneficiary in a lump sum payment as soon as administratively possible following the Termination Date.
7.3 Distribution of Benefits Upon a Change of Control. In the event of a Change of Control, within 30 days thereafter, a Participant may elect to receive the vested portion of the Participants Accounts. If a Participant elects to be paid a benefit under this Section 7.3, the lump sum payment due to the Participant (or Beneficiary, in the event of the Participants death) under this Section shall be made on the first day of the 13th month immediately following the end of the election period.
ARTICLE
8
SURVIVOR BENEFITS
8.1 Death of Participant Prior to the Commencement of Benefits. In the event of a Participants death prior to the commencement of benefits in accordance with Article 7, distribution of the Participants Accounts shall be made to the Participants Beneficiary in a lump sum as soon as practicable on the first day of the seventh month following the Participants death. The amount of any lump sum benefit payable in accordance with this Section shall equal the value of the Participants Accounts as of the last business day of the calendar month immediately preceding the date on which such benefit is paid. In lieu of the lump sum, a Beneficiary may elect, in the form and manner, and at the time specified by, the Plan Administrator, any form of payment allowed under Section 7.1 or 7.2, as applicable, that the Participant would have been able to elect had the Participant retired on the day before death.
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8.2 Death of Participant After Benefits Have Commenced. In the event a Participant dies after annual installment benefits payable under Section 7.1 or 7.2 have commenced, but before the entire balance of the applicable Distribution Account has been paid, any remaining installments shall continue to be paid to the Participants Beneficiary at such times and in such amounts as they would have been paid to the Participant had the Participant survived.
ARTICLE
9
EMERGENCY BENEFIT
In the event that the Plan Administrator, upon written request of a Participant, determines, in its sole discretion, that the Participant has suffered an unforeseeable financial emergency, the Employer shall pay to the Participant from the Participants Distribution Account(s), as soon as practicable following such determination, an amount necessary to meet the emergency, after deduction of any and all taxes as may be required pursuant to Section 11.9 (the Emergency Benefit). For purposes of this Plan, an unforeseeable financial emergency is an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence. Cash needs arising from foreseeable events such as the purchase of a house or education expenses for children shall not be considered to be the result of an unforeseeable financial emergency. Emergency Benefits shall be paid first from the Participants In-Service Distribution Accounts, if any, to the extent the balance of one or more of such In-Service Distribution Accounts is sufficient to meet the emergency, in the order in which such Accounts would otherwise be distributed to the Participant. If the distribution exhausts the In-Service Distribution Accounts, the Retirement Distribution Account may be accessed. With respect to that portion of any Distribution Option Account which is distributed to a Participant as an Emergency Benefit, in accordance with this Article, no further benefit shall be payable to the Participant under this Plan. Notwithstanding anything in this Plan to the contrary, a Participant who receives an Emergency Benefit in any Plan Year shall not be entitled to make any further deferrals for the remainder of such Plan Year. It is intended that the Plan Administrators determination as to whether a Participant has suffered an unforeseeable financial emergency shall be made consistent with the requirements under section 457(d) of the Code.
ARTICLE
10
ACCELERATED DISTRIBUTION
10.1 Availability of Withdrawal Prior to Retirement. Upon the Participants written election, the Participant may elect to withdraw all or a portion (minimum of 25%) of the Participants Distribution Account(s) at any time prior to the time such Distribution Account otherwise becomes payable under the Plan, provided the conditions specified in Section 10.3, Section 10.4, and Section 10.5 are satisfied.
10.2 Acceleration of Periodic Distributions. Upon the Participants written election, the Participant or Participants Beneficiary who is receiving installment payments under the Plan may elect to have all or a percentage of the remaining installments distributed in the form of an immediately payable lump sum, provided the condition specified in Section 10.3 is satisfied.
