<PAGE> 1
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
HUFFY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
HUFFY CORPORATION
(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)(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 fee 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> 2
HUFFY CORPORATION LOGO
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1999
To our Shareholders:
It is a pleasure to invite you to attend your Company's 1999 Annual Meeting
of Shareholders which will be held this year on Thursday, April 22, 1999, at
10:00 a.m., Eastern Daylight Time, in the Frederick C. Smith Auditorium at
Sinclair Community College, 444 West Third Street, Dayton, Ohio.
I hope you will be able to join us to review the year and see what the
future holds for the Company. Prior to and immediately following the meeting,
various company products and services will be exhibited. For your convenience, a
map of the area and directions to the meeting are enclosed.
If you plan to attend the meeting an admission ticket will be required and
is attached to the proxy card. Please indicate the number attending from your
immediate family. If your shares are held in the name of a broker or other
nominee and you do not have an admission ticket, please bring with you a proxy
or letter from the broker, trustee, bank or nominee confirming your beneficial
ownership of the shares.
Formal Notice of the Meeting and Proxy Statement accompany this letter.
Whether or not you plan to be at the meeting, it is important to exercise your
right to vote. Please vote your preferences on the enclosed proxy card and sign,
date and return it promptly in the envelope provided so that your shares will be
represented. I look forward to seeing you at the meeting.
Sincerely,
/s/ Don R. Graber
Don R. Graber
Chairman of the Board
<PAGE> 3
HUFFY CORPORATION LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1999
The Annual Meeting of Shareholders of Huffy Corporation (the "Company"), an
Ohio corporation, will be held in the Frederick C. Smith Auditorium, Sinclair
Community College, Building 12, 444 W. Third Street, Dayton, Ohio 45402, on
Thursday, April 22, 1999 at 10:00 a.m. (Eastern Daylight Time) for the following
purposes:
1. To elect three Directors to serve for terms of three years.
2. To ratify the appointment of KPMG LLP as independent public accountants
for 1999.
3. To consider one shareholder proposal that has been presented to the
Company for consideration by shareholders as properly may be brought
before the Annual Meeting.
4. To transact such other business as properly may be brought before the
Annual Meeting or any adjournment(s) thereof.
Shareholders of record at the close of business on February 26, 1999, are
entitled to vote at the meeting or any adjournment(s) thereof.
By Order of the Board of
Directors
/s/ Nancy A. Michaud
Nancy A. Michaud
Secretary
Dayton, Ohio
March 5, 1999
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER YOU
EXPECT TO ATTEND OR NOT, PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL
IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE TO SAVE THE COMPANY THE
EXPENSE OF FOLLOW-UP LETTERS AND TELEPHONE CALLS.
<PAGE> 4
HUFFY CORPORATION
225 BYERS ROAD
MIAMISBURG, OHIO 45342
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1999
MARCH 5, 1999
GENERAL INFORMATION
PERSONS MAKING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Huffy Corporation (the "Company") to be
used at the Annual Meeting of Shareholders to be held on April 22, 1999, and any
adjournment(s) of such meeting. This Proxy Statement and the accompanying proxy
card were first mailed to Shareholders on or about March 5, 1999. The Company
will bear the cost of soliciting proxies and will, upon request, reimburse
banks, brokerage houses and other institutions for their expenses in forwarding
proxy materials to their principals. Directors, Officers and employees of the
Company may solicit proxies personally from some Shareholders if proxies are not
received promptly. In addition, the Company has retained Morrow & Co. to assist
in the solicitation of proxies for which the Company will pay fees estimated to
total $5,000.
VOTING SECURITIES
The authorized voting capital stock of the Company consists of 60,000,000
shares of Common Stock, $1.00 par value, of which there were 11,798,584 shares
issued and outstanding as of February 26, 1999, which is the record date for the
determination of the holders of Common Stock entitled to receive notice of and
to vote at the Annual Meeting. Each share of Common Stock entitles the holder to
one vote.
ACTIONS TO BE TAKEN BY HOLDERS OF PROXIES
Unless otherwise directed by the person giving the proxy, all properly
executed proxies will be voted: (1) for the election of Jack D. Michaels, James
F. Robeson and Patrick W. Rooney; (2) in favor of ratification of the
appointment of KPMG LLP as independent public accountants for the Company for
1999; (3) against the shareholder proposal; and (4) at the discretion of the
holders of the proxies, in the transaction of such other business as may
properly come before the Annual Meeting or any adjournment(s) thereof.
The holders of the proxies may, in their discretion, vote for substitute
nominee(s) designated by the Board of Directors, or take other legally
permissible action in the event that any nominee becomes unable to serve for any
reason presently unknown.
A proxy may be revoked at any time before exercise by written notice to the
Company bearing a later date than the proxy, by submission of a later dated
proxy, or by voting in person in open meeting (although presence at the Annual
Meeting will not in and of itself constitute revocation of the proxy). Any
written notice revoking a proxy should be sent to Huffy Corporation, 225 Byers
Road, Miamisburg, Ohio 45342, Attention: Nancy A. Michaud, Secretary.
