THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

October 31, 2015

January 31, 2015

November 1, 2014

Assets

Current assets:

Cash and cash equivalents

$

71,332

$

38,044

$

36,430

Accounts receivable, less allowance for uncollectible accounts of $1887, $1,604 and $1,616

31,743

31,013

31,622

Merchandise inventories

630,608

656,957

667,438

Prepaid expenses

15,079

27,952

15,314

Other current assets

48,219

55,986

51,470

Assets held for disposal

500

2,648

4,636

Total current assets

797,481

812,600

806,910

Property and equipment, net of accumulated depreciation of $1,287,150, $1,251,797 and $1,257,988

579,300

604,380

614,326

Goodwill

32,869

32,869

56,794

Deferred income taxes

49,103

56,571

57,070

Other long-term assets

33,602

35,321

37,301

Total assets

$

1,492,355

$

1,541,741

$

1,572,401

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

219,903

$

227,132

$

217,066

Trade payable program liability

127,765

140,904

145,105

Accrued expenses

198,535

226,176

209,524

Deferred income taxes

65,615

61,216

68,556

Current maturities of long-term debt

2,000

2,000

2,000

Total current liabilities

613,818

657,428

642,251

Long-term debt less current maturities

192,500

211,000

229,500

Other long-term liabilities

42,047

45,567

45,843

Deferred gain from asset sales

96,298

103,596

105,370

Commitments and contingencies

Stockholders’ equity:

Common stock, par value $1 per share:

Authorized 500,000,000 shares; issued 68,557,041 shares

68,557

68,557

68,557

Additional paid-in capital

297,560

298,299

297,313

Retained earnings

407,854

397,890

428,845

Accumulated other comprehensive income

(519

)

(391

)

43

Treasury stock, at cost - 14,453,129 shares; 14,988,205 shares and 15,177,705 shares

(225,760

)

(240,205

)

(245,321

)

Total stockholders’ equity

547,692

524,150

549,437

Total liabilities and stockholders’ equity

$

1,492,355

$

1,541,741

$

1,572,401

Supplemental balance sheet information:

Working capital

$

183,663

$

155,172

$

164,659

Current ratio

1.30

1.24

1.26

Accounts payable to inventory ratio

55.1

%

56.0

%

54.3

%

Total debt as a percent of total capitalization

26.2

%

28.9

%

29.6

%

Debt as a percent of total capitalization, net

18.4

%

25.0

%

26.2

%

Thirteen weeks ended

Thirty-nine weeks ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

%

%

%

%

Amount

Sales

Amount

Sales

Amount

Sales

Amount

Sales

Merchandise sales

$

389,138

76.6

$

395,941

76.5

$

1,204,143

76.4

$

1,208,778

76.4

Service revenue

118,998

23.4

121,643

23.5

372,800

23.6

373,401

23.6

Total revenues

508,136

100.0

517,584

100.0

1,576,943

100.0

1,582,179

100.0

Costs of merchandise sales

273,137

70.2

278,800

70.4

839,086

69.7

843,946

69.8

Costs of service revenue

117,202

98.5

120,450

99.0

358,720

96.2

362,473

97.1

Total costs of revenues

390,339

76.8

399,250

77.1

1,197,806

76.0

1,206,419

76.3

Gross profit from merchandise sales

116,001

29.8

117,141

29.6

365,057

30.3

364,832

30.2

Gross profit from service revenue

1,796

1.5

1,193

1.0

14,080

3.8

10,928

2.9

Total gross profit

117,797

23.2

118,334

22.9

379,137

24.0

375,760

23.7

Selling, general and administrative expenses

119,372

23.5

117,651

22.7

357,487

22.7

365,345

23.1

Net gain (loss) from dispositions of assets

6,000

1.2

(109

)

—

6,485

0.4

(519

)

—

Gain on sale from leasehold interest

—

—

—

—

10,000

0.6

—

—

Operating profit

4,425

0.9

574

0.1

38,135

2.4

9,896

0.6

Other income

345

0.1

418

0.1

1,050

0.1

1,175

0.1

Interest expense

(3,217

)

(0.6

)

(3,485

)

