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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 3, 1998
Commission file number 1-11276
DISCOUNT AUTO PARTS, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-1447420
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
4900 Frontage Road, South 33815
Lakeland, Florida
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(Address of principal executive offices) (zip code)
(941) 687-9226
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock $.01 Par Value - 16,605,244 shares as of March 3, 1998
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DISCOUNT AUTO PARTS, INC.
INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 3, 1998 and June 3, 1997 ........................... 3
Condensed Consolidated Statements of Income - for the thirty-nine and thirteen weeks
ended March 3, 1998 and the forty and fourteen weeks ended March 4, 1997 ......................... 4
Condensed Consolidated Statements of Cash Flows - for the thirty-nine weeks ended
March 3, 1998 and the forty weeks ended March 4, 1997 ............................................ 5
Notes to Condensed Consolidated Financial Statements.............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................. 11
Item 6. Exhibits and Reports on Form 8-K................................................................... 13
SIGNATURES................................................................................................. 14
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PART I - FINANCIAL INFORMATION
DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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<CAPTION>
MARCH 3 JUNE 3
1998 1997
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ASSETS (In thousands)
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Current assets:
Cash and cash equivalents $ 4,967 $ 6,409
Inventories 168,249 151,644
Prepaid expenses and other current assets 10,662 18,644
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Total current assets 183,878 176,697
Property and equipment 356,553 316,315
Less allowances for depreciation and amortization (61,663) (50,726)
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294,890 265,589
Other assets 2,515 780
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Total assets $ 481,283 $ 443,066
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 48,281 $ 63,753
Other current liabilities 12,580 9,571
Litigation settlement - 20,400
Current maturities of long-term debt 2,400 2,400
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Total current liabilities 63,261 96,124
Deferred income taxes 5,641 3,764
Long-term debt 163,608 114,117
Stockholders' equity:
Preferred stock - -
Common stock 166 166
Additional paid-in capital 140,721 140,519
Retained earnings 107,886 88,376
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Total stockholders' equity 248,773 229,061
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Total liabilities and stockholders' equity $ 481,283 $ 443,066
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</TABLE>
See accompanying notes.
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DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE FORTY THIRTEEN FOURTEEN
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
-------------------------------- ------------------------------
MARCH 3 MARCH 4 MARCH 3 MARCH 4
1998 1997 1998 1997
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $ 325,306 $ 297,765 $ 110,329 $ 101,876
Cost of sales, including distribution costs 198,167 189,238 66,942 64,023
------------- -------------- ------------ --------------
Gross profit 127,139 108,527 43,387 37,853
Selling, general and administrative expenses 90,316 73,312 31,301 26,885
------------- -------------- ------------ --------------
Income from operations 36,823 35,215 12,086 10,968
Other income (expense), net 2,379 (97) 2,063 (18)
Interest expense (7,479) (4,364) (2,812) (1,825)
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Income before income taxes 31,723 30,754 11,337 9,125
Income taxes 12,213 11,831 4,365 3,513
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Net income $ 19,510 $ 18,923 $ 6,972 $ 5,612
============= ============== ============ ==============
Net income per share:
Basic $ 1.18 $ 1.14 $ 0.42 $ 0.34
============= ============== ============ ==============
Diluted $ 1.17 $ 1.13 $ 0.42 $ 0.34
============= ============== ============ ==============
Weighted average number of shares 16,600 16,579 16,605 16,581
============= ============== ============ ==============
</TABLE>
See accompanying notes.
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DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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THIRTY-NINE FORTY
WEEKS ENDED WEEKS ENDED
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MARCH 3 MARCH 4
1998 1997
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OPERATING ACTIVITIES
Net income $ 19,510 $ 18,923
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 11,129 9,044
Deferred income taxes 8,190 1,075
Net (gain) on sales of property and equipment (669) -
Changes in operating assets and liabilities:
(Increase) in inventories (16,605) (24,033)
Decrease (increase) in prepaid expenses and other
current assets 1,669 (4,046)
(Increase) decrease in other assets (1,761) 108
(Decrease) increase in trade accounts payable (15,472) 692
(Decrease) in litigation settlement (20,400) -
Increase (decrease) in other current liabilities 3,009 (722)
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Net cash (used in) provided by operating activities (11,400) 1,041
INVESTING ACTIVITIES
Proceeds from sales of property and equipment 1,474 -
Purchases of property and equipment (41,209) (52,166)
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Net cash used in investing activities (39,735) (52,166)
FINANCING ACTIVITIES
Proceeds from short-term borrowings and long-term debt 188,601 77,100
Payments of short-term borrowings and long-term debt (139,110) (25,551)
Proceeds from issuance of common stock 202 138
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Net cash provided by financing activities 49,693 51,687
Net (decrease) increase in cash and cash equivalents (1,442) 562
Cash and cash equivalents at beginning of period 6,409 4,552
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Cash and cash equivalents at end of period $ 4,967 $ 5,114
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</TABLE>
See accompanying notes.
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DISCOUNT AUTO PARTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 3, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Discount Auto Parts, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. For
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended June 3,
1997.
Operating results for the thirteen and thirty-nine week periods ended March 3,
1998 are not necessarily indicative of the results that may be expected for the
entire fiscal year.
2. NET INCOME PER SHARE
In 1997, the Financial Accounting Standards Board Issued Statement 128,
"Earnings Per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share. All
earnings per share amounts for all periods presented have been restated to
conform to the Statement 128 requirements.
Basic and diluted earnings per share may differ for the periods presented as a
result of the effect of dilutive employee stock options. Such dilutive stock
options totaled 85,043 shares and 91,639 shares for the third quarter of fiscal
1998 and 1997, respectively. The effect of dilutive stock options for the first
nine months of fiscal 1998 and 1997 was 90,267 shares and 122,631 shares,
respectively.
3. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
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<CAPTION>
March 3 June 3
1998 1997
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Unsecured revolving loan $ - $ 12,500
Real estate acquisition and
construction lines of credit - 92,017
Revolving credit agreement 105,208 -
Senior term notes 50,000 -
Senior secured notes 10,800 12,000
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166,008 116,517
Less current maturities (2,400) (2,400)
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$ 163,608 $ 114,117
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</TABLE>
As of June 3, 1997, the Company had an unsecured revolving loan agreement with
a bank. The agreement provided for maximum borrowings of $20 million, including
up to $1 million for letters of credit. Interest was payable monthly and was a
function of the prime rate or the London Interbank Offered Rate (LIBOR).
