EX-99.2 3 a08-29966_1ex99d2.htm EX-99.2

Exhibit 99.2

 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

 

(UNAUDITED)

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(dollar amounts in thousands, except per share amounts)

 

 

 

Thirteen weeks ended

 

Thirty-nine weeks ended

 

 

 

November 1, 2008

 

November 3, 2007

 

November 1, 2008

 

November 3, 2007

 

 

 

Amount

 

%
Sales

 

Amount

 

%
Sales

 

Amount

 

%
Sales

 

Amount

 

%
Sales

 

Merchandise Sales

 

$

378,461

 

81.5

 

$

430,368

 

81.4

 

$

1,189,872

 

81.4

 

1,323,161

 

81.7

 

Service Revenue

 

85,705

 

18.5

 

98,393

 

18.6

 

272,380

 

18.6

 

297,275

 

18.3

 

Total Revenues

 

464,166

 

100.0

 

528,761

 

100.0

 

1,462,252

 

100.0

 

1,620,436

 

100.0

 

Costs of Merchandise Sales

 

268,235

 

70.9

 

343,933

 

79.9

 

838,574

 

70.5

 

971,358

 

73.4

 

Costs of Service Revenue

 

81,087

 

94.6

 

86,902

 

88.3

 

250,434

 

91.9

 

261,847

 

88.1

 

Total Costs of Revenues

 

349,322

 

75.3

 

430,835

 

81.5

 

1,089,008

 

74.5

 

1,233,205

 

76.1

 

Gross Profit from Merchandise Sales

 

110,226

 

29.1

 

86,435

 

20.1

 

351,298

 

29.5

 

351,803

 

26.6

 

Gross Profit from Service Revenue

 

4,618

 

5.4

 

11,491

 

11.7

 

21,946

 

8.1

 

35,428

 

11.9

 

Total Gross Profit

 

114,844

 

24.7

 

97,926

 

18.5

 

373,244

 

25.5

 

387,231

 

23.9

 

Selling, General and Administrative Expenses

 

119,827

 

25.8

 

133,550

 

25.3

 

361,445

 

24.7

 

392,501

 

24.2

 

Net (Loss) Gain from Dispositions of Assets

 

(53

)

—

 

(515

)

(0.1

)

9,555

 

0.7

 

1,829

 

0.1

 

Operating (Loss) Profit

 

(5,036

)

(1.1

)

(36,139

)

(6.8

)

21,354

 

1.5

 

(3,441

)

(0.2

)

Non-operating Income

 

305

 

0.1

 

1,032

 

0.2

 

1,797

 

0.1

 

4,703

 

0.3

 

Interest Expense

 

7,098

 

1.5

 

11,501

 

2.2

 

18,977

 

1.3

 

36,488

 

2.3

 

(Loss) Earnings From Continuing Operations Before Income Taxes

 

(11,829

)

(2.5

)

(46,608

)

(8.8

)

4,174

 

0.3

 

(35,226

)

(2.2

)

Income Tax (Benefit) Expense

 

(4,775

)

40.4

(1)

(20,677

)

44.4

(1)

185

 

4.4

(1)

(16,293

)

46.3

(1)

Net (Loss) Earnings From Continuing Operations

 

(7,054

)

(1.5

)

(25,931

)

(4.9

)

3,989

 

0.3

 

(18,933

)

(1.2

)

Discontinued Operations, Net of Tax

 

(228

)

—

 

(2,059

)

(0.4

)

(1,151

)

(0.1

)

(1,703

)

(0.1

)

Net (Loss) Earnings

 

(7,282

)

(1.6

)

(27,990

)

(5.3

)

2,838

 

0.2

 

(20,636

)

(1.3

)

Retained Earnings, beginning of period

 

408,351

 

 

 

462,615

 

 

 

406,819

 

 

 

463,797

 

 

 

Cumulative effect adjustment for adoption of EITF 06-10, net of tax

 

—

 

 

 

—

 

 

 

(1,165

)

 

 

—

 

 

 

Cumulative effect adjustment for adoption of FIN 48

 

—

 

 

 

—

 

 

 

—

 

 

 

(155

)

 

 

Cash Dividends

 

(3,523

)

 

 

(3,510

)

 

 

(10,551

)

 

 

(10,630

)

 

 

Effect of Stock Options

 

—

 

 

 

—

 

 

 

(37

)

 

 

(1,261

)

 

 

Dividend Reinvestment Plan

 

(849

)

 

 

(27

)

 

