The Pep Boys - Manny, Moe & Jack (NYSE:"PBY"), the nation's
leading automotive aftermarket retail and service chain, announced
the following results for the thirteen weeks (fourth quarter) and
fifty-two weeks (fiscal year) ended January 28, 2006. Operating
Results Fourth Quarter Sales Sales for the thirteen weeks ended
January 28, 2006 were $549,817,000, 0.7% less than the $553,440,000
recorded last year. Comparable merchandise sales increased 0.7% and
comparable service revenue decreased 4.3%. In accordance with GAAP,
merchandise sales includes merchandise sold through both our retail
and service center lines of business and service revenue is limited
to labor sales. Recategorizing Sales into the respective lines of
business from which they are generated, comparable Retail Sales
(DIY and Commercial) increased 0.6% and comparable Service Center
Revenue (labor plus installed merchandise and tires) decreased
1.3%. Earnings On a GAAP basis, Net Loss from Continuing Operations
Before Cumulative Effect of Change in Accounting Principle
increased from a Net Loss of $9,701,000 (($0.18) per share - basic
and diluted) to a Net Loss of $22,703,000 (($0.42) per share -
basic and diluted). Adjusted Net Loss from Continuing Operations
Before Cumulative Effect of Change in Accounting Principle improved
from a Net Loss in 2004 of $13,403,000 (($0.24) per share - basic
and diluted), excluding an $8,125,000 after tax gain related to the
sale of a distribution center and $4,423,000 in after tax charges
related to certain executive severance obligations, to a Net Loss
in 2005 of $13,153,000 (($0.24) per share - basic and diluted),
excluding $9,550,000 in after tax charges related to the early
extinguishment of debt and the write down of certain commercial
sales information system assets. Fiscal Year Sales Sales for the
fiscal year ended January 28, 2006 were $2,235,226,000, 1.5% lower
than the $2,269,974,000 recorded last year. Comparable merchandise
sales decreased 0.2% and comparable service revenue decreased 6.1%.
Recategorizing Sales (see above), comparable Retail Sales increased
0.6% and comparable Service Center Revenue decreased 3.9%. Earnings
On a GAAP basis, Net Earnings (Loss) from Continuing Operations
Before Cumulative Effect of Change in Accounting Principle
decreased from Net Earnings of $25,455,000 ($0.45 per share - basic
and $0.44 per share - diluted) to a Net Loss of $35,773,000
(($0.65) per share - basic and diluted). Adjusted Net Earnings
(Loss) from Continuing Operations Before Cumulative Effect of
Change in Accounting Principle decreased from Net Earnings in 2004
of $21,834,000 ($0.39 per share - basic and $0.38 per share -
diluted), excluding a $7,947,000 after tax gain related to the sale
of a distribution center and $4,326,000 in after tax charges
related to certain executive severance obligations, to a Net Loss
in 2005 of $26,183,000 (($0.48) per share - basic and diluted),
excluding $9,590,000 in after tax charges related to the early
extinguishment of debt and the write down of certain commercial
sales information system assets. Commentary CEO Larry Stevenson
noted, "For Q4, comparable Service Center Revenue accelerated from
recent quarters. As we discussed on our last earnings call, we have
been emphasizing the stability and training of our re-invigorated
store and field team, and that is starting to show results with
customer volumes. As we begin 2006, our primary focus transitions
from sales growth to increasing labor productivity and gross profit
rates while maintaining sales momentum. On the retail/commercial
side, our focus this holiday season on margin management, rather
than sales, resulted in improved gross profit dollars and gross
profit rate vs. last year, despite essentially flat sales. As with
this quarter, we expect to maintain or reduce our SG&A expense
until Service Center profitability improves. Inventories for Q4
were up 2.2% from last year, down from a year on year increase in
Q3 of 6.0%." Accounting Matters Service Labor Reallocation As
previously announced, effective the first day of fiscal 2005, we
restructured our field operations into separate retail and service
teams. In connection with this restructuring, certain retail
personnel, who were previously utilized in merchandising roles
supporting the service business, were reassigned to purely
service-related responsibilities. The labor and benefits costs
related to these associates, approximately $5,800,000 in this
quarter, which were previously recognized in SG&A, are now
recognized in Costs of Service Revenue. Co-op Advertising During
fiscal 2005, a portion of our vendor support funds were provided in
support of specific advertising costs or "co-op," which, in
accordance with EITF No. 02-16, we accounted for as a reduction of
SG&A. We have completed the restructuring of substantially all
of our vendor agreements to provide flexibility in how we use
vendor support funds, to eliminate the administrative burden of
tracking the application of such funds and to ensure that we are
receiving the best possible pricing. Going forward, substantially
all of the future allowances received from vendors will be
accounted for as a reduction of inventories and recognized as a
reduction to cost of sales as the related inventories are sold in
accordance with EITF No. 02-16. Assuming that all of our vendor
agreements had been so restructured as of October 30, 2005, both
our SG&A and Gross Profit for the fourth quarter would have
increased by approximately $8,800,000, without materially impacting
inventory valuation or Net Earnings from Continuing Operations.
