<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
KEVCO, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total Fee Paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
KEVCO, INC.
University Centre I
1300 S. University Drive
Suite 200
Fort Worth, TX 76107
April 7, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Meeting") of Kevco, Inc., a Texas corporation ("Kevco") to be held at 10:00
a.m., local time, on May 8, 1997, at the Bellevue Room (I and II), Fort Worth
Club, 306 West 7th Street, Fort Worth, Texas 76102. The attached Notice of
Annual Meeting and Proxy Statement fully describe the formal business to be
transacted at the Meeting, which includes the election of three directors of
Kevco. We have enclosed a copy of Kevco's Annual Report for the fiscal year
ended December 31, 1996.
Directors and officers of Kevco will be present to help host the Meeting
and to respond to any questions that our shareholders may have. I hope that you
will be able to attend.
Kevco's Board of Directors believes that a favorable vote on each of the
matters to be considered at the Meeting is in the best interest of Kevco and its
shareholders and unanimously recommends a vote "FOR" each such matter.
Accordingly, we urge you to review the attached material carefully and to return
the enclosed Proxy promptly. Whether or not you plan to attend the Meeting,
please complete, sign, date and return your proxy in the enclosed envelope. If
you attend the Meeting, you may vote in person if you wish, even though you have
previously returned your proxy. It is important that your shares be represented
and voted at the Meeting.
On behalf of your Board of Directors, thank you for your support.
Sincerely,
Jerry E. Kimmel
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
KEVCO, INC.
University Centre I
1300 S. University Drive
Suite 200
Fort Worth, TX 76107
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 8, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Kevco, Inc. (the "Company") will be held at 10:00 a.m., local
time, on May 8, 1997, at the Bellevue Room (I and II), Fort Worth Club, 306 West
7th Street, Fort Worth, Texas 76102, for the following purposes:
(1) The election of three members of the Board of Directors, which
currently consists of six directors, and will consist of seven directors on
the date of the Meeting, for the term of office stated in the Proxy
Statement.
(2) Such other business as may properly come before the Meeting or any
adjournments thereof.
The close of business on March 19, 1997, has been fixed as the record date
for determining shareholders entitled to notice of and to vote at the Meeting or
any adjournments thereof. For a period of at least 10 days prior to the
Meeting, a complete list of shareholders entitled to vote at the Meeting will be
open for examination by any shareholder during ordinary business hours at the
offices of Kevco, Inc. at University Centre I, 1300 S. University Drive, Suite
200, Fort Worth, TX 76107.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY TO ASSURE THAT
YOUR SHARES ARE REPRESENTED AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE
PREPAID IF MAILED IN THE UNITED STATES) IS PROVIDED. EVEN IF YOU HAVE GIVEN
YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
By Order Of The Board Of Directors
Richard S. Tucker
Secretary
Fort Worth, Texas
April 7, 1997
<PAGE>
KEVCO, INC.
University Centre I
1300 S. University Drive
Suite 200
Fort Worth, TX 76107
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 8, 1997
This Proxy Statement is being first mailed on or about April 7, 1997
to shareholders of Kevco, Inc., a Texas corporation (the "Company"), by the
Board of Directors to solicit proxies (the "Proxies") for use at the Annual
Meeting of Shareholders (the "Meeting") to be held at 10:00 a.m., local time, on
May 8, 1997, at the Bellevue Room (I and II), Fort Worth Club, 306 West 7th
Street, Fort Worth, Texas 76102, or at such other time and place to which the
Meeting may be adjourned (the "Meeting Date").
The purpose of the Meeting is to consider and act upon (i) the
election of three directors for terms expiring in 2000 and (ii) such other
matters as may properly come before the Meeting or any adjournments thereof.
All shares represented by valid Proxies, unless the shareholder
otherwise specifies, will be voted (i) FOR the election of the persons named
herein under "Election of Directors" as nominees for election as directors of
the Company for the term described therein, and (ii) at the discretion of the
Proxy holders with regard to any other matter that may properly come before the
Meeting or any adjournments thereof.
Where a shareholder has appropriately specified how a Proxy is to be
voted, it will be voted accordingly. The Proxy may be revoked at any time by
providing written notice of such revocation to ChaseMellon Shareholder Services,
L.L.C., 2323 Bryan Street, Suite 2300, Dallas, Texas 75201, Attention: Mona
Vorhees, by May 7, 1997. If notice of revocation is not received by such date,
a shareholder may nevertheless revoke a Proxy if he attends the Meeting and
desires to vote in person; however, if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the meeting, you must
obtain from the record holder a proxy issued in your name.
RECORD DATE AND VOTING SECURITIES
The record date for determining the shareholders entitled to vote at
the Meeting is the close of business on March 19, 1997 (the "Record Date"), at
which time the Company had issued and outstanding 6,809,500 shares of Common
Stock, par value $.01 per share (the "Common Stock"). Common Stock is the only
class of outstanding voting securities of the Company.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of
a majority of the issued and outstanding shares of Common Stock is necessary to
constitute a quorum to transact business. Each share represented at the Meeting
in person or by proxy will be counted toward a quorum. In deciding all
questions and other matters, a holder of Common Stock on the Record Date shall
be entitled to cast one vote for each share of Common Stock registered in his or
her name.
