Pep Boys reduces comparative net loss in 3Q
Pep Boys-Manny, Moe & Jack posted a net loss of $7.7 million on sales of $550.8 million for the third quarter ended Oct. 28, 2006. That compares to a net loss of $11.4 million on sales of $545.9 million for the same period in 2005.
The "net" losses represent losses from "continuing operations before cumulative effect of change in accounting principle."
Operating profit improved by $11.7 million to $3.2
million, while EBITDA improved by $12.3 million to $25.1 million.
Pep Boys also recorded a 0.8% increase in comparable sales, which included a 0.2% increase in comparable merchandise sales and a 3.9% increase in comparable service revenue. (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.)
Comparable retail sales, both do-it-yourself and commercial, decreased 1.8%, while comparable service center revenue -- labor plus installed merchandise and tires -- increased 4.8%.
"While the external operating environment continued to be difficult this quarter, we have started to make progress in improving our operating results," says William Leonard, interim CEO.
"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," he adds.
According to Chief Financial Officer Harry Yanowitzsaid, Pep Boys has reinforced its balance sheet "through a restrained capital spend, careful working capital management, and completed an important
He says 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 third quarter, Pep Boys amended its term loan facility to:
* increase its size from $200 to $320 million;
* extend its maturity from January 2011 to October 2013; and
* reduce its interest rate from LIBOR plus 3% 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 from the facility were used to satisfy and discharge $119 million in outstanding convertible notes that were set to mature June 1, 2007.
Through the first 39 weeks of the year, Pep Boys recorded a net loss of $7.1 million on sales of $1.7 billion.