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, 1999 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 SMALLCAP MARKET
<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 8, 1999,
(based upon the closing price of $1.51 on that day, as reported
on the NASDAQ SMALLCAP MARKET) was approximately $2,941,446. 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 8, 1999: 4,745,014.
Documents Incorporated By Reference
Portions of the Registrant's definitive Proxy Statement for its
2000 Annual Meeting of Shareholders, which will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after September 30, 1999, are incorporated by
reference in Part III (Items 10, 11, 12, and 13) of this Form 10-K.
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
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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
and to consumers via the internet. The Company's traditional
business is conducted through ten full-service distribution
centers, four specialty distribution centers, eight direct
distribution centers and 79 jobbing stores that operate in the
same areas as the Company's full-service distribution centers
generally under the name Advantage Auto Stores, except in the
Dayton, Ohio area, where the Company's jobbing stores operate
under the name Genuine Auto Parts. The Company's operations are
located along the Eastern Seaboard and in the Midwest.
On July 6, 1999, the Company, through its wholly-owned subsidiary
iAutoparts, Inc. ("iAutoparts"), launched iAutoparts.com, its
online automotive parts store. The Company believes that
iAutoparts.com is an innovative approach to the auto parts
aftermarket distribution model. It will extend the Company's
reach directly to the consumer, entering new geographical and
customer markets, and further expand its distribution mix. As of
December 9, 1999, more than 3,500 users registered vehicles on
iAutoparts.com and the Web site experienced in excess of 2.5
million page views ("hits") since the inception of this site. To
date, iAutoparts has had a nominal financial impact on the
Company.
As previously reported, 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"). The filing 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
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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.) The Autoworks, Inc. Plan of Reorganization was
approved and confirmed pursuant to a court order dated November
18, 1999. The remaining assets of Autoworks will be transferred
to a Creditor Trust to be administered under a Creditors Trust
Agreement dated November 18, 1999.
(c) Narrative Description of Business
The Company's continuing operations are contained in two industry
segments: wholesale sale of automotive aftermarket products
through traditional and direct distribution methods. Below is a
description of each segment.
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 operate 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
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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 214 manufacturers,
and distributes these products through its distribution network
to approximately 1,100 independent jobbing stores and 79 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, eight direct
distribution centers and 79 Advantage Auto jobbing 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 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.
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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 larger 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 Auto Value's
servicing and marketing programs are beneficial to the jobbers
and result in such customers purchasing the preponderance of
their inventory needs from the Company.
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 jobbing
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 19.9%, 17.8% and 21.2% of the Company's net sales, in
Fiscal 1999, 1998 and 1997, 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 products under this label.
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Distribution Centers
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).
Full-Service Distribution Centers
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,
sales force, clerical, stock-handling and delivery employees.
Customers may place their stock orders by computer, telephone, fax
or in person at service counters.
Direct Distribution Centers
The Company operates eight (8) direct distribution centers (two of
which do business under the Professional Auto Warehouse ("PAW")
name) in targeted metropolitan areas. The Company has selected
direct distribution center locations that it has opened based upon
a high concentration of repair bays and competitive rent. On
October 1, 1999, the Company closed its Nu-Way - Merchants Road
location in Rochester, New York, and its customers are now being
serviced by the Company's Meisenzahl Auto Parts location on Carter
Street, in Rochester, New York. The Company has no plans to
replace the Nu-Way - Merchants Road location.
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The Company believes that its direct distribution centers carry a
more complete inventory selection than most other national direct
distributors. The average Company direct distribution center
stocks approximately 29,000 SKU's, with the largest stocking over
62,000 SKU's. 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 with rapid delivery of parts
orders.
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. Auto Value merged with All Pro/ Bumper to Bumper,
another large programmed automotive parts buying group, in July
1999. This increased the size and buying power of Auto Value.
Eli N. Futerman, President and Chief Executive Officer of the
Company is a past Chairman and currently a director and Treasurer
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
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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 Company locations. In Fiscal
1999, the Company held trade shows in Dayton, Ohio and
Goldsboro, North Carolina.
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 1999, 46 of the Company's independent jobber
customers joined the Auto Value program through the Company and 43
independent jobber customers resigned or were terminated from the
program. As of October 31, 1999, 268 of the Company's independent
jobber customers and all of the Company-owned jobbing 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 which operate
under "Genuine Parts Company" in Dayton, Ohio, "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 October 31, 1999, the Company owned
and operated a total of 79 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 nine years ago, the Company embarked on
a jobbing store remodeling project. During Fiscal 1999, the
Company remodeled nine jobbing stores, leaving seven stores to be
remodeled. The Company plans to remodel or relocate six more
jobbing stores in the next Fiscal year.
iAutoparts
On July 6, 1999, the Company, through its wholly-owned subsidiary,
iAutoparts, Inc., launched iAutoparts.com, its online automotive
parts store available 24 hours a day. iAutoparts.com is the first
online automotive parts store powered by the industry's leading
CCI/Triad ePartExpert electronic parts catalog. The Web site
guides users through a logical search to ensure accurate
automotive parts selection. ePartExpert provides technical tips,
parts
<PAGE 9>
specifications and suggestions for related parts. iAutoparts.com
offers more that two million nationally branded automotive hard
parts and maintenance items in inventory, representing in excess
of $45.0 million in automotive parts on hand and available for
immediate delivery.
iAutoparts.com is operated by iAutoparts, Inc., a wholly-owned
subsidiary of the Company, with the assistance of its information
technology service provider, CCI/Triad, located in Austin, Texas.
iAutoparts has a direct relationship with parts manufacturers
which enables it to provide rapid delivery of hard-to-find parts.
All iAutoparts.com orders have been fulfilled from the Company's
full service distribution center in Rochester, New York. To date,
iAutoparts has had nominal sales.
On November 30, 1999, iAutoparts, Inc. entered into an agreement
with Capital Formation Group of Rochester, L.P., a full service
financial advisory, investment and merchant banking company, with
expertise in the area of private corporate financing, to assist
and advise management in exploring strategic alternatives for the
auto parts e-commerce business. There is no assurance that any
strategic alternative involving iAutoparts will be adopted and
implemented, or that if any transaction is effected involving
iAutoparts that it will ultimately enhance the Company's
shareholder value.
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 214 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. 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.
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In Fiscal 1999, the Company's 15 largest suppliers accounted for
approximately 70.0% of its total distribution center purchases,
and its largest supplier accounted for approximately 20.9% 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 parts
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
telecommunicate with the Company. A majority of the Company's
independent jobber customers have the capability to access
pricing and product availability information from 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. 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. In addition,
the Company has filed applications with the United States Patent
and Trademark Office for the iAutoparts name and logo, in
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connection with the sale of automotive parts via the internet.
There are no assurances that these applications will be granted.
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 and its iAutoparts.com
website, 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.
Employees
As of October 31, 1999, the Company had 1,185 employees (of which
906 were full-time and 279 were part-time), in full-service and
direct-distribution centers and jobbing operations, of whom 76
were distribution center and jobbing store account executives, 62
were headquarters personnel, 166 were distribution center and
jobbing store management personnel and the remaining 881 were
distribution center workers, jobbing store employees, drivers,
counter persons, data entry and other personnel. As of October
31, 1999, a total of 14 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 12>
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, 1999, the Company operated the following
distribution center locations:
Approximate Gross
Ground Level
Location Square Feet Type
New York
Rochester 40,000 Full-Service
Rochester-North 37,000 Direct Distribution
Rochester-South 11,400 Direct Distribution
Rochester-Greece 5,000 Direct Distribution
Rochester-Gates 4,500 Direct Distribution
Farmington 5,000 Direct Distribution
Bronx 35,000 Full-Service
Syracuse 34,500 Full-Service
Buffalo 27,800 Full-Service
Buffalo 8,000 Direct Distribution
Newburgh 22,000 Full-Service
Batavia 5,700 Accessory
Albany 12,900 Direct Distribution
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
Indiana
Indianapolis 13,000 Pick-Up
Pennsylvania
Harrisburg 14,500 Direct Distribution
<PAGE 13>
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, 2002 and September 30, 2000, respectively;
leases its Rochester-Greece direct distribution site from an
unaffiliated party which expires in December 2002; 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 its direct distribution center in
Gates, New York and Farmington, New York from FCA Associates, a
partnership comprised of Eli N. Futerman, the Company's President
and Chief Executive Officer, Daniel J. Chessin, Executive Vice
President and Corporate Secretary and David M. Appelbaum, its
Vice President of Direct Distribution, under leases which expire
on October 31, 2001. The Company leases the remaining
distribution facilities from members of the Futerman family or
their affiliates 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 October 31, 1999, there were 79 Advantage Auto Stores
served by the Company's distribution centers located in or near
the following cities:
Advantage Advantage
Distribution Auto Stores Distribution Auto Stores
Center Serviced Center Serviced
Location Location
Rochester, New 16 Dayton, Ohio 20
York
Syracuse, New York 10 Goldsboro, North 8
Carolina
Buffalo, New York 6 Richmond, 12
Virginia
Newburgh, New York 3 Bladensburg, 2
Maryland
Cleveland, Ohio 2
<PAGE 14>
As of October 31, 1999, the Company leased 75 and owned four
Advantage Auto Stores sites. The leases on 9 store sites were
month-to-month, leases on 31 store sites had remaining terms of
three years or less, and leases on 35 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 or their affiliates under leases which expire
between January 31, 2000 and October 31, 2004.
