PBY Prospect Capital Corporaton

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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)

215-430-9000

(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   o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   o   No   x

As of November 28, 2008 there were 52,127,463 shares of the registrant’s Common Stock outstanding.

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Index

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PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands, except share data)

UNAUDITED

See notes to condensed consolidated financial statements.

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THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND CHANGES IN RETAINED EARNINGS

(dollar amounts in thousands, except per share amounts)

UNAUDITED

See notes to condensed consolidated financial statements.

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THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

UNAUDITED

See notes to condensed consolidated financial statements.

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THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar Amounts in Thousands)

NOTE 1. Condensed Consolidated Financial Statements

The condensed consolidated balance sheet as of November 1, 2008, the condensed consolidated statements of operations and changes in retained earnings for the thirteen and thirty-nine week periods ended November 1, 2008 and November 3, 2007 and the condensed consolidated statements of cash flows for the thirty-nine week periods ended November 1, 2008 and November 3, 2007 are unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at November 1, 2008 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by Rule 10-01 of the Securities and Exchange Commission’s Regulation S-X, “Interim Financial Statements”. 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 Annual Report on Form 10-K for the fiscal year ended February 2, 2008. The results of operations for the thirteen and thirty-nine week periods ended November 1, 2008 are not necessarily indicative of the operating results for the full fiscal year.

Our fiscal year ends on the Saturday nearest January 31. Accordingly, references to fiscal 2007, fiscal 2008 and fiscal 2009 refer to the years ended February 2, 2008, January 31, 2009 and January 30, 2010.

NOTE 2. New Accounting Standards

Adopted:

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines the term fair value, establishes a framework for measuring it within generally accepted accounting principles and expands disclosures about its measurements. The Company adopted SFAS 157 on February 3, 2008.  This adoption did not have a material effect on the Company’s financial statements.  Fair value disclosures are provided in Note 15.

In March 2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue Number 06-10, “Collateral Assignment Split-Dollar Life Insurance Arrangements” (EITF 06-10). EITF 06-10 provides guidance to help companies determine whether a liability for the postretirement benefit associated with a collateral assignment split-dollar life insurance arrangement should be recorded in accordance with either SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (if, in substance, a postretirement benefit plan exists), or Accounting Principles Board Opinion No. 12 (if the arrangement is, in substance, an individual deferred compensation contract). EITF 06-10 also provides guidance on how a company should recognize and measure the asset in a collateral assignment split-dollar life insurance contract. EITF 06-10 is effective for fiscal years beginning after December 15, 2007, although early adoption is permitted. On February 3, 2008, the Company adopted EITF 06-10, which resulted in a $1,855 pretax charge to retained earnings for its only existing collateral assignment split-dollar life insurance arrangement – an arrangement in place for a former CEO who retired in fiscal 2003.

In June 2007, the FASB ratified EITF Issue Number 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF 06-11). EITF 06-11 applies to share-based payment arrangements with dividend protection features that entitle employees to receive (a) dividends on equity-classified nonvested shares, (b) dividend equivalents on equity-classified nonvested share units, or (c) payments equal to the dividends paid on the underlying shares while an equity-classified share option is outstanding, when those dividends or dividend equivalents are charged to retained earnings under SFAS No. 123(R), “Share-Based Payment,” and result in an income tax deduction for the employer. A consensus was reached that a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity-classified non-vested equity shares, non-vested equity share units, and outstanding equity share options should be recognized as an increase in additional paid-in capital. EITF 06-11 is effective prospectively for the income tax benefits that result from dividends on equity-classified employee share-based payment awards that are declared in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. On February 3, 2008, the Company adopted EITF 06-11, which did not have a material impact on its consolidated Financial statements.

In October 2008 the FASB issued FASB Staff Position FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.” This FSP clarifies the application of SFAS 157 in a market that is not active. This FSP shall be effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of this standard did not have a material impact on the Company’s financial statements.

