<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
March 31, 1998
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 7, 1998, 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 two directors of
Kevco. We have enclosed a copy of Kevco's Annual Report for the fiscal year
ended December 31, 1997.
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 7, 1998
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 7, 1998, 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 two members of the Board of Directors 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 16, 1998, 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 the Company 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
March 31, 1998
<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 7, 1998
This Proxy Statement is being first mailed on or about March 31, 1998 to
shareholders of Kevco, Inc., a Texas corporation ("Kevco" or 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 7, 1998, 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 two directors for terms expiring in 2001 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 6, 1998. 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 16, 1998 (the "Record Date"), at which
time the Company had issued and outstanding 6,831,159 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
consists of 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, Richard Nevins and Martin C. Bowen, are in the class
whose term of office expires in 1998. The Board of Directors of the Company has
nominated Messrs. Nevins and Bowen for reelection as directors at the Meeting to
serve for a three-year term expiring at the Company's Annual Meeting of
Shareholders in 2001 or until their successors are 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 two nominees. The following sets forth information as of March 27, 1998, 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 2001:
Martin C. Bowen(1) 54 Director 1998
Richard Nevins(1) 50 Director 1998
Continuing Directors:
Jerry E. Kimmel 60 Chairman of the Board, President and 2000
Chief Executive Officer
Richard S. Tucker(1) 53 Secretary and Director 2000
Gregory G. Kimmel 29 Vice President and Director 2000
Clyde A. Reed, Jr. 63 Executive Vice President, Chief 1999
Operating Officer and Director
Ellis L. McKinley, Jr. 46 Vice President, Chief Financial Officer, 1999
Treasurer and Director
</TABLE>
____________________________
(1) Member of the Audit Committee and the Compensation Committee
2
<PAGE>
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. 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, as Vice President, Corporate Development since
August 1997 and as director of the Company since May 1997. Mr. Kimmel received
his B.S. in Education from McMurry 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, Jr. 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 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.
3
<PAGE>
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. During 1997, the Board of Directors met 7 times and acted by
unanimous written consent 5 times. During 1997, 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.
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 1997 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, Chairman. The Audit Committee met 2 times in 1997.
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, Richard
Nevins and Martin C. Bowen, Chairman. The Compensation Committee met one time in
1997.
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.
4
<PAGE>
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information with respect to beneficial
ownership of Common Stock as of March 16, 1998 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 1997 based on salary and bonus earned during 1997
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 16, 1998. All persons listed have sole voting and investment
power with respect to their shares unless otherwise indicated.
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OR OF BENEFICIAL PERCENT
NUMBER OF PERSONS IN GROUP OWNERSHIP OF CLASS
- -------------------------- --------- --------
Jerry E. Kimmel(1) 3,744,760(2) 54.8%
Clyde A. Reed, Jr. 30,014(3) *
Ellis L. McKinley, Jr. 21,950(4) *
Richard S. Tucker 5,500(5) *
Martin C. Bowen 3,000(5) *
Richard Nevins 7,405(5) *
C. Lee Denham 9,400(6) *
M. O'Neal Miller 5,100(7) *
Gregory G. Kimmel 221,086(8) 3.2%
Wellington Management Company, 460,800(10) 6.7%
L.L.P.(9)
All directors and executive officers 4,043,115(11) 58.6%
as a group (8 persons)
___________________________________
* 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 626,386 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 16,950 shares of Common Stock subject to presently exercisable
options, or options exercisable within 60 days.
(5) Includes 2,500 shares of Common Stock subject to presently exercisable
options.
(6) Consists of 9,400 shares of Common Stock subject to presently exercisable
options.
(7) Includes 2,100 shares of Common Stock beneficially owned by such
individual's spouse.
(8) Includes 12,949 shares of Common Stock subject to presently exercisable
options and excludes 2,406 shares of Common Stock held as custodian for
such individual's children.
(9) The address of Wellington Management Company, LLP ("WMC") is 75 State
Street, Boston, Massachusetts 02109.
(10) Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission dated January 14, 1998, WMC has shared power to dispose or
direct the disposition of 460,800 shares of Common Stock and shared power
to vote or to direct the vote of 330,400 shares. As part of such Schedule
13G, WMC disclosed that its relevant subsidiary under Rule 13d-
1(b)(1)(ii)(G) is Wellington Trust Company, NA., a wholly-owned subsidiary
of WMC and a bank as defined in Section 3(a)(6) of the Securities Exchange
Act of 1934, which has the same business address as WMC.
