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Pep Boys - Manny, Moe & Jack Message Board

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  • daninfw04 daninfw04 Jan 28, 2009 6:19 PM Flag

    Another Seeking Alpha story

    The $173 million has already been used to reduce debt. It is an amortization issue where a portion of it each year is reported as a "profit" for lack of a better way of saying it to offset the "expense" that year for the lease payments. I believe the amount will be amortized over 15 years. It's a bean counters way of using the money now and paying for it gradually over the life of the leases. There's a more technical explanation but I wanted to put it in layman's terms. The fact they didn't have to pay taxes at current corporate tax rate of say 38.5-40.0% gave PBY about $69 million to reduce more debt this past year. As they pay 1/15th of the tax on the gain each year in future years, the lease expense will offset most if not all of it so they will ultimately pay little or no tax on the gain. Pretty smart. DaninFW

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