The Company's real estate acquisition and construction lines of credit provided
for maximum aggregate borrowings of $130 million for the acquisition and
construction of properties. Interest was payable monthly and was a function of
the prime rate or LIBOR. The facilities were provided by two separate banks.
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Effective July 16, 1997, the Company replaced its aforementioned credit
facilites with a new three year $175 million unsecured revolving credit
agreement (the "Revolver"). The rate of interest payable under the Revolver is
a function of LIBOR or the prime rate of the lead agent bank, at the option of
the Company. The Company may increase the amount of the facility to $200
million with the consent of the syndication of banks. During the term of the
Revolver, the Company is obligated to pay a fee of .125% per annum for the
unused portion of the Revolver.
Effective August 8, 1997, the Company completed the placement of a separate $50
million senior term notes facility (the "Notes"). The Notes provide for
interest at a fixed rate of 7.46%, payable semi-annually, with semi-annual
principal payments of $7.1 million, beginning on July 15, 2004. The net
proceeds from the Notes were used to reduce the Company's indebtedness under
the Revolver.
As of March 3, 1998, the Company had approximately $69.8 million of available
borrowings under the Revolver.
The Company has issued two senior secured notes, each for an original principal
amount of $12 million, with an insurance company. The notes are collateralized
by a first mortgage on certain retail store properties, equipment and fixtures.
The agreements provide for interest at fixed rates of 10.11% and 9.8%, payable
quarterly, with annual principal payments of $1.2 million on each December 15
and May 31.
The Company's debt agreements contain various restrictions, including the
maintenance of certain financial ratios and restrictions on dividends, with
which the Company was in compliance as of March 3, 1998.
4. PROPOSED BUSINESS COMBINATION
On October 17, 1997, the Company entered into a definitive merger agreement to
acquire all of the outstanding common stock of Hi-Lo Automotive Inc. ("Hi-Lo")
in exchange for Discount Auto Parts common stock. Under the terms of the
merger agreement, stockholders of Hi-Lo were to receive 0.1485 of a share of
Discount Auto Parts common stock for each outstanding share of Hi-Lo stock,
subject to certain adjustments based upon changes in the average price of
Discount's stock during a specified period. There were approximately 10.8
million shares of Hi-Lo common stock outstanding which represented a
transaction equity value of approximately $36 million. The merger, which was
expected to be completed in February 1998, was subject to approval by Hi-Lo
shareholders and certain other conditions. The agreement could be terminated by
either Discount Auto Parts or Hi-Lo under certain circumstances.
On December 23, 1997, the Company received a notice of termination of the
merger agreement from Hi-Lo. The Company was also advised that Hi-Lo had
contemporaneously entered into a definitive agreement with O'Reilly Automotive,
Inc. of Springfield, Missouri, providing for an acquisition price of $4.35 cash
per share. Under the terms of the agreement with Discount Auto Parts, Hi-Lo was
entitled to terminate the agreement if it entered into an agreement relating to
a superior proposal, provided that Hi-Lo simultaneously paid a $4 million
termination fee to Discount Auto Parts. The termination fee was received by
Discount Auto Parts on December 23, 1997. The termination fee, less related
expenses, is reported in the Company's third quarter results.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS AND THIRTY-NINE WEEKS ENDED MARCH 3, 1998 COMPARED TO FOURTEEN
WEEKS AND FORTY WEEKS ENDED MARCH 4, 1997
Total sales for the third quarter of fiscal 1998 were $110.3 million as
compared to $101.9 million a year earlier. The third quarter of fiscal 1997
contained fourteen weeks versus the thirteen weeks in the third quarter of
fiscal 1998. Commercial sales of R-12 freon represented approximately $1.7
million or 1.7% of total sales for the third quarter of fiscal 1997, and were
negligible in the third quarter of fiscal 1998.
Excluding the impact of such commercial sales and the extra week in fiscal
1997, traditional Do-It-Yourself ("DIY") retail sales for the third quarter of
fiscal 1998 increased 18.5% over the comparable fiscal 1997 period. Traditional
DIY comparable store sales increased 6.0% for the third quarter of fiscal 1998
as compared to the third quarter of fiscal 1997, after excluding the effect of
the extra week. The balance of the increase in total sales for the fiscal 1998
third quarter was attributable to net sales from new stores opened since the
beginning of fiscal 1997.
Total sales for the first nine months of fiscal 1998 were $325.3 million,
compared to $297.8 million for the first nine months of fiscal 1997. The first
nine months of fiscal 1997 contained forty weeks versus the thirty-nine weeks
in the first nine months of fiscal 1998. Commercial sales of R-12 freon
represented approximately $30.0 million or 10.1% of total sales for the first
nine months of fiscal 1997, and were negligible in the first nine months of
fiscal 1998. Excluding the impact of such commercial sales and the extra week
in fiscal 1997, traditional DIY retail sales for the first nine months of
fiscal 1998 increased 24.7% over the comparable fiscal 1997 period. Traditional
DIY comparable store sales increased 8.6% for the first nine months of fiscal
1998 as compared to the first nine months of fiscal 1997, after excluding the
effect of the extra week. When including commercial sales of freon in
comparable store sales for the first nine months of fiscal 1997, comparable
store sales would have reflected a decrease of 3.1% for the first nine months
of fiscal 1998. The balance of the increase in net sales for the first nine
months of fiscal 1998 was attributable to net sales from new stores opened
since the beginning of fiscal 1997.
At March 3, 1998, the Company had 435 stores in operation, compared with 400
stores at June 3, 1997 and 378 stores at March 4, 1997.
Gross profit for the third quarter of fiscal 1998 increased to $43.4 million,
or 39.3% of net sales, as compared to $37.9 million, or 37.2% of net sales, for
the comparable period of fiscal 1997. Gross profit for the first nine months of
fiscal 1998 increased to $127.1 million or 39.1% of net sales, as compared to
$108.5 million or 36.4% of net sales for the first nine months of fiscal 1997.