In order to be elected a director, a nominee must receive a plurality
of the votes of the shares of Common Stock present in person or represented by
proxy at the Meeting. Votes that are withheld and broker non-votes will not be
counted in the election of directors, but will be counted toward a quorum.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes
and presently consists of six directors. On the date of the Annual Meeting of
Shareholders, the size of the Board of Directors of the Company will be seven
directors, with two classes consisting of two directors and one class consisting
of three directors, with the term of one class expiring each year and with the
directors of each class, upon election, holding a three year term. Each
director shall serve until the Annual Meeting of Shareholders in the year in
which his term expires or until his successor is elected and shall have
qualified.
Two directors, Jerry E. Kimmel and Richard S. Tucker, are in the class
whose term of office expires in 1997. The Board of Directors of the Company has
nominated Messrs. Jerry E. Kimmel and Richard S. Tucker for reelection as
directors at the Meeting to serve for a three-year term expiring at the
Company's Annual Meeting of Shareholders in 2000 or until their successors are
elected and shall have qualified. The Board of Directors of the Company has
also nominated Mr. Gregory G. Kimmel for election as director to serve for a
three-year term expiring at the Company's Annual Meeting of Shareholders in 2000
or until his successor is elected and shall have qualified.
Each of the nominees has indicated his willingness to serve as a
member of the Board of Directors if elected; however, in case any nominee shall
become unavailable for election to the Board of Directors for any reason not
presently known or contemplated, the Proxy holders have discretionary authority
to vote the Proxy for a substitute nominee or nominees. Proxies cannot be voted
for more than three nominees. The following sets forth information as of April
2, 1997, as to the nominees for election at the Meeting and each of the
directors whose term of office will continue after the Meeting, including their
ages, present principal occupations, other business experience during the last
five years, membership on committees of the Board of Directors and directorships
in other publicly-held companies.
<TABLE>
<CAPTION>
Year
Term as
Director
Name Age Position Expires
- ---- --- -------- --------
<S> <C> <C> <C>
Nominees for a three-year
term ending in 2000:
Jerry E. Kimmel 59 Chairman of the Board, Chief 1997
Executive Officer, Treasurer and
Secretary
Richard S. Tucker(1) 53 Secretary and Director 1997
Gregory G. Kimmel 28 Vice President *
Continuing Directors:
Martin C. Bowen(1) 53 Director 1998
Richard Nevins(1) 49 Director 1998
Clyde A. Reed, Jr. 61 Executive Vice President, Chief 1999
Operating Officer and Director
Ellis L. McKinley, Jr. 45 Vice President, Chief Financial 1999
Officer, Treasurer and Director
</TABLE>
____________________________
* Nominee
(1) Member of the Audit Committee and the Compensation Committee
Mr. Jerry E. Kimmel is a founder of the Company and has spent his
entire career in this industry. Mr. Kimmel has served as President of Kevco
since 1978 and has served as Chairman of the Board and Chief Executive Officer
of the Company since 1993. In 1992, Mr. Kimmel was inducted into the MH/RV Hall
of Fame. Mr.
2
<PAGE>
Kimmel served as the Chairman of the Board of Governors of the Manufactured
Housing Institute ("MHI"), a leading manufactured housing trade group, in 1983
and 1984, and has served in various other MHI board capacities.
Richard S. Tucker has served as a director of the Company since 1976,
as an assistant secretary of the Company since 1988, and as the Secretary of the
Company since November 1996. Since 1995, Mr. Tucker has been a partner in the
law firm of Jackson & Walker, L.L.P., the Company's outside legal counsel. From
1984 to 1995, Mr. Tucker was a member of the law firm of Simon, Anisman, Doby &
Wilson, a Professional Corporation, located in Fort Worth, Texas. Mr. Tucker
received his B.B.A. in Accounting from the University of Texas in 1966 and his
J.D. from Southern Methodist University School of Law in 1969.
Gregory G. Kimmel joined the Company in 1994 and has served as Vice
President since January 1996. Mr. Kimmel received his B.S. in Education from
McMurray University in 1994. Gregory G. Kimmel is the son of Jerry E. Kimmel,
the Chairman, President and Chief Executive Officer of the Company.
Clyde A. Reed joined the Company in 1965 and has served as Executive
Vice President since 1986 and Chief Operating Officer since 1991. From 1978 to
1986, Mr. Reed served as Vice President of the Company. Mr. Reed has been a
director of the Company since November 1996.
