<PAGE>
<PAGE> 1
(Logo)
$75,000,000
The Pep Boys - Manny, Moe & Jack
4% Convertible Subordinated Notes Due 1999
Interest payable March 1 and September 1 Due September 1, 1999
----------
The Notes are convertible into Common Stock of The Pep Boys - Manny, Moe &
Jack at any time on or before September 1, 1999, unless previously
redeemed, at a conversion price of $41.00 per share, subject
to adjustment in certain events. On August 23, 1994, the
reported last sale price of the Common Stock on the
New York Stock Exchange was $33 per share.
The Notes are redeemable, in whole or in part, at the option of the
Company at any time on or after September 15, 1997 at the redemption
prices set forth herein plus accrued interest. The Notes are
subordinated to all existing and future Senior Indebtedness
(as defined herein) of the Company. As of July 30, 1994,
after giving effect to the offering of the Notes (the
"Offering") and application of the net proceeds
therefrom, Senior Indebtedness of the Company
would have been approximately $327.4 million.
The Notes have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR AD- EQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public (1) Commissions Company (1)(2)
----------- -------------- --------------
<S> <C> <C> <C>
Per Note ............................................. 100% 1.00% 99.00%
Total (3) ............................................ $75,000,000 $750,000 $74,250,000
</TABLE>
(1) Plus accrued interest, if any, from August 31, 1994.
(2) Before deduction of estimated expenses of $250,000 payable by the
Company.
(3) The Company has granted the Underwriter an option, exercisable for 30
days from the date of the initial public offering of the Notes, to
purchase up to an additional $11,250,000 principal amount of Notes
solely to cover over-allotments. If the option is exercised in full,
the total Price to Public will be $86,250,000, Underwriting Discounts
and Commissions will be $862,500 and Proceeds to Company will be
$85,387,500.
----------
The Notes are offered by the Underwriter when, as and if issued by the
Company, delivered to and accepted by the Underwriter and subject to its
right to reject orders in whole or in part. It is expected that the Notes
will be ready for delivery on or about August 31, 1994.
CS First Boston
The date of this Prospectus is August 24, 1994
<PAGE>
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
NOTES OFFERED HEREBY OR THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
----------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files annual and quarterly reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information
concerning the Company may be inspected, and copies of such material may
be obtained at prescribed rates, at the Commission's Public Reference
Section, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as
well as at the Commission's Regional Offices at Seven World Trade Center,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Room 1400, Chicago, Illinois 60661-2511. The Company's Common
Stock is listed on the New York Stock Exchange (the "NYSE"). Reports,
proxy statements and other information concerning the Company may be
inspected at the offices of the NYSE at 20 Broad Street, New York, New
York 10005.
This Prospectus constitutes part of a Registration Statement on Form
S-3 (the "Registration Statement") filed by the Company with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto, in
accordance with the rules and regulations of the Commission. For further
information concerning the Company and the Notes offered hereby, reference
is made to the Registration Statement and the exhibits and schedules filed
therewith, which may be inspected without charge at the office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of
which may be obtained from the Commission at prescribed rates. Any
statements contained herein concerning the provisions of any document are
not necessarily complete, and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in
its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended January
29, 1994, the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1994, the description of the Company's common stock, par
value $1.00 per share (the "Common Stock"), set forth in the
Registration Statement on Form 8-A filed by the Company to register such
securities under Section 12 of the Exchange Act, and any amendments or
reports filed for the purpose of updating such description, the
description of the Company's Common Stock Purchase Rights set forth in the
Registration Statement on Form 8-A, dated December 21, 1987, as amended by
the Company's Form 8, dated June 30, 1989, and the Company's Current
<PAGE>
<PAGE> 3
Report on Form 8-K, dated May 6, 1994, each as filed with the Commission
pursuant to the Exchange Act, are incorporated into this Prospectus by
reference.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of this Offering
shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such reports and documents. Any
statement incorporated herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by
reference (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such document). Requests for
such documents should be submitted in writing to Mr. Frederick A.
Stampone, Senior Vice President - Chief Administrative Officer and
Secretary, The Pep Boys - Manny, Moe & Jack, 3111 West Allegheny Avenue,
Philadelphia, Pennsylvania 19132, telephone (215) 229-9000.
THE COMPANY
The Pep Boys - Manny, Moe & Jack (together with its subsidiaries, the
"Pep Boys" or the "Company") is a leading automotive aftermarket
retail and service chain. The Company is engaged principally in the retail
sale of automotive parts and accessories, automotive maintenance and
service and the installation of parts. Pep Boys operates its business
through its chain of 395 Pep Boys stores (as of July 30, 1994), of which
279 are owned and 116 are leased. Pep Boys stores are located in 29 states
in predominantly four market areas - the middle Atlantic, southeastern,
western and southwestern regions. Pep Boys' operations are supplied by
distribution facilities in five locations.
The Company operates approximately 8,004,000 gross square feet of
retail space for an average of approximately 20,300 gross square feet per
store, including an aggregate of 3,741 service bays. A typical new Pep
Boys store is a free-standing warehouse format supercenter of
approximately 22,000 square feet. Each new supercenter has approximately
11 service bays along with a product offering of approximately 24,000
stock-keeping units ("SKUs") and is generally located in an area with
high automotive traffic count and population density. Pep Boys believes
that the operation of service bays in its supercenter stores
differentiates it from most of its competitors by providing its customers
with the ability to purchase parts and have them installed at the same
location. Pep Boys intends to introduce a supplemental store format under
the name "Pep Boys - PARTS USA", with approximately 22,000 SKUs, in
locations that the Company believes will be better served by stores with
an extensive selection of parts and accessories but without tires or
service bays. See "Recent Developments."
<PAGE>
<PAGE> 4
During fiscal years 1991, 1992 and 1993, Pep Boys added a net of 24,
20 and 29 stores, respectively. In fiscal 1994, the Company plans to open
approximately 50 new warehouse format supercenters and expects to close
approximately six older stores. In fiscal 1993, the Company's annual gross
revenues increased by more than $85 million to $1.24 billion (a 7%
increase) and net earnings increased by $11 million to $65.5 million
(a 20% increase). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Although the Company's competition varies by geographical area, the
Company believes that it generally has a favorable competitive position in
terms of price, depth and breadth of merchandise, quality of personnel and
customer service. The Company believes that it provides customers with
among the lowest prices in each of its markets. Pep Boys employs an
everyday-low-price strategy which it believes provides its customers
better value and consistency on a day-to-day basis and improves inventory
management. In addition, Pep Boys believes that it carries among the
largest selection of parts, accessories and chemicals in the automotive
aftermarket retail industry, with approximately 24,000 SKUs per
supercenter. The Company also believes it provides a high level of
customer service through its well-trained and knowledgeable employees. The
Company's advertising strategy consists primarily of television
advertising and multi-page catalogs, supplemented with radio advertising
and various in-store promotions.
The Company utilizes electronic parts catalogs, enabling employees to
reference and access parts instantly while noting price, related items and
in-stock position. In addition, the Company monitors product sales by SKU
through its point-of-sale system which utilizes bar code slot scanning.
This system enables the Company to monitor its gross margins and set
minimum and maximum inventory levels for each store. The Company's new
centralized buying system and a perpetual inventory-automatic
replenishment system orders additional inventory from one of the Company's
warehouses when a store's inventory on hand falls below the minimum level
set for each SKU.
The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation, was
incorporated in 1925. The Company's executive offices are located at 3111
West Allegheny Avenue, Philadelphia, Pennsylvania 19132, telephone (215)
229-9000.
