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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 December 2, 1997
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
Lakeland, Florida 33815
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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 - 16,604,375 shares as of December 2, 1997
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DISCOUNT AUTO PARTS, INC.
INDEX
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PART I. FINANCIAL INFORMATION Page
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 2, 1997 and June 3, 1997...................... 3
Condensed Consolidated Statements of Income - for the twenty-six and thirteen weeks
ended December 2, 1997 and November 26, 1996................................................... 4
Condensed Consolidated Statements of Cash Flows - for the twenty-six weeks
ended December 2, 1997 and November 26, 1996................................................... 5
Notes to Condensed Consolidated Financial Statements........................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 7
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings.............................................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............................................ 12
Item 6. Exhibits and Reports on Form 8-K............................................................... 13
SIGNATURES............................................................................................. 13
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PART I - FINANCIAL INFORMATION
DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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DECEMBER 2 JUNE 3
1997 1997
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ASSETS (In thousands)
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Current assets:
Cash and cash equivalents $ 6,362 $ 6,409
Inventories 163,013 151,644
Prepaid expenses and other current assets 14,699 18,644
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Total current assets 184,074 176,697
Property and equipment 341,679 316,315
Less allowances for depreciation and amortization (57,938) (50,726)
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283,741 265,589
Other assets 2,550 780
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Total assets $ 470,365 $ 443,066
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 52,118 $ 63,753
Other current liabilities 11,258 9,571
Litigation settlement - 20,400
Current maturities of long-term debt 2,400 2,400
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Total current liabilities 65,776 96,124
Deferred income taxes 5,641 3,764
Long-term debt 157,162 114,117
Stockholders' equity:
Preferred stock - -
Common stock 166 166
Additional paid-in capital 140,707 140,519
Retained earnings 100,913 88,376
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Total stockholders' equity 241,786 229,061
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Total liabilities and stockholders' equity $ 470,365 $ 443,066
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</TABLE>
See accompanying notes.
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DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED
--------------------------------- -----------------------------
DECEMBER 2 NOVEMBER 26 DECEMBER 2 NOVEMBER 26
1997 1996 1997 1996
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(In thousands, except per share amounts)
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Net sales $ 214,977 $ 195,889 $ 105,240 $ 105,788
Cost of sales, including distribution
costs 131,225 125,215 63,890 69,062
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Gross profit 83,752 70,674 41,350 36,726
Selling, general and administrative
expenses 59,015 46,427 29,438 23,938
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Income from operations 24,737 24,247 11,912 12,788
Other income (expense), net 316 (79) 592 (101)
Interest expense (4,667) (2,539) (2,614) (1,471)
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Income before income taxes 20,386 21,629 9,890 11,216
Income taxes 7,849 8,318 3,803 4,318
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Net income $ 12,537 $ 13,311 $ 6,087 $ 6,898
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Net income per share $ 0.76 $ 0.80 $ 0.37 $ 0.42
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Weighted average number of shares 16,597 16,576 16,601 16,578
============ ============ =========== ==========
</TABLE>
See accompanying notes.
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DISCOUNT AUTO PARTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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TWENTY-SIX WEEKS ENDED
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DECEMBER 2 NOVEMBER 26
1997 1996
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OPERATING ACTIVITIES (In thousands)
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Net income $ 12,537 $ 13,311
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 7,348 5,867
Deferred income taxes 8,190 -
(Gain) on sales of property and equipment (609) -
Changes in operating assets and liabilities:
(Increase) in inventories (11,369) (16,836)
(Increase) in accounts receivable - (13,519)
(Increase) in prepaid expenses and other
current assets (2,368) (4,553)
(Increase) decrease in other assets (1,835) 106
(Decrease) in trade accounts payable (11,635) (3,872)
(Decrease) in litigation settlement (20,400) -
Increase in other current liabilities 1,687 2,220
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Net cash used in operating activities (18,454) (17,276)
INVESTING ACTIVITIES
Proceeds from sales of property and equipment 853 -
Purchases of property and equipment (25,679) (35,673)
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Net cash used in investing activities (24,826) (35,673)
FINANCING ACTIVITIES
Proceeds from short-term borrowings and long-term debt 162,000 53,600
Payments of short-term borrowings and long-term debt (118,955) (1,200)
Proceeds from issuance of common stock 188 94
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Net cash provided by financing activities 43,233 52,494
Net (decrease) in cash and cash equivalents (47) (455)
Cash and cash equivalents at beginning of period 6,409 4,552
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Cash and cash equivalents at end of period $ 6,362 $ 4,097
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</TABLE>
See accompanying notes.