(11) Includes 65,644 shares of Common Stock subject to presently exercisable
options and excludes 5,100 shares of Common Stock attributable to M. O'Neal
Miller, who is no longer an executive officer of the Company.
5
<PAGE>
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid during each of the Company's last three 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
1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL SECURITIES
FISCAL COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/ COMPENSATION ($)
SARS(#)
<S> <C> <C> <C> <C> <C>
Jerry Kimmel,........................... 1997 $250,000 $244,961 - $13,593(1)
Chairman of the Board, 1996 $366,271 $249,600 - $17,163(2)
President and Chief 1995 $398,479 $191,530 - $19,643(3)
Executive Officer
Clyde A. Reed, Jr....................... 1997 $204,540 $81,438 - $12,655(4)
Executive Vice President 1996 $188,088 $96,667 11,750 $29,756(5)
and Chief Operating Officer 1995 $179,737 $154,007 7,096 $26,440(6)
Ellis L. McKinley, Jr.,................. 1997 $162,975 $27,146 - $ 1,047(7)
Vice President, 1996 $145,980 $29,167 14,400 $ 1,057(7)
Chief Financial Officer 1995 $ 54,527 $25,000 7,050 -
and Treasurer
C. Lee Denham,.......................... 1997 $114,095 $ 98,178 - $ 1,594(8)
President, Sunbelt 1996 $ 95,850 $222,221 9,400 $ 1,434(9)
1995 $ 39,000 $110,000 $ 4,292(10)
M. O'Neal Miller........................ 1997 $144,711 - - $ 5,000(11)
1996 - - - -
1995 - - - -
</TABLE>
______________________
(1) Consists of $12,546, representing personal use of a Company supplied car
and $1,047, 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,
$3,560, representing payments by the Company for medical insurance premiums
and $1,057, representing the Company's contribution to such individual's
401(k) Plan account.
(3) 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.
(4) Consists of $3,851, representing personal use of a Company supplied car,
$7,757, representing expense recognized by the Company in 1997 relating to
future payments to be made under a deferred compensation agreement and
$1,047, representing the Company's contribution to such individual's 401(k)
Plan account.
(5) 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, representing the Company's contribution to such individual's 401(k)
Plan account.
(6) 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.
(7) Represents the Company's contribution to such individual's 401(k) Plan
account.
(8) Consists of $547, representing personal use of a Company supplied car and
$1,047, representing the Company's contribution to such individual's 401(k)
Plan account.
(9) Consists of $377, representing personal use of a Company supplied car and
$1,057, representing the Company's contribution to such individual's 401(k)
Plan account.
(10) Consists of $1,241, representing personal use of a Company supplied car and
$3,051, representing the Company's contribution to such individual's 401(k)
Plan account.
(11) Represents the personal use of a Company supplied car.
6
<PAGE>
YEAR END OPTION VALUES
The following table presents the information regarding the value of
stock options outstanding at December 31, 1997 held by each of the Named
Executive Officers. No stock options were exercised by the Named Executive
Officers in 1997.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END(#) AT FY-END($)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Jerry E. Kimmel - - - -
Clyde A. Reed, Jr. 18,846(2) - $139,690 -
C. Lee Denham 9,400(3) - $50,102 -
Ellis McKinley, Jr. 16,950(4) 4,500(5) $128,165 $13,500
M. O'Neal Miller - - - -
_____________________
(1) The closing price for the Company's Common Stock as reported through The
Nasdaq Stock Market on December 31, 1997, was $16.50. Value is calculated
on the basis of the difference between the option exercise price and $16.50
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, options to acquire 9,400 shares of Common Stock at $11.17 per share
and options to acquire 500 shares of Common Stock at $13.50 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 receives 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.
On September 1, 1997, the Company entered into a one year consulting
agreement with Richard Nevins providing for the payment of $50,000 for general
consulting services to the Company.
7
<PAGE>
EMPLOYMENT AGREEMENTS
Effective October 1, 1996, Mr. Kimmel 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 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 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 has held primary responsibility for determining
executive compensation. However, as the methods of determining the 1997
compensation levels were not materially changed from prior years, the
Compensation Committee did not alter these levels other than by approving an
option grant to a newly hired executive officer. Further, two of the Company's
executive officers are parties to employment agreements, which provide for their
base compensation levels.
