1
Exhibit (c)(3)
EMPIRE
VALUATION
CONSULTANTS
PRIVATE & CONFIDENTIAL
March 20, 2001
Special Committee of Independent Directors of
Hahn Automotive Warehouse, Inc.
c/o William Buckingham, Director
24 Berkeley Street
Rochester, New York 14607
Dear Committee:
As an extension of Empire's presentation on March 14th, you have asked us to
present to you an analysis of Hahn's net asset value ("NAV") and to advise you
what consideration of its NAV is reasonable in light of the implied ranges in
fair market value using the capitalization of income and market approaches which
we previously discussed. In addition, you have asked me to review and comment on
the March 15, 2001 letter to you from Eli Futerman and Daniel Chessin.
NAV COMPUTATION
- ---------------
Exhibit 1 (attached) presents an estimate of Hahn's NAV using the following
assumptions:
Land and Building: The Company owns five properties with an original cost of
$959,000 and a current book value of about $656,000. Based upon my discussions
with Al Van Erp and a review of the property's real estate tax assessments, we
have estimated a current market value of $1,292,000 and transaction costs of
7.5%. The majority of this market value was estimated for Hahn's Cleveland
property, which was estimated at $1M. (+$539K)
- -----------------------------------------------------------------------------------------------
350 Fifth Avenue, Suite 5513 New York, N.Y. 10118 (212) 714-0122 Fax: (212) 714-0124
3255 Brighton Henrietta T. L. Road Rochester, N.Y. 14623 (716) 475-9260 Fax: (716) 475-9380
2
Special Committee of Independent Directors of
Hahn Automotive Warehouse, Inc.
March 20, 2001
Page 2
OTHER FIXED
ASSETS: Capitalized Leases adjusted to zero. (-$2.7M)
Leasehold Improvements adjusted to zero. (-$642K)
Computer equip adjusted to 30% of cost (+$109K)
Furn. & Fix. adjusted to 30% of cost (+$234K)
Vehicles adjusted to 50% of cost (+$1.1M)
INVENTORY: Adjusted to FIFO (no deferred tax booked) (+$2,879,000)
GOODWILL: Adjusted to Zero (-$2,124,000)
DEFERRED TAX
ASSET: Adjusted to $1,899,000, which equaled $2,399,000 minus a $500K
NYS tax exposure. (-$2,548,000)
AUTOWORKS,
LTD: No change to equity & receivable. The company history was
losses in first two years and a $140+ profit in 2000. The
outlook for 2001 is $50K profit to breakeven.
IAUTOSPORTS: $90K investment was adjusted down 50%. Outlook uncertain.
CC OF ROCH: Net equity of $58 adjusted down 50%.
CAPITALIZED
CLOSING COST: Adjusted to zero (-$504K)
CONTINGENT LIAB.
OPER. LEASES: Estimated at $1,353,000 Future lease obligation is about $3.5
million through 2006.
CONTINGENT LIAB.
AUTOWORKS: Estimated at $450K - midpoint of possible range.
With the above adjustments, Hahn's estimated NAV is about $1.87 per share. If
one remove the contingent liabilities (Tax $500K and operating leases
$1,353,000) the NAV per share rises to $2.26/share. If one adjust the base NAV
($1.87) for a 10% adjustment to A/R & inventory, then NAV drops to $0.54 per
share.
- -----------------------------------------------------------------------------------------------
350 Fifth Avenue, Suite 5513 New York, N.Y. 10118 (212) 714-0122 Fax: (212) 714-0124
3255 Brighton Henrietta T. L. Road Rochester, N.Y. 14623 (716) 475-9260 Fax: (716) 475-9380
3
Special Committee of Independent Directors of
Hahn Automotive Warehouse, Inc.
March 20, 2001
Page 3
Delaware Block Method
Exhibit 2 presents a range of hypothetical values for Hahn's common stock using
a weighting process often referred to as the Delaware Block Method. The
concluded fair market value for Hahn's common stock are:
High end: ($1.17 to $1.58)
Low end: ($0.70 to $0.79)
Mid point: ($0.94 to $1.04)
If there is a dissenting case for Hahn, I believe that the appropriate weighting
would be no more than 40% to NAV and more likely 20% to 30% weighting. The
market approach would be given the highest weighting; however, at issue would be
the appropriate control premium.
I will discuss the March 15th response letter at today's meeting.
Should you care to discuss any aspect of the above, please call me at (716)
475-9260.
Sincerely,
/s/ Terence L. Griswold
Terence L. Griswold, ASA
Managing Director
TLG/mmc/Encs.
