UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by a Party other than the Registrant [X]
[X] Preliminary Proxy Statement
Name of Registrant as Specified in its Charter:
HI-LO AUTOMOTIVE, INC.
Name of Person Filing Proxy Statement:
HWANG FAMILY LTD PARTNERSHIP, BY KWANG-CHOU HWANG
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PRELIMINARY PROXY STATEMENT SUBMITTED BY
HWANG FAMILY LTD. PARTNERSHIP
2432 KEYHOLE, IRVING, TX 75062
This proxy statement and the accompanying proxy card, which
is pink, are furnished to the shareholders of Hi-Lo Automotive,
Inc., a Delaware corporation, in connection with the solicitation
by Hwang Family Ltd. Partnership, for use at the upcoming 1997
Annual Meeting of Stockholders of the company on May 20, 1997.
For the exact time and location, please refer to the proxy
statement mailed to you by the company. Definitive copies of
this material are intended to be released to stockholders around
April 21, 1997.
On March 25, 1997, the record date set by the company for
stockholders entitled to vote in this election, there are
10,756,000 shares of common stock outstanding. Each share is
entitled to one vote, no cumulative voting being allowed.
Principal holders of these shares include the participants in
this solicitation, 13.4 % , Franklin Resources Mutual fund, 9.9
%, and Dimensional Fund, 6.5% of outstanding shares, based on
year-end filings of these funds. A more detailed information
regarding the principal holders of Hi-Lo securities is presented
in the proxy statement the company has provided you.
The execution and return of the enclosed proxy will not
affect a stockholder's right to attend the meeting and vote in
person. A stockholder may revoke his or her proxy by appearing
at the meeting in person, or send a letter of revocation to this
solicitor at any time before it is exercised. Also a later dated,
executed proxy card will revoke any prior dated proxy.
The solicitation is made by dissident shareholder, Hwang
Family Ltd. Partnership, that is contesting the nomination and
election of six new directors by the board of Hi-Lo Automotive.
The other participants are :
Kwang- chou Hwang, Ming-Ing H. Hwang, Larry D. Smith,
Fred J. Hwang, and Michael A. Ward.
The service of IECA will be used in the printing of proxy
card and the distribution of Proxy material to shareholders. The
cost of such service is estimated at $8,000. Additional cost of
printing, shipping, and legal expenses is around $12,000, with
cost to date of approximately $1200. The grand total cost of
about $20,000 will be borne entirely by the partnership unless
some other investors are willing to pitch in voluntarily.
Reimbursement from the company will not be sought.
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Disclosure Regarding Participants
Hwang Family Ltd. Partnership, partners, Kwang-chou
Hwang, and Ming-Ing H. Hwang have not been convicted in a
criminal proceeding during the past ten years. The two partners
are both retirees, and reside at 2432 Keyhole Dr., Irving, Texas
75062. The partnership, together with the partners, beneficially
own 1050,950 shares of Hi-Lo common stock (par value $0.01), and
directly own 1000 shares of the same. Time and shares purchased
in the past two years were: May 1995, 5000 shares; May 1996,
20,000 shares; July 1996, 178,600 shares; August 1996, 451,000
shares; September 1996, 50,000 shares; October 1996, 136,350
shares; November 1996, 50,000 shares; December 1996, 68,600
shares; and January 1997, 92,400 shares. These shares were bought
in the open market with cash. They are not, and were not within
the past year, a party to any contract, arrangements or
understandings with any person with respect to any securities of
Hi-Lo Automotive, except the agreement disclosed below regarding
this election.
Larry D. Smith, age 59, is a retired M.D. and resides at
8207 Mason Rd., Manvel, Texas 77578. Dr. Smith is a beneficial
owner of 331,600 shares of Hi-Lo Automotive Inc. common stock
(par value $0.01), and a direct owner of none of the same. He
purchased all these shares in December, 1996 without any outside
financing. During the past ten years, he has not been convicted
in a criminal proceeding. He has not, and was not within the
past year, a party to any contract, arrangements or
understandings with any person with respect to any securities of
Hi-Lo Automotive, except the agreement disclosed below regarding
this election.
Fred J. Hwang is an anesthesiologist and is a partner of
North Hills Anesthesiology Associates, 8017 Glenview, Hurst,
Texas. During the past ten years, he has not been convicted in a
criminal proceeding. He owns 48,800 shares of Hi-Lo Automotive
common stock (par value $0.01) beneficially and none directly.
He bought 1000 shares on June 7, 1995, 18,800 shares in August
1996, 12,000 shares in September 1996, 8000 shares in November
1996, 3000 shares on December 11, 1996, and 6000 shares on March
17, 1997. No borrowed funds were used in these purchases. He is
not, and was not within the past year, a party to any contract,
arrangements or understandings with any person with respect to
any securities of Hi-Lo Automotive, other than the agreement as
disclosed below regarding this election.