14
10.3 Forfeiture Penalty. In the event of a withdrawal pursuant to Section 10.1, or an accelerated distribution pursuant to Section 10.2, the Participant shall forfeit from his Distribution Account from which the withdrawal is made an amount equal to 10% of the amount of the withdrawal or accelerated distribution, as the case may be. The forfeited amount shall be deducted from the applicable Distribution Account prior to giving effect to the requested withdrawal or acceleration. The Participant and the Participants Beneficiary shall not have any right or claim to the forfeited amount, and the Employer shall have no obligation whatsoever to the Participant, the Participants Beneficiary or any other person with regard to the forfeited amount.
10.4 Minimum Withdrawal. In no event shall the amount withdrawn in accordance with Section 10.1 be less than 25% of the amount credited to the Participants Distribution Account immediately prior to the withdrawal.
10.5 Suspension from Deferrals. In the event of a withdrawal pursuant to Section 10.1, a Participant who is otherwise eligible to make deferrals under Article 4 shall be prohibited from making any deferrals with respect to the Plan Year immediately following the Plan Year during which the withdrawal was made, and any election previously made by the Participant with respect to deferrals for the Plan Year of the withdrawal shall be void and of no effect with respect to subsequent deferrals for such Plan Year.
ARTICLE
11
MISCELLANEOUS
11.1 Amendment and Termination. The Plan may be amended, suspended, discontinued or terminated at any time by the Plan Administrator, acting on behalf of the Company; provided, however, that no such amendment, suspension, discontinuance or termination shall reduce or in any manner adversely affect the rights of any Participant with respect to benefits that are payable or may become payable under the Plan based upon the balance of the Participants Accounts as of the effective date of such amendment, suspension, discontinuance or termination. Following a termination of the Plan, the Plan Administrator, acting on behalf of the Company, shall determine when amounts shall be distributed from each Participants Distribution Accounts notwithstanding any terms of the Plan to the contrary.
11.2 Claims Procedure.
a. Claim
A person who believes that he is being denied a benefit to which he is entitled under the Plan (hereinafter referred to as a Claimant) may file a written request for such benefit with the Plan Administrator, setting forth the claim.
b. Claim Decision
Upon receipt of a claim, the Plan Administrator shall advise the Claimant that a reply will be forthcoming within ninety (90) days and shall, in fact, deliver such reply within
15
such period. The Plan Administrator may, however, extend the reply period for an additional ninety (90) days for reasonable cause.
If the claim is denied in whole or in part, the Claimant shall be provided a written opinion, using language calculated to be understood by the Claimant, setting forth:
(a) The specific reason or reasons for such denial;
(b) The specific reference to relevant provisions of the Plan on which such denial is based;
(c) A description of any additional material or information necessary for the Claimant to perfect the claim and an explanation why such material or such information is necessary;
(d) Appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review;
(e) The time limits for requesting a review under subsection (c) and for review under subsection (d) hereof; and
(f) The Participants right to bring an action for benefits under Section 502 of ERISA.
c. Request for Review
Within sixty (60) days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Plan Administrator review its determination. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comment in writing for consideration by the Plan Administrator. If the Claimant does not request a review of the initial determination within such sixty (60) day period, the Claimant shall be barred and estopped from challenging the determination.
d. Review of Decision
Within sixty (60) days after the Plan Administrators receipt of a request for review, it will review the initial determination. After considering all materials presented by the Claimant, the Plan Administrator will render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth the specific reasons for the decision and containing specific references to the relevant provisions of this Agreement on which the decision is based and the Participants right to bring an action for benefits under Section 502 of ERISA. If special circumstances require that the sixty (60) day time period be extended, the Plan Administrator will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty (120) days after receipt of the request for review.
11.3 Designation of Beneficiary. Each Participant may designate a Beneficiary or Beneficiaries (which Beneficiary may be an entity other than a natural person) to receive any
16
payments which may be made following the Participants death. Such designation may be changed or canceled at any time without the consent of any such Beneficiary. Any such designation, change or cancellation must be made in a form approved by the Plan Administrator and shall not be effective until received by the Plan Administrator, or its designee. If no Beneficiary has been named, or the designated Beneficiary or Beneficiaries shall have predeceased the Participant, the Beneficiary shall be the Participants estate. If a Participant designates more than one Beneficiary, the interests of such Beneficiaries shall be paid in equal shares, unless the Participant has specifically designated otherwise.