RECENT DEVELOPMENTS
For the quarter ended July 30, 1994, the Company's sales increased 13%
to $370.4 million from $329.1 million for the same period in the prior
fiscal year, and the Company's net earnings for the quarter increased 23% to
$23.5 million, or $.39 per share, from $19.1 million, or $.31 per share,
for the same period in the prior fiscal year. For the six months ended
July 30, 1994, the Company's sales increased 13% to $708.1 million from
$628.3 million for the same period in the prior fiscal year, and the
Company's net earnings for the six months before an accounting change
increased 26% to $41.1 million, or $.68 per share, from $32.5 million, or
$.53 per share, for the same period in the prior fiscal year. During
the first quarter of the 1994 fiscal year, the Company adopted the
Financial Accounting Board's SFAS No. 112, "Employers' Accounting for
<PAGE>
<PAGE> 5
Postemployment Benefits." See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." This accounting change
resulted in a charge to earnings for the first quarter of $4.3 million, or
$.07 per share. During the quarter ended July 30, 1994, the Company's
comparable store sales and service revenue increased 5% and 6%,
respectively, and during the six months ended July 30, 1994, the Company's
comparable store sales and service revenue increased 5% and 8%,
respectively. During the quarter ended July 30, 1994, the Company opened
eight new warehouse format supercenters bringing the total for the first
half of the year to ten new supercenters opened.
On August 11, 1994, Pep Boys announced that it will introduce a
supplemental store format under the name "Pep Boys - PARTS USA" in
locations that the Company believes will be better served by stores
with an extensive selection of parts and accessories but without tires or
service bays. These locations will primarily consist of certain urban
areas, smaller markets and areas located between supercenters. It is
expected that PARTS USA stores will stock approximately 22,000 SKUs.
As compared to the supercenters, the Company expects these stores to have
a higher percentage of hard parts and accessories, the highest margin
merchandise categories, in the sales mix. By supplementing its supercenter
expansion with PARTS USA stores, the Company seeks to increase its
market penetration and share over time. Pep Boys plans to open at least
ten PARTS USA stores in 1995. The Company's plans for opening additional
supercenters are not expected to be affected by the supplemental PARTS USA
store format. Pep Boys intends to open 50 supercenters during its 1994
fiscal year and 60 supercenters during its 1995 fiscal year.
USE OF PROCEEDS
The net proceeds from the sale of the Convertible Subordinated Notes
due 1999 (the "Notes") offered hereby are estimated to be $74.0 million
($85.1 million if the Underwriter's over-allotment option is exercised in
full). The proceeds of the Offering will be used to repay portions of the
Company's short-term variable-rate debt, bearing interest at rates which
range from 4.6% to 5.0%. The short-term debt expected to be repaid was
incurred within one year of the date hereof to purchase shares of Common
Stock to be held in the Company's flexible employee benefits trust (the
"Flexitrust") (established on April 29, 1994 to fund a portion of the
Company's obligations arising from various employee compensation and
benefit plans), to finance a portion of the capital expenditures incurred
in connection with the opening of new stores and for working capital
purposes. The short-term debt matures within sixty days of the date of
this Prospectus. See "Capitalization." Pending use of the proceeds of
the Offering, the Company expects to invest such funds in short-term
marketable securities.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
April 30, 1994, and as adjusted to give effect to the sale of the Notes
offered hereby (assuming the over-allotment option is not exercised). See
"Use of Proceeds."
<PAGE>
<PAGE> 6
<TABLE>
<CAPTION>
Actual As Adjusted
-------- -----------
(amounts in thousands)
<S> <C> <C>
Short-term debt(1) .......................................................... $ 94,600 $ 20,600
Current maturities of long-term debt ......................................... 7,317 7,317
Long-term debt less current maturities:
Indebtedness to banks under revolving credit loan agreement(1) ............. $ 55,000 $ 55,000
Mortgage notes ............................................................. 2,059 2,059
8 7/8% Notes ............................................................... 125,000 125,000
9.33% Notes ................................................................ 23,214 23,214
6 5/8% Notes ............................................................... 75,000 75,000
Notes offered hereby........................................................ - 75,000
-------- --------
$280,273 $355,273
Less current maturities ................................................. 7,317 7,317
-------- --------
Total long-term debt ...................................................... $272,956 $347,956
-------- --------
Stockholders' equity:
Common Stock, par value $1.00 per share: Authorized 500,000,000 shares;
61,187,166 shares issued and outstanding ................................. 61,187 61,187
Paid-in capital ............................................................ 124,523 124,523
Retained earnings .......................................................... 399,398 399,398
-------- --------
585,108 585,108
Less shares held in Flexitrust, 1,965,200 shares at cost(2)................. 52,364 52,364
-------- --------
Total stockholders' equity ................................................ 532,744 532,744
-------- --------
Total long-term debt and stockholders' equity ................................ $805,700 $880,700
======== ========
</TABLE>
----------
(1) As of July 30, 1994, outstanding short-term debt was $92.7 million and
outstanding indebtedness to banks under revolving credit loan
agreement was $90.0 million. The increase in outstanding indebtedness
to banks under revolving credit loan agreement as of July 30, 1994 as
compared to April 30, 1994 is primarily the result of capital
expenditures associated with the Company's store expansion program.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
(2) On April 29, 1994, the Company sold these shares of Common Stock,
which it had repurchased in the open market, to the Flexitrust in
exchange for a promissory note payable to the Company.
<PAGE>
<PAGE> 7
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock of the Company is listed on the New York Stock
Exchange under the symbol "PBY". There were 3,573 registered
shareholders as of April 30, 1994. The table below sets forth the high and
low sales prices of the Common Stock and the quarterly cash dividends
declared per share of Common Stock during the periods indicated.
<TABLE>
<CAPTION>
Price Range Cash
--------------- Dividends
Low High Declared
--- ---- --------
<S> <C> <C> <C>
Fiscal Year ending January 28, 1995
First Quarter............................................. $26 $31 $.0425
Second Quarter............................................ 29 1/4 33 3/4 .0425
Third Quarter (as of August 23, 1994)..................... 29 1/8 33 7/8
Fiscal Year ended January 29, 1994
First Quarter ............................................ $19 7/8 $26 7/8 $.0375
Second Quarter............................................ 20 24 .0375
Third Quarter ............................................ 20 1/8 25 1/8 .0375
Fourth Quarter............................................ 22 7/8 27 1/2 .0375
Fiscal Year ended January 30, 1993
First Quarter ............................................ $17 1/8 $23 5/8 $.0325
Second Quarter............................................ 19 1/4 24 7/8 .0350
Third Quarter ............................................ 21 1/4 27 3/8 .0350
Fourth Quarter............................................ 21 1/2 27 1/4 .0350
</TABLE>
The last reported sales price for the Common Stock on the New York
Stock Exchange on August 23, 1994 was $33.
It is the present intention of the Company's Board of Directors to
continue to pay regular quarterly cash dividends; however, the declaration
and payment of future dividends will be determined by the Board of
Directors in its sole discretion and will depend upon the earnings,
financial condition and capital needs of the Company and other factors
which the Board of Directors deems relevant.
<PAGE>
<PAGE> 8
SELECTED FINANCIAL DATA
The selected financial data for the five years ended January 29, 1994
(except for "Number of retail outlets," "Ratio of earnings to fixed
charges" and "Total square footage") were derived from audited
financial statements. The financial statements for the three years ended
January 29, 1994, which have been audited by Deloitte & Touche LLP,
independent certified public accountants, are incorporated by reference
herein. The selected financial data for the 13-week periods ended April
30, 1994 and May 1, 1993, respectively, have been derived from unaudited
financial statements and reflect, in the opinion of the Company, all
adjustments necessary to present fairly the information for such periods.
