SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ACR GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other than the 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)(1) and 0-11
ACR GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of ACR Group, Inc. will be held at the
Adam's Mark Hotel, 2900 Briarpark Dr., Houston, Texas 77042, on Thursday, August
17, 2000 at 10:00 a.m., Central Daylight time, for the following purposes:
(1) To elect directors; and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record as of the close of business on June 19, 2000 are
entitled to notice of the meeting and are entitled to vote at the meeting or any
adjournment thereof.
By Order of the Board of Directors.
/s/ Anthony R. Maresca
-------------------------------
Anthony R. Maresca
Secretary
June 29, 2000
YOUR VOTE IS IMPORTANT
----------------------
Please mark, date and sign your proxy and return
it promptly in the enclosed envelope.
ACR GROUP, INC.
3200 Wilcrest Drive, Suite 440
Houston, Texas 77042-6039
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
for use at the annual meeting of shareholders of ACR Group, Inc. (the" Company")
to be held at the time and place and for the purposes set forth in the foregoing
Notice of Annual Meeting of Shareholders and at any adjournments thereof.
SOLICITATION OF PROXIES
Proxies in the accompanying form are solicited by management at the
direction of the Board of Directors. Execution and return of the proxy will not
in any way affect a shareholder's right to attend the meeting and to vote in
person, and a shareholder giving a proxy has the power to revoke it at any time
before it is exercised by giving written notice to the Company at or prior to
the meeting. Properly executed proxies in the accompanying form, received in due
time and not previously revoked, will be voted as specified. Where no choice is
specified, proxies will be voted FOR the election of all directors named below.
The original solicitation will be conducted by mail. The Company will bear
the expense of solicitation of proxies, including the charges and expenses of
brokerage firms and others incurred in forwarding solicitation material to
beneficial owners of stock. Further solicitation of proxies may be made by
telephone or oral communication with shareholders of the Company following the
original solicitation. All further solicitation will be by regular employees of
the Company who will not be additionally compensated therefor.
RECORD DATE - OUTSTANDING SECURITIES
Only holders of Common Stock of the Company of record at the close of
business on June 19, 2000, are entitled to notice of and to vote at the meeting.
At that date, there were outstanding 10,670,634 shares of the Company's Common
Stock. Each shareholder is entitled to one vote for each share of Common Stock
held on all matters coming before the meeting and, except as otherwise provided
by applicable law, a favorable vote consists of a simple majority of the votes
cast. Shareholders are not entitled to cumulate their votes in the election of
directors, which means that the holders of more than half of the shares voting
for the election of directors can elect all of the directors if they choose to
do so.
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ELECTION OF DIRECTORS
Information Concerning Directors
It is proposed that five directors will be elected at the meeting, each to
hold office until the next annual meeting of shareholders and until his
successor is duly elected and qualified. The Company has no reason to believe
that any nominee will be unavailable at the time of election. All of the
nominees are presently members of the Board of Directors of the Company. The
names of the persons nominated by management, together with information as to
their principal occupations, age, and experience, are as follows:
Alex Trevino, Jr., age 64, 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.
Anthony R. Maresca, age 49, has been employed by the Company since 1985,
serving as Controller until November 1985 when he became 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.
A. Stephen Trevino, age 37, is an attorney and has been employed by the
Company since March 1999. Prior to joining the Company, he was an attorney in
private practice. Mr. Trevino has been a director of the Company since 1997.
Mr. Trevino is the son of Alex Trevino, Jr., Chairman and Chief Executive
Officer of the Company.
Ronald T. Nixon, age 44, 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 1992.
Roland H. St. Cyr, age 70, has been an independent consultant to Hallmark
Air Conditioning, Inc. ("Hallmark") since June 1997. From 1974 to June 1997, Mr.
St. Cyr was Chairman of the Board of Directors and Chief Executive Officer of
Hallmark. Hallmark is an HVACR contracting company located in Houston, which was
acquired by Group Maintenance America, Inc. in 1997. Mr. St. Cyr has been a
director of the Company since 1998.
The Board of Directors of the Company met four times during the fiscal year
ended February 29, 2000. The Board has established two standing committees. The
Audit Committee, comprised of Messrs. Nixon and St. Cyr, exercises oversight
with respect to the Company's accounting practices and procedures and its
relationship with its independent auditors. The Audit Committee met two times
during fiscal 2000. The Compensation Committee, comprised of Messrs. St. Cyr and
Nixon, makes recommendations to the Board of Directors regarding the
compensation and benefits of officers. There was one Compensation Committee
meeting held during fiscal 2000. The Company does not have a nominating
committee.
