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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
__________________
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For the Fiscal Year Ended Commission File Number
February 28, 1997 0-12490
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ACR GROUP, INC.
(Exact name of registrant as specified in its Charter)
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<S> <C>
Texas 74-2008473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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3200 Wilcrest Drive, Suite 440, Houston, Texas 77042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 780-8532
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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The aggregate market value of the common stock held by nonaffiliates
of the registrant on April 30, 1997 was $23,302,056. The aggregate market
value was computed by reference to the last trading price as reported on the
National Association of Securities Dealers Automated Quotation System. For the
purposes of this response, Executive Officers, Directors and holders of more
than 10% of the Registrant's common stock are considered affiliates of the
registrant.
The number of shares outstanding of the registrant's common stock as
of April 30, 1997: 10,371,555 shares
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ALEX TREVINO, JR., age 61, has served as a director of the Company
since 1982, Chairman of the Board of the Company since 1988 and President and
Chief Executive Officer of the Company since July 1990. From February 1990
until his date of employment, he was a consultant to the Company. From
September 1987 to February 1990, he served as President of Western Operations
of the Refrigeration and Air Conditioning Group of MLX Corporation, which is a
distributor of commercial refrigeration, heating and cooling equipment.
ANTHONY R. MARESCA, age 46, has been employed by the Company since
1985, serving as Controller until November 1985 when he was promoted to Senior
Vice President, Chief Financial Officer and Treasurer. Mr. Maresca has been a
director of the Company since 1986. Mr. Maresca is a certified public
accountant.
RONALD T. NIXON, age 41, has been a shareholder and officer since 1990
in The Catalyst Group, Inc., a mid-market private investment firm specializing
in providing equity and subordinated debt financing. Mr. Nixon has been a
director of the Company since December 1992.
A. STEPHEN TREVINO, age 34, is a partner in the law firm of Trevino &
Leppert, L.L.P. Mr. Trevino has been a director of the Company since May 1997.
Mr. Trevino is the son of Alex Trevino, Jr., Chairman and Chief Executive
Officer of the Company.
The Board of Directors of the Company met four times during the fiscal
year ended February 28, 1997. The Board has established two standing
committees. The Audit Committee, comprised of Messrs. Nixon and A. Stephen
Trevino, exercises oversight with respect to the Company's accounting practices
and procedures and its relationship with its independent auditors. The Audit
Committee met one time during fiscal 1997. The Compensation Committee,
comprised of Messrs. Nixon and A. Stephen Trevino, makes recommendations to the
Board of Directors regarding the compensation and benefits of officers. There
was one Compensation Committee meeting held during fiscal 1997. The Company
does not have a nominating committee.
No director attended less than 75% of the aggregate of the total
number of meetings of the Board of Directors and the total number of meetings
held by all committees of the Board of Directors on which the director served.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid by the Company during the fiscal years ended February 28,
1997, February 29, 1996 and February 28, 1995 to the Company's chief executive
officer. No other executive officer of the Company received compensation which
exceeded $100,000 during the fiscal year ended February 28, 1997.
SUMMARY COMPENSATION TABLE
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Long-Term
Compensation Awards
Fiscal Annual Compensation --------------------------------
Name and Principal Period ------------------- Restricted
Position Ended Salary Stock Award ($) Options (#)
------------------------------- ------- ------ --------------- -----------
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Alex Trevino, Jr. 2/28/97 $150,000 $125,000 -
President and 2/29/96 150,000 - 25,000
Chief Executive Officer
2/28/95 125,000 - 25,000
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Option Grants in Last Fiscal Year
No options were granted by the Company during the fiscal year ended
February 28, 1997 to any of the executive officers or directors.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
The following table discloses the value, as of February 28, 1997, of
unexercised stock options held by the Company's chief executive officer. Such
officer did not exercise any stock options during the fiscal year ended
February 28, 1997.
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Number of Unexercised Value of Unexercised in-
Options at the-Money Options at
Shares February 28, 1997 February 28, 1997
Acquired on Value --------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alex Trevino, Jr. -0- - 383,437 - $855,897 -
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors consists of the
two directors who are not employed by the Company. There are no committee
interlocks or insider participation among the members of the Compensation
Committee.
The goal of the Compensation Committee is to ensure that the Company's
compensation policies are suitable to attract and retain highly qualified
executive officers and directors. Particular emphasis is placed on creating an
appropriate blend of base and incentive compensation. Incentive compensation
may also include both cash and equity components to align executives' interests
with those of the shareholders.
The Committee reviews annually the compensation of the Company's
executive officers. In evaluating the level of base compensation, the
Committee gives particular consideration to the relative compensation of
executives in similar positions in publicly traded wholesale distribution
companies with comparable sales. From time to time, the Committee may obtain
advice from compensation and benefits consultants. The Committee does not
anticipate that compensation paid to executive officers will exceed the limits
for deductibility established by Section 162(m) of the Internal Revenue Code of
1986, as amended.
