SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-10823
HI-LO AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0232254
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2575 W. BELLFORT
HOUSTON, TEXAS
77054
(Address of principal executive offices)
(Zip Code)
(713) 663-6700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 10,775,109 shares outstanding of the issuer's only class of
common stock as of May 1, 1997.
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HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
MARCH 31, 1997
PAGE
Part I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements and Notes .................. 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 10
Part II - OTHER INFORMATION
Item 1. Not Applicable
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Not Applicable
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K ............................. 14
SIGNATURE PAGE ............................................................. 15
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
1997 1996
---------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash ................................................ $ 135 $ 1,180
Accounts receivable -
Trade, net of allowance for doubtful accounts
of $741 and $929 ................................ 6,303 5,651
Other ............................................. 5,137 6,878
Inventories ......................................... 95,260 91,401
Prepaids and other assets ........................... 1,865 1,628
---------- ----------
Total current assets ......................... 108,700 106,738
PROPERTY AND EQUIPMENT, net .......................... 31,949 31,980
DEFERRED INCOME TAXES AND OTHER ...................... 3,353 3,620
---------- ----------
$ 144,002 $ 142,338
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ................ 586 750
Accounts payable and accrued liabilities ............ 35,167 32,600
---------- ----------
Total current liabilities .................. 35,753 33,350
LONG-TERM DEBT, net of current maturities ........... 45,386 45,612
OTHER LIABILITIES .................................... 4,047 4,082
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000
shares authorized, none issued ................... -- --
Common stock, $.01 par value, 30,000,000
shares authorized, 10,775,109 and 10,775,109
shares issued and outstanding .................... 108 108
Additional paid-in capital ......................... 68,316 68,316
Retained earnings .................................. (9,608) (9,130)
---------- ----------
Total stockholders' equity .................... 58,816 59,294
---------- ----------
$ 144,002 $ 142,338
========== ==========
See Notes to Consolidated Financial Statements
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HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
-----------------------------
1997 1996
------------ ------------
Sales ........................................ $ 55,505 $ 60,835
Costs and expenses:
Cost of goods sold, buying and
distribution ............................... 33,129 37,073
Operating, selling, general and
administrative ............................. 21,991 22,991
------------ ------------
Operating income ............................. 385 771
Interest expense ............................. 1,122 1,022
Other (income) expense, net .................. (19) 281
------------ ------------
Income (loss) before taxes on income
(benefit from loss) ........................ (718) (532)
Taxes on income (benefit from loss) .......... (240) (101)
------------ ------------
Net income (loss) ............................ $ (478) $ (431)
============ ============
Net income (loss) per common and
common equivalent share .................... $ (.04) $ (.04)
============ ============
Weighted average common and common
equivalent shares outstanding .............. 10,775,000 10,756,000
See Notes to Consolidated Financial Statements
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HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
COMMON STOCK ADDITIONAL RETAINED
------------------ PAID-IN EARNINGS
SHARES AMOUNT CAPITAL DEFICIT
---------- ---- ------- --------
Balance, December 31, 1995 ....... 10,756,350 $108 $68,277 $ 44,593
Issuance of common stock ......... 18,759 -- 39 --
Net income (loss) ................ -- -- -- (53,723)
---------- ---- ------- --------
Balance, December 31, 1996 ....... 10,775,109 $108 $68,316 $ (9,130)
Issuance of common stock ......... -- -- -- --
Net income (loss) ................ -- -- -- (478)
---------- ---- ------- --------
Balance, March 31, 1997 .......... 10,775,109 $108 $68,316 $ (9,608)
========== ==== ======= ========
See Notes to Consolidated Financial Statements
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HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................. $ (478) $ (431)
---------- ----------
Adjustments to reconcile net income to cash
provided by operating activities -
Depreciation and amortization .................. 1,039 1,740
Other .......................................... (44) --
Changes in assets and liabilities -
Accounts receivable, net of allowances for