11.4 Limitation of Participants Right. Nothing in this Plan shall be construed as conferring upon any Participant any right to continue in the employment of the Company, nor shall it interfere with the rights of the Company to terminate the employment of any Participant and/or to take any personnel action affecting any Participant without regard to the effect which such action may have upon such Participant as a recipient or prospective recipient of benefits under the Plan. Any amounts payable hereunder shall not be deemed salary or other compensation to a Participant for the purposes of computing benefits to which the Participant may be entitled under any other arrangement established by the Company for the benefit of its employees.
11.5 No Limitation on Company Actions. Nothing contained in the Plan shall be construed to prevent the Company from taking any action which is deemed by it to be appropriate or in its best interest. No Participant, Beneficiary, or other person shall have any claim against the Company as a result of such action.
11.6 Obligations to Company. If a Participant becomes entitled to a distribution of benefits under the Plan, and if at such time the Participant has outstanding any debt, obligation, or other liability representing an amount owing to the Company, then the Company may offset such amount owed to it against the amount of benefits otherwise distributable. Such determination shall be made by the Plan Administrator.
11.7 Nonalienation of Benefits. Except as expressly provided herein, no Participant or Beneficiary shall have the power or right to transfer (otherwise than by will or the laws of descent and distribution), alienate, or otherwise encumber the Participants interest under the Plan. The Companys obligations under this Plan are not assignable or transferable except to (a) any corporation or partnership which acquires all or substantially all of the Companys assets or (b) any corporation or partnership into which the Company may be merged or consolidated. The provisions of the Plan shall inure to the benefit of each Participant and the Participants Beneficiaries, heirs, executors, administrators or successors in interest.
11.8 Protective Provisions. Each Participant shall cooperate with the Company by furnishing any and all information requested by the Company in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Company may deem necessary and taking such other relevant action as may be requested by the Company. If a Participant refuses to cooperate, the Company shall have no further obligation to the Participant under the Plan, other than payment to such Participant of the then current balance of the Participants Distribution Option Accounts in accordance with his prior elections.
17
11.9 Withholding Taxes. The Company may make such provisions and take such action as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation of any governmental authority, whether Federal, state or local, to withhold in connection with any benefits under the Plan, including, but not limited to, the withholding of appropriate sums from any amount otherwise payable to the Participant (or his Beneficiary). Each Participant, however, shall be responsible for the payment of all individual tax liabilities relating to any such benefits.
11.10 Unfunded Status of Plan. The Plan is intended to constitute an unfunded plan of deferred compensation for Participants. Benefits payable hereunder shall be payable out of the general assets of the Company, and no segregation of any assets whatsoever for such benefits shall be made. Notwithstanding any segregation of assets or transfer to a grantor trust, with respect to any payments not yet made to a Participant, nothing contained herein shall give any such Participant any rights to assets that are greater than those of a general creditor of the Company.
11.11 Severability. If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.
11.12 Governing Law. The Plan shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania, without reference to the principles of conflict of laws.
11.13 Headings. Headings are inserted in this Plan for convenience of reference only and are to be ignored in the construction of the provisions of the Plan.
11.14 Gender, Singular and Plural. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may read as the plural and the plural as the singular.
11.15 Notice. Any notice or filing required or permitted to be given to the Plan Administrator or the Plan Administrator under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the Human Resources Department, or to such other entity as the Plan Administrator or the Plan Administrator may designate from time to time. Such notice shall be deemed given as to the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
18
EXHIBIT 10.27 - THE PEP BOYS ANNUAL INCENTIVE BONUS PLAN (AMENDED AND RESTATED AS OF DECEMBER 9, 2003)
THE
PEP BOYS - MANNY, MOE & JACK
ANNUAL INCENTIVE BONUS PLAN
(as amended and restated as of December 9, 2003)
The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (the Company), established, effective January 29, 1989, an Annual Incentive Bonus Plan for the benefit of officers of the Company who were eligible to participate as provided therein. On March 31, 1992, March 30, 1994, March 31, 1995 and March 31, 1998, the Board of Directors of the Company (the Board) amended the plan in numerous respects. By action of the Board on December 9, 2003, the plan was further amended to read in its entirety as hereinafter set forth (the Plan).
