Pep Boys 2013 Annual Report Download - page 87

ITEM 2 PROPERTIES
The Company owns its five-story, approximately 300,000 square foot corporate headquarters in
Philadelphia, Pennsylvania. The Company also owns the following administrative regional offices—
approximately 4,000 square feet of space in each of Melrose Park, Illinois and Bayamon, Puerto Rico.
The Company leases an administrative regional office of approximately 3,500 square feet in Los
Angeles, California.
Of the 799 store locations operated by the Company at February 1, 2014, 228 are owned and 571
are leased. As of February 1, 2014, 142 of the 228 stores owned by the Company are currently used as
collateral under our Senior Secured Term Loan, due October 2018.
The following table sets forth certain information regarding the owned and leased warehouse space
utilized by the Company to replenish its store locations at February 1, 2014:
Approximate Owned
Products Square or Stores
Warehouse Locations Warehoused Footage Leased Serviced States Serviced
San Bernardino, CA . . . All 600,000 Leased 196 AZ, CA, NV, UT, WA
McDonough, GA ..... All 392,000 Owned 244 AL, FL, GA, LA, NC, PR, SC, TN
Mesquite, TX ........ All 244,000 Owned 82 AR, CO, LA, MO, NM, OK, TX
Plainfield, IN ........ All 403,000 Owned 80 IL, IN, KY, MI, MN, OH, PA
Chester, NY ......... All 402,000 Owned 197 CT, DE, MA, MD, ME, NH, NJ,
NY, PA, RI, VA
Philadelphia, PA ...... Tires & Batteries 74,000 Leased 70 DE, NJ, PA, VA, MD
Total .............. 2,115,000
The Company anticipates that its existing and future warehouse space and its access to outside
storage will accommodate inventory necessary to support future store expansion and any increase in
SKUs through the end of fiscal 2014.
ITEM 3 LEGAL PROCEEDINGS
The Company is party to a consent decree, effective July 15, 2010, with the United States
Environmental Protection Agency (‘‘EPA’’) that, among other things, required the Company to
implement a formal compliance program with respect to certain small gasoline engine merchandise sold
by the Company. In the fourth quarter of fiscal 2013, the EPA alleged, in writing, that the Company
had violated certain inspection, testing and reporting requirements of the Consent Decree and made an
aggregated stipulated penalty demand of $2.3 million as a result thereof. The Company is currently
engaged in settlement negotiations with the EPA with respect thereto. The Company has accrued an
amount that it believes is sufficient to resolve those violations for which it believes it is liable. If the
Company is unable to resolve all of the violations with the EPA through its settlement negotiations, the
Company intends to invoke formal dispute resolution procedures with the EPA under the terms of the
Consent Decree.
The Company is also party to various actions and claims arising in the normal course of business.
The Company believes that amounts accrued for awards or assessments in connection with all such
matters are adequate and that the ultimate resolution of these matters will not have a material adverse
effect on the Company’s financial position. However, there exists a possibility of loss in excess of the
amounts accrued, the amount of which cannot currently be estimated. While the Company does not
believe that the amount of such excess loss will be material to the Company’s financial position, any
such loss could have a material adverse effect on the Company’s results of operations in the period(s)
during which the underlying matters are resolved.
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable.
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