<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 August 2, 1997
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
---------------------------------------- ----------
(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 August 2, 1997 there were 63,442,612 shares of the registrant's
Common Stock outstanding.
<PAGE>
<PAGE>2
- -----------------------------------------------------------------------
Index Page
- -----------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Condensed Consolidated
Financial Statements (Unaudited)
Consolidated Balance Sheets -
August 2, 1997 and February 1, 1997 3
Consolidated Statements of Earnings -
Thirteen and Twenty-six weeks ended
August 2, 1997 and August 3, 1996 4
Condensed Consolidated Statements of
Cash Flows - Twenty-six weeks ended
August 2, 1997 and August 3, 1996 5
Notes to Condensed Consolidated
Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-13
PART II - OTHER INFORMATION 14-15
- ---------------------------
SIGNATURE 16
- -------------------------------------------------------------------
<PAGE>
<PAGE>3
<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except per share amounts)
<CAPTION>
Aug. 2, 1997 Feb. 1, 1997*
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash....................................................... $ 4,566 $ 2,589
Accounts receivable, net................................... 10,290 7,653
Merchandise inventories.................................... 547,132 520,082
Prepaid expenses........................................... 20,011 33,042
Deferred income taxes...................................... 16,982 16,982
Other...................................................... 24,170 24,570
------------- -------------
Total Current Assets.................................... 623,151 604,918
Property and Equipment - at cost
Land....................................................... 284,373 278,345
Building and improvements.................................. 853,023 794,244
Furniture, fixtures and equipment.......................... 499,746 448,425
Construction in progress................................... 38,659 22,528
------------ -------------
1,675,801 1,543,542
Less accumulated depreciation and amortization............. 391,353 353,808
------------- -------------
Total Property and Equipment............................ 1,284,448 1,189,734
Other........................................................ 24,519 23,713
------------- -------------
Total Assets.................................................. $1,932,118 $1,818,365
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................... $ 201,805 $ 337,536
Accrued expenses........................................... 156,471 133,557
Short-term borrowings...................................... 66,000 63,000
Current maturities of long-term debt....................... 152 134
------------- -------------
Total Current Liabilities............................... 424,428 534,227
Long-Term Debt, less current maturities...................... 376,820 217,178
Deferred Income Taxes........................................ 60,248 50,382
Convertible Subordinated Notes............................... 86,250 86,250
Zero Coupon Convertible Subordinated Notes................... 155,261 152,237
Commitments and Contingencies
Stockholders' Equity:
Common Stock, par value $1 per share:
Authorized 500,000,000 shares - Issued and
outstanding 63,442,612 and 63,119,491..................... 63,443 63,119
Additional paid-in capital................................. 167,452 162,660
Retained earnings.......................................... 658,485 612,581
------------- ------------
889,380 838,360
Less:
Shares held in benefits trust, 2,232,500 shares, at cost. 60,269 60,269
------------- ------------
Total Stockholders' Equity.............................. 829,111 778,091
------------- ------------
Total Liabilities and Stockholders' Equity.................... $1,932,118 $1,818,365
============= ============
<FN>
See notes to condensed consolidated financial statements.
*Taken from the audited financial statements at Feb. 1, 1997.
