SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1996
Commission File Number 0-20984
HAHN AUTOMOTIVE WAREHOUSE, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 16-0467030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
415 West Main Street Rochester, New York 14608
(Address of principal executive offices) (Zip Code)
(716) 235-1595
(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
Number of shares outstanding of the registrant's common stock,
par value $.01 per share, on August 13, 1996; 4,562,513.
HAHN AUTOMOTIVE WAREHOUSE, INC.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets - June 30, 1996 and
September 30, 1995
Condensed Consolidated Statements
of Income - for the nine months and three months
ended June 30, 1996 and June 30, 1995
Condensed Consolidated Statements
of Cash Flows - for the nine months
ended June 30, 1996 and
June 30, 1995
Notes to Condensed Consolidated
Financial Statements
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
<TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands except share data)
<CAPTION>
ASSETS 6/30/96 9/30/95
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $197 $205
Accounts receivable:
Trade, net of allowance
for doubtful accounts 21,683 17,919
Inventory 75,278 72,156
Other Current Assets 1,749 2,921
Total Current Assets 98,907 93,201
Property, Equipment, and
Leasehold Improvements, Net 14,271 15,269
Other Assets 2,266 2,010
$115,444 $110,480
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt and capital lease
obligations $2,888 $6,881
Current portion - Notes Payable -
Officers and Affiliates 691 500
Accounts payable 22,521 23,020
Compensation related liabilities 2,850 3,139
Other accrued expenses 4,230 3,932
Total Current Liabilities 33,180 37,472
Long-term Debt 47,388 40,476
Capital Lease Obligations 567 892
Notes Payable - Officers and Affiliates 1,892 0
Total Liabilities 83,027 78,840
Shareholders' Equity:
Common stock (par value
$.01 per share:
authorized 20,000,000 shares
issued and outstanding
4,387,032 and 4,562,513, respectively) 46 44
Additional paid-in capital 24,608 23,161
Retained earnings 7,763 8,435
Total Shareholders' Equity 32,417 31,640
$115,444 $110,480
</TABLE>
<TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME
(In Thousands except per share data)
(Unaudited)
<CAPTION>
For The 9 Months For The 3 Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $165,557 $165,109 $60,801 $57,834
Cost of Products Sold 97,435 99,103 36,498 34,655
Gross Profit 68,122 66,006 24,303 23,179
Selling, General
Administrative
Expense 61,440 62,356 20,825 21,696
Depreciation and
Amortization 2,380 2,335 775 798
Income (Loss) from
Operations 4,302 1,315 2,703 685
Interest Expense (3,332) (3,307) (1,143) (1,152)
Interest and Service
Charge Income 324 384 80 133
Income (Loss)
Before Taxes 1,294 (1,608) 1,640 (334)
Income Taxes
(Refundable) 518 (417) 656 93
Net Income (Loss) $776 $(1,191) $984 $(427)
Net Income (Loss)
Per Share $.17 $(.26) $.22 $(.09)
Weighted Average
Shares
Outstanding 4,562,513 4,561,113 4,562,513 4,562,513
</TABLE>
<TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In Thousands except per share data)
(Unaudited)
<CAPTION>
9 Mo. Ended 9 Mo. Ended
06/30/96 06/30/95
<S> <C> <C>
Cash Flows from Operating
Activities:
Net Income (Loss) $776 $(1,191)
Adjustments to Reconcile
Net Income (Loss) to Net
Cash Used In Operating
Activities:
Depreciation and
Amortization 2,380 2,335
Provision for Doubtful
Accounts and Notes 489 449
Changes in Assets and Liabilities:
Trade Receivables (4,253) (1,314)
Inventory (3,122) (1,393)
Other Assets 682 955
Accounts Payable and Other Accruals (490) (10,731)
Net Cash Provided By (used in)
Operating Activities (3,538) (10,890)
Cash Flows from Investing Activities:
Proceeds from Sale of Fixed Assets 0 89
Additions to Property, Equipment and
Leasehold Improvements (1,148) (1,862)
Net Cash used in Investing Activities(1,148) (1,773)
Cash Flows from Financing Activities:
Net Borrowings Under (payment of)
Line of Credit 6,654 15,558
Proceeds from Stock Options 0 44
Proceeds from Long-Term Debt and
Demand Notes 538 375
Proceeds from Subordinated Notes 2,150 0
Payment of Long-Term Debt and Demand
Notes (3,720) (3,009)
Payment of Notes Payable -
Officers and Affiliates (567) (60)
Payment of Capital Lease Obligations (377) (341)
Net Cash Provided By Financing
Activities 4,678 12,567
Net Increase (Decrease) in Cash (8) (96)
Cash at Beginning of Year 205 304
Cash at End of Period 197 208
Supplemental Disclosures of Cash
Flow Information:
Cash Paid During the Nine Mo. For:
Interest $3,550 $3,322
Income Taxes $325 $1,822
</TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The condensed interim consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. The interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to
fairly present such information. Although the Company believes
that the disclosures included on the face of the interim
consolidated financial statements and in the other footnotes
herein are adequate to make the information presented not
misleading, certain information and footnote disclosures,
including significant accounting policies, normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that all
condensed consolidated financial statements contained herein be
read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report for the fiscal
year ended September 30, 1995 on Form 10-K, filed with the
Securities and Exchange Commission, Washington, D.C. 20549.