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 its wholly-owned subsidiary Autoworks, Inc. as
discussed below (which previously filed for reorganization under
Chapter 11 of the Bankruptcy Code), and that Autoworks' conduct
was appropriate and not wrongful. The Company's motion for
summary judgment was denied and the trial court has found the
Company liable on the plaintiffs' claim. Following the
commencement of the hearing on damages, and before the hearing
was completed, the parties entered into a stipulation on damages
so that the Company could appeal the finding of liability. On
November 23, 1999, the Company filed its Notice of Appeal and on
December 1, 1999, the Company filed its Designation of Record for
Appeal and Certification Regarding the Transcript with the United
States Court of Appeals for the Sixth Circuit. In the event that
the Company is successful in obtaining a reversal of the trial
court's determination of liability, then there will be no damages
payable by the Company. In the event that the Company's appeal
is unsuccessful, then the parties will resume and continue with
the hearing on damages until completed. While the outcome of
this appeal, and any subsequent determination of damages is
inherently uncertain, the Company believes that it is unlikely
that any adverse verdict would have a material adverse effect on
its financial condition; however it could materially adversely
affect net income or cash flow depending upon the fiscal year in
which a final judgment is entered against the Company.
<PAGE 15>
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 ("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
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. In May, 1999, a disagreement and dispute
arose between the Company and the Committee over the terms and
provisions to be included in the Plan of Reorganization. In
June, 1999, the Company and the Committee entered into an
amendment to the settlement, pursuant to which the Company would
continue to maintain ownership of Autoworks following the
approval of the Plan of Reorganization, and the Company would
make an additional payment to the Bankruptcy Estate in the amount
of $100,000 in three (3) equal annual installments, without
interest, commencing June 15, 2000.
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 except as
stated in the first paragraph of this Item 3 - Legal Proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of Fiscal 1999
to a vote of the Company's shareholders, through the solicitation
of proxies or otherwise.
<PAGE 16>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
Until July 28, 1999, the Company's common stock was quoted on the
NASDAQ National Market. As a result of not meeting public float
requirements for the NASDAQ National Market, the Company's Common
Stock was transferred to the NASDAQ SmallCap Market effective
July 29, 1999. Its trading symbol is HAHN. The table below
shows the range of the high and low actual closing prices for the
Company's common stock during each quarterly period of Fiscal
Years 1999 and 1998:
Fiscal Year Fiscal Year
Ended Ended
September 30, High Low September 30, High Low
1999 1998
1st Quarter 5 7/16 2 1st Quarter 7 1/8 5 7/8
2nd Quarter 2 13/16 2 2nd Quarter 5 7/8 5 7/8
3rd Quarter 1 7/8 1/2 3rd Quarter 5 3/4 5 1/2
4th Quarter 6 1/4 1 4th Quarter 5 1/2 5 1/4
The Company did not pay any cash dividends during the last two
Fiscal Years. 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 November 18, 1999, the Company had 68 holders of record of its
common stock.
<PAGE 17>
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial
information of the Company for each of the five fiscal years for
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".
<TABLE>
<CAPTION>
Years Ended September 30,
(In thousands, except share and per share data)
<S> <C> <C> <C>
1999 1998 1997
Income Statement Data:
Net sales $130,998 $133,503 $142,242
Cost of Products sold 82,002 82,778 86,967
Gross profit 48,996 50,725 55,275
Selling, general and
administrative expense 43,512 44,059 46,717
Depreciation and
amortization 1,775 1,602 2,005
Income from operations 3,709 5,064 6,553
Interest expense (3,650) (3,771) (4,670)
Other income 372 411 719
Income (loss) before
provision for income
taxes 431 1,704 2,602
Provision for income
taxes 151 665 1,011
Income from continuing
operations 280 $1,039 $1,591
Loss from discontinued
operations:
Write-down of investment
in subsidiary, net of tax -- -- (18,789) (1)
<PAGE 18>
Loss from discontinued
operations, net of tax -- -- (3,937)
Total loss from
discontinued operations -- -- (22,726)
Net income (loss) $280 $1,039 ($21,135)
Income from continuing
operations per share $0.06 $0.22 $0.34
Loss from discontinued
operations per share -- -- (4.79)
Net income (loss) per
share $0.06 $0.22 ($4.45)
Weighted average shares
outstanding 4,745,014 4,745,014 4,745,014
Balance Sheet Data:
Working capital $45,387 $42,212 $45,485
Total assets 79,723 78,311 77,792
Long-term debt and
capital lease
obligations,
excluding current
maturities 45,484 44,645 45,908
Stockholders' equity 13,773 13,561 12,364
</TABLE>
<TABLE>
<CAPTION>
Years Ended September 30,
(In thousands, except share and per share data)
<S> <C> <C> <C>
1996 1995
Income Statement Data:
Net sales $138,395 $130,733
Cost of Products sold 86,077 79,773
Gross profit 52,318 50,960
<PAGE 19>
Selling, general and
administrative expense 41,657 39,215
Depreciation and
amortization 1,756 1,902
Income from operations 8,905 9,843
Interest expense (4,402) (4,387)
Other income 600 434
Income (loss) before
provision for income
taxes 5,103 5,890
Provision for income
taxes 1,950 2,152
Income from continuing
operations $3,153 $3,738
Loss from discontinued
operations:
Write-down of investment
in subsidiary, net of -- --
tax
Loss from discontinued
operations, net of tax (1,294) (5,115)
Total loss from
discontinued operations (1,294) (5,115)
Net income (loss) $1,859 ($1,377)
Income from continuing
operations per share $0.66 $0.79
Loss from discontinued
operations per share (0.27) (1.08)
Net income (loss) per
share $0.39 ($0.29)
Weighted average shares
outstanding 4,745,014 4,743,938
<PAGE 20>
Balance Sheet Data:
Working capital $65,452 $64,623
Total assets 97,819 97,602
Long-term debt and
capital lease
obligations,
excluding current
maturities 40,893 41,368
Stockholders' equity 33,499 31,640
(1) 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>
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 notes 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.
<PAGE 21>
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, before 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 substantially
recovered as a result of the Autoworks' inventory and fixtures
liquidation, the net proceeds of which were paid to Autoworks'
secured creditors. The residual portion of the charge,
approximately $6.5 million, represented reserves recorded to
cover liabilities the Company had retained with respect to
Autoworks.
Results of Operations
Fiscal Year 1999 Compared to Fiscal Year 1998
Net Sales for Fiscal 1999 decreased $2.5 million, or 1.9% from
the prior fiscal year, to $131.0 million. This decrease is
attributable to net sales decreases of 3.3% at the direct
distribution centers and 3.7% at the full-service distribution
centers, partially offset by a net sales increase of 1.1% at the
Advantage Auto Stores.
The Advantage Auto Stores net sales increase was the result of
the acquisition of two former jobbing store customers and
partially offset by the closing of five Advantage Auto Stores and
a 1.8% decrease in comparable store sales. The Net Sales
decreases in the direct distribution and full service
distribution centers is attributable to the softness in the
automotive aftermarket parts industry. This softness is the
result of factors such as leasing, improved vehicle performance,
warranties and increased competition in the industry. Sales on a
comparable location basis declined by 1.8% in the Advantage Auto
Stores, 3.3% in the direct distribution division and 3.7% in the
full service distribution. Full service distribution decrease was
compounded by the purchase of two jobbing customers that are now
operated as Advantage Auto Stores.