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To be adopted:

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” which replaces SFAS No. 141, “Business Combinations.” SFAS No. 141R, among other things, establishes principles and requirements for how an acquirer entity recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any controlling interests in the acquired entity; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Costs of the acquisition will be recognized separately from the business combination. SFAS No. 141R applies prospectively, except for taxes, to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2008. The Company is currently evaluating the impact SFAS No. 141 will have on its consolidated financial statements beginning in fiscal 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51.” SFAS No. 160, among other things, provides guidance and establishes amended accounting and reporting standards for a parent company’s noncontrolling interest in a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS No. 160 to have a material impact on its financial condition, results of operations or cash flows.

In February 2008, the FASB issued Staff Position No. FAS 157-2 (FSP No.157-2), “Effective Date of FASB Statement No. 157,” that defers the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities.  SFAS 157 is effective for certain nonfinancial assets and nonfinancial liabilities for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS No. 157 on its consolidated financial statements beginning in fiscal 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS No. 161 expands the disclosure requirements in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” about an entity’s derivative instruments and hedging activities. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact SFAS No. 161 will have on its consolidated financial statements beginning in fiscal 2009.

In June 2008, the FASB, issued Staff Position EITF 03-6-1 (FSP EITF 03-6-1), “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings per Share.” Under the guidance of FSP EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings-per-share pursuant to the two-class method.  FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within these fiscal years. All prior-period earnings per share data presented shall be adjusted retrospectively.  Early application is not permitted. The Company is currently evaluating the impact FSP EITF 03-6-1 will have on its consolidated financial statements beginning in fiscal 2009.

NOTE 3. Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market. Cost is determined by using the last-in, first-out (LIFO) method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on inventory and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected fiscal year-end inventory levels and costs. If the first-in, first-out (FIFO) method of costing inventory had been used by the Company, inventory would have been $586,811 and $555,188 as of November 1, 2008 and February 2, 2008, respectively. Inventory levels increased during the current quarter reflecting seasonal product offerings.

The Company provides estimates for inventory shrinkage based upon historical levels and the results of its cycle counting program.

The Company also provides for potentially excess and obsolete inventories based on current inventory levels, the historical analysis of product sales and current market conditions. The nature of the Company’s inventory is such that the risk of obsolescence is minimal and excess inventory has historically been returned to the Company’s vendors for credit. The Company records a provision when less than full credit is expected from a vendor or when market is lower than recorded costs. These provisions are revised, if necessary, on a quarterly basis for adequacy. The Company’s inventory is recorded net of provisions for these matters which were $12,679 and $11,167 at November 1, 2008 and February 2, 2008, respectively.

During the third quarter of fiscal 2007, the Company recorded a $32,803 inventory write-down for the discontinuance and planned exit of certain non-core merchandise adopted as one of the initial steps in the Company’s long-term strategic plan. The write-down

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reduced the carrying value of the discontinued merchandise from $74,080 to $41,277. The carrying value of the discontinued merchandise is evaluated quarterly as compared to the estimated sell through that was utilized in determining the impairment. The inventory impairment was recorded in cost of merchandise sales on the consolidated statement of operations. The carrying value of the discontinued merchandise was $226 at November 1, 2008 and $8,612 at February 2, 2008.

NOTE 4. Property and Equipment

The Company’s property and equipment as of November 1, 2008 and February 2, 2008 was as follows:

During the second quarter of fiscal 2008, the Company settled an outstanding contractual obligation to purchase 29 properties that were previously leased under a master operating lease for $117,121, including $803 of fees.  The Company allocated the acquisition cost to these properties based on relative fair values.  The acquisition cost was lower than the aggregate fair value for these properties.

NOTE 5. Income Taxes

On February 4, 2007, the Company adopted the provisions of FIN 48. In connection with the adoption, the Company recorded a net decrease to retained earning of $155 and reclassified certain previously recognized deferred tax attributes as FIN 48 liabilities.  The amount of unrecognized tax benefits at February 4, 2007 was $7,126 including accrued interest of $734.

The company recognizes interest and penalties related to uncertain tax positions in income tax expense.  As of November 1, 2008 and February 2, 2008, we had approximately $1,263 and $1,172 of accrued interest and penalties related to uncertain tax positions, respectively.

