Pep Boys Second Quarter Earnings Up 32%; CEO & CFO Certify SEC Reports & Financial Statements
PHILADELPHIA--Aug. 15, 2002--The Pep Boys - Manny, Moe & Jack , the nation's leading full-service automotive aftermarket chain, announced a 32% increase in earnings for the thirteen weeks ended August 3, 2002.The Company also announced that its Chief Executive Officer and Chief Financial Officer have complied with the SEC's order of June 27, 2002, requiring the certification of the Company's 2001 Annual Report on Form 10-K and subsequent Securities Exchange Act of 1934 filings. In addition, the Company stated that its existing corporate governance program and procedures were already in compliance with most of the applicable guidelines recently enacted under the Sarbanes-Oxley Act of 2002, as well as the NYSE's new corporate governance reform proposals.
Operating Results
Second Quarter
Sales
Sales for the quarter ended August 3, 2002, were $585,785,000, 2.2% more than the $573,074,000 recorded last year. Comparable store sales increased 2.0% and included increases of 2.9%, 2.4% and 3.9% in retail merchandise, installed merchandise and commercial delivery, respectively, while comparable service labor revenue decreased 1.6%.
Earnings
Increased sales, higher merchandise margins and leveraged operating expenses enabled the Company to achieve net earnings of $16,554,000 ($.32 per share - basic and $.30 per share - diluted), 32% higher than the $12,519,000 ($.24 per share - basic and diluted) recorded last year.
Six Months
Sales
Sales for the six months ended August 3, 2002, were $1,144,758,000, 1.8% more than the $1,124,651,000 recorded last year. Comparable store sales increased 1.7% and included increases of 3.1%, 1.8% and 3.1% in retail merchandise, installed merchandise and commercial delivery, respectively, while comparable service labor revenue decreased 2.4%.
Earnings
Increased sales and higher merchandise margins enabled the Company to achieve net earnings of $30,119,000 ($.59 per share - basic and $.56 per share - diluted), 39% higher than the $21,627,000 ($.42 per share - basic and diluted) recorded last year.
Corporate Governance
In addition to complying with the Securities and Exchange Commission's order of June 27, 2002, relative to the certification by the Chief Executive Officer and Chief Financial Officer of the Company's 2001 Annual Report on Form 10-K and subsequent Securities Exchange Act of 1934, the Company stated the following relating to its existing Corporate Governance program:
-- Board of Directors
(1) In order to maximize the independence of the Board of
Directors, nine of the ten members of the Board are
independent. Only one member of management, the CEO, serves on
the Company's Board, but is not permitted to serve on any
committees.
(2) The Company has a nominating committee, compensation committee
and audit committee, each of which is comprised exclusively of
independent directors.
(3) No member of the Board of Directors is engaged in any form of
business with the Company or has received compensation other
than normal director's fees.
(4) The Company's audit committee is comprised of three
independent directors and includes a practicing CPA, an
individual with extensive audit committee experience and an
individual with an accounting and financial background.
(5) In March 2000, the Company eliminated its staggered Board of
Directors in favor of the yearly election by shareholders of
each member of the Board.
-- Additional Governance
(1) The Company's longstanding "Conflict of Interest" policy
prohibits all officers from having a financial interest in a
competitor or supplier and does not permit the acceptance of
gifts or meals from vendors.
(2) The Company has an internal audit function.
(3) All of the Company's stock option plans have been approved by
its shareholders.
(4) The Company has never repriced "under water" stock options.
-- Independent Auditors
(1) The Company's Independent Auditors were not engaged to perform
and did not receive compensation for the design or
implementation of any financial information systems or other
forms of management consulting.
(2) The Company's Independent Auditors have provided written
disclosures to the Company's Audit Committee as required by
Independence Standards Board Standard #1.
(3) The Company's Independent Auditors have complied with
Statement on Auditing Standards #61 (Communication with Audit
Committees).
Commentary
Pep Boys' Chairman and Chief Executive Officer, Mitchell G. Leibovitz, made the following comments:
"We are pleased to report a 32% increase in second quarter earnings - the seventh consecutive quarter in which earnings increased more than 30%. Despite the recent downturn in consumer confidence, we remain optimistic about our prospects for the balance of the year."
"We have always taken pride in Pep Boys' approach to corporate governance and applaud efforts to achieve and maintain consistently high standards throughout Corporate America."
Pep Boys Financial Highlights
Thirteen Thirteen
Weeks Ended Weeks Ended
August 3, 2002 August 4, 2001
-------------- --------------
Total Revenues $ 585,785,000 $ 573,074,000
Net Earnings $ 16,554,000 (a) $ 12,519,000 (b)
Average Shares-Basic 51,489,000 51,344,000
Average Shares-Diluted 58,068,000 52,033,000
Basic Earnings Per Share $ .32 (a) $ .24 (b)
Diluted Earnings Per Share $ .30 (a) $ .24 (b)
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
August 3, 2002 August 4, 2001
-------------- --------------
Total Revenues $ 1,144,758,000 $ 1,124,651,000
Net Earnings $ 30,119,000 (a) $ 21,627,000 (b)
Average Shares-Basic 51,467,000 51,305,000
Average Shares-Diluted 55,338,000 51,649,000
Basic Earnings Per Share $ .59 (a) $ .42 (b)
Diluted Earnings Per Share $ .56 (a) $ .42 (b)
(a) Includes $129,000 net loss on the early retirement of debt
(b) Includes $234,000 net gain on the early retirement of debt
Pep Boys has 629 stores and over 6,500 service bays in 36 states and Puerto Rico. Along with its vehicle repair and maintenance capabilities, the company also serves the commercial auto parts delivery market and is one of the leading sellers of replacement tires in the United States. Customers can find the nearest location by calling 1-800-PEP-BOYS or by visiting pepboys.com.
Notes: Certain statements made herein, including those discussing management's expectations for future periods, are forward-looking and involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements due to factors beyond the control of the Company, including the strength of the national and regional economies and retail and commercial consumers' ability to spend, the health of the various sectors of the market that the Company serves, the weather in geographical regions with a high concentration of the Company's stores, competitive pricing, location and number of competitors' stores and product and labor costs. Further factors that might cause such a difference include, but are not limited to, the factors described in the Company's filings with the Securities and Exchange Commission.
In accordance with the SEC's Regulation FD (fair disclosure), investors will now have an opportunity to listen to the Company's quarterly conference calls discussing its results and related matters. The calls will be broadcast live over the Internet at Broadcast Networks' Vcall web site, located at http://www.vcall.com. The call for the first quarter will be broadcast live on Thursday, August 15, at 8:30 AM EDT. To listen to the call live, please go to the web site at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call. Supplemental financial information is available on Pep Boys web site at www.pepboys.com.
Internet: http://www.pepboys.com