Pep Boys 2008 Annual Report Download - page 118

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2009, February 2, 2008 and February 3, 2007
(dollar amounts in thousands, except share data)
NOTE 3—ACCRUED EXPENSES
The Company’s accrued expenses as of January 31, 2009 and February 2, 2008, were as follows:
January 31, February 2,
2009 2008
Casualty and medical risk insurance ......................... $154,046 $164,435
Accrued compensation and related taxes ...................... 34,818 46,376
Sales tax payable ....................................... 11,458 12,367
Other ............................................... 54,432 69,445
Total ................................................ $254,754 $292,623
NOTE 4—OTHER CURRENT ASSETS
The Company’s other current assets as of January 31, 2009 and February 2, 2008, were as follows:
January 31, February 2,
2009 2008
Reinsurance premiums and receivable ........................ $62,014 $64,653
Deferred income taxes ................................... — 11,837
Income taxes receivable .................................. 163 873
Other ............................................... 244 106
Total ................................................ $62,421 $77,469
NOTE 5—LEASE AND OTHER COMMITMENTS
On November 27, 2007, the Company sold the land and buildings for 34 owned properties to an
independent third party. Net proceeds from this sale were $162,918. Concurrent with the sale, the
Company entered into agreements to lease the stores back from the purchaser over minimum lease
terms of 15 years. Each property has a separate lease and was separately evaluated under SFAS No.13,
‘‘Accounting for Leases (as amended).’’ The leases call for an initial term of 15 years with four five-year
renewal options. The leases contain provisions to set rent at fair market value upon exercise of the
renewal options. The leases have yearly incremental rental increases based on either CPI, with certain
limitations, or fair market value. The Company discounted the minimum lease payments, reflecting
escalation amounts, during the initial term of 15 years using its then incremental borrowing rate. For
properties where the value of the land was greater than 25% of the property value, the building
component was evaluated separately. The Company classified 33 of these leases as operating leases in
accordance with SFAS No.13. The Company actively uses these properties and considers the leases as
normal leasebacks. In accordance with SFAS No.98, ‘‘Accounting for Leases (as amended),’’ a $13,971
gain on the sale of these properties was recognized immediately upon execution of the sale and an
$87,625 gain was deferred. The immediate gain represents those properties sold where the realized gain
exceeds the present value of the minimum lease payments. The deferred gain is being recognized over
the minimum term of these leases. The Company has continuing involvement in one property relating
to an environmental indemnity and has recorded those associated net proceeds of $4,742, included in
the total proceeds of $162,918, as a debt borrowing and as a financing activity in the Statement of Cash
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