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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9031
SUNBELT NURSERY GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1932993
(State of incorporation) (I.R.S. Employer Identification No.)
32382 DEL OBISPO, SAN JUAN CAPISTRANO, CALIFORNIA 92675
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 714/248-3811
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $0.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Based on the closing sales price on September 26, 1997, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
$8,500,000.
The number of shares of the registrant's Common Stock, $0.01 par value per
share, outstanding as of September 26, 1997, was 8,500,000.
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 the 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 the Form 10-K or any amendment to the
Form 10-K. [ ]
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
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DIRECTORS
The current directors of the Company, their respective ages, tenure with the
Company as directors, and business experience are listed below. Each current
director intends to stand for re-election to the Company's Board of Directors at
the next annual meeting of stockholders.
RUDY BOSCHWITZ, age 66, has served as a director of the Company since October
31, 1994. Mr. Boschwitz serves as Chairman of the Board of Directors of Home
Valu, Inc., a retailer of home improvement products headquartered in
Minneapolis, Minnesota. Mr. Boschwitz also serves as a member of the Boards of
Directors of Chicago Mercantile Exchange and TCF Bank. Mr. Boschwitz served as
United States Senator from the State of Minnesota from 1978 to 1990.
RODNEY P. BURWELL, age 58, has served as a director of the Company since
October 31, 1994. Mr. Burwell also serves as the Chairman of the Board of
Directors of Xerxes Corporation, a manufacturer of underground storage
containers located in Minneapolis, Minnesota, and has served as its Chief
Executive Officer since 1969. Mr. Burwell is also a member of the Boards of
Directors of Children's Broadcasting Corporation and Vaughn Communications.
TIMOTHY R. DUOOS, age 41, has served as the Chairman of the Board of the
Company since October 31, 1994, and Chief Executive Officer of the Company since
November 18, 1994 and its President since October 13, 1997. Mr. Duoos is also
the principal stockholder of Lyndale Garden Center, Inc., a regional retailer of
lawn and garden products, located in Minneapolis, Minnesota, and has served as
the Chairman of the Board of Directors of Lyndale Garden Center, Inc. since
October 1986.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three standing committees, the Executive Committee,
the Audit Committee and the Compensation Committee.
Executive Committee. The Executive Committee directs and manages the business
affairs of the Company in the intervals between meetings of the Board of
Directors. The Executive Committee is empowered to act in lieu of the Board of
Directors on any matter except those matters for which the Board of Directors
has specifically reserved authority to itself and those matters specifically
reserved to the full Board pursuant to the Delaware General Corporation Law and
the Certificate of Incorporation and Bylaws of the Company. The Executive
Committee presently consists of Messrs. Duoos and Boschwitz.
Audit Committee. The Audit Committee reviews the professional services and
independence of the Company's certified public accountants, the plan and results
of the Company's internal audits, and the Company's accounts, procedures and
internal controls and recommends the Company's independent public accountants.
The Audit Committee met one time during fiscal year 1997. The Audit Committee
presently consists of Mr. Boschwitz.
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Compensation Committee. The Compensation Committee determines matters
regarding the compensation of officers of the Company. The Compensation
Committee met one time during fiscal 1997. The Compensation Committee presently
consists of Messrs. Duoos and Burwell. Mr. Duoos is the President and Chief
Executive Officer of the Company.
MEETINGS OF THE BOARD OF DIRECTORS
During fiscal 1997, the Board of Directors held four meetings. Each incumbent
director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors held during the period in which he was a
director and (ii) the total number of meetings held by all committees on which
he served (during the period that he served).
COMPENSATION OF DIRECTORS
Directors Fees. Directors of the Company who are not employees of the Company
receive $300 for each Board of Directors or committee meeting attended, whether
by teleconference or in person, plus reasonable expenses incurred in the
performance of their duties.
Stock Options. On March 6, 1995, the Board of Directors approved, and on
November 9, 1995, the stockholders ratified, an amendment to the 1991 Stock
Option Plan suspending the provisions of the 1991 Stock Option Plan applicable
to non-employee directors, and the grant of certain non-qualified stock options
to the then-current non-employee directors. As a result, each of the Company's
non-employee directors received 50,000 shares of the Company's Common Stock at
an exercise price equal to the fair market value of the Common Stock on the date
each was elected to the board of directors. Accordingly, options to purchase
150,000 shares were issued during fiscal 1996. For each director, the options
will become 50% vested on their first anniversary date, and the remaining 50%
vests on the second anniversary date assuming continuous service as a member of
the Board of Directors. Once vested, the options may be exercised at any time
during their period of service and for a period of three years following their
resignation from the Board. The options expire ten years from the March 6, 1995
and April 11, 1995 grant dates. The exercise price at the date of grant
approximated fair market value.
