Pep Boys 2010 Annual Report Download - page 110

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 29, 2011, January 30, 2010 and January 31, 2009
NOTE 5—DEBT AND FINANCING ARRANGEMENTS (Continued)
Other Contractual Obligations
On April 6, 2009, the Company entered into a vendor financing program with availability up to
$50.0 million which is funded by various bank participants who have the ability, but not the obligation,
to purchase account receivables owed by the Company directly from vendors. The Company, in turn,
makes the regularly scheduled full vendor payments to the bank participants. The availability under the
program was subsequently increased to $100.0 million in December, 2010. There was an outstanding
balance of $56.3 million and $34.1 million under the program as of January 29, 2011 and January 30,
2010, respectively.
The Company has letter of credit arrangements in connection with its risk management, import
merchandising and vendor financing programs. The Company was contingently liable for $0.3 million in
outstanding commercial letters of credit as of January 29, 2011, and $107.6 million and $103.3 million
in outstanding standby letters of credit as of January 29, 2011 and January 30, 2010, respectively.
The Company is also contingently liable for surety bonds in the amount of approximately
$10.3 million and $10.2 million as of January 29, 2011 and January 30, 2010, respectively. The surety
bonds guarantee certain payments (for example utilities, easement repairs, licensing requirements and
customs fees).
The annual maturities of all long-term debt for the next five fiscal years are:
(dollar amounts in thousands)
Fiscal Year Long-Term Debt
2011 Senior Secured Term Loan, due October 2013 ..................... $ 1,079
2012 Senior Secured Term Loan, due October 2013 ..................... 1,079
2013 Senior Secured Term Loan, due October 2013 ..................... 146,478
2014 7.50% Senior Subordinated Notes, due December 2014 .............. 147,565
Thereafter ......................................................... —
Total ................................................... $296,201
Interest rates that are currently available to the Company for issuance of debt with similar terms
and remaining maturities are used to estimate fair value for debt issues that are not quoted on an
exchange. The estimated fair value of long-term debt including current maturities was $298.3 million
and $290.8 million as of January 29, 2011 and January 30, 2010.
NOTE 6—LEASE AND OTHER COMMITMENTS
During 2008, the Company sold 63 owned properties to an independent third party, and
concurrent with the sale, entered into agreements to lease the properties back from the purchaser. Net
proceeds from this sale were $211.5 million. Each lease has an initial term of 15 years, four five-year
renewal options, and annual incremental rental increases that are 1.5% of the prior year’s rentals. The
Company immediately recognized a $7.7 million gain on the sale of these properties and deferred an
$89.9 million gain. The Company determined that it had continuing involvement in two properties
relating to an environmental indemnity and recorded $8.5 million of the transaction’s total net proceeds
as a borrowing and as a financing activity in the Statement of Cash Flows. Subsequently, during fiscal
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