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Pep Boys - Manny Moe & Jack  (NYSE:PBY) Long-Term Debt & Capital Lease Obligation: $193 Mil (As of Oct. 2015)

Long-Term Debt is the debt due more than 12 months in the future. Pep Boys - Manny Moe & Jack's long-term debt & capital lease obligation for the quarter that ended in Oct. 2015 was $193 Mil.

LT-Debt-to-Total-Asset is a measurement representing the percentage of a corporation's assets that are financed with loans and financial obligations lasting more than one year. The ratio provides a general measure of the financial position of a company, including its ability to meet financial requirements for outstanding loans. It is calculated as a company's long-term debt divide by its Total Assets. Pep Boys - Manny Moe & Jack's long-term debt for the quarter that ended in Oct. 2015 was $193 Mil. Pep Boys - Manny Moe & Jack's Total Assets for the quarter that ended in Oct. 2015 was $1,492 Mil. Pep Boys - Manny Moe & Jack's LT-Debt-to-Total-Asset for the quarter that ended in Oct. 2015 was 0.13.

Pep Boys - Manny Moe & Jack's LT-Debt-to-Total-Asset declined from Oct. 2014 (0.15) to Oct. 2015 (0.13). It may suggest that Pep Boys - Manny Moe & Jack is progressively becoming less dependent on debt to grow their business.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Pep Boys - Manny Moe & Jack Annual Data

Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15
Long-Term Debt & Capital Lease Obligation Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 295.12 294.04 198.00 199.50 211.00

Pep Boys - Manny Moe & Jack Quarterly Data

Jan11 Apr11 Jul11 Oct11 Jan12 Apr12 Jul12 Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15
Long-Term Debt & Capital Lease Obligation Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 229.50 211.00 193.50 193.00 192.50

Calculation

Long-Term Debt is the debt due more than 12 months in the future. The debt can be owed to banks or bondholders. Some companies issue bonds to investors and pay interest on the bonds.

Long-Term Capital Lease Obligation represents the total liability for long-term leases lasting over one year. It's amount equal to the present value (the principal) at the beginning of the lease term less lease payments during the lease term.

The interest paid on companies' debt is reflected in the income statement as interest expense. If a company has too much debt and it cannot serve the interest payment on the debt or repay the matured debt, the company risks bankruptcy. Peter Lynch famously said: A company that does not have debt cannot go bankrupt.

A company's long term debt may have different dates of maturity and interest rates, depending on the terms.

Usually a company issues long term debt to pay for its capital expenditures. Borrowing allows the company to do things that otherwise cannot be done with only the capital it has. But debt can be risky.


Explanation

LT-Debt-to-Total-Asset is a measurement representing the percentage of a corporation's assets that are financed with loans and financial obligations lasting more than one year. The ratio provides a general measure of the financial position of a company, including its ability to meet financial requirements for outstanding loans. A year-over-year decrease in this metric would suggest the company is progressively becoming less dependent on debt to grow their business.

Pep Boys - Manny Moe & Jack's Long-Term Debt to Total Asset Ratio for the quarter that ended in Oct. 2015 is calculated as:

LT-Debt-to-Total-Asset (Q: Oct. 2015 )=Long-Term Debt & Capital Lease Obligation (Q: Oct. 2015 )/Total Assets (Q: Oct. 2015 )
=192.5/1492.355
=0.13

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Buffett says that durable competitive advantages carry little to no LT debt because the company is so profitable that even expansions or acquisitions are self financed.

We are interested in long term debt load for the last ten years. If the ten years of operation show little to no long term debt, then the company has some kind of strong competitive advantage.

Warren Buffett's historic purchases indicate that on any given year, the company should have sufficient yearly net earnings to pay all long term within 3 or 4 year earnings period. (e.g. Coke + Moody's = 1yr)

Companies with enough earning power to pay long term debt in less than 3 or 4 years is a good candidate in our search for long term competitive advantage.

BUT, these companies are targets for leveraged buy outs, which saddles the business with long term debt.

If all else indicates the company has a moat, but it has ton of debt, a leveraged buyout may have created the debt. In these cases the company's bonds offer the better bet, in that the company’s earnings power is focused on paying off the debt and not growth.

Important: little or no long term debt often means a Good Long Term Bet


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