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CURRENT EXECUTIVE OFFICERS
The current executive officers of the Company, their respective ages,
positions held and tenure as officers are as follows:
<TABLE>
<CAPTION>
Officer of
Position(s) Held the Company
Name Age with the Company Since
---- --- ---------------- -----
<S> <C> <C> <C>
Timothy R. Duoos.................. 41 Chairman of the Board of Directors, November 1994
President and Chief Executive Officer
Chad Ruth......................... 32 Senior Vice President - Operations and October 1997
Secretary
Thomas R. Hoekstra................ 48 Chief Financial Officer and Assistant October 1997
Secretary
</TABLE>
BUSINESS EXPERIENCE
Information concerning the business experience of Mr. Duoos is provided under
the section entitled "Directors" immediately above.
Mr. Ruth has spent his entire business career in nursery and garden center
operations. Mr. Ruth joined Wolfe Nursery, a wholly owned subsidiary, in 1985
and served in various capacities for the Company until 1993. In 1993, Mr. Ruth
was recruited by the Dayton-Hudson Company to assist in the development of their
Target Garden Centers in Texas. In 1995, Mr. Ruth returned to the Company and
served in various management positions until his appointment as Senior Vice
President - Operations in October 1997.
Mr. Hoekstra joined the Company in October 1997 as Chief Financial Officer.
From 1994 to March 1997, Mr. Hoekstra was Corporate Controller, Assistant
Secretary and Assistant Treasurer for Barry's Jewelers, Inc. in Monrovia,
California. Prior to his role at Barry's Jewelers, Inc., he spent five years
with Harris Department stores as Controller.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission and
the applicable national stock exchange. Executive officers, directors and
beneficial owners in excess of ten percent (10%) of the Company's Common Stock
are required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and beneficial owners in excess of ten percent
(10%) were complied with.
4
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ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors historically has
established the compensation of the executive officers of the Company. Since
October 31, 1994, the Compensation Committee has consisted of Rodney P. Burwell,
Chairman, and Timothy R. Duoos. Mr. Burwell is not an employee of the Company.
Mr. Duoos is the President and Chief Executive Officer of the Company.
Compensation of executive officers has historically consisted of salary,
annual bonus and long-term compensation in the form of stock options. The
Company strives to establish levels of compensation that attract, retain and
motivate executives and that are designed to reward strong financial performance
of the Company and enhance stockholder value through awards of stock-based
plans. Compensation of executive officers during the 1997 fiscal year consists
solely of salary. The Company will consider bonus and long-term compensation
plans in the future, depending upon the Company's return to profitability and
improvements in financial condition.
The salary of the Chief Executive Officer and other executive officers for the
past fiscal year was based upon a review of past corporate and individual
performance. In evaluating corporate performance for the 1997 fiscal year,
consideration was given to the Company's losses, factors (such as weather) that
affected the Company's operating results, but were beyond the control of
management, and actions that have been taken that are intended to enable the
Company to achieve improved financial performance in the future. In addition to
corporate performance, consideration was given to individual efforts and
achievements and the level of individual contribution to the overall performance
of the Company. Based on these factors, most specifically the Company's
financial performance in fiscal 1997, salaries of all executive officers were
maintained during the 1997 fiscal year. Mr. Duoos abstained from the vote
approving his salary as the Company's Chief Executive Officer.
Long-term incentives for the Company's executive officers are provided through
awards under the Stock Option Plan. Awards under the 1991 Stock Option Plan are
designed to increase stockholder value by providing value to executives only
when there is an increase in value to all stockholders. Specific formulae have
not been used for the determination of option grants, but consideration is given
to the number of stock options outstanding at the time of awards. Due to the
Company's financial performance, no stock options were awarded to the Company's
executives in fiscal 1997.
A certain executive officer is eligible for an annual bonus based on the
Company's profitability and performance as a whole. All executive bonuses are
recommended by the Compensation Committee and must be approved by the full Board
of Directors.
Timothy R. Duoos
Rodney P. Burwell, Chairman
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Timothy R. Duoos, the Company's President and Chief Executive Officer, is
also a member of the Compensation Committee of the Board of Directors. In
connection with the Company's loan agreement with American National Bank and
Trust Company, Chicago, Illinois (the "Bank") dated October 1994, Mr. Duoos
agreed to personally guarantee the repayment of all amounts borrowed by the
Company from the Bank pursuant to the Company's revolving line of credit. In
consideration therefore, the Company has agreed to pay Mr. Duoos an annual loan
guarantee fee of $60,000. As of June 29, 1997, the total amount of indebtedness
borrowed by the Company under the line of credit was approximately $2,700,000.