The improvement in gross margins for the third quarter of fiscal 1998 and the
first nine months of fiscal 1998 was due in part to the higher level of
commercial sales of R-12 freon in the fiscal 1997 comparable periods, which
generally had lower gross margins due to the product's commodity nature.
Excluding the impact of commercial freon sales in fiscal 1997, the gross margin
would have been 37.5% for the third quarter of fiscal 1997 and 38.1% for the
first nine months of fiscal 1997.
Selling, general and administrative (SG&A) expenses increased as a percentage
of sales from 26.4% in the third quarter of fiscal 1997 to 28.4% in the third
quarter of fiscal 1998. SG&A expenses increased as a percentage of sales from
24.6% in the first nine months of fiscal 1997 to 27.8% in the first nine months
of fiscal 1998. The increase in both periods arose in part because of the
impact of increased commercial sales of R-12 freon in the fiscal 1997 periods.
Such commercial sales generally had very limited associated SG&A expenses.
Excluding the commercial sales of R-12 freon, SG&A expenses as a percentage of
sales for the third
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quarter and first nine months of fiscal 1997 would have been 26.8% and 27.4%,
respectively. In addition to the commercial sales of freon discussed above, the
Company incurred approximately $600,000 of expenses in the third quarter of
fiscal 1998 related to the development and roll-out of the Company's commercial
delivery program.
Income from operations for the third quarter of fiscal 1998 was $12.1 million
as compared to $11.0 million in the third quarter of fiscal 1997. Income from
operations for the first nine months of fiscal 1998 was $36.8 million as
compared to $35.2 million for the first nine months of fiscal 1997. Income from
operations for the third quarter and first nine months of fiscal 1997 include
earnings associated with commercial sales of freon; such sales of freon
generally were not effectuated in fiscal 1999 and thus did not impact the
fiscal 1998 results. The fiscal 1997 income from operations also reflect an
extra week of results. When excluding the impact of such commercial sales and
the extra week, traditional DIY operating income (which reflects operating
income exclusive of commercial freon sales and associated cost of sales)
increased 22.2% and 31.9% for the third quarter and first nine months of fiscal
1998, respectively, over the comparable period results.
Other income for the third quarter and first nine months of fiscal 1998
primarily reflects the $4.0 million fee received from the termination of the
proposed acquisition of Hi-Lo Automotive, Inc., less related expenses.
Interest expense for the third quarter of fiscal 1998 was $2.8 million,
compared to $1.8 million for the third quarter of fiscal 1997. Interest
expense for the first nine months of fiscal 1998 was $7.5 million as compared
to $4.4 million for the first nine months of fiscal 1997. The increase in
interest expense was primarily the result of increased borrowings associated
with new store growth and the September 1997 funding of the amounts due
pursuant to the terms of the Settlement Agreement with Airgas.
The Company's effective tax rate for the third quarter and the first nine
months of fiscal 1998 and fiscal 1997 was 38.5%.
As a result of the above factors, net income was $7.0 million or $.42 per
diluted share for the third quarter of fiscal 1998 as compared to net income of
$5.6 million or $.34 per diluted share for the third quarter of fiscal 1997.
Net income was $19.5 million or $1.17 per diluted share for the first nine
months of fiscal 1998 as compared to net income of $18.9 million or $1.13 per
diluted share for the first nine months of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the thirty-nine weeks ended March 3, 1998, net cash of $11.4 million was
utilized by the Company's operations versus $1.0 million provided by the
Company's operations for the forty week period of fiscal 1997. During the
thirty-nine weeks ended March 3, 1998, this net use of cash was due primarily
to the September 1997 funding of the $18.5 million of required payments under
the Airgas Settlement Agreement and, the payment of associated legal expenses.
Other primary cash uses for the period included a reduction in trade accounts
payable (which was largely a result of fiscal 1997 year-end extended vendor
terms coming due), and an increase in inventories resulting primarily from new
store growth. These uses of cash were offset in part by current period
earnings, depreciation, a reduction in deferred income taxes primarily
associated with the Airgas Settlement payments in September 1997, and an
increase in other current liabilities.
Capital expenditures for the thirty-nine weeks ended March 3, 1998 were $41.2
million. The majority of the capital expenditures related to the 36 stores
opened during that period and costs associated with the expansion of the
Company's distribution center. For all of fiscal 1998, the Company expects to
open approximately 55 new stores (of which 36 were open as of the end of the
third quarter of fiscal 1998). The Company has recently reduced its total
anticipated new store openings for fiscal 1998. This revision was determined by
management to be necessary in order to enable the new store set teams to have
sufficient time to properly set each new store and enable the Company's
distribution center to ship the base inventory for the new stores without
negatively impacting the overall flow of merchandise to the Company's existing
stores. The Company expects to open 5 to 10 of the previously scheduled new
store openings in the first few weeks of fiscal 1999. In addition, work
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has begun on the expansion of the Company's existing distribution center from
approximately 300,000 square feet to approximately 600,000 square feet, with
completion expected in the late summer of 1998. The total cost of the expansion,
which includes some additional office space, is estimated to be approximately
$15 million to $18 million.
The Company also began the roll-out of a commercial delivery service in the
third quarter of fiscal 1998. The Company's commercial delivery service is
expected to consist of a program whereby commercial customers (such as auto
service centers, commercial mechanics, garages and the like) can establish
commercial accounts with the Company and order automotive parts from the
Company and such parts will be delivered from, or can be picked up from, nearby
Discount Auto Parts stores. The Company expects that its entry into the
commercial delivery market will require total capital expenditures of
approximately $5 million of which approximately $3.1 million has been incurred
to date. In addition, the commercial delivery program can be expected to
require the Company to extend trade credit to certain of the commercial account
customers as part of the ordinary course of business. The extension of such
trade credit will increase the capital requirements associated with the
roll-out of the program and will expose the Company to credit risk from
uncollectible accounts. The Company is in the process of establishing systems
to manage and control such credit risk. The amount of capital that is needed
to cover extension of trade credit will be dependent in large part upon the
success of the commercial delivery service roll-out and how quickly the
commercial business develops. Because this is a relatively new aspect of the
auto parts supply business for the Company, there are risks associated with the
Company's entry into this new aspect of the business and there can be no
assurance as to if or when the commercial delivery service business will be
profitable or as to whether the Company will experience any financial or other
challenges in managing and controlling the credit risk.