<PAGE 22>
Gross Profit declined $1.7 million or 3.4% to $49.0 million in
Fiscal 1999 from $50.7 million in the previous fiscal year. Gross
profit decrease was due to the decline in net sales and the gross
profit margin. Gross profit margin declined to 37.4% in Fiscal
1999 from 38.0% in Fiscal 1998.
Selling, general and administrative expenses decreased $547,000
from $44.1 million in Fiscal 1998 to $43.5 million, in the
current fiscal year. This dollar decrease is generally due to a
net reduction of three Advantage Auto Store locations. Due to the
decrease in net sales the selling, general and administrative
expense as a percentage of net sales increased to 33.2% in Fiscal
1999 from 33.0% for the Fiscal Year 1998.
Depreciation and amortization expense increased $173,000 from
$1.6 million in Fiscal 1998 to $1.8 million in the Fiscal Year
ending September 30, 1999. This increase is primarily
attributable to negative goodwill being fully amortized in
January of Fiscal Year 1999.
As a result of the factors discussed above, income from
operations before interest and taxes for Fiscal 1999, decreased
$1.4 million from $5.1 million or 3.8% of net sales in the prior
fiscal year to $3.7 million or 2.8% of net sales in the current
fiscal year.
Interest expense decreased $121,000 in Fiscal 1999 to $3.7
million from $3.8 million for Fiscal 1998. This decrease is
attributable to slightly lower outstanding debt balances during
the Fiscal Year 1999 as compared to Fiscal 1998.
In Fiscal 1999 the provision for income taxes on income was
$151,000, an effective rate of 35.0%, as compared to $665,000, an
effective rate of 39.0%, in 1998.
As a result of the factors discussed above, the Company had net
income for Fiscal 1999 of $280,000 or $.06 per share as compared
to $1.0 million or $.22 per share of net income for Fiscal 1998.
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
<PAGE 23>
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 expense from continuing
operations 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 from continuing operations
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.
Income from continuing 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 from continuing operations 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
debt balances outstanding in Fiscal 1998.
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
<PAGE 24>
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.
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 terms from vendors.
During Fiscal 1999, 1998 and 1997, operating activities provided
net cash of $300,000, $2.4 million and $1.0 million,
respectively, including non-cash items for depreciation and bad
debt of $1.9 million, $2.1 million and $3.2 million,
respectively.
During Fiscal 1999, 1998 and 1997, investing activities consisted
mainly of routine capital expenditures for delivery vehicles,
computer equipment, and store and warehouse fixtures. Capital
expenditures for continuing operations were $800,000, $300,000
and $1.1 million, respectively. Excluding acquisitions, the
Company expects to make capital expenditures of approximately
$800,000 in Fiscal 2000.
Financing activities during Fiscal 1999 generated cash of
approximately $300,000 and in Fiscal 1998 and 1997 financing
activities consumed $2.5 million and $5.5 million, respectively.
The cash generated in 1999 was primarily the result of the
financing of capital asset expenditures, while long-term debt
payments were offset by increased borrowings on the line of
credit. During Fiscal 1999, Michael Futerman and Eli Futerman
deferred principal payments due from the Company under the
subordinated notes in the original principal amount of
$2,150,000. As a result, in Fiscal 1999, the Company made
interest payments only on the subordinated notes. Funds consumed
during Fiscal 1998 and Fiscal 1997 reflect payments on long-term
debt and a reduction of net borrowings under the Company's credit
facilities.
In connection with the Autoworks Chapter 11 proceeding, the
Company recorded a one-time charge of $26.5 million, before 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, represented reserves recorded to cover liabilities
the Company had retained with respect to Autoworks. At September
30, 1999, the
<PAGE 25>
Company had a $1.3 million reserve and the Company believes that
it is adequately reserved for the remaining exposures it faces
for Autoworks liabilities, including the settlement agreement
discussed below.
On October 22, 1997, the Company entered into a Loan and Security
Agreement (the "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 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 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 the estate of Michael Futerman, an officer, director
and the principal shareholder of the Company. Secured mortgages
on certain real estate were pledged as collateral guarantees by
Michael Futerman. These obligations are now guaranteed by the
Estate of Michael Futerman, as Mr. Futerman passed away on August
23, 1999. The credit facility contains 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.) As of September,
1999, the Company and Fleet Capital signed an amendment to the
credit facility pursuant to which the Company is required to meet
a fixed charge coverage ratio of .50 for the first three quarters
and .7 for the fourth quarter of Fiscal 2000, which will be
measured on a rolling twelve month basis. As of December 10,
1999, the Company had an outstanding balance of $37.1 million
under the credit facility, with availability of an additional
$1.4 million due to borrowing base restrictions, and was in
compliance with all financial covenants.
In the Autoworks Chapter 11 proceeding, the Official Unsecured
Creditors Committee ("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
<PAGE 26>
Settlement Agreement and Release by order dated June 18, 1998.
The Company made the payments due under the Settlement Agreement
and Release in the amount of $320,000 on July 1, 1999 and July 1,
1998.
In June, 1999, the Company and the Committee entered into a
further settlement, pursuant to which the Company would continue
to maintain ownership of Autoworks following the approval of the
Plan of Reorganization, and the Company would make an additional
payment to the Bankruptcy Estate in the amount of $100,000 in
three (3) equal annual installments, without interest. The first
of the three payments is due June 15, 2000.
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 meet its other short-term and
longer-term liquidity needs at least through the end of Fiscal
2000.
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 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),
would be Year 2000 compliant and operational. The plan
addressed all of the Company's locations and included a review of
computer applications that connect elements of the Company's
business directly to its customers and suppliers. The plan also
included an assessment process to determine that the Company's
significant customers and suppliers ("Third-Party Activities")
would also be Year 2000 compliant.
<PAGE 27>
The Company's plan to resolve the Year 2000 issue included four
major phases - assessment, remediation, testing, and
implementation. The Company has completed all phases of its plan
for significant information technology and operating equipment
that it believes would 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 systems. The Company also has determined that certain
of its operating equipment would also require modifications to
make certain they remain operational.
As of November 30, 1999 the remediation of operating equipment
has been substantially completed. 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 has been substantially
completed.
As of November 30, 1999, 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 could not be implemented. It is possible
that the Company may identify potential risks of Year 2000
disruption in the future. 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 has
modified or replaced 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 website, 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.
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.
<PAGE 28>
Software modification to the Company's mainframe computer system
has been completed and tested. All vendor supplied 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 expenses were
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 were incurred for these upgrades.
The Company utilized 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
September 30, to be Total
1999 Incurred Cost
Capital expenditures
related to new
systems and equipment $67 $33 $100
Operating expenses
related to
modifications of
existing systems
and equipment $17 $33 $50
Total capital and
expense $84 $66 $150
There can be no guarantee that the Company will not 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 that were not identified in
the original plan. Contingency plans have been completed to
attempt to mitigate the extent of any such potential disruption
to business operations.
<PAGE 29>
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", "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 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
<PAGE 30>
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 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
<PAGE 31>
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 Eli N.
Futerman and Daniel J. Chessin. 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.
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
materially adversely affected.
7. The failure of the Company or its material suppliers to
effectively address Year 2000 issues could materially adversely
effect its future earnings and liquidity.
8. 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, the continued
development and
<PAGE 32>
viability of the Internet and e-commerce and the volatility of
stock prices of Internet-focused companies, and Hahn Automotive
Warehouse, Inc., in particular, and the traffic and usage levels
of the iAutoparts web site.
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 $685,000 as of September 30, 1999. 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.
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 2000 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 28, 2000, 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 2000 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 28, 2000, and the
appropriate information therefrom is incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<PAGE 33>
The information required under this Item 12 shall be included in
the Company's definitive Proxy Statement for its 2000 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 28, 2000, 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 2000 Annual
Meeting of Shareholders to be filed with the Commission pursuant
to Regulation 14A on or before January 28, 2000, and the
appropriate information therefrom is incorporated herein by
reference.