(0.7

)

(9,809

)

(0.6

)

(10,269

)

(0.7

)

Earnings (loss) from continuing operations before income taxes and discontinued operations

1,553

0.3

(2,493

)

(0.5

)

29,376

1.9

802

0.1

Income tax (expense) benefit

(476

)

(30.7

)(1)

723

29.0

(1)

(11,702

)

(39.8

)(1)

(1,108

)

(138.2

)(1)

Earnings (loss) from continuing operations before discontinued operations

1,077

0.2

(1,770

)

(0.3

)

17,674

1.1

(306

)

—

Earnings (loss) from discontinued operations, net of tax

189

—

(194

)

—

296

—

(319

)

—

Net earnings (loss)

1,266

0.2

(1,964

)

(0.4

)

17,970

1.1

(625

)

—

Basic earnings (loss) per share:

Earnings (loss) from continuing operations before discontinued operations

$

0.02

$

(0.03

)

$

0.33

$

—

Discontinued operations, net of tax

—

—

—

(0.01

)

Basic earnings (loss) per share

$

0.02

$

(0.03

)

$

0.33

$

(0.01

)

Diluted earnings (loss) per share:

Earnings (loss) from continuing operations before discontinued operations

$

0.02

$

(0.03

)

$

0.33

$

—

Discontinued operations, net of tax

—

—

—

(0.01

)

Diluted earnings (loss) per share

$

0.02

$

(0.03

)

$

0.33

$

(0.01

)

Other comprehensive income (loss):

Derivative financial instruments adjustment, net of tax

(225

)

(170

)

(128

)

(336

)

Comprehensive income (loss)

$

1,041

$

(2,134

)

$

17,842

$

(961

)

Thirty-nine weeks ended

October 31, 2015

November 1, 2014

Cash flows from operating activities:

Net earnings (loss)

$

17,970

$

(625

)

Adjustments to reconcile net earnings to net cash provided by continuing operations:

Net (earnings) loss from discontinued operations

(296

)

319

Depreciation

49,326

55,518

Amortization of deferred gain from asset sales

(9,743

)

(9,453

)

Amortization of deferred financing costs

1,878

1,937

Stock compensation expense

3,343

1,533

Deferred income taxes

11,926

(66

)

Net (gain) loss from dispositions of assets

(6,485

)

519

Loss from asset impairment

3,251

5,243

Other

(592

)

(238

)

Changes in assets and liabilities, net of the effects of acquisitions:

Decrease in accounts receivable, prepaid expenses and other

19,743

19,644

Decrease in merchandise inventories

26,349

4,916

Decrease in accounts payable

(5,888

)

(36,494

)

Decrease in accrued expenses

(26,583

)

(28,363

)

Decrease in other long-term liabilities

(3,234

)

(2,182

)

Net cash provided by continuing operations

80,965

12,208

Net cash used in discontinued operations

(19

)

(583

)

Net cash provided by operating activities

80,946

11,625

Cash flows from investing activities:

Capital expenditures

(32,375

)

(54,975

)

Proceeds from dispositions of assets

13,483

56

Net cash used in investing activities

(18,892

)

(54,919

)

Cash flows from financing activities:

Borrowings under line of credit agreements

125,885

479,438

Payments under line of credit agreements

(142,885

)

(447,938

)

Borrowings on trade payable program liability

117,487

143,614

Payments on trade payable program liability

(130,625

)

(128,310

)

Debt payments

(1,500

)

(1,500

)

Proceeds from stock issuance

2,872

989

Net cash (used in) provided by financing activities

(28,766

)

46,293

Net increase in cash and cash equivalents

33,288

2,999

Cash and cash equivalents at beginning of period

38,044

33,431

Cash and cash equivalents at end of period

$

71,332

$

36,430

Supplemental cash flow information:

Cash paid for income taxes

$

981

$

845

Cash received from income tax refunds

$

—

$

244

Cash paid for interest

$

8,003

$

8,482

Accrued purchases of property and equipment

$

1,308

$

1,350

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE

(in thousands, except per share data)

Thirteen weeks ended

Thirty-nine weeks ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

(a)