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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.
Beneficial Ownership of Common Stock
The following table sets forth certain information concerning beneficial
ownership of the Company's Common Stock as of April 30, 2000, 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.
3
Amount and Nature Percent
of Beneficial Of
Name and Address of Beneficial Owner Ownership (1) Class
- ------------------------------------ ----------------- -------
Alex Trevino, Jr. (2) (3) 2,164,187 20.2%
ACR Group, Inc.
3200 Wilcrest Drive, Suite 440
Houston, TX 77042
Ronald T. Nixon (4) 946,750 8.2%
The Catalyst Group
Three Riverway, Suite 770
Houston, TX 77056
Anthony R. Maresca 312,650 2.9%
ACR Group, Inc.
3200 Wilcrest Drive, Suite 440
Houston, TX 77042
A. Stephen Trevino (5) 128,475 1.2%
General Counsel
ACR Group, Inc.
3200 Wilcrest, Suite 440
Houston, TX 77042
Roland H. St. Cyr 10,000 *
3151 Lake Island Dr.
Montgomery, TX 77356
DST Investments 1,468,394 13.8%
2 Memorial Point
Houston, TX 77024
The Catalyst Fund, Ltd. (6) 925,000 8.0%
Three Riverway, Suite 770
Houston, TX 77056
Dana L. Fisher (7) 739,014 6.9%
ACR Supply, Inc.
8798 Westpark
Houston, TX 77063
St. James Capital Partners, L.P. (8) 601,175 5.5%
1980 Post Oak Blvd., Suite 2030
Houston, TX 77056
EOT Investments, Inc. (9) 583,364 5.5%
5125 Cape Romain
Corpus Christi, TX 78412
Thomas W. Courtney 542,975 5.1%
833 Wyndemere Way
Naples, FL 34105
All Directors and Executive Officers 3,562,062 30.5%
as a group (5 persons) (10) (11)
*Less than 1%
4
(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, 2000.
(2) Includes 1,468,394 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 100,000 shares which are subject to options exercisable within 60
days of April 30, 2000.
(4) Includes 925,000 shares which are subject to warrants issued to The
Catalyst Fund, Ltd., exercisable within 60 days of April 30, 2000, the
beneficial ownership of which is disclaimed by Mr. Nixon.
(5) Includes 124,200 shares owned by The MESA Fund, L.P., a partnership whose
partners include the wife and children of Mr. A. Stephen Trevino.
(6) Includes 925,000 shares which are subject to warrants exercisable within 60
days of April 30, 2000.
(7) Includes 8,667 shares which are subject to options exercisable within 60
days of April 30, 2000.
(8) Includes 306,001 shares which are subject to warrants exercisable within 60
days of April 30, 2000.
(9) Includes 1,667 shares which are subject to options exercisable within 60
days of April 30, 2000.
(10) Includes an aggregate of 1,025,000 shares which are subject to options and
warrants exercisable by directors and executive officers as a group within
60 days of April 30, 2000.
(11) Includes all shares as to which directors and executive officers disclaim
beneficial ownership.
Compensation of Executive Officers and Directors
Summary Compensation Table
--------------------------
The following table sets forth certain information regarding compensation
paid by the Company during the fiscal years ended February 29, 2000 and February
28, 1999 and 1998 to the Company's chief executive officer and to other
executive officers of the Company whose compensation exceeded $100,000 in any
fiscal year.
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Summary Compensation Table
Long-Term
Fiscal Annual Compensation Compensation Awards
Name and Principal Year ---------------------- --------------------
Position Ended Salary Bonus Options (#)
------------------ ------- ------ ----- -----------
Alex Trevino, Jr. 2/29/00 $225,000 $35,000 -
President and 2/28/99 212,500 - 300,000
Chief Executive Officer 2/28/98 150,000 - 75,000
Anthony R. Maresca 2/29/00 125,000 31,000 -
Senior Vice President, 2/28/99 119,833 - 100,000
Secretary and Treasurer
Option Grants in Last Fiscal Year
---------------------------------
No options were granted by the Company during the fiscal year ended
February 29, 2000 to any of the executive officers or directors.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
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Option Values
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The following table discloses the exercise of stock options during the
fiscal year ended February 29, 2000 by the Company's chief executive officer,
and the value, as of February 29, 2000, of unexercised stock options.