1. Purpose. The Plan is intended to increase the profitability of the Company by giving employees of the Company holding positions at the levels of officer or director (such employees being hereinafter collectively referred to as the Eligible Employees) a financial stake in the growth and profitability of the Company. The Plan has the further objective of enhancing the Companys compensation packages for Eligible Employees, thus enabling the Company to attract and retain officers and other key employees of the highest ability. The Plan is intended to provide Eligible Employees with incentive opportunities that: (a) provide compensation opportunities which are competitive with other companies of similar size and industry focus; (b) focus Eligible Employees attention on the accomplishment of specific Company goals; and (c) recognize different levels and types of individual contributions by providing a portion of the incentive payout for the achievement of individual objectives. The Plan is intended to supplement, not replace, any other bonus paid by the Company to any of its Eligible Employees and is not intended to preclude the continuation of such arrangements or the adoption of additional bonus or incentive plans, programs or contracts.
2. Definitions.
(a) Applicable Performance Measures shall mean the Company Performance Measures and/or the Individual Performance Measures upon which a Participants right to receive a Bonus is based.
(b) Award Period shall mean a measuring period of one Fiscal Year.
(c) Bonus shall mean a cash payment made by the Company to a Participant after an Award Period, based on performance against specific predetermined performance objectives for both the Company and the Participant, as calculated in accordance with the provisions of this Plan document.
(d) Bonus Level shall mean the level at which a Participant shall participate in the Plan as set forth in Paragraph 4(b) hereof.
(e) CEO shall mean the person elected to the office of Chief Executive Officer of the Company by the Board of Directors.
(f) Code shall mean the Internal Revenue Code of 1986, as amended.
(g) Compensation Committee shall mean the Compensation Committee of the Board. The Compensation Committee shall consist of two or more persons appointed by the Board, each of whom shall be an outside director as defined under Code section 162(m) and related Treasury regulations.
(h) Executive Officer shall mean an executive officer (within the meaning of the Securities Exchange Act of 1934, as amended) who is among the top five most highly compensated employees of the Company at the beginning of any Award Period.
(i) Fiscal Year shall mean the Fiscal Year of the Company which ends on the Saturday nearest January 31 in each year.
(j) Participant shall have the meaning set forth in Paragraph 4 hereof.
(k) President shall mean the person elected to the office of President, Chief Operating Officer or equivalent of the Company by the Board of Directors.
(l) Salary shall mean the base salary of a Participant for a Fiscal Year. For purposes of the foregoing, base salary shall include (i) amounts which the Participant elects to forego to provide benefits under a plan which satisfies the provisions of Section 401(k) or Section 125 of the Internal Revenue Code and (ii) amounts which the Participant elects to defer under a deferred compensation plan or program, other than an equity-based deferred compensation plan, adopted by the Company. Base salary shall not include any amount attributable to any
bonus paid or accrued (including any bonus deferred under a deferred compensation plan or program adopted by the Company), whether or not pursuant to a plan or program.
3. Administration, Amendment and Termination.
(a) The Plan shall be administered by the Compensation Committee acting by a majority vote of its members. The Compensation Committee shall have the power and authority to take all actions and make all determinations which it deems necessary or desirable to effectuate, administer or interpret the Plan. The Companys adoption and continuation of the Plan is voluntary. The Compensation Committee shall have the power and authority to extend, amend, modify or terminate the Plan at any time; provided, however, that the Compensation Committee shall not have the power to amend or modify any provision of the Plan without stockholder approval in a manner that would affect the terms of the Plan applicable to Executive Officers, if stockholder approval would be required under Code section 162(m). The Compensation Committees authority to extend, amend or modify the Plan shall include, without limitation, the right to change Award Periods, to determine the time or times of paying Bonuses, to establish and approve Company and individual performance goals and the relative weightings of the goals, and to establish such other measures as may be necessary to meet the objectives of the Plan. In particular, but without limitation of the foregoing, the Compensation Committee shall have the power and authority to make any amendments or modifications to the Plan which may be necessary for the Plan to maintain compliance with Section 162(m) of the Internal Revenue Code of 1986, as amended. An action to terminate or to substantively amend or modify the Plan shall become effective immediately upon its adoption or on such date as specified by the Compensation Committee, but not with respect to any Fiscal Year prior to the Fiscal Year in which the Compensation Committee so acts.
