SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1999
Commission File Number 0-20984
HAHN AUTOMOTIVE WAREHOUSE, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 16-0467030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
415 West Main Street Rochester, New York 14608
(Address of principal executive offices) (Zip Code)
(716) 235-1595
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
<PAGE 1>
YES X NO
Number of shares outstanding of the registrant's common stock,
par value $.01 per share, on August 12, 1999; 4,745,014.
HAHN AUTOMOTIVE WAREHOUSE, INC.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1999 and September 30, 1998
Condensed Consolidated Statements of Operations -
for the nine months and three months ended June 30,
1999 and June 30, 1998
Condensed Consolidated Statements of Cash Flows -
for the nine months ended June 30, 1999
and June 30, 1998
Condensed Consolidated Statements of Comprehensive
Income - for the nine months and three months ended
June 30, 1999, and June 30, 1998
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Other
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE 2>
<TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, except share data)
<CAPTION>
ASSETS 6/30/99 9/30/98
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $82 $329
Marketable Securities $688 $789
Trade Accounts Receivable (Net of
Allowance for Doubtful Accounts) 17,822 15,595
Inventory 43,928 44,037
Other Current Assets 2,384 2,567
Total Current Assets 64,904 63,317
Property, Equipment, and Leasehold
Improvements, net 6,891 7,613
Other Assets 7,201 7,381
Total Assets 78,996 78,311
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt
and capital lease obligations 2,578 2,810
Accounts payable 10,362 10,718
Compensation related liabilities 1,795 1,758
Discontinued Operations 390 1,142
Other accrued expenses 5,832 4,391
Total Current Liabilities 20,957 20,819
Obligations Under Credit Facility 37,101 35,190
Notes Payable-Officers and Affiliates 643 1,129
Long-Term Debt 1,763 1,810
Capital Lease Obligations 3,292 3,564
Other Liabilities 1,787 2,238
Total Liabilities 65,543 64,750
<PAGE 3>
Shareholders' Equity:
Common stock (par value $.01 per
share; authorized 20,000,000
shares; issued and
outstanding 4,745,014 47 47
Additional Paid-in Capital 25,975 25,975
Retained Earnings (12,661) (12,619)
Accumulated Other Comprehensive
Income 92 158
Total Shareholders' Equity 13,453 13,561
Total Liabilities and Shareholders'
Equity $78,996 $78,311
</TABLE>
<TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except for share and per share data)
(Unaudited)
<CAPTION>
For the 9
Months Ended
June 30, June 30,
1999 1998
<S> <C> <C>
Net sales $97,260 $99,660
Cost of Products Sold 61,090 62,343
Gross Profit 36,170 37,317
Selling, General and
Administrative Expense 32,544 32,721
Depreciation and Amortization 1,233 1,199
Operating Income 2,393 3,397
Interest Expense (2,696) (2,832)
Interest and Service Charge
Income 235 326
<PAGE 4>
Income (Loss) Before Taxes (68) 891
Income Taxes (Refundable) (26) 328
Net Income (Loss) ($42) $563
Basic and Diluted Earnings
Per Share:
Net Income (Loss) ($0.01) $0.12
Basic and Diluted Weighted
Average Number of Shares 4,745,014 4,745,014
</TABLE>
<TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except for share and per share data)
(Unaudited)
<CAPTION>
For the 3
Months Ended
June 30, June 30,
1999 1998
<S> <C> <C>
Net sales $35,044 $35,808
Cost of Products Sold 22,173 22,654
Gross Profit 12,871 13,154
Selling, General and
Administrative Expense 11,160 11,286
Depreciation and Amortization 426 389
Operating Income 1,285 1,479
<PAGE 5>
Interest Expense (891) (928)
Interest and Service Charge
Income 79 101
Income (Loss) Before Taxes 473 652
Income Taxes (Refundable) 180 242
Net Income (Loss) $293 $410
Basic and Diluted Earnings
Per Share:
Net Income (Loss) $0.06 $0.09
Basic and Diluted Weighted
Average Number of Shares 4,745,014 4,745,014
</TABLE>
<TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
9 Mo. Ended 9 Mo. Ended
6/30/99 6/30/98
<S> <C> <C>
Cash flows from operating
activities:
Net income (Loss) ($42) $563
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 1,233 1,199
Provision for doubtful
accounts and notes 389 491
<PAGE 6>
Change in assets and
liabilities:
Trade receivables (2,616) (432)
Inventory 109 1,086
Other assets 230 2,113
Accounts payable and other
accruals (46) (3,501)
Net cash provided by (used in)
operating activities (743) 1,519
Cash flows from investing
activities:
Additions to property, equip.