Number of Unexercised Value of Unexercised
Options at in-the-Money Options at
Shares February 29, 2000 February 29, 2000
Acquired on Value -------------------------------- --------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ----------- -------- ------------- --------------- ------------- ---------------
Alex Trevino, Jr. 11,331 $6,969 100,000 300,000 $17,475 $ -
Anthony R. Maresca - - - 100,000 - -
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.
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The Committee reviews annually the compensation of the Company's executive
officers. In evaluating the level of base compensation, the Compensation
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 2000, there were no adjustments made to any provision of the
executives' employment contracts, and the Committee believes that the
compensation provisions of the contracts remain appropriate. Effective March 1,
2000, the Compensation Committee increased the base salaries of the Company's
executive officers in recognition of their efforts in improving the Company's
performance and expanded responsibilities.
Roland H. St. Cyr Ronald T. Nixon
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 for
the period from February 28, 1995 to February 29, 2000.
[GRAPH]
Table 1 - Cumulative Value of $100 Investment
02/28/95 02/29/96 02/28/97 02/28/98 02/28/99 02/29/00
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Nasdaq Non-Financial Stocks $ 100.00 $ 139.90 $ 161.80 $ 218.00 $ 291.50 $ 638.10
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Nasdaq Stock Market Index $ 100.00 $ 139.40 $ 166.30 $ 227.30 $ 296.00 $ 604.30
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ACR Group, Inc. $ 100.00 $ 104.20 $ 366.70 $ 366.70 $ 183.30 $ 195.80
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Table II - Non-Cumulative Annual Return
02/28/95 02/29/96 02/28/97 02/28/98 02/28/99 02/29/00
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Nasdaq Non-Financial Stocks NA 39.90% 15.65% 34.73% 33.72% 118.90%
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Nasdaq Stock Market Index NA 39.40% 19.30% 36.68% 30.22% 104.16%
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ACR Group, Inc. NA 4.20% 251.92% 0.00% (50.01%) 6.82%
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Employment Contracts and Termination of Employment Arrangements
---------------------------------------------------------------
Mr. Trevino serves as President and Chief Executive Officer of the Company
under an employment agreement that became effective as of March 1, 1998, and
terminates, with two years prior notice from the Company, on February 28, 2002
or at any time thereafter. In the absence of notice of termination, the term of
the agreement will be extended for additional two-year terms. The agreement may
also be terminated by the Company without such notice for cause, death or
disability, or if the Company has a net loss before taxes in any fiscal year.
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.
Under the agreement, Mr. Trevino's minimum annual salary is $225,000, which
was increased to $260,000 effective March 1, 2000. The agreement also provides
that Mr. Trevino is to receive a cash bonus of (i) $25,000 for each year in
which the Company's diluted earnings per share is equal to or greater than the
forecast diluted earnings per share as approved by the Board of Directors, plus
(ii) an amount equal to his base annual salary multiplied by the percentage by
which the Company's diluted earnings per share exceeds the forecast diluted
earnings per share approved by the Board of Directors. As of March 1, 1998, Mr.
Trevino also received options ("Options") to purchase 300,000 shares of the
Company's Common Stock at an exercise price of $2.24 per share (fair market
value at the date of grant). Such Options become exercisable on March 1, 2006,
but may be exercised earlier if the market price of the Common Stock attains
certain specified levels.
Mr. Anthony R. Maresca, the Company's Senior Vice President and Chief
Financial Officer, entered into an employment agreement with the Company
effective as of March 1, 1998. Under the agreement, Mr. Maresca's minimum
annual salary is $125,000, which was increased to $145,000 effective March 1,
2000, and all other terms are substantially the same as in Mr. Trevino's
employment agreement described above. As of March 1, 1998, Mr. Maresca also
received Options to purchase 100,000 shares of the Company's Common Stock at an
exercise price of $2.24 per share, which are exercisable as described in the
preceding paragraph with respect to the Options granted to Mr. Trevino. For the
year ended February 29, 2000, Mr. Trevino and Mr. Maresca each earned a cash
bonus of $25,000, paid in April 2000, as a result of the Company achieving a
targeted earnings per share approved by the Board of Directors.
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1998, the Company obtained loans aggregating $1.54 million from The
Catalyst Fund, Ltd. ("Catalyst") and an affiliate of Catalyst to pay the
Company's outstanding indebtedness to St. James Capital Partners, L.P. In April
1997, the Company borrowed $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
9
ACH. In 1993, the Company borrowed $1.0 million from Catalyst to pay the cash
portion of the purchase price of ACR Supply, Inc. ("ACRS") and for working
capital for ACRS. All of these loans bear interest at 12 1/2% per annum and are
secured by both the stock and operating assets of certain of the Company's
subsidiaries and an assignment of proceeds from life insurance policies on Mr.
