SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: Commission File Number
September 30, 1998 0-20984
HAHN AUTOMOTIVE WAREHOUSE, INC.
(Exact name of Registrant as specified in its Charter)
New York 16-0467030
(State of Incorporation) (I.R.S. Employer Identification No.)
415 West Main Street, Rochester, New York 14608
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(716)235-1595.
Securities registered pursuant to Section 12(b) of the Act and
the Exchange on which such securities are registered:
COMMON STOCK, PAR VALUE $0.01 PER SHARE NASDAQ: NMS
<PAGE> 1
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 or No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Registrant's Common Stock held
by non-affiliates of the Registrant as of December 15, 1998,
(based upon the closing price of $3.00 on that day, as reported
on the NASDAQ:NMS) was approximately $6,551,415. For the sole
purpose of making this calculation, the term "non-affiliate" has
been interpreted to exclude the directors and corporate officers.
Such interpretation is not intended to be, and should not be
construed as an admission by the Registrant or such directors or
corporate officers that such directors or corporate officers are
"affiliates" of the Registrant, as that term is defined in the
Securities Act of 1933.
The number of shares of Registrant's Common Stock, par value $.01
per share, outstanding as of December 15, 1998: 4,745,014.
Documents Incorporated By Reference
Portions of the Registrant's definitive Proxy Statement for its 1999
Annual Meeting of Shareholders, which will be filed with the
Securities and Exchange Commission pursuant to regulations 14A, not
later than 120 days after September 30, 1998, are incorporated by
reference in Part III (Items 10, 11, 12, and 13) of this Form 10-K.
<PAGE> 2
PART I
Item 1. BUSINESS
(a) General Development of Business
This Annual Report on Form 10-K ("Form 10-K") contains forward-
looking statements. Forward-looking statements, which were based
upon certain assumptions and describe future plans, strategies
and expectations of the Company are generally identifiable by use
of the word "believes", "expects", "intends", "anticipates",
"plans to", "estimates", "projects" or similar expressions. Hahn
Automotive Warehouse, Inc. desires to take advantage of the
"safe harbor" which is afforded such statements under the Private
Securities Litigation Reform Act of 1995 when they are
accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ
materially from those in the forward-looking statements. Such
cautionary statements are set forth under the heading "Important
Information Regarding Forward-Looking Statements" located in Item
7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of this Form 10-K. All references to
a "Fiscal" year refer to the twelve (12) month period ended
September 30 of such year.
Hahn Automotive Warehouse, Inc. was incorporated in the State of
New York in 1958. Its principal executive offices are located in
Rochester, New York. Unless the context indicates otherwise, the
term "Company" refers to Hahn Automotive Warehouse, Inc. and its
consolidated subsidiaries other than AUTOWORKS, Inc.
("AUTOWORKS").
The Company is engaged in the sale of automotive aftermarket
products to commercial service establishments on a regional
basis. The Company's business is conducted through ten full-
service distribution centers, four specialty distribution
centers, nine direct distribution centers and 82 jobber stores
that operate in the same areas as the Company's full-service
distribution centers generally under the name Advantage Auto
Stores. The Company's operations are located along the Eastern
Seaboard and in the Midwest.
Until the third quarter of fiscal 1997, the Company's AUTOWORKS,
Inc. subsidiary was also engaged in the retail sale of automotive
aftermarket products. The Company decided to exit the retail
business due to negative cash flow and ongoing losses in that
business. On July 24, 1997, the Company's wholly-owned
subsidiary, AUTOWORKS, Inc., filed a petition for relief under
Chapter 11 of Title 11 of the U.S. Bankruptcy Code in the United
States Bankruptcy Court for the Western District of New York
("Chapter 11 Proceeding").See Part 1 - Item 3 "Legal Proceedings").
Thefiling was undertaken to assure the orderly administration of
AUTOWORKS' assets and liabilities. Neither the Company nor any
Company subsidiary (other than AUTOWORKS) filed a petition or is
in bankruptcy. As of November 1, 1998, substantially all of the
AUTOWORKS assets had been disposed of and the net proceeds were
paid to the AUTOWORKS secured creditors and used for expenses of
the bankruptcy estate pursuant to a court order dated August 19,
1997. In connection with the filing, the Company recorded a one-
time after-tax charge of $18.8 million, or $3.96 per share. (See
Part II - Item 7 - "Management Discussion and Analysis of
Financial Condition and Results of Operations - General and Note
2 of the Company's Consolidated Financial Statements.)
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On October 22, 1997, the Company entered into a new long-term $50
million credit facility which is secured by substantially all of
the Company's assets. The facility consists of up to a $50
million borrowing base revolving credit facility (less the
outstanding balance of a $2.5 million term loan, a $3.5 million
swing line advance facility and a $2.0 million letter of credit
sub-facility). Proceeds from the facility were used to repay the
Company's prior revolving credit facility and senior secured
notes. (See Part II - Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" -
Liquidity and Capital Resources.)
The Official Unsecured Creditors' Committee ("Committee") in the
AUTOWORKS Chapter 11 proceeding had indicated that it may pursue
certain claims against the Company. On April 22, 1998, a
Settlement Agreement and Release was negotiated between the
Company and the Committee. Under the settlement agreement and
release, the Committee agreed to release the Company from all
claims in exchange for the Company's payment to the AUTOWORKS
bankruptcy estate of up to a maximum of $2.0 million over five
years. If certain payments are made in a timely manner, the
Company will pay less than $2.0 million, but not less than $1.6
million by June 15, 2002. Such amounts are appropriately
reserved for in the discontinued operations line item on the
balance sheet. The bankruptcy court approved the Settlement
Agreement and Release by order dated June 18, 1998, the
Settlement Agreement and Release was thereafter signed by all
parties and the Company made the first payment to the AUTOWORKS
bankruptcy estate in the amount of $320,000 on July 1, 1998.
(c) Narrative Description of Business
The Company's continuing operations are contained in one industry
segment: wholesale sale of automotive aftermarket products. Below
is a description of the segment.
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Industry Overview
The market is composed of two basic segments: Passenger car and
light truck products and heavy duty truck products. The Company
operates in the passenger car and light truck market, and
currently has a minor presence in the heavy duty truck market.
The market for passenger car and light truck products has two
basic sales channels: (i) wholesale or installed parts service,
serving professional installers, vehicle dealers, retail auto
parts stores and other distributors, and (ii) retail, serving do-
it-yourself ("DIY") retail customers.
The wholesale segment is the Company's primary area of focus.
Traditionally, the wholesale segment has distributed automotive
parts using a three-step or full-service distribution process.
With full-service distribution, parts manufacturers deliver parts
to warehouse distributors, who then deliver to local jobbers who
sell individual parts to end users for installation. Full-
service distribution allows jobbers to provide rapid parts
availability to local area professional installers, including
service stations, garages and major accounts. The Company's Full-
Service Distribution Centers and jobbing stores participate in
this market.
The two-step or direct distribution process has evolved in response
to increasing capital needs and shrinking margins, and to date has
been more successful in metropolitan areas where there are higher
concentrations of professional installers. Direct distributors
eliminate a level of distribution from the traditional full-service
distribution process. Thus, a large jobber may purchase directly
from manufacturers and sell directly to professional installers,
thereby eliminating the warehouse distributor level, or a warehouse
distributor may skip the jobber level and sell parts directly to
installers. The Company's direct distribution division targets
this market.
Distribution Business
The Company purchases nearly 150,000 automotive aftermarket stock
keeping units ("SKUs"), consisting predominately of nationally
branded automotive hard parts, as well as maintenance items,
accessories and private label products, from about 217
manufacturers, and distributes these products through its
distribution network to approximately 1,000 independent jobbing
stores and 82 Company-owned jobbing stores, which operate
principally under the Advantage Auto Stores name. These jobbers
supply automotive parts to commercial establishments performing
automotive services and, to a much lesser extent, the DIY market.
The Company's distribution network consists of ten full-service
distribution centers, four specialty distribution centers,
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nine direct distribution centers and 82 Advantage Auto jobber stores
located along the Eastern Seaboard and in the Midwest. The Company
generally does not sell tires or perform automobile repairs or
installations through either its distribution centers or jobbing
operations.
Distribution and Growth Strategy
The Company's distribution strategy is based on five key elements:
Rapid Delivery From Extensive Inventory - The Company
maintains a broad product inventory consisting of approximately
150,000 stock keeping units (SKU's) throughout its full-service
distribution network, from which it generally delivers products
to customers within 24 hours of receipt of an order. The Company
believes that speed of delivery is essential for a jobber to meet
the time constraints of its service establishment customers and
to manage its own inventory.
Strong Customer Relationships and Trained Work Force - The
Company is a customer driven company built on strong, long-term
relationships. The Company provides operational support to its
customers on a regular basis to assist them in many aspects of
their businesses. In addition, the Company maintains trained and
experienced sales and distribution center personnel to assist
jobbers in selecting parts and filling their inventory needs.
Growth in Existing Markets - The Company seeks to build its
revenue base in existing markets by (i) adding new jobbing store
customers within territories presently served, and
(ii) encouraging existing accounts to purchase additional product
lines from the Company.
Leadership in Auto Value Programmed Distribution Group -
Auto Value Associates, Inc. ("Auto Value") is one of the fastest
growing independent national purchasing and marketing programs in
the automotive aftermarket. The Company believes that it is one
of the largest participants by sales volume and number of jobbing
customers who subscribe to Auto Value's marketing program. The
Company seeks to convert its independent jobbing customers to the
Auto Value program, as the Company believes the servicing and
marketing programs are beneficial to the jobbers and result in
such customers purchasing the preponderance of their inventory
needs from the Company.
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Operating Efficiencies - The Company's operations are
structured to realize operating efficiencies both for itself and
for its customers, to benefit from economies of scale in product
purchasing, information systems and employee training and to
provide an efficient distribution system with the objectives of
ease of order placement and speed of delivery.
Products
The Company's distribution centers and Company-owned jobber stores,
operating as Advantage Auto Stores (and Genuine Auto Parts in the
Dayton, Ohio, area) (herein collectively referred to as "Advantage
Auto Stores"), generally offer a wide selection of predominantly
nationally branded automotive products for domestic and foreign
cars, vans and light trucks. The Company stocks a wide range of
automotive aftermarket products throughout its distribution
network, consisting principally of new and remanufactured
automotive hard parts, as well as maintenance items and accessory
products. Hard parts include, among others, brake parts, exhaust
components, engine parts, suspension parts and fuel systems.
The Company's customers purchase name-brand products and private-
label products which carry a larger gross profit margin.
These private-label products, marketed under the Parts Master
label, are manufactured by a variety of vendors for members of the
Auto Value programmed distribution group. Parts Master products
accounted for approximately 17.8%, 21.2% and 17.2% of the Company's
net sales, in Fiscal 1998, 1997 and 1996, with the remainder of net
sales derived from manufacturer's branded products. Since Parts
Master brand products have higher profit margins than name brand
products, the Company continually seeks ways to expand sales of
Parts Master products, in some instances by having national brand
manufacturers supply these products under this label.
Distribution Center
Central to the Company's strategy of providing rapid distribution of
a broad variety of parts is a distribution network comprised of
three varieties of distribution centers: full-service, direct
distribution and specialty (which consist of pick-up and accessory
distribution centers).
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Full-Service Distribution
Full-service distribution centers distribute to jobbers within a
radius of approximately 150 miles, and nine of them serve as hubs
for a surrounding network of Company-owned Advantage Auto Stores.
The Company extends the distribution area of three of its full-
service distribution centers with smaller pick-up distribution
centers.
These pick-up distribution centers carry specialized inventory
categories with slower inventory turns for customer pick-up when
needed, to supplement regular deliveries from the full-service
distribution center. The Company also operates a specialty
distribution center to centralize the purchasing and distribution
of accessory items.
The Company, in total, operates ten full-service distribution centers,
three pick-up distribution centers and one accessory distribution
center. The inventory carried by full-service distribution centers
generally range from approximately 33,500 to over 75,500 SKUs,
while the pick-up distribution centers stock, on average,
approximately 19,000 SKUs and the accessory distribution center
stocks select items, such as floor mats, antennas and mirrors.
Each full-service distribution center employs a General Manager, a
sales force and clerical, stock-handling and delivery employees.
Customers may place their stock orders by computer, telephone, fax
or in person at service counters.
Direct Distribution
Commencing with the Company's acquisition of Meisenzahl Auto Parts
Inc. and an affiliate company (collectively, "Meisenzahl") at the
end of Fiscal 1994, the Company entered the direct distribution
market. During Fiscal 1995, the Company established three
additional direct distribution centers (two of which do business
under the name Professional Auto Warehouse) in targeted
metropolitan areas. In early Fiscal 1997, the Company acquired
four direct-distribution centers in or about the Rochester, New
York, area. (See Part II - Item 7 "Management Discussion and
Analysis of Financial Condition and Results of Operations -
General.) The Company has selected direct distribution center
locations based on both competitive rent and a high concentration
of repair bays.
The Company believes that its direct distribution centers carry a
more complete inventory selection than other national direct
distributors. The average Company direct distribution center
stocks approximately 29,000 SKUs, with the largest stocking over
62,500 SKUs. These locations stock and sell a complete inventory
of replacement parts for domestic and foreign cars, vans and light
trucks at competitive prices because they utilize a direct
distribution system, rather than the traditional full-service
(three-step) system used by other suppliers in the industry. In
addition to parts, the direct distribution centers also supply
professional installers with equipment and tools. Each direct
distribution center maintains a delivery fleet to provide
professional installers their orders on a rapid basis.
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The Company expects to continue to expand the number of its direct
distribution centers by opening new locations during Fiscal 1999,
subject to debt service and other funding requirements. On
September 30, 1998, Meisenzahl was merged into Hahn and Meisenzahl
became a division of the Company.
Auto Value Program
The Company is a member of Auto Value, an independent corporation
which was incorporated in 1983 to provide to its shareholders the
benefits of collective purchasing power under arrangements which it
negotiates with vendors from whom its shareholders may purchase
inventory. Auto Value neither purchases nor sells automotive parts
and is not involved in the chain of distribution.
Auto Value offers its shareholders value-added marketing,
merchandising, advertising and promotion and interior and exterior
design layout for delivery to the participating jobber customers of
its shareholders. Auto Value also offers its shareholders access
to private-label products under the Parts Master name.
Auto Value requires its shareholders to participate in its purchasing
programs to a specified degree and to contribute equally toward its
operating expenses, which are generally nominal. Shareholders
whose jobber customers participate in the marketing service of the
Auto Value program are required to pay a basic fee plus charges for
goods and services provided under the program.
Eli N. Futerman, President of the Company is a past Chairman and
currently a director of Auto Value. The Company does not believe
that any material conflicts of interests exist as a result of Mr.
Futerman's positions in the Company and Auto Value.
Jobber Services
The Company's extensive inventory line provides jobber customers with
the opportunity to purchase aftermarket products from a single
source, which affords its jobber customers the opportunity to
reduce operating expenses and improve inventory planning and
control.
The Company provides support to its customers through its account
executives who visit them on a regular basis, advising such
customers on products and services, assisting in solving
logistical, marketing, merchandising and other problems, as well as
soliciting increased purchases from the Company. These customer
support services are supplemented by manufacturers' sales
representatives who periodically call on the Company's customers on
behalf of the Company and by annual trade shows at various Company
locations.
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The Company provides value-added services to its jobber customers
that participate in the Auto Value programmed distribution group.
Through the Auto Value program, the Company assists its
participating jobber customers in marketing, merchandising,
inventory management and control, store appearance, advertising and
promotion.
During Fiscal 1998, 54 of the Company's independent jobber customers
joined the Auto Value program through the Company and 34
independent jobber customers resigned or were terminated from the
program. As of October 31, 1998, 268 of the Company's independent
jobber customers and all of the Company's Advantage Auto Stores
participated in the Auto Value marketing program.
Advantage Auto Stores
To support its distribution center business, the Company operates
a chain of jobbing stores under the Advantage Auto Stores name,
except for certain Company-owned jobbing stores in the Dayton,
Ohio, region which operate under the Genuine Parts Company name,
Finn Auto Parts in Canandaigua, New York and Eagle Auto Parts in
East Rochester, New York. References to Advantage Auto Stores in
this report include these jobbing stores. The Advantage Auto
Stores are located only in regions supplied by the Company's full-
service distribution centers. As of November 2, 1998, the
Company owned and operated a total of 82 Advantage Auto Stores.
As the Advantage Auto Stores are members of the Auto Value
program, they typically feature certain consistent appearances
and merchandising programs. The stores emphasize knowledgeable
sales people and rapid availability of parts with daily truck
deliveries. Approximately eight years ago, the Company embarked
on a jobbing store remodeling project. During Fiscal 1998, the
Company remodeled seven jobbing stores, leaving seven stores to
be remodeled. The Company plans to remodel or relocate six more
jobbing stores in the next Fiscal year.
Purchasing
All product selection and purchasing functions for the
distribution centers and the jobbing stores are centralized at
the Company's headquarters in Rochester, New York, except for
accessory products which are purchased by management of the
specialty distribution center. The Company purchases its
products from approximately 217 suppliers which ship directly to
the Company's direct and full service distribution centers. In
most areas, the Company sources each of its product lines from
one supplier, although most automotive parts categories have more
than one competitive supplier.
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Inventory purchases are based upon quality, price, service, market
conditions and, where appropriate, brand recognition. Suppliers'
programs are reviewed periodically to evaluate product mix,
quality, pricing and service.
The manufacturers of automotive aftermarket products typically
provide replacement warranties, which the Company extends to its
customers. In general, the Company has certain privileges with
most of its suppliers that enable it to return slower moving or
overstocked items for full credit, which minimizes inventory
obsolescence. The Company extends a return policy to its
stocking customers. Periodically, the Company's suppliers permit
it to defer payments for certain product lines.
In Fiscal 1998, the Company's 15 largest suppliers accounted for
approximately 71.5% of its total distribution center purchases,
and its largest supplier accounted for approximately 21.3% of its
distribution center purchases. The Company considers its
relationships with its suppliers to be good and believes that
alternate sources of supply exist at substantially similar costs
for substantially all products which it stocks. The Company's
suppliers are generally able to meet its demand for products.
Inventory Control and Management Information System
The Company's management information system is an important
element in its strategy of maintaining margins while offering its
customers competitive prices and rapid delivery of a wide variety
of products. The fully integrated, real-time system, which was
designed for general use by distributors in the automotive
aftermarket, operates on mainframe computers located at the
Company's Rochester, New York, headquarters and links all of the
Company's distribution centers. The system enables the Company's
Advantage Auto Stores and independent jobbing customers to
communicate electronically with the Company. A majority of the
Company's independent jobber customers have the capability to
access pricing and product availability information in the
Company's computer system. This electronic link streamlines and
hastens the order process by enabling the Advantage Auto Stores,
as well as the independent jobbing customers to electronically
determine product availability and order products, eliminating
the need to telephone or visit a distribution center directly to
place an order.
Advertising
The Company's Advantage Auto Stores promote broad product
availability, competitive prices and customer service through
direct mail and local media, including newspapers, yellow pages
and radio.