Ellis L. McKinley, Jr. joined the Company in 1995, has served as Vice
President and Chief Financial Officer since such time and has served as a
director and Treasurer of the Company since November 1996. From 1994 to 1995,
Mr. McKinley was Vice President of Finance, Chief Financial Officer, Secretary
and Treasurer of Renters Choice, Inc. From 1976 until 1994, Mr. McKinley was
employed with Grant Thornton, a public accounting firm in Dallas, Texas, where
he served as an audit partner from 1987 through 1994. Mr. McKinley received his
B.B.A. in Accounting from the University of Texas in 1976.
Martin C. Bowen has served as a director of the Company since November
1996. Mr. Bowen has served as President and Chief Executive Officer of
Performing Arts Fort Worth, Inc. since 1993, Vice President of Fine Line, Inc.
since January 1996 and as a director of Aztec Manufacturing Company since
November 1993. From 1989 to 1992 he was Chairman of the Fort Worth Region for
Team Bank. From 1987 to 1989, Mr. Bowen served as Chairman & CEO of Texas
American Bank/Houston. From 1985 to 1987 he served as Executive Vice President
of Texas American Bank/Fort Worth. Mr. Bowen received his B.B.A. in Finance
from Texas A&M University in 1964 and his Bachelor of Foreign Trade degree from
the American Institute of Foreign Trade, Phoenix, Arizona, in 1968.
Additionally, he received his J.D. from Baylor University School of Law in 1973.
Richard Nevins has served as a director of the Company since November
1996. Since 1992, Mr. Nevins has served as President of Richard Nevins &
Associates, a financial advisory firm. Mr. Nevins was elected as a director of
Fruehauf Trailer Corporation ("Fruehauf") in 1995 and was elected as Chairman of
Fruehauf's executive committee in August 1996. On October 7, 1996, Fruehauf
filed for relief under Chapter 11 of the Bankruptcy Code of the United States.
Together with the other members of the Fruehauf board who had been elected by
the shareholders, Mr. Nevins resigned his positions with Fruehauf effective
October 9, 1996. During 1996, Mr. Nevins has served as acting Chief Operating
Officer and Chief Restructuring Officer for Sun World International, a
California agricultural firm, following the filing of a petition in bankruptcy
by Sun World International. From 1995 to 1996, Mr. Nevins served as a director
of Ampex Corporation and from 1993 to 1995 he served as a director of The Actava
Group (now Metromedia International Group). From 1990 to 1992 he was a Managing
Director of Smith Barney Harris Upham & Co. Mr. Nevins received his B.A. in
Economics from the University of California, Riverside in 1972 and his M.B.A.
from Stanford Graduate School of Business in 1975.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the
Board of Directors. The Board of Directors meets on a regularly scheduled basis
to review significant developments affecting the Company and to act on matters
requiring approval of the Board of Directors. It also holds special meetings
when an important matter requires action by the Board of Directors between
scheduled meetings. The Board of Directors met 3 times and acted by unanimous
written consent 4 times during 1996. During 1996, each member of the Board of
Directors participated in all Board of Directors and applicable meetings held
during the period for which he was a director.
3
<PAGE>
The Board of Directors has two standing committees: the Audit
Committee and the Compensation Committee. The functions of these committees,
their current members, and the number of meetings held during fiscal 1996 are
described below.
Audit Committee. The Audit Committee was established to review the
professional services and independence of the Company's independent auditors,
and the Company's accounts, procedures and internal controls. The Audit
Committee recommends to the Board of Directors the appointment of the firm
selected to be the independent public accountants for the Company and monitors
the performance of such firm; reviews and approves the scope of the annual
audit; reviews and evaluates with the independent public accountants the
Company's annual audit and annual consolidated financial statements; reviews
with management the status of internal accounting controls; evaluates problem
areas having a potential financial impact on the Company that may be brought to
its attention by management, the independent public accountants or the Board of
Directors; and evaluates all public financial reporting documents of the
Company. The Audit Committee is comprised of Richard S. Tucker, Martin C. Bowen
and Richard Nevins. The Audit Committee met one time in 1996.