Trevino. As of February 29, 2000, Catalyst has subordinated its security
interests in connection with up to $18.9 million in additional secured
borrowings of the Company. In connection with the January 1998 loans, the
Company granted Catalyst and its affiliate warrants to purchase 175,000 shares
of the Company's Common Stock at a price of $2.06 per share, exercisable at any
time before February 28, 2003. In connection with the 1993 loan, Catalyst
received a warrant to purchase one million shares of the Company's Common Stock
at a price of $.59 per share, which also is exercisable at any time before
February 28, 2003. In 1996, Catalyst sold its rights under the 1993 warrant to
purchase 250,000 shares of Common Stock. Mr. Nixon is a shareholder and officer
of the general partner of Catalyst. As of April 30, 2000, the aggregate unpaid
balance owed to Catalyst and its affiliate by the Company on all of the debt
facilities was $1,370,726.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The independent auditors of the Company are Ernst & Young LLP, and the Company
anticipates re-appointing such firm as the independent auditor of the Company
for fiscal 2001. A representative of Ernst & Young LLP will be present at the
annual meeting with the opportunity to make a statement if he desires to do so
and will be available to respond to appropriate questions addressed to him.
PROPOSALS OF SHAREHOLDERS
It is anticipated that the next annual meeting will be held in August 2001
with proxy solicitation commencing in July 2001. Any proposal to be presented
at next year's annual meeting of shareholders must be received by the Company at
its principal executive offices by February 26, 2001, for inclusion in the
Company's proxy materials relating to that meeting. Any such proposals must
comply in all respects with the rules and regulations of the Securities and
Exchange Commission.
OTHER MATTERS
Management knows of no matter to be presented for action at the meeting other
than those described above. However, if any such other matter should properly
come before the meeting, or if any vacancy in the proposed slate of directors
should be caused by an unexpected occurrence before the holding of the election,
the proxies will vote thereon in accordance with the recommendations of
management or for such other nominee as management may select.
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The statements set forth herein as to the present principal occupations of the
nominees as directors, the beneficial ownership of securities of the Company,
and other matters not of record with the Company, are based upon information
furnished to the Company.
By Order of the Board of Directors,
/s/ Anthony R. Maresca
-----------------------------------
Anthony R. Maresca
Secretary
June 29, 2000
The Company will furnish without charge to each person whose proxy is being
solicited, upon the written request of such person, a copy of the Annual Report
of the Company on Form 10-K for the fiscal year ended February 29, 2000, as
filed with the Securities and Exchange Commission, including the financial
statements and schedules thereto. Requests for copies of such Report should be
directed to Anthony R. Maresca, ACR Group, Inc., 3200 Wilcrest Drive, Suite 440,
Houston, Texas 77042.
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ACR GROUP, INC.
PROXY FOR ANNUAL MEETING TO BE HELD AUGUST 17, 2000
The undersigned hereby appoints Alex Trevino, Jr. and Anthony R. Maresca,
or either of them, each with power of substitution, the proxies of the
undersigned, to vote the stock of the undersigned at the annual meeting of
shareholders of ACR Group, Inc., to be held at the Adam's Mark Hotel, 2900
Briarpark Dr., Houston, Texas 77042, on Thursday, August 17, 2000, at 10:00
a.m., Houston time, or at any adjournments thereof, as indicated on the reverse
side hereof.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS and will be voted as
indicated by the shareholder. Unless a contrary direction is indicated, the
proxies shall vote the shares FOR the election as directors of the Board's
nominees and in accordance with the recommendations of management on any other
business coming before the meeting.
(Continued on reverse side)
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Please mark your vote as indicated in this example [X].
(1) To elect five directors for a term of one year: Anthony R. Maresca, Ronald T. Nixon, Roland H. St. Cyr,
Alex Trevino, Jr., and A. Stephen Trevino
FOR the nominees WITHHOLD AUTHORITY (INSTRUCTION: To withhold authority to vote for any individual
listed at right to vote for the nominee(s) nominee, write that nominee's name in the space provided below).
listed at right
[_] [_] ________________________________________________________________
Please do not fold, bend or mutilate this card.
(Please sign your name here exactly as it appears hereon. Joint
owners must each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full
title as it appears hereon).
Dated _______________________________________________________, 2000
___________________________________________________________________
Signature
___________________________________________________________________
Signature
Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.