The selected financial data should be read in conjunction with the
financial statements and other information contained in the Company's
Annual Report on Form 10-K for the year ended January 29, 1994, the
Company's Quarterly Report on Form 10-Q for the quarter ended April 30,
1994 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
13 Weeks Ended Year Ended
--------------------------- -----------------------------------------------------------------------------
April 30, 1994 May 1, 1993 Jan. 29, 1994 Jan. 30, 1993 Feb. 1, 1992 Feb. 2, 1991 Feb. 3, 1990(1)
-------------- ----------- ------------- ------------- ------------ ------------ ---------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Statement
Data
Merchandise sales . $ 290,826 $ 260,452 $1,076,543 $1,008,191 $ 873,381 $ 774,502 $ 703,487
Service revenue ... 46,874 38,695 164,590 147,403 128,127 110,172 95,204
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues .... 337,700 299,147 1,241,133 1,155,594 1,001,508 884,674 798,691
Gross profit
from merchandise
sales ............ 82,603 68,905 307,861 272,412 240,199 217,052 190,874
Gross profit
from service
revenue........... 7,924 5,884 27,457 24,528 19,726 17,854 18,120
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total gross
profit ........... 90,527 74,789 335,318 296,940 259,925 234,906 208,994
Selling, general and
administrative
expenses ......... 57,926 49,696 214,710 194,160 176,275 157,468 139,913
Operating profit .. 32,601 25,093 120,608 102,780 83,650 77,438 69,081
Nonoperating
income ........... 1,099 1,088 3,601 3,015 1,933 1,601 4,097
Interest expense .. 5,720 5,012 19,701 20,180 25,071 20,262 18,054
Earnings before
income taxes and
change in
accounting
principle......... 27,980 21,169 104,508 85,615 60,512 58,777 55,124
Income taxes....... 10,423 7,727 38,996 31,036 21,640 21,247 20,061
Earnings before
change in
accounting
principle......... 17,557 13,442 65,512 54,579 38,872 37,530 35,063
Cumulative effect of
change in accounting
principle......... (4,300) - - - - - -
Net earnings....... 13,257 13,442 65,512 54,579 38,872 37,530 35,063
Net earnings per share
before cumulative
effect of change in
accounting
principle(2)...... 0.29 0.22 1.06 .90 .69 .67 .63
Cumulative effect of
change in accounting
principle......... (0.07) - - - - - -
Net earnings
per share(2)...... 0.22 0.22 1.06 .90 .69 .67 .63
<PAGE>
<PAGE> 9
</TABLE>
<TABLE>
<CAPTION>
13 Weeks Ended Year Ended
--------------------------- -----------------------------------------------------------------------------
April 30, 1994 May 1, 1993 Jan. 29, 1994 Jan. 30, 1993 Feb. 1, 1992 Feb. 2, 1991 Feb. 3, 1990(1)
-------------- ----------- ------------- ------------- ------------ ------------ ---------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Working capital.... $ 77,468 $ 127,507 $ 92,518 $ 104,622 $ 81,935 $ 91,801 $ 70,160
Total assets....... 1,155,615 1,025,910 1,078,518 967,813 856,925 819,421 676,030
Long-term debt..... 272,956 229,943 253,000 209,347 279,250 285,868 227,648
Stockholders'
equity ........... 532,744 521,792 547,759 509,763 378,514 344,603 311,754
Other Statistics
Ratio of earnings
to fixed
charges(3)......... 4.7x 4.2x 4.9x 4.3x 3.1x 3.3x 3.4x
Depreciation and
amortization...... $ 10,542 $ 9,421 $ 39,125 $ 36,674 $ 33,439 $ 27,838 $ 22,941
Capital
expenditures...... $ 30,032 $ 19,018 $ 135,165 $ 78,025 $ 65,801 $ 105,826 $ 88,398
Number of retail
outlets .......... 387 359 386 357 337 313 281
Total square
footage........... 7,813,000 7,095,000 7,771,000 7,039,000 6,522,000 5,950,000 5,299,000
<FN>
----------
(1) The fiscal year ended February 3, 1990 included 53 weeks.
(2) The shares of Common Stock held by the Flexitrust, which consisted of 1,965,200 shares as of April 30, 1994, are not
considered to be outstanding in the computation of earnings per share until the shares are utilized to fund various
compensation and benefit plans.
(3) Computed by dividing earnings by fixed charges. "Earnings" consist of earnings before income taxes plus fixed charges
(exclusive of capitalized interest costs). "Fixed charges" consist of interest costs (including capitalized interest
costs) plus one-third of rental expense (which amount is considered representative of the interest factor in rental
expense).
</TABLE>
<PAGE>
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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.
<TABLE>
<CAPTION>
Percentage of Total Revenues
--------------------------------------------------------------------------
13 Weeks Ended Fiscal Year Ended
--------------------------- ---------------------------------------------
April 30, 1994 May 1, 1993 Jan. 29, 1994 Jan. 30, 1993 Feb. 1, 1992
-------------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Merchandise sales 86.1% 87.1% 86.7% 87.2% 87.2%
Service revenue(1) ..... 13.9 12.9 13.3 12.8 12.8
--------------------------------------------------------------------------
Total revenues ......... 100.0 100.0 100.0 100.0 100.0
Costs of merchandise
sales(2).............. 71.6(3) 73.5(3) 71.4(3) 73.0(3) 72.5(3)
Costs of service
revenue(2) ........... 83.1(3) 84.8(3) 83.3(3) 83.4(3) 84.6(3)
--------------------------------------------------------------------------
Total costs of revenues 73.2 75.0 73.0 74.3 74.0
Gross profit from
merchandise sales..... 28.4(3) 26.5(3) 28.6(3) 27.0(3) 27.5(3)
Gross profit from
service revenue ...... 16.9(3) 15.2(3) 16.7(3) 16.6(3) 15.4(3)
--------------------------------------------------------------------------
Total gross profit ..... 26.8 25.0 27.0 25.7 26.0
Selling, general and
administrative
expenses ............. 17.1 16.6 17.3 16.8 17.6
--------------------------------------------------------------------------
Operating profit ....... 9.7 8.4 9.7 8.9 8.4
Nonoperating income..... .3 .4 .3 .3 .2
Interest expense........ 1.7 1.7 1.6 1.8 2.5
--------------------------------------------------------------------------
Earnings before income
taxes and cumulative
effect of change in
accounting principle.. 8.3 7.1 8.4 7.4 6.1
Income taxes............ 37.3(4) 36.5(4) 37.3(4) 36.3(4) 35.8(4)
--------------------------------------------------------------------------
Earnings before
cumulative effect of
change in accounting
principle............. 5.2 4.5 5.3 4.7 3.9
Cumulative effect of
change in accounting
principle............. (1.3) - - - -
--------------------------------------------------------------------------
Net earnings ........... 3.9 4.5 5.3 4.7 3.9
==========================================================================
</TABLE>
<PAGE>
<PAGE> 11
<TABLE>
<CAPTION>
Percentage Change
-------------------------------------------------------------
1st Quarter 1994 vs. Fiscal 1993 vs. Fiscal 1992 vs.