and leasehold improvements,
net (378) (130)
Net cash used in investing
activities (378) (130)
Cash flows from financing
activities:
Net borrowings under (payment
of) line of credit 1,256 (685)
Proceeds from long-term debt
and demand notes 182 119
Payments of long-term debt
and demand notes (203) (244)
Payment of notes payable-
officers and affiliates (111) (547)
Payment of capital lease
obligations (250) (256)
Net cash provided by (used in
financing activities 874 (1,613)
Net increase (decrease) in cash (247) (224)
Cash at beginning of year 329 632
Cash at end of period 82 408
<PAGE 7>
Supplemental disclosures of
cash flow information
Cash paid during the Nine
month period for:
Interest $2,436 $2,994
Income taxes paid $32 $95
In January, 1998 the company
renewed capital lease
agreements relating to the
rental of Distribution
Centers $0 $3,136
</TABLE>
HAHN AUTOMOTIVE WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
For the Nine Months For the Three Months
ended June 30 ended June 30
1999 1998 1999 1998
Net Income (Loss) ($42) $563 $293 $410
Unrealized Gain (Loss) on
Marketable Securities,
Net of Tax ($66) $0 ($23) $0
Comprehensive Net
Income (Loss) ($108) $563 $270 $410
<PAGE 8>
HAHN AUTOMOTIVE WAREHOUSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The condensed interim consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. The condensed consolidated balance sheet at September
30, 1998 has been derived from the Company's audited financial
statements at that date. The interim financial statements
reflect all adjustments which are, in the opinion of management,
necessary to fairly present such information. Although the
Company believes that the disclosures included on the face of the
interim consolidated financial statements and in the other
footnotes herein are adequate to make the information presented
not misleading, certain information and footnote disclosures,
including significant accounting policies, normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that all
condensed consolidated financial statements contained herein be
read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report for the fiscal
year ended September 30, 1998, on Form 10-K, filed with the
Securities and Exchange Commission, Washington, D.C. 20549. This
information may be obtained through the web site of the
Securities and Exchange Commission, EDGAR Filing section at
http://www.sec.gov.
Operating results for the nine month period ended June 30, 1999
are not necessarily indicative of the results that may be
expected for the entire fiscal year.
2. Comprehensive Income
Effective October 1, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This Statement requires that companies
disclose comprehensive income, which includes net income and
unrealized gains and losses on marketable securities classified
as available-for-sale. The unrealized loss on marketable
securities for the nine months ended June 30, 1999 is net of a tax
benefit of $35,000.
<PAGE 9>
3. Earnings Per Share
The Company presents earnings per share ("EPS") in accordance
with Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share". SFAS No. 128 requires dual
presentation of basic EPS and diluted EPS on the face of the
statements of operations. Basic EPS is computed using net income
(loss) 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.
BASIC AND DILUTED EARNINGS PER SHARE
Nine Months
Ended June 30
1999 1998
Basic and Diluted Shares Outstanding:
Weighted average number of
shares outstanding 4,745,014 4,745,014
Net income (Loss) ($42) $563
Basic and Diluted EPS (.01) $.12
The exercise of outstanding stock options has not been included
in the calculation of diluted EPS since the effect would be
antidilutive because all outstanding options were out of the
money as of June 30, 1999.