Operating results for the nine month period ended June 30, 1996
are not necessarily indicative of the results that may be
expected for the entire fiscal year.
2. Stockholders' Equity
On December 13, 1994, and January 31, 1995 two employees
exercised options for 4,160 shares of the Company's common stock.
The Company realized net proceeds of approximately $44,000, which
were used in the general operations of the business.
On March 15, 1996, the Board of Directors declared a 4% stock
dividend on the Company's common stock, payable May 1, 1996 to
shareholders of record as of April 10, 1996. Accordingly,
amounts equal to the fair market value of the additional shares
issued have been charged to retained earnings and credited to
common stock and additional paid-in capital at June 30, 1996.
Earnings per share and weighted average shares outstanding have
been presented as if the stock dividend had occurred at the
beginning of fiscal year 1996.
3. Debt (in thousands)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
06/30/96 9/30/95
<S> <C> <C>
Term Loan $0 $13,000
Revolving Credit 42,365 21,724
Senior Secured Notes 6,400 8,550
Other Long-term Debt 1,083 3,605
Notes Payable - Officers and Affiliates 2,150 0
Capitalized Lease Obligations 995 1,371
Less Current Maturities (3,146) (6,881)
$49,847 $41,369
(/TABLE)
On June 30, 1996, the Company entered into a new Credit Agreement
with a syndicate of four banks, the proceeds of which were used
to refinance the existing bank debt of the Company and
Meisenzahl. The Statements of Cash Flow reflect only the cash
payments made on the bank debt prior to such refinancing.
The new Credit Agreement provides for $47,500,000 of availability
(subject to a borrowing base formula) and expires June, 1999.
Loans made pursuant to the new Credit Agreement accrue interest
at either a base rate plus a margin or a LIBOR rate plus a
margin. Base rate loans bear interest at the rate per annum
equal to the prime commercial lending rate for the syndicate's
administrative agent plus 75 basis points through and including
November 15, 1996. After November 15, 1996, the applicable base
rate margin changes quarterly to between 0 and 100 basis points
depending upon the Company's debt coverage ratio. LIBOR rate
loans bear interest at the LIBOR rate plus 200 basis points
through and including November 15, 1996. After November 15,
1996, the applicable LIBOR rate margin changes quarterly to
between 112.5 and 225 basis points depending upon the Company's
debt coverage ratio.
The Senior Secured Notes are due June 15, 1999. The note
agreement requires single annual sinking fund payments of
$2,150,000 which commenced June 15, 1993 with a final payment of
$2,100,000 due June 15, 1999. The Senior Secured Notes may be
prepaid, subject to a prepayment penalty. Interest at 10.25% is
payable semi-annually in June and December.
The Credit Agreement and Senior Secured Notes are collateralized
by substantially all of the Company's assets and contain
covenants and restrictions, including limitations on
indebtedness, liens, leases, mergers and sales of assets, and
investments, and on dividends, stock purchases and other payments
with respect to capital stock and cash flow coverage
requirements. At June 30, 1996, the Company was in compliance
with all covenants under the Senior Secured Notes agreement.
5. Legal
The Company was a defendant in a lawsuit filed in the Federal
District Court for the District of Maryland by AP Parts
International, Inc. on May 31, 1995. This lawsuit has been
dismissed with prejudice at no expense to the Company.
HAHN AUTOMOTIVE WAREHOUSE, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Hahn Automotive Warehouse, Inc. (the "Company") operates its
automotive aftermarket business both through the Company and its
wholly-owned subsidiaries, AUTOWORKS, Inc. and Meisenzahl Auto
Parts, Inc. These operations include the Company's 14 Distribution
Centers and 84 Advantage Auto Stores which serve the commercial and
jobber market, AUTOWORKS' one Distribution Center and 132 stores
which serve the retail market and five Direct Distribution Centers
which serve the two-step market. Unless otherwise indicated, the
discussion herein refers to the financial condition and results of
operation of the Company on a consolidated basis.
