Pep Boys 2011 Annual Report Download - page 112

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 13—BENEFIT PLANS (Continued)
Domestic equities, non-US equities, and both long duration fixed income securities consist of
collective trust (‘‘CT’’) funds. CT funds are comprised of shares or units in commingled funds that are
not publicly traded. The underlying assets in these funds (equity securities and fixed income securities)
are publicly traded on exchanges and price quotes for the assets held by these funds are readily
available. CT funds are valued at their net asset values that are calculated by the investment manager
of the fund and have daily or monthly liquidity. These investments are classified within Level 2 of the
fair value hierarchy.
Guaranteed annuity contracts (‘‘GACs’’) are annuity insurance contracts. GACs are primarily
invested in public bonds with some small placement in common stock, private placement bonds and
commercial mortgage products. The GACs are valued based on unobservable inputs, as observable
inputs are not available, using valuation methodologies to determine fair value. GACs are deemed to
be Level 3 investments.
The following table provides a summary of changes in fair value of Level 3 financial assets during
fiscal 2011:
(dollar amounts in thousands) Fair Value
Balance, January 29, 2011 .................................... $1,250
Transfers from other investments .............................. 1,676
Interest income and gains.................................... 143
Administrative fees ........................................ (81)
Benefits paid during the period ................................ (1,654)
Balance, January 28, 2012 .................................... $1,334
DEFERRED COMPENSATION PLAN
The Company maintains a non-qualified deferred compensation plan that allows its officers and
certain other employees to defer up to 20% of their annual salary and 100% of their annual bonus.
Additionally, the first 20% of an officer’s bonus deferred into the Company’s stock is matched by the
Company on a one-for-one basis with Company stock that vests and is expensed over three years. The
shares required to satisfy distributions of voluntary bonus deferrals and the accompanying match in the
Company’s stock are issued from its treasury account.
RABBI TRUST
The Company establishes and maintains a deferred liability for the non-qualified deferred
compensation plan and the Account Plan. The Company plans to fund this liability by remitting the
officers’ deferrals to a Rabbi Trust where these deferrals are invested in variable life insurance policies.
These assets are included in non-current other assets and are considered to be a Level 2 measure
within the fair value hierarchy. Accordingly, all gains and losses on these underlying investments, which
are held in the Rabbi Trust to fund the deferred liability, are recognized in the Company’s
Consolidated Statement of Operations. Under these plans, there were liabilities of $6.9 million at
January 28, 2012 and $6.2 million at January 29, 2011, respectively, which are recorded primarily in
other long-term liabilities.
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