During fiscal 1997, there were no adjustments made to any element of
Mr. Trevino's compensation. However, the Compensation Committee decided to
accelerate the timing of the restricted stock award that was granted to Mr.
Trevino based upon the Company's attainment during fiscal 1997 of the level of
net income before taxes specified in his employment contract. In the opinion
of the Compensation Committee, the acceleration of such award benefitted both
the Company and Mr. Trevino. The Committee intends to re-evaluate the
provisions of Mr. Trevino's present employment contract which expires on
February 28, 1998.
Ronald T. Nixon A. Stephen Trevino
Chairman Member
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STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends) to ACR Group, Inc.'s shareholders, as well
as the NASDAQ Stock Market Index and the NASDAQ Non-Financial Stocks Index.
The Company did not enter the HVACR industry until the middle of 1990, and from
1990 to 1993, gradually developed its businesses in the industry. From
February 28, 1993, when the Company acquired ACR Supply, Inc., the Company has
been a significant member of the HVACR industry.
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CUMULATIVE TOTAL RETURN 1992-1997
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A) VALUE OF $100 INVESTED 1992 1993 1994 1995 1996 1997
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ACR Group, Inc. $100 $355.56 $533.33 $533.33 $555.56 $1,955.56
NASDAQ Stock Market Index $100 $106.45 $125.98 $127.74 $177.99 $212.33
NASDAQ Non-Financial Stocks $100 $98.81 $119.62 $117.83 $164.85 $190.70
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B) ANNUAL RETURN 1992 1993 1994 1995 1996 1997
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ACR Group, Inc. NA 255.56% 50.00% 0.00% 4.17% 252.00%
NASDAQ Stock Market Index NA 6.45% 18.35% 1.40% 39.34% 19.30%
NASDAQ Non-Financial Stocks NA (1.19%) 21.06% (1.49%) 39.90% 15.68%
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Employment Contract and Termination of Employment Arrangement
Mr. Trevino and the Company entered into an employment agreement
effective as of May 17, 1993, having a term ending February 28, 1998. Pursuant
to the agreement, Mr. Trevino serves as President and Chief Executive Officer
of the Company. The agreement may be terminated by the Company for cause,
death or disability, or if the Company has a net loss before taxes in any
fiscal year. In the event that the agreement is otherwise terminated by the
Company, Mr. Trevino is to be paid all compensation and benefits provided
under the agreement through the later of February 28, 1998 or one year after
termination of his employment.
Under the agreement, Mr. Trevino's annual salary is $150,000.
Pursuant to the agreement, Mr. Trevino received a restricted stock award of
125,000 shares of the Company's Common Stock during the fiscal year ended
February 28, 1997, based upon the Company attaining a specified level of net
income before taxes for such fiscal year. The agreement also provides that Mr.
Trevino is to receive a cash bonus equal to his annual salary multiplied by the
percentage by which the Company's net income before taxes for a fiscal year
exceeds the forecast net income before taxes as approved by the Board of
Directors. Such bonus may not exceed 75% of Mr. Trevino's base salary. No
bonus was earned by Mr. Trevino for the fiscal year ended February 28, 1997.
Mr. Trevino's employment agreement further provides that the Company
will grant Mr. Trevino options to purchase up to a maximum of 425,000 shares of
the Company's Common Stock at an exercise price per share equal to the greater
of the average of the market price of the Company's Common Stock for the thirty
trading days preceding the date of grant or the Company's book value per share.
For each full fiscal year during the term of the agreement, Mr. Trevino will be
granted 25,000 options for each $.01 per share that the Company's net income
before taxes exceeds $.03 per share (less options previously granted under the
agreement for prior fiscal years). If Mr. Trevino's employment is terminated
by the Company without cause, all stock options not previously granted are to
be granted and shall be fully vested. All options granted under the agreement
expire on the sooner of five years from the date of grant or ninety days after
termination. Pursuant to this agreement, Mr. Trevino was granted an option to
purchase 25,000 shares of Common Stock with respect to the Company's net income
before taxes for each of the fiscal years ended February 28, 1994 and 1995, and
will be granted an option to purchase 75,000 shares with respect to the
Company's net income before taxes for the fiscal year ended February 28, 1997.
The agreement also provides that if Mr. Trevino terminates his
employment, or if the Company terminates his employment for cause, Mr. Trevino
is prohibited from competing with the Company for a period of two years.
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Compensation of Directors
Non-employee directors are paid $3,600 per year, payable quarterly,
for service on the Board. In addition, non-employee directors are paid $500
for each meeting of the Board or a committee of the Board attended in person
and are reimbursed for actual expenses incurred for attendance at meetings.
Directors who are employed by the Company receive no compensation for being a
director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning
beneficial ownership of the Company's Common Stock as of April 30, 1997, by (i)
each shareholder who is known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) each director and nominee for
director, (iii) the President and Chief Executive Officer, and (iv) all
directors and executive officers as a group. Except as otherwise indicated,
the shareholders listed in the table have sole voting and investment power with
respect to the shares indicated. All information with respect to beneficial
ownership has been furnished by the shareholders to the Company.