Results of Operations - Three months ended June 30, 1996 compared
to three months ended June 30, 1995.
Net sales for the third quarter of fiscal 1996 (ended June 30,
1996) increased $3.0 million, or 5.1% over net sales for the same
quarter of the last fiscal year (ended June 30, 1995). In
comparison to the previous fiscal year and on a same store or
warehouse basis, for the current quarter, Advantage Auto net sales
increased 9.3%, mainly as a result of increased unit sales,
Distribution Center net sales gained 16.6%, also due to higher unit
sales, and Direct Distribution Centers improved 28.9% because of
higher unit sales. These sales increases were partially offset by
a 4.2% decline in same store sales at the AUTOWORKS division which
is attributable generally to increased competition in certain
markets. As a percentage of net sales, AUTOWORKS contributed
35.0%, Distribution Centers contributed 32.7%, Advantage Auto
Stores contributed 25.7%, and Meisenzahl contributed 6.6%.
As a result of increased net sales, gross profit increased $1.1
million to $24.3 million for the current quarter from $23.2 million
in the third quarter of the prior fiscal year. Gross profit margin
expressed as a percentage of net sales remained constant at 40.0%.
Selling, general and administrative expense decreased in the
current quarter by $871,000 compared to the same period in fiscal
1995. This decrease resulted from concentrated payroll and
overall expense control at the AUTOWORKS division. As a
percentage of net sales, expenses declined to 34.3% compared to
37.5% for the same quarter last year. This is primarily due to
the increase in the Company's net sales and a decrease in the
AUTOWORKS division's expenses.
Depreciation and amortization decreased $23,000 in the quarter
ended June 30, 1996, to $775,000 from $798,000 for the same
period of the prior fiscal year. This drop is primarily due to
the Company's increased use of leases in replacement of certain
capital expenditures in order to comply with the requirements of
the Company's new Credit Facility.
Interest expense decreased $9,000 from $1.152 million for the
third quarter of fiscal 1995 to $1.143 million for the current
quarter. This decrease is due to slightly lower average
outstanding borrowings during the current quarter compared to the
same quarter of last year.
For the current quarter, as a result of the Company's
profitability, the Company's tax expense increased to $656,000
from $93,000 for the same quarter last year. The unusual
relationship between the pre-tax loss for the third quarter of
the previous fiscal year and the tax expense is due to taxes
being payable in certain states even though no profit was
generated.
As a result of the factors discussed above, the Company realized
after tax profit of $984,000 or $.22 per share compared to a net
loss of $427,000 or $.09 per share for the same quarter last
fiscal year.
Results of Operations - Nine months ended June 30, 1996 compared
to nine months ended June 30, 1995.
Net sales increased $448,000, or .3% from $165.1 million for the
nine months ended June 30, 1995 to $165.6 million for the
corresponding nine months of fiscal 1996. This slight increase
is the result of the strong performance by the Distribution
Centers, offset in part by the decrease in sales in the AUTOWORKS
division. The drop in AUTOWORKS sales is attributable to the
closing of 14 stores and opening five stores during the nine
month period ending June 30, 1996, and a comparable store sales
decrease of 3.7% due to increased competition in certain markets.
For the first nine months of the current fiscal year, expressed
as a percentage of net sales, AUTOWORKS contributed 38.2%,
Distribution Centers contributed 30.2%, Advantage Auto Stores
contributed 25.5% and Meisenzahl's sales were 6.1%.
Year-to-date gross profit for the current fiscal year increased
by $2.1 million or 3.2%, to $68.1 million over the same period
last year. As a percentage of net sales, gross profit increased
to 41.1% from 40.0% in the comparable period of fiscal 1995. The
gross margin rate increase is primarily due to purchasing
economies achieved with the AUTOWORKS and Meisenzahl acquisitions
and, to a smaller extent, the increase in Advantage Auto Stores
sales as a percentage of the Company's net sales.
Selling, general and administrative expense decreased to $61.4
million for the current nine months representing a decrease of
$1.0 million over the same period last year. This decrease is
primarily the result of the reductions in expenses at the
AUTOWORKS division. As a percentage of net sales, selling,
general and administrative expense declined to 37.1% of net sales
from 37.8% for the same period in fiscal 1995. This decline is
mainly due to the current quarter increase in net sales and the
decrease in the AUTOWORKS division's expenses.