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, 1999, and 1998
Statements of Operations for the Years Ended
September 30, 1999, 1998 and 1997
Statements of Changes in Stockholders' Equity
for the Years Ended September 30, 1999, 1998
and 1997
Statements of Cash Flows for the Years Ended
September 30, 1999, 1998 and 1997
Notes to Financial Statements
(2) Financial Statement Schedule
Report of Independent Accountants on Financial
Statement Schedule
Schedule II Valuation and Qualifying Account Reserves
for the Years Ended September 30, 1999, 1998 and 1997
<PAGE 34>
(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.
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 15, 1999 By: *S// Eli N. Futerman
Eli N. Futerman,
President and 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 15, 1999 *S// Eli N. Futerman
Eli N. Futerman, Director
Date: December 15, 1999 *S// Peter J. Adamski
Peter J. Adamski
Vice President - Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: December 15, 1999 *S// Daniel J. Chessin
Daniel J. Chessin, Director
Date: December 15, 1999 *S// Stephen B. Ashley
Stephen B. Ashley, Director
Date: December 15, 1999 *S// William A. Buckingham
William A. Buckingham, Director
Date: December 15, 1999 *S// Robert I. Israel
Robert I. Israel, Director
<PAGE 35>
Date: December 15, 1999 *E. Philip Saunders
E. Philip Saunders, Director
* By: S// Eli N. Futerman
Eli N. Futerman, Attorney-in-Fact
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FINANCIAL STATEMENTS AND SCHEDULES
September 30, 1999
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.
Hahn Automotive Warehouse, Inc. and Subsidiaries
Index To Consolidated Financial Statements
September 30, 1999
Report of Independent Accountants
Consolidated Balance Sheets at September 30, 1999 and 1998
Consolidated Statements of Operations for the Years Ended
September 30, 1999, 1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended September 30, 1999, 1998 and 1997
<PAGE 36>
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Accountants on Financial Statement
Schedules
Schedule II - Valuation and Qualifying Account Reserves
Report of Independent Accountants
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, 1999 and 1998,
and the results of their operations and their cash flows for the
three fiscal years ended September 30, 1999, 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
Rochester, New York
November 23, 1999
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc. and
Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
<PAGE 37>
September
30,
1999 1998
<S> <C> <C>
Assets
Current Assets:
Cash $81 $329
Marketable securities 685 789
Trade receivables, net of allowance for
doubtful accounts of $2,015 in 1999
and $2,719 in 1998 17,577 15,595
Inventory 44,501 44,037
Other current assets 3,009 2,567
Total current assets 65,853 63,317
Property, equipment and leasehold
improvements, net 6,892 7,613
Other assets 6,978 7,381
$79,723 $78,311
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt and
capital lease obligations $1,541 $2,096
Accounts payable 12,377 10,718
Compensation related liabilities 1,673 1,758
Discontinued operations 604 1,142
Other accrued expenses 4,271 4,391
Total current liabilities 20,466 20,105
Obligations under credit facility 36,611 35,190
Notes payable-officers and affiliates 1,736 1,843
Other long-term debt 1,704 1,810
Capital lease obligations 3,196 3,564
Other liabilities 2,237 2,238
Stockholders' equity:
Common stock (par value $.01 per share;
authorized 20,000,000 shares; issued
and outstanding 4,745,014 in 1999
and 1998) 47 47
Additional paid-in capital 25,975 25,975
Retained deficit (12,339) (12,619)
Accumulated other comprehensive income:
Unrealized gain on marketable
<PAGE 38>
securities, net of deferred taxes 90 158
Total stockholders' equity 13,773 13,561
$79,723 $78,311
The accompanying notes are an integral
part of the financial statements.
</TABLE>
<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,
1999 1998
<S> <C> <C>
Net sales $130,998 $133,503
Cost of product sold 82,002 82,778
Gross profit 48,996 50,725
Selling, general and administrative
expense 43,512 44,059
Depreciation and amortization 1,775 1,602
Income from operations 3,709 5,064
Interest expense (3,650) (3,771)
Other income 372 411
Income before provision for
income taxes 431 1,704
Provision for income taxes 151 665
Income from continuing operations 280 1,039
Loss from discontinued operations:
Write-down of investment in
subsidiaries, net of taxes -- --
Loss from discontinued operations,
net of tax -- --
<PAGE 39>
Total loss from discontinued
operations -- --
Net income (loss) $280 $1,039
Income from continuing operations
per share $0.06 $0.22
Loss from discontinued operations
per share -- --
Net income (loss) per share $0.06 $0.22
Weighted average shares outstanding 4,745,014 4,745,014
The accompanying notes are an integral part of
the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc. and
Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share data)
For the
Year
Ended
1997
<S> <C>
Net sales $142,242
Cost of product sold 86,967
Gross profit 55,275
Selling, general and administrative
expense 46,717
Depreciation and amortization 2,005
Income from operations 6,553
Interest expense (4,670)
Other income 719
Income before provision for
<PAGE 40>
income taxes 2,602
Provision for income taxes 1,011
Income from continuing operations 1,591
Loss from discontinued operations:
Write-down of investment in
subsidiaries, net of taxes (18,789)
Loss from discontinued operations,
net of tax (3,937)
Total loss from discontinued
operations (22,726)
Net income (loss) ($21,135)
Income from continuing operations
per share $0.34
Loss from discontinued operations
per share ($4.79)
Net income (loss) per share ($4.45)
Weighted average shares outstanding 4,745,014
The accompanying notes are an integral
part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc.
and Subsidiaries
Consolidated Statements of Change
in Stockholders' Equity
(In thousands, except share and per share data)
Common Additional
Stock Paid-In
Shares Amount Capital
<S> <C> <C> <C>
Balance at
September 30, 1996 4,562,513 $46 $24,607
<PAGE 41>
Net loss
Stock dividend 182,501 1 1,368
Balance at
September 30, 1997 4,745,014 $47 $25,975
Components of
Comprehensive Income:
Net Income
Unrealized gain
on investment
Total Comprehensive Income
Balance at
September 30, 1998 4,745,014 $47 $25,975
Components of Comprehensive
Income:
Net Income
Unrealized loss
on investment
Total Comprehensive Income
Balance at
September 30, 1999 4,745,014 $47 $25,975
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc.
and Subsidiaries
Consolidated Statements of
Changes in Stockholders' Equity
(In thousands, except share and per share data)
<PAGE 42>
Accumulated
Other
Retained Comprehensive
Earnings Income Total
<S> <C> <C> <C>
Balance at
September 30, 1996 $8,846 $33,499
Net loss (21,135) (21,135)
Stock dividend (1,369)
Balance at
September 30, 1997 ($13,658) $12,364
Components of
Comprehensive
Income:
Net Income 1,039 1,039
Unrealized gain
on investment $158 158
Total Comprehensive Income 1,197
Balance at
September 30, 1998 ($12,619) $158 $14,758
Components of
Comprehensive
Income:
Net Income 280 280
Unrealized loss
on investment (68) (68)
Total Comprehensive Income 212
Balance at
September 30, 1999 ($12,339) $90 $13,773
The accompanying notes are an integral part of the financial
statements.
<PAGE 43>
</TABLE>
<TABLE>
<CAPTION>
Hahn Automotive Warehouse, Inc.
and Subsidiaries
Consolidated Statements of Cash Flow
(In thousands, except share and per share data)
For the
Years
Ended
September 30,
1999 1998 1997
<S> <C> <C> <C>
Cash Flows from operating
activities:
Net income from continuing
operations $280 $1,039 $1,591
Items to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 1,775 1,602 2,005
Provision for doubtful
accounts 142 453 1,176
Loss from discontinued
operations, before
non-cash items -- -- (3,103)
Change in assets and
liabilities:
Trade receivables (2,124) 947 (1,119)
Inventory (464) (1,521) 1,020
Other assets (260) 1,983 (3,901)
Accounts payable and
other accruals 951 (2,058) 232
Net assets of discontinued
operations -- -- 9,243
Net cash provided by
operating activities 300 2,445 7,144
<PAGE 44>
Cash flows from investing
activities:
Additions to property,
equipment and leasehold
improvements, net (833) (279) (1,067)
Net cash used in investing
activities (833) (279) (1,067)
Cash flows from financing
activities:
Net borrowings under
line of credit 1,965 (996) (1,433)
Proceeds from long-term
debt and demand notes 544 6,119 89
Payment of long-term
debt and demand notes (1,737) (6,555) (3,501)
Payment of notes payable -
officers and affiliates (149) (711) (237)
Payment of capital lease
obligations (338) (326) (442)
Net cash provided by
(used in) financing
activities 285 (2,469) (5,524)
Net (decrease) increase
in cash (248) (303) 553
Cash at beginning of year 329 632 79
Cash at end of year $81 $329 $632
Supplemental disclosures
of cash flow information:
Cash paid during the year
for:
Interest $3,656 $3,916 $4,689
Income taxes $72 $95 $297
Supplemental disclosure of
non-cash investing
activities:
Debt issued in connection
with acquisitions $137 -- $1,900
<PAGE 45>
Supplemental disclosure of
non-cash financing
activities:
Issuance of 182,501 shares
of common stock in
conjunction with the 4%
stock dividend in fiscal
1997 -- -- $1,369
In January, 1998 the company
renewed capital lease
agreements relating to the
Rental of Distribution
Centers -- $3,768 --
The accompanying notes are an integral part of the financial
statements.
