THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share amounts)

Thirteen Weeks Ended

Twenty-Six weeks ended

July 30, 2011

July 31, 2010

July 30, 2011

July 31, 2010

%

%

%

%

Amount

Sales

Amount

Sales

Amount

Sales

Amount

Sales

Merchandise sales

$

415,267

79.5

$

406,179

80.5

$

823,894

79.5

$

815,368

80.3

Service revenue

107,327

20.5

98,676

19.5

212,240

20.5

199,520

19.7

Total revenues

522,594

100.0

504,855

100.0

1,036,134

100.0

1,014,888

100.0

Costs of merchandise sales

287,721

69.3

282,362

69.5

573,050

69.6

566,158

69.4

Costs of service revenue

99,663

92.9

87,992

89.2

192,752

90.8

176,634

88.5

Total costs of revenues

387,384

74.1

370,354

73.4

765,802

73.9

742,792

73.2

Gross profit from merchandise sales

127,546

30.7

123,817

30.5

250,844

30.5

249,210

30.6

Gross profit from service revenue

7,664

7.1

10,684

10.8

19,488

9.2

22,886

11.5

Total gross profit

135,210

25.9

134,501

26.6

270,332

26.1

272,096

26.8

Selling, general and administrative expenses

113,268

21.7

113,108

22.4

222,168

21.4

224,740

22.1

Net (loss) gain from dispositions of assets

(3

)

—

2,449

0.5

86

—

2,494

0.2

Operating profit

21,939

4.2

23,842

4.7

48,250

4.7

49,850

4.9

Non-operating income

569

0.1

621

0.1

1,156

0.1

1,205

0.1

Interest expense

6,444

1.2

6,643

1.3

12,941

1.3

13,251

1.3

Earnings from continuing operations before income taxes

16,064

3.1

17,820

3.5

36,465

3.5

37,804

3.7

Income tax expense

2,173

13.5

(1)

7,021

39.4

(1)

10,169

27.9

(1)

14,845

39.3

(1)

Earnings from continuing operations

13,891

2.7

10,799

2.1

26,296

2.5

22,959

2.3

Income (loss) from discontinued operations, net of tax

52

—

(201

)

—

15

—

(411

)

—

Net earnings

13,943

2.7

10,598

2.1

26,311

2.5

22,548

2.2

Retained earnings, beginning of period

412,716

384,451

402,600

374,836

Cash dividends

(1,586

)

(1,581

)

(3,171

)

(3,160

)

Shares issued and other

(150

)

(223

)

(817

)

(979

)

Retained earnings, end of period

$

424,923

$

393,245

$

424,923

$

393,245

Basic earnings per share:

Earnings from continuing operations

$

0.26

$

0.21

$

0.49

$

0.44

Discontinued operations, net of tax

—

(0.01

)

—

(0.01

)

Basic earnings per share

$

0.26

$

0.20

$

0.49

$

0.43

Diluted earnings per share:

Earnings from continuing operations

$

0.26

$

0.20

$

0.49

$

0.43

Discontinued operations, net of tax

—

—

—

—

Diluted earnings per share

$

0.26

$

0.20

$

0.49

$

0.43

Cash dividends per share

$

0.03

$

0.03

$

0.06

$

0.06

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands)

July 30, 2011

January 29, 2011

July 31, 2010

Assets

Current assets:

Cash and cash equivalents

$

61,977

$

90,240

$

92,363

Accounts receivable, less allowance for uncollectible accounts of $1,191; $1,551 and $1,703

21,731

19,540

24,204

Merchandise inventories

584,297

564,402

558,932

Prepaid expenses

19,694

28,542

20,816

Other current assets

50,891

60,812

53,376

Total current assets

738,590

763,536

749,691

Property and equipment - net

693,742

700,981

694,262

Goodwill

48,584

2,549

2,549

Deferred income taxes

67,988

66,019

58,968

Other long-term assets

31,700

23,587

14,815

Total assets

$

1,580,604

$

1,556,672

$

1,520,285

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

230,884

$

210,440

$

196,676

Trade payable program liability

61,440

56,287

55,280

Accrued expenses

206,627

236,028

226,505

Deferred income taxes

58,825

56,335

35,750

Current maturities of long-term debt

1,079

1,079

1,079

Total current liabilities

558,855

560,169

515,290

Long-term debt less current maturities

294,583

295,122

305,661

Other long-term liabilities

75,688

70,046

76,325

Deferred gain from asset sales

146,573

152,875

159,177

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

295,934

295,361

294,535

Retained earnings

424,923

402,600

393,245

Accumulated other comprehensive loss

(15,870

)

(17,028

)

(18,758

)

Treasury stock, at cost - 15,883,352 shares and 15,971,910 shares and 16,072,557 shares

(268,639

)

(271,030

)

(273,747

)

Total stockholders’ equity

504,905

478,460

463,832

Total liabilities and stockholders’ equity

$

1,580,604

$

1,556,672

$

1,520,285

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

(UNAUDITED)

Twenty-Six weeks ended

July 30, 2011

July 31, 2010

Cash flows from operating activities:

Net earnings

$

26,311

$

22,548

Adjustments to reconcile net earnings to net cash provided by continuing operations:

(Income) loss from discontinued operations, net of tax

(15

)

411

Depreciation and amortization

39,654

36,656

Amortization of deferred gain from asset sales

(6,302

)

(6,299

)

Stock compensation expense

1,908

1,998

Deferred income taxes

4,238

5,600

Net gain from disposition of assets

(86

)