Depreciation and amortization increased $45,000 from $2.3 million
in fiscal 1995 to $2.4 million for the same nine month period in
the current fiscal year. This slight increase is attributable to
the opening and remodeling of AUTOWORKS stores and the opening of
one new Direct Distribution Center, for which expenditures were
mostly offset by the leasing of replacement delivery vehicles
instead of purchasing them.
Interest expense remained at $3.0 million for the nine month
periods ending June 30, 1995 and 1996.
As a result of the factors discussed above, the Company's net
profit after tax was $776,000 or $.17 per share compared to a net
loss of $1.2 million or $.26 per share for the same nine month
period of 1995.
During the fourth quarter of the current year, the Company may
record a charge against earnings to establish a reserve for costs
that may be incurred in connection with certain leases assigned
by AUTOWORKS to a third party prior to the Company's acquisition
of AUTOWORKS. The charge may or may not be material; the Company
currently has insufficient facts to estimate the magnitude of the
charge. The third party assignee of the leases has filed for
protection under the bankruptcy law and has rejected a number of
the assigned leases. As a result, certain landlords have
asserted claims against AUTOWORKS for remaining rents and charges
due under the assigned leases. AUTOWORKS intends to oppose such
claims where defenses exist. To the extent that AUTOWORKS has
legal liability to the landlords, it will attempt to mitigate
such liability. The statements in this paragraph are forward-
looking and, therefore, are subject to certain risks and
uncertainties, including the following: the Company's ability to
successfully oppose or compromise claims made by landlords under
the assigned leases; the Company's ability to successfully use or
relet the property covered by the assigned leases; the rate at
which the Company relets such property; and the ability of the
Company to succeed in mitigating or offsetting the liability.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended June 30, 1996, net earnings adjusted for
non-cash items, including depreciation and bad debt, increased to
$3.6 million from $1.6 million for the same nine month period last
year, or an increase of 125.0%, which is attributable to the
Company's return to profitability for the period compared to a loss
in the previous year. Net cash used by operating activities
declined to $3.5 million for the current nine months from $10.9
million for the same period last year. This decline is primarily
due to a lesser reduction in payables this year than for the same
period last year, and, to a lesser extent, the increase in net
earnings. This decline in payable reductions reflects mainly a
significant payment made by the Company last year in connection
with the termination of an extended payment program which AUTOWORKS
maintained with its vendors.
During the nine months ended June 30, 1996, the Company's capital
expenditures totaled $1.1 million compared to $1.8 million during
the first three quarters of fiscal 1995. The decline in capital
expenditures is attributable to the increased number of operating
leases entered into by the Company during fiscal 1996. The Company
expects to continue its increased use of operating leases during
the remainder of this fiscal year and during the term of the new
Credit Facility discussed below.
Financing activities produced $4.7 million during the nine months
ended June 30, 1996. These funds were generally derived from net
borrowings under the Company's revolving credit line and from the
$2.1 million subordinated demand loan made by the Futermans to the
Company on February 13, 1996.
On June 30, 1996, the Company, its operating subsidiaries, and a
syndicate of four banks (the "Syndicate Banks") for which Fleet
Bank ("Fleet") acts as lead participant and administrative agent,
entered into a Credit Facility Agreement ("Credit Facility"), the
proceeds of which were used to refinance the existing bank debt of
the Company and its subsidiaries. The Credit Facility provides for
a $47.5 million revolving loan facility which expires in June,
1999. Loans made pursuant to the Credit Facility accrue interest
at either a base rate plus a margin or LIBOR rate plus a margin.
Base rate loans bear interest at the rate per annum equal to
Fleet's prime commercial lending rate plus 75 basis points through
and including November 15, 1996. After November 15, 1996, the
applicable base rate margin changes quarterly to between 0 and 100
basis points depending upon the Company's debt coverage ratio.
LIBOR rate loans bear interest at the LIBOR rate plus 200 basis
points through and including November 15, 1996. After November 15,
1996, the applicable LIBOR rate margin changes quarterly to between
112.5 and 225 basis points depending upon the Company's debt
coverage ratio.
Availability under the Revolving Loan is subject to a borrowing
base formula equal to a percentage of eligible receivables,
eligible inventory, and fixed assets (up to a maximum of $3 million
for fixed assets) and is reduced by the face amount of letters of
credit which the Company has outstanding under the Credit Facility.
As of August 9, 1996, the Company had outstanding loans of $41.6
million and undrawn letters of credit with an aggregate face amount
of $1.35 million leaving availability of $4.5 million under the
Credit Facility.
