Pep Boys 2007 Annual Report Download - page 98

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 2, 2008, February 3, 2007 and January 28, 2006
(dollar amounts in thousands, except share data)
NOTE 3—ACCRUED EXPENSES
The Company’s accrued expenses as of February 2, 2008 and February 3, 2007, were as follows:
February 2, February 3,
2008 2007
Casualty and medical risk insurance .......................... $164,435 $173,826
Accrued compensation and related taxes ...................... 46,376 44,317
Sales tax payable ....................................... 12,367 11,286
Other ............................................... 69,445 62,851
Total ................................................ $292,623 $292,280
NOTE 4—OTHER CURRENT ASSETS
The Company’s other current assets as of February 2, 2008 and February 3, 2007, were as follows:
February 2, February 3,
2008 2007
Reinsurance premiums and receivable ........................ $64,653 $69,239
Deferred income taxes ................................... 11,837 —
Income taxes receivable .................................. 873 —
Other ............................................... 106 1,129
Total ................................................ $77,469 $70,368
NOTE 5—LEASE AND OTHER COMMITMENTS
On November 27, 2007, the Company sold the land and buildings for 34 owned properties to an
independent third party. Net proceeds from this sale were $162,918. Concurrent with the sale, the
Company entered into agreements to lease the stores back from the purchaser over minimum lease
terms of 15 years. The Company classified 33 of these leases as operating leases. The lease calls for an
initial term of 15 years with four five-year renewal options. The leases have yearly incremental rental
increases based on either CPI, with certain limitations, or fair market value. A $13,971 gain on the sale
of these properties was recognized immediately upon execution of the sale and an $87,625 gain was
deferred. The deferred gain is being recognized over the minimum term of these leases. The Company
has recognized $1,030 of the deferred gain in the fourth quarter of fiscal 2007. The Company has
continuing involvement in one property and has recorded those associated net proceeds of $4,742,
included in the total proceeds of $162,918, as a debt borrowing and as a financing activity in the
Statement of Cash Flows. Accordingly, the Company continues to reflect the property on its balance
sheet in accordance with Statement of Financial Accounting Standards No. 13, ‘‘Accounting for
Leases.’’
On October 18, 2004, the Company entered into a Master Lease agreement providing for the lease
of up to $35,000 of new point-of-sale hardware for the Company’s stores at an interest rate of LIBOR
plus 2.25%. This Master Lease is reflected in the Company’s consolidated financial statements as an
operating lease. The Company has evaluated this transaction in accordance with the guidance of
FIN 46 and re-evaluated the transaction under FIN 46R and has determined that it is not required to
consolidate the leasing entity. The Company has an outstanding commitment of approximately $9,836
52
10-K