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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 14, 1999
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Kevco, Inc.
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(Exact name of registrant as specified in its charter)
Texas 000-21621 75-2666013
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1300 S. University Drive, Suite 200, Fort Worth, Texas 76107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 332-2758
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ITEM 5. OTHER EVENTS.
On July 14, 1999, Kevco, Inc., a Texas corporation (the "Company"), entered
into a Securities Purchase Agreement dated as of July 14, 1999 with Wingate
Partners II, L.P., a Delaware limited partnership ("Wingate") (the "Securities
Purchase Agreement"). Pursuant to the Securities Purchase Agreement, Wingate is
to acquire common stock, notes and warrants on terms more fully described in the
notice to shareholders presented below. A copy of the Securities Purchase
Agreement has been filed as an exhibit to this Form 8-K and is incorporated
herein by reference.
The transactions contemplated by the Securities Purchase Agreement were
unanimously approved by the Board of Directors of the Company.
On July 15, 1999, the Company mailed the following notice to its
shareholders:
Dear Shareholder:
Kevco, Inc. (the "Company") is pleased to inform you that on July 14,
1999 it entered into a Securities Purchase Agreement (the "Agreement")
with Wingate Partners II, L.P. ("Wingate"), pursuant to which Wingate,
subject to certain conditions, will make a $37 million investment in
the Company through the purchase of the following securities from the
Company (the "Transaction"):
(i) 2,700,000 newly-issued shares of the Company's common stock
("Common Stock") for a purchase price of $5.00 per share;
(ii) five year warrants (the "Warrants") to acquire for a
purchase price of $5.50 per share an aggregate of 1,743,182 shares of
a new class of non-voting common stock of the Company (the "Non-Voting
Stock"); and
(iii) $23.5 million in principal amount of convertible, senior
subordinated notes of the Company divided into two tranches -- Tranche
A in the principal amount of $17.0 million (the "Tranche A Notes") and
Tranche B in the principal amount of $6.5 million (the "Tranche B
Notes" and with the Tranche A Notes, the "Notes").
The Tranche A Notes will be exchangeable at the holders' option for
3,090,909 shares of a newly-created series of preferred stock of the
Company -- Series A 10-3/8% Convertible Pay-in-Kind Voting Preferred
Stock ("Voting Preferred Stock") -- or directly into 3,090,909 shares
of Common Stock, in each case at an initial exchange ratio of $5.50
per share. Shares of Voting Preferred Stock, when and if issued in
exchange for Tranche A Notes, will be entitled to vote together with
the Common Stock on an as converted basis. The Voting Preferred Stock
will be convertible on a share-for-share basis into Common Stock. The
Tranche B Notes will be exchangeable at the holders' option for
1,181,818 shares of a second newly-created series of preferred stock
of the Company -- Series B 10-3/8% Convertible Pay-in-Kind Non-Voting
Preferred
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Stock ("Non-Voting Preferred Stock" and with the Voting Preferred
Stock, the "Preferred Stock") -- or directly into 1,181,818 shares of
Non-Voting Stock, in each case at an initial exchange ratio of $5.50
per share. Shares of Non-Voting Preferred Stock will have no voting
rights. The Non-Voting Preferred Stock will itself be convertible into
an equal number of shares of Non-Voting Stock. Interest on the Notes
may be paid in cash or, at the Company's option, continue to accrue
unpaid in which case a holder of the Notes may elect to have all
accrued interest paid in shares of Non-Voting Preferred Stock.
Dividends on the Preferred Stock may, at the Company's option, be paid
either in cash or in additional shares of Non-Voting Preferred Stock.
The Notes and any Preferred Stock that may be issued in exchange for
Notes will be callable by the Company beginning three years from
closing. The Company intends promptly following the closing of the
Transaction to take the steps necessary to amend and restate its
Articles of Incorporation to provide for the creation of the
Non-Voting Stock and the Preferred Stock. The convertible securities
contain standard antidilution provisions.
In addition to the 2,700,000 shares of Common Stock to be issued at
closing, if the Notes and Warrants were fully converted and exercised,
the Company would issue an additional 6,015,909 shares of Common Stock
and Non-Voting Stock - making an aggregate of 8,715,909 shares (the
"Shares") potentially issuable in connection with the Transaction
(excluding shares potentially issuable as interest or dividends on the
Notes and Preferred Stock).