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Direct distribution centers are promoted through yellow-page
advertising and direct mail. Full-service distribution centers
provide the Auto Value marketing program to affiliated jobbers
and their installer customers.
Trademarks
The Company owns and has registered its Advantage Auto Stores
trademark in the United States Patent and Trademark Office. In
addition, the Company is a licensee of the Auto Value and Parts
Master trademarks pursuant to a trademark license agreement which
provides for termination upon the occurrence of certain events.
Under the trademark license agreement, the Company has the right
to use and permit its jobber customers to use the Auto Value and
Parts Master trademarks. The Company believes that these
trademarks are material to the Company's business.
Competition
The automotive replacement parts market is highly fragmented and
extremely competitive. The Company competes most directly with
national, regional and local warehouse distributors. The Company
believes that two of the largest warehouse distribution networks
are National Automotive Parts Association, headquartered in
Atlanta, Georgia, the largest member of which is Genuine Parts
Company (which is not affiliated with the Company's Dayton, Ohio,
area jobbing stores of the same name), which distributes under
the NAPA trademark, and General Parts, Inc. headquartered in
Raleigh, North Carolina, trading under the Carquest name. The
wholesale distribution market contains numerous other
participants, including programmed buyer groups. The Company
competes with these groups on the basis of product availability,
service and price.
Through its chain of Advantage Auto Stores, the Company also
competes directly with other independent jobbing stores,
automotive specialty retail chains and discount and general
merchandise stores. The Company also competes indirectly with
various original equipment manufacturers and other manufacturers,
distributors and retailers who sell aftermarket products in
alternative distribution channels. Some of the Company's current
and potential competitors are larger and have far greater
financial resources.
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Employees
As of October 31, 1998, the Company had 1,216 (of which 926 were
full-time and 290 were part-time) employees in full-service and
direct-distribution centers and jobbing operations, of whom 77
were distribution center and jobbing store account executives, 63
were headquarters personnel, 190 were distribution center and jobbing
store management personnel and the remaining 886 were
distribution center workers, jobbing store employees, drivers,
counter persons, data entry and other personnel. As of October
31, 1998, a total of 13 employees at two distribution centers
were represented under collective bargaining agreements. The
Company has never experienced any material labor disruption and
is unaware of any efforts or plans to organize additional
employees. Management believes that its labor relations with its
employees are good.
<PAGE 13>
Item 2. PROPERTIES
Distribution Center and Jobbing Facilities
The Company's principal executive offices are located in
Rochester, New York, and presently occupies approximately 22,000
square feet.
As of October 31, 1998, the Company operated the following
distribution center locations:
Approximate
Gross Ground
Location Level Type
Square Feet
New York
Rochester 40,000 Full-Service
Rochester-North 37,000 Direct Dist.
Rochester-South 11,400 Direct Dist.
Rochester- 15,000 Direct Dist.
Merchants 5,000 Direct Dist.
Rochester-Greece 4,500 Direct Dist.
Rochester-Gates 5,000 Direct Dist.
Farmington 35,000 Full-Service
Bronx 34,500 Full-Service
Syracuse 27,800 Full-Service
Buffalo 8,000 Direct Dist.
Buffalo 22,000 Full-Service
Newburgh 5,700 Accessory
Batavia 12,900 Direct Dist.
Albany
Ohio
Dayton 59,800 Full-Service
Independence 33,500 Full-Service
North Carolina
Goldsboro 39,000 Full-Service
Virginia
Richmond 32,700 Full-Service
Norfolk 6,500 Pick-Up
Maryland
Bladensburg 18,100 Full-Service
Baltimore 10,700 Pick-Up
<PAGE> 14
Indiana
Indianapolis 13,000 Pick-Up
Pennsylvania
Harrisburg 14,500 Direct Dist.
The Company owns the Independence, Ohio, site; leases its Norfolk,
Virginia, Albany, New York, and Harrisburg, Pennsylvania, sites
from unaffiliated parties under leases which expire on March 31,
2005, December 31, 1999 and September 30, 2000, respectively;
leases its direct distribution Rochester-Merchants, Rochester-
Gates and Farmington sites from an unaffiliated party under
leases which expire in 2001; leases its Rochester-Greece direct
distribution site from an unaffiliated party which expires in
December 1999; and leases its Rochester-North and the Buffalo
direct distribution locations from David Appelbaum, a Vice
President of the Company under leases which expire in September
2004. A third direct distribution location, Rochester-South, is
also leased from a partnership comprised of Mr. Appelbaum and an
unaffiliated third party and expires concurrently with other
leases held by Mr. Appelbaum. The Company leases the remaining
distribution facilities from members of the Futerman family or
affiliates thereof under leases which expire between 2001 and
2008. Except for the Independence, Ohio, site (which is subject
to a first mortgage), none of the Company's facilities are
subject to any encumbrance.
As of November 2, 1998, there were 82 Advantage Auto Stores
served by the Company's distribution centers located in or near
the following cities:
Advantage Advantage
Distribution Auto Stores Distribution Center Auto Stores
Center Serviced Location Serviced
Location
Rochester, New 16 Dayton, Ohio 21
York
Syracuse, New 9 Goldsboro, North 8
York Carolina
Buffalo, New 7 Richmond, Virginia 13
York
Newburgh, New 2 Bladensburg, 4
York Maryland
Cleveland, Ohio 2
<PAGE> 15
As of November 2, 1998, the Company leased 78 and owned four
Advantage Auto Stores sites. As of November 2, 1998, leases on 9
store sites were month-to-month, leases on 45 store sites had
remaining terms of three years or less, and leases on 24 store
sites had remaining terms of more than three years, excluding
renewal options. The Company leases certain of these sites from
members of the Futerman family.
Discontinued AUTOWORKS Facilities.
AUTOWORKS leased from an unaffiliated party a 312,000 square foot
distribution center located in Moraine, Ohio, which previously
served the AUTOWORKS store chain. The lease of the Moraine
distribution center expired at the end of December 1997. The
remaining leases for AUTOWORKS' locations have been assigned to
and assumed by third parties, terminated by agreement or rejected
in connection with the Chapter 11 proceeding filed on July 24,
1997. Three (3) leased properties, which have not been
terminated or assumed, are guaranteed by the Company. The
Company is in the process of attempting to negotiate agreements
to terminate these guarantees and/or to locate replacement
tenants through commercial brokers. One other leased property
guaranteed by the Company has been substantially assumed by a
third party.
Item 3. LEGAL PROCEEDINGS.
On October 31, 1995 a complaint was filed against the Company by
27 former employees of AUTOWORKS, INC. seeking class action
status in the United States District Court, Southern District of
Ohio, Western Division (Case Number C-3-95-904). The complaint
requests compensatory damages, liquidated damages and attorney's
fees available under the Fair Labor Standards Act based on an
alleged failure to pay overtime wages to certain individuals
classified as exempt employees. The Company is vigorously
defending this action and maintains that the plaintiffs were
employees of AUTOWORKS, INC., and its conduct was appropriate and
not wrongful. While the outcome of this litigation is inherently
uncertain, the Company believes that it is unlikely that any
adverse verdict would have a significant financial impact on its
financial condition.
In July 1997, the Company's wholly-owned subsidiary, AUTOWORKS,
filed a petition for reorganization under Chapter 11 of Bankruptcy
Code. The proceeding was brought in and is presently pending in
the United States Bankruptcy Court for the Western District of New
York (the "Bankruptcy Court"). Subsequent to the filing, the
Official Unsecured Creditor's Committee in the proceeding, claimed
that there had been preferential transfers between the Company and
AUTOWORKS amounting to approximately $6.5 million and made further
claims based upon the
<PAGE> 16
doctrines of substantive consolidation, and fraud in connection with
the Company's acquisition of AUTOWORKS. On June 18, 1998, the
Bankruptcy Court approved a settlement among Hahn, AUTOWORKS, the
Committee and the Company's secured creditors pursuant to which the
Company is required to pay the AUTOWORKS bankruptcy estate up to a
maximum of $2.0 million over five years. If certain payments are
made in a timely manner, the Company will pay less than $2.0
million, but in no event will the Company pay the AUTOWORKS
bankruptcy estate less than $1.6 million by June 15, 2002. The
parties also provided appropriate releases including any existing
and potential claims which the Committee had against the Company.
The Company is involved in various other claims and disputes
arising in the normal course of business. The Company's
management believes that it has meritorious defenses and/or
insurance coverage against such matters and that the outcome of
all pending proceedings, individually and in the aggregate, will
not have a material adverse effect upon the Company's business,
results of operations, cash flows or financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of Fiscal 1998
to a vote of the Company's shareholders, through the solicitation
of proxies or otherwise.
<PAGE> 17
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS.
The Company's common stock is traded in the over-the-counter
market and quoted on the National Association of Securities
Dealer Automated Quotation System-National Market System
("NASDAQ:NMS"). Its trading symbol is HAHN. The table below
shows the range of high and low actual trade prices for the
Company's common stock during each quarterly period of Fiscal
years 1998 and 1997:
Fiscal Year Ended Fiscal Year Ended
September 30, 1998 September 30, 1997
High Low High Low
1st Quarter 7 1/8 5 7/8 1st Quarter 9 8
2nd Quarter 5 7/8 5 7/8 2nd Quarter 9 7 1/2
3rd Quarter 5 3/4 5 1/2 3rd Quarter 9 6 3/4
4th Quarter 5 1/2 5 1/4 4th Quarter 7 6
The Company did not pay any cash dividends during the last two
fiscal years. The Company did issue a 4% stock dividend on May
1, 1997, to holders of record on April 10, 1997. The Company
does not intend to pay any cash dividends for the foreseeable
future and intends to retain earnings, if any, for the future
operation and expansion of the Company's business. Any
determination to pay dividends in the future will be at the
discretion of the Company's Board of Directors and will be
dependent upon the Company's results of operations, financial
condition, contractual restrictions and other factors deemed
relevant by the Board of Directors. The Company's revolving
credit facility agreement prohibits the Company from paying cash
dividends on its common stock, provided, however, for each fiscal
year ending after September 30, 1997, the Company may distribute
dividends if it is not in default and would not be put in default
by virtue of such dividends and the dividend does not exceed the
Company's adjusted net earnings, as defined in such agreement,
for the fiscal year.
On December 1, 1998, the Company had 71 holders of record of its
common stock.
<PAGE> 18
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial
information of the Company for each of the five fiscal years in
the period ended September 30th. This table should be read in
conjunction with the audited consolidated financial statements of
the Company and the related notes thereto included elsewhere
herein and Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations". The Company's
financial statements were restated in Fiscal 1997 to reflect
AUTOWORKS as a discontinued business.
Year Ended September 30,
1998 1997 (2) 1996
(In thousands, except share and
per share data)
<S> <C> <C> <C>
Income Statement Data:
Net sales $133,503 $142,242 $138,395
Cost of product sold 82,778 86,967 86,077
Gross profit 50,725 55,275 52,318
Selling, general and
administrative expense 44,059 46,717 41,657
Depreciation and
amortization 1,602 2,005 1,756
Income from operations 5,064 6,553 8,905
Interest expense (3,771) (4,670) (4,402)
Other income 411 719 600
Income (loss) before
provision for income taxes 1,704 2,602 5,103
Provision for income taxes 665 1,011 1,950
Income from continuing
operations $1,039 $1,591 $3,153
Loss from discontinued
operations:
Write-down of investment
in subsidiary, net of tax - (18,789) -
Income (loss) from discontinued
operations, net of tax - (3,937) (1,294)
Total loss from
discontinued operations - (22,726) (1,294)
Net income (loss) $1,039 ($21,135) $1,859
<PAGE> 19
Basic and diluted amount per share:
Income from continuing
operations per share $0.22 $0.34 $0.66
Income (loss) from continuing
operations per share - (4.79) (0.27)
Net income (loss)
per share $0.22 ($4.45) $0.39
Weighted average
shares outstanding 4,745,014 4,745,014 4,745,014
Balance Sheet Data:
Working capital $ 42,498 $ 45,485 $ 65,452
Total assets $ 78,311 $ 77,792 $ 97,819
Long-term debt and
capital lease obligations
excluding current
maturities $ 41,693 $ 41,874 $ 40,893
Stockholders' equity $ 13,561 $ 12,364 $ 33,499
Year Ended September 30,
1995 1994 (1)
(In thousands,except share
and per share data)
<S> <C> <C>
Income Statement Data:
Net sales $130,733 $122,875
Cost of product sold 79,773 78,218
Gross profit 50,960 44,657
Selling, general and
administrative expense 39,215 34,357
Depreciation and
amortization 1,902 1,805
Income from operations 9,843 8,495
Interest expense (4,387) (3,129)
Other income 434 441
Income (loss) before
provision for income taxes 5,890 5,807
Provision for income taxes 2,152 2,228
<PAGE> 20
Income from continuing
operations $3,738 $3,579
Loss from discontinued
operations:
Write-down of investment
in subsidiary, net of tax - -
Income (loss) from discontinued
operations, net of tax (5,115) 563
Total loss from
discontinued operations (5,115) 563
Net income (loss) ($1,377) $4,142
Basic and diluted
amounts per share:
Income from continuing
operations per share $0.79 $0.80
Income (loss) from discontinued
operations per share (1.08) 0.12
Net income (loss)
per share ($0.29) $0.92
Weighted average
shares outstanding 4,743,938 4,496,526
Balance Sheet Data:
Working capital $ 64,623 $ 60,456
Total assets $ 97,602 $ 95,805
Long-term debt and
capital lease obligations
excluding current
maturities $ 41,368 $ 38,173
Stockholders' equity $ 31,640 $ 32,973
(1) On November 29, 1993, the Company acquired AUTOWORKS for $13.3 million
in cash.
(2) On July 24, 1997, AUTOWORKS filed for protection under Chapter 11
of the United States Bankruptcy Code. In connection with the filing,
the Company recorded a onetime after tax charge of $18.8 million and
restated all of its financial statements to reflect AUTOWORKS as a
discontinued business. (See Note 2 to the Company's Consolidated
Financial Statements included in Item 8 of this Report.)
</TABLE>
<PAGE> 21
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information in this Item 7 contains forward-looking statements.
The Company desires to take advantage of the "safe harbor" which is
afforded such statements under the Private Securities Litigation
Reform Act of 1995 when they are accompanied by meaningful
cautionary statements identifying important factors that could
cause results to differ materially from those in the forward-
looking statements. Such cautionary statements are set forth under
the heading "Important Information Regarding Forward-Looking
Statements" below in this Item 7.
The discussion contained in this Item 7 should be read in
conjunction with the Selected Financial Data, the Consolidated
Financial Statements and accompanying footnotes elsewhere in this
Form 10-K. In all periods discussed herein, the Company's fiscal
year ended on September 30.
General
On October 14, 1996, the Company acquired, from Nu-Way Auto Parts,
Inc. ("Nu-Way"), four direct distribution centers located in the
Rochester, New York area for a purchase price of $2.7 million
(the "Nu-Way Acquisition"). An insignificant number of jobber
customers of the Company were served by these direct distribution
centers. The four locations were integrated into the Company's
direct distribution division and accordingly, the operating
results of Nu-Way have been included in the Company's results of
operation from the date of the acquisition forward.
Due to AUTOWORKS continuing losses and negative cash flow, the
Company decided during Fiscal 1997 to exit the retail business
and focus its operations in the wholesale automotive aftermarket
segment. AUTOWORKS filed a Chapter 11 Petition for
Reorganization on July 24, 1997. (See Part I - Item 3 - "Legal
Proceedings".) As a result, the Company has deconsolidated
AUTOWORKS and classified it as a discontinued operation in the
Company's financial statements and all previous periods have been
restated to reflect this treatment; references herein to
previous period figures are to the restated figures and do not
include AUTOWORKS.
In connection with the AUTOWORKS Chapter 11 proceeding, the
Company recorded a one-time charge of $26.5 million, less tax
benefits of $7.7 million, during the third quarter of Fiscal
1997. Approximately $20 million of this charge was recorded to
write-down the Company's investment in AUTOWORKS to its net
realizable value.
<PAGE> 22
The adjusted investment was substantially recovered as a result of
the AUTOWORKS inventory and fixtures liquidation, the net
proceeds of which were paid to AUTOWORKS, Inc. secured creditors.
The residual portion of the charge, approximately $6.5 million,
represents reserves recorded to cover liabilities the Company
has retained with respect to AUTOWORKS.
Results of Operations
Fiscal Year 1998 Compared to Fiscal Year 1997
Net sales for Fiscal 1998 decreased $8.7 million, or 6.1%, from
the prior Fiscal year, to $133.5 million. The decrease is
attributable to a decrease in net sales of 1.3% at the direct
distribution centers, 7.0% at the full-service distribution
centers and 6.9% at the Advantage Auto Stores. These decreases
are generally attributable to softness in the auto parts industry
caused by various factors, which include improved vehicle
manufacturing and performance, longer vehicle warranties, leased
vehicles, warranted pre-owned vehicles, and increased
competition. Throughout the fiscal year the Company closed seven
Advantage Auto Stores and opened five new locations, which
contributed to the net sales decline in the division. On a
comparable location basis, direct distribution division sales
increased 4.5% (excluding the Nu-Way Acquisition) while the full
service distribution centers and Advantage Auto Stores sales
declined 7.0% and 7.1% respectively.
Gross profit from continuing operations for Fiscal 1998 was $50.7
million, or 38.0% of net sales, compared to $55.3 million, or
38.9% of net sales, for Fiscal 1997. The decrease in gross
profit of $4.6 million, or 8.2%, was due to the decline in net
sales.
Selling, general, and administrative expenses decreased $2.6
million from $46.7 million in Fiscal 1997, to $44.1 million, in
Fiscal 1998 but increased as a percentage of net sales from 32.8%
to 33.0%. The decrease in the dollar amount is attributable to
the Company's ongoing efforts to control expenses and the
reductions relative to lower net sales, while the increase in the
percentage was caused by lower net sales.
Depreciation and amortization expense decreased $403,000 from $2.0
million for Fiscal 1997 to $1.6 million for Fiscal 1998. This
decrease was primarily attributable to a decrease in depreciation
expense due to the utilization of operating leases rather than
the purchase of fixed assets and to the write-off in 1997 of
capitalized origination costs associated with the Company's prior
credit facility (which was replaced by the Company's current
credit facility) that were being amortized over the term of the
prior facility.
<PAGE> 23
Income from operations before interest and taxes for Fiscal 1998
decreased $1.5 million from $6.6 million, or 4.6% of net sales in
Fiscal 1997, to $5.1 million, or 3.8% of net sales in Fiscal 1998
as a result of the factors discussed above.
Interest expense decreased $900,000 in Fiscal 1998 to $3.8 million
compared to $4.7 million for the previous year. This decrease is
attributable to lower average borrowings outstanding under the
New Credit Facility.
The Fiscal 1998 provision for income taxes on income from
continuing operations was $665,000, an effective rate of 39.0%,
as compared to $1.0 million, an effective rate of 38.9%, in
Fiscal 1997. The effective rate in both years differs from the
Federal rate of 34% primarily due to state income taxes.