doubtful accounts .......................... 1,336 655
Inventories .................................. (3,859) (828)
Prepaids and other assets .................... (238) (1,374)
Accounts payable and other accrued liabilities 2,566 (2,480)
Income taxes payable/receivable .............. (247) (529)
---------- ----------
Total adjustments .......................... 553 (2,816)
---------- ----------
Net cash provided by (used in)
operating activities ................... 75 (3,247)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (1,027) (1,248)
Proceeds from assets sold .......................... 326 --
---------- ----------
Net cash used in investing activities .... (701) (1,248)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (Payments) on indebtedness ................ (419) 3,314
---------- ----------
Net cash provided by (used in)
financing activities ................... (419) 3,314
---------- ----------
INCREASE (DECREASE) IN CASH .......................... (1,045) (1,181)
CASH AT BEGINNING OF PERIOD .......................... 1,180 1,800
---------- ----------
CASH AT END OF PERIOD ................................ $ 135 $ 619
========== ==========
See Notes to Consolidated Financial Statements
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<PAGE>
HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes the disclosures are adequate to make
the information presented not misleading. In the opinion of management, all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations for the
periods presented have been included. Operating results for the current quarter
and year to date periods ending March 31, 1997, are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997. For
further information, reference should be made to the annual consolidated
financial statements and notes thereto for the year ending December 31, 1996.
Balance sheet information for December 31, 1996, has been derived from the
1996 annual audited financial statements.
The Company costs its inventory on the last-in, first-out (LIFO) method.
Had the first in, first out (FIFO) inventory costing method been used,
inventories would have been equal to the LIFO balance at December 31, 1996 and
1995; and March 31, 1997 and 1996.
B. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is based on the weighted
average number of common shares outstanding and assumes exercise of outstanding
options for Common Stock which are dilutive, using the treasury stock method.
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share".
SFAS No. 128 revises the standards for computing earnings per share currently
prescribed by APB Opinion No. 15. SFAS No. 128 retroactively revises the
presentation of earnings per share in the financial statements and will be
effective for the Company for the year ending December 31, 1997. The earnings
per share in the accompanying financial statements were computed pursuant to APB
Opinion No. 15 and is the same that would be required for basic earnings per
share under SFAS No. 128, which is determined using only the weighted average
shares outstanding. The Company also has potentially dilutive outstanding
options that would not be included in the computation of diluted earnings per
share under SFAS No. 128 because to do so would be anti-dilutive.
C. DEBT
BORROWINGS
Debt consisted of the following (in thousands):
MARCH 31, 1997
-------------
Note payable to a bank ....... $ 44,027
Long-term debt ............... 1,737
Capital lease obligations .... 208
-------------
45,972
Less - Current maturities .... 586
-------------
$ 45,386
=============
The weighted average interest rate on the note payable to a bank was 7.84%
and 6.65% at March 31, 1997 and March 31, 1996.
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<PAGE>
HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On October 23, 1996, the Company entered into a financing agreement
with a new lender. Initial funding under this financing agreement was used to
repay amounts outstanding under the Company's prior credit facility. The new
financing agreement provides for up to $60.0 million of borrowing availability
under a revolving credit facility, which matures October 22, 1999, with annual
renewals at the option of the Company and the lender. Credit availability is
limited to 60% of the value of saleable inventory and 85% of accounts
receivable, subject to certain adjustments and reserves which may be made at the
discretion of the lender. The facility is secured by all inventories,
receivables and fixed assets of the Company and its subsidiaries. The borrowings
may be priced, at the Company's option, at the lenders' prime rate, plus 1/4 of
1% or London Interbank Offered Rates (LIBOR) plus 2.25%. The Company pays a
commitment fee of 3/8 of 1% per annum on all unused portions of the credit
facility. Loan covenants relate to the Company's net worth, cash flow, and
restrict capital expenditures to $5.9 million for 1997, and $5.0 million for
1998 and 1999; and restrict operating lease payments to $16.0 million per annum
through 1999. The Company was in compliance with this financing agreement as of
March 31, 1997.