1st Quarter 1993 Fiscal 1992 Fiscal 1991
-------------------- ---------------- -----------------
<S> <C> <C> <C>
Merchandise sales 11.7% 6.8% 15.4%
Service revenue(1) ..... 21.1 11.7 15.0
-------------------------------------------------------------
Total revenues ......... 12.9 7.4 15.4
Costs of merchandise
sales(2).............. 8.7 4.5 16.2
Costs of service
revenue(2) ........... 18.7 11.6 13.4
-------------------------------------------------------------
Total costs of revenues 10.2 5.5 15.8
Gross profit from
merchandise sales..... 19.9 13.0 13.4
Gross profit from
service revenue ...... 34.7 11.9 24.3
-------------------------------------------------------------
Total gross profit ..... 21.0 12.9 14.2
Selling, general and
administrative
expenses ............. 16.6 10.6 10.1
-------------------------------------------------------------
Operating profit ....... 29.9 17.3 22.9
Nonoperating income..... 1.0 19.4 56.0
Interest expense........ 14.1 (2.4) (19.5)
-------------------------------------------------------------
Earnings before income
taxes and cumulative
effect of change in
accounting principle.. 32.2 22.1 41.5
Income taxes............ 34.9 25.6 43.4
-------------------------------------------------------------
Earnings before
cumulative effect of
change in accounting
principle............. 30.6 20.0 40.4
Cumulative effect of
change in accounting
principle............. - - -
-------------------------------------------------------------
Net earnings ........... (1.4) 20.0 40.4
=============================================================
<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>
<PAGE>
<PAGE> 12
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.
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.
Fiscal 1993 vs. Fiscal 1992
Total revenues for fiscal 1993 increased 7% over fiscal 1992 due to a
<PAGE>
<PAGE> 13
higher store count (386 at January 29, 1994 compared with 357 at January
30, 1993) coupled with a 1% increase in comparable store revenues.
Comparable store merchandise sales remained constant while comparable
store service revenue increased 3% over fiscal 1992.
The increase in gross profit from merchandise sales, as a percentage
of merchandise sales, was due primarily to higher merchandise margins,
offset, in part, by increases in store occupancy costs and warehousing
costs. The Company currently intends to continue its policy of taking what
it deems appropriate measures to respond to the price reduction practices
of certain competitors.
The small increase in gross profit from service revenue, as a
percentage of service revenue, was due primarily to a decrease in service
employee benefit costs, offset, in part, by an increase in service
personnel and occupancy costs.
The increase in selling, general and administrative expenses, as a
percentage of total revenues, was due primarily to an increase in store
expenses.
The decrease in interest expense was due to lower interest rates,
offset, in part, by higher debt levels incurred to fund the Company's
store expansion program.
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 20% increase in net earnings in fiscal 1993, as compared with
fiscal 1992, was due to a substantial 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.
Fiscal 1992 vs. Fiscal 1991
Total revenues for fiscal 1992 increased 15% over fiscal 1991 due to a
higher store count (357 at January 30, 1993 compared with 337 at February
1, 1992) coupled with a substantial increase in comparable store revenues.
Comparable store revenues increased 12% over fiscal 1991. Comparable store
merchandise sales increased 12% and comparable store service revenue
increased 10% over fiscal 1991.
The decrease in gross profit from merchandise sales, as a percentage
of merchandise sales, was due primarily to lower merchandise margins
offset, in part, by a decrease in store occupancy costs. During fiscal
1992, selling prices on certain merchandise were lowered in an effort to
increase market share. Additionally, the Company lowered its selling
prices in certain markets on a significant number of items in response to
the actions of certain competitors.
The increase in gross profit from service revenue, as a percentage of
service revenue, was due primarily to decreases in service personnel and
<PAGE>
<PAGE> 14
occupancy costs, offset, in part, by an increase in service employee
benefit costs.
The decrease in selling, general and administrative expenses, as a
percentage of total revenues, was due primarily to a decrease in store
expenses and lower employee benefit and advertising costs. This was
partially offset by a slight increase in general office costs.
The substantial decrease in interest expense was due primarily to the
conversion of substantially all of the Company's $75,000,000 convertible
subordinated debentures into equity during fiscal 1992.
The 40% increase in net earnings in fiscal 1992, as compared with
fiscal 1991, was due to a substantial increase in comparable store
revenues, and decreases, as a percentage of total revenues, in selling,
general and administrative costs and interest expense, offset, in part, by
a decrease in gross profit from merchandise sales.
Effects of Inflation
The Company uses the LIFO method of inventory valuation. Thus, the
cost of merchandise sold approximates current cost. Although the Company
cannot accurately determine the precise effect of inflation on its
operations, it does not believe inflation has had a material effect on
revenues or results of operations.
Liquidity and Capital Resources
The Company's cash requirements arise principally from the need to
finance the acquisition, construction and equipping of new stores and to
purchase inventory. The Company opened 37 stores in fiscal 1993, 29 stores
in fiscal 1992 and 27 stores in fiscal 1991. In fiscal 1993, with
increased levels of capital expenditures due to an accelerated expansion
program coupled with cash from operating activities and lines of credit
utilized to purchase its stock for transfer to the Flexitrust, the Company
increased its debt by $77,525,000. In fiscal 1992, with substantial cash
flows from operating activities and the conversion of substantially all
its $75,000,000 convertible subordinated debentures, the Company reduced
its debt by $72,639,000. In fiscal 1991, with the increased cash flows
from operating activities and reduced levels of capital expenditures, the
Company reduced its debt by $25,037,000.
The following table indicates the Company's principal cash
requirements for the past three years.
<PAGE>
<PAGE> 15
<TABLE>
<CAPTION>
Fiscal 1993 Fiscal 1992 Fiscal 1991 Total
-------------------------------------------------------
(dollar amounts in thousands)
<S> <C> <C> <C> <C>
Capital expenditures ................ $135,165 $78,025 $65,801 $278,991
Increase (decrease) in inventory (net
of checks outstanding and accounts
payable) ........................... 26,487 24,001 (21,715) 28,773
-----------------------------------------------------
Total cash requirements .............. $161,652 $102,026 $ 44,086 $307,764
=====================================================
Cash provided by operating activities
(excluding net inventory additions) $111,595 $100,415 $ 73,625 $285,635
=====================================================
</TABLE>
Inventories have increased in the past three years as the Company
added a net of 73 stores while stock-keeping units per store rose during
the period from approximately 19,000 to approximately 24,000, many of
which were higher cost hard parts.
During the first quarter of 1994, the Company invested $30,032,000 in
property and equipment while inventory increased by $57,097,000.
The Company currently plans to open approximately 50 stores in fiscal
1994, two of which have been opened in the first quarter and eight of
which have been opened in the second quarter. Management estimates that
the cost to open all 50 stores, coupled with capital expenditures relating
to existing stores, warehouses and offices during fiscal 1994 will be
approximately $155,000,000. In addition to the funds required to finance
the Company's store expansion, the Company has authorization to purchase
Common Stock having a value of up to $75,000,000 for sale to the
Flexitrust, of which Common Stock having a value of $52,364,000 had been
purchased as of April 30, 1994 ($57,495,000 as of August 16, 1994). Funds
required to finance the store expansion, including related inventory
requirements, and the stock repurchase are expected to come from operating
activities with the remainder provided by unused lines of credit, which
totalled $104,400,000 at April 30, 1994 ($71,300,000 at July 30, 1994), or
from accessing traditional lending sources which may include the public
capital markets.
The Company's working capital was $95,012,000 at July 30, 1994,
$77,468,000 at April 30, 1994, $92,518,000 at January 29, 1994 and
$104,622,000 at January 30, 1993. The Company's long-term debt, as a
percentage of its total capitalization, was 35% at July 30, 1994, 34% at
April 30, 1994, 32% at January 29, 1994 and 29% at January 30, 1993.
<PAGE>
<PAGE> 16
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture (the "Indenture"),
between the Company and First Fidelity Bank, National Association, as
trustee (the "Trustee"), a form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Indenture do not purport to be
complete, and where particular provisions of the Indenture are referred
to, such provisions, including definitions of certain terms, are
incorporated by reference as a part of such summaries or terms, which
are qualified in their entity by reference to the provisions of the
Indenture. The section references appearing below are to sections in
the Indenture.
