Pep Boys 2006 Annual Report Download - page 89

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 3, 2007, January 28, 2006 and January 29, 2005
(dollar amounts in thousands, except share data)
50
SALE OF COMMON STOCK On March 24, 2004, the Company sold 4,646,464 shares of common
stock (par value $1 per share) at a price of $24.75 per share for net proceeds of $108,854.
RIGHTS AGREEMENT On December 31, 1997, the Company distributed as a dividend one
common share purchase right on each of its common shares. The rights will not be exercisable or
transferable apart from the Company’s common stock until a person or group, as defined in the rights
agreement (dated December 5, 1997), without the proper consent of the Company’s Board of Directors,
acquires 15% or more, or makes an offer to acquire 15% or more of the Company’s outstanding stock.
When exercisable, the rights entitle the holder to purchase one share of the Company’s common stock for
$125. Under certain circumstances, including the acquisition of 15% of the Company’s stock by a person or
group, the rights entitle the holder to purchase common stock of the Company or common stock of an
acquiring company having a market value of twice the exercise price of the right.
The rights do not have voting power and are subject to redemption by the Company’s Board of
Directors for $.01 per right anytime before a 15% position has been acquired and for 10 days thereafter, at
which time the rights become non-redeemable. The rights expire on December 31, 2007.
BENEFITS TRUST On April 29, 1994, the Company established a flexible employee benefits trust
with the intention of purchasing up to $75,000 worth of the Company’s common shares. The repurchased
shares will be held in the trust and will be used to fund the Company’s existing benefit plan obligations
including healthcare programs, savings and retirement plans and other benefit obligations. The trust will
allocate or sell the repurchased shares through 2023 to fund these benefit programs. As shares are released
from the trust, the Company will charge or credit additional paid-in capital for the difference between the
fair value of shares released and the original cost of the shares to the trust. For financial reporting
purposes, the trust is consolidated with the accounts of the Company. All dividend and interest
transactions between the trust and the Company are eliminated. In connection with the Dutch Auction
self-tender offer, 37,230 shares were tendered at a price of $16.00 per share in fiscal 1999. At February 3,
2007, the Company has reflected 2,195,270 shares of its common stock at a cost of $59,264 as “cost of
shares in benefits trust” on the Company’s consolidated balance sheet.
NOTE 7—Discontinued Operations
In accordance with SFAS No. 144, our discontinued operations continues to reflect the costs
associated with the stores remaining from the 33 stores closed on July 31, 2003 as part of our corporate
restructuring. The remaining reserve balance is not material.
During the second quarter of fiscal 2006, we sold a store that we have leased back and will continue to
operate for a one year period. Due to our significant continuing involvement with this store following the
sale, we reclassified back into continuing operations, for all periods presented, this store’s revenues and
costs that had been previously reclassified into discontinued operations during the third quarter of fiscal
2005, in accordance with SFAS No. 144 and EITF 03-13.