Compensation Committee. The function of the Compensation Committee is
to fix the annual salaries and bonuses for the officers and key employees of the
Company. The Compensation Committee is comprised of Richard S. Tucker, Martin
C. Bowen and Richard Nevins. The Compensation Committee met one time in 1996.
The Company does not have a nominating committee. The functions
customarily performed by a nominating committee are performed by the Board of
Directors as a whole.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information with respect to beneficial
ownership of Common Stock as of March 19, 1997 by (i) all persons known to the
Company to be the beneficial owner of 5% or more of the Common Stock, (ii) each
director of the Company, (iii) the chief executive officer and each of the
Company's four other most highly compensated executive officers whose total
annual compensation for 1996 based on salary and bonus earned during 1996
exceeded $100,000 (the "Named Executive Officers"), and (iv) all the Company
directors and executive officers as a group. This table does not include shares
of Common Stock that may be purchased pursuant to options not exercisable within
60 days of March 19, 1997. All persons listed have sole voting and investment
power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial Owner or of Beneficial Percent
Number of Persons in Group Ownership of Class
- --------------------------- ----------------- --------
<S> <C> <C>
Jerry E. Kimmel(1) 3,759,196(2) 55.2%
Clyde A. Reed, Jr. 30,014(3) *
Ellis L. McKinley, Jr. 21,450(4) *
Richard S. Tucker 5,500(5) *
Martin C. Bowen 3,000(5) *
Richard Nevins 3,500(5) *
C. Lee Denham 13,400(6) *
Roger J. Kollat(7) 0 *
Gregory G. Kimmel 219,882(11) 3.2%
FMR Corp.(9) 388,000(10) 5.7%
All directors and executive officers as
a group (7 persons) 3,836,060(8) 55.9%
</TABLE>
- ------------------------------
* Less than 1%
(1) The address of Mr. Kimmel is University Centre I, 1300 S. University Drive,
Suite 200, Fort Worth, Texas 76107.
(2) Excludes 625,636 shares of outstanding Common Stock and 15,299 shares of
Common Stock issuable upon exercise of options beneficially owned by Mr.
Kimmel's adult children and his brother. Mr. Kimmel disclaims beneficial
ownership of such shares.
(3) Includes 18,846 shares of Common Stock subject to presently exercisable
options.
(4) Includes 16,450 shares of Common Stock subject to presently exercisable
options.
(5) Includes 2,500 shares of Common Stock subject to presently exercisable
options.
4
<PAGE>
(6) Includes 9,400 shares of Common Stock subject to presently exercisable
options.
(7) Mr. Kollat is no longer an employee of the Company.
(8) Includes 52,196 shares of Common Stock subject to presently exercisable
options.
(9) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.
(10) Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission dated February 14, 1997, FMR Corp. has sole power to dispose or
direct the disposition of 388,000 shares of Common Stock. Such power to
dispose or direct such disposition is as a result of a wholly-owned
subsidiary, Fidelity Management & Research Company, acting as investment
adviser to several investment companies. One such investment company
(Fidelity Low-Priced Stock Fund ("Fidelity"), which has the same business
address as FMR Corp.) owned 336,000 shares or 4.9% of the Common Stock.
Neither Edward C. Johnson 3d, FMR Corp. nor Edward C. Johnson 3d has the
sole power to vote or direct the voting of such shares, which power resides
in the various funds' Board of Trustees. Mr. Johnson 3d owns 12.0%, and
Abigail Johnson owns 24.5% of the aggregate outstanding voting stock of FMR
Corp.
(11) Includes 12,948 shares of Common Stock subject to presently exercisable.
5
<PAGE>
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid during each of the Company's last two fiscal years to the
Company's Chief Executive Officer and each of the Company's three other most
highly compensated executive officers, based on salary and bonus earned during
1995 and 1996.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Name and Principal Fiscal Underlying
Position Year Salary($) Bonus($) Options/ All Other
SARs(#) Compensation ($)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jerry Kimmel, 1996 $366,271 $249,600 - $17,163(1)
Chairman of the Board, 1995 $398,479 $191,530 - $19,643(2)
President and Chief
Executive Officer
Clyde A. Reed, Jr. 1996 $188,088 $ 96,667 11,750 $29,756(3)
Executive Vice President 1995 $179,737 $154,007 7,096 $26,440(4)
and Chief Operating
Officer
Ellis L. McKinley, Jr., 1996 $145,980 $ 29,167 14,400 $ 1,057(7)
Vice President, 1995 $ 54,527 $ 25,000 7,050 -
Chief Financial Officer
and Treasurer
C. Lee Denham, 1996 $ 95,850 $222,221 9,400 $ 1,434(5)
President, Sunbelt 1995 $ 39,000 $110,000 $ 4,292(6)
Roger J. Kollat 1996 $ 87,737 $ 25,001 - $ 1,057(7)
1995 $140,358 $ 81,500 3,548(8) $ 3,535(9)
</TABLE>
- ----------------------
(1) Consists of $12,546, representing personal use of a Company supplied car,
$3,560, representing payments by the Company for medical insurance premiums
and $1,057.49, representing the Company's contribution to such individual's
401(k) Plan account.
(2) Consists of $12,546, representing personal use of a Company supplied car,
$3,866, representing payments by the Company for medical insurance premiums
and $3,051, representing the Company's contribution to such individual's
401(k) Plan account.
(3) Consists of $4,518, representing personal use of a Company supplied car,
$24,181, representing expense recognized by the Company in 1996 relating to
future payments to be made under a deferred compensation agreement and
$1,057.49, representing the Company's contribution to such individual's
401(k) Plan account.
(4) Consists of $2,491, representing personal use of a Company supplied car,
$20,898, representing expense recognized by the Company in 1995 relating to
future payments to be made under a deferred compensation agreement and
$3,051, representing the Company's contribution to such individual's 401(k)
Plan account.
(5) Consists of $377, representing personal use of a Company supplied car and
$1,057.49, representing the Company's contribution to such individual's
401(k) Plan account.