Following consummation of the Transaction, Wingate would initially own
approximately 28.3% of the outstanding Common Stock and, assuming the
full exercise of the Warrants into Non-Voting Stock and the conversion
of the Tranche A Notes and Tranche B Notes into Common Stock and
Non-Voting Stock, respectively, Wingate would own approximately 45.8%
of the outstanding Common Stock and, with the shares of Non-Voting
Stock, approximately 55.9% of the total common equity interest in the
Company.
The Board of Directors of the Company has unanimously approved the
Agreement and the transactions contemplated thereby, including the
issuance of the Shares. The Company intends to consummate the
Transaction as soon as possible and believes that it will likely do so
within the next two weeks.
The Company is subject to the rules of The Nasdaq Stock Market, which
would generally require the Company to seek the approval of its
shareholders for the issuance of the Shares because the number of
Shares exceeds 20% of the number of shares currently issued and
outstanding. Shareholder approval is not required by the Company's
Articles of Incorporation, applicable Texas corporate law or
otherwise.
The Company's founder and current chief executive officer, Mr. Jerry
E. Kimmel, who owns more than a majority of the Company's outstanding
voting stock (approximately 54%), has advised the Company in writing
that he consents to the Transaction and would vote all his shares in
favor of its approval (including the
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issuance of the Shares) if a shareholder vote were held. Because Mr.
Kimmel could, by himself, determine the outcome of any shareholder
vote, the Board of Directors has decided that the process of seeking
formal shareholder approval would not warrant the expenditure of the
Company's time and resources and would not benefit the Company's
Shareholders. Accordingly, the Board of Directors sought and obtained
a confirmation from The Nasdaq Stock Market that the Company could
satisfy its obligations under the Nasdaq rules by mailing this notice
to its shareholders in lieu of seeking shareholder approval of the
issuance of the Shares.
Any inquiries related to the Transaction should be directed to Burton
Rice, Executive Vice President of Corporate Communications
Incorporated, at 615-254-3376.
Very truly yours,
/s/ Richard S. Tucker
Richard S. Tucker
Secretary
Kevco, Inc.
Further, on July 14, 1999, the Company issued the following press release:
WINGATE PARTNERS II, L.P. TO INVEST $37 MILLION
IN KEVCO
FORT WORTH, Texas (July 14, 1999) - Kevco, Inc. ("Kevco")
(Nasdaq/NM-KVCO) today announced that Wingate Partners II, L.P. ("Wingate")
has agreed to purchase a total of $37 million of Kevco's common stock,
convertible debt and warrants. Wingate will purchase 2.7 million shares of
newly issued voting common stock of Kevco for a total purchase price of
$13.5 million, $23.5 million of senior subordinated debt convertible into
3.1 million shares of newly issued voting common stock and 1.2 million
shares of a new class of non-voting common stock and warrants exercisable
at $5.50 per share for 1.7 million shares of a new class of non-voting
common stock. Closing of the transaction, which is subject to certain
conditions, is expected within the next two weeks. Kevco intends to file a
special report on Form 8-K with the Securities and Exchange Commission,
with respect to the transaction.
Kevco currently has approximately 6.9 million shares of voting common
stock outstanding. Following the purchase of 2.7 million common shares,
Wingate will own approximately 28% of the outstanding voting stock.
Assuming full conversion of the convertible debt and exercise of its
warrants, Wingate would own approximately 46% of the voting common stock
and all of Kevco's non-voting common stock.
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As a part of the transaction, Fred Hegi of Wingate will become
chairman of the board, president and chief executive of Kevco. Jerry E.
Kimmel, currently chairman, president and chief executive officer, will
continue to serve as a director and assume the newly-created position of
vice chairman. Mr. Kimmel, who is not selling any shares in the
transaction, will continue to be the largest non-institutional shareholder
of Kevco. Effective from the closing of the transaction, Rusty Hardin,
currently executive vice president of Kevco, will become president of
Kevco's Distribution Division. Bob Tennyson and Lee Denham will continue to
be responsible for the manufacturing and wood products divisions,
respectively. Clyde Reed will continue as executive vice president handling
special integration projects until his planned retirement in April, 2000.