 

(1,207

)

 

 

(27

)

 

 

Retained Earnings, end of period

 

$

396,697

 

 

 

$

431,088

 

 

 

$

 396,697

 

 

 

$

 431,088

 

 

 

Basic and Diluted (Loss) Earnings per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (Loss) Earnings From Continuing Operations

 

$

(0.13

)

 

 

$

(0.49

)

 

 

$

0.08

 

 

 

$

(0.36

)

 

 

Discontinued Operations, Net of Tax

 

(0.01

)

 

 

(0.05

)

 

 

(0.03

)

 

 

(0.04

)

 

 

(Loss) Earnings per Share

 

$

(0.14

)

 

 

$

(0.54

)

 

 

$

0.05

 

 

 

$

(0.40

)

 

 

Cash Dividends per Share

 

$

0.0675

 

 

 

$

0.0675

 

 

 

$

0.2025

 

 

 

$

0.2025

 

 

 

 

(1) As a percentage of earnings from continuing operations before income taxes

 


 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

 

(UNAUDITED)

 

CONSOLIDATED BALANCE SHEETS

 

(dollar amounts in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

November 1, 2008

 

February 2, 2008

 

November 3, 2007

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,371

 

$

20,926

 

$

26,200

 

Accounts receivable, less allowance for uncollectible accounts of $2,109; $1,937; and $1,562

 

25,838

 

29,450

 

28,325

 

Merchandise inventories

 

584,700

 

561,152

 

589,916

 

Prepaid expenses

 

30,133

 

43,842

 

27,894

 

Other

 

43,774

 

77,469

 

65,751

 

Assets held for disposal

 

18,222

 

16,918

 

—

 

Total Current Assets

 

741,038

 

749,757

 

738,086

 

Property and Equipment - net

 

747,921

 

780,779

 

862,760

 

Deferred income taxes

 

50,315

 

20,775

 

28,669

 

Other

 

28,669

 

32,609

 

23,472

 

Total Assets

 

$

1,567,943

 

$

1,583,920

 

$

1,652,987

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

221,863

 

$

245,423

 

$

226,535

 

Trade payable program liability

 

38,316

 

14,254

 

21,596

 

Accrued expenses

 

256,620

 

292,623

 

276,429

 

Deferred income taxes

 

15,013

 

—

 

—

 

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

 

2,060

 

2,114

 

3,445

 

Total Current Liabilities

 

533,872

 

554,414

 

528,005

 

 

 

 

 

 

 

 

 

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

 

330,535

 

400,016

 

549,751

 

Other long-term liabilities

 

64,487

 

72,183

 

78,930

 

Deferred gain from asset sales

 

173,184

 

86,595

 

—

 

Commitments and Contingencies

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

Common Stock, par value $1 per share:

 

 

 

 

 

 

 

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

 

68,557

 

68,557

 

68,557

 

Additional paid-in capital

 

292,585

 

296,074

 

294,911

 

Retained earnings

 

396,697

 

406,819

 

431,088

 

Accumulated other comprehensive loss

 

(11,470

)

(14,183

)

(11,299

)

Less cost of shares in treasury - 14,234,313 shares, 14,609,094 shares and 14,633,938 shares

 

221,240

 

227,291

 

227,692

 

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

 

59,264

 

59,264

 

59,264

 

Total Stockholders’ Equity

 

465,865

 

470,712

 

496,301

 

Total Liabilities and Stockholders’ Equity

 

$

1,567,943

 

$

1,583,920

 

$

1,652,987

 

 

 

 

 

 

 

 

 

Working Capital

 

207,166

 

195,343

 

210,081

 

 

 

 

 

 

 

 

 

Long-term debt and obligations under capital leases,

 

330,535

 

400,016

 

549,751

 

Total Stockholders’ Equity

 

465,865

 

470,712

 

496,301

 

Total Capitalization

 

796,400

 

870,728

 

1,046,052

 

LTD as percent of total capitalization

 

41.50

%

45.94

%

52.55

%

 


 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

 

(UNAUDITED)

 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(dollar amounts in thousands)

 

Thirty-nine weeks ended

 

November 1, 2008

 

November 3, 2007

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net Earnings (Loss)

 

$

2,838

 

$

(20,636

)

Adjustments to reconcile net earnings (loss) to net cash (used in) provided by continuing operations:

 

 

 

 

 

Discontinued operations

 

1,151

 

1,703

 

Depreciation and amortization

 

55,109

 

61,724

 

Inventory impairment

 