(6) Consists of $1,241, representing personal use of a Company supplied car and
$3,051, representing the Company's contribution to such individual's 401(k)
Plan account.
(7) Represents the Company's contribution to such individual's 401(k) Plan
account.
6
<PAGE>
(8) All such options were cancelled upon Mr. Kollat's termination of his
employment with the Company on July 17, 1996.
(9) Consists of $484, representing personal use of a Company supplied car and
$3,051, representing the Company's contribution to such individual's 401(k)
Plan account.
OPTION GRANTS DURING 1996
The following table provides information related to options granted
to the Named Executive Officers during 1996.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term(1)
- ------------------------------------------------------------------------------------------ -----------------------------
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to
SARs Employees in Exercise or Base Expiration
Name Granted(#) Fiscal Year Price($/Sh)(2) Date 5%($) 10%($)
- ------ ---------- ------------ ---------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jerry E. Kimmel - - - - - -
Clyde A. Reed, Jr. 11,750(3) 3.0 $11.17 12/31/02 $36,261.26 $80,127.91
C. Lee Denham 9,400(3) 2.4 $11.17 12/31/02 $29,009.01 $64,102.32
Ellis L. McKinley, Jr. 5,000(4) 1.3 $13.50 12/16/06 $37,214.65 $91,661.47
9,400(3) 2.4 $11.17 12/31/02 $29,009.01 $64,102.32
Roger J. Kollat - - - - - -
</TABLE>
____________________
(1) The dollar amounts in these columns represent potential value that might be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming that the market price of the Common Stock
appreciates in value from the date of grant at the 5% and 10% annual rates
prescribed by regulation, and therefor are not intended to forecast
possible future appreciation, if any, of the price of the Common Stock.
(2) The exercise price of each option was equal to the fair market value of the
Common Stock on the date of the grant.
(3) Immediately exercisable.
(4) Consists of options to acquire 5,000 shares of Common Stock vesting 10% per
year on December 16 up to and including December 16, 2006, the date the
options expire.
7
<PAGE>
YEAR END OPTION VALUES
The following table presents the information regarding the value of
stock options outstanding at December 31, 1996 held by each of the Named
Executive Officers. No stock options were exercised by the Named Executive
Officers in 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY-End(#) at FY-End($)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jerry E. Kimmel - - - -
Clyde A. Reed, Jr. 18,846(2) - $92,575.06 -
C. Lee Denham 9,400(3) - $ 26,602 -
Ellis McKinley, Jr. 16,450(4) 5,000(5) $ 85,540 $2,500
Roger J. Kollat - - - -
</TABLE>
______________________
(1) The closing price for the Company's Common Stock as reported through The
Nasdaq National Market on December 31, 1996, was $14.00. Value is
calculated on the basis of the difference between the option exercise price
and $14.00 multiplied by the number of shares of Common Stock underlying
the option.
(2) Consists of options to acquire 7,096 shares of Common Stock at $5.64 per
share and options to acquire 11,750 shares of Common Stock at $11.17 per
share.
(3) Consists of options to acquire 9,400 shares of Common Stock at $11.17 per
share.
(4) Consists of options to acquire 7,050 shares of Common Stock at $5.64 per
share and options to acquire 9,400 shares of Common Stock at $11.17 per
share.
(5) Consists of options to acquire shares of Common Stock at $13.50 per share,
vesting 10% on each December 16 up to and including December 16, 2006, the
date the options expire.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company will receive a fee of $1,000 for attendance at each Board of
Directors meeting and $500 for attendance at each Board committee meeting
(unless held on the same day as a Board of Directors meeting). All directors of
the Company are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof, and for other out-of-
pocket expenses incurred in their capacity as directors of the Company.
EMPLOYMENT AGREEMENTS
Mr. Kimmel has entered into a five year employment agreement with
Kevco providing for an annual base salary of $250,000. In addition to base
salary, beginning in 1997, Mr. Kimmel, through his employment agreement, is
eligible for an annual bonus equal to 2.4% of the Company's income before income
taxes for the year provided that income before income taxes is at least $5.0
million. Such salary and bonus are subject to increase, but not decrease, by
the Company. Increases in Mr. Kimmel's compensation will be reviewed annually
by the Company's Compensation Committee in a manner so as to qualify under the
performance based compensation provisions of the Internal Revenue Code. Under
the agreement, Mr. Kimmel has agreed to perform services on behalf of the
Company and its subsidiaries in Fort Worth, Texas as he reasonably determines
are necessary to carry out his duties under the agreement. Mr. Kimmel, his
spouse and dependents are, until the death of the survivor of Mr. Kimmel and his
spouse, entitled to participate at Kevco's expense in health programs offered to
Company employees generally or, if insurance coverage is not available, to have
their health care costs reimbursed by the Company. Upon the death of Mr.