At March 31, 1997, the Company had $44.0 million outstanding under the
credit facility and total unutilized credit facilities of approximately $8.6
million.
The Company has established irrevocable letters of credit totaling
$1,200,000 as security for various insurance contracts.
The book values of cash, trade accounts receivables and accounts payable
approximate their fair values principally because of the short-term maturities
of these instruments. The estimated fair value of long-term debt approximates
the book value as the debt is priced based upon a floating rate.
D. SUPPLEMENTAL CASH FLOW INFORMATION
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ----------
Cash paid during the period for:
Interest .......................... $ 1,352 $ 879
Income taxes ...................... $ -- $ --
E. STOCKHOLDERS' EQUITY
The Board of Directors and the Company's stockholders have approved the
Hi-Lo Automotive, Inc. 1990 Stock Option and 1991 Associate Stock Purchase
Plans, as amended. The Stock Option Plan reserves 1,400,000 shares of the
Company's Common Stock for issuance to directors, officers and employees. At
March 31, 1997, options for 1,037,366 shares were outstanding, 39,723 shares had
been exercised, 845,977 shares had been canceled and 322,911 shares were
available for issuance.
Under the Stock Purchase Plan, each eligible employee has the right to
purchase shares as determined by the Plan formula. As of March 31, 1997, of the
175,000 shares of the Company's Common Stock reserved for issuance under this
Plan, 132,270 shares had been issued and 42,730 shares of the Company's Common
Stock remained reserved for issuance.
Preferred Share Purchase Rights
On August 23, 1996, the Company's Board of Directors adopted a Stockholder
Rights Plan to help assure that all of the Company's stockholders receive fair
and equal treatment in the event of a proposed take over of the Company. The
Rights Plan was effected by issuing one preferred share purchase right for each
outstanding share of common stock.
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<PAGE>
HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
These rights are not currently exercisable and will become exercisable only upon
the occurrence of specified events related to a change in control of the
Company. When exercisable, each right will entitle the holder to purchase 1/1000
of a share of the Company's Series A Junior Participating Preferred Stock at an
initial exercise price of $14.00 per right. The rights expire on September 2,
2006, unless extended or redeemed.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Certain statements contained in this section which are not historical
facts are forward-looking statements that involve risks, uncertainties, and
assumptions including, but not limited to, customer demand and trends in the
auto parts, products and accessories industry, related inventory risks due to
shifts in customer demand, the effect of economic conditions, the impact of
competitors' locations and pricing, difficulties with respect to new
technologies such as point-of-sale systems, parts catalogs, supply constraints
or difficulties, and the results of financing efforts. Should one or more of
these or other risks or uncertainties materialize or should the underlying
assumptions prove incorrect, actual outcomes could vary materially.
The Company sells automotive aftermarket parts, products and accessories
to retail and commercial customers through retail stores in Texas, Louisiana and
California.
The Company's store openings prior to 1997 were generally in markets where
existing national competitors already have and/or are opening stores. Certain
national competitors have also continued to open new stores in Hi/LO's existing
markets. Management believes that the markets in which it operates will continue
to see increasing competition for the foreseeable future. New store competition
has a significant short term impact on retail sales of the Company's nearby
stores. Future successful financial results are dependent upon the Company's
ability to compete effectively with these national competitors.
To respond to increased competition, the Company is remodeling older
stores located near recently opened competitor stores, improving customer
service, reducing operating, selling, and general and administrative costs when
appropriate, and continuing to improve distribution efficiencies. These
initiatives are being supported by changes in product assortment, including more
high quality product offerings and increased sales and marketing efforts in the
commercial markets. Additionally, the Company has plans to open up to five new
stores during 1997, and is focusing on the performance of its existing stores to
improve profitability. The Company identified up to 11 under performing stores
during 1996 which it plans to close by year end 1997, three of which have been
closed in 1996 and one of which closed in the first quarter of 1997. The
commercial program is also being streamlined and consolidated including the
outsourcing of commercial delivery in many locations.
