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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 30, 1994
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from to
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Commission File No. 1-3381
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The Pep Boys - Manny, Moe & Jack
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-0962915
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(State or other jurisdiction of (I.R.S. Employer ID number)
incorporation or organization)
3111 W. Allegheny Ave. Philadelphia, PA 19132
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(Address of principal executive offices) (Zip code)
215-229-9000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports); and (2) has been subject
to such filing requirements for the past 90 days. Yes ( x ) No ( )
As of April 30, 1994 there were 61,187,166 shares of the registrant's Common
Stock outstanding.
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Index Page
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PART I - FINANCIAL INFORMATION
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Item 1. Condensed Consolidated
Financial Statements (Unaudited)
Consolidated Balance Sheets -
April 30, 1994 and January 29, 1994 3
Consolidated Statements of Earnings -
Thirteen weeks ended April 30, 1994
and May 1, 1993 4
Condensed Consolidated Statements of
Cash Flows - Thirteen weeks ended
April 30, 1994 and May 1, 1993 5
Notes to Condensed Consolidated
Financial Statements 6
Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7-9
PART II - OTHER INFORMATION 10
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SIGNATURE 11
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<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except per share amounts)
<CAPTION>
Apr. 30, 1994 Jan. 29, 1994*
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash....................................................... $ 16,106 $ 12,050
Accounts receivable, net................................... 1,969 1,525
Merchandise inventories.................................... 362,969 305,872
Deferred income taxes...................................... 10,058 9,100
Other...................................................... 7,712 13,161
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Total Current Assets.................................... 398,814 341,708
Property and Equipment-at cost
Land....................................................... 193,292 183,601
Building and improvements.................................. 506,621 500,467
Furniture, fixtures and equipment.......................... 233,087 229,730
Construction in progress................................... 19,989 9,364
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952,989 923,162
Less accumulated depreciation and amortization............. 210,099 199,710
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Total Property and Equipment............................ 742,890 723,452
Other........................................................ 13,911 13,358
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Total Assets.................................................. $1,155,615 $1,078,518
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Checks outstanding......................................... $ 30,572 $ 22,193
Accounts payable........................................... 106,145 104,248
Accrued expenses........................................... 71,721 59,574
Short-term borrowings...................................... 94,600 54,500
Income taxes payable....................................... 10,991 1,278
Current maturities of long-term debt....................... 7,317 7,397
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Total Current Liabilities............................... 321,346 249,190
Long-Term Debt, less current maturities...................... 272,956 253,000
Deferred Income Taxes........................................ 28,569 28,569
Commitments
Stockholders' Equity:
Common Stock, par value $1 per share:
Authorized 500,000,000 shares - Issued and
outstanding 61,187,166 and 61,060,055..................... 61,187 61,060
Additional paid-in capital................................. 124,523 122,977
Retained earnings.......................................... 399,398 388,653
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585,108 572,690
Less:
Treasury Stock, 948,200 shares at cost................... - 24,931
Shares held in benefits trust, 1,965,200 shares at cost.. 52,364 -
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Total Stockholders' Equity.............................. 532,744 547,759
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Total Liabilities and Stockholders' Equity.................... $1,155,615 $1,078,518
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See notes to condensed consolidated financial statements.
*Taken from the audited financial statements at Jan. 29, 1994.
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<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollar amounts in thousands, except per share amounts)
UNAUDITED
<CAPTION>
Thirteen weeks ended
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Apr. 30, 1994 May 1, 1993
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<S> <C> <C>
Merchandise Sales.................................... $290,826 $260,452
Service Revenue...................................... 46,874 38,695
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Total Revenues....................................... 337,700 299,147
Costs of Merchandise Sales........................... 208,223 191,547
Costs of Service Revenue............................. 38,950 32,811
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Total Costs of Revenues.............................. 247,173 224,358
Gross Profit from Merchandise Sales.................. 82,603 68,905
Gross Profit from Service Revenue.................... 7,924 5,884
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Total Gross Profit................................... 90,527 74,789
Selling, General and Administrative Expenses......... 57,926 49,696
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Operating Profit..................................... 32,601 25,093
Nonoperating Income.................................. 1,099 1,088
Interest Expense..................................... 5,720 5,012
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Earnings Before Income Taxes and Cumulative
Effect of Change in Accounting Principle............ 27,980 21,169
Income Taxes......................................... 10,423 7,727
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Earnings Before Cumulative Effect of Change in
Accounting Principle................................ 17,557 13,442
Cumulative Effect of Change in Accounting Principle.. (4,300) -
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Net Earnings......................................... 13,257 13,442
Retained Earnings, beginning of year................. 388,653 332,261
Cash Dividends....................................... 2,512 2,277
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Retained Earnings, end of period..................... $399,398 $343,426
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Earnings per Share Before Cumulative Effect
of Change in Accounting Principle................... $ .29 $ .22
Cumulative Effect of Change in Accounting Principle.. (.07) -
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Net Earning per Share................................ $ .22 $ .22
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Cash Dividends per Share............................. $ .0425 $ .0375
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See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
UNAUDITED
<CAPTION>
Thirteen weeks ended
---------------------------------
Apr. 30, 1994 May 1, 1993
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<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities............. $ 3,150 $(17,357)
Cash Flows from Investing Activities:
Capital expenditures............................................ (30,032) (19,018)
Other, net...................................................... 25 66
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Net Cash Used in Investing Activities........................... (30,007) (18,952)
Cash Flows from Financing Activities:
Net borrowings under line of credit agreements.................. 60,100 44,000
Reduction of long-term debt..................................... (124) (4,059)
Dividends paid.................................................. (2,512) (2,277)
Acquisition of treasury stock................................... (28,339) -
Proceeds from exercise of stock options
and dividend reinvestment plan................................ 1,788 864
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Net Cash Provided by Financing Activities....................... 30,913 38,528
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Net Increase in Cash................................................. 4,056 2,219
Cash at Beginning of Year............................................ 12,050 11,644
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Cash at End of Period................................................ $ 16,106 $ 13,863
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See notes to condensed consolidated financial statements.