The Company anticipates that total capital expenditures for fiscal 1998
including the costs associated with the distribution center expansion and the
working capital costs associated with the roll-out of the commercial delivery
service, will be in the range of $60 million to $70 million.
As discussed in Note 4 of the Notes to Condensed Financial Statements, the
Company received a $4 million termination fee following the end of the second
quarter of fiscal 1998 as a result of the December 1997 termination of the
definitive merger agreement to acquire Hi-Lo Automotive, Inc.
As of March 3, 1998, the Company had $69.8 million of additional availability
under its existing financing agreements.
The Company has historically been able to finance most of its new store growth
through unsecured lines of credit and medium and longer term mortgage financing
provided by banks and other institutional lenders, and through cash flow from
operations. Consistent with its historical practice, the Company expects to
finance both its short and long-term liquidity needs for new store growth, as
to land and buildings, primarily through these lines of credit and mortgage
financing (renewals and replacements thereof), and as to equipment and
fixtures, primarily through cash flow from operations.
The Company's new store development program also requires significant working
capital, principally for inventories. The Company has historically used trade
credit to partially finance new store inventories and has been successful in
negotiating extended payment terms and incentives from many suppliers through
volume purchases. The Company believes that it will be able to continue
financing some of its inventory growth through the extension of favorable
payment terms and incentives from its vendors, but there can be no assurance
that the Company will be successful in doing so. The additional funding for
inventory expansion has been provided in large part from cash flow from
operations.
The Company believes that the expected cash flows from operations, available
bank borrowings and trade credit, will be sufficient to fund both short term
and long term capital and liquidity needs of the Company.
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YEAR 2000 ISSUE
The Company has conducted a review of its computer systems to identify the
systems that could be affected by the "Year 2000" issue and is developing an
implementation plan to resolve the issue. The Year 2000 problem is the result
of computer programs being written using two digits rather than four to define
the applicable year. Any of the Company's programs that have time sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations. The
Company presently believes that, with modifications to existing software and
converting to new software, the Year 2000 problem will not pose significant
operational problems for the Company's computer systems as so modified and
converted. However, if such modifications and conversions are not completed
timely or if the Company's vendors are unable to make their own modifications
and conversions on a timely basis, the Year 2000 problem may have a material
impact on the operations of the Company. Management of the Company believes the
financial impact of addressing the Year 2000 issue will be immaterial.
FORWARD LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this quarterly report contain forward looking
statements that are based on the current expectations, estimates and
projections about the industry in which the Company operates, management's
beliefs and the assumptions made by management. These statements include the
words "anticipates", "expects", "expected", "estimated" and "believes",
variations of such words, and similar expressions which are intended to
identify such forward looking statements. These forward looking statements are
subject to potential risks and uncertainties that could cause actual results to
differ materially from historical results or those currently anticipated.
These potential risks and uncertainties include increased competition, extent
of the market demand for auto parts, availability of inventory supply,
propriety of inventory mix, adequacy and perception of customer service,
product quality and defect experience, availability of and ability to take
advantage of vendor pricing programs and incentives, sourcing availability,
rate of new store openings, cannibalization of store sites, mix and types of
merchandise sold, governmental regulation of products, new store development
and the like, performance of information systems, effectiveness of deliveries
from the distribution center, ability to hire, train and retain qualified team
members, availability of quality store sites, ability to complete timely
expansion of the distribution center, ability to successfully roll-out the
commercial delivery service, credit risk associated with the commercial
delivery service, environmental risks, availability of expanded and extended
credit facilities, legal expenses associated with disputes and investigations
concerning freon matters, potential for liability with respect to these matters
and other risks.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Airgas, Inc., Airgas Management, Inc., and Airgas Speciality Gases, Inc., vs.
Discount Auto Parts, Inc., Brad Davis, JLM Enterprises, Inc. d/b/a Autoplex
Parts, Jerral L. Mayes, Sr., William D. Morris, and John Does 1-100. United
States District Court for the Southern District of Georgia, Civil Division,
Civil Action CV 497-32.
In February 1997, a complaint was filed by Airgas, Inc. and certain Airgas
affiliates against several defendants, including the Company and one of its
employees. The complaint alleged, among other things, that the Company took
part in a conspiracy with other companies and individuals unrelated to Discount
Auto Parts to defraud Airgas in connection with commercial sales of refrigerant
R-12 (freon) and sought compensatory damages in excess of $20 million, treble
damages and other relief totaling in excess of $80 million. The trial was
scheduled to begin on August 4, 1997.
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Effective July 26, 1997, the Company entered into a Compromise and Settlement
Agreement (the "Settlement Agreement") with Airgas and its affiliates, the other
defendants, and certain other parties, the terms of which were set forth in the
Company's Annual Report on Form 10-K for the year ended June 3, 1997. Because of
the involvement of the bankruptcy estate, the entire settlement was contingent
upon bankruptcy court approval.
On September 5, 1997, the bankruptcy courts approved the terms of the
settlement. Subsequently, pursuant to the terms of the Settlement Agreement,
the Company has made the required aggregate payments of $18.5 million to the
appropriate parties, and has purchased certain products from Airgas and from
one of the bankruptcy estates. Pursuant to the terms of the Settlement
Agreement, Discount Auto Parts, Airgas, the RSI bankruptcy estate, the other
defendants and certain other parties exchanged mutual releases of all claims
and issues between them. In the Settlement Agreement, there was no finding or
admission of wrongdoing on the part of Discount Auto Parts.
The Company is presently involved in litigation with its insurance carrier
pursuant to which the Company is seeking recovery under its insurance policy of
certain amounts incurred in connection with the Airgas litigation and the
settlement thereof. The ultimate outcome of such litigation or an estimate of
the amount of potential insurance recoveries, if any, cannot be determined at
this time. No benefit for any recovery which may result has been reflected in
the accompanying financial statements.
