Pep Boys 2011 Annual Report Download - page 76

reduction in the outstanding balance was due to the expiration of letters of credit that were no longer
required after we amended our Revolving Credit Agreement.
We are also contingently liable for surety bonds in the amount of approximately $8.3 million and
$10.3 million as of January 28, 2012 and January 29, 2011, respectively. The surety bonds guarantee
certain of our payments (for example utilities, easement repairs, licensing requirements and customs
fees).
Off-balance Sheet Arrangements
We lease certain property and equipment under operating leases and lease financings which
contain renewal and escalation clauses, step rent provisions, capital improvements funding and other
lease concessions. These provisions are considered in the calculation of our minimum lease payments
which are recognized as expense on a straight-line basis over the applicable lease term. Any lease
payments that are based upon an existing index or rate are included in our minimum lease payment
calculations. Total operating lease commitments as of January 28, 2012 were $813.0 million.
Pension and Retirement Plans
The Company has a Supplemental Executive Retirement Plan (SERP). This unfunded plan had a
defined benefit component that provided key employees designated by the Board of Directors with
retirement and death benefits. Retirement benefits were based on salary and bonuses; death benefits
were based on salary. Benefits paid to a participant under the defined benefit pension plan are
deducted from the benefits otherwise payable under the defined benefit portion of the SERP. On
January 31, 2004, we amended and restated our SERP. This amendment converted the defined benefit
portion of the SERP to a defined contribution portion for certain unvested participants and all future
participants. On December 31, 2008, the Company terminated the defined benefit portion of the SERP
with a $14.4 million payment and recorded a charge of $6.0 million. The SERP currently consists of
only the defined contribution plan which we refer to as our ‘‘Account Plan.’’
The Company has a qualified 401(k) savings plan and a separate savings plan for employees
residing in Puerto Rico, which cover all full-time employees who are at least 21 years of age with one
or more years of service. The Company contributes the lesser of 50% of the first 6% of a participant’s
contributions or 3% of the participant’s compensation. For fiscal 2011, 2010 and 2009, the Company’s
contributions were conditional upon the achievement of certain pre-established financial performance
goals which were met in fiscal 2010 and 2009, but not in fiscal 2011. The Company’s savings plans’
contribution expense was $3.0 million and $3.1 million in fiscal 2010 and 2009, respectively.
We also have a defined benefit pension plan (the ‘‘Plan’’) covering full-time employees hired on or
before February 1, 1992. As of December 31, 1996, the Company froze the accrued benefits under the
Plan and active participants became fully vested. The Plan’s trustee will continue to maintain and invest
plan assets and will administer benefits payments. Pension plan assets are stated at fair market value
and are composed primarily of money market funds and collective trust funds primarily invested in
equity and fixed income investments. While we had no minimum funding requirement during fiscal
2011 or fiscal 2010, we made a $3.0 million discretionary contribution to the Plan in April 2011 and a
$5.0 million discretionary contribution to the Plan in October 2010. In fiscal 2011, the Company began
the process of terminating the Plan. The termination of the Plan is expected to be completed by the
end of fiscal 2012. In order to terminate the Plan, in accordance with Internal Revenue Service and
Pension Benefit Guaranty Corporation requirements, the Company is required to fully fund the Plan on
a termination basis and will commit to contribute the additional assets necessary to do so. Plan
participants will not be adversely affected by the Plan termination, but rather will have their benefits
either converted into a lump sum cash payment or an annuity contract placed with an insurance carrier.
32