5. Debt (in thousands)
Long-term debt consists of the following:
6/30/99 9/30/98
Credit Facility Agreement 37,821 36,566
Notes Payable-Officers
and Affiliates 1,882 1,993
Other Long-term Debt 2,018 2,038
Less Current Maturities (2,214) (2,468)
$39,507 $38,129
<PAGE 10>
The Company's credit facility agreement, which expires on October
22, 2002, provides for a revolving credit facility subject to a
borrowing base, up to a maximum of $50.0 million. 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. 30 Day LIBOR
and the prime rate were 5.24% and 7.75%, respectively, on June
30, 1999.
As of August 12, 1999, the Company had an outstanding balance of
$36.9 million under the Credit Facility Agreement with an
availability of $2.5 million.
Borrowings outstanding under the Credit Facility Agreement are
collateralized by substantially all of the Company's assets. The
Credit Facility Agreement contains covenants and restrictions,
including limitations on indebtedness, liens, leases, mergers and
sales of assets, investments, dividends, stock purchases and
other payments in addition to tangible net worth, fixed charge
ratio, minimum tangible net worth and minimum fixed charge
coverage ratio requirements. The Company was in compliance with
all covenants, as amended, at the end of the third fiscal quarter
of 1999.
On December 14, 1995, the Company entered into an agreement with
its then Chief Executive Officer and principal shareholder
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 $4.0 million
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 then Chief Executive
Officer and the President of the Company, on February 1 and
January 24, 1996, respectively, in the aggregate amount of
$2,150,000. The Notes bear interest, which is payable monthly,
at an annual rate of 12%. The Notes provide for monthly
principal 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.
HAHN AUTOMOTIVE WAREHOUSE, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
<PAGE 11>
The discussions set forth in this Form 10-Q may contain forward-
looking comments. Such comments are based upon the information
currently available to management of the Company and management's
perception thereof as of the date of this report. Actual results
of the Company's operations could materially differ from those
indicated in the forward-looking comments. The difference could
be caused by a number of factors identified by the Company in
press releases, other communications with the Company's
shareholders and the Company's filings with the Security and
Exchange Commission from time to time including, but not limited
to, those discussed under the heading "Important Information
Regarding Forward-Looking Statements" in the Company's Annual
Report on Form 10-K, dated December 22, 1998, which has been
filed with the United States Securities and Exchange Commission
(the "Commission"). That Annual Report may be obtained by
contacting the Commission's public reference operations or
through the worldwide web site at http://www.sec.gov, EDGAR
Filing section. Readers are strongly encouraged to obtain and
consider all such factors listed in the December 22, 1998 Annual
Report and any amendments or modifications thereof when
evaluating any forward-looking comments concerning the Company.
The Company assumes no obligation to update forward looking
statements to reflect events or circumstances after the date on
which such statements were made.
GENERAL
On July 6, 1999, the Company launched iAutoparts.com (R),
an automotive electronic parts store powered by CCI/Triad's
ePartExpert electronic catalog. iAutoparts.com is operated by
iAutoparts, Inc., a subsidiary of Hahn Automotive Warehouse, Inc.
The Company added the online distribution strategy to its
traditional wholesale mix to provide a convenient option for
automotive enthusiasts, do-it-yourself consumers and Internet
shoppers. The Company believes that Internet commerce is a
potential market for future growth as Internet shopping becomes
more common with the shopping public.
The Company selected CCI/Triad, the Company's proprietary
hardware and software vendor, to implement the eCommerce web site
utilizing CCI/Triad's online automotive parts catalog known as
ePartExpert. The iAutoparts.com site allows the online shopper
to accurately search part information, identify parts needed,
enter an order and receive updates on order processing and
fulfillment.
ePartExpert is a trademark of Cooperative Computing Inc.
iAutoparts.com is a service mark owned by Hahn Automotive
Warehouse, Inc.
<PAGE 12>
Results of Operations - three months ended June 30, 1999,
compared to three months ended June 30, 1998.