The Company's obligations under the Credit Facility are secured by
substantially all of the assets of the Company and its
subsidiaries. The Company and its subsidiaries are subject to
customary secured lending covenants, including restrictions on
additional liens, additional indebtedness, sale of assets, payment
of dividends, affiliate transactions, certain loans, investments,
acquisitions and fundamental corporate changes (including changes
to the Futerman's stockholdings that would result in the Futermans
no longer having effective voting control over the Company). The
Company and its subsidiaries are also required to maintain a
minimum level of interest rate protection instruments and to comply
with certain financial covenants, including: current ratio, fixed
charges ratio, funded debt ratio, tangible net worth, capital
expenditures, and collateral coverage ratio. The most restrictive
covenants contained in the Credit Facility include the Company's
obligation to maintain a fixed charge ratio of not less than 1.0 to
1.0 at the last day of each fiscal quarter for the most recent four
(4) quarter periods and a collateral coverage ratio of 1.1 to 1.0
at the last day of each fiscal quarter. In addition, the Credit
Facility's prohibition on incurring capital expenditures beyond
$1.5 million annually is below the Company's annual average capital
expenditures for the last three (3) years and will require the
Company to replace certain capital assets with operating leases.
In addition, the Credit Facility's capital expenditure limitation
effectively precludes the Company from making future acquisitions
without the consent of the Syndicate Banks.
In connection with the Company's new Credit Facility, the Company
repaid and refinanced the $2.5 million of indebtedness advanced to
it by Michael Futerman and Eli Futerman in February, 1996. The
Company repaid $350,000 of this debt and exchanged five (5) year
subordinated notes with the Futermans for the demand notes
representing the remaining $2,150,000 principal balance. The
Futermans' subordinated notes bear interest at the rate of 12% per
annum. Interest is payable monthly. The notes are redeemable at
the option of the Company, in whole or in part, at any time,
subject to a Subordination Agreement with the Syndicate Banks. The
notes are payable in fifty (50) equal monthly principal payments
which commence on January 1, 1997, and continue through and
including February 1, 2001. In the event that the Company at any
time has net income of $4,141,000 or greater, then, in such event,
the Company must prepay principal on the notes in the aggregate
amount equal to 19.186% of its net income above and beyond such net
income amount, provided that the Company is not in default under
the Credit Facility and such payment does not result in the Company
defaulting thereunder. The Futermans' subordinate notes are
unsecured and subordinated to all of the Company's indebtedness to
the Syndicate Banks.
The Company expects to incur additional interest expense during
fiscal 1996 as a result of higher interest rates under the new
Credit Facility and the borrowings from the Futermans.
The Company's principal sources of liquidity are internally
generated funds, borrowings under its Credit Facility, leasing
arrangements and vendor financing. The Company anticipates that
these sources will provide sufficient working capital to operate
the Company's business, make expected capital expenditures,
continue implementation of the AUTOWORKS operational and
organizational changes and to meet its other short-term and long-
term liquidity needs for at least the next 12 months.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 19, 1996, the Company settled its litigation with AP Parts
International, Inc. ("AP Parts") pending in the United States
District Court for the District of Maryland (civil action no. DKC-
95-1611). Pursuant to such settlement, AP Parts discontinued such
litigation with prejudice at no costs to the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Credit Facility Agreement, dated June 26, 1996,
among the Company and its operating subsiaries,
Fleet Bank (individually and as administrative
agent), The Chase Manhattan Bank, N.A.,
Manufacturers and Traders Trust Company and The
Sumitomo Bank, Limited.
10.2 $1,650,000 Promissory Note, dated February 1, 1996,
executed by the Company in favor of Michael
Futerman.
10.3 $500,000 Promissory Note, dated February 1, 1996,
executed by the Company in favor of Eli N. Futerman.
27 Selected financial information as required for Edgar
elctronic filing for the nine months ended June 30,
1996.
(b) Reports on Form 8-K
None
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 hereunto duly authorized.
HAHN AUTOMOTIVE WAREHOUSE, INC.
(Registrant)
By:s//Mike Futerman
Mike Futerman
Chief Executive Officer
By:s//Eli N. Futerman
Eli N. Futerman
President
By:s//Albert J. Van Erp
Albert J. Van Erp
Vice President - Finance
Dated: August 13, 1996
EXHIBITS
Exhibit 10.1 "P"
Exhibit 10.2
PROMISSORY NOTE
$1,650,000.00 Rochester, New York
February 1, 1996
FOR VALUE RECEIVED, HAHN AUTOMOTIVE WAREHOUSE, INC.
