PHILADELPHIA — Pep Boys said this week it will implement approximately $20.1 million in pre-tax cost reduction initiatives in order to improve the company’s 2009 financial performance.
The cost-cutting measures include a company-wide freeze on merit increases; the elimination of approximately 50 positions, representing 11 percent of the store support workforce; and numerous other spending reductions. In addition, 401(k) matching contributions and certain other retirement contributions have been conditioned on the company achieving profitability targets in 2009. A pre-tax charge of approximately $0.6 million has been recorded in the fourth quarter of the 2008 fiscal year for costs associated with the workforce reductions.
“We have taken these steps to accelerate the company’s return to profitability, which we project will occur in the upcoming year,” said CEO Mike Odell. “Our store base remains strong and no closures are planned, nor are any of our stores impacted by the staff reduction.”
“We expect positive cash flow for fiscal 2009 which, together with our strong balance sheet, provides us with the ability to fund the expansion initiatives of our long-term strategic plan by adding additional service-only locations,” said CFO Ray Arthur.
The company previously announced closing a new $300 million senior secured revolving credit facility with a syndicate led by Bank of America, Wells Fargo and Regions Bank.