COMPANY COMMON STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Common Stock for the period of the Company's last five fiscal
years from January 31, 1992 to June 29, 1997, with the cumulative total return
over the same period of the S&P Index 500 and the S&P Retail-Specialty Index. As
required by applicable rules of the Securities and Exchange Commission, the
graph was prepared assuming (i) that $100 was invested on January 31, 1992 in
each of the Common Stock, the S&P Index and the S&P Retail-Specialty Index and
(ii) all dividends were reinvested on the ex-dividend dates.
[CHART APPEARS HERE]
COMPARISON OF CUMMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
1/31/92 1/31/93 1/30/94 1/29/95 1/28/96 6/30/96 6/29/97
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SUNBELT NURSERY GROUP 100.00 85.96 45.61 29.82 35.09 28.95 16.67
S&P RETAIL SPECIALTY INDEX 100.00 113.57 119.17 98.72 78.43 110.02 111.96
S&P 500 INDEX 100.00 110.60 124.85 125.51 174.04 185.31 249.61
</TABLE>
(1) In August 19996, the Board of Director approved a change in the Company's
fiscal year end to the Sunday nearest the end of June.
6
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SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid to the
Company's Chief Executive Officer(s) and the other executive officers whose
total cash compensation during fiscal 1997 exceeded $100,000 ("Named Executive
Officers") for services rendered by such persons to the Company and its
subsidiaries in all capacities, during the past three fiscal years.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------- ------------------
Name and Principal Position Fiscal Other Annual Securities All Other
- ------------------------------- Year Salary Bonus Compensation(1) Underlying Options Compensation
------ ------ ----- ----------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
TIMOTHY R. DUOOS 1997 120,000 0 -- 0 0
Chairman of the Board and 1996 110,923 0 -- 0 0
Chief Executive Officer 1995 40,000 0 -- 0 0
RICHARD R. DWYER(2) 1997 180,000 0 -- 0 0
President 1996 180,000 0 14,489(3) 0 0
1995 45,962 0 0 50,000 0
</TABLE>
(1) "Other Annual Compensation" is intended to cover forms of annual
compensation that are not otherwise categorized as salary or bonus, such as
perquisites. Except as otherwise stated, to the present knowledge of the
Company, no Named Executive Officer received "Other Annual Compensation" in
any of the past three fiscal years exceeding the threshold level for
disclosure purposes, being the lesser of either $50,000 or 10% of the total
annual salary and bonus reported for the Named Executive Officer for such
fiscal year.
(2) Mr. Dwyer resigned as President and Secretary of the Company on October 13,
1997.
(3) Represents reimbursement of moving expenses for Mr. Dwyer.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information, with respect to individual grants
under the Company's Stock Option Plan, or otherwise, to the Named Executive
Officers during the last fiscal year.
<TABLE>
<CAPTION>
Number of Percent of Total Potential Realizable Value at
Securities Options/ SARs Exercise Assumed Annual Rates of Stock
Underlying Granted to of Base Price Appreciation
Options/SARs Employees in Price Expiration for Option Term
Name and Position Granted Fiscal Year ($/Sh) Date -----------------------------
----------------- ------------ ---------------- -------- ---------- 5% 10%
--------- --------
<S> <C> <C> <C> <C> <C> <C>
Timothy R. Duoos -0- -- -- -- -- --
Richard R. Dwyer -0- -- -- -- -- --
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table provides information with respect to the exercise of
options by the Named Executive Officers during the last fiscal year and the
value of unexercised stock options held as of the end of the fiscal year.
<TABLE>
<CAPTION>
Number of Securities Value ($) of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired on Value ($) Realized Options at 6-29-97 6-29-97 Exercisable
Name Exercise Upon Exercise Exercisable/Unexercisable Unexercisable(1)
---- ----------- ------------------ ------------------------- ------------------------
<S> <C> <C> <C> <C>
Timothy R. Duoos -0- -0- None -0-
Richard R. Dwyer -0- -0- 12,000/-0- N/A
</TABLE>
(1) Value realized is calculated by determining the difference between the fair
market value of the securities underlying the options and the exercise price
of the options. Because the market price of the Company's Common Stock on
June 29,1997 was less than the option exercise price, none of the
exercisable options listed herein were "in-the-money."