Management believes the Company is regaining its momentum and as a result
of the initiatives begun in response to the increased competition, as well as
expected seasonal increases in sales and profitability, the Company's financial
results are expected to improve in the Second Quarter of 1997. Historically, the
Company's second and third quarters are strongest because of seasonal sales
volume increases. The Company can not, however, provide any assurance that it
will be profitable for any reporting period in 1997.
The following discussion of the Company's results of operations and
financial condition should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included in Part I, Item 1.
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<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the income statement data of the Company
expressed as a percentage of sales and the percentage change in such income
statement data from period to period.
QUARTER ENDED
MARCH 31,
--------------------
1997 1996 PERCENTAGE CHANGE
-------- -------- ----------
Sales .................................. 100.0% 100.0% (8.8)%
Cost of sales .......................... 59.7 60.9 (10.6)
-------- -------- ----------
Gross profit ........................... 40.3 39.1 (5.8)
Operating, selling, general
and administrative expenses ........... 39.6 37.8 (4.3)
-------- -------- ----------
Operating income ....................... 0.7 1.3 (50.1)
Interest expense ....................... 2.0 1.7 9.8
Other (income) expense, net ............ -- 0.5 106.8
-------- -------- ----------
Income (loss) before taxes ............. (1.3) (0.9) (35.0)
Taxes (tax benefit) on income (loss) ... (0.4) (0.2) (137.6)
-------- -------- ----------
Net income (loss) ...................... (0.9)% (0.7)% (10.9)%
======== ======== ==========
THREE MONTHS ENDED MARCH 31, 1997 (FIRST QUARTER) COMPARED TO MARCH 31, 1996
Sales of $55.5 million decreased by $5.3 million, or 8.8%, from the
comparable 1996 quarter. The decrease was due to same store sales declines of
$4.7 million or 7.8% and $0.6 million or 1.0%, due to store closings. The
Company's markets continue to be highly competitive and weather conditions such
as the mild and wet First Quarter of 1997 adversely impact sales volumes. Same
store sales represent a comparison of store sales between corresponding full
periods and includes only stores open for both periods. At the end of the First
Quarter of 1997, the Company had 190 stores in operation compared to 194 at the
end of the First Quarter of 1996.
Gross profit was $22.4 million, or 40.3% of sales, compared with $23.8
million, or 39.1% of sales, for the First Quarter of 1996. The 1.2% increase in
gross profit, as a percentage of sales, was attributable to improved product
margins at the point of sale together with a shift in mix to the higher margin
retail business. During the First Quarter of 1997, the continued emphasis on
higher margin branded products and increased commodity margins contributed to
the increased profit margins.
Operating, selling, general and administrative expenses for the quarter
were $22.0 million, or 39.6% of sales, compared to $23.0 million, or 37.8% of
sales, for the First Quarter of 1996. The decrease in costs of $1.0 million was
a result of lower operating, selling, general and administrative costs
associated with continuing efforts to reduce costs to minimize the impact of
lower sales volumes on profitability.
Operating income was $0.4 million, or 0.7% of sales, compared to $0.8
million, or 1.3% of sales, in the First Quarter of 1996, due to the factors
discussed above.
Interest expense was $1.1 million, or 2.0% of sales, compared to $1.0
million, or 1.7% of sales, for the First Quarter of 1996. The increase resulted
primarily from higher average interest rates during the period.
The Company's effective income tax rate (benefit) was (33.0)% of the
pre-tax income (loss) compared to (19.0)% of pre-tax income (loss) for the First
Quarter of 1996. The increase in this benefit as a result of the pre-tax loss
was attributable to the amortization of goodwill in 1996, which is not
deductible for federal income tax purposes.
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<PAGE>
The Company's loss increased $0.1 million to $0.5 million or .9% of sales
in the First Quarter of 1997 as compared to a net loss of $0.4 million in the
First Quarter of 1996, due to the factors previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities during the First Quarter of 1997
provided net cash of $0.1 million, primarily from replacing a cash
collateralized letter of credit with a standby letter of credit. Investing
activities utilized $0.7 million of cash, principally related to the Company's
capital expenditures. Financing activities used $0.4 million of cash,
principally to reduce the outstanding balance under the credit agreement.
