Pep Boys Manny Moe & Jack : 12/08/2014—Pep Boys Reports Third Quarter 2014 Results

Sales for the thirteen weeks ended November 1, 2014 increased by $10.5 million, or 2.1%, to

$517.6 million from $507.0 million for the thirteen weeks ended November 2, 2013. Comparable sales increased 1.2%, consisting of an increase of 6.1% in comparable service revenue and a decrease of 0.2% in comparable merchandise sales. In accordance with GAAP, service revenue

is limited to labor sales, while merchandise sales include merchandise sold through both our service center and retail lines of business. Re-categorizing sales into the respective lines of business from which they are generated, comparable service center revenue increased 3.7%, while comparable retail sales decreased 1.8%.

Net loss for the third quarter of fiscal 2014 was $2.0 million ($0.03 per share) as compared to net

earnings of $1.0 million ($0.02 per share) recorded in the third quarter of fiscal 2013. The 2014 results included, on a pre-tax basis, a $1.4 million asset impairment charge and $1.4 million in severance charges. The 2013 results included, on a pre-tax basis, a $2.0 million asset impairment charge and $0.6 million in severance charges.

Sales for the thirty-nine weeks ended November 1, 2014 increased by $11.3 million, or 0.7%, to

$1,582.2 million from $1,570.8 million for the thirty-nine weeks ended November 2, 2013. Comparable sales decreased 0.7%, consisting of a 4.9% comparable service revenue increase and a 2.3% comparable merchandise sales decrease. Re-categorizing sales (see above), comparable service center revenue increased 0.8%, while comparable retail sales decreased 2.4%.

Net loss for the first nine months of 2014 was $0.6 million ($0.01 per share) as compared to net earnings of $10.2 million ($0.19 per share) for the first nine months of fiscal 2013. The 2014 results included, on a pre-tax basis, a $5.2 million asset impairment charge, a $4.0 million litigation charge and $2.4 million in severance charges. The 2013 results included, on a pre-tax

basis, a $4.9 million asset impairment charge and $0.6 million in severance charges. In addition, the 2014 results included a $0.9 million tax expense related to valuation allowances.

"Our recent top-line growth has continued into the fourth quarter," said interim CEO John Sweetwood. "Particular highlights are tires, commercial and eCommerce sales; however, this balance of business shift has continued to pressure gross margin rate."

John continued, "Our Road Ahead stores continue to produce positive results. Cincinnati and Denver will be completed in the fourth quarter, with grand re-openings scheduled for the first quarter of 2015. Baltimore, which will serve as our first test of a reduced average per-store investment, will be grand re-opened in the second quarter of 2015."

John concluded, "We have engaged Spencer Stuart to conduct our CEO search, which is progressing as planned."

Since 1921, Pep Boys has been the nation's leading automotive aftermarket chain. With over 7,500 service bays in over 800
locations in 35 states and Puerto Rico, Pep Boys offers name-brand tires; automotive maintenance and repair; parts and expert advice for the Do-It-Yourselfer; commercial auto parts delivery; and fleet maintenance and repair. Customers can find the nearest location by calling 1-800-PEP-BOYS (1-800-737-2697) or by visiting www.pepboys.com.
Certain statements contained herein constitute "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995. The words "guidance," "expect," "anticipate," "estimates," "targets," "forecasts" and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include management's expectations regarding implementation of its long-term strategic plan, future financial performance, automotive aftermarket trends, levels of competition, business development activities, future capital expenditures, financing sources and availability and the effects of regulation and litigation. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. The Company's actual results may differ materially from the results discussed in the forward-looking statements due to factors beyond the control of the Company, including the strength of the national and regional economies, retail and commercial consumers' ability to
spend, the health of the various sectors of the automotive aftermarket, the weather in geographical regions with a high concentration of the Company's stores, competitive pricing, the location and number of competitors' stores, product and labor costs and the additional factors described in the Company's filings with the SEC. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
Investors have an opportunity to listen to the Company's quarterly conference calls discussing its results and related matters. The call for the third quarter will be broadcast live on Tuesday, December 9 at 8:30 a.m. EST over the Internet at the Vcall website, located at www.investorcalendar.com. To listen to the call live, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call. Supplemental financial information will be available the morning of Tuesday, December 9 on Pep Boys' website at www.pepboys.com. In addition, Pep Boys' investor presentation, also available at www.pepboys.com, will be updated to reflect the Company's year-to-date results.