Commentary CFO Harry Yanowitz said, "During the quarter, we
refinanced a substantial portion of our debt by closing a
$200,000,000 five-year senior secured bank facility. The proceeds
were used to pay down the remainder of our $143,000,000 medium term
notes, our only maturities in 2006, and to pay down a portion of
our revolving credit facility. As part of that refinancing, we
settled an interest rate remarketing option attached to the medium
term notes at a cost of $8,100,000 and pre-paid $3,300,000 in
interest. In addition, we recorded a $4,200,000 non-cash asset
impairment charge, reflecting the remaining value of a commercial
sales software asset. This asset represents the only remaining
piece of a larger in-store system developed between 2001 and 2003,
which the Company decided not to roll out and to which no further
additions have been made since 2003." To aid in comparing this
quarter's results to last year's, we have provided the following
summary table reflecting the adjustments for the foregoing items,
as well as to eliminate the benefit of an asset sale and the cost
of executive severance costs recorded in Q4 fiscal 2004. Please see
the Additional Information for a reconciliation of the Adjusted
results to GAAP. -0- *T Summary Results (dollar amounts in
thousand, except per share amounts) Adjusted (LOB GAAP Format) Q4
Fiscal Q4 Fiscal Q4 Fiscal Q4 Fiscal 2005 2004 2005 2004 ---------
--------- --------- --------- Gross Profit from Merchandise Sales
(GAAP)/Retail Sales (Adjusted) $112,515 $125,191 $ 84,728 $ 74,610
Gross Profit (Loss) from Service Revenue (GAAP)/ Service Center
Revenue (Adjusted) (310) 19,268 36,251 52,268 --------- ---------
--------- --------- Total Gross Profit $112,205 $144,459 $120,979
$126,878 ========= ========= ========= ========= Selling, General
and Administrative Expenses $127,639 $148,478 $132,213 $136,681
Operating Loss $(15,434) $ (4,019) $(11,234) $ (9,803) Loss From
Continuing Operations Before Cumulative Effect of Change in
Accounting Principle $(22,703) $ (9,701) $(13,153) $(13,403) Loss
Per Share From Continuing Operations Before Cumulative Effect of
Change in Accounting Principle - Basic and Diluted $ (0.42) $
(0.18) $ (0.24) $ (0.24) Comparable Merchandise Sales (GAAP)/Retail
Sales (Adjusted) 0.7% 6.0% 0.6% 8.2% Comparable Service Revenue
(GAAP)/Service Center Revenue (Adjusted) -4.3% -1.2% -1.3% -0.3%
Total Sales -0.7% 4.6% - - *T Form 10-K and Annual Meeting The
Company's Annual Report on Form 10-K discussing the results for the
fiscal year is expected to be filed with the Securities and
Exchange Commission on or before April 13, 2006, and the Company
expects to hold its 2006 Annual Meeting of Shareholders in late
summer. -0- *T Pep Boys Financial Highlights January 28, January
29, Thirteen Weeks Ended: 2006 2005 ---------------------
------------- ------------- Total Revenues $549,817,000
$553,440,000 Net Loss From Continuing Operations Before Cumulative
Effect of Change in Accounting Principle $(22,703,000) $
(9,701,000) Adjustments (Net of Tax): Loss on Impairment of
Software Assets $ 2,650,000 (a) $ - Gain on Disposal of Warehouse -
(8,125,000) Executive Severance - 4,423,000 Extinguishment of
Interest Rate Call Option and Interest on Debt Prepayments $
6,900,000 (b) $ - ------------- ------------- Total Adjustments $
9,550,000 $ (3,702,000) ============= ============= Adjusted Loss
From Continuing Operations Before Cumulative Effect of Change in
Accounting Principle $(13,153,000) $(13,403,000) =============
============= Average Shares - Basic and Diluted 54,180,000
55,017,000 Basic and Diluted Loss Per Share from Continuing
Operations Before Cumulative Effect of Change in Accounting
Principle $ (0.42) $ (0.18) Adjusted Basic and Diluted Loss Per
Share from Continuing Operations Before Cumulative Effect of Change
in Accounting Principle $ (0.24) $ (0.24) (a) Write-down of the
remaining portion of commercial sales information system assets.
