Pep Boys 2013 Annual Report Download - page 118

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 1, 2014, February 2, 2013 and January 28, 2012
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The reserve for warranty activity for the years ended February 1, 2014 and February 2, 2013,
respectively, are as follows:
(dollar amounts in thousands)
Balance, January 28, 2012 .................................... $ 673
Additions related to sales in the current year ...................... 11,920
Warranty costs incurred in the current year ....................... (11,729)
Balance, February 2, 2013 .................................... 864
Additions related to sales in the current year ...................... 13,748
Warranty costs incurred in the current year ....................... (13,930)
Balance, February 1, 2014 .................................... $ 682
ADVERTISING The Company expenses the costs of advertising the first time the advertising
takes place. Gross advertising expense for fiscal 2013, 2012 and 2011 was $62.8 million, $63.3 million
and $54.9 million, respectively, and is recorded within selling, general and administrative expenses. No
advertising costs were recorded as assets as of February 1, 2014 or February 2, 2013.
STORE OPENING COSTS The costs of opening new stores are expensed as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates the ability to recover
long-lived assets whenever events or circumstances indicate that the carrying value of the asset may not
be recoverable. In the event assets are impaired, losses are recognized to the extent the carrying value
exceeds fair value. In addition, the Company reports assets to be disposed of at the lower of the
carrying amount or the fair market value less selling costs. See discussion of current year impairments
in Note 11, ‘‘Store Closures and Asset Impairments.’’
EARNINGS PER SHARE Basic earnings per share are computed by dividing earnings by the
weighted average number of common shares outstanding during the year. Diluted earnings per share
are computed by dividing earnings by the weighted average number of common shares outstanding
during the year plus incremental shares that would have been outstanding upon the assumed exercise
of dilutive stock based compensation awards.
DISCONTINUED OPERATIONS The Company’s discontinued operations reflect the operating
results for closed stores where the customer base could not be maintained. Loss from discontinued
operations relates to expenses for previously closed stores and principally includes costs for rent, taxes,
payroll, repairs and maintenance, asset impairments, and gains or losses on disposal.
ACCOUNTING FOR STOCK-BASED COMPENSATION At February 1, 2014, the Company has
two stock-based employee compensation plans, which are described in Note 14, ‘‘Equity Compensation
Plans.’’ Compensation costs relating to share-based payment transactions are recognized in the financial
statements. The cost is measured at the grant date, based on the calculated fair value of the award, and
is recognized as an expense over the employee’s requisite service period (generally the vesting period of
the equity award).
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