 

 

32,803

 

Amortization of deferred gain from asset sales

 

(7,305

)

—

 

Accretion of asset retirement obligation

 

206

 

191

 

Stock compensation expense

 

2,314

 

8,529

 

Gain from debt retirement

 

(3,460

)

—

 

Deferred income taxes

 

(3,603

)

(11,812

)

Gain from dispositions of assets

 

(9,555

)

(1,829

)

Change in fair value of derivative

 

140

 

3,665

 

Loss from asset impairment

 

370

 

7,199

 

Excess tax benefits from stock based awards

 

(3

)

(687

)

Change in cash surrender value of life insurance policies

 

98

 

(5,423

)

Changes in Operating Assets and Liabilities:

 

 

 

 

 

Decrease in accounts receivable, prepaid expenses and other

 

39,759

 

32,004

 

Increase in merchandise inventories

 

(23,548

)

(15,677

)

Decrease in accounts payable

 

(23,560

)

(38,954

)

Decrease in accrued expenses

 

(37,077

)

(5,911

)

(Decrease) increase in other long-term liabilities

 

(3,818

)

682

 

Net cash (used in) provided by continuing operations

 

(9,944

)

47,571

 

Net cash (used in) provided by discontinued operations

 

(880

)

2,752

 

Net Cash (Used in) Provided by Operating Activities

 

(10,824

)

50,323

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Cash paid for master lease properties

 

(117,121

)

—

 

Cash paid for property and equipment

 

(22,653

)

(33,074

)

Proceeds from dispositions of assets

 

209,085

 

2,376

 

Proceeds from surrender of life insurance policies

 

—

 

26,714

 

Net cash provided by (used in) continuing operations

 

69,311

 

(3,984

)

Net cash provided by (used in) discontinued operations

 

2,558

 

(432

)

Net Cash Provided by (Used in) Investing Activities

 

71,869

 

(4,416

)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Borrowings under line of credit agreements

 

99,888

 

436,584

 

Payments under line of credit agreements

 

(141,413

)

(419,267

)

Excess tax benefits from stock based awards

 

3

 

687

 

Borrowings on trade payable program liability

 

154,886

 

87,578

 

Payments on trade payable program liability

 

(130,824

)

(79,972

)

Payment for finance issuance cost

 

(182

)

—

 

Proceeds from lease financing

 

8,661

 

—

 

Reduction of long-term debt

 

(24,550

)

(2,432

)

Payments on capital lease obligations

 

(146

)

(210

)

Dividends paid

 

(10,550

)

(10,630

)

Repurchase of common stock

 

—

 

(58,152

)

Proceeds from exercise of stock options

 

23

 

3,632

 

Proceeds from dividend reinvestment plan

 

604

 

591

 

Net Cash Used in Financing Activities

 

(43,600

)

(41,591

)

Net Increase in Cash and Cash Equivalents

 

17,445

 

4,316

 

Cash and Cash Equivalents at Beginning of Period

 

20,926

 

21,884

 

Cash and Cash Equivalents at End of Period

 

$

38,371

 

$

26,200

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

—

 

—

 

Cash paid for income taxes

 

$

1,070

 

$

214

 

Cash paid for interest

 

$

17,043

 

$

30,100

 

Accrued purchases of property and equipment

 

$

1,435

 

$

258

 

 


 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

 

(UNAUDITED)

 

 

 

COMPUTATION OF BASIC AND DILUTED (LOSS) EARNINGS PER SHARE

 

(in thousands, except per share amounts)

 

 

 

Thirteen weeks ended

 

Thirty-nine weeks ended

 

 

 

November 1,
2008

 

November 3,
2007

 

November 1,
2008

 

November 3,
2007

 

 

 

 

 

 

 

 

 

 

 

(a)   Net (Loss) Earnings From Continuing Operations

 

$

(7,054

)

$

(25,931

)

$

3,989

 

$

(18,933

)

 

 

 

 

 

 

 

 

 

 

Discontinued Operations, Net of Tax

 

(228

)

(2,059

)

(1,151

)

(1,703

)

 

 

 

 

 

 

 

 

 

 

Net (Loss) Earnings

 

$

(7,282

)

$

(27,990

)

$

2,838

 

$

(20,636

)

 

 

 

 

 

 

 

 

 

 

(b)   Basic average number of common shares outstanding during period

 

52,099

 

51,844

 

52,106

 

52,206

 

 

 

 

 

 

 

 

 

 

 

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

 

—

 