/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 Twenty-six weeks ended
--------------------------------- ----------------------------------
August 2, 1997 August 3, 1996 August 2, 1997 August 3, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Merchandise Sales.................................... $ 452,697 $ 405,724 $ 863,018 $ 769,974
Service Revenue...................................... 86,601 70,949 165,558 135,313
-------------- ------------- -------------- --------------
Total Revenues....................................... 539,298 476,673 1,028,576 905,287
Costs of Merchandise Sales........................... 311,702 279,634 596,425 535,364
Costs of Service Revenue............................. 67,131 55,618 129,744 107,201
-------------- ------------- -------------- --------------
Total Costs of Revenues.............................. 378,833 335,252 726,169 642,565
Gross Profit from Merchandise Sales.................. 140,995 126,090 266,593 234,610
Gross Profit from Service Revenue.................... 19,470 15,331 35,814 28,112
-------------- ------------- -------------- --------------
Total Gross Profit................................... 160,465 141,421 302,407 262,722
Selling, General and Administrative Expenses......... 104,957 86,088 202,794 167,795
-------------- ------------- -------------- --------------
Operating Profit..................................... 55,508 55,333 99,613 94,927
Nonoperating Income.................................. 1,356 483 2,609 947
Interest Expense..................................... 9,481 7,824 18,389 15,952
-------------- ------------- -------------- --------------
Earnings Before Income Taxes......................... 47,383 47,992 83,833 79,922
Income Taxes......................................... 17,295 17,757 30,599 29,571
-------------- ------------- -------------- --------------
Net Earnings......................................... 30,088 30,235 53,234 50,351
Retained Earnings, beginning of period............... 632,069 541,411 612,581 524,443
Cash Dividends....................................... 3,672 3,163 7,330 6,311
------------- ------------- ------------- --------------
Retained Earnings, end of period..................... $ 658,485 $ 568,483 $ 658,485 $ 568,483
============= ============= ============= ==============
Net Earnings per Share............................... $ .47 $ .49 $ .84 $ .82
============= ============= ============ ==============
Cash Dividends per Share............................. $ .0600 $ .0525 $ .120 $ .105
============= ============= ============ ==============
<FN>
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>
Twenty-six weeks ended
----------------------------------
August 2, 1997 August 3, 1996
-------------- --------------
<S> <C> <C>
Net Cash (Used in) Provided by Operating Activities............. $ (25,168) $ 56,946
Cash Flows from Investing Activities:
Capital expenditures............................................ (133,863) (77,798)
Other, net...................................................... 684 1,130
--------- ---------
Net Cash Used in Investing Activities........................... (133,179) (76,668)
Cash Flows from Financing Activities:
Net borrowings under line of credit agreements.................. 113,000 136,000
Reduction of long-term debt..................................... (212) (107,106)
Dividends paid.................................................. (7,330) (6,311)
Net proceeds from issuance of notes............................. 49,750 -
Proceeds from exercise of stock options
and dividend reinvestment plan................................ 5,116 8,107
--------- ---------
Net Cash Provided by Financing Activities....................... 160,324 30,690
--------- ---------
Net Increase in Cash................................................. 1,977 10,968
Cash at Beginning of Year............................................ 2,589 11,487
--------- ---------
Cash at End of Period................................................ $ 4,566 $ 22,455
========= =========
<FN>
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 August 2, 1997, the consolidated
statements of earnings for the thirteen and twenty-six week periods ended
August 2, 1997 and August 3, 1996 and the condensed consolidated statements of
cash flows for the twenty-six week periods ended August 2, 1997 and
August 3, 1996 have been prepared by the Company without audit. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations
and cash flows at August 2, 1997 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 1,
1997 annual report to shareholders. The results of operations for the
thirteen and twenty-six week periods ended August 2, 1997 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 $3,300,000
higher at August 2, 1997 and February 1, 1997.
NOTE 3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." This new standard requires dual presentation of basic and diluted
earnings per share (EPS) on the face of the statement of earnings and requires
reconciliation of the numerators and denominators of the basic and diluted EPS
calculations. This statement will be effective for the fourth quarter of the
Company's 1997 fiscal year. Assuming the Company had adopted the provisions of
SFAS No. 128, the pro forma effect on the Company's EPS calculations for the
thirteen week periods ended August 2, 1997 and August 3, 1996 are as follows:
August 2, 1997- as reported: $.47, basic: $.49; August 3, 1996 - as reported:
$.49, basic: $.50. The Company's EPS calculations for the twenty-six week
periods ended August 2, 1997 and August 3, 1996 are as follows: August 2, 1997-
as reported: $.84, basic: $.86; August 3, 1996 - as reported: $.82, basic: $.83.
The Company's reported EPS calculations are the same as pro forma diluted EPS.
NOTE 4. Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement, which establishes standards for reporting and disclosure of
comprehensive income, is effective for interim and annual periods beginning
after December 15, 1997, although earlier adoption is permitted.
