Pep Boys 2011 Annual Report Download - page 99

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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 5—DEBT AND FINANCING ARRANGEMENTS (Continued)
letters of credit as of January 29, 2011. The Company was contingently liable for $31.7 million and
$107.6 million in outstanding standby letters of credit as of January 28, 2012 and January 29, 2011,
respectively.
The Company is 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 payments (for example utilities, easement repairs, licensing requirements and
customs fees).
The annual maturities of all long-term debt for the next five fiscal years are:
(dollar amounts in thousands)
Fiscal Year Long-Term Debt
2012 Senior Secured Term Loan, due October 2013 ............. $ 1,079
2013 Senior Secured Term Loan, due October 2013 ............. 146,478
2014 7.50% Senior Subordinated Notes, due December 2014 ....... 147,565
2015 ................................................ —
Thereafter ........................................... —
Total .............................................. $295,122
Interest rates that are currently available to the Company for issuance of debt with similar terms
and remaining maturities are used to estimate fair value for debt issues that are not quoted on an
exchange. The estimated fair value of long-term debt including current maturities was $293.6 million
and $298.3 million as of January 28, 2012 and January 29, 2011.
NOTE 6—LEASE AND OTHER COMMITMENTS
In fiscal 2010, the Company sold one property to an unrelated third party. Net proceeds from this
sale were $1.6 million. Concurrent with this sale, the Company entered into an agreement to lease the
property back from the purchaser over a minimum lease term of 15 years. The Company classified this
lease as an operating lease. The Company actively uses this property and considers the lease as a
normal leaseback. The Company recorded a deferred gain of $0.4 million.
In fiscal 2009, the Company sold four properties to unrelated third parties. Net proceeds from
these sales were $12.9 million. Concurrent with these sales, the Company entered into agreements to
lease the properties back from the purchasers over minimum lease terms of 15 years. Each property
has a separate lease with an initial term of 15 years and four five-year renewal options. Every five
years, the leases have rent increases of an amount equal to the lesser of 8% of the monthly rent due in
the immediately preceding lease year or the percentage of the CPI increase between five year
anniversaries. The Company classified these leases as operating leases, actively uses these properties
and considers the leases as normal leasebacks. The Company recognized a gain of $1.2 million on the
sale of these properties and recorded a deferred gain of $6.4 million.
In connection with the three acquisitions that occurred during fiscal 2011, the Company assumed
additional lease obligations totaling $120.2 million over an average of 14 years.
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