General
The Notes will be unsecured subordinated obligations of the Company,
will mature on September 1, 1999 and will be limited to $75,000,000
aggregate principal amount, plus such additional amount not in excess of
$11,250,000 as may be purchased by the Underwriters upon exercise of their
over-allotment option. The Notes will bear interest at the rate per annum
stated on the cover page of this Prospectus from the date of issuance, or
from the most recent Interest Payment Date to which interest has been paid
or provided for, payable semi-annually on March 1 and September 1 in each
year, commencing March 1, 1995, to the person in whose name such Note (or
any predecessor Note) is registered at the close of business on the
February 15 or August 15 preceding such Interest Payment Date
(Sections 301 and 307).
Principal of and premium, if any, and interest on the Notes will be
payable, Notes may be presented for conversion, and transfer of the Notes
will be registrable at the office or agency of the Company in the Borough
of Manhattan, the City of New York, or at any other office or agency
maintained by the Company for such purpose. In addition, payment of
interest may be made, at the option of the Company by check mailed to the
address of the person entitled thereto as shown on the Note Register
(Sections 301, 305, 1002 and 1202). The Notes are to be registered Notes,
without coupons, in denominations of $1,000 or any integral multiple
thereof (Section 302). No service charge will be made for any conversion
or registration of transfer or exchange of Notes, except for any tax or
other governmental charge that may be imposed in connection therewith
(Section 305).
Conversion Rights
The Notes will be convertible, in whole or from time to time in part
(in denominations of $1,000 or integral multiples thereof), at the option
of the holder thereof, into Common Stock of the Company, initially at the
conversion price stated on the cover page hereof, at any time prior to
redemption or maturity, except that the right to convert Notes called for
redemption will terminate at the close of business on the tenth day
preceding the Redemption Date and will be lost if not exercised prior
to that time, unless the Company defaults in making the payment due upon
redemption (Section 1201).
<PAGE>
<PAGE> 17
If the Company, by dividend or otherwise, declares or makes a
distribution on its Common Stock of the type referred to in clause (4) or
(5) of the following paragraph, the Holder of each Note, upon the
conversion thereof subsequent to the close of business on the date fixed
for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the conversion price
adjustment in respect of such distribution pursuant to such clause (4) or
(5), will be entitled to receive for each share of Common Stock into which
such Note is converted the portion of the evidence of indebtedness, shares
of capital stock, cash and other assets so distributed applicable to one
share of Common Stock; provided, however, that the Company may, with
respect to all Holders so converting, in lieu of distributing any portion
of such distribution not consisting of cash or securities of the Company,
pay such Holder cash equal to the fair market value thereof, as determined
in good faith by the Board of Directors (Section 1201).
The conversion price will be subject to adjustment in certain events,
including: (1) the payment of dividends (and other distributions) in
Common Stock on any class of capital stock of the Company; (2) the
issuance to all holders of Common Stock of rights, warrants or options
entitling them to subscribe for or purchase Common Stock at less than the
current market price (as defined in the Indenture); provided, however,
that if such rights, warrants or options are only exercisable upon the
occurrence of certain triggering events, then the conversion price will
not be adjusted until such triggering events occur; (3) subdivisions,
combinations and reclassifications of Common Stock; (4) distributions to
all holders of Common Stock of evidences of indebtedness of the Company,
shares of any class of capital stock, cash or other assets (including
securities, but excluding those dividends, rights, warrants, options and
distributions referred to above and dividends and distributions paid in
cash out of the retained earnings of the Company); (5) distributions
consisting exclusively of cash (excluding any cash distributions for which
an adjustment has been made pursuant to a preceding clause of this
paragraph) to all holders of Common Stock in an aggregate amount that,
together with (A) other all-cash distributions made within the preceding
12 months not triggering a conversion price adjustment and (B) all Excess
Payments (as defined below) in respect of each tender offer or other
negotiated transaction by the Company or any of its subsidiaries for
Common Stock concluded within the preceding 12 months not triggering a
conversion price adjustment, exceeds an amount equal to 20% of the
Company's market capitalization (being the product of the current market
price of the Common Stock times the number of shares of Common Stock then
outstanding) on the date of such distribution; (6) issuance of Common
Stock to an Affiliate for a net consideration per share less than the
current market price per share (other than issuances of Common Stock under
certain employee benefit plans); and (7) payment of an Excess Payment in
respect of a tender offer or other negotiated transaction by the Company
or any of its subsidiaries for Common Stock, if the aggregate amount of
such Excess Payment, together with (A) the aggregate amount of all-cash
distributions made within the preceding 12 months not triggering a
conversion price adjustment and (B) all Excess Payments in respect of each
tender offer or other negotiated transaction by the Company or any of its
subsidiaries for Common Stock concluded within the preceding 12 months not
triggering a conversion price adjustment, exceeds an amount equal to 20%
of the Company's market capitalization on the expiration of such tender
<PAGE>
<PAGE> 18
offer (Section 1204). "Excess Payment" means the excess of (A) the
aggregate of the cash and value of other consideration paid by the Company
or any of its subsidiaries with respect to the shares acquired in the
tender offer or other negotiated transaction over (B) the market value of
such acquired shares after the completion of the tender offer or other
negotiated transaction.
No adjustment of the conversion price will be required to be made
until cumulative adjustments amount to 1% or more of the conversion price
as last adjusted (Section 1204). Notwithstanding the foregoing, no
adjustment to the conversion price shall reduce the conversion price below
the then par value per share of the Common Stock.
Certain adjustments in the conversion price in accordance with the
foregoing provisions (other than to take account of a stock dividend or
stock split) could be taxable pursuant to Section 305 of the Internal
Revenue Code of 1986, as amended, as a constructive distribution of stock
to holders of the Notes at the time of such adjustments in the conversion
price.
In addition to the foregoing adjustments, the Company will be
permitted to make such reductions in the conversion price as it considers
to be advisable in order that any event treated for federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
holders of the Common Stock (Section 1204). In the case of certain
consolidations or mergers to which the Company is a party or the transfer
of substantially all of the assets of the Company, each Note then
outstanding would, without the consent of any Holders of Notes, become
convertible only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder
of the number of shares of Common Stock into which such Note might have
been converted immediately prior to such consolidation, merger or transfer
(assuming such holder of Common Stock failed to exercise any rights of
election and received per share the kind and amount receivable per share
by a plurality of non-electing shares) (Section 1211).
Fractional shares of Common Stock are not to be issued upon
conversion, but, in lieu thereof, the Company will pay a cash adjustment
based upon the market price (Section 1203). Notes surrendered for
conversion during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date (except Notes that mature prior to
such Interest Payment Date and Notes called for redemption on a redemption
date within such period) must be accompanied by payment of an amount equal
to the interest thereon which the registered Holder is to receive. Except
where Notes surrendered for conversion must be accompanied by payment as
described above, no interest on converted Notes will be payable by the
Company on any Interest Payment Date subsequent to the date of conversion.
No other payment or adjustment for interest or dividends is to be made
upon conversion (Sections 307 and 1202).
Subordination of Notes
The payment of principal of and premium, if any, and interest on the
Notes is, to the extent set forth in the Indenture, subordinated in right
<PAGE>
<PAGE> 19
of payment to the prior payment in full of all Senior Indebtedness (as
defined below), whether now outstanding or incurred in the future (Section
1301). Upon any payment or distribution of assets of the Company to
creditors upon any dissolution, winding up, liquidation or reorganization,
the holders of all Senior Indebtedness will be entitled to receive payment
in full of all amounts due or to become due thereon before the Holders of
the Notes will be entitled to receive any payment in respect of the
principal of or premium, if any, or interest on the Notes (Section 1302),
but the obligation of the Company to make payments of principal of or
premium, if any, and interest on the Notes will not otherwise be affected
(Section 1304).