("Maker"), promises to pay to the order of MICHAEL FUTERMAN
("Payee"), at 415 West Main Street, Rochester, New York, or at
such other place as Payee may designate in writing, the principal
sum of $1,650,000.00, together with interest which shall, prior
to Acceleration (hereinafter defined) or Maturity (hereinafter
defined), accrue at the fixed rate of 12% per annum, calculated
on the basis of a 360 day year for the actual number of days
elapsed. Unless sooner accelerated, this Note shall be payable
as follows:
On March 1, 1996 and on the first day of each
month through and including December 1, 1996, Maker
shall pay Payee all accrued interest then due on this
Note.
On the first day of each month, commencing
January 1, 1997 through and including January 1, 2001,
Maker shall pay Payee a principal payment in the amount
of $33,000.00, together with a payment of all accrued
interest then due on this Note.
On February 1, 2001 ("Maturity"), Maker shall
pay Payee the then remaining unpaid principal balance
of this Note, together with a payment of all accrued
interest then due on this Note.
If any payment due under this Note is not paid within ten
days of the date when due, Maker shall also pay Payee a late
charge equal to 5% of the amount past due. Upon the earlier of
Acceleration or Maturity, interest shall accrue on the unpaid
principal balance of this Note at the fixed rate of 15% per annum
(calculated on the basis of a 360 day year for the actual number
of days elapsed), until this Note is paid in full. Payments
shall be applied by Payee first to late charges, if any, then to
accrued interest, then to principal.
PAYMENT OF THIS NOTE IS SUBORDINATE TO PAYMENT OF CERTAIN
OBLIGATIONS OF MAKER TO FLEET BANK ("FLEET"), AND TO OTHERS
(COLLECTIVELY WITH FLEET, "THE LENDERS"), PURSUANT TO THE TERMS
OF A WRITTEN SUBORDINATION AGREEMENT EXECUTED BY PAYEE IN FAVOR
OF THE LENDERS ON OR ABOUT JUNE 26, 1996 ("SUBORDINATION
AGREEMENT").
In addition to the regularly scheduled payments of principal
and interest referred to above, Maker shall also make the
mandatory principal prepayments referred to below, provided that
as of the date any such prepayment is required, such prepayment
will not result in Maker failing to comply immediately after such
payment with any financial covenants under Article 11 of the
Credit Agreement referred to below as a result thereof
("Financial Covenant Condition"). For each fiscal year of Maker
(commencing with Maker's fiscal year ending September 30, 1996),
that Maker's net income (as shown in the audited consolidated
financial statements of Maker, required to be delivered by Maker
pursuant to the terms of the Credit Agreement ("Financial
Statements"), exceeds $4,141,000.00 ("Base Amount"), Maker shall,
subject to the Financial Covenant Condition, make a mandatory
principal prepayment on this Note to Payee equal to 19.186% of
the amount that Maker's net income for the fiscal year exceeds
the Base Amount ("Mandatory Prepayment"). For example, if
Maker's net income for fiscal year ending September 30, 1996 is
$5,000,000.00, the Mandatory Prepayment payable to Payee would be
$164,807.74 (($5,000,000.00 - $4,141,000.00) x 19.186%). The
Mandatory Prepayment shall be made by Maker within ten days of
the date Maker delivers the Financial Statements to Fleet. The
term "Credit Agreement" means a Credit Facility Agreement entered
into by Maker, Meisenzahl Auto Parts, Inc., Auto Works, Inc.,
Fleet as agent for the Lenders, and the Lenders on or about June
26, 1996, as amended and replaced from time to time.
Subject to the following sentence, all Mandatory Prepayments
and any other partial prepayments hereunder shall be applied in
inverse order of maturity to principal installments due
hereunder. In the event that the application of a principal
prepayment in accordance with the foregoing sentence would result
in the Maturity of this Note being prior to the maturity of any
Revolving Line Note executed by Maker, Auto Works, Inc. and
Meisenzahl Auto Parts, Inc. (collectively, the "Borrowers") and
made payable to a Lender pursuant to the Credit Agreement, then
such prepayment shall not be applied in inverse order of maturity
to principal installments due hereunder; instead, each monthly
principal payment due after the prepayment shall be reduced by an
amount equal to the prepayment principal amount divided by the
number of principal payments remaining hereunder after the
prepayment. As a condition to any such prepayment, the Maker may
require the Payee to execute an amendment solely for the purpose
of confirming the new principal payment amounts.