</TABLE>
Hahn Automotive Warehouse, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in Thousands, Except Share and Per Share Data)
September 30, 1999
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.
<PAGE 46>
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 $2,992 and
$3,179 at September 30, 1999 and 1998, respectively.
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 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.
Intangible 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.
Revenue Recognition
The Company recognizes revenue upon shipment of product.
<PAGE 47>
Advertising
Advertising expenses are charged to operations during the year
in which they are incurred and were approximately $702, $786 and
$1,128 for the years ended September 30, 1999, 1998 and 1997,
respectively.
Comprehensive Income
During Fiscal Year 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income". This statement establishes
rules for the reporting of comprehensive income and its
components. Comprehensive income consists of net income and
unrealized gains (losses) on investments held as available-for-
sale and is presented in the Consolidated Statements of Changes
in Stockholders' Equity. The adoption of SFAS No. 130 has no
impact on total stockholders' equity.
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 compensation including stock
options. The adoption of SFAS No. 128 had no effect on EPS
reported in prior periods.
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 48>
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 1998 and 1997 financial
statements and related footnote amounts have been made to conform
to the fiscal 1999 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 filing, Autoworks has operated as a debtor-in-
possession while its assets are being 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 restated) reflect all
discontinued operations separately from continuing operations.
<PAGE 49>
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
included 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.
3. Marketable Security
The marketable security held at September 30, 1999 and 1998
is classified as available-for-sale and is summarized as
follows:
Market Unrealized
Cost Value Gain
September 30, 1999
Debt security:
Zero Coupon Bond $550 $685 $ 135
September 30, 1998
Debt security:
Zero Coupon Bond $550 $789 $ 239
4. Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements consist of the
following:
September 30, Useful Lives
1999 1998 (Years)
Land $ 25 $ 25 -
Buildings 880 880 10 - 30
Buildings under
capitalized leases 4,422 4,422 10
Leasehold improvements 2,251 2,227 10
Computer equipment 2,484 2,103 6
Furniture and fixtures 4,314 4,343 8
Vehicles 2,996 3,084 4 - 5
17,372 17,084
<PAGE 50>
Less - Accumulated
depreciation and
amortization 10,480 9,471
$6,892 $7,613
Depreciation and amortization expense related to property,
equipment and leasehold improvements for the years ended
September 30, 1999, 1998 and 1997 was approximately $1,554,
$1,440 and $1,614, respectively. Included in accumulated
depreciation and amortization at September 30, 1999 and 1998
was approximately $1,115 and $673, respectively, of
accumulated amortization on capital leases.
5. Long-Term Debt
Long-term debt includes the following:
September 30,
1999 1998
Credit Facility Agreement $ 37,113 $ 36,566
Notes payable-officers and
affiliates 1,843 1,993
Other long-term debt 2,264 2,038
41,220 40,597
Less - Current portion 1,169 2,468
$ 40,051 $ 38,129
The Company is subject to a Credit Facility Agreement that
expires on October 22, 2002 and provides a revolving credit
note, subject to a borrowing base, up to a maximum of
$50,000. 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 5.4% and 8.25%,
respectively, at September 30, 1999.
<PAGE 51>
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 obtained waivers for all
covenant violations during Fiscal 1999.
The Company has outstanding promissory notes ("Notes") with
the former Chairman of the Board of Directors and with the
President and Chief Executive Officer of the Company, in the
aggregate amount of $2,150. The Notes, which are due in
October, 2003, bear interest which is payable monthly, at the
annual rate of 12%. The remaining balance of notes payable
due to officers and affiliates is comprised of a number of
notes to related parties with varying terms. The Company is
also subject to a number of other debt agreements, including
mortgages, which comprise the balance of long-term debt.
Annual maturities of long-term debt for subsequent fiscal
years are approximately: 2000 - $1,169; 2001 - $785; 2002 -
$1,578; 2003 - $36,060; 2004 - $44 and thereafter - $1,584.
6. Commitments and Contingencies
Leases
The Company leases certain facilities from related parties.
These leases have been accounted for as capital leases under
SFAS No. 13.
Payments made for capital leases amounted to $683, $540 and
$527 for the fiscal years ended September 30, 1999, 1998 and
1997, respectively.
The Company also leases warehouse and jobber facilities under
noncancellable operating lease agreements, which expire
through 2008. 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 $2,850, $2,911 and $2,792, which included
approximately $1,423, $1,616 and $1,381 of payments to
related parties for the years ended September 30, 1999, 1998
and 1997, respectively.
In addition, the Company leases various equipment under
noncancellable operating lease agreements expiring through
2005. Rent expense related to all equipment operating leases
totaled approximately $267, $460 and $519, for the years
ended September 30, 1999, 1998 and 1997, respectively.
<PAGE 52>
Future minimum rental payments under noncancellable leases
for fiscal years subsequent to September 30, 1999 are as
follows:
Capital
Leases Operating Leases
Related Related
Parties Parties Other
2000 $683 $ 1,378 $ 1,382
2001 683 1,323 894
2002 575 1,073 476
2003 575 921 304
2004 575 596 91
Thereafter 1,973 23 17
$ 5,064 $ 5,314 $ 3,164
Less - Interest 1,496
3,568
Less - Current portion 372
Long-term portion $3,196
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
On April 22, 1998, a Settlement Agreement and Release
("Settlement Agreement") was negotiated between the Company
and the Official Unsecured Creditors' Committee
("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
<PAGE 53>
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, and the second payment in
the amount of $320,000 on July 1, 1999. On November 18,
1999, the Company agreed to a modification of the Settlement
Agreement that will increase the required annual payments to
$353,333 on June 15, 2000, June 15, 2001 and June 15, 2002.
7. Income Taxes
Income tax expense (benefit) is comprised of the following
for the years ended September 30:
1999 1998 1997
Continuig operations:
Current
Federal $ 469 $ (42) $ 1,423
State 20 33 315
489 (9) 1,738
Deferred: (338) 674 (727)
Total provision for income tax
from continuing operations 151 665 1,011
Discontinued operations:
Current - - (3,923)
Deferred - - (4,027)
Total benefit from income
taxes from discontinued
operations - - (7,950)
Total provision for (benefit from)
income taxes $ 151 $ 665 $(6,939)
Temporary differences which give rise to deferred tax assets
and liabilities at September 30 are as follows:
1999 1998
Accounts receivable $ 470 $1,204
Inventory (993) (1,070)
Accrued liabilities 1,448 858
Deferred compensation 174 156
Other 141 115
Net operating loss carryforward 2,679 2,317
Net deferred tax asset $3,918 $3,580
<PAGE 54>
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 2019.
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 will
be approximately $105 for the Fiscal Year ended September 30,
1999, and was $99 and $108 for the years ended September 30,
1998 and 1997, respectively.
9. Net Income Per Share
Net income per share was calculated as follows for the fiscal
years ended September 30:
1999 1998 1997
Basic and Diluted Earnings
Per Share
Basic and Diluted Shares
Outstanding:
Weighted average number
of shares outstanding 4,745,014 4,745,014 4,745,014
Net Income $ 280 $ 1,039 $ (21,135)
Basic and Diluted EPS $ .06 $ .22 $ (4.45)
The potential exercise of outstanding stock options of
419,258, 550,450 and 560,329 at September 30, 1999, 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, the Board of Directors declared a 4% stock
dividend on the Company's common stock, which was distributed
May 1, 1997 to stockholders of record as of April 10, 1997.