In addition to the Airgas litigation, certain federal investigation into the
subject matter of this litigation are ongoing. In particular, federal grand
jury proceedings in Savannah, Georgia in which the Company had been called upon
to respond to subpoenas may continuing and the Company is aware that the SEC
had commenced its own informal investigation. In connection with these
proceedings, the Company intends to continue its cooperation.
Dexter Carson, et. al. vs. Discount Auto Parts, Inc., et. al. United States
District Court for the Southern District of Florida, Civil Division, Civil
Action 96-08833-CIV-HURLEY
On January 23, 1997, a complaint was filed against the Company and certain of
its current and former team members in the United States District Court for the
Southern District of Florida, Civil Division.
The action alleges, among other things, racial discrimination, failure to
promote, discriminatory firing, violations of the Family Medical Leave Act,
negligence, negligent misrepresentation and related causes of action on behalf
of ten current and former team members and one related individual. No specific
dollar amount is alleged in the complaint, but the complaint seeks to recover,
under several different counts, compensatory and punitive damages, lost wages,
reinstatement, costs and attorney's fees. The Company has filed a Motion To
Dismiss and a Motion To Strike certain references within the complaint. The
motions are pending, and the Court, on its own initiative, is reconsidering the
Company's Motion For Misjoinder. Discovery is continuing. The Company believes
that the claims in the complaint are without merit and intends to defend the
action vigorously.
Automotive Supply Company vs. Discount Auto Parts et al., Superior Court of the
State of California for the County of San Bernardino, No. SCV 43674.
On or about December 9, 1997, a complaint was filed against the Company by
Automotive Supply Company in California alleging, among other things, breach of
contract, account stated, breach of implied covenant of good faith and fair
dealing, fraud and negligent misrepresentation, all in connection with the
supply by Automotive Supply Company of rotating electrical parts to the
Company. The complaint seeks compensatory damages in excess of $16,000,000 as
well as punitive and exemplary damages. The Company believes the claims in the
complaint are without merit and intends to defend the action vigorously.
Indeed, the Company has filed an answer denying the essential allegations in
the complaint and, by way of a counterclaim, is seeking
12
<PAGE> 13
to recover amounts the Company asserts it is owed to it by Automotive Supply
Company as well as amounts representing other damages the Company has suffered
as a result of Automotive Supply Company's own actions. Discovery has commenced
and is continuing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.18 First Amendment and Restatement of the Discount Auto Parts, Inc.
Supplemental Executive Profit Sharing Plan
27 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the thirteen
week period ended March 3, 1998.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DISCOUNT AUTO PARTS, INC.
Date : April 13, 1998 By: /s/ Peter J. Fontaine
------------------------------
Peter J. Fontaine
Chief Executive Officer (Principal
Executive Officer)
Date : April 13, 1998 By: /s/ C. Michael Moore
------------------------------
C. Michael Moore
Chief Financial Officer (Principal
Financial and Accounting Officer)
14
<PAGE> 1
EXHIBIT 10.18
FIRST
AMENDMENT AND RESTATEMENT
OF THE
DISCOUNT AUTO PARTS, INC.
SUPPLEMENTAL EXECUTIVE PROFIT SHARING PLAN
(ORIGINAL PLAN EFFECTIVE AS OF MAY 30, 1995;
FIRST AMENDMENT AND RESTATEMENT EFFECTIVE AS OF JUNE 3, 1997)
<PAGE> 2
FIRST
AMENDMENT AND RESTATEMENT
OF THE
DISCOUNT AUTO PARTS, INC.
SUPPLEMENTAL EXECUTIVE PROFIT SHARING PLAN
(ORIGINAL PLAN EFFECTIVE AS OF MAY 30, 1995;
FIRST AMENDMENT AND RESTATEMENT EFFECTIVE AS OF JUNE 3, 1997)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. ESTABLISHMENT AND PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Eligibility for Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 4. BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Deferred Profit Sharing Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Establishment of Accounts, Crediting Income . . . . . . . . . . . . . . . . . . . . . 5
4.3 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 Notice of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Forfeiture of Nonvested Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5. FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Payment from Company's General Assets . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 No Trust Created . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Unsecured Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 "Rabbi" Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 6. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Liability of Committee and Board;
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.1 Nontransferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.3 Employment by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.4 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 4
FIRST
AMENDMENT AND RESTATEMENT
OF THE
DISCOUNT AUTO PARTS, INC.
SUPPLEMENTAL EXECUTIVE PROFIT SHARING PLAN
This Amendment and Restatement of the Discount Auto Parts, Inc.
Supplemental Executive Profit Sharing Plan is made and entered into this 19th
day of January 1998, but is effective for all purposes as of June 3, 1997,
except as may be otherwise noted herein, by Discount Auto Parts, Inc. (the
"Company").
W I T N E S S E T H
WHEREAS, the Company has previously adopted the Discount Auto Parts,
Inc. Supplemental Executive Profit Sharing Plan (the "Original Plan"),
effective as of May 30, 1995; and
WHEREAS, pursuant to the terms of the Original Plan, the Company is
authorized and empowered to amend the Original Plan; and
WHEREAS, the Company deems it advisable and in the best interest of
the Participants to amend the Original Plan to allow the Committee to establish
from time to time the specified percentage of Compensation applicable to each
Participant for each Plan Year; to limit the term "Compensation" to mean only
regular salary and wages, overtime pay, and bonuses; and make other desired
changes.
NOW, THEREFORE, the Original Plan is hereby amended and restated in
its entirety to read as follows:
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 ADOPTION. Effective as of June 3, 1997, the Company hereby
amends, restates and reestablishes, in accordance with the terms hereof, an
unfunded plan of deferred compensation for certain of its officers and other
key management personnel and their beneficiaries as described herein, which
plan shall continue to be known as the "Discount Auto Parts, Inc. Supplemental
Executive Profit Sharing Plan" (the "Plan").
1.2 PURPOSES. The purposes of this Plan are to provide additional
retirement benefits to a select group of officers and other key management
personnel, upon whom major responsibilities for the successful operation,
administration, and management of the Company rest and whose present and
potential contributions are important to the continued success of the Company,
and to enable the Company to attract and retain in its employ highly qualified
persons for the successful conduct of its business. It is intended that these
purposes will be assisted through the granting of annual Deferred Profit
Sharing Awards.
