<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
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 May 4, 1996
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from to
----------- ----------
Commission File No. 1-3381
------
The Pep Boys - Manny, Moe & Jack
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-0962915
------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer ID number)
incorporation or organization)
3111 W. Allegheny Ave. Philadelphia, PA 19132
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(Address of principal executive offices) (Zip code)
215-229-9000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports); and (2) has been subject
to such filing requirements for the past 90 days. Yes ( x ) No ( )
As of May 4, 1996 there were 62,237,087 shares of the registrant's Common
Stock outstanding.
<PAGE>
<PAGE>2
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Index Page
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PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Condensed Consolidated
Financial Statements (Unaudited)
Consolidated Balance Sheets -
May 4, 1996 and February 3, 1996 3
Consolidated Statements of Earnings -
Thirteen weeks ended May 4, 1996
and April 29, 1995 4
Condensed Consolidated Statements of
Cash Flows - Thirteen weeks ended
May 4, 1996 and April 29, 1995 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
- ---------------------------
SIGNATURE 11
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<PAGE>
<PAGE>3
<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except per share amounts)
<CAPTION>
May 4, 1996 Feb. 3, 1996*
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash....................................................... $ 23,751 $ 11,487
Accounts receivable, net................................... 8,472 4,832
Merchandise inventories.................................... 399,740 417,852
Deferred income taxes...................................... 16,338 16,338
Other...................................................... 10,878 15,964
------------- -------------
Total Current Assets.................................... 459,179 466,473
Property and Equipment-at cost:
Land....................................................... 244,037 243,738
Building and improvements.................................. 711,210 695,029
Furniture, fixtures and equipment.......................... 373,308 356,605
Construction in progress................................... 10,967 12,431
------------ -------------
1,339,522 1,307,803
Less accumulated depreciation and amortization............. 308,435 293,751
------------- -------------
Total Property and Equipment............................ 1,031,087 1,014,052
Other........................................................ 19,824 19,483
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Total Assets.................................................. $1,510,090 $1,500,008
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................... 151,693 222,524
Accrued expenses........................................... 104,139 95,875
Short-term borrowings...................................... 41,900 -
Income taxes payable....................................... 13,016 -
Current maturities of long-term debt....................... 1,168 108,206
------------- -------------
Total Current Liabilities............................... 311,916 426,605
Long-Term Debt, less current maturities...................... 386,258 280,793
Deferred Income Taxes........................................ 40,900 40,900
Convertible Subordinated Notes............................... 86,250 86,250
Commitments and Contingencies
Stockholders' Equity:
Common Stock, par value $1 per share:
Authorized 500,000,000 shares - Issued and
outstanding 62,237,087 and 62,084,021..................... 62,237 62,084
Additional paid-in capital................................. 141,387 139,202
Retained earnings.......................................... 541,411 524,443
------------- ------------
745,035 725,729
Less:
Cost of shares in benefits trust-2,232,500 shares, at cost. 60,269 60,269
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Total Stockholders' Equity.............................. 684,766 665,460
------------- ------------
Total Liabilities and Stockholders' Equity.................... $1,510,090 $1,500,008
============= ============
See notes to condensed consolidated financial statements.
*Taken from the audited financial statements at Feb. 3, 1996.