Kimmel, the Company must continue to pay his base salary for the remainder of
the then existing agreement term. The agreement can be terminated by the
Company only for cause (as defined
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in such agreement). The employment agreement, which is guaranteed by the
subsidiaries of the Company, is automatically extended for an additional year at
the end of each year's service.
Effective June 30, 1995, Mr. Denham entered into a two-year employment
agreement with Kevco providing for a minimum annual base salary of $78,000. In
addition to base salary, Mr. Denham is eligible to participate in a bonus pool,
which pool during the term of the agreement will not exceed, in the aggregate,
$1.0 million. Mr. Denham's portion of such pool is determined by the Company's
Board of Directors. Mr. Denham's agreement is automatically extended each year
for an additional year if not terminated sixty days prior to its then current
term.
Effective May 24, 1977, Mr. Reed entered into a retirement agreement
with the Company that generally provides that the Company will pay Mr. Reed or
his beneficiaries $55,000 per year for 10 years if Mr. Reed is employed with the
Company at age 65 or upon death or disability. Such agreement also provides for
a smaller lump sum payment that the Company will make upon Mr. Reed's
termination of employment prior to age 65, death or disability. Such lesser
amount equals approximately $14,000 for each year following the effective date
of the agreement, up to such termination.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Company is engaged in a highly competitive industry. In order to
succeed, the Company believes that it must be able to attract and retain
qualified executives. Prior to the Company's initial public offering in
November 1996, compensation levels for executive officers were set by the Board
of Directors. Following the consummation of the Company's initial public
offering, the Compensation Committee held primary responsibility for determining
executive compensation; however, as 1996 compensation levels had already been
determined by the Board of Directors, the Compensation Committee did not alter
these levels other than by approving certain option grants. Further, two of the
Company's executive officers are parties to employment agreements (the
"Executive Employment Agreements"), which provide for their base compensation
levels. The Compensation Committee intends that future determinations of
executive compensation will take into account input from the Company's senior
management and, among other things, one or more of the following goals:
. Company, employee and shareholder interests;
. Rewarding executives for successful strategic management;
. Recognizing outstanding performance;
. Providing incentives and rewards that will attract and
retain highly qualified and productive people;
. Motivating employees to high levels of performance; and
. Ensuring external competitiveness and internal
equity.
To achieve these goals, the Company's executive compensation policies
will integrate annual base compensation with, in some cases, bonuses based on a
variety of factors that may include the Company's operating performance and
individual initiatives and performance. In measuring the Company's operating
performance, the Compensation Committee may consider, among other things, the
Company's attainment of gross margin, operating profit and growth targets;
limits on corporate general and administrative expenses; net income and earnings
per share targets; and debt to capital ratio levels. The Compensation Committee
has not applied a formula assigning specific weights to any such factors.
Compensation through stock options is designed to attract and retain qualified
executives and to ensure that such executives have a continuing stake in the
long-term success of the Company. When granting stock options, the Compensation
Committee may consider, among other things, a number of criteria, including
the recipient's level of cash compensation, years of service with the Company,
position with the Company, the number of unexercised options held by the
recipient, and other factors. Similarly, the Compensation Committee has not
applied a formula assigning specific weights to any of these factors when making
their determinations. In order to continue to provide management the long-term
incentives afforded by stock options, during 1996 the Compensation
9
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Committee, or the Board of Directors, as applicable, approved the grant of
options to a number of the Company's officers, directors and employees.
Chief Executive Officer's Compensation for 1996. The Company's Chief
Executive Officer is compensated under the terms of his employment agreement,
which since October 1, 1996, provided for an annual base salary of $250,000 and
beginning in 1997, bonuses as described under the heading "Employment
Agreements," above. In 1996, prior to October 1, 1996, Mr. Kimmel's employment
agreement provided for an annual base salary of $400,400 and bonuses at the
discretion of the Board of Directors. For 1996, the Company's Chief Executive
Officer received a bonus of $249,600.
Compensation of Executive Officers. Compensation of the Company's
executive officers is generally comprised of base salary, annual cash bonuses,
long-term incentive compensation in the form of stock options and various
benefits. In determining salaries for the executive officers in 1996, the Board
of Directors took into account individual experience and performance of its
executive officers. In determining stock option grants for the executive
officers, the Compensation Committee, or the Board of Directors, as applicable,
evaluated a number of criteria, including the recipient's level of cash
compensation, years of service with the Company, position with the Company, the
number of unexercised options held by the recipient, and other factors.
This report is submitted by the members of the Compensation Committee:
COMPENSATION COMMITTEE
Martin C. Bowen (Chairman)
Richard S. Tucker
Richard Nevins
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company leases three of its warehouse locations from two
affiliated partnerships (K&E Land & Leasing, a Texas general partnership of
which Mr. Kimmel is a managing partner, and 1741 Conant Partnership, a Texas
general partnership of which K&E Land & Leasing is the managing general
partner). Mr. Kollat, the Company's former President of its IDC Limited
division, owns a one-third interest in 1741 Conant Partnership. The Company
also leases computer equipment from K&E Land & Leasing. These leases (i) expire
in November 2003, April 2005, October 2007 and October 2003, respectively, (ii)
provide for total future (i.e. post 1996) base rent payments of approximately
$886,000, $762,000, $2.5 million and $1.5 million, respectively, and (iii)
require payments to be made in equal monthly amounts. Mr. Kimmel's indirect
interest in such leases is 38.0%, 38.0%, 25.3% and 38.0%, respectively. Mr.
