Hi-Lo Automotive Announces Merger Agreement and Third Quarter Earnings
20 October 1997
Hi-Lo Automotive Announces Merger Agreement and Third Quarter Earnings
HOUSTON, Oct. 20 -- Hi-Lo Automotive, Inc.
(Company) today announced execution of a definitive merger agreement with
Discount Auto Parts, Inc. , pursuant to which the Company will
become a wholly owned subsidiary of Discount Auto Parts. The Company also
reported results for its third quarter ended September 30, 1997.
Under the terms of the merger, stockholders of the Company will receive
0.1485 of a share of Discount Auto Parts common stock for each share of the
Company's stock so long as the market price of Discount Auto Parts common
stock is between $22.727 and $26.148 (based on the average closing prices of
Discount Auto Parts common stock during the ten days ending three days before
Hi-Lo's stockholders meeting held to consider the merger). If the average
price of Discount Auto Parts common stock during the specified period is less
than $22.727 but above $20.78 then the exchange ratio will be increased to
provide the Company's stockholders with $3.37 of Discount Auto Parts common
stock for each share of the Company's common stock but if the average price of
Discount Auto Parts common stock during the period is less than $20.78, the
Company's shareholders will receive 0.1624 of a share of Discount Auto Parts
common stock for each outstanding share of the Company's common stock. If the
average price of Discount Auto Parts common stock during the specified period
is more than $26.148 then the exchange ratio will be reduced to provide
Hi-Lo's shareholders with $3.88 of Discount Auto Parts common stock for each
share of the Company's common stock. Based on Friday's closing price for
Discount Auto Parts common stock of $22.50, the Company's stockholders would
receive 0.1500 of a share of Discount Auto Parts common stock for each Company
share.
There are approximately 10.8 million shares of Hi-Lo common stock
outstanding, representing a transaction equity value of approximately
$36 million. The combination has been structured to be a tax free transaction
and is expected to be recorded utilizing the purchase method of accounting.
The Board of Directors of each company has approved the merger. The
merger, which is expected to be completed by February 1998, is subject to
approval by the Company's stockholders and certain other conditions, including
the termination of the waiting period under the Hart-Scott-Rodino Improvements
Act of 1976. The merger agreement may be terminated by either Discount Auto
Parts or the Company under certain circumstances, including, among others, by
the Company if the average closing price of Discount Auto Parts common stock
over the specified period prior to the Company's stockholders meeting is less
than $19.55.
Sales for the third quarter ended September 30, 1997, were $65.3 million
compared to $64.4 million for the third quarter of 1996, a 1.4% increase.
Same store sales for the three months ended September 30, 1997, increased
2.8%. Net income for the quarter was $1.3 million, compared to a net loss of
$51.7 million in the third quarter of 1996. Earnings per share for the
quarter was $.12, compared to a net loss per share of $4.80 for the third
quarter of the previous year.
Sales for the nine months ended September 30, 1997, were $184.6 million
compared to $192.3 million for the same period of 1996, a 4.0% decrease. Same
store sales for the nine months ended September 3O, l997, decreased 2.8%. Net
income for the nine-month period was $l.9 million compared to a net loss of
$51.9 million in 1996. Net income per share for the nine-month period was
$.18 compared to a net loss per share of $4.83 in 1996.
Some of the information in this press release constitutes forward-looking
information based on current information and expectations of the Company that
involve a number of uncertainties. Among the factors that could materially
affect the validity of the forward-looking information are the following:
changes in current industry trends, changes in competitive factors, changes in
the economic environment in which the Company has its operations, and other
factors which would generally affect the operations of the Company.
Hi-Lo Automotive, Inc. sells automotive aftermarket parts, products and
accessories to retail and commercial customers through its 187 stores in
Texas, Louisiana and California.
HI-LO AUTOMOTIVE, INC.
INCOME STATEMENT
(in thousands, except share data)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996* 1997 1996*
Sales $65,293 $64,396 $184,559 $192,323
Operating Income (loss) 3,136 (60,027) 6,344 (57,541)
Income (loss) before
taxes on income 1,984 (61,296) 2,971 (61,416)
Net Income (loss) $1,313 $(51,659) $1,933 $(51,905)
Net income (loss)
per share $.12 $(4.80) $.18 $(4.83)
Average shares
outstanding 10,775,000 10,756,000 10,775,000 10,756,000
* During the quarter ended September 30, 1996, the Company recorded
pre-tax charges of $59.4 million. This included a charge of
$3.7 million to cost of goods sold as a result of valuing certain
inventories at their realizable values which is less than original
costs. Also included in the pre-tax charge was $4.3 million of
operating, selling, general and administrative expenses, primarily
related to store occupancy costs. The remaining $51.4 million
provision for asset impairment and store closings included
$37.7 million of intangibles, primarily cost in excess of net assets
acquired (goodwill), and $13.7 million for store closings and
liquidation of real estate previously acquired for future expansion.
SOURCE Hi-Lo Automotive, Inc.