Mr. Hegi remarked, "We are excited about this opportunity to make a
substantial investment in Kevco. One of every three new homes purchased
today in the United States was built under factory controlled conditions.
Through Jerry Kimmel's leadership, Kevco has become the largest distributor
of building products for the manufactured housing industry with a customer
base that includes all of the major producers. While Kevco has had
declining profitability during the past year, we do not believe current
financial results are indicative of Kevco's longer-term earnings growth
potential. Leveraging Wingate's experience in integrating distribution
companies, our focus will be to work with Kevco's operating management to
complete the integration process, strengthen systems capabilities and
improve operating efficiency throughout Kevco. We appreciate the trust
Kevco's customers and suppliers have placed in Kevco and intend to continue
earning that respect through outstanding performance. Kevco has a solid and
dedicated group of employees, and we believe that together we can realize
Jerry Kimmel's vision for superior customer service and profitability."
Upon closing of the transaction, Kevco will have four directors,
including Hegi and Kimmel. One of the other directors will be a current
director, and the other member of the Board will be Jim Johnson, a
principal of Wingate. The Company intends to add significant outside
capabilities to its Board by naming several new directors with extensive
experience in distribution operations, finance and corporate strategy. It
is expected that these new additions will be announced shortly.
Kevco, headquartered in Fort Worth, Texas, is a leading wholesale
distributor and manufacturer of building products to the manufactured
housing and recreational vehicle industries.
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CERTAIN STATEMENTS IN THIS NEWS RELEASE CONSIST OF FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED
TO, KEVCO'S SUBSTANTIAL LEVERAGE AND ITS EFFECTS ON KEVCO'S ABILITY TO
OBTAIN ADDITIONAL CAPITAL AS NEEDED, KEVCO'S ABILITY TO INTEGRATE ITS
OPERATIONS AND SUCCESSFULLY IMPLEMENT NEW MANAGEMENT INFORMATION SYSTEMS,
KEVCO'S SUCCESS IN ADDRESSING AND REMEDIATING YEAR 2000-RELATED ISSUES,
KEVCO'S ABILITY TO PROFITABLY OPERATE ITS NEW MANUFACTURING FACILITIES,
CUSTOMER DEMAND FOR MANUFACTURED HOUSING AND RECREATIONAL VEHICLES, THE
EFFECT OF ECONOMIC CONDITIONS, THE IMPACT OF RAW MATERIALS PRICES, KEVCO'S
ABILITY TO MAINTAIN PROFITABILITY IN THE EVENT OF THE LOSS OF A SIGNIFICANT
CUSTOMER AND OTHER RISKS DETAILED FROM TIME TO TIME IN THE REPORTS FILED BY
KEVCO WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING KEVCO'S ANNUAL
REPORT ON FORM 10-K. DESCRIPTIONS OF AGREEMENTS CONTAINED HEREIN ARE
SUMMARIES ONLY AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE
TERMS OF SUCH AGREEMENTS.
Descriptions of agreements contained herein are summaries only and are
qualified in their entirety by reference to the terms of such agreements, which
agreements or forms of which agreements are filed as exhibits hereto and
incorporated herein by reference.
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ITEM 7. EXHIBITS
Exhibit Nos.
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2.1 Securities Purchase Agreement dated as of July 14, 1999 between Wingate
and the Company (1)(2)
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(1) Filed herewith.
(2) Schedules and similar attachments are omitted, but descriptions of such
omitted schedules or attachments are contained in such document. The
Company hereby undertakes to provide copies of such omitted schedules or
attachments to the staff of the Securities and Exchange Commission upon
request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Kevco, Inc.
Date: July 20, 1999 By: /s/ Jerry E. Kimmel
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Jerry E. Kimmel
Chairman of the Board,
President and Chief Executive
Officer
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Index to Exhibits
EXHIBIT NOS. DESCRIPTION
2.1 Securities Purchase Agreement dated as of July 14, 1999 between
Wingate and the Company (1)(2)
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(1) Filed herewith.
(2) Schedules and similar attachments are omitted, but descriptions of such
omitted schedules or attachments are contained in such document. The
Company hereby undertakes to provide copies of such omitted schedules or
attachments to the staff of the Securities and Exchange Commission upon
request.