Kimmel's immediate family members (including a trust for the benefit of one such
family member) own indirect interests in such leases of 12.0%, 12.0%, 8.0% and
12.0%, respectively. Mr. Kollat owns a one-third indirect interest in the third
of such leases through his ownership of a partnership interest in 1741 Conant
Partnership. Aggregate expenditures by the Company under such leases in 1996
were approximately $672,000, of which approximately $226,000 was indirectly
attributable to Mr. Kimmel's interests in such partnerships (excluding immediate
family members' interests) and of which approximately $77,000 was indirectly
attributable to Mr. Kollat's interest in 1741 Conant Partnership. It is
anticipated that aggregate expenditures by the Company under such leases for the
remainder of their terms will be approximately $5.6 million, of which
approximately $1.8 million will be indirectly payable (less partnership
expenses) to Mr. Kimmel (excluding immediate family members' interests) and of
which approximately $830,000 will be indirectly payable (less partnership
expenses) to Mr. Kollat. With respect to the premises leased from 1741 Conant
Partnership, the Company has agreed to perform the obligations of the
partnership contained in the mortgage. The Company believes that the amounts it
has paid under such leases have not been less favorable to the Company than had
the leases been negotiated on an arms-length basis. The Company has amended the
terms of such leases so that their terms are no less favorable to the Company
than had the leases been negotiated on an arms-length basis. Two of the leased
warehouses were financed through economic development and industrial revenue
bonds; one series of which was issued by Newton, Kansas in the original
principal amount of $575,000, and with respect to which the Company is the sub-
lessee of the premises and a co-guarantor, and one series of which was issued by
Elkhart, Indiana in the original principal amount of $400,000, and with respect
to which the Company is the lessee of the premises and had agreed to perform the
obligation of the lessor contained in the mortgage.
10
<PAGE>
Prior to October 26, 1993, Billy T. Everett owned 50% of the then
outstanding common stock of the Company and served as Chairman of the Board of
the Company. Effective October 26, 1993, the Company repurchased 13% of Mr.
Everett's Common Stock holdings in exchange for the issuance of a promissory
note in the original principal amount of $747,500 and bearing interest at a
floating rate, which was 6% per annum on the date of the note; such note was
retired in 1994. Also effective October 26, 1993, Mr. Kimmel purchased Mr.
Everett's remaining Common Stock holdings in exchange for approximately $5.0
million cash and, in order to facilitate such purchase, the Company loaned Mr.
Kimmel $5.0 million. The loan is payable in monthly principal installments of
$62,500 plus interest at 9% per annum as of December 31, 1995 with the final
installment due in November 1997. As of June 30, 1996, $3.1 million remained
outstanding under such loan, and effective as of such date the note evidencing
this loan was distributed to Kevco's shareholders.
Effective October 26, 1993, Mr. Kimmel purchased a portion of a
shareholder's Common Stock holdings in exchange for approximately $5.0 million
cash and, in order to facilitate such purchase, the Company loaned Mr. Kimmel
$5.0 million. The loan is payable in monthly principal installments of $62,500
plus interest at 9% per annum as of December 31, 1995 with the final installment
due in November 1997. As of June 30, 1996, $3.1 million remained outstanding
under such loan, and effective as of such date the note evidencing this loan was
distributed to Kevco's shareholders.
Gregory G. Kimmel and James Kimmel, Jerry Kimmel's brother, earned, in
the aggregate, approximately $137,000 in compensation in 1996. Mr. Tucker, a
director of the Company, is a partner in Jackson & Walker, L.L.P., which is the
Company's principal outside legal counsel.
STOCK PERFORMANCE CHART
The following chart compares the percentage change in the cumulative
total shareholder return on the Company's Common Stock from November 1, 1996,
the date of the Company's initial public offering, through December 31, 1996,
with the cumulative total return on the S&P Small Cap 600 and the Nasdaq Stock
Market. The comparison assumes $100 was invested immediately prior to such
period in Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends. Dates on the following chart represent the last day
of the indicated fiscal year. The Company paid no dividends during such period,
except that immediately prior to the consummation of the Company's initial
public offering, the Company declared and made distributions to its shareholders
of record on such declaration date.
<TABLE>
<CAPTION>
<S> <C> <C>
100 117 Kevco
100 104 S&P SmallCap 600
100 105 NASDAQ Stock Market
</TABLE>
11
<PAGE>
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
with respect to fiscal 1994, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities have been complied with, except that Ellis L.