</TABLE>
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THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Condensed Consolidated Financial Statements
The consolidated balance sheet as of April 30, 1994, the consolidated
statements of earnings for the thirteen week periods ended April 30, 1994 and
May 1, 1993 and the condensed consolidated statements of cash flows for the
thirteen week periods ended April 30, 1994 and May 1, 1993 have been prepared
by the Company without audit. In the opinion of management, all adjustments
(which included only normal recurring adjustments as well as the accounting
change referred to in Note 3 below) necessary to present fairly the financial
position, results of operations and cash flows at April 30, 1994 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's January 29,
1994 annual report to shareholders. The results of operations for the
thirteen week period ended April 30, 1994 are not necessarily indicative of
the operating results for the full year.
NOTE 2. Merchandise Inventories
Merchandise inventories are valued at the lower of cost (last-in, first-out)
or market. If the first-in, first-out method of valuing inventories had been
used by the Company, inventories would have been approximately $15,852,000
and $15,452,000 higher at April 30, 1994 and January 29, 1994, respectively.
NOTE 3. Postemployment Benefits
On January 30, 1994, the Company adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits." This statement establishes accrual accounting
standards for employer-provided benefits which cover former or inactive
employees after employment, but before retirement. Adoption of this
accounting standard on January 30, 1994 resulted in a one-time charge to
earnings of $4,300,000 (net of income tax benefit of $2,552,000) or $.07 per
share recognized as a cumulative effect of a change in accounting principle.
NOTE 4. Employee Benefits Trust
On April 29, 1994, the Company established a flexible employee benefits trust
to fund a portion of its obligations arising from various employee
compensation and benefit plans. The Company has authorization to purchase
Common Stock having a value of up to $75,000,000 for sale to the trust. As
of April 30, 1994, the Company sold 1,965,200 shares of Common Stock, having
a value of $52,364,000, which it had repurchased in the open market, to the
trust in exchange for a promissory note payable to the Company.
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<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED APRIL 30, 1994
Results of Operation -
The following table presents for the periods indicated certain items in the consolidated statements of earnings as a
percentage of total revenues (except as otherwise provided) and the percentage change in dollar amounts of such items
compared to the indicated prior period.
<CAPTION>
Percentage of Total Revenues Percentage Change
- - ------------------------------------------------------ ---------------------------------- -----------------
Thirteen weeks ended April 30, 1994 May 1, 1993 Fiscal 1994 vs.
(Fiscal 1994) (Fiscal 1993) Fiscal 1993
- - ------------------------------------------------------ -------------- ------------- -----------------
<S> <C> <C> <C>
Merchandise Sales..................................... 86.1% 87.1% 11.7%
Service Revenue (1)................................... 13.9 12.9 21.1
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Total Revenues........................................ 100.0 100.0 12.9
Costs of Merchandise Sales (2)........................ 71.6 (3) 73.5 (3) 8.7
Costs of Service Revenue (2).......................... 83.1 (3) 84.8 (3) 18.7
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Total Costs of Revenues............................... 73.2 75.0 10.2
Gross Profit from Merchandise Sales................... 28.4 (3) 26.5 (3) 19.9
Gross Profit from Service Revenue..................... 16.9 (3) 15.2 (3) 34.7
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Total Gross Profit.................................... 26.8 25.0 21.0
Selling, General and Administrative Expenses.......... 17.1 16.6 16.6
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Operating Profit...................................... 9.7 8.4 29.9
Nonoperating Income................................... .3 .4 1.0
Interest Expense...................................... 1.7 1.7 14.1
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Earnings Before Income Taxes and Cumulative Effect
of Change in Accounting Principle.................... 8.3 7.1 32.2
Income Taxes.......................................... 37.3 (4) 36.5 (4) 34.9
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Earnings Before Cumulative Effect
of Change in Accounting Principle.................... 5.2 4.5 30.6
Cumulative Effect of Change in Accounting Principle... (1.3) - -
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Net Earnings.......................................... 3.9 4.5 (1.4)
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<FN>
(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 earnings before income taxes.
