Pep Boys 2008 Annual Report Download - page 122

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)
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.
NOTE 7—STORE CLOSURES AND ASSET IMPAIRMENTS
In the third quarter of fiscal year 2007, the Company adopted a 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 closures during the fourth quarter of fiscal year 2007, these stores were operated as
clearance centers. The Company accounted for these store closures in accordance with the provisions of
SFAS No.146 ‘‘Accounting for Costs Associated with Exit or Disposal Activities’’ and SFAS No.144
‘‘Accounting for the Impairment or Disposal of Long-Lived Assets.’’
During fiscal year 2007, the Company recorded charges of $15,551 related to store closures which
included a $10,963 impairment charge to fixed assets, $2,906 in long-term lease and other related
obligations, net of subleases, $155 in workforce reduction costs, and store breakdown costs of $1,527.
The impairment of fixed assets includes the adjustment to the market value of those owned stores that
were classified as assets held for disposal as of February 2, 2008 in accordance with SFAS No.144 and
the impairment of leasehold improvements. The assets held for disposal have been valued at the lower
of their carrying amount or their estimated fair value, net of disposal costs. The long-term lease and
other related obligations represent the fair value of such obligations less the estimated net sublease
income.
The store closure costs are reflected in fiscal year 2007 Statement of Operations as follows:
Cost of Cost of Selling, Discontinued
Merchandise Service General and Operations
Sales Revenue Administrative (pre-tax) Total
Impairment of fixed assets ............. $5,350 $1,849 $ — $3,764 $10,963
Long-term lease obligations, net of
sub-lease ........................ 1,479 493 — 934 2,906
Workforce reduction ................. — — 111 44 155
Store breakdown cost ................ — — 1,102 425 1,527
Total ............................ $6,829 $2,342 $1,213 $5,167 $15,551
During fiscal year 2006, the Company recorded an $840 asset impairment charge principally
related to one store location.
Earlier during fiscal year 2007, the Company closed 2 stores in addition to the 31 low-return
stores.
During fiscal year 2008, the Company did not close any stores, however, the Company did record
$5,353 of asset impairment charges to lower the carrying amounts of owned stores, classified as assets
held for disposal, and the impairment of leasehold improvement in accordance with SFAS No.144
($2,779 was charged to merchandise cost of sales, $648 was charged to service cost of sales and $1,926
(pretax) was charged to discontinued operations).
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