(b) All actions taken and all determinations made by the Compensation Committee in accordance with the power and authority conferred upon the Compensation Committee under Paragraph 3(a) above shall be final, binding and conclusive on all parties, including the Company and all Participants.
4. Participants.
(a) Each Eligible Employee shall be entitled to participate in the Plan for each Fiscal Year or portion thereof in which such employee holds a position at the level of officer or director of the Company (the Participants, or individually, Participant), unless excluded from participation by the Compensation Committee or as provided by Paragraph 11 hereof. With respect to an individual who becomes an Eligible Employee during an Award Period, such individual shall become a Participant, unless excluded from participation by the Compensation Committee or as provided in Paragraph 11 hereof, and shall be eligible to receive an amount equal to the amount which would have been paid if the Participant had been an Eligible Employee for the entire Award Period, multiplied by a fraction, the numerator of which is the number of days during the Award Period that the Participant was an Eligible Employee of the Company and the denominator of which is the number of days in the Award Period.
(b) Each Participant shall participate in the Plan and earn Bonuses at one of five Bonus Levels, as set forth below:
|
Bonus Level |
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Participant Group |
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Tier I |
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CEO |
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Tier II |
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President |
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Tier III |
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Executive Vice Presidents |
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Tier IV |
|
Senior Vice Presidents |
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Tier V |
|
Vice Presidents |
With respect to any Participant who was employed at more than one of the Bonus Levels during an Award Period, the total Bonus amount for such Award Period for which such Participant shall be eligible shall be the sum of prorated Bonus payments corresponding to the applicable Bonus Levels. Each such prorated Bonus payment shall equal the amount which would have been paid if the Participant had been an Eligible Employee at the applicable Bonus Level for the entire Award Period, multiplied by a fraction, the numerator of which is the number of days
during the Award Period that the Participant was employed at such Bonus Level and the denominator of which is the number of days in the Award Period.
5. Company Performance Measures.
(a) Under the Plan, for each Award Period the Compensation Committee will establish minimum, target and maximum performance goals for the Company using one or more of the following business criteria (the Company Performance Measures): (1) return on total stockholder equity; (2) earnings per share of Common Stock; (3) net income (before or after taxes); (4) earnings before interest, taxes, depreciation and amortization; (5) sales or revenue targets; (6) return on assets, capital or investment; (7) cash flow: (8) market share; (9) cost reduction goals; (10) budget comparisons; (11) implementation or completion of projects or processes strategic or critical to the Corporations business operations; (12) measures of customer satisfaction; and (13) any combination of, or a specified increase in, any of the foregoing. Such performance goals may be based upon the attainment of specified levels of the Corporations performance under one or more of the measures described above relative to the performance of other entities and may also be based on the performance of any of the Corporations business units or divisions or any parent or subsidiary. In addition, the Compensation Committee will establish relative weightings for the respective Company Performance Measures being used.
(b) To the extent applicable, the Compensation Committee, in determining whether and to what extent a Company Performance Measure has been achieved, shall use the information set forth in the Companys audited financial statements.
6. Individual Performance Measures. Under the Plan, for each Award Period the Company will establish individual or small team performance goals for each Participant (the Individual Performance Measures); provided, however, that Individual Performance Measures shall not apply to a Bonus designated as qualified performance-based compensation under Code section 162(m).