Michael A. Ward is a partner of Coastal Securities, 1160
Dairy Ashford, Fifth Floor, Houston, Texas 77079. During the
past ten years, Mr. Ward has not been convicted in a criminal
proceeding. He is a beneficial owner of 4000 shares of Hi-Lo
common stock (par value $0.01) , and direct owner of 1000 share
of the same. He purchased 1000 shares on February 4, and 4000
shares on February 6, 1996. No indebtedness was involved in
purchasing of these shares. He is not, and was not within the
past year, a party to any contract, arrangements or
understandings with any person with respect to any securities of
Hi-Lo Automotive, except the agreement disclosed below regarding
this election.
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Participants as a group hold 1,436,350 shares of Hi-Lo
common stock, representing 13.4 % of total number of shares
qualified to vote in this election. The participants have agreed
to vote all their shares for election of the three nominees
supported by the solicitor, and reject all nominees recommended
by the present board.
No participant has any arrangement or understanding with
respect to future employment with the company, except as director
of the company.
Performanc of Company and Management
As you all know, Hi/Lo is in a precarious financial
situation, with dwindling market share and mounting losses
threatening to put it out of business. Table 1, which is prepared
from the company's 1996 quarterly reports, summarizes the
financial performance of the company from 1991 to 1996. The most
disturbing aspect is the way per store sales has decreased over
the years, especially in the last two years. This in spite of
consumer price increases each year. The huge loss shown for
1996 does include a huge write-off taken in the third quarter,
but even without that, the third and the fourth quarter figures
include sizable operating losses. This trend can not continue
much longer before the company will be faced with liquidity
problems. For more detailed financial data of the company, please
study its annual report you have just received from the company.
Table 1. Financial Performance of Hi/Lo
1996 1995 1994 1993 1992 1991
Sales/Store 1.293 1.380 1.499 1.520 1.547 1.429
(million)
Operating (59.3) 8.43 17.51 13.38 17.58 16.48
Income(MM)
Net Income (4.99) 0.16 0.85 0.64 0.89 0.80
Per Shr($)
The management of the company has not taken any meaningful
measures to improve its competitiveness. Instead of focusing on
restoring reputation and returning to profitability, the company
is squandering more money, at a tune of two million dollars,
developing a hi-tech central call station to serve all commercial
garages. This plan was conveyed to the solicitor at a meeting on
November 7, 1996. After this meeting, this solicitor wrote Mr.
Michael Young a letter enumerating the reasons why the solicitor
believed that it should be scrapped. This venture, like the
California expansion, in which the company paid $9.8 million on
November 1, 1994, to purchase 8 stores in California and had to
write off about $5.0 million in 3 rd quarter 1996 to reflect the
true values based on cash flows produced, is bound to fail simply
because it does not make any business sense. The $5.0 million
write-off figure was given to the solicitor by the CFO of the
company at the same November meeting. Commercial repair shops
always shop for auto parts at stores closest to them. They want
parts delivered within minutes. And they like to deal with some
one they like and can trust. The business involves a lot of
exchanges and is, therefore, very difficult to handle by a
central call station. Every mechanic this solicitor has contacted
chuckled when told of this new hi-tech call center plan.
These two examples are cited here to demonstrate the
general attitude and mind set of the management that, when faced
tough problems to solve, would launch some Quixotic ventures to
create a false sense of achievement. The manager of the
partnership has conducted an extensive investigation to identify
some of the problems plaguing the company and has submitted
various suggestions to the company, hoping to see some
improvements in its operations. These problems include
inadequate electronic catalog system that only quotes high priced
brand parts for certain vehicles; failure to carry many common
auto parts; prices higher than those offered by AutoZone;
employing 2 managers in each store which deals with both regular
and commercial customers, each reporting to different
supervisors, thus resulting in much waste of man power; giving
local store managers no authority to run the stores; and so
forth. So far the management has only fixed an electronic catalog
problem pointed out by the solicitor. It took a little over 3
months to fix the problem. And since this catalog glitch was
fixed in early March, sales seems to have improved somewhat.
However, a lot more must be done to improve our performance.
Purpose and Intention
The partnership attempts , with your support, to elect
three investor friendly directors who have been nominated for
this upcoming election. Your proxies, if executed and returned,
will be voted for electing these three candidates for directors
and rejecting all board nominated directors on the ballot. If you
have any questions, please call us at (972) 570-7718
If proxies from a majority of shareholders are received, we
should be able to take control of the company, and the newly
elected directors will hold a meeting to elect a new chairman of
the board, and also decide whether to fill any more directors to
serve until the next election, as is permitted by the by-laws.
The following plan will then be implemented immediately: (a). A
committee will be formed to look for a buyer of the company. (b).