As a result of the factors discussed above, for Fiscal 1998, the
Company had income from continuing operations of $1.0 million, or
$.22 per share, as compared to income from continuing operations
in Fiscal 1997 of $1.6 million, or $.34 per share. In addition,
during Fiscal 1997, taking into account the now discontinued
AUTOWORKS operations, the Company incurred a net loss of $21.1
million, or $4.45 a share. This net loss was primarily
attributed to the one-time charge relative to AUTOWORKS of $18.8
million, net of tax, and losses from discontinued operations for
the first nine months of the Fiscal year of $3.9 million, net of
tax.
Fiscal Year 1997 Compared to Fiscal Year 1996
Net sales for Fiscal 1997 increased $3.8 million, or 2.8%, from
the prior Fiscal year, to $142.2 million. The increase is
attributable to net sales increases of 44.8% at the direct
distribution centers and 1.5% at the full-service distribution
centers, partially offset by a net sales decline of 6.1% at the
Advantage Auto Stores. The direct distribution centers' increase
resulted from the October 1996 Nu-Way Acquisition and a 6.8%
increase in comparable location sales from the previous Fiscal
year. The Advantage Auto Stores' net sales decline is
principally due to three store closings during Fiscal 1996 and a
5.3% decrease in comparable net sales primarily as the result of
general softness in the automotive parts industry and increased
competition.
Gross profit from continuing operations for Fiscal 1997 was $55.3
million, or 38.9% of net sales, compared to $52.3 million, or
37.8%, of net sales for Fiscal 1996. Gross profit expressed as a
percentage of net sales increased as the result of two
acquisitions during Fiscal 1997, and to a lesser extent, the
changing sales mix and maturation of the direct distribution
division, which generally has a higher gross margin than
full-service distribution center sales.
<PAGE> 24
Selling, general, and administrative expenses increased $5.0
million from $41.7 million in Fiscal 1996, or 30.1% of net sales,
to $46.7 million, or 32.8% of net sales, in Fiscal 1997. This
increase is primarily attributable to the Nu-Way Acquisition,
increased payroll expenses and additional administrative and
professional expenses associated with the AUTOWORKS Chapter 11
proceeding.
Depreciation and amortization expense increased $249,000 for
Fiscal 1997 from the previous Fiscal year. This increase is
attributable to the write-off of capitalized origination costs
associated with the Company's prior credit facility (which was
replaced by the Company's New Credit Facility described below)
that were being amortized over the term of the prior facility,
and an increase in amortization expense related to goodwill
associated with the Nu-Way Acquisition. The increases were
partially offset by the utilization of operating leases rather
than the purchase of fixed assets.
Income from continuing operations before interest and taxes for
Fiscal 1997 decreased $2.3 million from $8.9 million, or 6.4% of
net sales in Fiscal 1996, to $6.6 million, or 4.6% of net sales
in Fiscal 1997 as a result of the factors discussed above.
Interest expense increased $300,000 in Fiscal 1997 to $4.7 million
compared to $4.4 million for the previous year. This increase is
attributable to higher average borrowings outstanding in Fiscal
1997 and a higher interest rate during the fourth quarter of
Fiscal 1997, due to the Company's forbearance agreement with its
lenders.
The Fiscal 1997 provision for income taxes on income from
continuing operations was $1.0 million, an effective rate of
38.9%, as compared to $2.0 million, an effective rate of 38.2%,
in Fiscal 1996 due to the decrease in income from continuing
operations. The effective rate in both years differs from the
Federal rate of 34% primarily due to state income taxes.
As a result of the factors discussed above, in Fiscal 1997, the
Company had income from continuing operations of $1.6 million, or
$.34 per share, as compared to income from continuing operations
of $3.2 million, or $.66 per share in Fiscal 1996. During Fiscal
1997, taking into account the Company's now discontinued
AUTOWORKS' business, the Company incurred a net loss of $21.1
million, or $4.45 a share, compared to net income of $1.9
million, or $.39 a share, in Fiscal 1996. The loss incurred in
Fiscal 1997 includes the one-time charge relative to
AUTOWORKS' $18.8 million, net of tax, and losses from
discontinued operations for the first nine months of the Fiscal
year of $3.9 million, net of tax. Net income in Fiscal 1996
includes losses from discontinued operations of $1.3 million,
net of tax.
<PAGE> 25
Liquidity and Capital Resources
The Company's principal sources of liquidity for its operational
and capital requirements are internally generated funds,
borrowings under its revolving credit facility, leasing
arrangements and extended payment terms from vendors.
During Fiscal 1998, operating activities generated net cash of
$2.4 million, resulting from income from continuing operations
adjusted for non-cash items (including depreciation and bad debt
expense) of $3.1 million and the receipt of a $2.6 million tax
refund reduced by changes in working capital. During Fiscal
1997, operating activities generated net cash of $1.0 million,
resulting from income from continuing operations adjusted for non-
cash items (including depreciation and bad debt expense) of $4.8
million which was partially offset by changes in working capital
including an increase of $4.0 million in other assets which
primarily represents the recording of a $2.6 million receivable
for the tax refund received during Fiscal 1998. In fiscal 1996,
operating activities generated net cash of $6.2 million,
resulting from income from continuing operations adjusted for non-
cash items (including depreciation and bad debt) of $5.6 million,
which was partially offset by changes in working capital.
Investing activities consist mainly of routine capital
expenditures for delivery vehicles, computer equipment, and store
and warehouse fixtures. Capital expenditures for continuing
operations were $300,000, $1.1 million and $300,000 during Fiscal
1998, 1997 and 1996, respectively. Excluding acquisitions, the
Company expects to make capital expenditures of approximately
$450,000 in Fiscal 1999.
Financing activities during Fiscal 1998, 1997 and 1996 consumed
$2.5 million, $5.5 million and $1.9 of net cash, respectively.
Funds consumed during Fiscal 1998 and Fiscal 1997 reflect
payments on long-term debt and a reduction of net borrowings
under the Company's current and prior credit facility. In 1996,
such payments were partially offset by the issuance of $2.2
million of subordinated debt to Michael Futerman and Eli N.
Futerman, Chief Executive Officer and President of the Company,
respectively. (See Note 5 to the Company's Consolidated
Financial Statements.)
<PAGE> 26
In connection with the AUTOWORKS Chapter 11 proceeding, the
Company recorded a one-time charge of $26.5 million, less tax
benefits of $7.7 million, during the third quarter of Fiscal
1997. Approximately $20 million of this charge was recorded to
write-down the Company's investment in AUTOWORKS to its net
realizable value. The adjusted investment was subsequently
recovered as a result of the AUTOWORKS inventory and fixtures
liquidation. The residual portion of the charge, approximately
$6.5 million, represents reserves recorded to cover liabilities
the Company has retained with respect to AUTOWORKS. At September
30, 1998, $3.3 million of the original $6.5 million reserves
included in the Company's $2.6 million AUTOWORKS charge had yet
to be utilized. The Company believes that it is adequately
accrued for the remaining exposures it faces for AUTOWORKS
liabilities, including the settlement agreement discussed below,
and that the remaining reserves at September 30, 1998 will be
fully utilized during the next four years.
On October 22, 1997, the Company entered into a Loan and Security
Agreement (the "New Credit Facility") with Fleet Capital
Corporation ("Fleet"), which matures on October 22, 2002. The
facility provides for, among other things, a revolving credit
facility with $50 million in maximum availability subject,
however, to borrowing base restrictions, and a $2.5 million term
loan, a $3.5 million supplemental availability line and a $2.0
million letter of credit sub-facility. The proceeds of the
initial borrowing under the New Credit Facility, approximately
$36.0 million, were used to repay all amounts outstanding under
the previous credit agreement and Senior Secured Notes. The
obligations of the Company under the New Credit Facility are
secured by a first priority security interest on substantially
all present and future assets of the Company and are guaranteed
up to a maximum amount of $2.5 million by Michael Futerman, who
is an officer, director and the principal shareholder of the
Company. Secured mortgages on certain real estate were pledged
as collateral guarantees by Michael Futerman. The New Credit
Facility contains customary restrictive covenants, including,
without limitation, restrictions on changes in character of the
business, mergers, sales or transfers of assets, acquisitions,
capital expenditures, liens, indebtedness, restricted payments or
repurchases of other indebtedness, dividends and transactions
with affiliates. (See Note 5 to Company's Consolidated Financial
Statements.) During Fiscal 1998 the appropriate waivers were
received for the fixed charge covenant deficiencies. In December
1998, Fleet Capital agreed to change the Company's fixed charge
coverage ratio to .45 for the first two quarters of Fiscal 1999,
and to .8 and 1.25 for the third and fourth quarters of Fiscal
1999, respectively, which will be measured quarter by quarter.
As of November 30, 1998, the Company had an outstanding balance
of $35.6 million under the New Credit Facility with availability
of $2.5 million.
<PAGE> 27
In the AUTOWORKS Chapter 11 proceeding, the unsecured creditors
committee had indicated that it may pursue certain claims against
the Company. On April 22, 1998, a Settlement Agreement and
Release was negotiated between the Company and the Committee.
Under the Settlement Agreement and Release, the Committee agreed
to release the Company from all claims in exchange for the
Company's payment to the AUTOWORKS bankruptcy estate of up to a
maximum of $2.0 million over five years. If certain payments are
made in a timely manner, the Company will pay less than $2.0
million, but not less than $1.6 million by June 15, 2002. The
bankruptcy court approved the Settlement Agreement and Release by
order dated June 18, 1998, the Settlement Agreement and Release
was thereafter signed by all parties and the Company made the
first payment to the AUTOWORKS bankruptcy estate in the amount of
$320,000 on July 1, 1998.
In the future the Company may make minor strategic acquisitions
and open new direct distribution centers and Advantage Auto
Stores to the extent that its debt service and other funding
requirements permit. The Company's ability to open new direct
distribution centers depends on the Company's ability to
negotiate extended payment terms with vendors, (which initially
minimizes additional working capital requirements) and on
consents from the Company's lender.
The Company anticipates that its sources of cash flow will provide
sufficient working capital to operate its business, make expected
capital expenditures and to meet its other short-term and longer-
term liquidity needs at least through the end of Fiscal 1999.
Year 2000
The Year 2000 issue is the result of computer software programs
being written using two digits rather than four to define the
applicable year. Any of the Company's software programs,
computer hardware or equipment that have date-sensitive software
or embedded chips may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in
miscalculation or system failures. The plan is to devote
necessary resources required to resolve any significant Year 2000
issues in a timely manner.
The Company has developed an informal plan to ensure that all of
its significant date-sensitive computer software and hardware
systems and other equipment utilized in its various distribution
<PAGE> 28
and administrative activities (utilizing embedded chips or
software), will be Year 2000 compliant and operational on a
timely basis. The formal plan will address all of the Company's
locations and includes a review of computer applications that
connect elements of the Company's business directly to its
customers and suppliers. The plan is also to include an
assessment process to determine that the Company's significant
customers and suppliers ("Third-Party Activities") will also be
Year 2000 compliant.
The Company's plan to resolve the Year 2000 issue includes four
major phases - assessment, remediation, testing, and
implementation. The Company has substantially completed the
assessment phase of its plan for all of its significant
information technology and operating equipment that it believes
could be affected by the Year 2000 issue. Based upon its
assessment, the Company concluded that it would be necessary to
reprogram and/or replace certain of its information technology.
The Company also determined that certain of its operating
equipment would also require modifications to make certain they
remain operational.
The remediation of operating equipment is approximately 50%
complete, and the Company is targeting completion of its related
remediation efforts by the end of the second quarter of 1999.
Certain desktop personal computers that were Year 2000 deficient
have been replaced as part of the Company's scheduled rotation
replacement program, the cost of which does not impact the Year
2000 project. Testing and implementation of the affected
equipment is targeted to be substantially completed during the
second quarter of next year.
To date, the Company has not identified any Information Technology
("IT") or non-IT system that presents a material risk of not
being Year 2000 ready or for which a suitable alternative cannot
be implemented. However, as the initiative moves further into
the testing phase, it is possible that the Company may identify
potential risks of Year 2000 disruption. It is also possible
that such a disruption could have a material adverse effect on
the Company's financial condition and results of operations. The
Company is still in the process of modifying or replacing certain
time-sensitive software programs and other date sensitive devices
to avoid a potential inability to process transactions or engage
in other normal business activities.
With respect to Third-Party Activities, the Company will make
inquiries of its significant customers and suppliers and, at the
present time, is not aware of problems that would materially
<PAGE> 29
impact the Company's operations. However, the Company has no
means of ensuring that these customers and suppliers (and in turn
their customers and suppliers) will be Year 2000 compliant in a
timely manner. The inability of these parties to successfully
resolve their Year 2000 issues could have a material adverse
effect on the Company.
Software modification to the Company's mainframe computer system
has already begun. The vendor of the system has commenced the
distribution of Year 2000 software upgrades. It is anticipated
that all upgrades will be implemented and tested by the end of
the second quarter of 1999. There will be no expense to the
Company, as modified Year 2000 software is a part of the
Company's software maintenance agreement.
Substantially all of the Company owned remote store systems have
been upgraded with modified Year 2000 software without cost to
the Company, as these costs are also protected under the software
maintenance agreement for these systems.
The Company is utilizing both internal and external resources to
reprogram or replace, test, and implement the required Year 2000
modifications. The Company plans to complete the Year 2000
project including renovation, validation and implementation by
June 30, 1999. The Company's total cost to address the Year 2000
issue is estimated at $150,000 and is being funded through
operating cash flow. The elements of such costs are as follows
(amounts in thousands of dollars):
Incurred
Through Costs Yet Total
September 30, to be Estimated
1998 Incurred Cost
Capital expenditures related to
new systems and equipment $0 $100 $100
Operating expenses related to
modifications of existing
systems and equipment 0 50 50
Total capital and expense $0 $150 $150
The Company could potentially experience disruptions to some
aspects of its various activities and operations as a result of
non-compliant systems utilized by the Company or unrelated third
parties. Contingency plans are, therefore, under development to
mitigate the extent of any such potential disruption to business
operations.
<PAGE> 30
The costs of the Year 2000 project and the date which the Company
plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing
numerous assumptions of future events including the continued
availability of certain resources, third party modification plans
and other factors. There can be no guarantee that these
estimates will be achieved and actual results could differ
materially from those plans. Specific factors that might cause
such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and
similar uncertainties.
Recent Accounting Pronouncements
In June, 1997 the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No.
130 which establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial
statements. SFAS No. 130, which is effective for fiscal years
beginning after December 15, 1997, or the Company's Fiscal 1999,
requires that comprehensive income, and its' components, be
reported in a financial statement that is displayed with the same
prominence as other financial statements. It also requires that
an enterprise (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the
accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity
section of a statement of financial position. Reclassification
of financial statements for earlier periods provided for
comparative purposes is required. The Company will begin
reporting comprehensive income in its' quarterly filing on Form
10-Q as of and for the quarter ended December 31, 1998. It's
comprehensive income will consist of net income, as historically
reported, and the unrealized gain/loss on the marketable security
owned by the Company (see Note 3 to the Company's Consolidated
Financial Statements included in Item 8 of this Report, which is
currently reported as a component of stockholders' equity in
accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities".)
In June, 1997 the FASB also issued SFAS No. 131, "Disclosures
about Segments of an Enterprises and Related Information" which
establishes standards for the way that public business
enterprises report information about operating segments in annual
financial Statements and requires that those enterprises report
selected information about operating segments in interim
financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas, and majorcustomers. SFAS No. 131, which is
effective for financial statements for periods beginning after
December 15, 1997, or the Company's Fiscal 1999, generally
requires that financial information be reported on the basis
that it is used internally for evaluating segment performance
and deciding how to allocate resources to segments.
In the initial year of application, comparative information
for earlier years is to be restated. The Company will begin
reporting segment information in its annual filing on Form 10-K
as of and for the fiscal year ended September 30, 1998, and will
continue to report such information in its quarterly filings on
Form 10-Q thereafter. The Company believes that it has two
reportable segments under SFAS No. 131, differentiated along
the channel of distribution (direct vs. full-service) as discussed
under the caption - "Business" in Item 1 of this Report.
<PAGE> 31
Inflation
The Company does not believe that its operations have been
materially affected by inflation. In general, the Company has
been able to pass on to its customers any increases in the cost
of its inventory.
Seasonality
The Company's business is somewhat seasonal in nature, primarily
as a result of the impact of weather conditions on the demand for
automotive aftermarket products. Historically, the Company's net
sales and gross profits have been higher in the second half of
each Fiscal year than in the first half.
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-K which are not
historical facts, including but not limited to (i) anticipated
trends in the Company's business and the automotive replacement
parts industry, (ii) the sufficiency of cash to fund the
Company's debt service requirements and working capital needs
(iii) certain statements found under the captions "Results of
Operations" and "Liquidity and Capital Resources" and "Year
2000", are forward-looking statements within the meanings of
Section 27A of the Securities Act of 1933 and Section 21E of the
Exchange Act of 1934, as amended; such statements are typically
identified by the words "believe," "expect," "anticipate,"
"intend," "estimate," "plan" and similar expressions. These
statements involve a number of risks and uncertainties, certain
of which are beyond the Company's control. The actual results of
the future events described in the forward-looking statements in
this Form 10-K could materially differ from those contemplated in
the forward-looking statements in this Form
<PAGE> 32
10-K. In addition to the risks and uncertainties of ordinary
business operations, some of the factors that could cause actual
results to differ materially are the risks and uncertainties (i)
discussed herein, (ii) contained in the Company's other public
reports and filings and public statements from time to time and
(iii) set forth below:
1. The Company is highly leveraged, with substantial existing
indebtedness. The Company's ability to make scheduled payments
of principal or interest on, or to refinance, its indebtedness
will depend on its future operating performance and cash flow,
which are subject to prevailing economic conditions, prevailing
interest rate levels, and financial, competitive, business and
other factors beyond its control. The degree to which the
Company is leveraged could have important consequences, including
(i) the Company's future ability to obtain additional financing
for working capital or other purposes may be limited because of
the existence of this indebtedness and the borrowing advance
terms thereof; (ii) a substantial portion of the Company's cash
flow from operations will be dedicated to the payment of
principal and interest on its indebtedness until its term loan
and supplemental line of credit have been paid in full, thereby
reducing funds available for operation; (iii) certain of the
Company's borrowings are at variable rates of interest, which
could cause the Company to be vulnerable to increases in interest
rates; and (iv) the Company may be more vulnerable to economic
downturns and may be limited in its ability to respond to changes
in the automotive parts industry and competitive pressures.
Failure to comply with the Company's payment, covenant or other
obligations under its credit facilities could result in a default
thereunder that, if not cured or waived, could result in
acceleration of the relevant indebtedness or of other
indebtedness governed by agreements or instruments containing
cross default provisions.
2. The Company operates in a highly competitive environment and
its dollar sales and unit volume could be negatively affected by
its ability to maintain or increase prices, changes in sales mix
and changes in the demand for automotive products and changes in
the automotive replacement parts industry generally, including
pricing and other changes by the Company's competitors. The
Company competes directly and indirectly with numerous
distributors, retailers and manufacturers of automotive
aftermarket products, some of which distribute in channels that
may be expanding in terms of market share relative to the
channels in which the Company distributes its products. In
addition, some of the Company's current and potential competitors
are larger, have greater financial resources, and are less
leveraged than the Company. Furthermore, particularly in light
of the trend in the automotive parts industry
<PAGE> 33
toward increasing consolidation at the warehouse and jobber
levels, the Company's financial performance may be significantly
affected by the Company's ability to compete successfully for
associated jobber customers and otherwise take advantage of
consolidation opportunities and other trends.
