Pep Boys 2011 Annual Report Download - page 45

PART I
ITEM 1 BUSINESS
GENERAL
The Pep Boys—Manny, Moe & Jack and subsidiaries (the ‘‘Company’’) began operations in 1921
and is the leading national chain offering automotive service, tires, parts and accessories. This
positioning allows us to streamline the distribution channel and pass the savings on to our customers
facilitating our vision to be the automotive solutions provider of choice for the value-oriented customer.
The majority of our stores are in a Supercenter format (averaging 20,600 sq.ft.), which serves both
‘‘do-it-for-me’’ (‘‘DIFM’’), which includes service labor, installed merchandise and tires, and
‘‘do-it-yourself’’ (‘‘DIY’’) customers with the highest quality service and merchandise offerings. Most of
our Supercenters also have a commercial sales program that provides delivery of parts, tires and other
products to automotive repair shops and dealers. In 2009, as part of our long-term strategy to lead with
automotive service, we began complementing our existing Supercenter store base with Service & Tire
Centers. The Service & Tire Centers (averaging 5,900 sq.ft.) are designed to capture market share and
leverage our existing Supercenters and support infrastructure. This growth will occur both organically
and through acquisitions. The growth is targeted at existing markets, but may include new markets
opportunistically. The objective is to grow our market share and to leverage inventory, marketing,
distribution and support costs. Acquisitions will be used to accelerate growth in markets where the
Company is under-penetrated. In 2010, we introduced new, smaller format (14,000 sq.ft.) Supercenters.
The new, smaller Supercenters are designed to provide our customers with our complete offering of
automotive service, tires, parts and accessories in a more efficient and cost-effective footprint. In total,
as of January 28, 2012, the Company operated approximately 12,640,000 of gross square feet of retail
space, including over 7,100 service bays.
In fiscal 2011, we opened 119 Service & Tire Centers, including 99 Service & Tire Centers
acquired in three separate transactions, opened 1 new Supercenter, converted one Pep Express (retail
only) store and one Service & Tire Center into Supercenters, and closed two Service & Tire Centers
and one Supercenter. We are targeting a total of 75 new Service & Tire Centers and 10 Supercenters in
fiscal 2012. We expect to lease new Service & Tire Center and Supercenter locations, as we believe that
there are sufficient existing available locations in the marketplace with attractive lease terms to enable
our expansion.
On January 29, 2012, the Company entered into an Agreement and Plan of Merger (the ‘‘Merger
Agreement’’) with Auto Acquisition Company, LLC and Auto Mergersub, Inc., affiliates of The Gores
Group, LLC. On the terms and subject to the conditions set forth in the Merger Agreement, at the
effective time of the merger (i) each share of the Company’s common stock issued and outstanding
immediately prior to such time shall be converted into the right to receive $15.00 in cash without
interest, (ii) the Company’s common stock shall no longer be publicly traded on the New York Stock
Exchange and (iii) the Company will no longer file current nor periodic reports with the SEC (see
Note 19 of the Notes to Consolidated Financial Statements in ‘‘Item 8 Financial Statements and
Supplementary Data’’).
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