<PAGE> 5
ARTICLE 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used hereinafter, the following terms
shall have the meaning set forth below.
(a) "ACCOUNT" means the account to which a Participant's
Deferred Profit Sharing Awards are credited as set forth herein.
(b) "BOARD OF DIRECTORS" and "BOARD" means the board of
directors of the Company.
(c) A "CHANGE IN CONTROL" means:
(1) a change in control of the Company of a
nature that is required, pursuant to the Securities Exchange
Act of 1934 (the "1934 Act"), to be reported in response to
(i) Item 1(a) of a Current Report on Form 8-K or (ii) Item
6(e) of Schedule 14A, in each case as such requirements are in
effect on May 30, 1995;
(2) the adoption by the Company of a plan of
dissolution or liquidation;
(3) the closing of a sale of all or substantially
all of the assets of the Company;
(4) the closing of a merger, reorganization or
similar transaction (a "Transaction") involving the Company in
which the Company is not the surviving corporation or, if the
Company is the surviving corporation, immediately following
the closing of the Transaction, persons who were shareholders
of the Company immediately prior to the Transaction own less
than 50% of the combined voting power of the surviving
corporation's voting securities;
(5) the acquisition of "Beneficial Ownership" (as
defined in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 30% or more of the combined voting power
of the Company's outstanding securities by any "person" (as
that term is used in Sections 13(d) and 14(d)(2) of the 1934
Act and the rules and regulations promulgated thereunder, but
not including any trustee or fiduciary acting in that capacity
for an employee benefit plan sponsored by the Company) and
such person's "affiliates" and "associates" (as those terms
are defined under the 1934 Act);
(6) the failure of the "Incumbent Directors" (as
defined below) to constitute at least a majority of all
directors of the Company (for these purposes, "Incumbent
Directors" means individuals who were the directors of the
Company on May 30, 1995, and, after his election, any
individual becoming a director subsequent to May 30, 1995,
whose election, or nomination for election by the Company's
shareholders, is approved by a vote of at least two-thirds of
the directors then comprising the
2.
<PAGE> 6
Incumbent Directors, except that no individual shall be
considered an Incumbent Director whose initial assumption of
office as a director is in connection with an actual or
threatened "election contest" relating to the "election of
directors" of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the 1934 Act).
Notwithstanding any provision above to the contrary, no Change in
Control shall be deemed to have occurred with respect to any
particular Participant by virtue of a transaction, or series of
transactions, that results in the Participant, or a group of persons
that includes the Participant, acquiring the Beneficial Ownership of
more than 30% of the combined voting power of the Company's
outstanding securities.
(d) "COMMITTEE" means: (1) as to any matter involving the
participation or benefits under this Plan for any member of the
Executive Committee, the Compensation Committee of the Board, and (2)
as to any other matter, the Executive Committee of the Board.
(e) "COMPANY" means Discount Auto Parts, Inc., or any
successor entity. To the extent required, the term "Company" may
include any subsidiary of the Company or any other affiliated
corporation that has adopted this Plan and that employs a Participant.
(f) "COMPENSATION" means a Participant's regular salary
and wages, overtime pay, and bonuses paid by the Company and taxable
to the Participant; provided, however, that no Compensation in excess
of $150,000 (or such greater amount as is taken into account for each
employee of the Company under the Company's plan maintained pursuant
to Section 401(k) of the Internal Revenue Code) shall be taken into
account for any Participant.
(g) "CONTROL DATE" means the date on which a Change in
Control occurs.
(h) "DEFERRED PROFIT SHARING AWARDS" are rights to
receive, without payment to the Company, certain amounts as
hereinafter determined.
(i) "DISABILITY" means the total and permanent disability
of a Participant by reason of sickness or injury to perform all of the
duties assigned to him by the Company, with the existence of a
Disability to be determined by the Committee in its sole discretion.
(j) "NORMAL RETIREMENT AGE" means the Participant's 65th
birthday.
(k) "PARTICIPANT" means any officer or other management
employee of the Company who meets the eligibility requirements of the
Plan, as set forth in Article 3 hereof, to be and become a
Participant, and who continues to meet such requirements. For
purposes of maintaining Participants' Accounts and distributing
benefits, the term "Participant" shall also include any former
employee of the Company who became a Participant under the Plan and
who still has a balance in an Account under the Plan.
3.
<PAGE> 7
(l) "PLAN" means the Discount Auto Parts, Inc.
Supplemental Profit Sharing Plan, as it is set forth herein and as it
may be amended from time to time.
(m) "PLAN YEAR" means the 52/53-week period ending on the
Tuesday nearest May 31.
(n) "YEAR OF EMPLOYMENT" means a Plan Year on or after
June 1, 1988 beginning in which a Participant completes at least 1,000
hours of service. For these purposes, hours of service shall be
computed by the Committee in its sole discretion using substantially
the same rules provided under Section 410 of the Internal Revenue
Code. The determination of the Committee in this regard shall be
final and conclusive as to all parties.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the
context, any masculine terminology when used in the Plan shall also include the
feminine gender, and the definition of any term herein in the singular shall
also include the plural.
ARTICLE 3. PARTICIPATION
3.1 ELIGIBILITY FOR PARTICIPATION. The Committee shall have the
exclusive right to designate which officers or other management employees of
the Company shall be eligible to participate in this Plan. Participation shall
be limited to a select group of management or highly compensated employees and
is subject to change by the Committee from time to time. No such employee
shall be eligible to be so designated by the Committee unless such employee has
completed at least one year of continuous service with the Company as of the
date specified by the Committee as the effective date that such employee is to
be considered to have entered the Plan.
3.2 DURATION. An officer or other management employee who becomes
a Participant shall continue to be a Participant until the earlier of (a) the
date he or she is no longer employed by the Company or (b) the effective date
of a determination by the Committee that he or she shall not accrue additional
benefits under this Plan; provided, in either case, that if a Participant is
then vested in benefits under the Plan, he or she shall continue as a
Participant (even though not accruing additional benefits) for the purpose of
receiving his or her then accrued vested benefits pursuant to the provisions of
this Plan.