3. The Company's financial performance is subject to and could
be negatively impacted by changes in economic conditions, vehicle
quality, extension of new parts warranties and maintenance,
vehicle scrappage rates and weather conditions, which can cause
seasonal variations in the Company's results of operations. The
occurrence of violent weather or mild weather may result in
significant fluctuations in operating results. Temperature
extremes tend to enhance sales by causing a higher incidence of
parts failure and increasing sales of seasonal products, while
milder weather tends to depress sales.
4. In light of the trend in the automotive parts industry toward
increasing consolidation at the warehouse and jobber levels, the
Company's financial performance may be significantly affected by
the Company's ability to compete successfully for associated
jobber customers and otherwise take advantage of consolidation
opportunities and other industry trends. The Company's ability
to do so depends on its ability to secure the consent of its
lender to future acquisitions and its ability to finalize such
transactions. If such a transaction is effected, the Company's
financial performance will depend on its ability to conclude the
acquisitions on favorable terms and to enhance those acquisitions
and integrate them into its operations. Full realization of the
potential benefits of any significant acquisition will be
dependent upon a variety of factors, including (i) retention of a
substantial portion of sales, (ii) achieving sales volumes
sufficient to utilize reductions in cost of goods sold (as a
percentage of net sales), (iii) achieving significant reduction
in selling, general and administrative expenses by, among other
things, consolidating redundant operating and administrative
facilities and closure of non-performing facilities and (iv)
obtaining deferred payment terms and other changeover incentives
from suppliers. There can be no assurance as to the extent to
which any such benefits may be realized from any acquisitions or
the timing of any such realization. Failure to achieve a
substantial portion of such potential benefits within time frames
anticipated by the Company could materially and adversely affect
the Company's future results of operations and financial
position.
5. The Company's past success has been largely dependent on
certain key personnel of the Company, including Michael Futerman
and Eli N. Futerman. The loss of the services of these
individuals could have a material adverse impact on the Company's
business and results of operations. Additionally, in order to
implement and manage its growth strategy, the Company will be
dependent upon its ability to continue to attract and
retain qualified personnel. There can be no assurance that the
Company will be able to continue to secure or retain such personnel.
<PAGE> 34
6. The Company is a defendant in various lawsuits. There can be
no assurance that the Company will prevail in any of these
lawsuits. To the extent that the Company sustains losses growing
out of any pending litigation which are presently not reserved or
otherwise provided for, its earnings and liquidity could be
adversely affected.
7. The failure of the Company or its material suppliers to
effectively address Year 2000 issues could adversely effect its
future earnings and liquidity.
<PAGE> 35
Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company holds a zero coupon bond to secure certain self-
insured claims. The fair market value of such bond was
approximately $789,000 as of September 30, 1998. See Note 3 to
the Company's Consolidated Financial Statements included in this
Report. The value of the bond tends to fluctuate with market
interest rate movements. The Company does not believe that the
security is material to the Company's financial position, results
of operation or cash flows.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary financial data required
by this Item 8 are listed at Part IV, Item 14 and are filed
herewith immediately following the signature page hereto.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There has been no change in accountants or reported disagreements
on accounting principles or practices or financial statement
disclosures.
<PAGE> 36
PART III
Item 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required under this Item 10 shall be included in
the Company's definitive Proxy Statement for its 1999 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 27, 1999, and the
appropriate information therefrom is incorporated herein by
reference.
Item 11.EXECUTIVE COMPENSATION.
The information required under this Item 11 shall be included in
the Company's definitive Proxy Statement for its 1999 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 27, 1999, and the
appropriate information therefrom is incorporated herein by
reference.
Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required under this Item 12 shall be included in
the Company's definitive Proxy Statement for its 1999 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 27, 1999, and the
appropriate information therefrom is incorporated herein by
reference.
Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required under this Item 13 shall be included in
the Company's definitive Proxy Statement for its 1999 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 27, 1999, and the
appropriate information therefrom is incorporated herein by
reference.
<PAGE> 37
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(a) List of documents filed.
(1) Financial Statements:
Report of Independent Accountants
Balance Sheets at September 30, 1998, and 1997
Statements of Operations for the Years Ended
September 30, 1998, 1997 and 1996
Statements of Changes in Stockholders' Equity
for the Years Ended September 30, 1998, 1997 and 1996
Statements of Cash Flows for the Years Ended
September 30, 1998, 1997 and 1996
Notes to Financial Statements
Financial Statement Schedules
Report of Independent Accountants on Financial
Statement Schedule
Schedule II - Valuation and Qualifying Account
Reserves for the Years Ended September 30, 1998,
1997 and 1996
(3) Exhibits
Those exhibits required to be filed by Item 601 of Regulation S-K
are listed in the Exhibit Index immediately preceding the
exhibits filed herewith and such listing is incorporated herein
by reference.
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HAHN AUTOMOTIVE WAREHOUSE, INC.
Date: December 21, 1998 By: *S//Michael Futerman
Michael Futerman, Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Date: December 21, 1998 *S//Michael Futerman
Michael Futerman, Director
Date: December 21, 1998 S//Eli N. Futerman
Eli N. Futerman, Director
Date: December 21, 1998 *S//Peter J. Adamski
Peter J. Adamski
Vice President - Finance
and Chief Financial Officer
Date: December 21, 1998 *S//Daniel J. Chessin
Daniel J. Chessin, Director
Date: December 21, 1998 *S//Ira D. Jevotovsky
Ira D. Jevotovsky, Director
Date: December 21, 1998 *S//Stephen B. Ashley
Stephen B. Ashley, Director
Date: December 21, 1998 *S//William A. Buckingham
William A. Buckingham, Director
Date: December 21, 1998 *S//Robert I. Israel
Robert I. Israel, Director
Date: December 21, 1998 *S//E. Philip Saunders
E. Philip Saunders, Director
* By: S//Eli N. Futerman
Eli N. Futerman, Attorney-in-Fact
<PAGE> 39
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FINANCIAL STATEMENTS AND SCHEDULES
September 30, 1998
FORMING A PART OF
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
OF
HAHN AUTOMOTIVE WAREHOUSE, INC.
<PAGE> 40
Hahn Automotive Warehouse, Inc. and Subsidiaries
Index To Consolidated Financial Statements
September 30, 1998
Page
Report of Independent Accountants
Consolidated Balance Sheets at
September 30, 1998 and 1997
Consolidated Statements of Operations for the
Years Ended September 30, 1998, 1997 and 1996
Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for
the Years Ended September 30, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants or
Financial Statement Schedules
Schedule II - Valuation and Qualifying
Account Reserves
<PAGE> 41
Report of Independent Accountants
November 30, 1998
To the Board of Directors and Stockholders of
Hahn Automotive Warehouse, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations, changes in
stockholders' equity and cash flows present fairly, in all
material respects, the financial position of Hahn Automotive
Warehouse, Inc. and Subsidiaries at September 30, 1998 and 1997,
and the results of their operations and their cash flows for the
three fiscal years ended September 30, 1998, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
<PAGE> 42
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
September 30,
1998 1997
<S> <C> <C>
Assets
Current Assets:
Cash $ 329 $ 632
Marketable securities 789 550
Trade and note receivables,
net of allowance for
doubtful accounts of
$2,927 in 1998 and
$3,230 in 1997 15,595 16,995
Inventory 44,037 42,516
Other current assets 2,567 4,312
Total current assets 63,317 65,005
Property, equipment and
leasehold improvements, net 7,613 5,062
Other assets 7,381 7,725
$78,311 $77,792
Liabilities and Stockholders'Equity
Current Liabilities:
Current portion of
long-term debt and
capital lease
obligations $ 2,810 $ 1,330
Accounts payable 10,718 12,062
Compensation related liabilities 1,758 1,880
Discontinued operations 1,142 2,120
Other accrued expenses 4,391 2,128
Total current liabilities 20,819 19,520
Obligations Under Credit Facility 35,190 37,455
Notes payable - officers and affiliates 1,129 2,704
Other long-term debt 1,810 1,440
Capital lease obligations 3,564 275
Other liabilities 2,238 4,034
Stockholders' equity:
Common stock (par value $.01 per share
authorized 20,000,000 shares:
issued and outstanding 4,745,014
in 1998 and 1997) 47 47
Additional paid-in capital 25,975 25,975
Deficit (12,619) (13,658)
Unrealized gain on marketable
securities, net of deferred taxes 158 -
Total stockholders' equity 13,561 12,364
$78,311 $77,792
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share data)
For the Years Ended September 30,
1998 1997 1996
<S> <C> <C> <C>
Net sales $133,503 $142,242 $138,395
Cost of product sold 82,778 86,967 86,077
Gross profit 50,725 55,275 52,318
Selling, general and
administrative expense 44,059 46,717 41,657
Depreciation and
amortization 1,602 2,005 1,756
Income from operations 5,064 6,553 8,905
Interest expense (3,771) (4,670) (4,402)
Other income 411 719 600
Income before provision
for income taxes 1,704 2,602 5,103
Provision for income taxes 665 1,011 1,950
Income from continuing
operations 1,039 1,591 3,153
Loss from discontinued
operations:
Write-down of investment
in subsidiaries, net of tax - (18,789) -
Loss from discontinued
operations, net of tax - (3,937) (1,294)
Total loss from
discontinued operations - (22,726) (1,294)
<PAGE> 45
Net income (loss) $ 1,039 $(21,135) $1,859
Basic and diluted amounts
per share:
Income from continuing
operations per share $ 0.22 $ 0.34 $ 0.66
Loss from discontinued
operations per share - (4.79) (0.27)
Net income (loss) per
share $ 0.22 $ (4.45) $ 0.39
Weighted average shares
outstanding 4,745,014 4,745,014 4,745,014
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc. and Subsidiaries
Consolidated Statement of Change in Shareholders' Equity
(In thousands, except share and per share data)
Total
Additional Retained Stock-
Common Stock Paid-In Earnings holders'
Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1995
4,387,032 $44 $23,161 $ 8,435 $31,640
Net income - - - 1,859 1,859
Stock dividend 175,481 2 1,446 (1,448) -
Balance at September 30, 1996
4,562,513 46 24,607 8,846 33,499
Net loss - - - (21,135) (21,135)
Stock dividend 182,501 1 1,368 (1,369) -
Balance at September 30, 1997
4,745,014 47 25,975 (13,658) 12,364
Net income - - - 1,039 1,039
Unrealized gain on marketable security
net of deferred taxes - - - 158 158
Balance at September 30, 1998
4,745,014 $47 $25,975 $(12,461) $13,561
The accompanying notes are an integral part of the financial statements.
<PAGE> 47
</TABLE>
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
For the years ended
September 30,
1998 1997 1996
<S> <C> <C> <C>
Cash Flows from operating activities:
Net income from continuing operations $1,039 $1,591 $ 3,153
Items to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 1,602 2,005 1,756
Provision for doubtful accounts 453 1,176 696
Loss from discontinued operations,
before non-cash items -- (3,103) (538)
Change in assets and liabilities:
Trade receivables 947 (1,119) (913)
Inventory (1,521) 1,020 1,141
Other assets 1,983 (3,901) (625)
Accounts payable and other accruals (2,058) 232 1,005
Net assets of discontinued
operations -- 9,243 (2,591)
Net cash provided by operating
activities 2,445 7,144 3,084
Cash flows from investing activities:
Additions to property, equipment and
leasehold improvements, net:
Continuing operations (279) (1,067) (294)
Discontinued operations -- -- (880)
Net cash used in investing
activities (279) (1,067) (1,174)
<PAGE> 48
Cash flows from financing activities:
Net borrowings under line of credit (996) (1,433) 1,276
Proceeds from long-term debt and
demand notes 6,119 89 -
Proceeds from notes payable -
officers and affiliates - - 2,150
Payment of long-term debt and
demand notes (6,555) (3,501) (4,765)
Payment of notes payable -
officers and affiliates (711) (237) (90)
Payment of capital lease obligations (326) (442) (478)
Net cash used in financing activities (2,469) (5,524) (1,907)
Net increase (decrease) in cash (303) 553 3
Cash at beginning of year 632 79 76
Cash at end of year $329 $632 $79
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest $3,916 $4,689 $ 4,467
Income taxes $ 95 $ 297 $ 1,589
Supplemental disclosure of non-cash
investing activities:
Debt issued in connection with
acquisitions $ - $1,900 $ -
Supplemental disclosure of non-cash
financing activities:
Issuance of 182,501 and 175,481
shares of common stock in
conjunction with the 4% stock
dividend in fiscal 1997 and
1996, respectively $ - $1,369 $ 1,448
Renewal of capital lease agreements
during fiscal 1998 $3,768 $ - $ -
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> 49
Hahn Automotive Warehouse, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in Thousands, Except Share and Per Share Data)
1. Summary of Accounting Policies
The Company
The Company sells and distributes automotive aftermarket
parts in the wholesale market through its network of
warehouses and jobber facilities along the Eastern Seaboard
and in the Midwest.
Principles of Consolidation
The consolidated financial statements include the accounts of
Hahn Automotive Warehouse, Inc. (the "Company") and its
wholly-owned subsidiaries. As a result of its bankruptcy
filing on July 24, 1997, the Company's AUTOWORKS, Inc.
subsidiary (see Note 2) was deconsolidated. All significant
intercompany transactions have been eliminated.
Marketable Security
The Company's only marketable security is a zero coupon bond
purchased as collateral against liability claims for which
the Company is self-insured. The Company has classified the
bond as available-for-sale, as defined by the Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
Unrealized holding gains and losses, net of deferred income
taxes, are reflected as a separate component of stockholders'
equity until realized. For the purpose of computing realized
gains and losses, cost is identified on a specific
identification basis.
Inventory
Inventory consists primarily of automotive replacement parts
and accessories and is stated at the lower of cost, on a last-
in, first-out ("LIFO") basis, or market. The replacement
cost of the inventory exceeded the LIFO value by
approximately $3,179 and $3,583 at September 30, 1998 and
1997, respectively.
Intangible Assets Property, Equipment and Leasehold
Improvements
Property, equipment and leasehold improvements are stated at
cost and are depreciated over their estimated useful lives
using the straight-line method. Major renewals and
betterments are capitalized. Maintenance, repairs and minor
renewals are expensed as incurred. When properties are
<PAGE> 50
retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts.
Assets Under Capital Leases
Leases which meet the capital lease criteria of SFAS No. 13,
"Accounting for Leases", are recorded as assets and
obligations at the lesser of the present value of future
rental payments or the fair market value of the leased
property at the inception of the lease. Amortization of
capitalized leased property has been provided using the
straight-line method over the estimated useful lives of the
assets.
Goodwill is amortized using the straight-line method over
lives ranging from 20 to 30 years. Deferred financing costs
are being amortized using the straight-line method over the
term of the Credit Facility Agreement (see Note 5). The
Company accounts for pre-opening costs at new stores in
accordance with Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities", expensing such costs as
incurred.
<PAGE> 51
Revenue Recognition
The Company recognizes revenue upon shipment of product.
Advertising
Advertising expenses are charged to operations during the
year in which they are incurred and were approximately $786,
$1,128 and $223 for the years ended September 30, 1998, 1997
and 1996, respectively.
Income Taxes
The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes". This statement requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and
liabilities.
Net Income Per Share
The Company has adopted SFAS No. 128, "Earnings Per Share",
which was issued by the Financial Accounting Standards Board
in 1997. SFAS No. 128 requires dual presentation of basic
earnings per share (EPS) and diluted EPS on the face of all
statements of earnings for periods ending after December 15,
1997. Basic EPS is computed as net earnings divided by the
weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that
could occur from common shares issuable through stock-based
compensations including stock options. The adoption of SFAS
No. 128 had no effect on EPS reported in prior years.
Impairment of Long-Lived Assets
In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Company continually evaluates the
existence of impairment of long-lived assets based upon
projected, undiscounted net cash flows of the respective
operation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
<PAGE> 52
Disclosure about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for
which it is practicable to estimate that value.
Current Assets and Liabilities - The carrying amount of
cash and equivalents, other assets and accrued
liabilities approximate fair value because of the short
maturity of those instruments.
Long-Term Debt - The carrying value of the Company's long-
term debt approximates fair value at the balance sheet
date.
Concentration of Credit Risk
The Company provides credit, in the normal course of
business, to jobber customers in the automotive aftermarket.
The Company's customers are not concentrated in any one
geographic region nor does any single customer account for a
significant amount of sales or accounts receivable. The
Company performs credit evaluations of its customers and
maintains allowances for potential credit losses which, when
realized, have been within the range of management's
expectations.
Reclassifications
Certain reclassifications of fiscal 1997 and 1996 financial
statements and related footnote amounts have been made to
conform to the fiscal 1998 presentation.
2. Discontinued Operations
In the third quarter of fiscal 1997, the Company made the
decision to exit the AUTOWORKS, Inc. ("AUTOWORKS") retail
business. On July 24, 1997, the Company's retail subsidiary,
AUTOWORKS, filed for reorganization under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy
Court in the Western District of New York to assure orderly
administration of AUTOWORKS' assets and liabilities. Since
the Chapter 11, AUTOWORKS has operated as a debtor-in-
possession while its assets are being sold and liquidated,
and its debts repaid and restructured. As a result, the
Company has deconsolidated, and classified as a discontinued
operation, the AUTOWORKS' subsidiary, which was accounted for
on the liquidation basis of accounting, effective July 24,
1997. The consolidated financial statements presented herein
(including all prior periods' statements which have been
<PAGE> 53
restated) reflect all discontinued operations separately from
continuing operations.
The Company recorded a provision of $18,789, net of tax, in
the third quarter of fiscal 1997, for the loss expected on
the divestment of the AUTOWORKS retail business. This
provision includes the write down of the Company's investment
in AUTOWORKS to its net realizable value and a reserve for
obligations for which the Company is jointly liable with
AUTOWORKS, including self-insured exposures and certain real-
estate and equipment leases guaranteed by the Company.