Maker shall be in default under this Note upon the
occurrence of any of the following:
Maker's failure to make any principal or
interest payment payable under this Note when due.
Commencement of any proceeding under the
Bankruptcy Code by or against Maker.
Occurrence of any Event of Default (defined
in the Credit Agreement) under the Credit Agreement.
If Maker is in default under this Note, all amounts due
under this Note shall become immediately due and payable at
Payee's sole option, without notice, demand or presentment, all
of which are hereby waived by Maker ("Acceleration"). Upon any
Acceleration, Payee may take all steps available to enforce his
rights under this Note, subject to limitations, if any, contained
in the Subordination Agreement.
In the event this Note is referred to any attorney for
collection, Maker shall pay all Payee's costs and expenses
related to such collection and enforcement, including but not
limited to Payee's reasonable attorneys' fees and disbursements.
This Note is governed by New York law and may not be amended
or terminated orally. Any litigation involving this Note shall,
at Payee's sole option, be triable only in a court located in
Monroe County, New York. MAKER WAIVES THE RIGHT TO A JURY TRIAL
IN ANY LITIGATION INVOLVING THIS NOTE.
This Note has been executed and unconditionally delivered to
Payee by Maker. By accepting this Note, Payee acknowledges that
Maker has paid to Payee all accrued interest payments due under
this Note through and including June 1, 1996.
HAHN AUTOMOTIVE
WAREHOUSE, INC.
By: s// Albert Van Erp
Title: Vice President-Finance
STATE OF NEW YORK )
COUNTY OF MONROE )ss:
On this day of June, 1996, before me personally came
Albert Van Erp, to me known, who, being by me duly sworn, did
depose and say that he is the Vice President - Finance of HAHN
AUTOMOTIVE WAREHOUSE, INC., the corporation described in and
which executed the above instrument; and that he signed his name
thereto by order of the board of directors of said corporation.
Notary Public
Exhibit 10.3
PROMISSORY NOTE
$500,000.00 Rochester, New York
January 24, 1996
FOR VALUE RECEIVED, HAHN AUTOMOTIVE WAREHOUSE, INC.
("Maker"), promises to pay to the order of ELI N. FUTERMAN
("Payee"), at 415 West Main Street, Rochester, New York, or at
such other place as Payee may designate in writing, the principal
sum of $500,000.00, together with interest which shall, prior to
Acceleration (hereinafter defined) or Maturity (hereinafter
defined), accrue at the fixed rate of 12% per annum, calculated
on the basis of a 360 day year for the actual number of days
elapsed. Unless sooner accelerated, this Note shall be payable
as follows:
1. On March 1, 1996 and on the first day of each
month through and including December 1, 1996, Maker
shall pay Payee all accrued interest then due on this
Note.
2. On the first day of each month, commencing
January 1, 1997 through and including January 1, 2001,
Maker shall pay Payee a principal payment in the amount
of $10,000.00, together with a payment of all accrued
interest then due on this Note.
3. On February 1, 2001 ("Maturity"), Maker shall pay
Payee the then remaining unpaid principal balance of
this Note, together with a payment of all accrued
interest then due on this Note.
If any payment due under this Note is not paid within ten
days of the date when due, Maker shall also pay Payee a late
charge equal to 5% of the amount past due. Upon the earlier of
Acceleration or Maturity, interest shall accrue on the unpaid
principal balance of this Note at the fixed rate of 15% per annum
(calculated on the basis of a 360 day year for the actual number
of days elapsed), until this Note is paid in full. Payments
shall be applied by Payee first to late charges, if any, then to
accrued interest, then to principal.
PAYMENT OF THIS NOTE IS SUBORDINATE TO PAYMENT OF CERTAIN
OBLIGATIONS OF MAKER TO FLEET BANK ("FLEET"), AND TO OTHERS
(COLLECTIVELY WITH FLEET, "THE LENDERS"), PURSUANT TO THE TERMS
OF A WRITTEN SUBORDINATION AGREEMENT EXECUTED BY PAYEE IN FAVOR
OF THE LENDERS ON OR ABOUT JUNE 26, 1996 ("SUBORDINATION
AGREEMENT").