<PAGE 55>
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.
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:
Option Price
Range
Shares Per Share
Options outstanding
October 1, 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
Exercised - -
Expired (176,192) 6.00 to 30.69
Granted 45,000 2.25 to 3.50
Options outstanding
September 30, 1999 419,258 $2.25 to $13.75
<PAGE 56>
Options exercisable at
September 30, 1999 334,439 $3.50 to $13.75
Included in exercisable options at September 30, 1998 are
140,608 options reserved for sale to the President and Chief
Executive Officer of the Company, which expired during 1999.
These options became exercisable annually beginning April 29,
1997 at option prices ranging from $17.33 to $30.69.
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
(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 1999 and 1998, respectively:
1999 1998
Dividend yields 0% 0%
Volatility factors of the expected
market price of the Company's
common stock 75.34% 30.88%
Expected option life 5 years 5 years
Interest rate on the date of the
grant, with the maturity equal
to the expected term 4.56% - 4.60% 5.49% - 5.99%
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 $7.44 and $7.98 at
September 30, 1999 and 1998, respectively. The weighted
average fair value of options granted in Fiscal 1999 was
$2.94 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
<PAGE 57>
price. The weighted average fair value of options granted in
1998 was $5.88 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 $132, $274 and
$76 in 1999, 1998 and 1997, respectively. The Company's pro
forma information is as follows:
1999 1998 1997
Pro forma income from $ 194 $ 872 $ 1,543
continuing operations
Pro forma income from
continuing operations
per share $ .04 $ .18 $ .33
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.Business Segment Information
Effective September 30, 1999, the Company has adopted the
provisions of SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement
establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about
its products, services, geographic areas and major customers.
Adoption of this statement had no impact on the Company's
consolidated financial position, results of operations or
cash flows. Comparative information for earlier years has
been restated. Restatement of comparative information for
interim periods in the initial year of adoption is to be
reported for interim periods in the second year of
application. The Company reports its operating results in
two segments: direct distribution and full service
distribution. Segment selection was based on internal
organizational structure, the way in which the operations are
managed and their performance evaluated by management and the
Company's Board of Directors, the availability of separate
financial results, and materiality considerations. The
accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
The Company evaluates performance based on operating profits
of the respective business units.
Information concerning the Company's Business Segments for
fiscal 1999, 1998 and 1997 is as follows (dollars in
thousands):
<PAGE 58>
1999 1998 1997
Net Sales to Customers
Full Service Distribution $111,744 $113,584 $122,052
Direct Distribution 19,254 19,919 20,190
Total Net Sales to $130,998 $133,503 $142,242
Customers
Operating Income
Full Service Distribution $3,243 $4,388 $5,565
Direct Distribution 466 676 988
Total Operating Profit $3,709 $5,064 $6,553
Interest Expense (3,650) (3,771) (4,670)
Other Income 372 411 719
Consolidated Pre Tax Income $431 $1,704 $2,602
Identifiable Assets
Full Service Distribution $73,152 $72,383 $72,513
Direct Distribution 6,571 5,928 5,279
Total Identifiable Assets $79,723 $78,311 $77,792
Capital Expenditures
Full Service Distribution $846 $406 $1,125
Direct Distribution 20 38 29
Total Capital Expenditure $866 $444 $1,154
Depreciation and Amortization
Full Service Distribution $1,584 $1,417 $1,822
Direct Distribution 191 185 183
Total Depreciation and
Amortization $1,775 $1,602 $2,005
12.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, 1999 and 1998:
Dec. 31 Mar. 31 June 30
Fiscal
1999
Net sales $29,869 $32,347 $35,044
Gross profit $11,385 $11,914 $12,871
<PAGE 59>
Net Income ($268) ($67) $293
Net income per share($0.06) ($0.01) $0.06
Fiscal 1998
Net sales $31,539 $32,313 $35,808
Gross profit $12,129 $12,034 $13,154
Net income $77 $76 $410
Net income per share $0.02 $0.02 $0.09
(a) The sum of quarterly amounts do not equal the fiscal
year amount due to rounding.
Sept. 30 Year
Fiscal 1999
Net sales $33,738 $130,998
Gross Profit $12,826 $37,611
Net income $322 $548
Net income per share $0.07 $0.06
Fiscal 1998
Net sales $33,843 $101,964
Gross profit $13,408 $38,596
Net income $476 $962
Net income per share $0.10 $0.22
(a) The sum of quarterly amounts do not equal the fiscal
year amount due to rounding.
<PAGE 60>
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors and Shareholders of
Hahn Automotive Warehouse, Inc. and Subsidiaries
Our audits of the consolidated financial statements referred to
in our report dated November 23, 1999, appearing in this Annual
Report on Form 10-K, also included an audit of the financial
statement schedule listed in Item 14(a)(2) of this Form 10-K. In
our opinion, this financial statement schedule presents fairly,
in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.
PricewaterhouseCoopers LLP
Rochester, New York
November 23, 1999
Hahn Automotive Warehouse, Inc.
Schedule II - Valuation and Qualifying Account Reserves
For the Years Ended September 30, 1999, 1998 and 1997
(Amounts in thousands)
Additions
Balance Charged Balance
at to at
Beginning Costs and End
Description of Period Expenses Deductions of Period
1999
Allowance for
doubtful accounts
and notes
receivable $ 2,719 $ 142 $ (846) $ 2,015
<PAGE 61>
1998
Allowance for
doubtful accounts
and notes
receivable $ 3,230 $ 453 $ (964) $ 2,719
1997
Allowance for
doubtful accounts
and notes
receivable $ 2,209 $ 1,176 $ (155) $ 3,230
EXHIBITS FILED WITH
FORM 10-K
OF
HAHN AUTOMOTIVE WAREHOUSE, INC.
FOR FISCAL YEAR ENDED
September 30, 1999
FORMING A PART OF
ANNUAL REPORT PURSUANT TO SECTION 13 OF OR 15(d)
THE SECURITIES EXCHANGE ACT OF 1934
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)*
<PAGE 62>
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)*
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 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)*
<PAGE 63>
Exhibit 10.11 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 10.12 Letter Agreement Lease Amendment dated
September 30, 1993 between Michael Futerman and
Hahn Automotive Warehouse, Inc. (Exhibit 10.13
to Hahn's Annual Report on Form 10-K for the
Fiscal year ended September 30, 1998)*
Exhibit 10.13 Second Amendment to Lease Agreement, dated
May 1997, between Michael Futerman and Hahn
Automotive Warehouse, Inc. (Exhibit 10.14 to
Hahn's Annual Report on Form 10-K for the
Fiscal year ended September 30, 1998)*
Exhibit 10.14 Second Amendment to Lease Agreement, dated
May, 1997 between the Michael Futerman
Irrevocable Trust and Hahn Automotive
Warehouse, Inc. (Exhibit 10.15 to Hahn's Annual
Report on Form 10-K for the Fiscal year ended
September 30, 1998)*
Exhibit 10.15 Third Amendment to Lease Agreement between
Michael Futerman and Hahn Automotive Warehouse,
Inc. (Exhibit 10.16 to Hahn's Annual Report on
Form 10-K for the Fiscal year ended September
30, 1998)*
Exhibit 10.16 Fourth Amendment to Lease Agreement
between Michael Futerman and Hahn Automotive
Warehouse, Inc. (Exhibit 10.17 to Hahn's Annual
Report on Form 10-K for the Fiscal year ended
September 30, 1998)*
Exhibit 10.17 Amendment to Lease Agreement between
Michael Futerman and Sara Futerman as Landlord
and Hahn Automotive Warehouse, Inc., as tenant.