Reclassification of financial information for earlier periods presented for
comparative purposes is required under SFAS No. 130. As this statement only
requires additional disclosures in the Company's consolidated financial
statements, its adoption will not have any impact on the Company's consolidated
financial position or results of operations. The Company expects to adopt SFAS
No. 130 effective February 1, 1998.
<PAGE>
<PAGE>7
NOTE 5. Disclosures about Segments of an Enterprise and Related Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement, which establishes
standards for the reporting of information about operating segments and requires
the reporting of selected information about operating segments in interim
financial statements, is effective for fiscal years beginning after
December 15, 1997, although earlier application is permitted. Reclassification
of segment information for earlier periods presented for comparative purposes is
required under SFAS No. 131. If applicable, this statement would only require
additional disclosures in the Company's consolidated financial statements and as
such, its adoption will not have any impact on the Company's consolidated
financial position or results of operations. The Company expects to adopt SFAS
No. 131 effective February 1, 1998.
<PAGE>
<PAGE>8
<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
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.
<CAPTION>
Percentage of Total Revenues Percentage Change
- ------------------------------------------------------ ------------------------------- -----------------
Thirteen weeks ended August 2, 1997 August 3, 1996 Fiscal 1997 vs.
(Fiscal 1997) (Fiscal 1996) Fiscal 1996
- ------------------------------------------------------ -------------- -------------- -----------------
<S> <C> <C> <C>
Merchandise Sales..................................... 83.9% 85.1% 11.6%
Service Revenue (1)................................... 16.1 14.9 22.1
----- ----- -----
Total Revenues........................................ 100.0 100.0 13.1
Costs of Merchandise Sales (2)........................ 68.9 (3) 68.9 (3) 11.5
Costs of Service Revenue (2).......................... 77.5 (3) 78.4 (3) 20.7
----- ----- -----
Total Costs of Revenues............................... 70.2 70.3 13.0
Gross Profit from Merchandise Sales................... 31.1 (3) 31.1 (3) 11.8
Gross Profit from Service Revenue..................... 22.5 (3) 21.6 (3) 27.0
----- ----- -----
Total Gross Profit.................................... 29.8 29.7 13.5
Selling, General and Administrative Expenses.......... 19.5 18.1 21.9
----- ----- -----
Operating Profit...................................... 10.3 11.6 .3
Nonoperating Income................................... .3 .1 180.7
Interest Expense...................................... 1.8 1.6 21.2
----- ----- -----
Earnings Before Income Taxes.......................... 8.8 10.1 (1.3)
Income Taxes.......................................... 36.5 (4) 37.0 (4) (2.6)
----- ----- -----
Net Earnings.......................................... 5.6 6.3 (.5)
===== ===== =====
<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>9
Thirteen Weeks Ended August 2, 1997 vs. Thirteen Weeks Ended August 3, 1996
- ---------------------------------------------------------------------------
Total revenues for the second quarter increased 13.1% due primarily to a higher
store count (646 at August 2, 1997 compared with 540 at August 3, 1996).
Comparable store revenues (revenues generated by stores in operation during
the same months of each period) increased slightly by 0.4%. Comparable store
merchandise sales decreased 1.3% while comparable service revenue
increased 10.3%.
Gross profit from merchandise sales remained constant, as a percentage of
merchandise sales, as substantially higher merchandise margins were offset by
increases in store occupancy and warehousing costs.
Selling, general and administrative expenses increased substantially, as a
percentage of total revenues, due primarily to increases in store expenses and
general office costs offset, in part, by a decrease in media costs.
<TABLE>
Nonoperating income consisted of the following:
(in thousands)
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Rental revenue $ 492 $ 405
Investment income 855 76
Other income 9 2
------ ------
Total $1,356 $ 483
====== ======
</TABLE>
The 0.5% decrease in net earnings was due primarily to relatively flat
comparable store sales and gross profit from merchandise sales, as a percentage
of merchandise sales, combined with substantially higher selling, general and
administrative expenses, as a percentage of total revenues.
<PAGE>
<PAGE>10
<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES
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.
<CAPTION>
Percentage of Total Revenues Percentage Change
- ------------------------------------------------------ ---------------------------------- -----------------
Twenty-six weeks ended August 2, 1997 August 3, 1996 Fiscal 1997 vs.