At September 30, the assets and liabilities of AUTOWORKS are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
Assets
<S> <C> <C>
Cash $ 192 $ 833
Accounts receivable,
net 5 40
Inventory - 220
Property, plant and
equipment 490 712
Other assets 1,280 127
Total assets $ 1,967 $ 1,932
Liabilities
Current liabilities $ 17,941 $ 17,906
Due to affiliates 33,375 33,375
Total Liabilities 51,316 51,281
Liabilities
exceeding assets $ 49,349 $ 49,349
</TABLE>
<PAGE> 54
Operating results (exclusive of the aforementioned provisions) of
AUTOWORKS for the years ended September 30, are as follows:
1998 1997 1996
Net sales $ - $ 57,292 $ 82,977
Loss from operations,
net of tax $ - $ (3,937) $ (1,294)
3. Marketable Security
The marketable security held at September 30, 1998 and 1997
is classified as available-for-sale and is summarized as
follows:
Market Unrealized
Cost Value Gain
September 30, 1998
Debt security:
Zero Coupon Bond $ 550 789 $ 239
September 30, 1997
Debt security:
Zero Coupon Bond $ 550 $ 550 $ -
4. Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements consist of the
following:
<PAGE> 55
September 30, Useful
Lives
1998 1997 (Years)
Land $ 25 $ 25 -
25 25
Buildings 880 880 10 - 30
Buildings under capitalized 4,422 3,136 10 - 20
leases
Leasehold improvements 2,227 2,163 10
Computer equipment 2,103 2,177 6
Furniture and fixtures 4,343 4,466 8
Vehicles 3,084 3,337 4 - 5
17,084 16,184
Less: Accumulated
depreciation and
amortization 9,471 11,122
$ 7,613 $ 5,062
Depreciation and amortization expense related to property,
equipment and leasehold improvements for the years ended
September 30, 1998, 1997 and 1996 was approximately $1,440,
$1,614 and $1,724, respectively. Included in accumulated
depreciation and amortization at September 30, 1998 and 1997
was approximately $673 and $2,824, respectively, of
accumulated amortization on capital leases.
5. Long-Term Debt
Long-term debt includes the following:
September 30,
1998 1997
Credit Facility Agreement $ 36,566 $ 37,830
Notes payable - officers 1,993 2,704
and affiliates
Other long-term debt 2,038 2,219
40,597 42,753
Less: Current portion 2,468 1,154
$ 38,129 $ 41,599
<PAGE> 56
On October 22, 1997, the Company closed on a new Credit
Facility Agreement. The new agreement expires on October 22,
2002 and provides a revolving credit note, subject to a
borrowing base, up to a maximum of $50,000. The proceeds of
the initial borrowings under the Credit Facility Agreement
were used to repay all amounts outstanding under the
Company's previously existing credit agreement and Senior
Secured Notes. Borrowings outstanding under the previous
credit agreement and Senior Secured Notes as of September 30,
1997 are assumed to have been replaced as of the balance
sheet date with borrowings under the new Credit Facility
Agreement.
Borrowings under the Credit Facility Agreement bear interest
at an annual rate equal to, at the Company's option, either
(a) LIBOR plus 1.75% to 2.5%, dependent upon the Company's
financial performance, or (b) the bank prime rate plus 0% to
.75%, dependent upon the Company's financial performance.
LIBOR and prime were 5.8% and 8.25%, respectively, at
September 30, 1998.
The Credit Facility Agreement is collateralized by
substantially all of the Company's assets and contains
covenants and restrictions, including limitations on
indebtedness, liens, leases, mergers and sales of assets,
investments, dividends, stock purchases and other payments in
accordance with capital stock and cash flow coverage
requirements. Restrictive covenants include maintenance of a
minimum tangible net worth and a minimum fixed charge
coverage ratio. The Company has obtained the appropriate
waivers for all covenant violations during fiscal 1998.
On December 14, 1995, the Company entered into an agreement
with its Chief Executive Officer and principal stockholder
whereby he would, upon request of a Special Committee of
disinterested directors of the Company's Board of Directors
("Special Committee"), purchase from the Company subordinated
debt up to a maximum aggregate principal amount of $4,000 on
terms and conditions to be negotiated with, but ultimately
determined by the Special Committee. As a result, the
Company executed promissory notes ("Notes") with the Chief
Executive Officer and the President of the Company, on
January 24 and February 1, 1996, respectively, in the
aggregate amount of $2,150. The Notes bear interest which is
payable monthly, at the annual rate of 12%. Commencing
January 1, 1997, the Notes require monthly principal
<PAGE> 57
repayments with possible mandatory prepayments if the
Company's net income exceeds certain defined amounts. Final
principal and interest payments are due February 1, 2001.
The remaining balance of notes payable due to officers and
affiliates is comprised of a number of notes to related
parties with varying terms.
Annual maturities of long-term debt for subsequent fiscal
years are approximately: 1999 - $2,468; 2000 - $1,331; 2001 -
$940; 2002 - $1,550; 2003 - $33,754 and thereafter - $554.
6. Commitments and Contingencies
Leases
The Company leases certain warehouse facilities from related
parties. The leases, which meet the requirements of a
capital lease under Financial Accounting Standards Board
Statement No. 13, have terms of approximately ten years.
The Company also leases warehouse and jobber facilities under
noncancellable operating lease agreements, which expire
through 2008. Certain of the leases are for facilities owned
by related parties. Most of these operating leases include
provisions for rent escalations and increases in operating
expenses (real estate taxes, insurance and maintenance).
Rent expense related to all facility operating leases totaled
approximately $2,911, $2,792 and $2,691, which included
approximately $1,874, $1,675 and $1,914 of payments to
related parties for the years ended September 30, 1998, 1997
and 1996, respectively.
In addition, the Company leases various equipment under
noncancellable operating lease agreements expiring through
2002. Rent expense related to all equipment operating leases
totaled approximately $460, $519 and $623, for the years
ended September 30, 1998, 1997 and 1996, respectively.
Future minimum rental payments under noncancellable leases
for fiscal years subsequent to September 30, 1998 are as
follows:
<PAGE> 58
Capital
Leases Operating
Leases
Related Related
Parties Parties Other
1999 $ 682 $ 1,153 $ 1,786
2000 682 534 1,643
2001 682 478 1,167
2002 575 409 777
2003 575 308 484
Thereafter 2,546 67 309
5,742 $ 2,949 $ 6,166
Less: Interest portion 1,836
3,906
Less: Current portion 342
Long-term portion $ 3,564
Contingencies
The Company is a defendant in certain lawsuits which have
arisen in the ordinary course of business. Management is of
the opinion that such lawsuits will not result in any
material liability to the Company. Accordingly, no provision
for loss has been made in the financial statements related to
these matters.
Uncertainties Related to the Bankruptcy of AUTOWORKS
The Official Unsecured Creditors' Committee ("Committee") in
the AUTOWORKS, Inc. ("AUTOWORKS") bankruptcy proceeding had
indicated that it may pursue claims against the Company, for
alleged preferential transfers between the Company and
AUTOWORKS, amounting to approximately $6.5 million, under the
doctrine of substantive consolidation, for alleged fraud of
creditors in connection with the Company's acquisition of
AUTOWORKS. On April 22, 1998, a Settlement Agreement and
<PAGE> 59
Release ("Settlement Agreement") was negotiated between the
Company and the Committee. Under the Settlement Agreement,
the Committee agreed to release the Company from all claims
in exchange for the Company's payment to the AUTOWORKS
bankruptcy estate of up to a maximum of $2.0 million over
five years. If certain payments are made in a timely manner,
the Company will pay less than $2.0 million, but not less
than $1.6 million by June 15, 2002. Such amounts are
appropriately reserved for. The bankruptcy court approved
the Settlement Agreement by court order dated June 18, 1998,
the Settlement Agreement was thereafter signed by all parties
and the Company made the first payment to the AUTOWORKS
bankruptcy estate in the amount of $320,000 on July 1, 1998.
7. Income Taxes
Income tax expense (benefit) is comprised of the following
for the years ended September 30:
1998 1997 1996
Continuing operations:
Current:
Federal $ (42) $ 1,423 $ 1,287
State 33 315 929
(9) 1,738 2,216
Deferred 674 (727) (266)
Total provision for income
taxes from continuing operations 665 1,011 1,950
Discontinued operations:
Current - (3,923) (802)
Deferred - (4,027) -
Total provision for (benefit
from) income taxes
from discontinued operations - (7,950) (802)
Total provision for (benefit from)
income taxes $ 665 $ (6,939) $ 1,148
Temporary differences which give rise to deferred tax assets
and liabilities at September 30 are as follows:
<PAGE> 60
1998 1997
Accounts receivable $ 1,204 $ 1,152
Inventory (1,070) (1,121)
Accrued liabilities 858 1,807
Deferred compensation 156 138
Other 115 42
Net operating loss
carryforwards 2,317 2,190
Net asset $ 3,580 $ 4,208
The Company believes it will have adequate future income to
offset all deferred tax assets. The net operating loss
carryforwards are available to use through 2018.
Actual tax expense differs from the expected tax expense
computed by applying the Federal statutory rate to income
from continuing operations before income taxes due
principally to state income taxes.
8. Employee Retirement Plan
The Company has a 401(k) profit sharing plan for all eligible
employees. Under the plan, employees are entitled to
contribute up to 15% of their base salary, and the Company
will match up to 15% of the employee's contributions. The
Company may also make a discretionary contribution at year
end. The Company's matching contribution under the plan was
approximately $115, $100 and $74 for the years ended
September 30, 1998, 1997 and 1996, respectively.
9. Net Income Per Share
Net income per share is calculated as follows for the fiscal
years ended September 30:
Fiscal Years Ended
September 30,
1998 1997 1996
Basic and Diluted Earnings
Per Share
Basic and Diluted Shares
Outstanding:
<PAGE> 61
Weighted average number
of shares outstranding 4,745,014 4,745,014 4,745,014
Net income $ 1,039 $ (21,135) $ 1,859
Basic and Diluted EPS $ .22 $ (4.45) $ .39
The exercise of outstanding stock options, 550,450 and
560,329 at September 30, 1998 and 1997, respectively, has not
been included in the calculation of diluted EPS since the
effect would be antidilutive.
10.Stockholders' Equity and Stock Options
On March 15, 1997 and 1996, the Board of Directors declared a
4% stock dividend on the Company's common stock,
distributable May 1 of each year to stockholders of record as
of April 10, 1997 and 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 September 30, 1997
and 1996. Earnings per share and weighted average shares
outstanding as of September 30, 1996, and for each of the
quarters presented, were restated to reflect this 4% stock
dividend.
The Company has two stock option plans which provide for the
granting of options of up to 750,000 shares of stock to
officers and key employees of the Company and an aggregate of
40,000 shares to non-employee Directors at the fair value of
the common stock at the date of grant. The options have a
maximum duration of ten years and may be exercised in
cumulative annual increments of 33 1/3% commencing one year
after the date of grant. During fiscal 1998, the
stockholders of the Company approved a plan to reduce the
exercise price of 202,780 outstanding options from the
original exercise prices ranging from $8.00 to $12.50 to a
range of $6.80 to $9.38.
The following table summarizes the Company's stock option
transactions:
<PAGE> 62
Option Price
Range
Shares Per Share
Options outstanding - October 1, 1995 377,850 $10.38 to $30.69
Exercised - -
Expired - -
Granted 65,760 8.50 to 10.38
Stock dividend 17,744 8.50 to 30.69
Options outstanding - September 30, 1996 461,354 8.50 to 30.69
Exercised - -
Expired (11,899) 8.00 to 13.50
Granted 89,250 7.50 to 8.00
Stock dividend 21,624 7.50 to 30.69
Options outstanding - September 30, 1997 560,329 7.50 to 30.69
Exercised - -
Expired (65,649) 6.00 to 15.25
Granted 55,770 6.00 to 6.25
Options outstanding - September 30, 1998 550,450 $6.00 to $30.69
Options exercisable at September 30,1998 451,750 $6.00 to $30.69
Included in exercisable options at September 30, 1998 are
140,608 options reserved for sale to the President of the
Company. These options became exercisable annually beginning
April 29, 1997 at option prices ranging from $17.33 to
$30.69. Certain options will expire on April 29, 1999 and
2002, if certain conditions are not met. The remaining
exercisable options will expire no later than April 29, 2004.
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock Based
Compensation", which requires companies to recognize
compensation expense for grants of stock options, or provide
pro forma disclosures relative to what the effect of such
accounting recognition would have been. The Company has
elected to continue using Accounting Principles Board Opinion
<PAGE> 63
(APB) No. 25, "Accounting for Stock Issued to Employees". No
compensation expense has been recorded, however pro forma
disclosures of net income and earnings per share have been
provided below as if SFAS No. 123 had been adopted.
Pro forma income and income per share information, as
required by SFAS No. 123, has been determined as if the
Company had accounted for employee stock options under SFAS
No. 123's fair value method. The fair value of these options
was estimated at grant date using a Black-Scholes option
pricing model with the following weighted-average assumptions
for 1998 and 1997, respectively:
1998 1997
Dividend yields 0% 0%
Volatility factors of the expected
market price of the Company's
common stock 30.88% 30.33%
Expected option life 5 years 5 years
Interest rate on the date of the grant
with the maturity equal to the
expected term 5.49% - 5.99% 5.57% - 6.34%
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the
options' vesting period (3 years). The weighted average
exercise price of options outstanding was $7.98 and $16.34 at
September 30, 1998 and 1997, respectively. The weighted
average fair value of options granted in fiscal 1998 was
$5.88 for both options whose stock price on the date of the
grant equaled the exercise price and options whose stock
price on the date of the grant was less than the exercise
price. The weighted average fair value of options granted in
1997 was $7.98 for options whose stock price on the date of
grant equaled the exercise price. The pro forma compensation
expense the Company would have recognized was $274, $76 and
$70 in 1998, 1997 and 1996, respectively. The Company's pro
forma information is as follows:
<PAGE> 64
1998 1997 1996
Pro forma income from
continuing operations $ 872 $ 1,543 $ 3,110
Pro forma income from
continuing operations per share $ .18 $ .33 $ .66
This disclosure is not likely to be representative of the
effects on reported income for future years, since options
fully vest over three years and additional options have
historically been granted each year.
11.Quarterly Financial Data
The following tables set forth the unaudited quarterly
results of continuing operations for each of the fiscal
quarters in the years ended September 30, 1998 and 1997:
Dec. 31 Mar. 31 June 30 Sept. 30 Year
Fiscal 1998
Net sales $31,539 $32,313 $35,808 $33,843 $133,503
Gross profit $12,129 $12,034 $13,154 $13,408 $ 50,725
Net income $ 77 $ 76 $ 410 $ 476 $ 1,039
Net income per
share (a) $ .02 $ .02 $ .09 $ .10 $ .22
Fiscal 1997
Net sales $33,872 $33,630 $37,920 $36,820 $142,242
Gross profit $13,101 $12,692 $14,049 $15,433 $ 55,275
Income from $ 656 $ 26 $ 203 $ 706 $ 1,591
continuing operations
Loss from
discontinued operations (585) (1,501) (20,640) - (22,726)
<PAGE> 65
Net income (loss) $ 71 $1,475) $20,437) $ 706 $(21,135)
Income from
continuing operations
per share $ .14 $ .01 $ .04 $ .15 $ .34
share
Loss from discontinued
operations per share (0.12) (0.32) (4.35) - (4.79)
Net income (loss)
per share $ .02 $ (.31) $ (4.31) $ .15 $ (4.45)
(a) The sum of quarterly amounts do not equal the fiscal
year amount due to rounding.
<PAGE> 66
`
Report of Independent Accountants
November 30, 1998
To the Board of Directors and Shareholders of
Hahn Automotive Warehouse, Inc. and Subsidiaries
In our opinion, the accompanying financial statement schedule is
fairly stated in all material respects in relation to the basic
financial statements, taken as a whole, of Hahn Automotive
Warehouse, Inc. and Subsidiaries as of and for the three fiscal
years ended September 30, 1998, which are covered by our report
dated November 30, 1998 as presented previously in this document.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. This information is
presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied
in the audit of the basic financial statements.
PricewaterhouseCoopers LLP
<PAGE> 67
Hahn Automotive Warehouse, Inc.
Schedule II- Valuation and
Qualifying Account Reserves
For the Years
Ended September 30, 1998, 1997 and 1996
(Amounts in thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
1998: Allowance
for doubtful
accounts and
notes receivable $ 3,230 $ 453 $ (756) $ 2,927
1997: Allowance
for doubtful
accounts and
notes receivable $ 2,209 $ 1,176 $ (155) $ 3,230
1996: Allowance
for doubtful
accounts and
notes receivable $ 2,018 $ 696 $ (505) $ 2,209
<PAGE> 68
EXHIBITS FILED WITH
FORM 10-K
OF
HAHN AUTOMOTIVE WAREHOUSE, INC.
FOR FISCAL YEAR ENDED
September 30, 1998
FORMING A PART OF
ANNUAL REPORT PURSUANT TO SECTION 13 OF OR 15(d)
THE SECURITIES EXCHANGE ACT OF 1934
<PAGE> 69
EXHIBIT INDEX
Exhibit 3.1 Restated Certificate of Incorporation
of Hahn (Exhibit 3.1 to The Company's
Registration Statement on Form S-1 (No. 33-
48694) as filed with the SEC on January
19, 1993)*
Exhibit 3.2 Amended and Restated By- Laws of Hahn
(Exhibit 3 to Hahn's Quarterly Report on
Form 10-Q for quarterly period ended March
31, 1994)*
Exhibit 4.1 Shareholders' Agreement, dated
September 30, 1994, between Hahn and David
Appelbaum (Exhibit 4.1 to Hahn's Annual
Report on Form 10-K for the Fiscal year
ended September 30, 1994)*
Exhibit 10.1 1992 Stock Option Plan (Exhibit 10.1
to Hahn's Registration Statement on Form S-
1 (No. 33-48694) as filed with the SEC on
January 19, 1993)*
Exhibit 10.2 Amendment No. 1 to 1992 Stock Option
Plan (Exhibit A to Hahn's 1995 Proxy
Statement)*
Exhibit 10.3 Amendment No. 2 to 1992 Stock Option
Plan (Exhibit A to Hahn's 1996 Proxy
Statement)*
Exhibit 10.4 Stock Option Agreement, dated April
29, 1994, between Hahn and Eli N. Futerman
(Exhibit 10.3 to Hahn's Quarterly Report
on Form 10-Q for the quarterly period
ended June 30, 1994)*
Exhibit 10.5 1993 Stock Option Plan for Non-
Employee Directors (Exhibit 4 to Hahn's
Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1994)*
Exhibit 10.6 Amended and Restated Selective
Incentive Plan Agreement, dated June 9,
1992, between Hahn and Eli N. Futerman
(Exhibit 10.2 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
<PAGE> 70
Exhibit 10.7 Amended and Restated Selective
Incentive Plan Agreement, dated June 9,
1992, between Hahn and Timothy Vergo
(Exhibit 10.3 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
Exhibit 10.8 Amended and Restated Selective
Incentive Plan Agreement, dated June 9,
1992, between Hahn and Albert J. Van Erp
(Exhibit 10.4 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
Exhibit 10.9 Amended and Restated Selective
Incentive Plan Agreement, dated June 9,
1992, between Hahn and Daniel J. Chessin
(Exhibit 10.5 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
Exhibit 10.10 Amended and Restated Selective
Incentive Plan Agreement, dated June 9,
1992, between Hahn and Ira D. Jevotovsky
(Exhibit 10.6 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
Exhibit 10.11 Deferred Compensation Agreement,
dated April 1, 1990, between Naftali
Futerman and Hahn (Exhibit 10.7 to Hahn's
Registration Statement on Form S-1 (No. 33-
48694) as filed with the SEC on January
19, 1993)*
Exhibit 10.12 Lease Agreement, executed June 10,
1992, between Michael Futerman as landlord
and Hahn as tenant, as amended (Exhibit
10.89 to Hahn's Registration Statement on
Form S-1 (No. 33-48694) as filed with the
SEC on January 19, 1993)*
Exhibit 10.13 Letter Agreement Lease Amendment
dated September 30, 1993 between Michael
Futerman and Hahn Automotive Warehouse,
Inc. (filed herewith)
Exhibit 10.14 Second Amendment to Lease Agreement,
dated May 1997, between Michael Futerman
and Hahn Automotive Warehouse, Inc. (filed
herewith)
<PAGE> 71
Exhibit 10.15 Second Amendment to Lease Agreement,
dated May, 1997 between the Michael
Futerman Irrevocable Trust and Hahn
Automotive Warehouse, Inc. (filed
herewith)
Exhibit 10.16 Third Amendment to Lease Agreement
between Michael Futerman and Hahn
Automotive Warehouse, Inc. (filed
herewith)
Exhibit 10.17 Fourth Amendment to Lease Agreement
between Michael Futerman and Hahn
Automotive Warehouse, Inc. (filed
herewith)
Exhibit 10.18 Amendment to Lease Agreement between
Michael Futerman and Sara Futerman as
Landlord and Hahn Automotive Warehouse,
Inc., as tenant (filed herewith)
Exhibit 10.19 Lease Agreement between the Michael
Futerman Living Trust as Landlord, and
Hahn Automotive Warehouse, Inc., as tenant
(filed herewith)
Exhibit 10.20 Lease Agreement, executed June 10,
1992, between Eli N. Futerman as landlord
and Hahn as tenant, as amended (Exhibit
10.9 to Hahn's Registration Statement on
Form S-1 (No. 33-48694), as filed with the
SEC on January 19, 1993)*
Exhibit 10.21 Letter Agreement Lease Amendment,
dated October 4, 1993, between Eli N.