Included in the unrecognized tax benefits of $2,741 and $3,847 at November 1, 2008 and February 2, 2008 was $1,744 and $2,244 of tax benefits, respectively, that if recognized, would affect our annual effective tax rate.  We are undergoing examinations of our tax returns in certain jurisdictions.  We have uncertain liabilities of approximately $1,877 for which it is reasonably possible that the amount will increase or decrease within the next twelve months.  However, based on the uncertainties associated with settlements and the status of examination, it is not possible to estimate the impact of the change.

The Company and its subsidiaries file U.S., state and Puerto Rico income tax returns in jurisdictions with varying statutes of limitations.  The 2005 through 2007 tax years generally remain subject to examination by federal and most state tax authorities.  The Company and its subsidiaries have various state income tax returns in the process of examination, appeals and settlement.  In Puerto Rico, the 2004 through 2007 tax years generally remain subject to examination by their respective tax authorities.

Under FAS 109, the company is required to project the deferred tax effects of expected year end temporary differences.  Based on the projections, as of January 31, 2009 the company will have $29,632 federal net operating losses, $128,455 of state losses and $0 of Puerto Rico losses.  As of February 2, 2008, the Company had $46,716 of federal losses, $180,411 of state losses and $768 of Puerto Rico losses.  The state losses will expire in various years beginning in 2008.

The temporary differences between the book and tax treatment of income and expenses result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company must assess the likelihood that any recorded deferred tax assets will be recovered against future taxable income. To the extent the Company believes that recovery is not more likely than not, a valuation allowance must be established. In this regard when determining whether or not a valuation allowance should be established, the Company considers various tax planning strategies, including potential real estate transactions to generate future taxable income.  The Company had valuation allowances for these matters of $5,649 and $4,077 as of November 1, 2008 and February 2, 2008, respectively.

NOTE 6. Discontinued Operations

In the third quarter of fiscal 2007, the Company adopted its long-term strategic plan. One of the initial steps in this plan was the

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identification of 31 low-return stores for closure. The Company is accounting for these store closures in accordance with the provisions of SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” and SFAS No. 144 “Accounting for Impairment or Disposal of Long-Lived Assets” (SFAS 144). In accordance with SFAS No. 144, discontinued operations for all periods presented reflect the operating results for 11 of the 31 closed stores because the Company does not believe that the customers of these stores are likely to become customers of other Pep Boys stores due to geographical considerations. The operating results for the other 20 closed stores are included in continuing operations because the Company believes that the customers of these stores are likely to become customers of other Pep Boys stores that are in close proximity.  Below is a summary of these discontinued stores’ operations for the thirteen and thirty-nine weeks ended November 1, 2008 and November 3, 2007:

The loss from discontinued operations during the thirteen and thirty-nine week periods ended November 3, 2007 includes a $3,764 asset impairment charge associated with 11 closed stores classified as discontinued operations.

Additionally, the Company has classified certain assets as assets held for disposal on its balance sheets.  As of November 1, 2008 and February 2, 2008, the net book values of these assets were as follows:

Three properties purchased on July 30, 2008 as part of the settlement of the master operating lease (see footnote 4), have been classified as held for sale as of November 1, 2008.

During the second quarter of fiscal 2008, the Company sold one property that was classified as held for sale for net proceeds of $1,266 and recognized a $254 net gain from disposition of assets.  During the third quarter of fiscal 2008, the Company sold three properties that were classified as held for sale as of February 2, 2008, for net proceeds of $2,944 and recognized a $201 gain within discontinued operations and a $36 net loss from disposition of assets.

The following details the fiscal 2008 activity in the reserve for store closings. The remaining reserve includes remaining rent on leases.

NOTE 7. Pension and Savings Plan

Pension expense includes the following:

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The Company has a qualified defined benefit pension plan with accrued benefits frozen at December 31, 1996. The Company makes contributions to this plan in accordance with the requirements of ERISA. The Company does not anticipate making a contribution to this plan during fiscal 2008.

The Company has a non-qualified Executive Supplemental Retirement Plan (SERP) that is an unfunded defined benefit plan. This plan was closed to new participants on January 31, 2004. As of November 1, 2008, the Company contributed $3,967 of an anticipated $5,500 contribution during fiscal 2008 to this plan.

