Pep Boys 2009 Annual Report Download - page 72

The following table sets forth certain information regarding the owned and leased warehouse space
utilized by the Company to replenish its store locations at January 30, 2010:
Approximate Owned
Products Square or Stores
Warehouse Locations Warehoused Footage Leased Serviced States Serviced
San Bernardino, CA ..... All 600,000 Leased 167 AZ, CA, NM, NV, UT, WA
McDonough, GA ........ All 392,000 Owned 137 AL, FL, GA, LA, NC, PR,
SC, TN, VA
Mesquite, TX .......... All 244,000 Owned 68 AR, CO, LA, MO, NM,
OK, TX
Plainfield, IN ........... All 403,000 Owned 68 IL, IN, KY, MI, MN, OH,
PA, TN
Chester, NY ........... All 400,400 Owned 147 CT, DE, MA, MD, ME,
NH, NJ, NY, PA, RI, VA
Philadelphia, PA ........ Tires & Batteries 43,000 Leased 47 DE, NJ, PA
McDonough, GA ........ All except tires 30,000 Leased — Auxiliary warehouse space
Total ................. 2,112,400
In addition to the distribution centers above, the Company leases four satellite warehouses of
approximately 78,700 square feet each. These satellite warehouses stock approximately 36,000 Stock-
Keeping Units (SKUs), serve an average of 10-30 stores and have retail capabilities. The Company
anticipates that its existing and future warehouse space and its access to outside storage will
accommodate inventory necessary to support future store expansion and any increase in SKUs through
the end of fiscal 2010.
ITEM 3 LEGAL PROCEEDINGS
In September 2006, the United States Environmental Protection Agency (‘‘EPA’’) requested certain
information from the Company as part of an investigation to determine whether the Company had
violated, and is in violation of, the Clean Air Act and its non-road engine regulations. The information
requested concerned certain generator and personal transportation merchandise offered for sale by the
Company. In the fourth quarter of fiscal 2008, the EPA informed the Company that it believed that the
Company had violated the Clean Air Act by virtue of the fact that certain of this merchandise did not
conform to their corresponding EPA Certificates of Conformity. During the third quarter of fiscal 2009,
the Company and the EPA reached a settlement in principle of this matter requiring that the Company
(i) pay a monetary penalty of $5 million, (ii) take certain corrective action with respect to certain
inventory that had been restricted from sale during the course of the investigation, (iii) implement a
formal compliance program and (iv) participate in certain non-monetary emission offset activities. The
Company had previously accrued an amount equal to the agreed upon civil penalty and a $3 million
contingency accrual with respect to the restricted inventory. During each of the third and fourth
quarters of fiscal 2009, the Company reversed approximately $1 million of the inventory accrual as a
portion of the subject inventory was released for sale.
The Company is also party to various other actions and claims arising in the normal course of
business.
The Company believes that amounts accrued for awards or assessments in connection with all such
matters are adequate and that the ultimate resolution of these matters will not have a material adverse
effect on the Company’s financial position. However, there exists a reasonable possibility of loss in
excess of the amounts accrued, the amount of which cannot currently be estimated. While the
Company does not believe that the amount of such excess loss could be material to the Company’s
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