</TABLE>
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Thirteen Weeks Ended April 30, 1994 vs. Thirteen Weeks Ended May 1, 1993
- - ------------------------------------------------------------------------
Total revenues for the first quarter increased 13% due to a higher store
count (387 at April 30, 1994 compared with 359 at May 1, 1993) coupled with
a 6% increase in comparable store revenues (revenues generated by stores in
operation during the same months of each period). Comparable store
merchandise sales increased 5% while comparable service revenue increased
11%.
Gross profit from merchandise sales increased, as a percentage of merchandise
sales, due primarily to higher merchandise margins offset, in part, by an
increase in store occupancy costs.
Gross profit from service revenue increased, as a percentage of service
revenue, due primarily to a decrease in service center occupancy costs.
Selling, general and administrative expenses increased, as a percentage of
total revenues, due primarily to higher media costs and a slight increase in
store expenses.
<TABLE>
Nonoperating income consisted of the following:
(in thousands)
<CAPTION>
1994 1993
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<S> <C> <C>
Rental revenue $ 328 $ 241
Investment income 474 22
Other income 297 448
Net gain on disposal of assets - 377
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Total $1,099 $1,088
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</TABLE>
The increase in income taxes, as a percentage of earnings before income
taxes, was due primarily to a 1% increase in the federal statutory tax rate
from 34% to 35%.
The 31% increase in earnings before the cumulative effect of a change in
accounting principle in 1994 as compared with 1993, was due primarily to an
increase in gross profit from merchandise sales, as a percentage of
merchandise sales, offset, in part, by an increase in selling, general and
administrative expenses, as a percentage of total revenues.
On January 30, 1994, the Company adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits." This statement establishes accrual accounting
standards for employer-provided benefits which cover former or inactive
employees after employment, but before retirement. Adoption of this
accounting standard on January 30, 1994 resulted in a one-time charge to
earnings of $4,300,000 (net of income tax benefit of $2,552,000) or $.07 per
share recognized as a cumulative effect of a change in accounting principle.
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LIQUIDITY AND CAPITAL RESOURCES - April 30, 1994
- - ----------------------------------------------
The Company's cash requirements arise principally from the need to finance
the acquisition, construction and equipping of new stores and the purchase of
inventory. During the first quarter of 1994, the Company invested
$30,032,000 in property and equipment while inventory increased $57,097,000.
Working capital decreased from $92,518,000 at January 29, 1994 to $77,468,000
at April 30, 1994. At April 30, 1994 the Company had stockholders' equity of
$532,744,000 and long-term debt of $272,956,000. The Company's long-term
debt was 34% of its total capitalization at April 30, 1994.
The Company plans to open approximately 48 new stores during the balance of
the current fiscal year. Management estimates that the cost of this
expansion, coupled with expenditures in existing stores, warehouses and
offices will be approximately $125,000,000. In addition to the funds
required to finance the Company's store expansion, the Company has
authorization to purchase up to $75,000,000 of Common Stock for sale to an
employee benefits trust, of which Common Stock having a value of $52,364,000
had been repurchased as of April 30, 1994. Funds required to finance the
store expansion including related inventory requirements and stock repurchase
are expected to come primarily from operating activities with the remainder
provided by unused lines of credit which totalled $104,400,000 at April 30,
1994, or from accessing traditional lending sources such as the public
capital markets.
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement Re: Computation of Earnings Per
Share
(b) On May 6, 1994, the Company filed a Form 8-K, dated April 29,
1994, reporting, under Item 5 thereof, the establishment of a
flexible trust for the benefit of various existing employee
compensation and benefit plans of the Company.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE PEP BOYS - MANNY, MOE & JACK
--------------------------------
(Registrant)
Date: June 14, 1994 By: \s\ Michael J. Holden
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Michael J. Holden
Senior Vice President &
Chief Financial Officer and Treasurer
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INDEX TO EXHIBITS
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(11) Computations of Earnings Per Share
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THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<CAPTION>
Thirteen weeks ended
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April 30, 1994 May 1, 1993
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<S> <C> <C>
(a) Earnings Before Cumulative Effect
of Change in Accounting Principle.............. $17,557 $13,442
(b) Cumulative Effect of Change in
Accounting Principle........................... (4,300) -
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(c) Net Earnings..................................... $13,257 $13,442
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Average number of Common Shares outstanding
during the period.............................. 59,242 60,707
Common Shares assumed issued upon exercise
of dilutive stock options, net of assumed
repurchase, at the average market price,
using the treasury stock method (1)............ 1,245 1,192
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(d) Average number of Common Shares assumed
outstanding during the period.................. 60,487 61,899
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Earnings per Share Before Cumulative Effect
of Change in Accounting Principle (a/d)........ $ .29 $ .22
Cumulative Effect of Change in Accounting
Principle (b/d)................................ (.07) -
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Net Earnings per Share (c/d)..................... $ .22 $ .22
============ =============
<FN>
(1) The number of Common Shares assumed issued upon exercise of dilutive stock options is essentially
the same for fully diluted earnings per share.
</TABLE>
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