Futerman and Hahn Automotive Warehouse,
Inc. (filed herewith)
Exhibit 10.22 Letter Agreement Lease Amendment,
dated September 30, 1996, between Eli N.
Futerman and Hahn Automotive Warehouse,
Inc. (filed herewith)
Exhibit 10.23 Lease Agreement, executed June 11,
1992, between EDR Associates as landlord
and Hahn as tenant (Exhibit 10.10 to
Hahn's Registration Statement on Form S-1
(No. 33-48694) as filed with the SEC on
January 19, 1993)*
<PAGE> 72
Exhibit 10.24 Letter Agreement Lease Amendment
dated September 1, 1993, between EDR
Associates and Hahn Automotive Warehouse,
Inc. (filed herewith)
Exhibit 10.25 Lease Agreement, fully executed June
11, 1992, between Eli Futerman, Daphne
Futerman and Rina F. Chessin as landlord
and Hahn as tenant (Exhibit 10.11 to
Hahn's Registration Statement on Form S-1
(No. 33-48694) as filed with the SEC on
January 19, 1993)*
Exhibit 10.26 Lease Agreement, executed June 12,
1992, between Futerman Associates as
landlord and Hahn as tenant (Exhibit 10.12
to Hahn's Registration Statement on Form S-
1 (No. 33-48694) as filed with the SEC on
January 19, 1993)*
Exhibit 10.27 Sublease Agreement, executed June 10,
1992, between 415 West Main St., Inc. as
landlord and Hahn as tenant (Exhibit 10.13
to Hahn's Registration Statement on Form S-
1 (No. 33-48694) as filed with the SEC on
January 19, 1993)*
Exhibit 10.28 Amendment to Sublease Agreement,
dated December 21, 1994, between 415 West
Main St., Inc. and Hahn (Exhibit 10.15 to
Hahn's Annual Report on Form 10-K for the
Fiscal year ended September 30, 1994)*
Exhibit 10.29 Lease Agreement, dated October 1,
1989, between Eli N. Futerman as lessor
and Hahn as lessee for lease of computer
equipment, as amended and assigned
(Exhibit 10.19 to Hahn's Registration
Statement on Form S-1 (No. 33-48694), as
filed with the SEC on January 19, 1993)*
<PAGE> 73
Exhibit 10.30 Master Equipment Lease Agreement,
dated April 19, 1994, between Hahn,
AUTOWORKS Holdings, Inc., AUTOWORKS, Inc.
and Fleet Bank (Exhibit 10.22 to Hahn's
Annual Report on Form 10-K for the year
ended September 30, 1994)*
Exhibit 10.31 Amendment to Addendum to Master Lease
Agreement dated June 26, 1996 between
Fleet Bank of New York as lessor and Hahn
and AUTOWORKS as lessees dated June 26,
1996*
Exhibit 10.32 Trademark License and Marketing
Agreement, effective May 1, 1988, between
Auto Value Associates, Inc. and Hahn
(Exhibit 10.22 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
Exhibit 10.33 Shareholders' Agreement, dated as of
December 15, 1983, among Auto Value
Associates, Inc. and the shareholders of
Auto Value Associates, Inc., including
Hahn, as amended (Exhibit 10.23 to Hahn's
Registration Statement on Form S-1 (No. 33-
48694) as filed with the SEC on January
19, 1993)*
Exhibit 10.34 Hahn's Promissory Note, dated April
1, 1992, in the principal amount of
$250,000 in favor of Eli N. Futerman
(Exhibit 10.27 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
Exhibit 10.35 Hahn's Promissory Note, dated April
1, 1992, in the principal amount of
$250,000 in favor of Michael Futerman
(Exhibit 10.28 to Hahn's Registration
Statement on Form S-1 (No. 33-48694) as
filed with the SEC on January 19, 1993)*
Exhibit 10.36 Hahn's Promissory Note, dated April
1, 1992, in the principal amount of
$250,000 in favor of Naftali Futerman
(Exhibit 10.29 to Hahn's Registration
Statement on Form S-1(No. 33-48694) as
filed with the SEC on January 19, 1993)*
<PAGE> 74
Exhibit 10.37 Hahn's Amended and Restated
Promissory Note, dated as of February 1,
1996, in the original principal amount of
$1,650,000 in favor of Michael Futerman
(Exhibit 10.2 to Hahn's Quarterly Report
on Form 10-Q for the quarter ended June
30, 1996)*
Exhibit 10.38 Hahn's Amended and Restated
Promissory Note, dated as of February 1,
1996, in the original principal amount of
$500,000 in favor of Eli Futerman (Exhibit
10-3 to Hahn's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1996)*
Exhibit 10.39 Deferred Compensation Agreement,
dated November 30, 1992, between Hahn and
Michael Futerman (Exhibit 10.37 to Hahn's
Registration Statement on Form S-1 (No. 33-
48694) as filed with the SEC on January
19, 1993)*
Exhibit 10.40 Hahn Automotive Warehouse, Inc.
Health Benefit Retirement Plan (Exhibit
10.38 to Hahn's Registration Statement on
Form S-1 (No. 33-48694) as filed with the
SEC on January 19, 1993)*
Exhibit 10.41 Credit Facility Agreement, dated June
26, 1996, among Hahn, AUTOWORKS, the
several lenders named therein and the
Fleet Bank, as agent (Exhibit 10.1 to
Hahn's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996)*
Certain instruments respecting long-term debt of the Company and
its subsidiaries have been omitted pursuant to Regulation Item
601. The Company hereby agrees to furnish a copy of any such
instrument to the Commission upon request.
Exhibit 10.42 Settlement Agreement and Release
dated June 29, 1998 between AUTOWORKS,
Inc., The Committee, Fleet Bank,
Manufacturers and Traders Trust, Sumitomo
Bank Ltd., Chase Manhattan Bank and
Massachusetts Mutual Life Insurance
Company. (Exhibit 3.1 to Hahn's Quarterly
Report on Form 10-Q for the Quarter Ended
June 30, 1998)*
<PAGE> 75
Exhibit 10.43 Waiver, Modification and Third
Amendment to the Credit Facility Agreement
and Forbearance Agreement, dated July 24,
1997 among the Company and its wholly-
owned subsidiaries and the syndicate of
banks (Exhibit 10.1 to Hahn's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1997)*
Exhibit 10.44 Buyer's Trademark License Agreement,
dated November 28, 1993, between Northern
Automotive Corporation and AUTOWORKS
(Exhibit 28.3 to Hahn's Current Report on
Form 8-K, dated December 10, 1993 (File
No. 0-20984)*
Exhibit 10.45 Credit Facility Amendment Number 1,
dated October 10, 1996, among Hahn,
AUTOWORKS, the several lenders named
therein and Fleet Bank, as agent (Exhibit
10.37 to Hahn Annual Report on Form 10-K
for the Fiscal year ended September 30,
1997)*
Exhibit 10.46 Credit Facility Agreement, dated
October 22, 1997 between Hahn and Fleet
Capital Corporation . (Exhibit 10.43 to
Hahn's Annual Report on Form 10-K for the
Fiscal year ended September 30, 1997.)*
Exhibit 10.47 Letter Agreement, dated August 5,
1997 between Schottenstein Bernstein
Capital Group, LLC, HLCO Trading Company,
Inc. and Garcel, Inc. d/b/a Great American
Asset Management, as joint venturers and
AUTOWORKS, Inc. (Exhibit 10.2 to Hahn's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997) (as modified
by Gordon Brothers Partners, Inc. and
AUTOWORKS, Inc. on August 20, 1997 with
respect to store disposition and
liquidation pricing).*
Exhibit 10.48 Lease Agreement dated September 30,
1994, between Meisenzahl and David
Appelbaum (Exhibit 10.47 to Hahn's Annual
Report on Form 10-K for the Fiscal year
ended September 30, 1994)*
<PAGE> 76
Exhibit 10.49 Lease Agreement, dated September 30,
1994, between Meisenzahl and David
Appelbaum (Exhibit 10.45 to Hahn's Annual
Report on Form 10-K for the Fiscal year
ended September 30, 1994)*
Exhibit 10.50 Non-Competition Agreement, dated
September 30, 1994, between Hahn and David
Appelbaum (Exhibit 10.49 to Hahn's Annual
Report on Form 10-K for the Fiscal year
ended September 30, 1994)*
Exhibit 10.51 Tax Procedures and Indemnity
Agreement, dated September 30, 1994,
between Hahn and David Appelbaum (Exhibit
10.50 to Hahn's Annual Report On Form 10-K
for the Fiscal year ended September 30,
1994)*
Exhibit 10.52 Indemnification Agreement, dated as
of September 30, 1994, executed by David
Appelbaum in favor of Hahn, Meisenzahl and
Regional (Exhibit 10.51 to Hahn's Annual
Report on Form 10-K for the Fiscal year
ended September 30, 1994)*
Exhibit 10.53 Letter Agreement, dated December 14,
1995, between Hahn and Michael Futerman
(Exhibit 10.53 to Hahn's Annual Report on
Form 10-K for Fiscal year ended September
30, 1995)*
Exhibit 21 List of Subsidiaries (filed herewith)
Exhibit 23 Consent of PricewaterhouseCoopers LLP
with respect to Financial Statements and Financial
Statement Schedules (filed herewith)
Exhibit 24 Powers of Attorney for Directors (filed herewith)
Exhibit 27 Selected Financial Data (filed herewith)
*These exhibits are incorporated herein by reference to
the registration statement or report referenced after
each exhibit which an asterisk appears.
Indicates executive compensation plans and arrangements.
<PAGE> 77
Exhibit 10.13
Letter Amendment Lease Amendment dated September 30, 1993 between
Michael Futerman and Hahn Automotive Warehouse, Inc.
<PAGE> 78
Exhibit 10.13
September 30, 1993
Mr. Albert J. Van Erp
Vice President - Finance
Hahn Automotive Warehouse, Inc.
415 West Main Street
Rochester, NY l4608
To Whom It May Concern:
This amendment concerns the Lease included on Exhibit "A"
which terminates December 14, 1992. This Lease term has been
extended to the present date with no rent increases. This Lease
will be extended five years commencing January 1, 1993 and
terminating December 31, 1997.
During this extended term there will be an increase in rent
as indicated on Exhibit "B".
Sincerely,
s/s Mike Futerman
Mike Futerman
MF/rmd
AGREEMENT
My signature below indicates Hahn Automotive Warehouse,
Inc.'s agreement to the above extensions of Lease terms and rent
increases as indicated on Exhibits "A" and "B".
s/s Albert J. Van Erp, V.P. 9/30/93
Albert J. Van Erp, V.P. - Finance Date
<PAGE> 79
EXHIBIT "A"
STORE # PROPERTY LEASE TERM RENT/MO RENT/YR
102 SYRACUSE,
NY 12/87 - 12/14/97 8,100 97,200
103 BUFFALO,
NY 12/87 - 12/14/97 4,200 50,400
104 NEWBURGH,
NY 12/87 - 12/14/97 3,500 42,000
105 BRONX,
NY 12/87 - 12/14/97 4,000 48,000
142 ELLENVILLE,
NY 4/91 - 3/31/96 1,300 15,600
143 KINGSTON,
NY 12/87 - 12/143/92 3,000 36,000
153 CANASTOTA,
NY 1/1/92 - 12/31/96 800 9,600
158 ROME,
NY 1/1/92 - 12/31/96 1,000 12,000
169 AUBURN,
NY 1/92 - 12/31/96 1,000 12,000
172 PAINTED
POST, NY 1/1/92 - 12/31/96 1,200 14,400
(2,094)*
175 GENEVA,
NY 4/1/92 - 3/31/97 1,450 17,400
176 HORNELL,
NY 1/1/92 - 12/31/96 1,000 12,000
(3,754)*
179 BATH,
NY 1/1/92 - 12/31/96 450 5,400
309 BLADENSBURG,
MD 12/87 - 12/14/97 4,100 49,200
<PAGE> 80
412 GOLDSBORO,
NC 12/87 - 12/14/97 7,440 89,280
416 A+ BATTERY 12/87 - 12/14/97 700 8,400
GOLDSBORO, NC
422 GOLDSBORO,
NC 12/87 - 12/14/97 1,860 22,320
RECORD 394 W. MAIN 12/87 - 12/14/97 850 10,200
STORAGE ROCHESTER, NY
806 DAYTON,
OH 9/91 - 8/31/01 9,000 108,000
*Taxes to be paid as additional annual rent. The Lease requires
Tenant to pay all real property taxes. Since some buildings have
more than one leasehold, we have listed the amount of all
property taxes tenant shall pay for a particular store, which
shall increase annually in proportion to the increase in real
property taxes.
<PAGE> 81
Exhibit 10.14
Second Amendment to Lease Agreement, dated May 1997, between
Michael Futerman and Hahn Automotive Warehouse, Inc.
<PAGE> 82
Exhibit 10.14
SECOND AMENDMENT TO LEASE AGREEMENT
BETWEEN
MICHAEL FUTERMAN
AND
HAHN AUTOMOTIVE WAREHOUSE, INC.
THIS AGREEMENT is made as of this day of May, 1997, by
and between MICHAEL FUTERMAN ("Landlord") and HAHN AUTOMOTIVE
WAREHOUSE, INC. ("Tenant").
Recitals
A. Landlord and Tenant are parties to a Lease Agreement
acknowledged June 10, 1992 (the "Lease Agreement").
B. The purpose of this Second Amendment is to extend the
lease term and modify the rental due pursuant to the Lease
Agreement as it pertains to certain warehouses.
Provisions
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree as follows:
1. Extension. The lease term for the Warehouses as set
forth further on Exhibit "B" is hereby extended through November
30, 2007, on all of the terms and subject to all of the
conditions and limitations set forth in the Lease Agreement.
Exhibit "A" to the Lease Agreement is hereby amended accordingly.
2. No Other Changes. Except as expressly set forth
herein, the Lease Agreement shall remain in full force and effect
without amendment or modification and as such is expressly
reaffirmed and ratified.
LANDLORD S/S Michael Futerman
MICHAEL FUTERMAN
TENANT HAHN AUTOMOTIVE WAREHOUSE, INC.
By S/S T. Vergo
Its V.P.
<PAGE> 83
EXHIBIT "B"
MICHAEL FUTERMAN
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
102
SYRACUSE, NY 12/1/97 - 11/30/07 $8625.00 $103,500.00
103
BUFFALO, NY 12/1/97 - 11/30/07 $4630.00 $ 55,560.00
104
NEWBURGH, NY 12/1/97 - 11/30/07 $3850.00 $ 46,200.00
<PAGE> 84
EXHIBIT "B"
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
143
KINGSTON, NY 1/1/93 - 12/31/97 3,15 37,800
<PAGE> 85
Exhibit 10.15
Second Amendment to Lease Agreement, dated May, 1997 between
the Michael Futerman Irrevocable Trust and Hahn Automotive Warehouse,
Inc.
<PAGE> 86
Exhibit 10.15
SECOND AMENDMENT TO LEASE AGREEMENT
BETWEEN
MICHAEL FUTERMAN IRREVOCABLE TRUST
AND
HAHN AUTOMOTIVE WAREHOUSE, INC.
THIS AGREEMENT is made as of this day of May, 1997, by
and between MICHAEL FUTERMAN IRREVOCABLE TRUST (Landlord") and
HAHN AUTOMOTIVE WAREHOUSE, INC. ("Tenant").
Recitals
A. Landlord, Michael Futerman and Tenant are parties to a
Lease Agreement acknowledged June 10, 1992 (the "Lease
Agreement").
B. The Landlord acquired title from Michael Futerman
pursuant to a deed and trust agreement dated November 30, 1992.
C. The purpose of this Second Amendment is to extend the
lease term and modify the rental due pursuant to the Lease
Agreement as it pertains to Warehouse #105, Bronx, NY..
Provisions
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree as follows:
1. Extension. The lease term for the Warehouse #105,
Bronx, NY, is hereby extended through November 30, 2007, on all
of the terms and subject to all of the conditions and limitations
set forth in the Lease Agreement except amended as follows:
No. Property Lease Term Rent/Mo Rent/Yr
105 Bronx, NY 12/1/97 - 11/30/07 $5,830.00 $69,960.00
2. No Other Changes. Except as expressly set forth
herein, the Lease Agreement shall remain in full force and effect
without amendment or modification and as such is expressly
reaffirmed and ratified.
LANDLORD S/S Eli Futerman
ELI N. FUTERMAN, TRUSTEE
TENANT HAHN AUTOMOTIVE WAREHOUSE, INC.
By S/S T. Vergo
Its V.P.
<PAGE> 87
Exhibit 10.16
Third Amendment to Lease Agreement between Michael Futerman
and Hahn Automotive Warehouse, Inc.
<PAGE> 88
Exhibit 10.16
THIRD AMENDMENT TO LEASE AGREEMENT
BETWEEN
MICHAEL FUTERMAN
AND
HAHN AUTOMOTIVE WAREHOUSE, INC.
THIS AGREEMENT is made as of this day of , 19 ,
by and between MICHAEL FUTERMAN ("Landlord") and HAHN AUTOMOTIVE
WAREHOUSE, INC. ("Tenant").
Recitals
A. Landlord and Tenant are parties to a Lease Agreement
acknowledged June 10, 1992 (the "Lease Agreement").
B. The purpose of this Third Amendment to Lease Agreement
is to modify Exhibit "A" by the addition of two (2) locations to
the existing Exhibit "A".