###

Sanjay Sood

215-430-9105

Email: investorrelations@pepboys.com

Pep Boys Financial Highlights

Thirteen weeks ended November 1, 2014 November 2, 2013

Total revenues $ 517,584,000 $ 507,042,000

Net (loss) earnings $ (1,964,000) $ 964,000

Basic (loss) earnings per share:

D

Thirty-nine weeks ended November 1, 2014 November 2, 2013

Total revenues $ 1,582,179,000 $ 1,570,835,000

Net (loss) earnings $ (625,000) $ 10,196,000

Basic (loss) earnings per share:

Average shares 53,533,000 53,363,000

Basic (loss) earnings per share: $ (0.01) $ 0.19

Diluted (loss) earnings per share:

Average shares 53,533,000 53,962,000

Diluted (loss) earnings per share: $ (0.01) $ 0.19

CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands)

Assets

Current assets:

November 1, 2014 February 1, 2014 November 2, 2013

Cash and cash equivalents
Accounts receivable, less allowance for
$ 36,430 $
33,431 $
55,798
uncollectible accounts of $1,616, $1,320 and $1,310 31,622 25,152 24,942
Merchandise inventories 667,438 672,354 664,901
Prepaid expenses 15,314 29,282 16,801
Other current assets 51,470 63,405 52,249
Assets held for disposal 4,636 2,013 500

Total current assets 806,910 825,637 815,191

Property and equipment, net of accumulated depreciation
of $1,257,988 $1,227,121 and $1,214,802 614,326 625,525 631,639
Goodwill 56,794 56,794 56,841
Deferred income taxes 57,070 57,686 48,311

Other long-term assets 37,301 39,839 37,265

Total assets
$ 1,572,401
$ 1,605,481 $
1,589,247

Liabilities and stockholders' equity

Current liabilities: Accounts payable
$ 217,066 $
256,031 $
253,818
Trade payable program liability 145,105 129,801 134,703
Accrued expenses 209,524 237,403 225,249
Deferred income taxes 68,556 69,373 59,455

Current maturities of long-term debt 2,000 2,000 2,000

Total current liabilities 642,251 694,608 675,225
Long-term debt less current maturities 229,500 199,500 196,500
Other long-term liabilities 45,843 48,485 49,618
Deferred gain from asset sales 105,370 114,823 117,974
Commitments and contingencies
Stockholders' equity:
Common stock, par value $1 per share:
Authorized 500,000,000 shares; issued 68,557,041 shares 68,557 68,557 68,557
Additional paid-in capital 297,313 297,009 296,578
Retained earnings 428,845 432,332 436,933
Accumulated other comprehensive income 43 379 339
Treasury stock, at cost - 15,177,705 shares; 15,358,872 shares and

15,442,779 shares (245,321) (250,212) (252,477) Total stockholders' equity 549,437 548,065 549,930
Total liabilities and stockholders' equity
$ 1,572,401
$ 1,605,481 $
1,589,247

Supplemental balance sheet information:

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(dollar amounts in thousands, except per share amounts)

Thirteen weeks ended

November 1, 2014 November 2, 2013

Thirty-nine weeks ended

November 1, 2014 November 2, 2013

% % % %

Amount Sales Amount Sales Amount Sales Amount Sales

Merchandise sales $ 395,941 76.5 $ 394,346 77.8 $ 1,208,778 76.4 $ 1,223,813 77.9

Service revenue 121,643 23.5 112,696 22.2 373,401 23.6 347,022 22.1

Total revenues 517,584 100.0 507,042 100.0 1,582,179 100.0 1,570,835 100.0

Costs of merchandise sales 278,800 70.4 267,489 67.8 843,946 69.8 838,126 68.5

Costs of service revenue 120,450 99.0 116,741 103.6 362,473 97.1 349,348 100.7

Total costs of revenues 399,250 77.1 384,230 75.8 1,206,419 76.3 1,187,474 75.6

Gross profit from merchandise sales 117,141 29.6 126,857 32.2 364,832 30.2 385,687 31.5

Gross profit from service revenue 1,193 1.0 (4,045) (3.6) 10,928 2.9 (2,326) (0.7) Total gross profit 118,334 22.9 122,812 24.2 375,760 23.8 383,361 24.4

Selling, general and administrative expenses 117,651 22.7 115,104 22.7 365,345 23.1 354,236 22.6

Net loss from dispositions of assets

(109) - (67) - (519) - (213) -

Operating profit 574 0.1 7,641 1.5 9,896 0.6 28,912 1.8

Other income 418 0.1 524 0.1 1,175 0.1 1,367 0.1

I(ntere)st expengse g p operations

operations

3,485 0.7 3,643 0.7 10,269 0.7 10,885 0.7

(2,493) (0.5) 4,522 0.9 802 0.1 19,394 1.2

Income tax (benefit) expense (723) 29.0 (1) 3,509 77.6 (1) 1,108 138.2 (1) 9,074 46.8 (1)

(Loss) earnings from continuing operations before discontinued operations

(1,770) (0.3) 1,013 0.2 (306) - 10,320 0.7

Loss from discontinued operations, net of tax (194) - (49) - (319) - (124) - Net (loss) earnings (1,964) (0.4) 964 0.2 (625) (0.0) 10,196 0.7