No payment on account of principal of or premium, if any, or interest
on the Notes may be made and no repurchase of the Notes may be made as
described herein under "Repurchase of Notes at the Option of the Holder
Upon a Change in Control" at any time when there is a continuing default
in any payment of principal of or premium, if any, or interest on any
Senior Indebtedness (as defined below), or any other event of default with
respect to any Senior Indebtedness resulting in the acceleration of the
maturity thereof. In addition, no payment on account of principal of or
premium, if any, or interest on the Notes may be made and no repurchase of
the Notes may be made as described herein under "Repurchase of Notes at
the Option of the Holder Upon a Change in Control" at any time there
shall have occurred and be continuing any event of default (other than a
default referred to in the immediately preceding sentence) with respect to
any Senior Indebtedness, which default would permit immediate acceleration
thereof, for the period commencing on receipt of notice of such default by
the Trustee from the holder of such Senior Indebtedness (or any
representative therefor) and ending on the earlier of (i) the date such
event of default has been cured or waived and (ii) the date 180 days after
receipt of such notice (Section 1303).
The Holders of the Notes will be subrogated to the rights of the
holders of Senior Indebtedness to the extent of payments made on Senior
Indebtedness upon any distribution of assets in any such proceedings out
of the distributive share of the Notes (Section 1302).
By reason of such subordination, in the event of insolvency of the
Company, Holders of the Notes may recover less, ratably, than other
creditors of the Company.
Senior Indebtedness is defined in the Indenture as the principal of
and premium, if any, and unpaid interest on, and any reasonable fees or
costs related to, (a) indebtedness of the Company (including indebtedness
of others guaranteed by the Company), other than the Notes, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed, (i) for money owing to banks, or their subsidiaries
or their affiliates, (ii) for money borrowed other than from banks or
(iii) arising under a lease of or given in connection with the acquisition
of property, equipment or other assets, which indebtedness, pursuant to
generally accepted accounting principles then in effect, is classified
upon the balance sheet of the Company as a liability of the Company,
unless, in each case, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
indebtedness is not superior in right of payment to the Notes; and (b)
<PAGE>
<PAGE> 20
renewals, extensions, modifications, amendments and refundings of any such
indebtedness; provided, however, that Senior Indebtedness shall not
include indebtedness to a subsidiary or other Affiliate of the Company
(Section 101).
As of July 30, 1994, after giving effect to this Offering and
application of the net proceeds therefrom, Senior Indebtedness would have
been approximately $327.4 million. The Company expects from time to time
to incur additional indebtedness constituting Senior Indebtedness. The
Indenture does not prohibit or limit the incurring of additional Senior
Indebtedness by the Company.
Redemption at the Option of the Company
The Notes are not subject to the provisions of any sinking fund. The
Notes will be redeemable, at the Company's option, as a whole or from time
to time in part (in denominations of $1,000 or integral multiples thereof),
on or after September 15, 1997 and prior to maturity, upon not less than
30 nor more than 60 days' notice mailed to the registered Holders thereof,
at the following redemption prices (expressed as percentages of principal
amount): if redeemed during the period commencing on September 15,1997
and ending on (and including) August 31, 1998, 101%; and thereafter at
100% of the principal amount, plus, in each case, accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the Interest Payment Date that is
on or prior to the redemption date) (Sections 203, 1101, 1105 and 1107).
Repurchase of Notes at the Option of the Holder Upon a Change in Control
In the event of any Change in Control (as defined below), each Holder
of Notes will have the right, at such Holder's option, to require the
Company to purchase all or any part (in denominations of $1,000 or
integral multiples thereof) of the Holder's Notes on the date (the
"Repurchase Date") that is 60 days after the date the Company gives
notice of the Change in Control as described below at a price (the
"Repurchase Price") equal to 100% of the principal amount thereof,
together with accrued and unpaid interest to the Repurchase Date (Section
1401). On or before the Repurchase Date, the Company will deposit with a
Paying Agent an amount of money sufficient to pay the Repurchase Price of
the Notes that are to be repaid on the Repurchase Date (Section 1403).
Promptly, but in any event within 30 days following any Change in
Control, the Company is required, with respect to any Senior Indebtedness
that would prohibit the repurchase of Notes by the Company in the event of
a Change in Control, to either (i) repay all such Senior Indebtedness in
full or (ii) obtain the requisite consents under such Senior Indebtedness
to permit the repurchase of the Notes as provided below (Section 1303).
Notwithstanding the foregoing, failure by the Company to repurchase the
Notes when required under the preceding paragraph will result in an Event
of Default under the Indenture whether or not such repurchase is permitted
by the subordination provisions of the Indenture (Section 501).
On or before the 20th day after the occurrence of a Change in Control,
the Company is obligated to mail to the Trustee and to all Holders of
record of the Notes a notice of the occurrence of such Change in Control,
<PAGE>
<PAGE> 21
the date by which the repurchase right must be exercised, the Repurchase
Price for the Notes and the procedures that the Holder must follow to
exercise this right. To exercise the repurchase right, the Holder of a
Note must deliver, at any time prior to the close of business on the
Repurchase Date, written notice to an agent designated by the Company for
such purpose of the Holder's exercise of such right, stating the
certificate numbers of the Note or Notes with respect to which the right
is being exercised, the portion (which portion must be $1,000 or an
integral multiple thereof) of the principal amount of the Notes that the
Holder will deliver to be repurchased, and that such Notes will be
repurchased pursuant to the terms of Article Fourteen (Section 1401).
Under the Indenture, a "Change in Control" of the Company is deemed
to have occurred at such time as (i) a "person" or "Group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (A) becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)
of more than 50% of the total voting rights attaching to the then
outstanding voting capital stock of the Company or (B) has the right or
the ability by voting right, contract or otherwise to elect or designate
for election a majority of the entire Board of Directors; or (ii) (A) the
Company consolidates with or merges into any other Person or conveys,
transfers or leases all or substantially all of its assets to any Person
or (B) any Person merges into the Company, in either event pursuant to a
transaction in which voting capital stock of the Company representing more
than 50% of the total voting rights of the Company outstanding immediately
prior to the effectiveness thereof is reclassified or changed into or
exchanged for cash, securities or other property; provided, that any
consolidation, merger, conveyance, transfer or lease between the Company
and any of its Subsidiaries (including, without limitation, the
reincorporation of the Company in another jurisdiction) shall be excluded
from the operation of this clause (ii). Notwithstanding the above, a
Change in Control shall not be deemed to have occurred by virtue of the
Company's or any of its employee benefit or stock plans' filing (or being
required to file after the lapse of time) a Schedule 13D or 14D-1 (or any
successor or similar schedule, form or report under the Exchange Act) as a
result of the Company's or any such plans' becoming the beneficial owner
of shares of capital stock of the Company entitling such person to
exercise a majority of the total voting power of all shares of capital
stock of the Company entitled to vote in ordinary circumstances in
elections of directors. (Section 101).
The right of Holders of the Notes to require the Company to repurchase
the Notes would not be triggered by certain corporate restructurings and
similar technical changes in corporate form, e.g., in the event of a
merger or consolidation of the Company where the Person formed by such
consolidation or into which the Company is merged expressly and directly
assumes the obligations of the Company in compliance with Section 801 of
the Indenture (Section 801). Furthermore, the right of Holders of the
Notes to require the Company to repurchase the Notes may be modified by
the Company and the Trustee with the consent of the Holders of not less
than a majority in principal amount of the Notes at the time outstanding
(Section 902).
If a Change in Control were to occur, there can be no assurance that
the Company would have sufficient funds to pay the Repurchase Price for
<PAGE>
<PAGE> 22
all Notes tendered. Except as described above with respect to a Change in
Control, the Indenture does not contain provisions that permit the Holders
of the Notes to require that the Company repurchase or redeem the Notes in
the event of a takeover, recapitalization or similar restructuring. In
addition, the Change in Control provisions may in certain circumstances
make more difficult or discourage a takeover of the Company.