During the First Quarter of 1997, the Company remodeled one store and
completed its national call center. The Company has financed its growth through
a combination of internally generated funds, bank borrowings, sale and lease
back transactions, and issuance of common stock. Capital expenditures were $1.0
million during the first three months of 1997 compared to $1.2 million for the
same period of 1996.
The Company plans to open up to five stores during 1997. The Company also
plans to remodel or relocate approximately seven stores prior to the end of
1997. Planned capital expenditures for the remainder of 1997, including those
associated with new store openings, remodels, and relocations, will be
approximately $4.2 to $4.9 million before sale lease back and direct lease
transactions.
The Company's primary capital requirements have been for new store
openings, including related inventories and for store remodelings, relocations
and acquisitions. Capital expenditures, which principally related to new,
remodeled or relocated stores, were $4.3 million in 1996, $12.1 million in 1995,
and $22.0 million in 1994. From the beginning of 1994 through the end of 1996,
the Company opened or acquired 44 stores and closed three stores and total
merchandise inventories increased by approximately $26.9 million. The Company
has financed this growth through a combination of equity, sale-leaseback
transactions, borrowings and internally generated funds. Most of the Company's
store sites are leased.
The Company evaluates all capital expenditures on a case by case basis to
determine whether such expenditures are prudent under current market conditions.
The Company did not open any new stores during 1996. The Company remodeled or
relocated ten stores during 1996. Total capital expenditures, including those
associated with remodels, relocations and conversions, during 1996 were
approximately $4.3 million.
On October 23, 1996, the Company entered into a financing agreement with a
new lender. Initial funding under this financing agreement was used to repay
amounts outstanding under the Company's prior credit facility. The new financing
agreement provides for up to $60.0 million of borrowing availability under a
revolving credit facility, which matures October 22, 1999, with annual renewals
at the option of the Company and the lender. Credit availability is limited to
60% of the value of saleable inventory and 85% of accounts receivable, subject
to certain adjustments and reserves which may be made at the discretion of the
lender. The facility is secured by all inventories, receivables and fixed assets
of the Company and its subsidiaries. The borrowings may be priced, at the
Company's option, at the lenders' prime rate, plus 1/4 of 1% or London Interbank
Offered Rates (LIBOR) plus 2.25%. The Company pays a commitment fee of 3/8 of 1%
per annum on all unused portions of the credit facility. Loan covenants relate
to the Company's net worth, cash flow, and restrict capital expenditures.
Capital expenditures are limited to $5.9 million for 1997, $5.0 million for 1998
and 1999. Additionally, operating lease payments are restricted to $16.0 million
per annum through 1999. The Company was in compliance with this financing
agreement as of March 31, 1997.
Future compliance with the financial covenants of the Company's financing
agreement is dependent on its ability to generate sufficient earnings and cash
flow to meet such covenants. In the event the Company is not able to remain in
compliance with the provisions of the financing agreement, it will attempt to
renegotiate the terms of the financing agreement so as to remain in compliance
or to refinance amounts outstanding under the credit facility. However, there
can be no assurance that the Company would be successful in such negotiations,
in which case the Company's funds available for its operating needs would be
limited to internally generated funds.
At March 31, 1997, the Company had $44.0 million outstanding under the
credit facility and total unutilized credit facilities of approximately $8.6
million.
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<PAGE>
Although the Company believes that existing working capital, cash flows
from operations, bank borrowings, sale- leasebacks of retail properties and
sales of excess real estate will be sufficient to fund both capital and
liquidity needs of the Company for the next year, the Company's ability to
access capital due to its declining operating results in recent periods could
have an adverse impact on the Company's ability to compete effectively in its
markets.
The book values of cash, trade accounts receivables and accounts payable
approximate their fair values principally because of the short-term maturities
of these instruments. The estimated fair value of long-term debt approximates
the book value as the note payable to a bank is priced based upon a floating
rate.
