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 (third quarter) and
thirty-nine weeks ended October 28, 2006. Operating Results Third
Quarter Sales Sales for the thirteen weeks ended October 28, 2006
were $550,849,000, 0.9% more than the $545,904,000 recorded last
year. Comparable Sales increased 0.8 %, including a 0.2% comparable
merchandise sales increase and a 3.9% comparable service revenue
increase. 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) decreased 1.8% and comparable Service Center Revenue
(labor plus installed merchandise and tires) increased 4.8%.
Earnings Net Loss from Continuing Operations Before Cumulative
Effect of Change in Accounting Principle improved from a Net Loss
of $11,376,000 ($.21 per share - basic and diluted) to a Net Loss
of $7,721,000 ($.14 per share - basic and diluted). Nine Months
Sales Sales for the nine months ended October 28, 2006 were
$1,686,015,000 versus $1,687,548,000 recorded last year. Comparable
Sales increased 0.1%, including a 0.1% comparable merchandise sales
decrease and a 1.0% comparable service revenue increase.
Recategorizing Sales (see above), comparable Retail Sales decreased
1.7% and comparable Service Center Revenue increased 2.9%. Earnings
Net Loss from Continuing Operations Before Cumulative Effect of
Change in Accounting Principle improved from a Net Loss of
$12,930,000 ($.23 per share - basic and diluted) to a Net Loss of
$7,118,000 ($.13 per share - basic and diluted). Commentary William
Leonard, Interim CEO said, �While the external operating
environment continued to be difficult this quarter, we have started
to make progress in improving our operating results. Notably, we
posted positive comparable store sales in our service center
operations, and made continued progress on our retail margins.
Also, we have been making continuing efforts to reduce our cost
structure to help improve overall results. We expect to build
momentum on these initiatives into the final quarter of the year
and through next year. Rebuilding the operating performance of our
service center operations remains my highest priority. I am
confident that building on a foundation of the right people,
executing every day, and delighting our service customers will
allow this franchise to thrive again.� Harry Yanowitz, Chief
Financial Officer, said, �We have reinforced our balance sheet
through a restrained capital spend, careful working capital
management, and completed an important refinancing. These efforts
have generated significant cash flow improvements and given the
organization the ability to focus solely on improving current
operating results by moving our next significant funded debt
maturity to 2013. During the quarter, we amended our Term Loan
Facility to increase its size from $200 to $320 million, to extend
its maturity from January 2011 to October 2013 and to reduce its
interest rate from LIBOR plus 3.00% to LIBOR plus 2.75% (with the
ability to further reduce the interest rate to LIBOR plus 2.50%,
upon achieving a specified leverage ratio). Proceeds were used to
satisfy and discharge $119 million in outstanding convertible notes
that mature June 1, 2007. Due to this refinancing, we recorded
additional interest expense of $4.2 million to reflect pre-paid
interest, fees and expenses, and the fair value of the remaining
conversion option in the defeased convertible notes. Margins, as
presented in our Line of Business format, improved slightly,
despite negative comps in retail, higher tire prices and higher
depreciation and occupancy costs. SG&A expenses were
essentially flat, as we anniversaried the reductions made during
the third quarter last year. In the third quarter this year versus
last year, Operating Profit improved by $11.7 million to $3.2
million, and EBITDA improved by $12.3 million to $25.1 million.
Year-to-date Net Cash Provided by Operating Activities has improved
by $83.5 million, and Capital Expenditures are $40.1 million less
than last year. We had no significant Gain or Loss on Sale of real
estate properties in the third quarter of 2006 or 2005. In the
third quarter last year, we recorded an increase to our road hazard
tire warranty estimate which reduced sales, margins and pre-tax
operating income by approximately $1.9 million.� Accounting Matters
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. In the third quarter of fiscal 2006, all of the allowances
received from vendors were 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 July 30, 2005, both our SG&A and Gross Profit for the
third quarter of fiscal 2005 would have increased by approximately
$7.5 million, without materially impacting inventory valuation or
Net Loss from Continuing Operations Before Cumulative Effect of
Change in Accounting Principle. � Pep Boys Financial Highlights �
Thirteen Weeks Ended: October 28, 2006 October 29, 2005 � Total
Revenues $ 550,849,000� $ 545,904,000� � Net Loss From Continuing
Operations Before Cumulative Effect of Change in Accounting
Principle $ (7,721,000 ) $ (11,376,000) � Average Shares � Basic
and Diluted 54,313,000� 54,774,000� � Basic and Diluted Loss Per
Share from Continuing Operations Before Cumulative Effect of Change
in Accounting Principle $ (0.14 ) $ (0.21) Thirty-nine Weeks Ended:
October 28, 2006 October 29, 2005 � Total Revenues $ 1,686,015,000�
$ 1,687,548,000� � Net Loss From Continuing Operations Before
Cumulative Effect of Change in Accounting Principle $ (7,118,000) $
(12,930,000) � Average Shares � Basic and Diluted 54,264,000�
55,288,000� � Basic and Diluted Loss Per Share from Continuing
Operations Before Cumulative Effect of Change in Accounting
Principle $ (0.13) $ (0.23) � EBITDA Reconciliation EBITDA is
defined as Net Loss plus Interest Expense, minus Income Tax
Benefit, plus Depreciation and Amortization. EBITDA is not a
measurement of financial performance under generally accepted
accounting principles and may not be compared to similarly
captioned information reported by other companies. In addition, it
does not replace net income or cash flow from operations as an
indicator of financial performance or liquidity. We believe EBITDA
provides a useful indicator of levels of our financial performance
and is frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in our industry.