(b) Obligations associated with the prepayment of $100,000,000
6.92% Term Enhanced Remarketable Securities and $43,000,000 6.88%
Medium Term Notes. Pep Boys Financial Highlights January 28,
January 29, Fifty-Two Weeks Ended: 2006 2005 ----------------------
--------------- --------------- Total Revenues $2,235,226,000
$2,269,974,000 Net (Loss) Earnings From Continuing Operations
Before Cumulative Effect of Change in Accounting Principle $
(35,773,000) $ 25,455,000 Adjustments (Net of Tax): Loss on
Impairment of Software Assets $ 2,667,000 (a) $ - Gain on Disposal
of Warehouse - (7,947,000) Executive Severance - 4,326,000
Extinguishment of Interest Rate Call Option and Interest on Debt
Prepayments $ 6,923,000 (b) $ - --------------- ---------------
Total Adjustments $ 9,590,000 $ (3,621,000) ===============
=============== Adjusted (Loss) Earnings From Continuing Operations
Before Cumulative Effect of Change in Accounting Principle $
(26,183,000) $ 21,834,000 =============== =============== Average
Shares - Basic 54,794,000 56,353,000 Average Shares - Diluted
54,794,000 57,649,000 Basic (Loss) Earnings Per Share from
Continuing Operations Before Cumulative Effect of Change in
Accounting Principle $ (0.65) $ 0.45 Diluted (Loss) Earnings Per
Share from Continuing Operations Before Cumulative Effect of Change
in Accounting Principle $ (0.65) $ 0.44 Adjusted Basic (Loss)
Earnings Per Share from Continuing Operations Before Cumulative
Effect of Change in Accounting Principle $ (0.48) $ 0.39 Adjusted
Diluted (Loss) Earnings Per Share from Continuing Operations Before
Cumulative Effect of Change in Accounting Principle $ (0.48) $ 0.38
(a) Write-down of the remaining portion of commercial sales
information system assets. (b) Obligations associated with the
prepayment of $100,000,000 6.92% Term Enhanced Remarketable
Securities and $43,000,000 6.88% Medium Term Notes. *T Pep Boys has
593 stores and more than 6,000 service bays in 36 states and Puerto
Rico. Along with its vehicle repair and maintenance capabilities,
the Company also serves the commercial auto parts delivery market
and is one of the leading sellers of replacement tires in the
United States. Customers can find the nearest location by calling
1-800-PEP-BOYS or by visiting pepboys.com. Certain statements
contained herein constitute "forward-looking statements" within the
meaning of The Private Securities Litigation Reform Act of 1995.
The word "guidance," "expect," "anticipate," "estimates,"
"forecasts" and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements include
management's expectations regarding future financial performance,
automotive aftermarket trends, levels of competition, business
development activities, future capital expenditures, financing
sources and availability and the effects of regulation and
litigation. Although the Company believes that the expectations
reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its
expectations will be achieved. The Company's actual results may
differ materially from the results discussed in the forward-looking
statements due to factors beyond the control of the Company,
including the strength of the national and regional economies,
retail and commercial consumers' ability to spend, the health of
the various sectors of the automotive aftermarket, the weather in
geographical regions with a high concentration of the Company's
stores, competitive pricing, the location and number of
competitors' stores, product and labor costs and the additional
factors described in the Company's filings with the SEC. The
Company assumes no obligation to update or supplement
forward-looking statements that become untrue because of subsequent
events. Investors have an opportunity to listen to the Company's
quarterly conference calls discussing its results and related
matters. The call for the fourth quarter will be broadcast live on
Friday, March 3 at 8:30 a.m. EST over the Internet at Broadcast
Networks' Vcall website, located at http://www.vcall.com. To listen
to the call live, please go to the website at least 15 minutes
early to register, download and install any necessary audio
software. For those who cannot listen to the live broadcast, a
replay will be available shortly after the call. Supplemental
financial information will be available the morning of March 3rd on
Pep Boys' website at www.pepboys.com.
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