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Amount and Nature Percent
of Beneficial of
Name and Address of Beneficial Owner Ownership (1) Class
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Alex Trevino, Jr. (2) (3) 2,198,831 20.4%
ACR Group, Inc.
3200 Wilcrest Drive, Suite 440
Houston, TX 77042
Ronald T. Nixon (4) 750,000 6.7%
The Catalyst Group
Three Riverway, Suite 770
Houston, TX 77056
Anthony R. Maresca 354,650 3.4%
ACR Group, Inc.
3200 Wilcrest Drive, Suite 440
Houston, TX 77042
A. Stephen Trevino (5) 1,630,894 13.7%
Trevino & Leppert, L.L.P.
5847 San Felipe, Suite 3475
Houston, TX 77057
DST Investments 1,493,394 14.4%
2 Memorial Point
Houston, TX 77024
St. James Capital Partners, L.P. (6) 1,423,530 12.4%
1980 Post Oak Blvd., Suite 2030
Houston, TX 77056
The Catalyst Fund, Ltd. (7) 750,000 6.7%
Three Riverway, Suite 770
Houston, TX 77056
Meridian Fund, Ltd. 809,560 7.8%
601 Jefferson, Suite 4000
Houston, TX 77002
EOT Investments, Inc. 686,697 6.6%
5125 Cape Romain
Corpus Christi, TX 78412
Dana L. Fisher 730,347 7.0%
ACR Supply, Inc.
806 East Harris
Pasadena, TX 77506
Thomas W. Courtney 542,975 5.2%
833 Wyndemere Way
Naples, FL 34105
All Directors and Executive Officers 2,655,981 21.3%
as a group (4 persons) (8) (9)
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(1) For each beneficial owner, the number of shares outstanding and their
percentage of stock ownership includes the number of common and all
common equivalent shares (including options exercisable within 60
days) owned by such individual at April 30, 1997.
(2) Includes 1,493,394 shares owned by DST Investments, a partnership
whose partners are Henrietta Trevino, wife of Mr. Trevino, and his two
adult children, and 2,000 shares owned by Henrietta Trevino. The
beneficial ownership of all of such shares is disclaimed by Mr.
Trevino.
(3) Includes 383,437 shares which are subject to options exercisable
within 60 days of April 30, 1997.
(4) Includes 750,000 shares which are subject to warrants issued to The
Catalyst Fund, Ltd., exercisable within 60 days of April 30, 1997, the
beneficial ownership of which is disclaimed by Mr. Nixon.
(5) Includes 1,493,394 shares owned by DST Investments, a partnership
whose partners are Mr. A. Stephen Trevino, his mother and his adult
sister, and 33,000 shares owned by the wife of Mr. A. Stephen Trevino,
the beneficial ownership of which he disclaims.
(6) Includes 530,000 shares which are subject to warrants exercisable
within 60 days of April 30, 1997, and 598,356 shares into which
certain indebtedness of ACR Group, Inc. may be converted within 60
days of April 30, 1997.
(7) Includes 750,000 shares which are subject to warrants exercisable
within 60 days of April 30, 1997.
(8) Includes an aggregate of 383,437 shares which are subject to options
exercisable by directors and executive officers as a group within 60
days of April 30, 1997.
(9) Excludes all shares as to which directors and executive officers
disclaim beneficial ownership.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1993, the Company obtained a loan from The Catalyst Fund, Ltd.
("Catalyst") for $1.0 million, the proceeds of which were used to pay the cash
portion of the purchase price of ACR Supply, Inc. ("ACRS") and for working
capital for ACRS. The loan bears interest at 12 1/2% per annum and is secured
by the stock and operating assets of certain of the Company's subsidiaries and
an assignment of proceeds from a life insurance policy on Mr. Trevino.
Catalyst has subordinated its security interests in connection with up to $8.9
million in additional secured borrowings of the Company. In addition, Catalyst
received a warrant to purchase one million shares of the Company's Common Stock
at a price of $.59 per share, exercisable at any time before May 1999. In
April 1997, the Company borrowed an additional $450,000 from Catalyst, the
proceeds of which were used to acquire the net assets of ACH Supply, Inc.
("ACH") and to provide working capital for ACH. The payment terms and the
interest rate of the additional borrowing are substantially the same as for the
Company's previously existing loan from Catalyst. Mr. Nixon is a shareholder
and officer of the general partner of Catalyst. As of April 30, 1997, the
aggregate unpaid balance owed to Catalyst by the Company on both debt
facilities was $942,934.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ACR GROUP, INC.
Date: October 7, 1997 By: /s/ Anthony R. Maresca
--------------------------------
Anthony R. Maresca
Senior Vice President and
Chief Financial Officer
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