/TABLE
<PAGE>
<PAGE>4
<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
-------------------------------
May 4, 1996 April 29, 1995
-------------- ---------------
<S> <C> <C>
Merchandise Sales.................................... $364,250 $307,549
Service Revenue...................................... 64,364 53,660
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Total Revenues....................................... 428,614 361,209
Costs of Merchandise Sales........................... 255,730 217,261
Costs of Service Revenue............................. 51,583 43,561
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Total Costs of Revenues.............................. 307,313 260,822
Gross Profit from Merchandise Sales.................. 108,520 90,288
Gross Profit from Service Revenue.................... 12,781 10,099
------------- -------------
Total Gross Profit................................... 121,301 100,387
Selling, General and Administrative Expenses......... 81,707 67,055
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Operating Profit..................................... 39,594 33,332
Nonoperating Income.................................. 464 456
Interest Expense..................................... 8,128 7,965
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Earnings Before Income Taxes 31,930 25,823
Income Taxes......................................... 11,814 9,619
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Net Earnings......................................... 20,116 16,204
Retained Earnings, beginning of year................. 524,443 454,288
Cash Dividends....................................... 3,148 2,817
------------ -------------
Retained Earnings, end of period..................... $541,411 $467,675
============ =============
Net Earnings per Share............................... $ .33 $ .27
============ =============
Cash Dividends per Share............................. $ .0525 $ .0475
============ =============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>5
<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
UNAUDITED
<CAPTION>
Thirteen weeks ended
----------------------------------
May 4, 1996 April 29, 1995
-------------- --------------
<S> <C> <C>
Net Cash Provided by Operating Activities....................... $ 5,108 $ 81,157
Cash Flows from Investing Activities:
Capital expenditures............................................ (32,413) (39,211)
Other, net...................................................... 52 23
------------ ------------
Net Cash Used in Investing Activities........................... (32,361) (39,188)
Cash Flows from Financing Activities:
Net borrowings (payments) under line of credit agreements....... 147,400 (18,800)
Reduction of long-term debt..................................... (107,073) (13,640)
Acquisition of treasury stock................................... - (2,705)
Dividends paid.................................................. (3,148) (2,817)
Proceeds from exercise of stock options
and dividend reinvestment plan................................ 2,338 604
------------ -----------
Net Cash Provided by (Used in) Financing Activities............. 39,517 (37,358)
------------ -----------
Net Increase in Cash................................................. 12,264 4,611
Cash at Beginning of Year............................................ 11,487 11,748
------------ -----------
Cash at End of Period................................................ $ 23,751 $ 16,359
============ ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>6
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 May 4, 1996, the consolidated statements
of earnings for the thirteen week periods ended May 4, 1996 and April 29,
1995 and the condensed consolidated statements of cash flows for the thirteen
week periods ended May 4, 1996 and April 29, 1995 have been prepared by the
Company without audit. In the opinion of management, all adjustments
necessary to present fairly the financial position, results of operations and
cash flows at May 4, 1996 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 February 3,
1996 annual report to shareholders. The results of operations for the
thirteen week period ended May 4, 1996 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 $9,991,000 and
$10,491,000 higher at May 4, 1996 and February 3, 1996,respectively.
NOTE 3. Accounting for Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which was effective for the Company beginning February 4,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply
APB Opinion No. 25, which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will continue to apply
APB Opinion No. 25 to measure its stock based compensation awards to
employees and will disclose the required pro forma effect on net income in
the fiscal year ended February 1, 1997 financial statements.
<PAGE>
<PAGE>7
<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MAY 4, 1996
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 May 4, 1996 April 29, 1995 Fiscal 1996 vs.
(Fiscal 1996) (Fiscal 1995) Fiscal 1995
- ------------------------------------------------------ -------------- ------------- -----------------
<S> <C> <C> <C>
Merchandise Sales..................................... 85.0% 85.1% 18.4%
Service Revenue (1)................................... 15.0 14.9 19.9
------ ------ ------
Total Revenues........................................ 100.0 100.0 18.7
Costs of Merchandise Sales (2)........................ 70.2 (3) 70.6 (3) 17.7
Costs of Service Revenue (2).......................... 80.1 (3) 81.2 (3) 18.4
------ ------ ------
Total Costs of Revenues............................... 71.7 72.2 17.8
Gross Profit from Merchandise Sales................... 29.8 (3) 29.4 (3) 20.2
Gross Profit from Service Revenue..................... 19.9 (3) 18.8 (3) 26.6
------ ------ ------
Total Gross Profit.................................... 28.3 27.8 20.8
Selling, General and Administrative Expenses.......... 19.1 18.6 21.9
------ ------ ------
Operating Profit...................................... 9.2 9.2 18.8
Nonoperating Income................................... .1 .1 1.8
Interest Expense...................................... 1.9 2.2 2.0
------ ------ ------
Earnings Before Income Taxes.......................... 7.4 7.1 23.6
Income Taxes.......................................... 37.0(4) 37.2(4) 22.8
------ ------ ------
Net Earnings.......................................... 4.7 4.5 24.1
====== ====== ======
<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>8
Thirteen Weeks Ended May 4, 1996 vs. Thirteen Weeks Ended April 29, 1995
- ------------------------------------------------------------------------
Total revenues for the first quarter increased 19% due to a higher store
count (518 at May 4, 1996 compared with 436 at April 29, 1995) 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 9%.
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 decreases in service center personnel and service
center occupancy costs.