8
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
The following table sets forth information with respect to the shares of
Common Stock owned of record and beneficially by (i) all persons who own of
record or are known by the Company to beneficially own more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each director of the
Company and each executive officer named in the Summary Compensation Table, and
(iii) all directors and present executive officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
------------------- ------------------------- --------
<S> <C> <C>
Timothy R. Duoos................... 3,200,500(2) 37.7%
6412 Lyndale Avenue South
Richfield, Minnesota 55423
Rodney P. Burwell.................. 1,234,300(3)(4) 14.5%
7901 Xerxes Ave. So., Suite 201
Minneapolis, MN 55431
Rudy Boschwitz..................... 100,000(3) 1.2%
Richard R. Dwyer................... 70,000(5)(6) *
All present executive officers
and directors as a group
(4 persons)....................... 4,604,800 54.2%
</TABLE>
*Less than one percent (1%)
(1) Shares are deemed to be "beneficially owned" by a person if such person,
directly or indirectly, has or shares (i) the voting power thereof,
including the power to vote or to direct the voting of such shares, or (ii)
the investment power with respect thereto, including the power to dispose or
direct the disposition of such shares. In addition, a person is deemed to
beneficially own any shares of which such person has the right to acquire
beneficial ownership within 60 days. Except as otherwise stated, each
person has sole voting and investment control with respect to the shares
listed, and the information set forth with respect to the ownership of the
Common Stock of the persons named in the table is as of September 1, 1997.
(2) Mr. Duoos has pledged 3,200,000 shares to secure the Company's obligations
under its loan agreement with a commercial bank providing for a revolving
line of credit. See "Change in Control" immediately below.
(3) Includes 50,000 shares that may be acquired upon exercise of certain non-
qualified stock options.
(4) Includes 1,000,000 shares owned by Healthy American Products, Inc., a
corporation in which Mr. Burwell is the majority shareholder and an officer
and a director. Includes 46,000 shares owned by trusts for the benefit of
Mr. Burwell's children. Mr. Burwell disclaims beneficial ownership of these
shares owned by such trusts. Also, includes 3,100 shares that may be
acquired upon exercise of certain non-qualified stock options.
(5) Includes 12,000 shares that may be acquired upon exercise of options. Mr.
Dwyer has pledged 58,000 shares to secure the Company's obligations under
its loan agreement with a commercial bank providing for a revolving line of
credit. See "Change in Control" immediately below.
(6) Mr. Dwyer resigned as the President and Secretary of the Company on October
13, 1997.
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CHANGE IN CONTROL
On October 19, 1994, Timothy R. Duoos purchased 4,200,000 shares of Common
Stock from SNG Acquisition Company, Inc., a wholly-owned subsidiary of General
Host Corporation. Such shares constitute approximately 49.4% of the total
issued and outstanding Common Stock. The purchase price for the shares was
$4,200,000, consisting of cash and the proceeds of a loan in the principal
amount of $1,500,000 from American National Bank and Trust Company, Chicago,
Illinois ("ANB"). In connection with the change in control, on October 31,
1994, the then serving members of the Company's Board of Directors resigned, and
Mr. Duoos and his nominees, Rudy Boschwitz, Rodney P. Burwell and Richard R.
Dwyer, became directors of the Company.
Also, on October 19, 1994, the Company and its subsidiaries entered into a
loan and security agreement with ANB providing for a line of revolving credit
(the "Loan Agreement") which matures in October 1997. As a condition to
obtaining the Loan Agreement, Timothy R. Duoos, the Chairman of the Board and
Chief Executive Officer, and Richard R. Dwyer, the President, agreed to pledge
to ANB 50.1% of the issued and outstanding Common Stock of the Company.
Presently, Mr. Duoos has pledged 3,200,000 shares to ANB pursuant to this
requirement. On October 14, 1994, the Company's Compensation Committee granted
an option to Mr. Dwyer covering 50,000 shares of Common Stock. Under the terms
of the stock option agreement with Mr. Dwyer, the option immediately vested and
became exercisable by Mr. Dwyer at a per share exercise price equal to $1.94,
the fair market per share value of the Common Stock on the date of grant. Mr.
Dwyer has exercised options to purchase 38,000 shares of Common Stock, which
shares have been pledged, along with 20,000 additional shares of Common Stock
owned by Mr. Dwyer, to secure the Company's borrowings under the Loan Agreement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
During the 1997 fiscal year, the Company paid approximately $111,000,
representing transportation services, to a travel service company of which Mr.
Duoos is a partial owner.
Lyndale Garden Centers, Inc., ("Lyndale") whose sole shareholder is Mr. Duoos,
has a receivable to the Company for $28,000 at June 29, 1997 for travel
expenditures and merchandise purchased from the Company. In addition, the
Company purchased $48,500 in seasonal merchandise from Lyndale during fiscal
1997.
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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.
Date: November 4, 1997 SUNBELT NURSERY GROUP, INC.
By /s/ Timothy R. Duoos
---------------------------
Timothy R. Duoos
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Timothy R. Duoos Date: November 4, 1997
-------------------------------------
Timothy R. Duoos
Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
By: /s/ Rudy Boschwitz Date: November 4, 1997
-------------------------------------
Rudy Boschwitz
Director
By: /s/ Rodney P. Burwell Date: November 4, 1997
-------------------------------------
Rodney P. Burwell
Director
11
