Pep Boys 2007 Annual Report Download - page 69

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defined benefit pension plan and the unfunded defined benefit portion of the SERP, aggregate cash
contributions are expected to be $2,865,000 in fiscal 2008.
RESULTS OF OPERATIONS
The following discussion explains the material changes in our results of operations for the fifty-two
weeks ended February 2, 2008, the fifty-three weeks ended February 3, 2007 and fifty-two weeks ended
January 28, 2006.
Discontinued Operations
In the third quarter of fiscal 2007, we adopted our long-term strategic plan. One of the initial steps
in this plan was the identification of 31 low-return stores for closure. Immediately prior to their
ultimate closure during the fourth quarter of fiscal 2007, these stores were operated as clearance
centers. We are accounting for these store closures in accordance with the provisions of FASB
Statement of Financial Accounting Standards (SFAS) No. 146 ‘‘Accounting for Costs Associated with
Exit or Disposal Activities’’ and SFAS No. 144 ‘‘Accounting for Impairment or Disposal of Long-Lived
Assets.’’ We recorded charges of $15,551,000 related to store closures which included a $10,963,000
impairment charge to fixed assets. In accordance with SFAS No. 144, our discontinued operations for
all periods presented reflect the operating results for 11 of the 31 closed stores because we do not
believe that the customers of these stores are likely to become customers of other Pep Boys stores due
to geographical considerations. Discontinued operations for fiscal 2007 also reflect pre-tax charges of
$1,403,000 and $3,764,000 for store closure and impairment of fixed assets, respectively. The operating
results for the other 20 closed stores are included in continuing operations because we believe that the
customers of these stores are likely to become customers of other Pep Boys stores that are in close
proximity.
During fiscal 2005, we sold a closed store for proceeds of $916,000 resulting in a pre-tax gain of
$341,000, which was recorded in discontinued operations on the consolidated statement of operations.
The following analysis of our results of continuing operations excludes the operating results of the
above-referenced 11 stores which have been reclassified to discontinued operations for all periods
presented.
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10-K