ARTICLE 4. BENEFITS
4.1 DEFERRED PROFIT SHARING AWARDS. The Committee may elect to
make a Deferred Profit Sharing Award to each Participant who is employed by the
Company on the last day of the Plan Year. Deferred Profit Sharing Awards shall
be discretionary in nature, shall be equal to a specified percentage of a
Participant's Compensation for the Plan Year and, if an election is made to
make a Deferred Profit Sharing Award for a particular Participant, the
Committee shall establish the specified percentage of Compensation applicable
to each Participant for the Plan Year. The Committee shall
4.
<PAGE> 8
establish the specified percentage of Compensation applicable to each
Participant for the Plan Year not later than August 15th following the Plan
Year for which Deferred Profit Sharing Awards are granted. The specified
percentage of Compensation applicable to Participants, at the election of the
Committee, may be the same for all Participants or may be different based upon
Participants' positions with the Company.
4.2 ESTABLISHMENT OF ACCOUNTS, CREDITING INCOME. The Company
shall cause a Deferred Profit Sharing Award account ("Account") to be
established and maintained in the name of each Participant.
(a) The Participant's Account shall be credited, as of
the last day of a Plan Year, with the amount of the Deferred Profit
Sharing Award made to the Participant for such Plan Year.
(b) The Participant's Account shall be credited, as of
the last day of a Plan Year, with accrued interest income on the
aggregate balance of such Participant's Account (including any accrued
interest added to such balance with respect to prior Plan Years) as of
the last day of the Plan Year (but determined prior to the crediting
of any Deferred Profit Sharing Award, if any, made to the Participant
for such Plan Year), at a rate for such Plan Year equal to the greater
of (i) the arithmetic average of the respective prime rates of the
Company's principal bank as established by such bank and in effect on
the last day of each fiscal quarter of such Plan Year or (ii) the
arithmetic average of the respective interest rates as established and
in effect as of the last day of each fiscal quarter of such Plan Year
under the MetLife Guaranteed Fixed Income Account provided for
pursuant to the Company's Team Members' Profit Sharing Plan. For
example, if with respect to a particular Plan Year the applicable
prime rate is 9% at the end of the first quarter, 8.5% at the end of
the second quarter, 8% at the end of the third quarter and 8.25% at
the end of the fourth quarter, the average prime rate would be
8.4375%; furthermore if with respect to such Plan Year the applicable
interest rate under the MetLife Guaranteed Fixed Income Account is
8.25% at the end of each of the four quarters of the Plan Year, the
average interest rate would also be 8.25%; and thus the interest rate
applicable for such Plan Year would be 8.4375%.
(c) The Participant's Account shall be charged with the
amount of any benefit paid to the Participant or his beneficiary
during the Plan Year to the extent such benefit is attributable to
such Participant's Account.
4.3 VESTING. Each Participant shall become vested in the balance
of his Account based upon the Employee's aggregate Years of Employment with the
Company, as follows:
<TABLE>
<CAPTION>
Years of Employment Vested Interest
------------------- ---------------
<S> <C>
Less than 3 years 0%
3 years, but less than 4 years 20%
4 years, but less than 5 years 40%
</TABLE>
5.
<PAGE> 9
<TABLE>
<S> <C>
5 years, but less than 6 years 60%
6 years, but less than 7 years 80%
7 years or more 100%
</TABLE>
Notwithstanding the preceding provisions of this Section 4.3, a Participant
shall become 100% vested in the balance of his Account:
(a) upon the Participant's attainment of his Normal
Retirement Age; or
(b) in the event of the Participant's death or
Disability, provided such Participant was employed by the Company on the day
prior to such death or Disability; or
(c) on a Control Date, provided such Participant was
employed by the Company on the day prior to such Control Date.
4.4 NOTICE OF AWARDS. Each Participant shall be provided with
notice of his Deferred Profit Sharing Award in such form as the Committee shall
approve from time to time. Each notice shall specify (1) the value of the
Deferred Profit Sharing Award made to the Participant for the Plan Year, (2)
the aggregate value of his Account as of the end of the Plan Year, (3) the
Participant's vested interest in his Account, and (4) such other terms and
provisions not inconsistent with the Plan as the Committee shall deem
necessary, proper, appropriate or advisable.
4.5 PAYMENT OF BENEFITS.
(a) Upon a Participant's termination of employment with
the Company, or, if earlier, upon such Participant's attainment of Normal
Retirement Age, such Participant shall become entitled to receive payment of
such Participant's vested interest in the balance of such Participant's Account
determined as of the date of such event. Payment of such benefit shall be made
in a lump sum within 120 days after the occurrence of the event giving rise to
the Participant's right to receive payment. If the date of such event occurs
prior to the end of a Plan Year but the payment is not made until after the end
of such Plan Year, then interest for such Plan Year shall be credited to such
Participant's Account as of the last day of the Plan Year and the payment of
such benefit shall include the interest so credited; provided however that
under such circumstances the Participant shall not be entitled to be awarded a
Deferred Profit Sharing Award for such Plan Year, no further adjustment,
including the crediting of interest, shall be made to such Participant's
Account and the vested percentage shall still be determined as of the date of
the event triggering such Participant's right to receive payment.
(b) A Participant who attains Normal Retirement Age and
receives a distribution of the balance of such Participant's Account but who
continues his employment with the Company and continues to be designated as a
Participant in the Plan shall subsequently be entitled to receive annual
distributions of any additional amounts credited to such Participant's Account.
Payment of such additional amounts (without any further adjustment) shall be
made in a lump sum within 120 days after each such additional amount is
credited to such Participant's Account.
6.
<PAGE> 10
4.6 FORFEITURE OF NONVESTED ACCOUNTS. Upon the termination of the
employment of a Participant prior to the vesting of the entire balance of his
Account, the Participant shall have no right to receive any payment with
respect to any nonvested interest in his Account, and such nonvested interest
shall, thereupon, and without further action, be forfeited by and not payable
to such Participant; also, such forfeited interest shall not be payable to or
allocated to the Account of any other Participant under the Plan.
4.7 DEATH BENEFITS. In the event of the Participant's death
before his separation from service or in the event of the Participant's
separation from service which is followed by the Participant's death prior to
payment of the benefit, the Participant's interest in his Account shall be paid
to the person named as beneficiary in a writing delivered to the Company prior
to the Participant's death. If a Participant has not designated a beneficiary,
or if no designated beneficiary is living on the date of distribution, such
amounts shall be distributed to the Participant's estate.
