Pep Boys 2011 Annual Report Download - page 81

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outstanding borrowings under the agreement. Additionally, the Company has a Senior Secured Term
Loan facility with a balance of $147.6 million at January 28, 2012, that bears interest at three month
LIBOR plus 2.00%. Excluding our interest rate swap, a one percent change in the LIBOR rate would
have affected net earnings by approximately $1.0 million for fiscal 2011. The risk related to changes in
the three month LIBOR rate are substantially mitigated by our interest rate swap.
The fair value of the Company’s fixed rate debt instruments, principally the 7.50% Senior
Subordinated Notes due December 15, 2014, was $149.0 million and $147.6 million at January 28, 2012
and January 29, 2011, respectively. The Company determines fair value on its fixed rate debt by using
quoted market prices and current interest rates.
Interest Rate Swaps
The Company entered into an interest rate swap for a notional amount of $145.0 million that is
designated as a cash flow hedge on the first $145.0 million of the Company’s Senior Secured Term
Loan facility. The interest rate swap converts the variable LIBOR portion of the interest payments to a
fixed rate of 5.036% and terminates in October 2013. As of January 28, 2012 and January 29, 2011, the
fair value of the swap was a net $12.5 million and $16.4 million payable, respectively, recorded within
other long-term liabilities on the balance sheet.
37