The Company has a non-qualified SERP defined contribution plan for key employees who were designated by the Board of Directors after January 31, 2004. The Company recorded a benefit for the defined contribution portion of the plan of approximately $248 and $158 for the thirteen weeks ended November 1, 2008, and November 3, 2007, respectively. The Company’s contribution expense was approximately $59 and $263 for the thirty-nine weeks ended November 1, 2008 and November 3, 2007, respectively.

The Company has two qualified savings plans, which cover all full-time employees who are at least 21 years of age with one or more years of service. The Company contributes the lesser of 50% of the first 6% of a participant’s contributions or 3% of the participant’s compensation. The Company’s savings plans’ contribution expense was approximately $927 and $961 for the thirteen weeks ended November 1, 2008 and November 3, 2007, respectively, and approximately $2,971 and $2,589 for the thirty-nine weeks ended November 1, 2008 and November 3, 2007, respectively.

NOTE 8.  Sale-Leaseback Transactions

On March 25, 2008, the Company sold 18 owned properties to an independent third party. Net proceeds from this sale were $62,542. Concurrent with the sale, the Company entered into agreements to lease the properties back from the purchaser over a minimum lease term of 15 years. The Company classified these leases as operating leases. The two master leases have an initial term of 15 years with four five-year renewal options. The leases have yearly incremental rental increases that are 1.5% of the prior year’s rentals.  These leases result in approximately $82,000 in future minimum rental payments during the initial non-cancelable lease term. The second through the fourth renewal options are at fair market rents. A $9 gain on the sale of these properties was recognized immediately upon execution of the sale and a $26,809 gain was deferred. The deferred gain is being recognized over 15 years.

On April 10, 2008, the Company sold 23 owned properties to an independent third party. Net proceeds from this sale were $72,977. Concurrent with the sale, the Company entered into agreements to lease the properties back from the purchaser over a minimum lease term of 15 years. The Company classified 22 of these leases as operating leases. The leases have an initial term of 15 years with four five-year renewal options. The leases have yearly incremental rental increases that are 1.5% of the prior year’s rentals. These leases result in approximately $92,000 in future minimum rental payments during the initial non-cancelable lease term. The second through the fourth renewal options are at fair market rents. A $5,522 gain on the sale of these properties was recognized immediately upon execution of the sale and a $34,483 gain was deferred. The deferred gain is being recognized over 15 years. The Company initially had continuing involvement in one property and, accordingly, recorded $4,583 of the transaction’s total net proceeds as a borrowing and as a financing activity in the Statement of Cash Flows. During the second quarter of 2008, the Company determined it no longer had continuing involvement with this property and recorded the sale of this property as a sale-leaseback transaction, removing the asset and related lease financing and recorded a $1,515 deferred gain.

On July 30, 2008, the Company sold 22 properties to an independent third party. Net proceeds from this sale were $75,951. Concurrent with the sale, the Company entered into agreements to lease the properties back from the purchaser over a minimum lease term of 15 years. The Company classified 21 of these leases as operating leases. The leases have an initial term of 15 years with four five-year renewal options. The leases have yearly incremental rental increases that are 1.5% of the prior year’s rentals. These leases result in approximately $97,000 in future minimum rental payments during the initial non-cancelable lease term. The second through the fourth renewal options are at fair market rents. A $2,124 gain on the sale of these properties was recognized immediately upon execution of the sale and a $28,638 gain was deferred. The deferred gain is being recognized over 15 years. The Company initially had continuing involvement in one property and, accordingly, recorded $3,896 of the transaction’s total net proceeds as a borrowing

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and as a financing activity in the Statement of Cash Flows. During the third quarter of 2008, the Company determined it no longer had continuing involvement with this property and recorded the sale of this property as a sale-leaseback transaction, removing the asset and related lease financing and recorded a $2,448 deferred gain.

The Company recognized $2,260 and $5,511 in Cost of Merchandise Sales, and $736 and $1,794 in Costs of Service Revenue of the deferred gain generated from the sale-leaseback transactions for the thirteen weeks and thirty-nine weeks ended November 1, 2008, respectively.

Of the 562 store locations operated by the Company at November 1, 2008, 235 are owned and 327 are leased.