In the event a Change in Control occurs and the Holders exercise their
rights to require the Company to repurchase Notes, the Company intends to
comply with applicable tender offer rules under the Exchange Act,
including Rules 13e-4 and 14e-1, as then in effect, with respect to any
such purchase (Section 1405).
Limitations on Mergers
The Company may, without the consent of the Holders of the Notes,
consolidate with or merge into any other entity or convey, transfer or
lease all or substantially all of its properties and assets to any person
provided that (i) the entity formed by such consolidation or into which
the Company is merged or the person that acquires by conveyance or
transfer, or which leases all or substantially all of the properties and
assets of the Company is a corporation, partnership or trust organized and
existing under the laws of the United States, any state thereof or the
District of Columbia, (ii) the successor entity shall expressly assume, by
a supplemental indenture executed and delivered by the successor entity to
the Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of and premium, if any, and interest on the Notes
and the performance of every covenant of the Indenture on the part of the
Company to be performed or observed and has provided for conversion rights
in accordance with the Indenture, (iii) immediately after giving effect to
such transaction, no Event of Default, and no event that, after notice or
lapse of time or both, would become an Event of Default, shall have
occurred and be continuing, and (iv) such consolidation, merger,
conveyance, transfer or lease does not affect the validity or
enforceability of the Notes (Section 801).
Modification and Waiver
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of not less than a
majority in principal amount of the Notes at the time outstanding;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each outstanding Note affected thereby, (i)
change the stated maturity of the principal of, or any installment of
interest on, any Note, (ii) reduce the principal amount of, or the
premium, if any, or interest on, any Note, (iii) change the place or
currency of payment of principal of, or premium, if any, or interest on,
any Note, (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any Note, (v) adversely affect the right
to convert Notes, (vi) modify the subordination provisions in a manner
adverse to the Holders of the Notes, (vii) reduce the above-stated
percentage of outstanding Notes necessary to modify or amend the Indenture
or (viii) reduce the percentage of aggregate principal amount of
outstanding Notes necessary for waiver of certain defaults (Section 902).
<PAGE>
<PAGE> 23
The Holders of a majority in aggregate principal amount of the
outstanding Notes may waive any past default under the Indenture, except
that a default in the payment of principal of or premium, if any, or
interest on the Notes or a failure to comply with certain covenants of the
Company may not be waived without the consent of the Holder of each
outstanding Note (Section 513).
Events of Default
The following will be Events of Default under the Indenture: (i)
failure to pay principal of or premium, if any, on any Note when due,
whether or not such payment is prohibited by the subordination provisions
of the Indenture; (ii) failure to pay any interest on any Note when due
for 30 days, whether or not such payment is prohibited by the
subordination provisions of the Indenture; (iii) failure to repurchase or
redeem the Notes as provided in the Indenture; (iv) failure to perform any
other covenant of the Company in the Indenture, which failure continues
for 60 days after written notice as provided in the Indenture; (v) default
in the payment of any indebtedness of the Company in excess of $10 million
for borrowed money or representing any Senior Indebtedness at its stated
maturity or default on any such indebtedness that results in the
acceleration of such indebtedness prior to its express maturity; and (vi)
certain events of bankruptcy, insolvency or reorganization of the Company
(Section 501).
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing,
the Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
indemnity (Section 603). Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in principal
amount of the Outstanding Notes will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee
(Section 512).
If an Event of Default shall occur and be continuing, other than an
event of bankruptcy, insolvency or reorganization of the Company, either
the Trustee or the Holders of at least 25% in principal amount of the
Outstanding Notes may accelerate the maturity of all Notes. If an Event of
Default shall occur and be continuing by reason of an event of bankruptcy,
insolvency or reorganization of the Company, the maturity of the Notes
shall immediately become due and payable without any act on the part of
the Trustee or any Holder. After any such acceleration but before a
judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind or annul such acceleration if all Events of
Default, other than the non-payment of acceleration principal, have been
cured or waived as provided in the Indenture (Section 502). For
information as to waiver of defaults, see "Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such
Holder shall have previously given to the Trustee written notice of a
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<PAGE> 24
continuing Event of Default and unless the Holders of at least 25% in
principal amount of the Outstanding Notes shall have made written request
and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in principal amount of the Outstanding Notes a
direction inconsistent with such request and shall have filed to institute
such proceeding within 60 days (Section 507). However, such limitations do
not apply to a suit instituted by a Holder of a Note for the enforcement
or payment of the principal or premium, if any, or interest on such Note
on or after the respective due dates expressed in such Note or of the
right to convert such Note in accordance with the Indenture (Section 508).
The Company will be required to furnish to the Trustee annually a
statement as to its performance of certain of its obligations under the
Indenture and as to any default in such performance (Section 1004).
Discharge of Indenture; Defeasance
The Company may terminate all obligations under the Indenture at any
time by delivering all outstanding Notes to the Trustee for cancellation
and paying any other sums payable under the Indenture.
The Indenture also provides that the Company may elect:
(a) to defease and be discharged from any and all obligations with
respect to the Notes and that the provisions of the Indenture
will no longer be in effect with respect to the Notes, except
for the obligations to register the transfer or exchange of
the Notes, to replace temporary or mutilated, destroyed, lost
or stolen Notes, to maintain an office or agency in respect of
the Notes and to hold monies for payment in trust
("Defeasance"); or
(b) to be released from its obligations with respect to the Notes
under certain restrictive covenants of the Indenture, and that
violation of such covenants will not constitute an "Event of
Default" under the Indenture ("Covenant Defeasance").
Such Defeasance or Covenant Defeasance will take effect only upon the
deposit with the Trustee, in trust for such purpose, of money and/or U.S.
Government Obligations that, through the payment of principal and interest
in accordance with their terms, will provide money in an amount sufficient
to pay the principal of and premium, if any, and interest on the Notes on
the dates such payments are due, and certain other conditions are
satisfied.
The Trustee
The Trustee is First Fidelity Bank, National Association, which also
serves as trustee of the Flexitrust.
<PAGE>
<PAGE> 25
DESCRIPTION OF COMMON STOCK AND RELATED RIGHTS
The statements made under this caption include summaries of certain
provisions contained in the Company's Articles of Incorporation, Bylaws
and Shareholders Rights Plan (as amended, the "Plan"). These statements
do not purport to be complete and are qualified in their entirety by
reference to such documents.
The Company is authorized to issue 500,000,000 shares of Common Stock,
$1.00 par value, of which 61,321,080 shares were outstanding as of July
30, 1994. Holders of Common Stock are entitled to receive dividends when
and as declared by the Board of Directors out of funds legally available
therefor. See "Price Range of Common Stock and Dividends" for
information as to dividend policy. Holders of Common Stock have no
preemptive right to purchase additional shares. Each share of Common Stock
is entitled to one vote with respect to matters other than the election of
directors. In the election of directors, each holder of Common Stock is
entitled to as many votes as is equal to the number of shares held
multiplied by the number of directors to be elected, and each shareholder
may cast all of such votes for a single director or may distribute them
among any number of directors to be voted for. The Bylaws of the Company
provide that the Board of Directors shall consist of not more than 12
members divided into three classes, the precise number of members to be
fixed from time to time by the Board of Directors. The Board is currently
comprised of nine Directors. The Directors of the class elected at each
annual election hold office for a term of three years, with the term of
each class expiring at successive annual meetings of shareholders.