ARTICLE 5. FINANCING
5.1 PAYMENT FROM COMPANY'S GENERAL ASSETS. Payment to a
Participant or his beneficiaries hereunder shall be made from assets which
shall continue, for all purposes, to be part of the general assets of the
Company, and no person, other than the Company, shall have, by virtue of the
provisions of this Plan or any agreement made pursuant to this Plan, any
interest in such assets.
5.2 NO TRUST CREATED. Nothing contained in this Plan, and no
action taken pursuant to the provisions of this Plan, shall create or be
construed to create a trust of any kind or a fiduciary relationship between the
Company and any Participant, his spouse or any other person.
5.3 UNSECURED INTEREST. No Participant hereunder shall have any
interest whatsoever in any specific asset of the Company. To the extent that
any person acquires a right to receive payments under this Plan, such right
shall be no greater than the right of any unsecured general creditor of the
Company.
5.4 "RABBI" TRUST. Notwithstanding the foregoing provisions of
this Article 5, the Company reserves the right to create and contribute funds
to a "Rabbi" trust for the purpose of paying some or all of the benefits
provided under this Plan, but the existence of any such trust shall not in any
way alter the relationship among the Company and a Participant as described in
this Article 5.
ARTICLE 6. ADMINISTRATION
6.1 ADMINISTRATION. The Committee shall have complete control
over the administration of the Plan, with all powers necessary to enable it to
carry out its duties in that respect. In connection with its administration of
the Plan, the Committee shall be empowered to exercise discretion, including
with respect to the interpretation of the terms of the Plan and in the
determination of eligibility for benefits and the amounts thereof; such
discretionary determinations and interpretations shall be binding
7.
<PAGE> 11
upon all Participants and others hereunder. Without limitation on the
foregoing, the Committee shall be authorized to construe and interpret all of
the provisions of the Plan, to adopt rules and practices concerning the
administration of the same, and to make any determination necessary hereunder,
all of which shall be binding and conclusive on all parties.
6.2 LIABILITY OF COMMITTEE AND BOARD; INDEMNIFICATION. To the
extent permitted by law, no member of the Committee or of the Board shall be
liable to any person for any action taken or omitted in connection with the
interpretation and administration of this Plan unless attributable to his own
gross negligence, fraud or bad faith. The Company shall indemnify the members
of the Committee and of the Board against any and all claims, losses, damages
and expenses, including counsel fees, incurred by them, and any liability,
including any amounts paid in settlement with their approval, arising from
their action or failure to act, except when the same is determined to be
attributable to their gross negligence, fraud or bad faith. The provisions of
this Section 6.2 are not intended to be exclusive, and nothing contained in
this Section 6.2 shall in any way limit indemnification provided members of the
Committee and/or members of the Board under the by-laws of the Company, by
contract, by statute or otherwise.
6.3 EXPENSES. The cost of payment from this Plan and the expenses
of administering the Plan shall be borne by the Company.
6.4 TAX WITHHOLDING. The Company may withhold, or require the
withholding of, from any payment which it is required to make, any federal,
state or local taxes required by law to be withheld with respect to such
payment and such sum as the Company may reasonably estimate as necessary to
cover any taxes for which the Company may be liable and which may be assessed
with regard to such payment. Upon discharge or settlement of such tax
liability, the Company shall distribute the balance of such sum, if any, to the
Participant from whose payment it was withheld, or if such Participant is then
deceased, to the beneficiary of such Participant. Prior to making any payment
hereunder, the Company may require such documents from any taxing authority, or
may require such indemnities or surety bond, as the Company shall reasonably
deem necessary for its protection.
ARTICLE 7. MISCELLANEOUS
7.1 NONTRANSFERABILITY. In no event shall the Company make any
payment under this Plan to any assignee or creditor of a Participant or of a
beneficiary. Prior to the time of a payment hereunder, a Participant or a
beneficiary shall have no rights by way of anticipation or otherwise to assign
(including without limitation in connection with a divorce) or otherwise
dispose of any interest under this Plan nor shall rights be assigned or
transferred by operation of law.
7.2 AMENDMENT OR TERMINATION.
(a) Except as provided to the contrary in subsection (b)
below, any provision of the Plan and any benefit payable under the
Plan may be amended or terminated at any time
8.
<PAGE> 12
by the Board, and no Participant or beneficiary of a deceased
Participant shall have a right to receive future benefits under the
Plan at any time. Notice of any such amendment or termination
shall be given in writing to each Participant and beneficiary of a
deceased Participant having an interest in the Plan.
(b) No amendment or termination of the Plan shall
decrease or otherwise adversely affect the payment of any amount
(without any further adjustment) as to which a Participant is vested
prior to the amendment or termination; and without limitation on the
foregoing, no amendment or termination of the Plan shall stop,
decrease or otherwise adversely affect the payment of any benefit then
paid or to be payable in the future to any Participant whose
employment with the Company had terminated prior to such amendment or
termination.
7.3 EMPLOYMENT BY COMPANY. Nothing in this Plan shall confer upon
the participant any right to any particular amount of compensation or any right
to continue in the employ of the Company, or shall interfere in any way with
the right of the Company to terminate such participant's employment at any
time.
7.4 APPLICABLE LAW. This instrument shall be construed in
accordance with and governed by the laws of the State of Florida, to the extent
not superseded by the laws of the United States.
9.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-02-1998
<PERIOD-START> JUN-04-1997
<PERIOD-END> MAR-03-1998
<CASH> 4,967
<SECURITIES> 0
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<INVENTORY> 168,249
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<PP&E> 356,553
<DEPRECIATION> 61,663
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<BONDS> 163,608
0
0
<COMMON> 166
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<TOTAL-LIABILITY-AND-EQUITY> 481,283
<SALES> 325,306
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<CGS> 198,167
<TOTAL-COSTS> 198,167
<OTHER-EXPENSES> 87,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,479
<INCOME-PRETAX> 31,723
<INCOME-TAX> 12,213
<INCOME-CONTINUING> 19,510
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<NET-INCOME> 19,510
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.17
</TABLE>