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 a stock option in 1997 to
a newly hired executive officer, the Compensation Committee considered, among
other things, a number of criteria, including the recipient's level of cash
compensation, the long term incentive afforded by stock options and position
with the Company.
Chief Executive Officer's Compensation for 1997. The Company's Chief
Executive Officer is compensated under the terms of his employment agreement,
which since October 1, 1996, has provided for an annual base salary of $250,000
and beginning in 1997, bonuses as described under the heading "Employment
Agreements," above. For 1997, the Company's Chief Executive Officer received a
bonus of $244,961.
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 1997, the
Compensation Committee adopted the prior policy of the Company's Board of
Directors which takes into account individual experience and performance of its
executive officers. Compensation of executive officers, which is based on
recommendations of senior management, is comprised of salary and incentive-based
compensation. Factors utilized in determining executive compensation include
market analysis and periodic evaluation of individual performance, as well as
anticipated and actual business unit performance and profits and asset
management.
8
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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 an affiliated
partnership (K&E Land & Leasing, a Texas general partnership) of which Mr.
Kimmel is a managing partner. 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 1997) base rent payments of approximately $758,000, $670,000, $2.3 million
and $1.3 million, respectively, and (iii) require payments to be made in equal
monthly amounts. As of December 31, 1997, Mr. Kimmel's indirect interest in such
leases was 38.0% and Gregory G. Kimmel's aggregate beneficial interest in such
leases was 4.0%. Mr. Kimmel's immediate family members (including Gregory G.
Kimmel's beneficial interest) owned indirect interests in such leases of 12.0%.
Aggregate expenditures by the Company under such leases in 1997 were
approximately $672,000, of which approximately $255,000 was indirectly
attributable to Jerry Kimmel's interests in such partnership (excluding
immediate family members' interests) and of which approximately $27,000 was
indirectly attributable to Gregory G. Kimmel's beneficial interest. It is
anticipated that aggregate expenditures by the Company under such leases for the
remainder of their terms will be approximately $5.0 million, of which
approximately $1.9 million will be indirectly payable (less partnership
expenses) to Jerry Kimmel (excluding immediate family members' interests) and of
which approximately $200,000 will be indirectly payable (less partnership
expenses) to Gregory G. Kimmel. 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. 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.
Prior to October 26, 1993, Billy T. Everett owned 50% of the then
outstanding common stock of the Company and served as its Chairman of the Board.
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.
Gregory G. Kimmel and James Kimmel, Jerry Kimmel's brother, earned, in
the aggregate, approximately $143,000 and $137,000 in compensation in 1997 and
1996, respectively. 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.
9
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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, 1997,
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.
[GRAPH APPEARS HERE]
11/1/96 12/31/96 12/31/97
------- -------- --------
Kevco, Inc. $100 $117 $138
S&P SmallCap 600 $100 $105 $132
The Nasdaq Stock Market $100 $106 $130
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 1997, 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.
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.
10
<PAGE>
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 1999
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 7, 1999, 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 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, 1997 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
March 31, 1998
11
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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 7, 1998
P The undersigned hereby appoints Jerry E. Kimmel, Ellis L. McKinley, Jr. and
R Richard S. Tucker, each with power to act without the others, as proxies, with
O full power of substitution and with discretionary authority, to vote all
X shares of Common Stock that the undersigned is entitled to vote at the Annual
Y Meeting of Shareholders of Kevco, Inc. ("Kevco") to be held on Thursday, May
7, 1998, 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 TWO 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)
- --------------------------------------------------------------------------------
FOLD AND DETACHED HERE
The Board of Directors recommends that shareholders vote Please mark [X]
FOR each director nominee. your vote as
indicated in
this example
1. Election as Directors of the two nominees listed below (except as indicated
to the contrary below):
FOR all nominees WITHHOLD AUTHORITY
listed to the right to vote on one or more
nominees listed, but vote
FOR the remaining nominees
[ ] [ ]
INSTRUCTION: To withhold authority to vote for any individual nominee, check
the withold box and write the nominee's name on the space
opposite his name.
Martin C. Bowen
--------------------------------------------------------
Richard Nevins
--------------------------------------------------------
2. With discretionary authority as to such other matters as may properly come
before the Annual Meeting.
Change
of [ ]
Address
Signature Signature Date
-------------------------- --------------------- ---------
NOTE: Please sign exactly as name appears herein. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACHED HERE