Earnings (loss) from continuing operations before discontinued operations

$

1,077

$

(1,770

)

$

17,674

$

(306

)

Earnings (loss) from discontinued operations, net of tax

189

(194

)

296

(319

)

Net earnings (loss)

$

1,266

$

(1,964

)

$

17,970

$

(625

)

(b) 

Basic average number of common shares outstanding during period

54,326

53,590

54,214

53,533

Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price

279

—

187

—

(c) 

Diluted average number of common shares assumed outstanding during period

54,605

53,590

54,401

53,533

Basic earnings per share:

Earnings from continuing operations before discontinued operations

(a) / (b)

$

0.02

$

(0.03

)

$

0.33

$

—

Discontinued operations, net of tax

—

—

—

(0.01

)

Basic earnings per share

$

0.02

$

(0.03

)

$

0.33

$

(0.01

)

Diluted earnings per share:

Earnings from continuing operations before discontinued operations

(a) / (c)

$

0.02

$

(0.03

)

$

0.33

$

—

Discontinued operations, net of tax

—

—

—

(0.01

)

Diluted earnings per share

$

0.02

$

(0.03

)

$

0.33

$

(0.01

)

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

ADDITIONAL INFORMATION

(dollar amounts in thousands)

Thirteen weeks ended

Thirty-nine weeks ended

October 31, 2015

November 1, 2014

October 31, 2015

November 1, 2014

Capital expenditures

$

10,273

$

15,965

$

32,375

$

54,975

Depreciation

$

16,131

$

19,172

$

49,326

$

55,518

Non-operating income:

Net rental revenue

$

263

$

358

$

844

$

1,040

Investment income

64

59

175

152

Other income

18

1

31

(17

)

Total

$

345

$

418

$

1,050

$

1,175

Comparable sales percentages:

Service

-2.5

%

6.1

%

-0.5

%

4.9

%

Merchandise

-1.6

%

-0.2

%

-0.1

%

-2.3

%

Total

-1.8

%

1.2

%

-0.2

%

-0.7

%

Total square feet of retail space (including service centers)

12,899,000

12,922,000

Store count

Supercenter

561

563

Service & Tire Center

238

233

Retail Only

5

6

Total

804

802

Sales and gross profit by line of business (A):

Service center revenue

$

286,183

$

289,375

$

877,872

871,590

Retail sales

221,953

228,209

699,071

710,589

Total revenues

$

508,136

$

517,584

$

1,576,943

$

1,582,179

Gross profit from service center revenue, prior to impairment charge

$

60,174

$

58,817

$

192,144

185,616

Service center revenue impairment charge

(315

)

(1,144

)

(1,673

)

(3,479

)

Gross profit from service center revenue

$

59,859

$

57,673

$

190,471

$

182,137

Gross profit from retail sales, prior to impairment charge

$

58,399

$

60,922

$

190,245

195,387

Retail sales impairment charge

(461

)

(261

)

(1,579

)

(1,764

)

Gross profit from retail sales

$

57,938

$

60,661

$

188,666

$

193,623

Total gross profit

$

117,797

$

118,334

$

379,137

$

375,760

Comparable sales percentages by line of business (A):

Service center revenue

-1.5

%

3.7

%

0.3

%

0.8

%

Retail sales

-2.2

%

-1.8

%

-0.9

%

-2.4

%

Total revenues

-1.8

%

1.2

%

-0.2

%

-0.7

%

Gross profit percentage by line of business (A):

Gross profit percentage from service center revenue, prior to impairment charge

21.0

%

20.3

%

21.9

%

21.3

%

Impairment charge

(0.1

)

(0.4

)

(0.2

)

(0.4

)

Gross profit percentage from service center revenue

20.9

%

19.9

%

21.7

%

20.9

%

Gross profit percentage from retail sales, prior to impairment charge

26.3

%

26.7

%

27.2

%

27.5

%

Impairment charge

(0.2

)

(0.1

)

(0.2

)

(0.2

)

Gross profit percentage from retail sales

26.1

%

26.6

%

27.0

%

27.2

%

Total gross profit percentage

23.2

%

22.9

%

24.0

%

23.7

%