—

 

83

 

—

 

 

 

 

 

 

 

 

 

 

 

(c)   Diluted average number of common shares assumed outstanding during period

 

52,099

 

51,844

 

52,189

 

52,206

 

 

 

 

 

 

 

 

 

 

 

Basic (Loss) Earnings per Share:

 

 

 

 

 

 

 

 

 

Net (Loss) Earnings From Continuing Operations    (a/b)

 

$

(0.13

)

$

(0.49

)

$

0.08

 

$

(0.36

)

Discontinued Operations, Net of Tax

 

(0.01

)

(0.05

)

(0.03

)

(0.04

)

Basic (Loss) Earnings per Share

 

$

(0.14

)

$

(0.54

)

$

0.05

 

$

(0.40

)

Diluted (Loss) Earnings per Share:

 

 

 

 

 

 

 

 

 

Net (Loss) Earnings From Continuing Operations    (a/c)

 

$

(0.13

)

$

(0.49

)

$

0.08

 

$

(0.36

)

Discontinued Operations, Net of Tax

 

(0.01

)

(0.05

)

(0.03

)

$

(0.04

)

Diluted (Loss) Earnings per Share

 

$

(0.14

)

$

(0.54

)

$

0.05

 

$

(0.40

)

 


 

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

 

(UNAUDITED)

 

ADDITIONAL INFORMATION

 

(dollar amounts in thousands)

 

 

 

Thirteen weeks ended

 

Thirty-nine weeks ended

 

 

 

November 1, 2008

 

November 3, 2007

 

November 1, 2008

 

November 3, 2007

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures (A)

 

$

8,934

 

$

11,728

 

$

139,224

 

$

30,073

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

$

18,181

 

$

20,727

 

$

55,109

 

$

62,416

 

 

 

 

 

 

 

 

 

 

 

Non-operating income:

 

 

 

 

 

 

 

 

 

Net rental revenue

 

$

115

 

$

724

 

$

1,069

 

$

1,849

 

Investment income

 

178

 

322

 

745

 

2,899

 

Other (expense) income

 

12

 

(14

)

(17

)

(45

)

 

 

 

 

 

 

 

 

 

 

Total

 

$

305

 

$

1,032

 

$

1,797

 

$

4,703

 

 

 

 

 

 

 

 

 

 

 

Comparable sales percentages:

 

 

 

 

 

 

 

 

 

Merchandise

 

-10.3

%

-4.1

%

-8.1

%

-4.1

%

Service

 

-11.0

%

2.6

%

-6.3

%

2.6

%

Total

 

-10.4

%

-2.9

%

-7.8

%

-2.9

%

 

 

 

 

 

 

 

 

 

 

Total square feet of retail space (including service centers)

 

 

 

 

 

11,514,000

 

12,142,100

 

 

 

 

 

 

 

 

 

 

 

Total Store Count

 

 

 

 

 

562

 

592

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail Sales

 

$

253,492

 

$

294,232

 

$

802,707

 

$

924,043

 

Service Center Revenue

 

210,674

 

234,529

 

659,545

 

696,393

 

Total Revenues

 

$

464,166

 

$

528,761

 

$

1,462,252

 

$

1,620,436

 

 

 

 

 

 

 

 

 

 

 

Gross Profit from Retail Sales

 

$

68,360

 

$

43,867

 

$

220,139

 

$

224,396

 

Gross Profit from Service Center Revenue

 

46,484

 

54,059

 

153,105

 

162,835

 

Total Gross Profit

 

$

114,844

 

$

97,926

 

$

373,244

 

$

387,231

 

 

 

 

 

 

 

 

 

 

 

Comparable Sales Percentages (B):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail Sales

 

-12.1

%

-8.1

%

-11.3

%

-7.3

%

Service Center Revenue

 

-8.2

%

4.5

%

-3.2

%

3.4

%

Total Revenues

 

-10.4

%

-2.9

%

-7.8

%

-2.9

%

 

 

 

 

 

 

 

 

 

 

Gross Profit Percentage by Line of Business (A):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Percentage from Retail Sales

 

27.0

%

14.9

%

27.4

%

24.3

%

Gross Profit Percentage from Service Center Revenue

 

22.1

%

23.1

%

23.2

%

23.4

%

Total Gross Profit Percentage

 

24.7

%

18.5

%

25.5

%

23.9

%

 

(A) Capital expenditures includes $117.1 million for the purchase of master lease properties during the second quarter of fiscal 2008.

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