(Fiscal 1997) (Fiscal 1996) Fiscal 1996
- ------------------------------------------------------ -------------- ------------- -----------------
<S> <C> <C> <C>
Merchandise Sales..................................... 83.9% 85.1% 12.1%
Service Revenue (1)................................... 16.1 14.9 22.4
------- ------- -------
Total Revenues........................................ 100.0 100.0 13.6
Costs of Merchandise Sales (2)........................ 69.1 (3) 69.5 (3) 11.4
Costs of Service Revenue (2).......................... 78.4 (3) 79.2 (3) 21.0
------ ------ ------
Total Costs of Revenues............................... 70.6 71.0 13.0
Gross Profit from Merchandise Sales................... 30.9 (3) 30.5 (3) 13.6
Gross Profit from Service Revenue..................... 21.6 (3) 20.8 (3) 27.4
------ ------ ------
Total Gross Profit.................................... 29.4 29.0 15.1
Selling, General and Administrative Expenses.......... 19.7 18.5 20.9
------ ------ ------
Operating Profit...................................... 9.7 10.5 4.9
Nonoperating Income................................... .3 .1 175.5
Interest Expense...................................... 1.8 1.8 15.3
------ ------ ------
Earnings Before Income Taxes.......................... 8.2 8.8 4.9
Income Taxes.......................................... 36.5 (4) 37.0 (4) 3.5
------ ------ ------
Net Earnings.......................................... 5.2 5.6 5.7
====== ====== ======
<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>11
Twenty-six Weeks Ended August 2, 1997 vs. Twenty-six Weeks Ended August 3, 1996
- -------------------------------------------------------------------------------
Total revenues for the first half increased 13.6% due to a higher store count
(646 at August 2, 1997 compared with 540 at August 3, 1996) coupled with a 1.3%
increase in comparable store revenues. Comparable store merchandise sales
decreased 0.4% while comparable service revenue increased 10.7%.
Gross profit from merchandise sales increased, as a percentage of merchandise
sales, due primarily to substantially higher merchandise margins offset, in
part, by increases in store occupancy costs and warehousing costs.
Gross profit from service revenue increased, as a percentage of service
revenue, due primarily to a decrease in service center employee benefits expense
offset, in part, by an increase in service center personnel costs.
Selling, general and administrative expenses increased substantially, as a
percentage of total revenues, due primarily to increases in store expenses and
general office costs offset, in part, by a decrease in media costs.
<TABLE>
Nonoperating income consisted of the following:
(in thousands)
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Rental revenue $ 908 $807
Investment income 1,661 129
Other income 40 11
------ ----
Total $2,609 $947
====== ====
</TABLE>
The 5.7% increase in net earnings was due primarily to increases in total and
comparable store revenues coupled with an increase in gross profit from
merchandise sales, as a percentage of merchandise sales, an increase in
gross profit from service revenue, as a percentage of service revenue, and an
increase in investment income, as a percentage of total revenues, offset, in
part, by a substantial increase in selling, general and administrative
expenses, as a percentage of total revenues.
<PAGE>
<PAGE>12
LIQUIDITY AND CAPITAL RESOURCES - August 2, 1997
- ------------------------------------------------
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 twenty-six weeks of 1997, the Company invested
$133,863,000 in property and equipment while net inventory (net inventory
includes the increase in inventory less the change in accounts payable)
increased $162,781,000. Working capital increased from $70,691,000 at February
1, 1997 to $198,723,000 at August 2, 1997. At August 2, 1997 the Company had
stockholders' equity of $829,111,000 and long-term debt of $618,331,000. The
Company's long-term debt was 43% of its total capitalization at August 2,
1997 and 37% at February 1, 1997.
The Company plans to open as many as 68 new stores during the balance of
the current fiscal year. Given the strong demand for automotive repair and
service the Company intends to open fewer PARTS USAs in 1997 than previously
planned, conserving capital and resources for an increased rate of new store
openings of its full service SUPERCENTERS in future years. Management estimates
that if all 68 new stores are opened the cost of this expansion, coupled with
expenditures in existing stores, warehouses and offices will be approximately
$100,000,000. 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
$153,000,000 at August 2, 1997, from the Company's Medium-Term Note program
with remaining capacity of $100,000,000 as of August 2, 1997 or from further
accessing traditional lending sources such as the public capital markets.