A reconciliation of EBITDA for the thirteen and thirty-nine weeks
ended October 28, 2006 and October 29, 2005, respectively, to the
most directly comparable GAAP measure in accordance with SEC
Regulation G follows: � Thirteen Weeks Ended: October 28, 2006
October 29, 2005 � Net Loss $ (7,922,000) $ (11,195,000) � Interest
Expense 15,581,000� 9,205,000� � Income Tax Benefit (3,642,000)
(5,856,000) � Depreciation and Amortization � 21,127,000� �
20,628,000� � EBITDA $ 25,144,000� $ 12,782,000� Thirty-nine Weeks
Ended: October 28, 2006 October 29, 2005 � Net Loss $ (7,273,000) $
(12,927,000) � Interest Expense 37,886,000� 27,354,000� � Income
Tax Benefit (3,042,000) (7,212,000) � Depreciation and Amortization
� 62,546,000� � 59,283,000� � EBITDA $ 90,117,000� $ 66,498,000� �
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 third quarter will be broadcast live on
Wednesday, November 15th 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 November 15
on Pep Boys' website at www.pepboys.com. 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 (third quarter) and thirty-nine weeks ended October
28, 2006. Operating Results Third Quarter Sales Sales for the
thirteen weeks ended October 28, 2006 were $550,849,000, 0.9% more
than the $545,904,000 recorded last year. Comparable Sales
increased 0.8 %, including a 0.2% comparable merchandise sales
increase and a 3.9% comparable service revenue increase. 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) decreased
1.8% and comparable Service Center Revenue (labor plus installed
merchandise and tires) increased 4.8%. Earnings Net Loss from
Continuing Operations Before Cumulative Effect of Change in
Accounting Principle improved from a Net Loss of $11,376,000 ($.21
per share - basic and diluted) to a Net Loss of $7,721,000 ($.14
per share - basic and diluted). Nine Months Sales Sales for the
nine months ended October 28, 2006 were $1,686,015,000 versus
$1,687,548,000 recorded last year. Comparable Sales increased 0.1%,
including a 0.1% comparable merchandise sales decrease and a 1.0%
comparable service revenue increase. Recategorizing Sales (see
above), comparable Retail Sales decreased 1.7% and comparable
Service Center Revenue increased 2.9%. Earnings Net Loss from
Continuing Operations Before Cumulative Effect of Change in
Accounting Principle improved from a Net Loss of $12,930,000 ($.23
per share - basic and diluted) to a Net Loss of $7,118,000 ($.13
per share - basic and diluted). Commentary William Leonard, Interim
CEO said, "While the external operating environment continued to be
difficult this quarter, we have started to make progress in
improving our operating results. Notably, we posted positive
comparable store sales in our service center operations, and made
continued progress on our retail margins. Also, we have been making
continuing efforts to reduce our cost structure to help improve
overall results. We expect to build momentum on these initiatives
into the final quarter of the year and through next year.
Rebuilding the operating performance of our service center
operations remains my highest priority. I am confident that
building on a foundation of the right people, executing every day,
and delighting our service customers will allow this franchise to
thrive again." Harry Yanowitz, Chief Financial Officer, said, "We
have reinforced our balance sheet through a restrained capital
spend, careful working capital management, and completed an
important refinancing. These efforts have generated significant
cash flow improvements and given the organization the ability to
focus solely on improving current operating results by moving our
next significant funded debt maturity to 2013. During the quarter,
we amended our Term Loan Facility to increase its size from $200 to
$320 million, to extend its maturity from January 2011 to October
2013 and to reduce its interest rate from LIBOR plus 3.00% to LIBOR
plus 2.75% (with the ability to further reduce the interest rate to
LIBOR plus 2.50%, upon achieving a specified leverage ratio).
