Pep Boys: 'Lease decision won't change any plans'

Jan. 31, 2005

Changes in the way Pep Boys - Manny, Moe & Jack computes its lease depreciation will have no impact on the chain's merchandising and store plans, say Pep Boys officials.

Earlier today, Pep Boys disclosed that it will use a "consistent lease period (generally, the initial lease term) when calculatiing depreciation of long-lived assets on leased properties and straight-line rent expense."

The corrections will result in non-cash adjustments. They also will not impact previously reported cash flows, cash balances, sales or comparable taxes; timing or amount of any actual lease payment or tax liability; compliance with any financial covenant under its revolving credit facility or other debt instruments; and current value of the company's lease holds or the underlying value of the company's real estate assets.

Several weeks ago, Pep Boys announced the restructuring of its field management team into separate retail and service organizations.

The new structure provides for a store retail manager and store service manager who will report through a distinct organization of area directors, divisional vice presidents and senior vice presidents.

At the time, Pep Boys also announced the departure of President George Babich, who left the company "to pursue other opportunities."

While Pep Boys sales during the fourth quarter of 2004 totaled $559 million, a 4% increase over the same period in 2003, its service center revenue -- which includes tires -- fell 3.4%.