The Company's net sales for the fiscal quarter ended June 30,1999
declined $764,000 to $35.0 million, from $35.8 million for the
same fiscal quarter of the previous year. This 2.1% decrease
resulted from increased competition at all levels of distribution
in the aftermarket auto parts industry. For the quarter, on a
comparable location basis, net sales decreased by 3.1% at the
Distribution Centers (partially the result of the acquisition of
two Independent Auto Value customers that are now operated as
Advantage Auto stores), .6% at the Advantage Auto Stores, and
6.8% at the Direct Distribution Centers.
Gross profit for the current quarter decreased $283,000 as
compared to the third quarter of fiscal 1998. Gross profit
expressed as a percentage of net sales remained consistent with
the same quarter for the prior fiscal year at 36.7%.
Selling, general and administrative expense decreased $126,000
from $11.3 million in the third quarter of fiscal 1998, to $11.2
million for the comparable quarter of fiscal 1999. This dollar
decrease is primarily the result of the Company's effort to
control operating expenses which were partially offset by the
expenses related to the two new Advantage Auto Stores. As a
percentage of net sales, selling, general and administrative
expense increased from 31.5% for the third quarter in fiscal 1998
to 31.9% during the same quarter of fiscal 1999. This percentage
change is due almost entirely to the decline in net sales.
Depreciation and amortization increased $37,000 from $389,000
during the corresponding quarter last year, to $426,000 during
the third quarter of the current fiscal year. This increase is
primarily attributable to negative goodwill, which resulted from
an acquisition in 1988, being fully amortized as of January 1999
which was partially offset by a reduction in capital
expenditures in favor of operating leases.
As a result of the factors discussed above, operating income
declined $194,000 from $1.5 million in the previous fiscal year
to $1.3 million in the current year's third quarter. As a
percentage of net sales, operating income decreased to 3.7% from
4.1% in the same quarter of fiscal 1998.
Interest expense declined $37,000 to $891,000 from $928,000 for
the same quarter of the previous fiscal year. This decline is
the result of lower average borrowings outstanding during the
quarter compared to the same quarter last year.
<PAGE 13>
As a result of the factors discussed above, income from
operations decreased $117,000 to $293,000 or $.06 per share,
from $410,000. or $.09 per share for the same quarter of last year.
Results of Operations - nine months ended June 30, 1999, compared
to nine months ended June 30, 1998.
The Company's net sales decreased $2.4 million or 2.4% from $99.7
million for the nine months ended June 30, 1998 to $97.3 million
for the corresponding nine months of fiscal year 1999. The major
causes of the net sales decline were increased competition and
the general softness in the auto parts industry caused by various
factors, which include improved vehicle manufacturing and
performance, longer vehicle warranties, leased vehicles and
increased competition in all segments of distribution. During
this nine month period the Company closed three non-performing
Advantage Auto Stores and acquired two new stores. The acquired
two stores were previously independent customers of the Company's
Distribution Centers. Thus the Distribution Centers' net sales
were negatively impacted by these acquisitions. On a comparable
location basis, compared to the same period during the previous
fiscal year, net sales declined by 4.0% at the Distribution
Centers, 2.8% at the Advantage Auto Stores and 4.0% at the Direct
Distribution Centers. Also as a percentage of the net sales,
contributions by each division were as follows: Distribution
Centers 47.4% Advantage Auto Stores 38.1% and Direct Distribution
Centers 14.5%.
Gross profit for the first nine months of the current fiscal year
decreased by $1.1 million to $36.2 million from $37.3 million for
the same period of the previous fiscal year. As a percentage of
net sales, gross profit decreased to 37.2% from 37.4% for the
previous year. This percentage decrease is primarily due to the
consolidation in the aftermarket industry, increased competition
and the other factors discussed above.
Selling, general and administrative expense declined $177,000
from $32.7 million for the first nine months of fiscal 1998 to
$32.5 million for the same period of fiscal 1999. This is
primarily due to the Company's efforts to control and reduce
expenses. As a percentage of net sales, selling, general and
administrative expense increased to 33.5% from 32.8% in the
previous fiscal year. This percentage increase was largely due
to a decline in sales as discussed above.
