Pep Boys Reports Third Quarter Results

Published: December 10, 2008

PHILADELPHIA — Pep Boys has announced the following results for the 13 (third quarter) and 39 weeks (nine months) ended Nov. 1.

Third quarter sales were $464.2 million as compared to $528.8 million in 2007. Comparable sales decreased 10.4 percent , including a 10.3 percent comparable merchandise sales decrease and an 11 percent comparable service revenue decrease. 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. Re-categorizing sales into the respective lines of business from which they are generated, comparable service center revenue (labor plus installed merchandise and tires) decreased 8.2 percent , while comparable retail sales (DIY and Commercial) decreased 12.1 percent .

Net Loss was $7.3 million or (14 cents) per share (basic and diluted) as compared to a loss of $28 million or (54 cents) per share (basic and diluted) in 2007. Net Loss for the third quarter of 2007 included $50 million in pre-tax costs for an inventory write down, asset impairment and increased legal reserves.

Sales were $1,462.3 million as compared to $1,620.4 million in 2007. Comparable sales decreased 7.8 percent, including an 8.1 percent comparable merchandise sales decrease and a 6.3 percent comparable service revenue decrease. 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. Re-categorizing sales into the respective lines of business from which they are generated, comparable service center revenue (labor plus installed merchandise and tires) decreased 3.2 percent, while comparable retail sales (DIY and Commercial) decreased 11.3 percent.

Net Earnings were $2.8 million or 5 cents per share (basic and diluted) as compared to a net loss of $20.6 million or (40 cents) per share (basic and diluted) in 2007.

“Our sales and operating results have been impacted by the decrease in miles driven and the general reduction in consumer spending. To offset these trends, we continue to focus on implementing our strategic plan, serving our customers well, tightly controlling spending and promoting the fact that ‘Pep Boys Does Everything. For Less..’," said CEO Mike Odell. “Pep Boys is the place to go for great prices on tires, oil changes and automotive maintenance and repairs – whether the customer is a Do It Yourselfer or wants our ASE-certified technicians to do it for them. With many dealerships and smaller shops currently closing, now is the time for the cost-conscious consumer to discover the value at Pep Boys.”

“Our liquidity position remains strong,” commented CFO Ray Arthur. “As of the end of Q3, we had $38.4 million cash on hand, an undrawn revolving credit facility and no significant debt maturities due until 2013. A year in advance of the Dec. 9, 2009 maturity of our current revolving credit facility, we have secured commitments from a syndicate led by Bank of America for a $300 million replacement facility. This facility is expected to close, subject to the satisfaction of customary closing conditions, before our fiscal year ends on Jan. 31, 2009.”

Sales for the thirteen weeks were $550,849,000, 0.9 percent more than the $545,904,000 recorded last year. Comparable Sales increased 0.8 percent, including a 0.2 percent comparable merchandise sales increase and a 3.9 percent 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 percent and comparable Service Center Revenue (labor plus installed merchandise and tires) increased 4.8 percent.

Net Loss from Continuing Operations Before Cumulative Effect of Change in Accounting Principle improved from a Net Loss of $11,376,000 (21 cents per share – basic and diluted) to a Net Loss of $7,721,000 (14 cents per share – basic and diluted).

Sales for the nine months were $1,686,015,000 versus $1,687,548,000 recorded last year. Comparable Sales increased 0.1 percent, including a 0.1 percent comparable merchandise sales decrease and a 1.0 percent comparable service revenue increase. Recategorizing Sales (see above), comparable Retail Sales decreased 1.7 percent and comparable Service Center Revenue increased 2.9 percent.

Net Loss from Continuing Operations Before Cumulative Effect of Change in Accounting Principle improved from a Net Loss of $12,930,000 (23 cents per share – basic and diluted) to a Net Loss of $7,118,000 (13 cents per share – basic and diluted).

For more information about Pep Boys, go to: http://www.pepboys.com.

Sales for the quarter were $559,198,000, 4 percent more than the $537,691,000 recorded last year. Comparable sales increased 4.1 percent, resulting from an increase of 5.1 percent in comparable merchandise sales and flat comparable service revenue. Recategorizing sales to more accurately reflect the two areas of the automotive aftermarket in which the company competes, comparable retail sales (DIY and commercial) increased 10.3 percent and comparable service center revenue (labor plus installed merchandise and tires) decreased 3.4 percent.

Net earnings from continuing operations of $7,881,000 (14 cents per share basic and diluted) declined from the $13,406,000 (26 cents per share – basic and 24 cents per share – diluted) recorded last year.

Sales for the nine months ending on Oct. 30, were $1,718,757,000, 7.1 percent more than the $1,604,631,000 recorded last year. Comparable sales increased 7.2 percent resulting from an increase of 8.5 percent in comparable merchandise sales and an increase of 1.8 percent in comparable service revenue. Recategorizing sales to more accurately reflect the two areas of the automotive aftermarket in which the company competes, comparable retail sales increased 15 percent and comparable service center revenue decreased 2.5 percent.

Net earnings from continuing operations of $38,721,000 (68 cents per share-basic and 64 cents per share diluted) increased from a Net Loss from continuing operations of $7,500,000 (14 cents per share basic and diluted) incurred in the prior year. Fiscal 2003 results include the impact of its corporate restructuring and other actions that were announced on July 31, 2003.

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