(Exhibit 10.18 to Hahn's Annual
Report on Form 10-K for the Fiscal year ended
September 30, 1998)*
Exhibit 10.18 Lease Agreement between the Michael
Futerman Living Trust as Landlord, and Hahn
Automotive Warehouse, Inc., as tenant. (Exhibit
10.19 to Hahn's Annual Report on Form 10-K for
the Fiscal year ended September 30, 1998)*
<PAGE 64>
Exhibit 10.19 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 10.20 Letter Agreement Lease Amendment, dated
October 4, 1993, between Eli N. Futerman and
Hahn Automotive Warehouse, Inc. (Exhibit 10.21
to Hahn's Annual Report on Form 10-K for the
Fiscal year ended September 30, 1998)*
Exhibit 10.21 Letter Agreement Lease Amendment, dated
September 30, 1996, between Eli N. Futerman and
Hahn Automotive Warehouse, Inc. (Exhibit 10.22
to Hahn's Annual Report on Form 10-K for the
Fiscal year ended September 30, 1998)*
Exhibit 10.22 Third Amendment to Lease, between Eli N.
Futerman, as landlord and Hahn Automotive
Warehouse, Inc., as tenant (Exhibit 10.2 to
Hahn's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999)*
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)*
Exhibit 10.24 Letter Agreement Lease Amendment dated
September 1, 1993, between EDR Associates and
Hahn Automotive Warehouse, Inc. (Exhibit 10.24
to Hahn's Annual Report on Form 10-K for the
Fiscal year ended September 30, 1998)*
Exhibit 10.25 Amendment to Lease Agreement between EDR
Associates, as landlord, and Hahn Automotive
Warehouse, Inc., dated November 17, 1998.
(Exhibit 10.1 to Hahn's Quarterly Report on
Form 10-Q for the quarter ended December 31,
1998)*
Exhibit 10.26 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)*
<PAGE 65>
Exhibit 10.27 Amendment to Lease Agreement between Eli
Futerman, Daphne Futerman and Rina F. Chessin,
as landlord, and Hahn Automotive Warehouse,
Inc., dated January, 1999. (Exhibit 10.1 to
Hahn's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999)*
Exhibit 10.28 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 10.29 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 10.30 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 10.31 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)*
Exhibit 10.32 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 10.33 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 10.34 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)*
<PAGE 66>
Exhibit 10.35 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 10.36 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 10.37 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 10.38 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)*
Exhibit 10.39 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 10.40 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 10.41 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)*
<PAGE 67>
Exhibit 10.42 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)*
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 10.43 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)*
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 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 10.46 Amendment to Loan and Security Agreement
dated February 10, 1999, between Hahn and Fleet
Capital Corporation (filed herewith)
Exhibit 10.47 Second Amendment to Loan and Security
Agreement dated September 30, 1999 between Hahn
and Fleet Capital Corporation (filed herewith)
Exhibit 10.48 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 ventures 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).*
<PAGE 68>
Exhibit 10.49 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)*
Exhibit 10.50 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 10.51 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 10.52 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 10.53 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 10.54 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 10.55 Lease Assignment for Nu-Way Properties
(filed herewith)
Exhibit 21 List of Subsidiaries(filed herewith)
Exhibit 23 Consent of PricewaterhouseCoopers LLP with
respect to Financial Statements and Financial
Statement Schedule (filed herewith)
Exhibit 24 Powers of Attorney for Directors
(filed herewith)
Exhibit 27 Selected Financial Data (filed herewith)
<PAGE 69>
*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.
EXHIBIT 10.46
AMENDMENT TO LOAN AND SECUIRTY AGREEMENT
EXHIBIT 10.46
AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is made as of February 10, 1999, by and between HAHN
AUTOMOTIVE WAREHOUSE, INC. ("Hahn" or the "Borrower") and FLEET
CAPITAL CORPORATION (the "Lender").
WITNESSETH:
WHEREAS, the Borrower and Meisenzahl Auto Parts, Inc.
("Meisenzahl"), as co-Borrowers, and the Lender have executed a
certain Loan and Security Agreement dated October 22, 1997 ("Loan
Agreement"), and related agreements and documents, to reflect
financing arrangements then established by the Lender for and on
behalf of the Borrower and Meisenzahl;
WHEREAS, Meisenzahl merged into Borrower effective September
30, 1998, as a result of which Hahn is and shall be the sole
Borrower under the Loan Agreement and related agreements and
documents; and
WHEREAS, the Borrower and the Lender desire to amend the
Loan Agreement under the terms an conditions set forth below.
Any capitalized terms used in this Amendment without definition
shall have the meanings assigned to those terms in the Loan
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
<PAGE 70>
1. Section 8.3 (ii) of the Loan Agreement is hereby
amended to provide that the Fixed Charge Covenant required to be
achieved by the Borrower shall be not less than (a) .45 to 1 for
the three (3) month period ending December 31, 1998 and also for
the three (3) month period ending March 31, 1999, (b) .80 to 1
for the three (3) month period ending June 30, 1999, (c) 1.25 to
1 for the three (3) month period ending September 30, 1999, and
(d) 1.0 to 1.0 for the twelve (12) month period ending December
31, 1999 and also for the twelve (12) month periods respectively
ending on the last day of each fiscal quarter thereafter (the
foregoing covenant requirements set forth in clauses (a), (b) and
(c) above being in lieu of and therefore replacing the
requirements as of such respective dates currently contained in
such Section 8.3 (ii)).
2. The Borrower hereby represents and warrants that (a)
all of its representations and warranties in the Loan Agreement
are true and correct, (b) no Default or Event of Default exists
under the Loan Agreement are true and correct, (c) this Amendment
has been duly authorized, executed and delivered by and
constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms, and (d) the
Borrower has reviewed the areas within its business and
operations which could be adversely affected by, and has
developed or is developing a program to address on a timely
basis, the risk that certain computer applications used by the
Borrower and its Subsidiaries (or any of its material suppliers,
customers or vendors) may be unable to effectively interpret,
process and manipulate data and recognize and perform properly,
date sensitive functions involving dates prior to, on and after
December 31, 1999 (the "Year 2000 Problem"). To the best of the
Borrower's knowledge, the Year 2000 problem will not cause any
Material Adverse Effect.
3. The Loan Agreement is further amended by adding a new
subsection 8.1.6 thereto as follows:
8.1.6 Year 2000 Compliance. Take all action necessary
to assure that the computer-based systems utilized by Borrower
and each of its Subsidiaries will be able to effectively
interpret, process and manipulate data, including dates before,
on and after December 31, 1999. At Lender's request, Borrower
shall provide to Lender assurance reasonably satisfactory to
Lender that the computer-based systems utilized by the Borrower
and each of its Subsidiaries, for which the inability to process
and manipulate
<PAGE 71>
data involving dates before, on and after December 31, 1999 would
have a Material Adverse Effect, are able to recognize and perform
without material error functions involving dates before, on and
after December 31, 1999.
4. This Amendment may be signed in any number of
counterparts or copies and by the parties hereto on separate
counterparts, but all such copies taken together shall constitute
one and the same instrument.
5. This Amendment will be binding upon and inure to the
benefit of the Borrower and the Lender and their respective
successors and assigns.
6. This Amendment modified and is deemed incorporated into
the Loan Agreement. To the extent that any term or provision of
this Amendment is or may be deemed expressly inconsistent with
any term or provision in the Loan Agreement, the terms and
provisions hereof shall control. Except as amended hereby, the
terms and provisions of the Loan Agreement remain unchanged and
in full force and effect.
IN WITNESS WHEREOF, and intending to be legally bound, this
Amendment is executed and delivered by the parties hereto as of
the date first written above.
HAHN AUTOMOTIVE WAREHOUSE, INC.
By: s//Peter J. Adamski
Print Name:
Title: Vice President -
Finance and Chief
Financial Officer
FLEET CAPITAL CORPORATION
By: s// Walter Schuppe
Print Name:
Title: Vice President
<PAGE 72>
EXHIBIT 10.47
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
EXHIBIT 10.47
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is made as of September 30, 1999, by and between
HAHN AUTOMOTIVE WAREHOUSE, INC. ("Hahn" or the "Borrower") and
FLEET CAPITAL CORPORATION (the "Lender").
WITNESSETH:
WHEREAS, the Borrower and Meisenzahl Auto Parts, Inc.
("Meisenzahl"), as co-Borrowers, and the Lender have executed a
certain Loan and Security Agreement dated October 22, 1997 ("Loan
Agreement"), and related agreements and documents, to reflect
financing arrangements then established by the Lender for and on
behalf of the Borrower and Meisenzahl;
WHEREAS, Meisenzahl merged into Borrower effective September
30, 1998, as a result of which Hahn is and shall be the sole
Borrower under the Loan Agreement and related agreements and
documents; and
WHEREAS, the Borrower and the Lender desire to amend the
Loan Agreement under the terms and conditions set forth below.