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DISCOUNT AUTO PARTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 2, 1997
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 twenty-six week periods ended December
2, 1997 are not necessarily indicative of the results that may be expected for
the entire fiscal year.
2. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
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December 2 June 3
1997 1997
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Unsecured revolving loan $ - $ 12,500
Real estate acquisition and
construction lines of credit - 92,017
Revolving credit agreement 97,562 -
Senior term notes 50,000 -
Senior secured notes 12,000 12,000
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159,562 116,517
Less current maturities (2,400) (2,400)
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$ 157,162 $ 114,117
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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.
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.
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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 December 2, 1997, the Company had approximately $77.4 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 December 2, 1997.
3. 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, will be reported in the Company's third quarter results.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS AND TWENTY SIX WEEKS ENDED DECEMBER 2, 1997 COMPARED TO
THIRTEEN WEEKS AND TWENTY SIX WEEKS ENDED NOVEMBER 26, 1996
Total sales for the second quarter of fiscal 1998 were $105.2 million as
compared to $105.8 million a year earlier. Commercial sales of R-12 freon
represented approximately $21.5 million or 20.3% of total sales for the second
quarter of fiscal 1997, and were negligible in the second quarter of fiscal
1998.
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Excluding the impact of such commercial sales, traditional Do-It-Yourself
("DIY") retail sales for the second quarter of fiscal 1998 increased 24.6% over
the comparable fiscal 1997 period. Traditional DIY comparable store sales
increased 9.6% for the second quarter of fiscal 1998 as compared to the second
quarter of fiscal 1997. When including commercial sales of freon in comparable
store sales for the second quarter of fiscal 1997, comparable store sales would
have reflected a decrease of 13.0% for the second quarter of fiscal 1998. The
balance of the increase in total sales for the fiscal 1998 second quarter was
attributable to net sales from new stores opened since the beginning of fiscal
1997.
Total sales for the first six months of fiscal 1998 increased 9.7% to $215.0
million, from $195.9 million a year earlier. Traditional Do-It-Yourself ("DIY")
retail sales for the first six months of fiscal 1998 increased 28.1% over the
comparable fiscal 1997 period. Commercial sales of R-12 freon represented
approximately $28.2 million or 14.4% of total sales for the first six months of
fiscal 1997, and were negligible in the first six months of fiscal 1998.
Traditional DIY comparable store sales increased 10.3% for the first six months
of fiscal 1998 as compared to the first six months of fiscal 1997. When
including commercial sales of freon in comparable store sales for the first six
months of fiscal 1997, comparable store sales would have reflected a decrease
of 6.0% for the first six months of fiscal 1998. The balance of the increase
in net sales for the first six months of fiscal 1998 was attributable to net
sales from new stores opened since the beginning of fiscal 1997.
At December 2, 1997, the Company had 421 stores in operation, compared with 400
stores at June 3, 1997 and 360 stores at November 26, 1996.
Gross profit for the thirteen week period ended December 2, 1997 increased to
$41.4 million, or 39.3% of net sales, as compared to $36.7 million, or 34.7% of
net sales, for the comparable period of fiscal 1997. Gross profit for the first
six months of fiscal 1998 increased to $83.8 million or 39.0% of net sales, as
compared to $70.7 million or 36.1% of net sales for the first six months of
fiscal 1997. The improvements in gross margins for the second quarter of fiscal
1998 and the first six months of fiscal 1998 was primarily due to higher
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 37.9% for the second quarter of fiscal 1997 and 38.4% for the
first six months of fiscal 1997.
Selling, general and administrative (SG&A) expenses increased as a percentage
of sales from 22.6% in the second quarter of fiscal 1997 to 28.0% in the second
quarter of fiscal 1998. SG&A expenses increased as a percentage of sales from
23.7% in the first six months of fiscal 1997 to 27.5% in the first six months
of fiscal 1998. The increase was primarily the result of the impact of the
higher level of commercial sales of R-12 freon in the fiscal 1997 quarter and
the first six months of fiscal 1997. 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 second quarter and first six
months of fiscal 1997 would have been 28.4% and 27.7%, respectively.
