Pep Boys 2011 Annual Report Download - page 117
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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 16—FAIR VALUE MEASUREMENTS (Continued)
value. As a result, the Company has determined that its cash equivalents in their entirety are classified
as a Level 1 measure within the fair value hierarchy.
Collateral investments:
Collateral investments include monies on deposit that are restricted. The Company carries these
investments at fair value. As a result, the Company has determined that its collateral investments are
classified as a Level 1 measure within the fair value hierarchy.
Deferred compensation assets:
Deferred compensation assets include variable life insurance policies held in a Rabbi Trust. The
Company values these policies using observable market data. The inputs used to value the variable life
insurance policy fall within Level 2 of the fair value hierarchy.
Derivative liability:
The Company has one interest rate swap designated as a cash flow hedge on $145.0 million of the
Company’s Senior Secured Term Loan facility that expires in October 2013. The Company values this
swap using observable market data to discount projected cash flows and for credit risk adjustments.
The inputs used to value derivatives fall within Level 2 of the fair value hierarchy.
Contingent consideration:
The Company had recorded contingent consideration as a result of the acquisition of Florida Tire.
The consideration was to be paid to the seller on each six month anniversary of the closing date until the
deferred purchase price is paid in full, subject to acceleration or cancellation clauses. The calculation of
the contingent consideration was based on a weighted average probability scenario that includes
management’s assumptions on expected future cash flows. As a result, the Company classified contingent
considerations as a Level 3 measure within the fair value hierarchy. During fiscal 2011 the remaining
deferred purchase price was cancelled in accordance with the terms of the purchase agreement.
The following table provides information by level for assets and liabilities that are measured at fair
value, on a recurring basis.
Fair Value Measurements
Fair Value at Using Inputs Considered as
(dollar amounts in thousands) January 28,
Description 2012 Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents ........... $58,244 $58,244 $ — $—
Collateral investments(a) ............. 17,276 17,276 — —
Deferred compensation assets(a) ....... 3,576 — 3,576 —
Liabilities:
Other liabilities
Derivative liability(b) ................ 12,540 — 12,540 —
(a) included in other long-term assets
(b) included in other long-term liabilities
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