Pep Boys 2013 Annual Report Download - page 119

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)
COMPREHENSIVE INCOME Other comprehensive income includes changes in the 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:
52 weeks ended 53 weeks ended 52 weeks ended
(dollar amounts in thousands) February 1, 2014 February 2, 2013 January 28, 2012
Parts and accessories ............ $1,238,384 $1,252,617 $1,259,500
Tires ....................... 370,313 391,331 383,257
Service labor ................. 457,871 446,782 420,870
Total revenues ................ $2,066,568 $2,090,730 $2,063,627
SIGNIFICANT SUPPLIERS During fiscal 2013, the Company’s ten largest suppliers accounted
for approximately 45% of merchandise purchased. Only one supplier accounted for more than 10% of
the Company’s purchases. Other than a commitment to purchase 6.3 million units of oil products at
various prices over a three-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 suppliers 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. The
Company records both liabilities and reinsurance receivables using actuarial methods utilized in the
insurance industry based upon historical claims experience. For the duration of fiscal 2013, the
Company self insured 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’s stop loss coverage receivables were immaterial as of February 1,
2014 and February 2, 2013. As of February 1, 2014, the Company moved to a premium based health
insurance program with third party providers.
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.
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