Income from operations for the second quarter of fiscal 1998 was $11.9 million
as compared to $12.8 million in the second quarter of fiscal 1997. Income from
operations for the first six months of fiscal 1998 was $24.7 million as
compared to $24.2 million for the same period a year ago. Income from
operations for the second quarter and first six months of fiscal 1997 include
earnings associated with commercial sales of freon which generally do not exist
in the fiscal 1998 results. When excluding the impact of such commercial sales,
traditional DIY operating income (which reflects operating income exclusive of
commercial freon sales and associated cost of sales) increased 47.9% and 37.6%
for the second quarter and first six months of fiscal 1998, respectively, over
the comparable period results.
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Interest expense for the thirteen weeks ended December 2, 1997 increased to
$2.6 million, compared to $1.5 million for the thirteen weeks ended November
26, 1996. Interest expense for the first six months of fiscal 1998 increased
to $4.7 million as compared to $2.5 million for the first six 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 thirteen and twenty-six weeks ended
December 2, 1997 was 38.5% as compared with 38.5% for the same periods a year
ago.
As a result of the above factors, net income was $6.1 million or $.37 per share
for the thirteen week period ended December 2, 1997 as compared to net income
of $6.9 million or $.42 per share for the thirteen weeks ended November 26,
1996. Net income was $12.5 million or $.76 per share for the first six months
of fiscal 1998 as compared to net income of $13.3 million or $.80 per share for
the first six months of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the twenty-six weeks ended December 2, 1997, net cash of $18.4 million was
utilized by the Company's operations versus $17.3 million for the comparable
twenty-six week period of fiscal 1997. During the twenty six weeks ended
December 2, 1997, this net use of cash was due primarily for the September 1997
funding of the $18.5 million or 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. The fiscal 1997 cash used in operation of $17.3 million includes
an increase in accounts receivable of $13.5 million. Such accounts receivable
were collected shortly following the end of the second quarter of fiscal 1997.
Capital expenditures for the twenty six weeks ended December 2, 1997 were $25.7
million. The majority of the capital expenditures related to the 21 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 70 new stores, as well as replacing or expanding additional
stores. In addition, work has begun on the expansion of the Company's existing
distribution center from 300,000 square feet to 600,000 square feet, with
completion expected in the 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 anticipates that it will begin 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 $3 million to $5 million of which approximately $2.5 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.
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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.
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 $70 million to $85 million.
As discussed in Note 3 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 December 2, 1997, the Company had $77.4 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, 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 much 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.
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
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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.
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.
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In addition to the Airgas litigation, certain federal investigation into the
subject mater 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 are believed to be continuing and the Company is aware
that the SEC has 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
it's 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 series of
motions which include a motion to dismiss for failure to state a claim for
relief, a motion to strike certain references within the complaint, a motion
for relief from improper joinder and a motion for more definitive statement.
All motions remain pending. 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. SCV43674
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 will be filing an answer denying the essential allegations
in the complaint and, by way of a counterclaim, will be seeking to recover
amounts the Company asserts 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on October 7, 1997.
There were 16,593,983 shares of Common Stock entitled to vote. The following
matters were voted at the meeting.
Warren Shatzer was elected to fill a Class II director seat for a three year
term, with 15,616,154 votes for his election and 93,745 withheld. E.E. Wardlow
was elected to fill a Class II director seat for a three year term with
15,614,430 votes for his election and 95,469 withheld. Directors continuing to
serve are Peter Fontaine, Chairman and Chief Executive Officer, William C.
Perkins, President and Chief Operating Officer, A Gordon Tunstall, Director and
David P. Walling, Director.
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A proposal to approve the Amendment and Restatement of the 1992 Team Member
Stock Purchase Plan was approved and adopted, with 14,378,144 votes for the
proposal, 46,148 against the proposal and 28,862 abstentions.
A proposal to approve the Amendment and Restatement of the 1995 Stock Option
Plan was approved and adopted, with 11,345,236 votes for the proposal,
3,077,379 against the proposal and 30,539 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K
On October 20, 1997 the Company filed a Form 8-K related to the
signing of the definitive merger agreement with Hi-Lo Automotive, Inc.
No other reports on Form 8-K were filed during the thirteen week
period ended December 2, 1997.
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: January 15, 1998 By: /s/ Peter J. Fontaine
--------------------------------
Peter J. Fontaine
Chief Executive Officer
(Principal Executive Officer)
Date: January 15, 1998 By: /s/ C. Michael Moore
--------------------------------
C. Michael Moore
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
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