Concurrently, various measures will be taken to improve Hi/Lo's
operations. These include, but not limited to, improving our
inadequate computer system with more competent computer
personnel, improving our warehouse and inventory control
operations, matching competitors' prices across the board,
decentralizing the current management structure, eliminating
commercial sales managers in many of company stores, and trying
to sell unprofitable stores to store managers or any other
interested parties. These measures will be influenced and
modified by surveys of opinions and suggestions that we will seek
from all key employees of the company down to store managers. We
hope that these actions would improve our bottom line so that
even if we do not succeed in finding a reasonable buyer, the
company would become more competitive and profitable.
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Nominees Supported by Solicitor
All three nominees for directorship who are supported by the
partnership have a common commitment and understanding that, if
elected, they will work vigorously toward enhancing shareholder
value. They are all firm believers in the doctrine that the
board should be controlled by shareholders. These nominees are:
MICHAEL A. WARD---Age 44, B.S., Business Administration, Univ. of
Kansas, 1979. Has worked in the financial fields for 18 years,
of which 12 years has been in bankruptcy/turnaround markets. Has
been a partner at Coastal Securities, Houston, Texas for 6
years. Currently holds 5000 shares of Hi/Lo common stock. If
elected, will work with other board members to improve stock
value by implementing various strategies.
KWANG-CHOU HWANG----Age 64, Ph.D Chem Eng., California Institute
of Technology, 1965. Senior Engineering Specialist, Space and
Aircraft systems, Garrett Corp., Los Angeles, 1966 to 1979.
Managed real estate and securities investments, 1979 to 1997.
Stockholder of Hi/Lo, 1995 to 1997, currently a beneficial owner
of 9.8 % of outstanding shares. He is managing partner of Hwang
Family Ltd. Partnership, Irving, TX. Committed to fight to
improve shareholder value if elected.
FRED J. HWANG----Age 32, B.S. Biochem, University of Dallas,
1986, M.D. University of Texas Health Sciences, Houston, 1990.
Completed Anesthesiology residency, St. Louis University
Hospitals, 1994. Currently a partner at North Hills
Anesthesiology Associates, Hurst, TX.. Throughout his young
life, he has been a hot rod enthusiast. Motorcycles, fast cars,
you name it. He is very much interested in anything mechanical,
which includes auto parts. Being son of Kwang-chou Hwang, and
also a beneficial owner of 48,800 shares of Hi/Lo, he vows to
work for maximizing shareholder value.
None of the nominees listed above has ever had any business,
financial or contractual relationship with the company in the
past.
The compensation and benefits these nominees will receive,
if elected, will be the same as those received by the present
board members. Please look in the proxy statement sent to you by
the company for details.
Voting Procedures
The company by-laws requires that the presence at the
meeting in person or by proxy of the holders of a majority of the
outstanding shares entitled to vote is necessary to constitute a
quorum. To be elected, a nominee must win a plurality of the
votes cast, with abstention votes treated equally with rejection
votes.
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The three nominees will not appear on the proxy card mailed
to you by the company, but do not let that bother you. The
company has assured this solicitor, in writing, that these
candidates can be presented and voted on at the meeting, or any
adjourned meeting thereof, and the partnership will vote your
proxies for these candidates. All you have to do, if you agree
with what this solicitor intends to do, is discard the proxy
card mailed out to you by the company, execute and return the
proxy card enclosed in this solicitation. Be sure to select Box 1
on the proxy card.
Stockholder Proposal and Director Nomination
Rules and deadlines regarding submittal of stockholder
proposal and nomination of directors for the 1998 stockholders'
meeting are presented in the proxy statement furnished to you by
the company, and will not be repeated here.
Your support is crucial at this moment in time and will be
greatly appreciated.
/s/ Kwang-chou Hwang
Kwang-chou Hwang
Managing Partner, Hwang Family Ltd. Partnership
Irving, TX 75062
Tel: (972) 570-7718
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APPENDIX
PROXY SOLICITED ON BEHALF HI-LOAUTOMOTIVE,INC.
OF HWANG FAMILY PARTNERSHIP 5/20/97
HI-LO AUTOMOTIVE,INC.ANNUAL
MEETING TO BE HELD ON 5/20/97 DIRECTIONS:
FOR HOLDERS AS OF 3/25/97 (MARK X FOR ONLY ONE BOX)
CUSIP: 42839-D-10-0
PARTNERSHIP RECOMMENDS BOX 1. CONFER AUTHORITY TO
HWANG FAMILY LTD.
01---MAICHAEL A WARD PARTNERSHIP TO VOTE
02---KWANG-CHOU HWANG FOR THREE NOMINEES
03---FRED J. HWANG LISTED HERE AND REJECT
ALL COMPANY NOMINEES
BOX 2. REJECT ALL NOMINEES
BOX 3. REJECT NOMINEES LISTED
BELOW:
NOMINEE:__________________
(WRITE ID NO FOR NOMINEE)
DATE:________________________
SIGNATURE:___________________