Selling, general and administrative expenses increased, as a percentage of
total revenues, due primarily to increases in general office expenses coupled
with slight increases in store expenses, media costs and employee benefit
costs.
<TABLE>
Nonoperating income consisted of the following:
(in thousands)
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Rental revenue $ 401 $ 378
Investment income 53 44
Other income 10 34
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Total $ 464 $ 456
====== ======
</TABLE>
Interest expense decreased, as a percentage of total revenues, due mainly to
spreading similar costs over higher sales volume.
Net earnings increased, as a percentage of total revenues, due to an increase
in comparable store sales coupled with increases, as a percentage of related
revenues in gross profit from merchandise sales and gross profit from service
revenues, and a decrease, as a percentage of total revenues, in interest
expense offset, in part, by an increase in selling general and administrative
expenses, as a percentage of total revenues.
<PAGE>
<PAGE>9
LIQUIDITY AND CAPITAL RESOURCES - May 4, 1996
- ----------------------------------------------
The Company's cash requirements arise principally from the need to finance
the acquisition, construction and equipping of new stores and to purchase
inventory. During the first quarter of 1996, the Company invested $32,413,000
in property and equipment while net inventory (net inventory includes the
increase in inventory less the change in accounts payable) increased
$52,719,000. Working capital increased from $39,868,000 at February 3, 1996
to $147,263,000 at May 4, 1996. At May 4, 1996, the Company had
stockholders' equity of $684,766,000 and long-term debt of $472,508,000. The
Company's long-term debt was 41% of its total capitalization at May 4, 1996
and 36% at February 3, 1996.
The Company plans to open approximately 88 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 $168,000,000. Funds required to finance the
store expansion including related inventory requirements are expected to come
primarily from operating activities with the remainder provided by unused
lines of credit which totalled $177,100,000 at May 4, 1996, or from accessing
traditional lending sources such as the public capital markets.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which was effective for the Company beginning February 4,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply
APB Opinion No. 25, which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will continue to apply
APB Opinion No. 25 to measure its stock based compensation awards to
employees and will disclose the required proforma effect on net income in the
fiscal year ended February 1, 1997 financial statements.
<PAGE>
<PAGE>10
PART II - OTHER INFORMATION
- ---------------------------
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
(27) Financial Data Schedules
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
during the quarter for which this report is filed.
<PAGE>
<PAGE>11
SIGNATURES
- ----------
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 6, 1996 By: /s/ Michael J. Holden
----------------------- -------------------------
Michael J. Holden
Executive Vice President,
Chief Financial Officer and Treasurer
<PAGE>
<PAGE>12
INDEX TO EXHIBITS
- -----------------
(11) Computations of Earnings Per Share
(27) Financial Data Schedule
<PAGE>
<TABLE>
<PAGE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES Exhibit 11
COMPUTATION OF NET EARNINGS PER SHARE
(in thousands, except per share data)
<CAPTION>
Thirteen weeks ended
----------------------------------
May 4, 1996 April 29, 1995
-------------- --------------
<S> <C> <C>
(a) Net Earnings..................................... $20,116 $16,204
Average number of Common Shares outstanding
during the period.............................. 59,919 59,300
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)............ 924 1,194
------------- -------------
(b) Average number of Common Shares assumed
outstanding during the period.................. 60,843 60,494
============= =============
Net Earnings per Share (a/b)..................... $ .33 $ .27
============ =============
<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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE
SHEET AS OF MAY 4, 1996 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE THIRTEEN WEEK
PERIOD ENDED MAY 4, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-1-1997
<PERIOD-END> MAY-4-1996
<CASH> 23,751
<SECURITIES> 0
<RECEIVABLES> 8,723
<ALLOWANCES> 251
<INVENTORY> 399,740
<CURRENT-ASSETS> 459,179
<PP&E> 1,339,522
<DEPRECIATION> 308,435
<TOTAL-ASSETS> 1,510,090
<CURRENT-LIABILITIES> 311,916
<BONDS> 472,508
0
0
<COMMON> 62,237
<OTHER-SE> 622,529
<TOTAL-LIABILITY-AND-EQUITY> 1,510,090
<SALES> 364,250
<TOTAL-REVENUES> 428,614
<CGS> 255,730
<TOTAL-COSTS> 133,290
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,128
<INCOME-PRETAX> 31,930
<INCOME-TAX> 11,814
<INCOME-CONTINUING> 20,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,116
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
