Pep Boys 2005 Annual Report Download - page 46

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41
THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 28, 2006, January 29, 2005 and January 31, 2004
(dollar amounts in thousands, except share data)
NOTE 4—OTHER CURRENT ASSETS
The Company’s other current assets as of January 28, 2006 and January 29, 2005, were as follows:
January 28,
2006
January 29,
2005
Reinsurance premiums receivable $ 82,629 $ 80,397
Income taxes receivable 2,694 15,404
Other 123 264
Total $ 85,446 $ 96,065
NOTE 5—LEASE AND OTHER COMMITMENTS
On October 18, 2004, the Company entered into a Master Lease agreement providing for the lease of up to $35,000 of new
point-of-sale hardware for the Company’s stores at an interest rate of LIBOR plus 2.25%. This Master Lease is reflected in the
Company’s consolidated financial statements as an operating lease. The Company has evaluated this transaction in accordance
with the guidance of FIN 46R and has determined that it is not required to consolidate the leasing entity. The Company has
an outstanding balance of approximately $20,507 on this operating lease facility as of January 28, 2006. The lease includes a
residual value guarantee with a maximum value of approximately $172. The Company expects the fair market value of the
leased equipment to substantially reduce or eliminate the Company’s payment under the residual guarantee at the end of the
lease term.
In accordance with FIN 45, the Company has recorded a liability for the fair value of the guarantee related to this
operating lease. As of January 28, 2006 and January 29, 2005, the current value of this liability was $105 and $90, respectively,
which is recorded in other long-term liabilities on the consolidated balance sheets.
On August 1, 2003, the Company refinanced $132,000 in operating leases. These leases, which expire on August 1, 2008,
have lease payments with an effective rate of LIBOR plus 2.06%. The Company has evaluated this transaction in accordance
with the original guidance of FIN 46 and has determined that it is not required to consolidate the leasing entity. As of January
28, 2006 there was an outstanding balance of $123,970 under the leases. The leases include a residual value guarantee with a
maximum value of approximately $105,000. The Company expects the fair market value of the leased real estate to substantially
reduce or eliminate the Company’s payment under the residual guarantee at the end of the lease term.
In accordance with FIN 45, the Company has recorded a liability for the fair value of the guarantee related to this
operating lease. As of January 28, 2006 and January 29, 2005, the current value of this liability was $2,493 and $3,491,
respectively, which is recorded in other long-term liabilities on the consolidated balance sheets.
The Company leases certain property and equipment under operating leases and capital leases, which contain renewal
and escalation clauses, step rent provisions, capital improvements funding and other lease concessions. These provisions are
considered in the Company’s calculation of the Company’s minimum lease payments, which are recognized as expense on a
straight-line basis over the applicable lease term. In accordance with SFAS No. 13, as amended by SFAS No. 29, any lease
payments that are based upon an existing index or rate are included in the Company’s minimum lease payment calculations.
Future minimum rental payments for noncancelable operating leases and capital leases in effect as of January 28, 2006 are
shown in the table below. All amounts are exclusive of lease obligations and sublease rentals applicable to stores for which
reserves, in conjunction with the restructuring, have previously been established.