McKinley inadvertently failed to file a timely Form 5 to report the grant of
certain stock options.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P. as
independent auditors to examine the Company's accounts for the current fiscal
year. It is expected that representatives of Coopers & Lybrand L.L.P. will be
present at the Meeting, will be available to respond to appropriate questions of
shareholders and will have an opportunity to make a statement if they desire.
As previously reported in the Company's Registration Statement on Form
S-1 (No. 333-11173), on July 14, 1995, the Company, with the approval of its
Board of Directors, dismissed Rylander, Clay & Opitz, L.L.P. as the Company's
independent auditor. The reports of Rylander, Clay & Opitz, L.L.P. for the past
two years did not contain an adverse opinion, disclaimer of opinion,
qualification, or modification as to certainty, audit scope or accounting
principles. There were no disagreements between the Company and Rylander, Clay
& Opitz, L.L.P. in the periods referred to above or in subsequent periods on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope which, if not resolved to the satisfaction of Rylander, Clay &
Opitz, L.L.P., would have caused it to make reference to the subject matter of
the disagreements in connection with its report. On July 15, 1995, the Company
engaged Coopers & Lybrand, L.L.P. to act as the Company's principal accountant.
SHAREHOLDER PROPOSALS
Shareholders may submit proposals on matters appropriate for
shareholder action at subsequent annual meetings of the Company consistent with
Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended.
For such proposals to be considered in the Proxy Statement and Proxy relating to
the 1998 Annual Meeting of Shareholders, such proposals must be received by the
Company, Attention: Secretary, at the address set forth on the first page of
this proxy statement, no later than January 8, 1998, in order to be included in
the Company's proxy materials and form of proxy relating to that meeting.
Shareholder proposals must also be otherwise eligible for inclusion.
OTHER BUSINESS
The Company does not intend to bring any business before the Meeting
other than those described herein and at this date the Company has not been
informed of any matters that may be presented at the Meeting by others; however,
if any other matters properly come before the Meeting or any adjournment
thereof, it is intended that the persons named in the accompanying Proxy will
vote pursuant to such Proxy in accordance with their best judgment on such
matters.
MISCELLANEOUS
All costs of solicitation of Proxies will be borne by the Company. In
addition to solicitation by mail, the officers and employees of the Company may
solicit Proxies by telephone or personally, without additional compensation.
The Company may also make arrangements with brokerage houses and other
custodians, nominees
12
<PAGE>
and fiduciaries for the forwarding of solicitation materials to the beneficial
owners of shares of Common Stock held of record by such persons, and the Company
may reimburse them for their out-of-pocket expenses incurred in connection
therewith. The Company's regularly retained investor relations firm Corporate
Communications, Inc. may also be called upon to solicit proxies by telephone and
mail.
The Annual Report to Shareholders of the Company, including financial
statements for the fiscal year ended December 31, 1996 accompanies this Proxy
Statement. The Annual Report is not to be deemed part of this Proxy Statement.
By Order Of The Board Of Directors
Richard S. Tucker
Secretary
Fort Worth, Texas
April 7, 1997
13
<PAGE>
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KEVCO, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 8, 1997
The undersigned hereby appoints Jerry E. Kimmel, Ellis L. McKinley, Jr. and
P Richard S. Tucker, each with power to act without the others, as proxies,
R with full power of substitution and with discretionary authority, to vote
O all shares of Common Stock that the undersigned is entitled to vote at the
X Annual Meeting of Stockholders of Kevco, Inc. ("Kevco") to be held on
Y Thursday, May 8, 1997, at the Bellevue Room (I and II), Fort Worth Club, 306
West 7th Street, Fort Worth, Texas 76102, or at any adjournment thereof,
hereby revoking any proxy heretofore given.
THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN, AND IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS
PROXY WILL BE VOTED (i) FOR THE ELECTION OF THE THREE NOMINEES FOR DIRECTOR,
AND (ii) IN THE DISCRETION OF THE PROXYHOLDERS ON ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
(Continued and to be signed on reverse side)
(change of address)
-------------------------------------
-------------------------------------
-------------------------------------
(if you have written in the above
space, please mark the corresponding
box on the reverse side of this card)
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<PAGE>
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[ X ] Please mark
your votes
as in this
example
The Board of Directors recommends that shareholders vote FOR each director
nominee.
1. Election as Directors of the three nominees listed below
(except as indicated to the contrary below):
INSTRUCTION: To withhold authority to vote for any individual nominee,
check the withhold box and write the nominee's name on the
space provided opposite his name.
[_] FOR all nominees [_] WITHHOLD AUTHORITY to vote on one or more
listed below nominees listed below, but vote FOR the
remaining nominees
Jerry E. Kimmel ---------------------------------------------
Richard S. Tucker ---------------------------------------------
Gregory G. Kimmel ---------------------------------------------
2. With discretionary authority as to such other matters as may properly come
before the Annual Meeting.
...................................................
. . Change
. . of [_]
. . Address
...................................................
Signature Date
------------------------------------------- -------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
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