(2,494

)

Loss from asset impairment

389

970

Other

272

179

Changes in assets and liabilities, net of the effects of acquisitions:

Decrease in accounts receivable, prepaid expenses and other

21,816

19,673

(Increase) decrease in merchandise inventories

(12,917

)

186

Increase (decrease) in accounts payable

12,043

(6,298

)

Decrease in accrued expenses

(33,202

)

(14,917

)

(Decrease) increase in other long-term liabilities

(2,831

)

911

Net cash provided by continuing operations

51,278

59,124

Net cash used in discontinued operations

(44

)

(1,249

)

Net cash provided by operating activities

51,234

57,875

Cash flows from investing activities:

Capital expenditures

(30,636

)

(27,284

)

Proceeds from dispositions of assets

89

4,077

Premiums paid on life insurance policies

(795

)

(500

)

Acquisitions, net of cash acquired

(42,757

)

(144

)

Collateral investment

(4,763

)

500

Net cash used in continuing operations

(78,862

)

(23,351

)

Net cash provided by discontinued operations

—

569

Net cash used in investing activities

(78,862

)

(22,782

)

Cash flows from financing activities:

Borrowings under line of credit agreements

5,045

16,290

Payments under line of credit agreements

(5,045

)

(16,290

)

Borrowings on trade payable program liability

59,097

63,808

Payments on trade payable program liability

(53,944

)

(42,627

)

Payment for finance issuance cost

(2,441

)

—

Debt payments

(539

)

(540

)

Dividends paid

(3,171

)

(3,160

)

Other

363

463

Net cash (used in) provided by financing activities

(635

)

17,944

Net (decrease) increase in cash and cash equivalents

(28,263

)

53,037

Cash and cash equivalents at beginning of period

90,240

39,326

Cash and cash equivalents at end of period

$

61,977

$

92,363

Supplemental cash flow information:

Cash paid for income taxes

$

629

$

810

Cash paid for interest

$

11,523

$

11,452

Accrued purchases of property and equipment

$

1,416

$

662

COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE

(in thousands, except per share data)

Thirteen Weeks Ended

Twenty-Six weeks ended

July 30, 2011

July 31, 2010

July 30, 2011

July 31, 2010

(a)

Earnings from continuing operations

$

13,891

$

10,799

$

26,296

$

22,959

Income (loss) from discontinued operations, net of tax

52

(201

)

15

(411

)

Net earnings

$

13,943

$

10,598

$

26,311

$

22,548

(b)

Basic average number of common shares outstanding during period

52,952

52,682

52,901

52,609

Common shares assumed issued upon exercise of dilutive stock options, net of assumed repurchase, at the average market price

697

447

691

426

(c)

Diluted average number of common shares assumed outstanding during period

53,649

53,129

53,592

53,035

Basic earnings per share:

Earnings from continuing operations

(a) / (b)

$

0.26

$

0.21

$

0.49

$

0.44

Discontinued operations, net of tax

—

(0.01

)

—

(0.01

)

Basic earnings per share

$

0.26

$

0.20

$

0.49

$

0.43

Diluted earnings per share:

Earnings from continuing operations

(a) / (c)

$

0.26

$

0.20

$

0.49

$

0.43

Discontinued operations, net of tax

—

—

—

—

Diluted earnings per share

$

0.26

$

0.20

$

0.49

$

0.43

THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES

ADDITIONAL INFORMATION

(dollar amounts in thousands)

Thirteen Weeks Ended

Twenty-Six weeks ended

July 30, 2011

July 31, 2010

July 30, 2011

July 31, 2010

Capital expenditures

$

12,513

$

14,773

$

30,636

$

27,284

Depreciation and amortization

$

19,770

$

18,442

$

39,654

$

36,656

Non-operating income:

Net rental revenue

$

523

$

570

$

1,017

$

1,087

Investment income

40

45

122

111

Other income

6

6

17

7

Total

$

569

$

621

$

1,156

$

1,205

Comparable sales percentages:

Service

0.3

%

-0.7

%

0.9

%

-0.3

%

Merchandise

-2.5

%

2.5

%

-1.8

%

2.1

%

Total

-2.0

%

1.8

%

-1.3

%

1.6

%

Total square feet of retail space (including service centers)

12,563,000

11,749,000

Store count

Supercenter

561

555

Service & Tire Center

156

30

Retail Only

8

9

Total

725

594

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

Service center revenue

$

260,835

$

236,051

$

508,165

476,377

Retail sales

261,759

268,804

527,969

538,511

Total revenues

$

522,594

$

504,855

$

1,036,134

$

1,014,888

Gross profit from service center revenue

$

60,669

$

55,671

$

119,631

113,512

Gross profit from retail sales

74,541

78,830

150,701

158,584

Total gross profit

$

135,210

$

134,501

$

270,332

$

272,096

Comparable sales percentages by line of business (A):

Service center revenue

-0.7

%

0.1

%

-0.2

%

0.5

%

Retail sales

-3.1

%

3.4

%

-2.3

%

2.6

%

Total revenues

-2.0

%

1.8

%

-1.3

%

1.6

%

Gross profit percentage by line of business (A):

Gross profit percentage from service center revenue

23.3

%

23.6

%

23.5

%

23.8

%

Gross profit percentage from retail sales

28.5

%

29.3

%

28.5

%

29.4

%

Total gross profit percentage

25.9

%

26.6

%

26.1

%

26.8

%