Basic (loss) earnings per share:

(Loss) earnings from continuing operations before discontinued operations

$ (0.03) $ 0.02 $ - $ 0.19

(Loss) from discontinued operations, net of tax - - (0.01) - Basic (loss) earnings per share $ (0.03) $ 0.02 $ (0.01) $ 0.19

Diluted (loss) earnings per share:

(Loss) earnings from continuing operations before discontinued operations

$ (0.03) $ 0.02 $ - $ 0.19

(Loss) from discontinued operations, net of tax - - (0.01) - Diluted (loss) earnings per share $ (0.03) $ 0.02 $ (0.01) $ 0.19

Other comprehensive (loss) income:

(1) As a percentage of earnings from continuing operations before income taxes and discontinued operations.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

Thirty-nine weeks ended November 1, 2014 November 2, 2013

Cash flows from operating activities: Net (loss) earnings
Adjustments to reconcile net (loss) earnings to net cash provided by continuing operations:
$ (625) $
10,196
Net loss from discontinued operations 319 124
Depreciation 55,518 59,941
Amortization of deferred gain from asset sales (9,453) (9,453) Amortization of deferred financing costs 1,937 1,952
Stock compensation expense 1,533 2,451
Deferred income taxes (66) (478) Net loss from dispositions of assets 519 213
Loss from asset impairment 5,243 4,882
Other (238) (322) Changes in assets and liabilities, net of the effects of acquisitions:
Decrease in accounts receivable, prepaid expenses and other 19,644 18,431
Decrease (increase) in merchandise inventories 4,916 (23,693) (Decrease) increase in accounts payable (36,494) 7,746

Decrease in accrued expenses (28,363) (6,589) Decrease in other long-term liabilities (2,182) (2,354)
Net cash provided by continuing operations 12,208 63,047

Net cash used in discontinued operations (583) (193) Net cash provided by operating activities 11,625 62,854
Cash flows from investing activities:

Net cas

Cash flows from financing activities:
Borrowings under line of credit agreements 479,438 1,926
Payments under line of credit agreements (447,938) (1,926) Borrowings on trade payable program liability 143,614 114,804
Payments on trade payable program liability (128,310) (129,819) Debt payments (1,500) (1,500) Proceeds from stock issuance 989 1,079

Repurchase of common stock - (2,750) Net cash provided by (used in) financing activities 46,293 (18,186) Net increase (decrease) in cash and cash equivalents 2,999 (3,388)

Cash and cash equivalents at beginning of period 33,431 59,186

Cash and cash equivalents at end of period
$ 36,430 $
55,798
Supplemental cash flow information: A

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE (in thousands, except per share data)

Thirteen weeks ended Thirty-nine weeks ended

November 1, 2014 November 2, 2013 November 1, 2014 November 2, 2013

(a) (Loss) earnings from continuing operations before discontinued operations

$ (1,770) $

1,013 $

(306) $

10,320

Loss from discontinued operations, net of tax (194) (49) (319) (124)

Net (loss) earnings

$ (1,964) $

964 $

(625) $

10,196

(b) Basic average number of common shares outstanding during period 53,590 53,315 53,533 53,363

Common shares assumed issued upon exercise of dilutive stock options,

net of assumed repurchase, at the average market price - 615 - 599

(c) Diluted average number of common shares assumed outstanding during period 53,590 53,930 53,533 53,962

Basic (loss) earnings per share:

(Loss) Earnings from continuing operations before discontinued operations (a) / (b) $

(0.03) $

0.02 $ - $

0.19

(Loss) from discontinued operations, net of tax - - (0.01) -

Basic (loss) earnings per share

$ (0.03) $

0.02 $

(0.01) $

0.19

Diluted (loss) earnings per share:

(Loss) Earnings from continuing operations before discontinued operations (a) / (c) $

(0.03) $

0.02 $ - $

0.19

(Loss) from discontinued operations, net of tax - - (0.01) -

Diluted (loss) earnings per share

$ (0.03) $

0.02 $

(0.01) $

0.19

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

ADDITIONAL INFORMATION (dollar amounts in thousands)

Thirteen weeks ended

Thirty-nine weeks ended

November 1, 2014 November 2, 2013 November 1, 2014 November 2, 2013

Total 1.2 % -2.8 % -0.7 % -1.0 %

Total 802 793

Sales and gross profit by line of business (A):

Total gross profit $ 118,334

$ 122,812

$ 375,760

$ 383,361

Comparable sales percentages by line of business (A):

Gross profit percentage by line of business (A):

Total gross profit percentage 22.9 % 24.2 % 23.7 % 24.4 % (A) Retail sales include DIY and commercial sales. Service center revenue includes revenue from labor and installed parts and tires.

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