7. Establishment of Plan Components.
(a) During the first ninety (90) days of each Award Period, the Compensation Committee, after consultation with the CEO, will establish and approve the following components of the Plan for the Award Period: (i) the Participants; (ii) the minimum, target and maximum Company performance levels for each Company Performance Measure being used; (iii) the relative weightings of the respective Company Performance Measures being used; (iv) the target, minimum and maximum Bonus amounts (each expressed as a percentage of salary) at each Bonus Level; and (v) the percentages of the Bonus amounts at each of the Bonus Levels which are attributable to the Companys performance and the individual Participants performance, respectively, during the Award Period. The Compensation Committee shall set forth the decisions reached on each of the items in this Paragraph 7(a) in its minutes.
(b) During the first ninety (90) days of each Award Period, the Company will prepare, and the Compensation Committee will review, approve and set forth in its minutes, the following information for the Award Period, as determined by the Compensation Committee: (i) the Bonus Levels; (ii) the Participants in each Bonus Level (classified by title of position held); (iii) the target Bonus amount for each Bonus Level (expressed as a percentage of salary); (iv) the percentages of the Bonus amounts at each of the Bonus Levels which are attributable to the Companys performance and the individual Participants performance, respectively, during the Award Period; (v) the Company Performance Measures for the current Award Period; (vi) the relative weightings of each such Company Performance Measure; and (vii) the minimum, target and maximum performance levels for each such Company Performance Measure.
8. Determination of Bonus. Within sixty (60) days after the end of the Award Period, actual performance will be compared to the predetermined performance levels for both Company Performance Measures and Individual Performance Measures, and the resulting actual Bonus amounts for Participants will be reviewed by the CEO and submitted to the Compensation Committee for final approval. Nothing in this Paragraph 8 shall be used to create any presumption that Bonuses under the Plan are the exclusive means of providing incentive compensation for Eligible Employees, it being expressly understood and agreed that the Compensation Committee has the authority to recommend to the Board of Directors payments to any of the Eligible Employees, in cash or otherwise, based on performance measures or otherwise, other than Bonuses under this Plan to Participants.
9. Special Rules for Executive Officers
(a) The maximum Bonus payable to an Executive Officer for any Fiscal Year shall not exceed three million dollars ($3,000,000).
(b) Notwithstanding anything to the contrary set forth in this Plan, the Compensation Committee shall establish the Applicable Performance Measures for Executive Officers no later than the earliest to occur of (i) the ninetieth (90th) day following the beginning of the Award Period or (ii) the date on which 25% of the Award Period has been completed, or (iii) such other date as may be required under applicable regulations under Code section 162(m). Such Applicable Performance Measures shall be set forth in the minutes of the Compensation Committee.
(c) Unless the Compensation Committee determines otherwise, any Bonus payable to an Executive Officer shall be based on Applicable Performance Measures that satisfy the requirements for qualified performance-based compensation under Code section 162(m), including the requirement that the achievement of the Applicable Performance Measures be substantially uncertain at the time they are established and that the Applicable Performance Measures be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the Applicable Performance Measures have been met. To the extent that any Bonus is designated as qualified performance-based compensation under Code section 162(m), no such Bonus may be made as an alternative to any other award that is not designated as qualified performance based compensation but instead must be separate and apart from all other awards made. To the extent a Bonus is designated as qualified performance-based compensation, the Compensation Committee is authorized to reduce such Bonus for any Award Period based upon its assessment of personal performance or other factors, but may not increase the Bonus that would otherwise be payable to the Participant. In no event shall a reduction to one Participants Bonus result in an increase to a Bonus designated as qualified performance based compensation under Code section 162(m).
(d) If a Bonus to which an Executive Officer may become entitled is designated as qualified performance-based compensation under Code section 162(m), the Compensation Committee shall certify in writing prior to payment of such Bonus that the Applicable Performance Measures were in fact achieved. Any such certification by the Compensation Committee shall be set forth in its minutes.
10. Payment of Bonuses. Bonuses shall be paid in cash or otherwise deferred by the Participant (as permitted by the Company) within ninety (90) days after the end of the Award Period to which such Bonus relates.
10. Termination of Employment.
(a) If a Participants employment with the Company has terminated during an Award Period, for any reason whatsoever, with or without cause, then the Participant may not receive a Bonus for such Award Period, except as otherwise provided in Paragraph 11(b) below or in a separate written agreement between the Company and the Participant.