In addition to the regularly scheduled payments of principal
and interest referred to above, Maker shall also make the
mandatory principal prepayments referred to below, provided that
as of the date any such prepayment is required, such prepayment
will not result in Maker failing to comply immediately after such
payment with any financial covenants under Article 11 of the
Credit Agreement referred to below as a result thereof
("Financial Covenant Condition"). For each fiscal year of Maker
(commencing with Maker's fiscal year ending September 30, 1996),
that Maker's net income (as shown in the audited consolidated
financial statements of Maker, required to be delivered by Maker
pursuant to the terms of the Credit Agreement ("Financial
Statements"), exceeds $4,141,000.00 ("Base Amount"), Maker shall,
subject to the Financial Covenant Condition, make a mandatory
principal prepayment on this Note to Payee equal to 19.186% of
the amount that Maker's net income for the fiscal year exceeds
the Base Amount ("Mandatory Prepayment"). For example, if
Maker's net income for fiscal year ending September 30, 1996 is
$5,000,000.00, the Mandatory Prepayment payable to Payee would be
$164,807.74 (($5,000,000.00 - $4,141,000.00) x 19.186%). The
Mandatory Prepayment shall be made by Maker within ten days of
the date Maker delivers the Financial Statements to Fleet. The
term "Credit Agreement" means a Credit Facility Agreement entered
into by Maker, Meisenzahl Auto Parts, Inc., Auto Works, Inc.,
Fleet as agent for the Lenders, and the Lenders on or about June
26, 1996, as amended and replaced from time to time.
Subject to the following sentence, all Mandatory Prepayments
and any other partial prepayments hereunder shall be applied in
inverse order of maturity to principal installments due
hereunder. In the event that the application of a principal
prepayment in accordance with the foregoing sentence would result
in the Maturity of this Note being prior to the maturity of any
Revolving Line Note executed by Maker, Auto Works, Inc. and
Meisenzahl Auto Parts, Inc. (collectively, the "Borrowers") and
made payable to a Lender pursuant to the Credit Agreement, then
such prepayment shall not be applied in inverse order of maturity
to principal installments due hereunder; instead, each monthly
principal payment due after the prepayment shall be reduced by an
amount equal to the prepayment principal amount divided by the
number of principal payments remaining hereunder after the
prepayment. As a condition to any such prepayment, the Maker may
require the Payee to execute an amendment solely for the purpose
of confirming the new monthly principal payment amounts.
Maker shall be in default under this Note upon the
occurrence of any of the following:
4. Maker's failure to make any principal or interest
payment payable under this Note when due.
5. Commencement of any proceeding under the
Bankruptcy Code by or against Maker.
6. Occurrence of any Event of Default (defined in the
Credit Agreement) under the Credit Agreement.
If Maker is in default under this Note, all amounts due
under this Note shall become immediately due and payable at
Payee's sole option, without notice, demand or presentment, all
of which are hereby waived by Maker ("Acceleration"). Upon any
Acceleration, Payee may take all steps available to enforce his
rights under this Note, subject to limitations, if any, contained
in the Subordination Agreement.
In the event this Note is referred to any attorney for
collection, Maker shall pay all Payee's costs and expenses
related to such collection and enforcement, including but not
limited to Payee's reasonable attorneys' fees and disbursements.
This Note is governed by New York law and may not be amended
or terminated orally. Any litigation involving this Note shall,
at Payee's sole option, be triable only in a court located in
Monroe County, New York. MAKER WAIVES THE RIGHT TO A JURY TRIAL
IN ANY LITIGATION INVOLVING THIS NOTE.
This Note has been executed and unconditionally delivered to
Payee by Maker. By accepting this Note, Payee acknowledges that
Maker has paid to Payee all accrued interest payments due under
this Note through and including June 1, 1996.
HAHN AUTOMOTIVE
WAREHOUSE, INC.
By: s// Albert Van Erp
Title: Vice President-Finance
STATE OF NEW YORK )
COUNTY OF MONROE )ss:
On this day of June, 1996, before me personally came
Albert Van Erp, to me known, who, being by me duly sworn, did
depose and say that he is the Vice President - Finance of HAHN
AUTOMOTIVE WAREHOUSE, INC., the corporation described in and
which executed the above instrument; and that he signed his name
thereto by order of the board of directors of said corporation.
Notary Public
Exhibit 27
</TABLE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 197
<SECURITIES> 0
<RECEIVABLES> 21,683
<ALLOWANCES> 0
<INVENTORY> 75,278
<CURRENT-ASSETS> 98,907
<PP&E> 14,271
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,444
<CURRENT-LIABILITIES> 33,180
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 32,417
<TOTAL-LIABILITY-AND-EQUITY> 115,444
<SALES> 165,557
<TOTAL-REVENUES> 165,557
<CGS> 97,435
<TOTAL-COSTS> 63,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,332
<INCOME-PRETAX> 1,294
<INCOME-TAX> 518
<INCOME-CONTINUING> 776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 776
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
