Pep Boys 2012 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 of the 2012 Pep Boys annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 131

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 2, 2013, January 28, 2012 and January 29, 2011
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
COMPREHENSIVE INCOME Other comprehensive income includes pension liability and fair
market value of cash flow hedges.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company may enter into
interest rate swap agreements to hedge the exposure to increasing rates with respect to its certain
variable rate debt agreements. The Company recognizes all derivatives as either assets or liabilities in
the statement of financial position and measures those instruments at fair value. See further discussion
in Note 5, ‘‘Debt and Financing Arrangements.’’
SEGMENT INFORMATION The Company has six operating segments defined by geographic
regions which are Northeast, Mid-Atlantic, Southeast, Central, West and Southern CA. Each segment
serves both DIY and DIFM lines of business. The Company aggregates all of its operating segments
and has one reportable segment. Sales by major product categories are as follows:
Year ended
February 2, January 28, January 29,
(dollar amounts in thousands) 2013 2012 2011
Parts and accessories ................... $1,252,617 $1,259,500 $1,261,678
Tires .............................. 391,331 383,257 336,490
Service labor ......................... 446,782 420,870 390,473
Total revenues ....................... $2,090,730 $2,063,627 $1,988,641
SIGNIFICANT SUPPLIERS During fiscal 2012, the Company’s ten largest suppliers accounted
for approximately 51% of merchandise purchased. Only one supplier accounted for more than 10% of
the Company’s purchases. Other than a commitment to purchase 4.2 million units of oil products at
various prices over a two-year period, the Company has no long-term contracts or minimum purchase
commitments under which the Company is required to purchase merchandise. Open purchase orders
are based on current inventory or operational needs and are fulfilled by vendors within short periods of
time and generally are not binding agreements.
SELF INSURANCE The Company has risk participation arrangements with respect to workers’
compensation, general liability, automobile liability, and other casualty coverages. The Company has a
wholly owned captive insurance subsidiary through which it reinsures this retained exposure. This
subsidiary uses both risk sharing treaties and third party insurance to manage this exposure. In
addition, the Company self insures certain employee-related health care benefit liabilities. The
Company maintains stop loss coverage with third party insurers through which it reinsures certain of its
casualty and health care benefit liabilities. The Company records both liabilities and reinsurance
receivables using actuarial methods utilized in the insurance industry based upon historical claims
experience.
RECLASSIFICATION Certain prior period amounts have been reclassified to conform to current
period presentation. These reclassifications had no effect on reported totals for assets, liabilities,
shareholders’ equity, cash flows or net income.
47