(b) If during an Award Period, a Participant dies; becomes disabled; or retires on or after his Early Retirement Date (as defined in the Companys defined benefit pension plan), such Participant (or the Participants designated beneficiary) shall be paid, within ninety (90) days after the end of the Award Period, an amount equal to the amount which would have been paid if the Participant had been employed by the Company throughout the entire Award Period, multiplied by a fraction, the numerator of which is the number of days during the Award Period that the Participant was employed by the Company and the denominator of which is the number of days in the Award Period.
11. Assignment and Alienation of Benefits.
(a) To the maximum extent permitted by law, a Participants right or benefits under this Plan shall not be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefit.
(b) If any Participant becomes bankrupt or attempts to anticipate, alienate, sell, assign, pledge, encumber, or charge any rights to a benefit hereunder, then such right or benefit, in the discretion of the Compensation Committee, may be terminated. In such event, the Company may hold or apply the same or any part thereof for the benefit of the Participant, his or her spouse, children or dependents, or any of them, in such manner and portion as the Compensation Committee may deem proper.
12. Miscellaneous.
(a) The establishment of this Plan shall not be construed as granting any Participant the right to remain in the employ of the Company, nor shall this Plan be construed as limiting the right of the Company to discharge a Participant from employment at any time for any reason whatsoever, with or without cause.
(b) The Company may withhold from any amounts payable under the Plan such Federal, state or local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(c) Notwithstanding any provision of the Plan to the contrary, Bonuses to Executive Officers, if made, will be made contingent upon, and subject to, stockholder approval of the Plan at the 2004 Annual Stockholders Meeting.
(d) It is the intent of the Company that the Plan and any Bonuses made under the Plan to Executive Officers comply with the applicable provisions of Code section 162(m). To the extent that any legal requirement of Code section 162(m) as set forth in the Plan ceases to be required under Code section 162(m), that Plan provision shall cease to apply.
(e) The paragraph headings in this Plan are for convenience only; they form no part of the Plan and shall not affect its interpretation.
(f) This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.
As adopted by the Board on |
THE PEP BOYS - MANNY, MOE & JACK |
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December 9, 2003. |
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By: |
/s/ Lawrence N. Stevenson |
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Chief Executive Officer |
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES |
Exhibit 12 - Statement
Regarding Computation |
(in thousands, except ratios) |
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Fiscal year |
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January 31, |
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February 1, |
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February 2, |
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February 3, |
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January 29, |
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Interest |
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$ |
38,255 |
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$ |
47,237 |
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$ |
53,709 |
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$ |
59,718 |
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$ |
51,557 |
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Interest factor in rental expense |
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21,019 |
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20,505 |
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20,620 |
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20,995 |
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19,635 |
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Capitalized interest |
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- |
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44 |
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1 |
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489 |
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1,098 |
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(a) Fixed charges, as defined |
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$ |
59,274 |
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$ |
67,786 |
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$ |
74,330 |
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$ |
81,202 |
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$ |
72,290 |
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(Loss) Earnings from
continuing operations |
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$ |
(18,007 |
) |
$ |
68,243 |
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$ |
54,206 |
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$ |
(80,176 |
) |
$ |
40,859 |
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Fixed charges |
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59,274 |
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67,786 |
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74,330 |
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81,202 |
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72,290 |
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Capitalized interest |
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- |
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(44 |
) |
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(1 |
) |
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(489 |
) |
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(1,098 |
) |
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(b) Earnings, as defined |
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$ |
41,267 |
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$ |
135,985 |
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$ |
128,535 |
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$ |
537 |
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$ |
112,051 |
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(c) Ratio of earnings to fixed charges (b÷a) |
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- |
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2.0x |
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1.7x |
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- |
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1.6x |
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The ratio of earnings to fixed charges is completed by dividing earnings by fixed charges. Earnings consist of earnings before income taxes plus fixed charges (exclusive of capitalized interest costs) plus one-third of rental expense (which amount is considered representative of the interest factor in rental expense). Earnings, as defined, were not sufficient to cover fixed charges by approximately $18.0 and $80.7 million for fiscal years ended January 31, 2004 and February 3, 2001, respectively.