Any capitalized terms used in this Amendment without definition
shall have the meanings assigned to those terms in the Loan
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Section 8.3 (ii) of the Loan Agreement is hereby amended to
provide that the Fixed Charge Covenant required to be achieved by
the Borrower shall be not less than (a) .60 to 1.0 for the three
(3) month period ending September 30, 1999, (b) .50 to 1 for the
twelve (12) month period ending December 31, 1999, and also for
the twelve (12) month periods ending on each March 31, 2000 and
June 30, 2000, (c) .70 to 1 for the twelve (12) month period
<PAGE 73>
ending September 30, 2000, and (d) 1.0 to 1.0 for the twelve (12)
month period ending December 31, 2000 and also for the twelve
(12) month periods respectively ending on the last day of each
fiscal quarter thereafter (the foregoing covenant requirements
set forth in clauses (a), (b) and (c) above being in lieu of and
therefore replacing the requirements as of such respective dates
currently contained in such Section 8.3 (ii)).
2. The Borrower hereby represents and warrants that (a) all of
its representations and warranties in the Loan Agreement are true
and correct, (b) no Default or Event of Default exists under the
Loan Agreement, and (c) this Amendment has been duly authorized,
executed and delivered by and constitutes the legal, valid and
binding obligation of the Borrower, enforceable in accordance
with its terms.
3. This Amendment may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but
all such copies taken together shall constitute one and the same
instrument.
4. This Amendment will be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors
and assigns.
5. This Amendment modifies and is deemed incorporated into the
Loan Agreement. To the extent that any term or provision of the
Amendment is or may be deemed expressly inconsistent with any
term or provision in the Loan Agreement, the terms and provisions
hereof shall control. Except as amended hereby, the terms and
provisions of the Loan Agreement remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, and intending to be legally bound, this
Amendment is executed and delivered by the parties hereto as of
the date first written above.
HAHN AUTOMOTIVE WAREHOUSE, INC.
By: Peter J. Adamski
Printed Name:
<PAGE 74>
Title: Vice President -
Finance and Chief
Financial Officer
FLEET CAPITAL CORPORATION
By: Walter Schuppe
Printed Name:
Title: Vice President
EXHIBIT 10.55
ASSIGNMENT OF LEASE
Exhibit 10.55
ASSIGNMENT OF LEASE
WHEREAS, RICHARD COHEN AND SUZANNE COHEN ("Assignors") own
real property as shown on Schedule "A" and made part hereof (the
"Property");
WHEREAS, Assignors have leased the Property to Hahn
Automotive Warehouse, Inc. and Harry R. Boos ("Tenants") pursuant
to lease agreements dated October 9, 1996 and August 22, 1989
respectively (the "Leases");
WHEREAS, Assignors are transferring the Property to FCA
Associates (the "Assignee");
NOW, THEREFORE, in consideration of the mutual promises
herein contained, Assignors and Assignee agree as follows:
1. Assignors hereby grant, transfer
and assign to Assignee all of their right, title and
interest in and to the Leases, together with any and
all extensions and renewals thereunder and hereby agree
to hold Assignee harmless from all losses, expenses,
costs, claims and liabilities (including reasonable
attorneys fees) arising out of Assignor's failure to
perform or comply with any of the landlord's
obligations pursuant to the Leases prior to the
effective date of this Assignment.
<PAGE 75>
2. Assignee hereby assumes the rights,
responsibilities and the liabilities of the landlord
pursuant to the Leases and hereby agrees to hold
Assignors harmless from all losses, expenses, costs,
claims and liabilities (including reasonable attorneys'
fees arising out of Assignee's failure to perform or
comply with any of the landlord's obligations pursuant
to the Leases subsequent to the effective date of this
Assignment.
IN WITNESS WHEREOF, this assignment has been executed on the
12th day of January, 1999.
Assignors:
ss/ Richard Cohen
RICHARD COHEN
ss/ Suzanne Cohen
SUZANNE COHEN
ASSIGNEE:
FCA ASSOCIATES
By: ss/
Its: Partner
STATE OF NEW YORK)
COUNTY OF MONROE) ss:
On this 12th day of January, 1999, before me, the
subscriber, personally appeared Richard Cohen and Suzanne Cohen
to me personally known and known to me to be the same persons
described in and who executed the foregoing instrument, and duly
acknowledged to me that they executed the same.
ss/
Notary Public
<PAGE 76>
STATE OF NEW YORK)
COUNTY OF MONROE) ss:
On this ______ day of January 1999, before me personally
came Eli Futerman to me known, who, being by me duly sworn, did
depose and say that he is a member of the Partnership of FCA
Associates, the Partnership described in and which executed the
foregoing instrument for and on behalf of said Partnership.
ss/
Notary Public
SCHEDULE "A"
PREMISES
Merchants Road 719 N. Winton Road Hahn Automotive
215 Merchants Road Warehouse, Inc.
Rochester, New York
Farmington 1295-1297 Mertensia Road Hahn Automotive
Farmington, New York Warehouse, Inc. and
Harry Boos
Gates 410 Spencerport Road Hahn Automotive
Rochester, New York Warehouse, Inc.
EXHIBIT 21
LIST OF SUBSIDIARIES
EXHIBIT 21
LIST OF SUBSIDIARIES
Autoworks, Inc. Michigan
HFV, Inc. Delaware
iAutoparts, Inc. New York
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE 77>
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (File nos. 333-85533, 33-64100
and 33-81854) of Hahn Automotive Warehouse, Inc. and Subsidiaries
of our report dated November 23, 1999 relating to the financial
statements, as of September 30, 1999 and 1998 and for the three
fiscal years ended September 30, 1999, which is included in
this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated November 23, 1999
relating to the financial statement schedule, which appears in
this Form 10-K.
PricewaterhouseCoopers LLP
Rochester, New York
December 7, 1999
EXHIBIT 24
POWERS OF ATTORNEY FOR DIRECTORS
EXHIBIT 24
POWERS OF ATTORNEY FOR DIRECTORS
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, 1999, 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 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 1, 1999
By: s// Stephen B. Ashley
Stephen B. Ashley, Director
POWER OF ATTORNEY
<PAGE 78>
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, 1999, 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 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 1, 1999
By: s// William A. Buckingham
William A. Buckingham, Director
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, 1999, 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 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 1, 1999
By: s// Robert I. Israel
Robert I. Israel, Director
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, 1999, 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 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.
<PAGE 79>
Date: December 1, 1999
By: s// E. Philip Saunders
E. Philip Saunders, Director
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, 1999, 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 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 1, 1999
By: s// Eli N. Futerman
Eli N. Futerman, President, Chief
Executive Officer and Director
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, 1999, 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 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 1, 1999
By: s// Daniel J. Chessin
Daniel J. Chessin, Executive Vice
President, Secretary and Director
<PAGE 80>
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, 1999, 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 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 1, 1999
By: s// Peter J. Adamski
Peter J. Adamski, Vice President -
Finance and Chief Financial Officer
EXHIBIT 27
Selected Financial Data
<PAGE 81>
EXHIBIT 27
SELECTED FINANCIAL DATA
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 81 329
<SECURITIES> 0 0
<RECEIVABLES> 17,577 15,595
<ALLOWANCES> 0 0
<INVENTORY> 44,501 44,037
<CURRENT-ASSETS> 65,853 63,317
<PP&E> 6,892 7,613
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 79,723 78,311
<CURRENT-LIABILITIES> 20,466 20,105
<BONDS> 0 0
0 0
0 0
<COMMON> 47 47
<OTHER-SE> 13,773 13,561
<TOTAL-LIABILITY-AND-EQUITY> 79,723 78,311
<SALES> 130,998 133,503
<TOTAL-REVENUES> 130,998 133,503
<CGS> 82,002 82,778
<TOTAL-COSTS> 43,512 44,059
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,650 3,771
<INCOME-PRETAX> 431 1,704
<INCOME-TAX> 151 665
<INCOME-CONTINUING> 280 1,039
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 280 1,039
<EPS-BASIC> .06 .22
<EPS-DILUTED> .06 .22
</TABLE>