The Company accepts payment for sales by cash, including checks and major
credit cards, and offers accounts to commercial customers.
SEASONALITY
The Company's business is seasonal in nature, with store sales and profits
historically running higher in the second and third quarters (April through
September) of each year than in the Company's first and fourth quarters. Sales
for the combined second and third quarters of 1996 were 52.9% of annual sales.
The Company's business is also influenced by weather conditions. Weather
extremes tend to enhance sales by causing a higher incidence of parts failure,
and thus increasing sales of seasonal products. Rainy weather, however, tends to
reduce sales by causing deferral of elective maintenance.
INSURANCE
The Company maintains insurance for on the job injuries to its associates and
other coverages for normal business risks. A substantial portion of the
Company's current and prior year insurance coverages are "high deductible"
policies in which the Company, in many cases, is responsible for the payment of
incurred claims up to specified individual and aggregate limits, over which a
third party insurer is contractually liable for any additional payment of such
claims. Accordingly, the Company bears certain economic risks related to these
coverages. On a continual basis, and as of each balance sheet date, the Company
records an accrual equal to the estimated costs expected to result from incurred
claims plus an estimate of claims incurred but not reported as of such date
based on the best available information at such date. However, the nature of
these claims is such that actual development of the claims may vary from the
estimated accruals. All changes in the accrual estimates are accounted for on a
prospective basis and can have a significant impact on the Company's financial
position or results of operations.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11.1 Schedule of Computation of Earnings Per Share
(b) Reports on Form 8-K
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hi-Lo Automotive, Inc.
Date: May 12, 1997 /s/ T. Michael Young
T. Michael Young
Chairman of the Board,
President and
Chief Executive Officer
Date: May 12, 1997 /s/ Gary D. Walther
Gary D. Walther
Vice President-Finance and
Chief Financial Officer
Date: May 12, 1997 /s/ Dale F. Bridges
Dale F. Bridges
Controller and
Chief Accounting Officer
-15-
EXHIBIT 11.1
HI-LO AUTOMOTIVE, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE DATA)
- ------------------------------------------------------------------------------
COLUMN A COLUMN B
- ------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
-----------------------------
1997 1996
------------ ------------
AVERAGE COMMON SHARES OUTSTANDING ............ 10,775,109 10,756,350
COMMON EQUIVALENT SHARES RESULTING FROM
STOCK OPTIONS ISSUED ....................... -- --
------------ ------------
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING ......................... 10,775,109 10,756,350
NET INCOME (LOSS) ............................ $ (478) $ (431)
============ ============
EARNINGS PER COMMON SHARE:
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE ........................... $ (.04) $ (.04)
============ ============
- ----------------
Earnings per share have been computed by dividing net income by the average
number of common and common equivalent shares outstanding. Common equivalent
shares outstanding were computed using the treasury stock method. The difference
between shares for primary and fully diluted earnings per share was not
significant in any period. On November 1, 1994, a note was issued that is
convertible, effective November 1, 1996, into 93,859 shares of the Company's
Common Stock. As of March 31, 1997, this note had no significant effect on
earnings per share.
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 135
<SECURITIES> 0
<RECEIVABLES> 12,181
<ALLOWANCES> (741)
<INVENTORY> 95,260
<CURRENT-ASSETS> 108,700
<PP&E> 77,865
<DEPRECIATION> (45,916)
<TOTAL-ASSETS> 144,002
<CURRENT-LIABILITIES> 35,753
<BONDS> 0
0
0
<COMMON> 108
<OTHER-SE> 59,186
<TOTAL-LIABILITY-AND-EQUITY> 144,002
<SALES> 55,505
<TOTAL-REVENUES> 55,505
<CGS> 33,129
<TOTAL-COSTS> 55,112
<OTHER-EXPENSES> (19)
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<INTEREST-EXPENSE> 1,122
<INCOME-PRETAX> (718)
<INCOME-TAX> (240)
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<CHANGES> 0
<NET-INCOME> (478)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