- -----------------------------------------------------------------------------------------------
350 Fifth Avenue, Suite 5513 New York, N.Y. 10118 (212) 714-0122 Fax: (212) 714-0124
3255 Brighton Henrietta T. L. Road Rochester, N.Y. 14623 (716) 475-9260 Fax: (716) 475-9380
4
EXHIBIT 1
HAHN AUTOMOTIVE WAREHOUSE INC. AND SUBSIDIARIES
CALCULATION OF NET ASSET VALUE
DEC 31, MARKET ADJUSTED BOOK TRANSACTION NET ASSET
2000 ADJUSTMENTS VALUE COSTS VALUE
========================================================================
ASSETS
- ------
Cash 80 80 80
Trade Receivables, Net 15,225 15,225 15,225
FIFO Inventory 47,695 47,695 47,695
Prepaid Expenses 450 450 450
Deferred Tax Benefit - S/T 1,449 (1,449) 0 0
------------------------------------------------------------------------
TOTAL CURRENT ASSETS 64,899 (1,449) 63,450 0 63,450
------------------------------------------------------------------------
Land & Buildings 932 360 1,292 (97) 1,195
Buildings Under Capital Leases 4,422 (4,422) 0 0
Leasehold Improvements 2,241 (2,241)
Computer Equip. - 30% of cost 2,628 (1,840) 788 788
Furniture & Fix - 30% of costs 4,023 (2,816) 1,207 1,207
Vehicles - 50% of costs 2,592 (1,296) 1,296 1,296
------------------------------------------------------------------------
TOTAL FIXED ASSETS 16,838 (12,255) 4,583 (97) 4,486
Less: Accumulated Depreciation (10,896) 10,896 0 0
------------------------------------------------------------------------
NET FIXED ASSETS 5,942 (1,359) 4,583 (97) 4,486
------------------------------------------------------------------------
Security Deposits 742 742 742
Deferred Tax Asset (adj. $500K for
tax audit) 2,998 (1,099) 1,899 1,899
Goodwill 2,124 (2,124) 0 0
Inv. In Autoworks LTD 469 469 469
Inv. In iAutosports (Internet) 90 (45) 45 45
Inv in Long-term Rec. 1,389 1,389 1,389
Inv. In CC of Rochester 58 (29) 29 29
Inv. In Grand rental 1 (1) 0 0
CSVLI 429 429 429
Capitalized Closing Cost & Other 504 (504) 0 0
------------------------------------------------------------------------
TOTAL OTHER ASSETS 8,804 (3,802) 5,002 0 5,002
------------------------------------------------------------------------
TOTAL ASSETS 79,645 (6,610) 73,035 (97) 72,938
========================================================================
LIABILITIES
- -----------
Current Portion of LTD and Capital
Leases 2,170 2,170 2,170
Accounts Payable 9,342 9,342 9,342
Compensation Related Liabilities 1,215 1,215 1,215
Discontinued Operations 375 375 375
Other Accrued Expenses 4,158 4,158 4,158
------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 17,260 0 17,260 0 17,260
------------------------------------------------------------------------
Obligations Under Credit Facility 37,788 37,788 37,788
Note Payable - Officer and
Affiliates 1,445 1,445 1,445
Capital lease Obligation - ($7.1M
through 2008) 2,706 2,706 2,706
Unaffilaited Lease obligation
($3.5M through 2006) 1,353 1,353 1,353
Other Long-term Debt 889 889 889
Contingent Liabilities -Autoworks 0 450 450 450
Other Liabilities 2,170 2,170 2,170
------------------------------------------------------------------------
TOTAL OTHER LIABILITIES 44,998 1,803 46,801 0 46,801
------------------------------------------------------------------------
TOTAL LIABILITIES 62,258 1,803 64,061 0 64,061
------------------------------------------------------------------------
Capital Stock 47 47 47
Paid-in Capital 25,975 25,975 25,975
Retained Earnings (10,391) (10,391) (10,391)
Balance Sheet Adjustments 1,756 (8,413) (6,657) (97) (6,753)
------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 17,387 (8,413) 8,974 (97) 8,878
------------------------------------------------------------------------
TOTAL LIABILITIES & EQUITY 79,645 (6,610) 73,035 (97) 72,939
========================================================================
Marketable Net Asset Value 8,878
Shares Outstanding 4,745,014
Marketable Net Asset Value per Share $1.87
5
EXHIBIT 2
HAHN AUTOMOTIVE WAREHOUSE INC. AND SUBSIDIARIES
WEIGHTING BETWEEN APPROACHES
(DELAWARE BLOCK APPROACH)
HIGH LOW AVG.
---- --- ----
INVESTMENT VALUE (CAPITALIZATION OF DEBT-FREE INCOME) 0.99000 0.95000 0.97000
MARKET VALUE 0.81000 0.75000 0.78000
NET ASSET VALUE 2.26000 0.54000 1.21000
1/3 WEIGHT EACH 1.35333 0.74667 0.98667
WEIGHT (30/30/40) 1.44400 0.72600 1.00900
WEIGHT (25/25/50) 1.58000 0.69500 1.04250
WEIGHT (40/40/20) 1.17200 0.78800 0.94200