On December 17, 1987, the Company adopted the Plan. Pursuant thereto,
the Board declared a dividend distribution of one Common Stock Purchase
Right ("Right") for each share of the Company's Common Stock then
outstanding and authorized the issuance of one Right with respect to each
share of Common Stock to become outstanding thereafter, including the
Common Stock issuable upon the conversion of the Notes offered hereby.
Each Right ordinarily entitles its holder to purchase one share of Common
Stock at an exercise price of $55 per share, subject to adjustment
pursuant to certain antidilution provisions. The Rights will become
exercisable only if a person or a group acquires beneficial ownership of
20% or more of the Company's Common Stock (exclusive of holdings as of
December 17, 1987) or announces a tender offer, the consummation of which
would result in ownership by a person or a group of 30% or more of the
Common Stock (exclusive of holdings as of December 17, 1987). The Company,
by action of its Board of Directors, is entitled to redeem the Rights at
$.02 per Right at any time before a person or a group has crossed the 20%
ownership threshold and, provided a majority of the Company's independent
directors approves such redemption, for 15 days thereafter.
If the Company is involved in a merger or other business combination
at any time after the Rights become exercisable, each Right will entitle
its holder to buy a number of shares of common stock of the acquiring
company having a market value equal to twice the exercise price of each
Right. In addition, if a person or group acquires 20% or more of the
Company's Common Stock (exclusive of shareholdings as of December 17,
1987) or if a 20% or greater shareholder (exclusive of shareholders as of
December 17, 1987) acquires the Company by means of a reverse merger or
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<PAGE> 26
engages in certain self-dealing transactions with the Company, each Right
not owned by such party will entitle its holder to purchase, at the
Right's then current exercise price, that number of shares of Common Stock
having a market value at the time of twice the exercise price of each
right. The Plan authorizes the Company's independent directors to waive or
alter certain features of the Rights in certain circumstances. The final
expiration date of the Rights, even if they never become exercisable, is
December 31, 1997.
The foregoing provisions of the Bylaws and the Plan may have an effect
of delaying, deferring or preventing a change in control of the Company.
Although the Flexitrust is not intended to be an antitakeover mechanism,
the creation of the Flexitrust and the purchase of shares of Common Stock
by the Flexitrust may also have certain antitakeover effects. Because the
trustee of the Flexitrust votes the Common Stock held by it in the manner
directed by participants in certain of the Company's employee benefit
plans, the transfer of shares of Common Stock to the Flexitrust may make
it more difficult for an acquiror of Common Stock to obtain an affirmative
vote for a proposed merger without employee support. Additionally, an
Interested Shareholder (as defined in Section 2553 of the Pennsylvania
Business Corporation Law of 1988, as amended (the "BCL")) would find it
difficult to engage in a business combination with the Company during the
five-year period after becoming an Interested Shareholder without the
support of some employees.
The Company's Common Stock is currently listed on the New York Stock
Exchange. The transfer agent and registrar for the Company's Common Stock
is American Stock Transfer & Trust Company, New York, New York.
UNDERWRITING
Under the terms and conditions contained in an underwriting agreement
between CS First Boston Corporation (the "Underwriter") and the Company
(the "Underwriting Agreement"), the Underwriter has agreed with the
Company to purchase from the Company all of the Notes.
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and that the
Underwriter will be obligated to purchase all of the Notes being offered
hereby if any are purchased.
The Company has granted the Underwriter an option, expiring at the
close of business on the 30th day after the date of the initial public
offering of the Notes, to purchase up to an additional $11,250,000
principal amount of Notes at the initial public offering price less the
underwriting discount, all as set forth on the cover page of this
Prospectus. The Underwriter may exercise such option only to cover
over-allotments in the sale of the Notes.
The Company has been advised by the Underwriter that it proposes to
offer the Notes to the public initially at the offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less
a concession of 0.60% of the principal amount per Note. The Underwriter
and such dealers may allow a discount of 0.10% of such principal amount on
sales to certain other dealers; after the initial public offering,
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<PAGE> 27
the public offering price and concession and discount to dealers may be
changed by the Underwriter.
The Notes have been approved for listing on The New York Stock
Exchange, subject to official notice of issuance; however, no assurance
can be given that an active trading market for the Notes will develop or
continue.
The Company and the directors and executive officers of the Company
have agreed that, for a period of 90 days after the commencement of the
Offering, they will not, without the prior written consent of the
Underwriter, directly or indirectly, issue, offer, sell, contract to sell,
grant any option to purchase, hypothecate or otherwise dispose of, or file
a registration statement under the Securities Act relating to, any Common
Stock or any security convertible into or exchangeable for Common Stock,
other than to the Underwriter pursuant to the Underwriting Agreement, upon
conversion of the Notes or pursuant to employee benefit plans (including
stock option plans) existing on the date of this Prospectus.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including civil liabilities under the Securities Act, and
under certain circumstances, to contribute to payments that the
Underwriter may be required to make in respect thereof.
The Underwriter from time to time performs investment banking services
for the Company for customary fees.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Notes in Canada is being made only on a
private placement basis exempt from the requirement that the Company
prepare and file a prospectus with the securities regulatory authorities
in each province where trades of Notes are effected. Accordingly, any
resale of the Notes in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant jurisdiction,
and which may require resales to be made in accordance with available
statutory exemptions or pursuant to a discretionary exemption granted by
the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of the Notes.
Representations of Purchasers
Each purchaser of Notes in Canada who receives a purchase confirmation
will be deemed to represent to the Company and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled
under applicable provincial securities laws to purchase such Notes without
the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, such purchaser is purchasing as principal and not
as agent, and (iii) such purchaser has reviewed the text above under
"Resale Restrictions."
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<PAGE> 28
Rights of Action and Enforcement
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a
result, Ontario purchasers must rely on other remedies that may be
available, including common law rights of action for damages or rescission
or rights of action under the civil liability provisions of the U.S.
federal securities laws.
All of the issuer's directors and officers as well as the experts
named herein may be located outside of Canada and, as a result, it may not
be possible for Ontario purchasers to effect service of process within
Canada upon the issuer or such persons. All or a substantial portion of
the assets of the issuer and such persons may be located outside Canada
and, as a result, it may not be possible to satisfy a judgment against the
issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or person outside of Canada.
Notice to British Columbia Residents
A purchaser of Notes to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the
sale of any Notes acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #88/5, a copy of which may be obtained from
the Company. Only one such report must be filed in respect of Notes
acquired on the same date and under the same prospectus exemption.
LEGAL MATTERS
The validity of the authorization and issuance of the Notes offered
hereby is being passed upon for the Company by Willkie Farr & Gallagher,
New York, New York, and for the Underwriter by Dewey Ballantine, New York,
New York.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended January 29, 1994 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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No dealer, salesperson or other individual has (Logo)
been authorized to give any information or to make any PEP BOYS(R)
representation not contained in this Prospectus and,
if given or made, such information or representation
must not be relied upon as having been authorized by $75,000,000
the Company or the Underwriter. This Prospectus does
not constitute an offer to sell or solicitation of an
offer to buy any of the securities offered hereby in
any jurisdiction or to any person to whom it is 4% Convertible Subordinated
unlawful to make such offer in such jurisdiction. Notes Due 1999
Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create
any implication that the information herein is correct
as of any time subsequent to the date hereof or that
there has been no change in the affairs of the Company
since such date. PROSPECTUS
(LOGO) CS FIRST BOSTON
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TABLE OF CONTENTS
Page
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Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
The Company..................................... 3
Recent Developments............................. 4
Use of Proceeds................................. 4
Capitalization.................................. 5
Price Range of Common Stock and Dividends....... 6
Selected Financial Data......................... 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
Description of Notes............................ 12
Description of Common Stock and Related Rights.. 18
Underwriting ................................... 20
Notice to Canadian Residents.................... 20
Legal Matters................................... 21
Experts......................................... 21
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