Proceeds were used to satisfy and discharge $119 million in
outstanding convertible notes that mature June 1, 2007. Due to this
refinancing, we recorded additional interest expense of $4.2
million to reflect pre-paid interest, fees and expenses, and the
fair value of the remaining conversion option in the defeased
convertible notes. Margins, as presented in our Line of Business
format, improved slightly, despite negative comps in retail, higher
tire prices and higher depreciation and occupancy costs. SG&A
expenses were essentially flat, as we anniversaried the reductions
made during the third quarter last year. In the third quarter this
year versus last year, Operating Profit improved by $11.7 million
to $3.2 million, and EBITDA improved by $12.3 million to $25.1
million. Year-to-date Net Cash Provided by Operating Activities has
improved by $83.5 million, and Capital Expenditures are $40.1
million less than last year. We had no significant Gain or Loss on
Sale of real estate properties in the third quarter of 2006 or
2005. In the third quarter last year, we recorded an increase to
our road hazard tire warranty estimate which reduced sales, margins
and pre-tax operating income by approximately $1.9 million."
Accounting Matters 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. In the third quarter of fiscal 2006, all of
the allowances received from vendors were 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 July 30, 2005, both our SG&A and Gross
Profit for the third quarter of fiscal 2005 would have increased by
approximately $7.5 million, without materially impacting inventory
valuation or Net Loss from Continuing Operations Before Cumulative
Effect of Change in Accounting Principle. -0- *T Pep Boys Financial
Highlights Thirteen Weeks Ended: October 28, 2006 October 29, 2005
------------------------------------ ----------------
---------------- Total Revenues $ 550,849,000 $ 545,904,000 Net
Loss From Continuing Operations Before Cumulative Effect of Change
in Accounting Principle $ (7,721,000 ) $ (11,376,000) Average
Shares - Basic and Diluted 54,313,000 54,774,000 Basic and Diluted
Loss Per Share from Continuing Operations Before Cumulative Effect
of Change in Accounting Principle $ (0.14 ) $ (0.21) *T -0- *T
Thirty-nine Weeks Ended: October 28, 2006 October 29, 2005
------------------------------------ ----------------
---------------- Total Revenues $ 1,686,015,000 $ 1,687,548,000 Net
Loss From Continuing Operations Before Cumulative Effect of Change
in Accounting Principle $ (7,118,000) $ (12,930,000) Average Shares
- Basic and Diluted 54,264,000 55,288,000 Basic and Diluted Loss
Per Share from Continuing Operations Before Cumulative Effect of
Change in Accounting Principle $ (0.13) $ (0.23) *T EBITDA
Reconciliation EBITDA is defined as Net Loss plus Interest Expense,
minus Income Tax Benefit, plus Depreciation and Amortization.
EBITDA is not a measurement of financial performance under
generally accepted accounting principles and may not be compared to
similarly captioned information reported by other companies. In
addition, it does not replace net income or cash flow from
operations as an indicator of financial performance or liquidity.
We believe EBITDA provides a useful indicator of levels of our
financial performance and is frequently used by securities
analysts, investors and other interested parties in the evaluation
of companies in our industry. A reconciliation of EBITDA for the
thirteen and thirty-nine weeks ended October 28, 2006 and October
29, 2005, respectively, to the most directly comparable GAAP
measure in accordance with SEC Regulation G follows: -0- *T
Thirteen Weeks Ended: October 28, 2006 October 29, 2005
------------------------------------ ----------------
---------------- Net Loss $ (7,922,000) $ (11,195,000) Interest
Expense 15,581,000 9,205,000 Income Tax Benefit (3,642,000)
(5,856,000) Depreciation and Amortization 21,127,000 20,628,000
---------------- ---------------- EBITDA $ 25,144,000 $ 12,782,000
================ ================ Thirty-nine Weeks Ended: October
28, 2006 October 29, 2005 ------------------------------------
---------------- ---------------- Net Loss $ (7,273,000) $
(12,927,000) Interest Expense 37,886,000 27,354,000 Income Tax
Benefit (3,042,000) (7,212,000) Depreciation and Amortization
62,546,000 59,283,000 ---------------- ---------------- EBITDA $
90,117,000 $ 66,498,000 ================ ================ *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 third quarter will be broadcast live on
Wednesday, November 15th 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 November 15
on Pep Boys' website at www.pepboys.com.
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