Provisions
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Additional locations. The parties agree that two (2)
locations should be added to Exhibit "A" as follows: 80 South
Main Street, Wellsville, New York 14895 and 207 Elm Street,
Warren, Ohio 44483 for the term and rental stated on attachment
"A" annexed hereto. These leases are subject to all of the
conditions and limitations set forth in the master Lease
Agreement.
2. No Other Changes. Except as expressly set forth
herein, the Lease Agreement shall remain in full force and effect
without amendment or modification and as such is expressly
reaffirmed and ratified.
LANDLORD s/s Mike Futerman (POA) Eli Futerman
MICHAEL FUTERMAN
TENANT HAHN AUTOMOTIVE WAREHOUSE, INC.
By s/s Daniel Chessin
Its Executive Vice President
<PAGE> 89
ATTACHMENT "A"
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
171
WELLSVILLE, NY 3/1/93 - 2/28/98 $1,150.00 $13,800.00
818
WARREN, OH 6/1/92 - 12/31/97 $ 950.00 $11,400.00
<PAGE> 90
Exhibit 10.17
Fourth Amendment to Lease Agreement between Michael Futerman
and Hahn Automotive Warehouse, Inc.
<PAGE> 91
Exhibit 10.17
FOURTH AMENDMENT TO LEASE AGREEMENT
BETWEEN
MICHAEL FUTERMAN
AND
HAHN AUTOMOTIVE WAREHOUSE, INC.
THIS AGREEMENT is made as of this day of , 1998, by
and between MICHAEL FUTERMAN ("Landlord") and HAHN AUTOMOTIVE
WAREHOUSE, INC. ("Tenant").
Recitals
A. Landlord and Tenant are parties to a Lease Agreement
acknowledged June 10, 1992 (the "Lease Agreement").
B. The purpose of this Fourth Amendment to Lease Agreement
is to extend the lease terms and modify the rental due pursuant
to the Lease as it pertains to certain locations.
Provisions
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Extension. The lease terms for the store locations
and storage location set forth on Exhibit "C" are hereby extended
through May 31, 2003, on all of the terms and subject to all of
the conditions and limitations set forth in the Lease Agreement.
Exhibit "A" to the Lease Agreement is hereby amended accordingly.
2. No Other Changes. Except as expressly set forth
herein, the Lease Agreement shall remain in full force and effect
without amendment or modification and as such is expressly
reaffirmed and ratified.
LANDLORD s/s Michael Futerman
MICHAEL FUTERMAN
TENANT HAHN AUTOMOTIVE WAREHOUSE, INC.
By s/s Albert Van Erp
Its Vice President
<PAGE> 92
EXHIBIT "C"
Michael Futerman
STORE PROPERTY LEASE TERM RENT/MO RENT/YR
NO.
309 BLADENSBURG, MD 6/1/98 - 6600 79,200
5/31/03
412 GOLDSBORO, NC 6/1/98 - 7440 89,280
5/31/03
422 GOLDSBORO, NC 6/1/98 - 1860 22,320
5/31/03
806 DAYTON, OH 6/1/98 - 9000 108,000
5/31/03
171 WELLSVILLE, NY 6/1/98 - 1150 13,800
5/31/03
818 WARREN, OH 6/1/98 - 950 11,400
5/31/03
Exhibit 10.18
Amendment to Lease Agreement between Michael Futerman
and Sara Futerman as Landlord and Hahn Automotive Warehouse, Inc., as
tenant
<PAGE> 93
Exhibit 10.18
AMENDMENT TO LEASE AGREEMENT
BETWEEN
MICHAEL FUTERMAN
AND
SARA FUTERMAN, AS LANDLORD
AND
HAHN AUTOMOTIVE WAREHOUSE, INC., AS TENANT
THIS AGREEMENT is made as of this day of , 1998, by
and between MICHAEL FUTERMAN and SARA FUTERMAN ("Landlord") and
HAHN AUTOMOTIVE WAREHOUSE, INC. ("Tenant").
Recitals
A. Landlord and Tenant are parties to a Lease Agreements
acknowledged June 10, 1992 (the "Lease Agreement").
B. The purpose of this Amendment to Lease Agreement is to
extend the lease terms and modify the rental due pursuant to the
Lease as it pertains to certain locations.
Provisions
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Extension. The lease terms for the store locations
and storage location set forth on Exhibit "A" are hereby extended
through May 31, 2003, on all of the terms and subject to all of
the conditions and limitations set forth in the Lease Agreement.
Exhibit "A" to the Lease Agreement is hereby amended accordingly.
2. No Other Changes. Except as expressly set forth
herein, the Lease Agreement shall remain in full force and effect
without amendment or modification and as such is expressly
reaffirmed and ratified.
LANDLORD s/s Michael Futerman
MICHAEL FUTERMAN
LANDLORD s/s Sara Futerman
SARA FUTERMAN
<PAGE> 94
TENANT HAHN AUTOMOTIVE WAREHOUSE, INC.
By s/s Albert Van Erp
Its Vice President
<PAGE> 95
EXHIBIT "A" AMENDED
MIKE FUTERMAN LEASES
STORE NO. PROPERTY LEASE TERM RENT/MO RENT/YR
143 KINGSTON, NY 6/1/98 - 3150 37,800
5/31/03
153 CANASTOTA, NY 6/1/98 - 800 9,600
5/31/03
158 ROME, NY 6/1/98 - 1000 12,000
5/31/03
172 PAINTED POST 6/1/98 - 1200 14,400 TAX: 2094
5/31/03
175 GENEVA, NY 6/1/98 - 1450 17,400
5/31/03
176 HORNELL, NY 6/1/98 - 1100 13,200 TAX: 3754
5/31/03
179 BATH, NY 6/1/98 - 450 5,400
5/31/03
820 TOLEDO, OH 6/1/98 - 1500 18,000
REYNOLDS RD 5/31/03
RECORDS WEST MAIN ST 6/1/98 - 850 10,200
STORAGE 394 5/31/03
<PAGE> 96
Exhibit 10.19
Lease Agreement between the Michael Futerman Living Trust
as Landlord, and Hahn Automotive Warehouse, Inc., as tenant
<PAGE> 97
Exhibit 10.19
HAHN AUTOMOTIVE WAREHOUSE, INC
LEASE AGREEMENT
Store No.
<PAGE> 98
LEASE AGREEMENT
Table of Contents
1: DEMISE, TERM AND USE
2: CONDITION OF PREMISES, IMPROVEMENTS
3: RENT
4: SECURITY DEPOSIT
5: DAMAGES
6: INSURANCE
7: REPAIRS AND MAINTENANCE OF THE PROPERTY
8: INDEMNIFICATION
9: DAMAGE OR DESTRUCTION
10: CONDEMNATION
11: ASSIGNMENT AND SUBLEASES
12: DEFAULT
13: LANDLORD'S RIGHT TO ENTER PREMISES
14: SUBORDINATION; ESTOPPEL CERTIFICATES
15: NOTICES
16: QUIET ENJOYMENT
17: ENVIRONMENTAL INDEMNITY AND REPRESENTATION
18: ENTIRE AGREEMENT
<PAGE> 99
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and is effective as of the date
set forth in Exhibit A attached hereto for each particular
property also set forth on Exhibit A and attached hereto, between
Michael Futerman Living Trust , with an address at 415 West Main
Street, Rochester, New York 14608 ("Landlord") and HAHN
AUTOMOTIVE WAREHOUSE, INC., 415 West Main Street, Rochester, New
York 14608 ("Tenant").
This Lease is granted and accepted upon the following terms
and conditions, and each of the parties agrees to perform and
observe all the terms, covenants and conditions to be performed
on its part. Exhibit A attached hereto is incorporated herein by
reference and made part of this Lease.
ARTICLE 1
DEMISE, TERM AND USE
1.1: The Landlord lets to Tenant, and Tenant takes from Landlord,
each parcel of real property as more particularly set forth on
Exhibit A attached hereto.
1.2: The term of this Lease shall be that term set forth on
Exhibit A attached hereto.
1.3: The Premises may be used only for the retail or wholesale
sale of auto parts and accessories; the aforementioned sentence
notwithstanding, the Tenant may also use the Premises for general
<PAGE> 100
office purposes.
ARTICLE 2
CONDITION OF PREMISES, IMPROVEMENTS
2.1 The Landlord will provide the Premises to the Tenant in "as
is" condition upon commencement of the Lease. The Tenant will
take good care of the Premises, will promptly repair all damage,
will comply with all laws, regulations or ordinances regarding
the Premises, and will surrender the Premises at the end of the
term in good condition normal wear and tear excepted.. Any
alterations or improvements to the Premises by the Tenant shall
be made only with the Landlord's permission. All improvements,
whether made prior to or during the term of this Lease, shall
become the property of the Landlord upon the expiration or
termination of this Lease.
ARTICLE 3
RENT
3.1: Tenant agrees to pay to the Landlord, at 415 West Main
Street, Rochester, New York 14608, or at such other place as the
landlord may designate by written notice, a net annual rent in
equal monthly installments as set forth on Exhibit A attached
hereto.
The net annual rental ("Net Rent") shall be in addition to
all other payments to be made by Tenant as hereafter provided,
and
<PAGE> 101
the Net Rent shall be paid in equal monthly installments in
advance on the first day of each calendar month during the term
of this Lease.
3.2: The Net Rent shall be absolutely net to the landlord, so
that this Lease shall yield, net to the Landlord, the Net Rent
specified in Section 1 in each year during the term of this
Lease. All costs and expenses relating to the Premises shall be
paid by Tenant, provided that nothing contained herein shall
require the Tenant to pay interest or principal under any
mortgage placed upon the Premises by the Landlord.
3.3: The Net Rent shall be paid to the Landlord without notice or
demand and without abatement, deduction or setoff.
3.4: On the anniversary of each lease year Tenant agrees that the
Net Rent payable under this Lease Agreement pursuant to Exhibit A
shall be increased by a percentage equal to the percentage
increase from the immediately preceding adjustment date ( as
hereinafter specified) of the "Consumer's Price Index for Urban
Wage Earners and Clerical Workers, U.S. City Average, All Items,
City Size A (1982-84=100)", issued by the Bureau of Labor
Statistics of the U.S. Department of Labor in the Current Labor
Statistic Section of the Monthly Labor Review (final publication
only). The term "adjustment date" as used herein shall refer to
the date on which the Index is published, which is closest to the
<PAGE> 103
date immediately preceding the anniversary of the term of this
Lease Agreement as set forth on Exhibit A. Any adjustment of the
Net Rent shall continue during the subsequent year.
3.5: Tenant will also pay as additional rent all costs for real
property taxes, utilities (heat, air and lighting), water and
sewer charges, and repairs of every kind and nature (whether
structural or nonstructural), and any and all other expenses
incurred in connection with the operation, maintenance and care
of the Premises. If the Tenant fails to pay any additional rent
as due, the Landlord may, at his option, pay the same. If so,
the Tenant shall reimburse the Landlord within five (5) days of
the Landlord's demand with interest at the highest rate allowed
by law.
3.6: If the Net Rent is paid after the fifth (5th) day of the
month, there shall be a late charge of five percent (5%) of the
amount due.
ARTICLE 4
SECURITY DEPOSIT
4.1: Tenant shall provide Landlord with a security deposit in the
amount of $0.00.
ARTICLE 5
DAMAGES
5.1: If the Demised Premises, or any portion thereof, shall be
damaged during the term by fire or any other casualty, the Tenant
<PAGE> 104
shall repair and/or rebuild the same as promptly as possible. In
such event the Lease shall not terminate but shall remain in full
force and effect and there shall be no reduction in rental while
said Premises are being repaired, nor for any period of delay
caused or requested by Tenant. Tenant's obligations to promptly
repair and/or rebuild shall be subject to any delays from labor
troubles, material shortages, insurance claim negotiations, or
any other causes whether similar or dissimilar to the foregoing,
beyond Tenant's control.
ARTICLE 6
INSURANCE
6.1: Tenant shall keep buildings and improvements on the Premises
insured against loss or damage by fire, with extended coverage,
and such other insurance hazards as may be determined by the
Landlord, naming Landlord as an additional insured. Tenant shall
be solely responsible for the cost of insurance as additional
rent. Tenant shall provide and keep in force bodily injury
liability insurance with limits of not less than ONE MILLION
DOLLARS ($1,000,000.00) with respect to any one person and not
less than TWO MILLION DOLLARS ($2,000,000.00) with respect to any
one occurrence, and property damage liability insurance with a
limit of not less than FOUR HUNDRED THOUSAND DOLLARS
($400,000.00) with respect to any one occurrence, said policies
naming Landlord
as an additional insured.
<PAGE> 104
6.2: All insurance policies shall be issued in the names of the
Landlord and Tenant as their interest may appear; and a copy of
all policies or a certificate of insurance showing the coverage
provided in the policies shall be delivered to the Landlord prior
to Tenant taking possession with proof of the premium payment.
Landlord shall be immediately notified by all insurance carriers
prior to a termination or cancellation of an insurance policy
insuring the Premises.
6.3: Landlord and Tenant each release the other from liability or
responsibility (to the other or anyone claiming through or under
them by way of subrogation or otherwise) for any loss or damage
to property covered by valid fire insurance with standard
extended coverage endorsement, even if such fire or other
casualty shall have been caused by the fault or negligence of the
other party, or anyone for whom such party may be responsible.
ARTICLE 7
REPAIRS AND MAINTENANCE OF THE PROPERTY
7.1: Throughout the term of this Lease, Tenant, at its sole cost
and expense, will keep the Premises in such condition as they are
at the commencement of this Lease, normal wear and tear excepted,
and make all nonstructural and structural repairs of every kind
and nature necessary to keep and maintain the Premises in good
order and state of repair, including, but not limited to all roof
<PAGE> 105
repairs and HVAC repairs. All repairs made by Tenant shall be
equal to or better than the quality and class of the original
work.
7.2: Tenant shall maintain all portions of the Premises in a
clean and orderly condition.
7.3: Tenant assumes the full and sole responsibility for the
condition, operation, repair, replacement, maintenance and
management of the Premises.
ARTICLE 8
INDEMNIFICATION
8.1: Tenant agrees that, except for acts or omissions of the
Landlord, it will indemnify, defend and save the Landlord
harmless from and against any and all liabilities, losses,
damages, costs, expenses, suits, judgments and claims by anyone
for injury or damage to person or property arising on the
Premises and the building and improvements thereon, or arising
from the use, occupation, operation, possession or control of the
Premises by the Tenant. Tenant further agrees to indemnify,
defend and save the Landlord harmless from any and all liability
arising from any failure by Tenant to perform any of the
agreements, terms, covenants or conditions of this Lease on
Tenant's part to be performed.
<PAGE> 106
8.2: Landlord agrees to indemnify, defend and save the Tenant
harmless from and against any and all liabilities, losses,
damages, costs, expenses, suits, judgments and claims by anyone
for injury or damage to person or property resulting directly
from Landlord's acts or omissions. Landlord further agrees to
indemnify, defend and save the Tenant harmless from any and all
liability arising from any failure by Landlord to perform any of
the agreements, terms, covenants or conditions of this Lease on
Landlord's part to be performed.
ARTICLE 9
DAMAGE OR DESTRUCTION
9.1: In case of damage to the Premises, Tenant shall promptly
give notice thereof to the Landlord. Subject to the provisions
of the following section, Tenant shall promptly repair any damage
by at least restoring the Premises to their original condition.
9.2: If all or substantially all of the Premises shall be damaged
or destroyed by fire or otherwise so as to render the Premises
uninhabitable, then Tenant shall have the option of terminating
this Lease by written notice to Tenant given within thirty (30)
days after the destruction or damage.
ARTICLE 10
CONDEMNATION
10.1: If the fee of the entire Demised Premises and the land
underlying the same is condemned or appropriated by any apparent
<PAGE> 107
competent authority, then and in that event the term of this
Lease shall cease and terminate on the date possession is to be
given to the condemning authority unless an earlier date is set
by Landlord. If the fee or a substantial part but less than all
of the Demised Premises and the land underlying the same is so
condemned or appropriated and if the remainder of the Demised
Premises can reasonably be used for substantially the same
purposes and in substantially the same manner, except for the
amount of floor space, as the Demised Premises prior to such
condemnation or appropriation, then this Lease shall continue in
full force and effect without change, with respect to the
remaining portion of the Premises, except that the fixed minimum
rent shall be equitably adjusted. The foregoing notwithstanding,
the Landlord at its option may notify Tenant of its desire to
terminate this Lease, such termination to be effective on date
set by Landlord. If this Lease shall so continue, the Landlord
shall, at its own expense, with reasonable promptness, repair
and/or rebuild the remaining portion of the Demised Premises,
provided, however, that Landlord shall in no event be required to
expend for such work an amount in excess of the amount of money
received by said Landlord for the taking of the portion of the
Demised Premises condemned. If the part of the Demised Premises
not condemned cannot be used for substantially the same purposes
and in the same manner, except for the amount of space, as the
Demised <PAGE> 108
Premises prior to such condemnation, the Landlord and the Tenant
shall have the option to terminate this Lease by written notice
to the other within ninety (90) days after the date of taking.
If any such notice be given, the Lease shall terminate at the end
of the month in which occurs the thirtieth (30th) day after the
giving of such notice.
10.2: In the event of the termination of this Lease as the
result of any condemnation or taking as aforesaid, whether whole
or partial, the Tenant shall not be entitled to any part of the
award for such condemnation and Landlord is to receive the full
amount of such award, the Tenant hereby expressly waiving any
right or claim to any part thereof; provided, however, Tenant
shall have the right to claim and recover from the condemning
authority, but not from Landlord, such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right
on account of any cost or loss to which Tenant might be put in
the loss or removal of Tenant's merchandise, furniture, trade
fixtures and the unamortized value of such lease hold
improvements and equipment to which title has not vested in
Landlord pursuant to the terms of this Lease. Notwithstanding
the above, Tenant shall be entitled to petition the municipality
for moving expenses, and loss of business use.
10.3: In the event of any termination of the Lease under this
provision, the rental shall be pro-rated to the date of vacation
<PAGE> 109
of the Premises.
10.4: Tenant agrees to promptly execute any and all
instruments as may be required to effectuate the provisions of
this Section.
ARTICLE 11
ASSIGNMENTS AND SUBLEASES
11.1: Tenant may not assign this Lease or sublet the Premises
in whole or in part or otherwise transfer or encumber its
leasehold estate without the prior written consent of the
Landlord which may be withheld for any reason within the sole
discretion of Landlord.
ARTICLE 12
DEFAULT
12.1: Any one or more of the following events shall
constitute a default:
a. default by Tenant in the payment of any Net Rent or
additional rent or charges payable under this Lease for a period
of ten (10) days after the date due; or
b. default by Tenant in the performance of or compliance
with any other covenant, agreement, term or provision in this
Lease, for a period of ten (10) days after written notice from
the Landlord to Tenant; or
c. filing by or against Tenant of a petition under any
Chapter of the Bankruptcy Code; or
<PAGE> 110
d. insolvency of Tenant; or
e. vacation or abandonment of the Premises by Tenant.
In the event of default, this Lease shall thereupon
terminate.