NOTE 9. Debt and Financing Arrangements

On February 15, 2007, the Company amended its Senior Secured Term Loan to reduce the interest rate from London Interbank Offered Rate (LIBOR) plus 2.75% to LIBOR plus 2.00%.

The Company used the proceeds from its March 25, 2008 sale-leaseback transaction and available cash to repay the $49,915 then drawn on its line of credit agreement and to repurchase $20,965 principal amount of its 7.50% Senior Subordinated Notes for $18,082.  The gain on the retirement of debt is included in interest expense.

As part of the April 10, 2008 sale-leaseback transaction, the Company determined that it has continuing involvement in one property and recorded the $4,583 proceeds, net of execution costs, as a borrowing in accordance with Statement of Financial Accounting Standards No. 13, “Accounting for Leases.” During the second quarter of 2008, the Company determined it no longer had continuing involvement with this property. Accordingly, the Company recorded this property as a sale-leaseback, retired the asset and related lease financing and recorded a $1,515 deferred gain.

As part of the July 30, 2008 sale-leaseback transaction, the Company determined that it has continuing involvement in one property and has recorded the $3,896 proceeds, net of execution costs, as a borrowing in accordance with Statement of Financial Accounting Standards No. 13, “Accounting for Leases.” During the third quarter of 2008, the Company determined it no longer had continuing involvement with this property. Accordingly, the Company recorded this property as a sale-leaseback, retired the asset and related lease financing and recorded a $2,448 deferred gain.

The Company had $231,223 of availability under its line of credit agreement on November 1, 2008.

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NOTE 10. Warranty Reserve

The Company provides warranties for both its merchandise sales and service labor. Warranties for merchandise are generally covered by the respective vendors, with the Company covering any costs above the vendor’s stipulated allowance. Service labor warranties are covered in full by the Company on a limited lifetime basis. The Company establishes its warranty reserves based on historical data of warranty transactions.

The reserve for warranty costs activity for the thirty-nine week periods ended November 1, 2008 and November 3, 2007, respectively, is as follows:

NOTE 11. (Loss) Earnings Per Share

(in thousands, except per share amounts)

As of November 1, 2008 and November 3, 2007, respectively, there were 1,339,000 and 3,397,000 outstanding options and restricted stock units. Certain stock options were excluded from the calculation of diluted earnings per share because their exercise prices were

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greater than the average market price of the common shares for the periods then ended and therefore would be anti-dilutive. All such shares are excluded from the diluted earnings per share calculation for the thirteen weeks ended November 1, 2008 and November 3, 2007, respectively, and for the thirty-nine weeks ended November 3, 2007. The total numbers of such shares excluded from the diluted earnings per share calculation are 1,540,000 for the thirty-nine weeks ended November 1, 2008.

NOTE 12. Supplemental Guarantor Information

The Company’s 7.50% Senior Subordinated Notes (the “Notes”) are fully and unconditionally and joint and severally guaranteed by certain of the Company’s direct and indirectly wholly-owned subsidiaries - namely, The Pep Boys Manny Moe & Jack of California, Pep Boys - Manny Moe & Jack of Delaware, Inc., Pep Boys — Manny Moe & Jack of Puerto Rico, Inc. and PBY Corporation, (collectively, the “Subsidiary Guarantors”). The Notes are not guaranteed by the Company’s wholly owned subsidiary, Colchester Insurance Company.

The following condensed consolidating information presents, in separate columns, the condensed consolidating balance sheets as of November 1, 2008 and February 2, 2008 and the related condensed consolidating statements of operations for the thirteen and thirty-nine weeks ended November 1, 2008 and November 3, 2007 and condensed consolidating statements of cash flows for the thirty-nine weeks ended November 1, 2008 and November 3, 2007 for (i) the Company (“Pep Boys”) on a parent only basis, with its investment in subsidiaries recorded under the equity method, (ii) the Subsidiary Guarantors on a combined basis including the consolidation by PBY Corporation of its wholly owned subsidiary, Pep Boys Manny Moe & Jack of California, (iii) the subsidiary of the Company that does not guarantee the Notes, and (iv) the Company on a consolidated basis.

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CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)