Exhibit 21
SUBSIDIARIES OF THE COMPANY
NAME |
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WHERE |
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%
OF SHARES |
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The Pep Boys Manny Moe & Jack |
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of California |
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3111 W. Allegheny Avenue |
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Philadelphia, PA 19132 |
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California |
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100% |
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Pep Boys - Manny, Moe & Jack |
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of Delaware, Inc. |
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3111 W. Allegheny Avenue |
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Philadelphia, PA 19132 |
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Delaware |
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100% |
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Pep Boys - Manny, Moe & Jack |
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of Puerto Rico, Inc. |
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3111 W. Allegheny Avenue |
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Philadelphia, PA 19132 |
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Delaware |
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100% |
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Colchester Insurance Company |
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7 Burlington Square |
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Burlington, VT 05401 |
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Vermont |
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100% |
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PBY Corporation |
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Suite 946 |
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1105 North Market Street |
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Wilmington, DE 19899 |
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Delaware |
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100% |
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Carrus Supply Corporation |
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1013 Centre Road |
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Wilmington, DE 19805 |
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Delaware |
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100% |
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Exhibit 23
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration Statement Numbers 33-31765, 33-64248, 33-35592, 33-61429, 33-32857, 333-40363, 333-51585, 333-81351, 333-89280, 333-100224 and 333-113723 of The Pep Boys - Manny, Moe & Jack and subsidiaries on Form S-8 and Post-Effective Amendment No. 2 to Registration Statement No. 333-98255 and Registration Statement Number 333-109625 of The Pep Boys - Manny, Moe & Jack and subsidiaries on Form S-3 of our report dated April 9, 2004, appearing in this Annual Report on Form 10-K of The Pep Boys - Manny, Moe & Jack and subsidiaries for the year ended January 31, 2004.
/s/ Deloitte & Touche
LLP
Philadelphia, Pennsylvania
April 9, 2004
Exhibit 31.1
CHIEF EXECUTIVE OFFICER
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Lawrence N. Stevenson, certify that: |
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1) |
I have reviewed this annual report on Form 10-K of The Pep Boys - Manny, Moe & Jack; |
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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; |
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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; |
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4) |
The registrants other certifying officers 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)) for the registrant and we have: |
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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; |
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b) |
evaluated the effectiveness of the registrants 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 period covered by this report; and |
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c) |
disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
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5) |
The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
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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 registrants ability to record, process, summarize and report financial information; and |
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b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 12, 2004 |
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/s/ Lawrence N. Stevenson |
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Lawrence N. Stevenson |
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Chief Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, George Babich, Jr., certify that: |
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1) I have reviewed this annual report on Form 10-K of The Pep Boys - Manny, Moe & Jack; |
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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; |
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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; |
||
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4) The registrants other certifying officers 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)) for the registrant and we have: |
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|
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; |
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b) evaluated the effectiveness of the registrants 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 period covered by this report; and |
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c) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
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5) The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
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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 registrants ability to record, process, summarize and report financial information; and |
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b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 12, 2004 |
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/s/ George Babich, Jr. |
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George Babich, Jr. |
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President & |
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Chief Financial Officer |
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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 the Annual Report of The Pep Boys - Manny, Moe & Jack (the Company) on Form 10-K for the year ended January 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the Report),
I, Lawrence N. Stevenson, 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:
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(i) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(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: April 12, 2004 |
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/s/ Lawrence N. Stevenson |
||
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Lawrence N. Stevenson |
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Chief Executive Officer |
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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 the Annual Report of The Pep Boys - Manny, Moe & Jack (the Company) on Form 10-K for the year ended January 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the Report),
I, George Babich, Jr., President and Chief Financial 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 |
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(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: April 12, 2004 |
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/s/ George Babich, Jr. |
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George Babich, Jr. |
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President and |
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Chief Financial Officer |
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