12.2: Upon termination of this Lease or at any time
thereafter, Landlord may recover possession of the Premises by
self-help, a summary proceeding, or other lawful means. Tenant
shall remain liable for the Net Rent and additional rent for the
balance of the original term of the Lease. Landlord may
accelerate and make immediately due and payable the Net Rent by
so notifying Tenant in writing. If the Landlord relets the
Premises for any part of the original term, rent collected from
the new tenant shall be credited against Tenant's liability to
Landlord, after deduction of all of Landlord's expenses in
connection with the reletting.
12.3: In the event of default, Tenant shall also pay Landlord
its reasonable attorneys fees and collection costs in connection
with recovering possession of the Premises and/or any amount due
under this Lease.
12.4: Landlord's remedies for default are cumulative. No
delay or failure by Landlord to promptly exercise his remedies
upon default shall constitute a waiver of that default or of any
future default. Acceptance of rent by Landlord after default
shall not constitute a waiver or estoppel.
12..5: In any action or proceeding arising out of an alleged
<PAGE> 111
default or out of any other matter relating to this Lease, both
Landlord and Tenant waive a jury trial and agree to have the
action or proceeding determined by the court without a jury.
12.6: Tenant waives any right of redemption under any present
or future law.
ARTICLE 13
LANDLORD'S RIGHT TO ENTER PREMISES
13.1 Tenant agrees to permit the Landlord and any authorized
representatives of the Landlord to enter the Premises at all
times during usual business hours, or any time in case of
emergency, for inspection, or to exhibit the Premises to a
prospective tenant or purchaser.
ARTICLE 14
SUBORDINATION; ESTOPPEL CERTIFICATES
14.1: The rights of Tenant under this Lease are subject and
subordinate to the lien of any mortgage which now or hereafter
may encumber the Premises.
14.2: Tenant agrees that upon ten (10) days prior request by
Landlord, Tenant will execute, acknowledge and deliver to
Landlord a statement in writing stating that this Lease is
unmodified and in full force and effect (or, if there have been
modifications, stating the modifications, and that the Lease as
modified is in full force and effect), the dates to which the Net
Rent and other charges have been paid and whether Landlord has
defaulted in the <PAGE> 112
performance of any of its obligations under the Lease.
ARTICLE 15
NOTICES
15.1: All written notices, demands and requests required to
be given by this Lease shall be either delivered personally or
sent by United States mail, postage prepaid, and addressed:
a. to Tenant: Hahn Automotive Warehouse, Inc.
415 West Main Street
Rochester, NY 14608
b: to Landlord: Michael Futerman Living Trust
415 West Main Street
Rochester, NY 14608
Attention: Michael Futerman, Trustee
or at such other address as the party subsequently designates in
writing. A notice, demand or request, which is mailed as
provided above shall be deemed given on the first business day
after mailing.
ARTICLE 16
QUIET ENJOYMENT
16.1: The Landlord agrees that Tenant, upon paying the Net
Rent, additional rent and all other charges herein provided for
and performing and fulfilling the covenants, agreements and
conditions of this Lease on Tenant's part to be performed and
fulfilled, shall lawfully and quietly hold, occupy and enjoy the
Premises during the term of this Lease.
<PAGE> 113
ARTICLE 17
ENVIRONMENTAL INDEMNITY AND REPRESENTATION
17.1: Tenant represents, warrants, and covenants that Tenant
will not use hazardous materials at or affecting the Demised
Premises in any manner which violates Federal, State or local
laws, ordinances, rules or regulations governing the use,
storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of hazardous materials.
17.2: Tenant covenants that it shall keep or cause the
Demised Premises to be kept free of hazardous materials and not
cause or permit the Demised Premises to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose,
produce or process hazardous materials, except in compliance with
all applicable Federal, State or local laws or regulations.
17.3: Tenant covenants to ensure compliance by all operators
and occupants of the Demised Premises with all applicable
Federal, State and local laws, ordinances, rules and regulations
and will ensure that all such operators and occupants obtain and
comply with any and all required approvals, registrations or
permits.
17.4: Tenant shall defend, indemnify and hold harmless
Landlord, its employees, agents, officers and directors from and
against any <PAGE> 114
claims, demands, penalties, fines, liabilities, settlements,
damages, costs or expenses of whatever kind or nature known,
contingent or otherwise, arising out of or in any way related to
hazardous materials permitted or suffered by Tenant, at the
Demised Premises or the soil, water, vegetation, buildings,
personal property, persons, animals or otherwise and any personal
injury (including wrongful death) or property damage arising out
of or related to the use by Tenant of such hazardous materials.
17.5: Termination of this Lease as a result of Tenant's
default shall not operate as a discharge of Tenant's engagements
as to hazardous materials and Tenant shall deliver the Demised
Premises to Landlord free of any and all hazardous materials.
17.6: In the event Tenant does not timely perform any of the
above obligations, Landlord may perform said obligations at the
expense of Tenant and such expense shall be considered additional
rent.
ARTICLE 18
ENTIRE AGREEMENT
18.1: This Lease together with Exhibit A, attached hereto,
contains the entire agreement between the parties and may not be
changed except by a subsequent writing signed by the parties.
<PAGE> 115
IN WITNESS WHEREOF, the parties hereto have executed this
Lease as of the day and year first above written.
"LANDLORD" MICHAEL FUTERMAN LIVING TRUST
BY:
"TENANT" HAHN AUTOMOTIVE WAREHOUSE, INC.
a New York corporation
By Its Vice President
<PAGE> 116
STATE OF )
) ss.
COUNTY OF )
On this day of , 1998 personally
appeared before me, the individual who executed this
instrument, and acknowledged the said instrument to be the free
and voluntary act and deed of the Michael Futerman Living Trust
for the uses and purposes therein mentioned and on oath stated
that they are authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year first above written.
Notary Public in and for the State
of , residing at
.
STATE OF NEW YORK )
) ss.
COUNTY OF MONROE )
On this day of , 1998, personally appeared
before me, Daniel R. McDonald, Esq., to me known to be the Vice
President of HAHN AUTOMOTIVE WAREHOUSE, INC., a New York
corporation, the corporation that executed the within and
foregoing instrument, and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation for the
uses and purposes therein mentioned and on oath stated that they
are authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year first above written.
Notary Public in and for the State
of New York, residing in Monroe
County.
<PAGE> 117
EXHIBIT A
STORE #
PROPERTY LEASE TERM RENT/MO
RENT/YR
101
415 W MAIN 7/1/98-6/30/08 $10,000.00
$120,000.00
ROCHESTER, NY
HQ
Hahn Office- 7/1/98-6/30/08 $ 7,000.00
84,000.00
Headquarters
ROCHESTER, NY
<PAGE> 118
Exhibit 10.21
Letter Agreement Lease Amendment, dated October 4, 1993, between
Eli N. Futerman and Hahn Automotive Warehouse, Inc.
<PAGE> 119
Exhibit 10.21
October 4, 1993
Mr. Albert J. Van Erp
Vice President - Finance
Hahn Automotive Warehouse, Inc.
415 West Main Street
Rochester, NY l4608
To Whom It May Concern:
This amendment concerns the Leases included on Exhibit "A"
which terminate December 14, 1992. This Lease term has been
extended to the present date with no rent increases. These
Leases will be extended five years commencing January 1, 1993 and
terminating December 31, 1997.
During this extended term there will be an increase in rent
as indicated on Exhibit "B".
Sincerely,
s/s Eli N. Futerman
Eli N. Futerman
ENF/rmd
AGREEMENT
My signature below indicates Hahn Automotive Warehouse,
Inc.'s agreement to the above extensions of Lease terms and rent
increases as indicated on Exhibits "A" and "B".
s/s Albert J. Van Erp, V.P. 10/4//93
Albert J. Van Erp, V.P. - Finance Date
<PAGE> 120
EXHIBIT "A"
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
161
CARTHAGE, NY 12/87 - 12/14/92 $2,550 $30,600
183
ONTARIO, NY 4/1/92 - 3/31/97 3,000 36,000
(7,031)*
191
ONTARIO, NY 4/1/92 - 3/31/97 3,150 37,800
423
LAGRANGE, NC 12/87 - 12/14/92 500 6,000
424
SANFORD, NC 11/1/91 - 10/31/96 900 10,800
902
NEWPORT NEWS, VA 12/87 - 12/14/92 1,400 16,800
481
RICHMOND, VA 12/87 - 12/14/97 7,000 84,000
(15,500)*
819
TOLEDO, OH 5/90 - 12/14/95 700 8,400
814
UCI-TOLEDO /90 - 12/14/2000 1,300 15,600
*Taxes to be paid as additional annual rent. The Lease requires
Tenant to pay all real property taxes. Since some buildings have
more than one leasehold, we have listed the amount of all
property taxes tenant shall pay for a particular store, which
shall increase annually in proportion to the increase in real
property taxes.
<PAGE> 121
EXHIBIT "B"
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
161
CARTHAGE, NY 1/1/93 - 12/31/97 2,675 $32,100
423
LAGRANGE, NC 1/1/93 - 12/31/97 525 6,300
902
NEWPORT NEWS, VA 1/1/93 - 12/31/97 1,500 18,000
<PAGE> 122
Exhibit 10.22
Letter Agreement Lease Amendment,, dated September 30, 1996, between
Eli N. Futerman and Hahn Automotive Warehouse, Inc.
<PAGE> 123
Exhibit 10.22
September 30, 1996
Mr. Albert J. Van Erp
Vice President - Finance
Hahn Automotive Warehouse, Inc.
415 West Main Street
Rochester, NY l4608
Dear Al:
This amendment concerns the Leases included on Exhibit "A"
(attached) for the property in Sanford, North Carolina, which
terminates October 31, 1996. It has been extended to November 1,
1996, for five years, terminating on October 31, 2001.
During this extended term there will be increased to $1,100 per
year.
Sincerely,
s/s Eli Futerman
Eli N. Futerman
ENF/pct
AGREEMENT
My signature below indicates Hahn Automotive Warehouse,
Inc.'s agreement to the extensions of the Lease term and rent
increase as indicated above.
s/s Albert J. Van Erp, V.P. 9/30/96
Albert J. Van Erp, V.P. - Finance Date
<PAGE> 124
EXHIBIT "A"
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
161
CARTHAGE, NY 12/87 - 12/14/92 $2,550 $30,600
183
ONTARIO, NY 4/1/92 - 3/31/97 3,000 36,000
(7,031)*
191
ONTARIO, NY 4/1/92 - 3/31/97 ,150 37,800
423
LAGRANGE, NC 12/87 - 12/14/92 500 6,000
424
SANFORD, NC 11/1/91 - 10/31/96 900 10,800
902
NEWPORT NEWS, VA 12/87 - 12/14/92 1,400 16,800
481
RICHMOND, VA 12/87 - 12/14/97 7,000 84,000
(15,500)*
819
TOLEDO, OH 5/90 - 12/14/95 700 8,400
814
UCI-TOLEDO 5/90 - 12/14/2000 1,300 15,600
*Taxes to be paid as additional annual rent. The Lease requires
Tenant to pay all real property taxes. Since some buildings have
more than one leasehold, we have listed the amount of all
property taxes tenant shall pay for a particular store, which
shall increase annually in proportion to the increase in real
property taxes.
<PAGE> 125
Exhibit 10.24
Letter Agreement Lease Amendment dated September 1, 1993, between
EDR Associates and Hahn Automotive Warehouse, Inc.
<PAGE> 126
Exhibit 10.24
September 1, 1993
Mr. Albert J. Van Erp
Vice President - Finance
Hahn Automotive Warehouse, Inc.
415 West Main Street
Rochester, NY l4608
To Whom It May Concern:
This amendment concerns the Leases included on Exhibit "A"
which terminate October 31, 1993. They shall each be extended
one year commencing November 1, 1993 and terminating October 31,
1994 at the current rate.
The Lease terms will then be extended for five years
commencing November 1, 1994 and terminating October 31, 1999 with
a five percent rent increase as indicated on Exhibit "B".
Sincerely,
s/s Eli N. Futerman
Eli N. Futerman
Associate
ENF/rmd
AGREEMENT
My signature below indicates Hahn Automotive Warehouse,
Inc.'s agreement to the above extensions of Lease terms and rent
increases as indicated on Exhibits "A" and "B".
s/s Albert J. Van Erp, V.P. 9/1/93
Albert J. Van Erp, V.P. - Finance Date
<PAGE> 127
EXHIBIT "A"
EDR ASSOCIATES
a New York General Partnership
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
167
PORT BYRON, NY 8/90 - 12/14/95 $ 1,250 $ 15,000
168
AUBURN, NY 8/90 - 12/14/95 1,250 15,000
OHIO STORES
814
A+ BATTERY 11/88 - 10/31/98 1,000 12,000
32 FRANKLIN
DAYTON, OH
861
HUBER HEIGHTS, OH 11/88 - 10/31/93 2,800 33,600
862
FAIRBORN, OH 11/88 - 10/31/93 2,400 28,800
863
MIAMISBURG, OH 11/88 - 10/31/93 2,000 24,000
864
401 S. MAIN ST. 11/88 - 10/31/93 4,800 57,600
DAYTON, OH
865
CENTERVILLE, OH 11/88 - 10/31/93 2,800 33,600
866
3744 SALEM AVENUE 11/88 - 10/31/93 2,300 27,600
DAYTON, OH
867
1840 W THIRD ST 11/88 - 10/31/93 1,800 21,600
DAYTON, OH
868
829 SHROYER ROAD 11/88 - 10/31/93 2,300 27,600
DAYTON, OH
<PAGE> 128
869
1933 E THIRD ST. 11/88 - 10/31/93 2,000 24,000
DAYTON, OH
870
1252 KEOWEE ST. 11/88 - 10/31/93 2,000 24,000
DAYTON, OH
617/653
INDIANAPOLIS, IN 10/91 - 11/30/96 6,600 79,200
(25,436)*
*Taxes to be paid as additional annual rent. The Lease requires
Tenant to pay all real property taxes. Since some buildings have
more than one leasehold, we have listed the amount of real
property taxes tenant shall pay for a particular store, which
shall increase annually in proportion to the increase in real
property taxes.
<PAGE> 129
EXHIBIT "B "
EDR ASSOCIATES
a New York General Partnership
STORE #
PROPERTY LEASE TERM RENT/MO RENT/YR
861
HUBER HEIGHTS, OH 11/1/94 - 10/31/99 2,940 35,280
862
FAIRBORN, OH 11/1/94 - 10/31/99 2,520 30,240
863
MIAMISBURG, OH 11/1/94 - 10/31/99 2,100 25,200
864
401 S. MAIN ST. 11/1/94 - 10/31/99 5,040 60,480
DAYTON, OH
865
CENTERVILLE, OH 11/1/94 - 10/31/99 2,940 35,280
866
3744 SALEM AVENUE 11/1/94 - 10/31/99 2,415 28,980
DAYTON, OH
867
1840 W THIRD ST 11/1/94 - 10/31/99 1,890 22,680
DAYTON, OH
868
829 SHROYER ROAD 11/1/94 - 10/31/99 2,415 28,980
DAYTON, OH
869
1933 E THIRD ST. 11/1/94 - 10/31/99 2,100 25,200
DAYTON, OH
870
1252 KEOWEE ST. 11/1/94 - 10/31/99 2,100 25,200
DAYTON, OH
<PAGE> 130
Exhibit 21
List of Subsidiaries
<PAGE> 131
Exhibit 21
List of Subsidiaries
Autoworks, Inc. D.I.P. - Michigan
HFV, Inc. - Delaware
<PAGE> 132
Exhibit 23
Consent of PricewaterhouseCoopers LLP with
respect to Financial Statements and Financial
Statement Schedules (filed herewith)
<PAGE> 133
Exhibit 23
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration
Statements of Hahn Automotive Warehouse, Inc. on Form S-8 (File
Nos. 33-81854 and 33-64100) of our report dated November 30,
1998, on our audits of the consolidated financial statements and
financial statement schedule of Hahn Automotive Warehouse, Inc.
as of September 30, 1998 and 1997 and for each of the three
fiscal years in the period ended September 30, 1998, which
reports are included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Rochester, New York
December 21, 1998
<PAGE> 134
Exhibit 24
Powers of Attorney
<PAGE> 135
Exhibit 24
POWER OF ATTORNEY
The undersigned director of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//Michael Futerman
Michael Futerman, Director
<PAGE> 136
POWER OF ATTORNEY
The undersigned officer of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//Peter J. Adamski
Peter J. Adamski
Vice President - Finance
and Chief Financial Officer
<PAGE> 137
POWER OF ATTORNEY
The undersigned director of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//Daniel J. Chessin
Daniel J. Chessin, Director
<PAGE> 138
POWER OF ATTORNEY
The undersigned director of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//Ira D. Jevotovsky
Ira D. Jevotovsky, Director
<PAGE> 139
POWER OF ATTORNEY
The undersigned director of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//Stephen B. Ashley
Stephen B. Ashley, Director
<PAGE> 140
POWER OF ATTORNEY
The undersigned director of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//William A. Buckingham
William A. Buckingham,
Director
<PAGE> 141
POWER OF ATTORNEY
The undersigned director of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//Robert I. Israel
Robert I. Israel, Director
<PAGE> 142
POWER OF ATTORNEY
The undersigned director of Hahn Automotive Warehouse,
Inc. (The "Corporation"), does hereby constitute and
appoint Eli N. Futerman, my true and lawful attorney
and agent, to execute the Corporation's Annual Report
on Form 10-K for the Fiscal year ended September 30,
1998, and any and all amendments thereto, and to do any
and all acts and things in my name and on my behalf in
my capacity as an officer of the Corporation, and to
execute any and all instruments for me and in my name
in such capacity which he may deem necessary or
advisable to the Corporation to comply with the
Securities and Exchange Act of 1934, as amended, and
any rules, regulations, and requirements of the
Securities and Exchange Commission, in connection
therewith.
Date: December 21, 1998
By: s//E. Philip Saunders
E. Philip Saunders, Director
<PAGE> 143
Exhibit 27
Selected Financial Data
EXHIBIT 27
<TABLE> <S> <C>
<ARTICLE>5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 329 632
<SECURITIES> 0 0
<RECEIVABLES> 15,595 16,995
<ALLOWANCES> 0 0
<INVENTORY> 44,037 42,516
<CURRENT-ASSETS> 63,317 65,005
<PP&E> 7,613 5,062
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 78,311 77,792
<CURRENT-LIABILITIES> 20,819 19,520
<BONDS> 0 0
0 0
0 0
<COMMON> 47 47
<OTHER-SE> 13,561 12,364
<TOTAL-LIABILITY-AND-EQUITY> 78,311 77,792
<SALES> 133,503 142,242
<TOTAL-REVENUES> 133,503 142,242
<CGS> 82,778 86,967
<TOTAL-COSTS> 44,059 46,717
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 (22,726)
<INTEREST-EXPENSE> 3,771 4,670
<INCOME-PRETAX> 1,704 2,602
<INCOME-TAX> 665 1,011
<INCOME-CONTINUING> 1,039 1,591
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,039 1,591
<EPS-PRIMARY> .22 (4.45)
<EPS-DILUTED> .22 (4.45)
</TABLE>