<PAGE 14>
Depreciation and amortization increased $34,000 and remained
reasonably consistent at $1.2 million for the nine month period
in both fiscal years. This increase is attributable to the
negative good will, which resulted from an acquisition in 1988,
being fully amortized as of January 1999 which was partially
offset by a reduction of capital expenditures in favor of
operating leases.
As a result of the factors discussed above, operating income
declined from $3.4 million for the first nine months of fiscal
1998 to $2.4 million for the first nine months of fiscal 1999.
As a percentage of net sales, operating income declined to 2.5%
from 3.4% for the same nine month period of fiscal 1998.
Interest expense decreased $136,000 in the first nine months of
fiscal 1999, to $2.7 million, from $2.8 million, for the same
nine months or fiscal 1998 This decrease is attributable to
lower average borrowings outstanding during the current nine
month period compared to the same period during the previous
fiscal year.
As a result of these factors the Company showed a net loss of
$42,000, or $.01 per share for the nine month period ended June
30, 1999, compared to net income of $563,000 or $.12 per share
for the first nine months of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1999, operations consumed
net cash of $743,000. This is largely due to a $2.6 million
seasonal increase in accounts receivable and a net loss of
$42,000, which was partially offset by non-cash items of
depreciation and amortization and provision for doubtful accounts
of $1.2 million and $389,000, respectively.
Investing activities consist mainly of capital expenditures
relating to the two Advantage Auto Store acquisitions and for
routine replacement of computer equipment and store fixtures.
Capital expenditures, were $378,000 during the first nine months
of fiscal 1999 compared to $130,000 during the same period of
fiscal 1998. There were four new Advantage Auto Stores added
during the same period of fiscal 1998.
Financing activities during the nine months of fiscal 1999
generated $874,000 of cash, due to increased net borrowings under
the Company's credit facility, partially offset by payments on
long-term debt. As of August 12,1999 the Company had $2.5 million
available under its revolving credit facility.
<PAGE 15>
Other risks and uncertainties which may affect actual results,
include but are not limited to, failure of the auto parts e-
commerce industry to develop at anticipated rates, failure of the
Company's e-commerce products and services to gain significant
market acceptance, competition, the ability of the Company to
protect its proprietary rights and the continued development and
viability of the Internet.
In the future, the Company expects to make minor strategic
acquisitions of jobbing stores to the extent that its debt
service and other funding requirements permit. The Company's
ability to open new distribution centers will depend on its
ability to negotiate extended payment terms with vendors, which
initially minimizes additional working capital requirements. The
Company believes that it will be able to continue to obtain such
financing.
The Company's principal sources of liquidity for its operational
requirements are internally generated funds, borrowings under its
revolving credit facility, leasing arrangements and extended
payment terms from vendors. In the absence of unanticipated
circumstances, the Company anticipates that these sources 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.
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 Company's plan is to
devote the necessary resources required to resolve any
significant Year 2000 issues in a timely manner.
The Company has developed a year 2000 plan to ensure that all of
its significant date-sensitive computer software and hardware
systems and other equipment utilized in its various distribution
and administrative activities (utilizing embedded chips or
software), will be Year 2000 compliant and operational on a
timely basis. The plan addresses 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 also includes an assessment process to
determine that the Company's significant customers and suppliers
("Third-Party Activities") will also be Year 2000 compliant.
<PAGE 16>
The Company's plan to resolve the Year 2000 issue includes four
major phases - assessment, remediation, testing, and
implementation. The Company has made substantial progress in all
phases of its plan for 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 has
determined that certain of its operating equipment would also
require modifications to make certain they remain operational.
As of June 30, 1999 the remediation of operating equipment was
approximately 95% complete, and the Company is targeting
completion of its related remediation efforts by September 30,
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 substantially completed.