On July 10, 1997 the Company established a Medium-Term Note program which
permits the Company to issue up to $150,000,000 of Medium-Term Notes from time
to time. Under such program, on July 15, 1997 the Company sold $50,000,000
principal amount of 6.52% senior notes maturing on July 16, 2007. Interest is
payable semi-annually on January 2 and July 2. The net proceeds of $49,750,000
were used for working capital, the repayment of debt and for general corporate
purposes.
FUTURE ACCOUNTING STANDARDS
- ---------------------------
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." This new standard requires dual presentation of basic and diluted
earnings per share (EPS) on the face of the statement of earnings and requires
reconciliation of the numerators and denominators of the basic and diluted EPS
calculations. This statement will be effective for the fourth quarter of the
Company's 1997 fiscal year. Assuming the Company had adopted the provisions of
SFAS No. 128, the pro forma effect on the Company's EPS calculations for the
thirteen week periods ended August 2, 1997 and August 3, 1996 are as follows:
August 2, 1997- as reported: $.47, basic: $.49; August 3, 1996 - as reported:
$.49, basic: $.50. The Company's EPS calculations for the twenty-six week
periods ended August 2, 1997 and August 3, 1996 are as follows: August 2, 1997-
as reported: $.84, basic: $.86; August 3, 1996 - as reported: $.82, basic: $.83.
The Company's reported EPS calculations are the same as pro forma diluted EPS.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement, which establishes standards for reporting and disclosure of
comprehensive income, is effective for interim and annual periods beginning
after December 15, 1997, although earlier adoption is permitted.
Reclassification of financial information for earlier periods presented for
comparative purposes is required under SFAS No. 130. As this statement only
requires additional disclosures in the Company's consolidated financial
statements, its adoption will not have any impact on the Company's consolidated
financial position or results of operations. The Company expects to adopt SFAS
No. 130 effective February 1, 1998.
<PAGE>
<PAGE>13
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement, which establishes
standards for the reporting of information about operating segments and requires
the reporting of selected information about operating segments in interim
financial statements, is effective for fiscal years beginning after
December 15, 1997, although earlier application is permitted. Reclassification
of segment information for earlier periods presented for comparative purposes is
required under SFAS No. 131. If applicable, this statement would only require
additional disclosures in the Company's consolidated financial statements and as
such, its adoption will not have any impact on the Company's consolidated
financial position or results of operations. The Company expects to adopt SFAS
No. 131 effective February 1, 1998.
<PAGE>
<PAGE>14
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
The Company is a defendant in a purported class action entitled "Brian Lee,
Anthony Baxton, and Harry Schlein v. The Pep Boys - Manny, Moe & Jack," in the
Circuit Court of Mobile County, Alabama. The Company has moved to dismiss the
case for failure to state a claim. The Company's motion to dismiss is pending
before the Circuit Court of Mobile County, Alabama. In their complaint, the
plaintiffs allege that the Company sold old or used automotive batteries to
consumers as if those batteries were new. The complaint purports to state
causes of action for fraud and deceit, negligent misrepresentation, breach of
contract and violation of state consumer protection statutes. The plaintiffs
are seeking compensatory and punitive damages, as well as injunctive and
equitable relief. The Company believes the claims are without merit and intends
to vigorously defend this action.
The Company is also party to various other lawsuits and claims arising in the
normal course of business. In the opinion of management, these lawsuits and
claims, including the case above, are not singularly or in the aggregate,
material to the Company's financial position or results of operations.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of shareholders was held on June 4, 1997, The
shareholders approved the election of directors shown below.
Directors Elected at Annual Meeting of Shareholders
---------------------------------------------------
Bernard J. Korman Chairman of the Board; Graduate Health
Systems
Chairman of the Board; NutraMax
Products, Inc.
J. Richard Leaman, Jr. Retired, formerly President & CEO;
S.D. Warren Company
.................................................................
