Pep Boys 2007 Annual Report Download - page 99

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 2, 2008, February 3, 2007 and January 28, 2006
(dollar amounts in thousands, except share data)
and $14,938 on this operating lease facility as of February 2, 2008 and February 3, 2007. 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 February 2, 2008 and February 3, 2007, the current
value of this liability was $38 and $71, respectively, which is recorded in other long-term liabilities on
the consolidated balance sheets.
On August 1, 2003, the Company renegotiated $132,000 of store and distribution center 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 guidance of
FIN 46 and re-evaluated the transaction under FIN 46R and has determined that it is not required to
consolidate the leasing entity.
As of February 2, 2008 and February 3, 2007 there was an outstanding commitment of $116,318
and $117,627 under the leases. The Company has notified the lessor of the Company’s election to
purchase, on or before August 1, 2008, 29 properties that are currently rented under this master
operating lease.
The Company leases certain property and equipment under operating leases, sale-leaseback
financings 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 February 2, 2008 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.
The net book values of assets under capital leases and sale-leaseback transactions accounted for
under the financing method at February 2, 2008 summarized as follows:
February 2,
2008
Land .................................................. $1,859
Buildings ............................................... 2,258
Equipment .............................................. 2,349
Total .................................................. 6,466
Accumulated depreciation ................................... (2,430)
$ 4,036
53
10-K