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 final 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. In
addition, there can be no assurance that governmental agencies,
utility companies, Internet access companies, third party service
providers and others outside the Company's control will be Y2K
compliant. The failure by such entities to be Y2K compliant
could result in a systemic failure beyond the control of the
Company, such as a prolonged Internet, telecommunications or
electrical failure, which could decrease the use of the Internet
or prevent users from accessing the Company's iAutoparts.com web
site, all of which together or in combination could have a
material adverse effect on the Company's business, prospects,
results of operations and financial condition.
<PAGE 17>
With respect to Third-Party Activities, the Company has made
inquiries of its significant customers and suppliers and, at the
present time, has not been notified of any significant or
substantial difficulties that would materially 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's financial condition and results of operation.
Software modification to the Company's mainframe computer system
has been completed, and testing is in process. The vendor of the
system has commenced the distribution of Year 2000 software
upgrades. All upgrades have been implemented and tested. There
will be no expense to the Company, as modified Year 2000 software
is a part of the Company's software maintenance agreement.
Personnel expense has and will continue to be incurred for the
implementation and testing phases.
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 covered under the software
maintenance agreement for these systems. Personnel and
implementation expenses will be incurred for these upgrades.
The Company is utilizing both internal and external resources to
reprogram or replace, test, and implement the required Year 2000
modifications. The Company has substantially completed the Year
2000 project including remediation, testing and implementation.
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
June 30, to be Estimated
1999 Incurred Cost
Capital expenditures
related to new systems
and equipment $52 $48 $100
Operating expenses
related to modifications
of existing systems and
equipment $13 $37 $50
Total capital and expense $65 $85 $150
<PAGE 18>
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 have been completed to mitigate the
extent of any such potential disruption to business operations.
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.
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.
PART II. OTHER INFORMATION
Item 4. Other
On February 1, 1999 the NASDAQ National Market notified the
Company that its common stock failed to meet the NASDAQ National
Market listing maintenance standard minimum public market float
requirement of $5 million or greater and that the Company's stock
would be delisted unless it achieved such float prior to May 3,
1999. The Company's common stock did not meet this requirement
since the notification date; the Company, however, requested a
hearing on NASDAQ's delisting decision which resulted in a stay
pending the results of the hearing. A hearing date was set for
June 10, 1999 before a panel authorized by NASDAQ's Board of
Governors ("the Panel"). At the hearing, the Company requested
that the listing of its securities be transferred to The NASDAQ
Small Cap Market. On July 26, 1999 the panel determined to
transfer the listing of the Company's securities to the NASDAQ
Small Cap Market effective July 29, 1999. On August 9, 1999 the Company
filed the required application and paid the applicable fees to
demonstrate compliance with all applicable requirements in a
timely manner. The NASDAQ Listing and Hearing Review Council
("Council") may, on its own motion, review any Panel decision
within forty five (45) days after issuance. To date the Company
has not received any notice regarding such a review by the
Council.
<PAGE 19>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
HAHN AUTOMOTIVE WAREHOUSE, INC.
(Registrant)
By: s//Mike Futerman
Mike Futerman
Chairman of the Board of Directors
By: s//Eli N. Futerman
Eli N. Futerman
President and Chief Executive Officer
By: s//Peter J. Adamski
Peter J. Adamski
Vice President - Finance and
Chief Financial Officer
Dated: August 12, 1999
Exhibit 27
<PAGE 20>
Selected financial information as required for Edgar
electronic filing for the six months ended June 30, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 82
<SECURITIES> 688
<RECEIVABLES> 17,822
<ALLOWANCES> 0
<INVENTORY> 43,928
<CURRENT-ASSETS> 64,904
<PP&E> 6,891
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,996
<CURRENT-LIABILITIES> 20,957
<BONDS> 0
0
0
<COMMON> 47
<OTHER-SE> 13,406
<TOTAL-LIABILITY-AND-EQUITY> 78,996
<SALES> 97,260
<TOTAL-REVENUES> 97,260
<CGS> 61,090
<TOTAL-COSTS> 33,777
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,696
<INCOME-PRETAX> (68)
<INCOME-TAX> (26)
<INCOME-CONTINUING> (42)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