Directors whose term of office continued after the Annual Meeting
of Shareholders
-----------------------------------------------------------------
Malcolmn D. Pryor Chairman of the Board;
Pryor, McClendon, Counts & Co., Inc.
Benjamin Strauss Retired, formerly Chairman & CEO;
Pep Boys
Myles H. Tanenbaum President & CEO; Arbor Property Trust
David V. Wachs Retired, formerly Chairman of the Board
& CEO; Charming Shoppes, Inc.
Mitchell G. Leibovitz Chairman of the Board & CEO; Pep Boys
Lester Rosenfeld Private Investor
Lennox K. Black Chairman of the Board;
Teleflex Incorporated
Chairman of the Board;
Penn Virginia Corporation
...................................................................
The shareholders approved an amendment to the Company's 1990 Stock
Incentive Plan with 48,864,301 affirmative votes; 5,037,214 negative
votes and 262,943 abstentions. The amendment increased the number of
shares available for award from 4,000,000 to a total of 6,000,000
shares.
<PAGE>
<PAGE>15
The shareholders also approved the appointment of the independent
auditors Deloitte & Touche, LLP with 54,149,838 affirmative votes,
129,939 negative votes and 160,043 abstentions.
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 Schedule
(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>16
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: By: /s/ Michael J. Holden
----------------------- -------------------------
Michael J. Holden
Executive Vice President,
& Chief Financial Officer
<PAGE>
<PAGE>17
INDEX TO EXHIBITS
- -----------------
(11) Computations of Earnings Per Share
(27) Financial Data Schedule
<TABLE>
THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<CAPTION>
Thirteen weeks ended Twenty-six weeks ended
---------------------------------- ---------------------------------
August 2, 1997 August 3, 1996 August 2, 1997 August 3, 1996
-------------- -------------- -------------- --------------
<S> <C> <C>
Net Earnings..................................... $30,088 $30,235 $53,234 $50,351
Adjustment for interest on 4% convertible
subordinated notes, net of income tax effect... 554 542 1,108 1,084
Adjustment for interest on zero coupon convertible
subordinated notes, net of income tax effect... 961 - 1,920 -
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Adjusted net earnings $31,603 $30,777 $56,262 $51,435
- ----------------------------------------------------------------------------------------------------------------------------------
Average number of Common Shares outstanding
during the period.............................. 61,074 60,131 $60,999 $60,024
Common shares assumed issued upon conversion of
4% convertible subordinated notes.............. 2,104 2,104 2,104 2,104
Common shares assumed issued upon conversion of
zero coupon convertible subordinated notes..... 3,513 - 3,513 -
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)............ 665 929 668 927
- ----------------------------------------------------------------------------------------------------------------------------------
(b) Average number of Common Shares assumed
outstanding during the period.................. 67,356 63,164 67,284 63,055
- ----------------------------------------------------------------------------------------------------------------------------------
Net Earnings per Share (a/b)..................... $ .47 $ .49 $ .84 $ .82
- ----------------------------------------------------------------------------------------------------------------------------------
<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>
</DOCUMEMT>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE
SHEET AS OF AUGUST 2, 1997 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWENTY-SIX WEEK
PERIOD ENDED AUGUST 2, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> AUG-2-1997
<CASH> 4,566
<SECURITIES> 0
<RECEIVABLES> 10,575
<ALLOWANCES> 285
<INVENTORY> 547,132
<CURRENT-ASSETS> 623,151
<PP&E> 1,675,801
<DEPRECIATION> 391,353
<TOTAL-ASSETS> 1,932,118
<CURRENT-LIABILITIES> 424,428
<BONDS> 618,331
0
0
<COMMON> 63,443
<OTHER-SE> 765,668
<TOTAL-LIABILITY-AND-EQUITY> 1,932,118
<SALES> 863,018
<TOTAL-REVENUES> 1,028,576
<CGS> 596,425
<TOTAL-COSTS> 726,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,389
<INCOME-PRETAX> 83,833
<INCOME-TAX> 30,599
<INCOME-CONTINUING> 53,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,234
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