1
<PAGE> 5
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. The Board
of Directors of the Company recommends that three Directors be elected each for
a three year term expiring in 2002. The Board of Directors of the Company
currently has 9 Directors: three whose terms expire in 1999, three whose terms
expire in 2000, and three whose terms expire in 2001. Jack D. Michaels, James F.
Robeson and Patrick W. Rooney, whose terms expire in 1999, have each been
recommended by the Nominating and Governance Committee of the Board of Directors
and nominated by the Board of Directors for election to the Board of Directors
for a three year term expiring in 2002.
Under Ohio law, if a Shareholder gives written notice to the President, a
Vice President or the Secretary of the Company, not less than 48 hours before
the time fixed for the Annual Meeting, that such Shareholder desires the voting
at the election of Directors to be cumulative, and if an announcement of the
giving of such notice is made upon the convening of the meeting by the chairman
or secretary of the meeting or by or on behalf of the Shareholder giving such
notice, then the Directors will be elected by cumulative voting. In such event,
each Shareholder has the right to give one candidate a number of votes equal to
the number of Directors then being elected multiplied by the number of such
Shareholder's shares, or to distribute such Shareholder's votes on the same
principle among two or more candidates. In the event that Directors are elected
by cumulative voting and cumulated votes represented by proxies solicited hereby
are insufficient to elect all the nominees, then the holders of the proxies
intend to vote such proxies cumulatively for the election of as many of such
nominees as possible and in such order as the holders may determine. Votes will
be counted by Harris Trust and Savings Bank acting as the inspector of
elections.
Under Ohio law and the Company's Code of Regulations, the three nominees
receiving the greatest number of votes shall be elected as Directors. Shares as
to which authority to vote is withheld, abstentions and shares not voted by
brokers and other entities holding shares on behalf of beneficial owners will
not be counted and will have no effect on the outcome of the election.
The following table sets forth certain information as to each nominee for
Director and each other person whose term of office as Director will continue
after this Annual Meeting:
<TABLE>
<CAPTION>
SERVED AS
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR THE PAST FIVE YEARS(1) AGE SINCE
- ------------------------------------------------------------ --- ---------
<S> <C> <C>
NOMINEES FOR TERMS EXPIRING IN 2002
Jack D. Michaels, Chairman, President and Chief Executive 61 1993
Officer of HON INDUSTRIES Inc. (manufacturer and marketer
of metal and wood office furniture and pre-fabricated
fireplaces/stoves) since 1995; prior thereto President and
Chief Executive Officer of such company(2)
James F. Robeson, Vice Chairman of Roberds, Inc. (retailer 62 1994
of a broad range of home furnishing products) since 1998;
prior thereto Chief Executive Officer and President of
Roberds, Inc. (retailer of a broad range of home
furnishing products) from 1997 to July, 1998 and
consultant to various distribution companies since 1993;
prior thereto Herbert E. Markley Visiting Scholar in
Business at Miami University since 1995(3)
Patrick W. Rooney, Chairman of the Board and Chief Executive 63 1995
Officer of Cooper Tire & Rubber Company (manufacturer of
tires and inner tubes for the automotive aftermarket, and
engineered rubber products for the O.E.M. automotive
industry) since 1998; prior thereto Chairman of the Board,
President and Chief Executive Officer of such company
since 1994(4)
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
SERVED AS
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR THE PAST FIVE YEARS(1) AGE SINCE
- ------------------------------------------------------------ --- ---------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
W. Anthony Huffman, retired from the Company and currently 56 1997
President of Huffman Travel Limited (engaged in travel
services) since 1997; prior thereto Vice
President-Corporate Affairs of the Company from 1994 to
1995
Donald K. Miller, President of Presbar Corporation (engaged 67 1988
in private equity investing and investment banking) since
1986; prior thereto Chairman of Greylock Financial Inc.
since 1992; and Chairman and Chief Executive Officer of
Thomson Advisory Group L.P. (now PIMCO Advisors Holdings
L.P.) from 1990-1993 and Vice Chairman from 1993-1994(5)
Joseph P. Viviano, Vice Chairman of Hershey Foods 60 1996
Corporation since 1999 (engaged in the manufacture,
distribution and sale of consumer food products); prior
thereto President and Chief Operating Officer of such
company since 1994(6)
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Don R. Graber, Chairman of the Board, President and Chief 55 1996
Executive Officer of the Company since December, 1997;
prior thereto President and Chief Operating Officer of the
Company since July, 1996; prior thereto President of
Worldwide Household Products Group and Group Vice
President of The Black & Decker Corporation (engaged in
the marketing and manufacture of products used in and
around the home and for commercial applications) since
1993(7)
Linda B. Keene, Vice President-Market Development of 47 1993
American Express Financial Advisors since 1994 (engaged in
financial advising services)
Thomas C. Sullivan, Chairman and Chief Executive Officer of 61 1995
RPM, Inc. (manufacturer of specialty chemicals and
coatings)(8)
</TABLE>
- ---------------
(1) Except as disclosed herein, no information is included in this Proxy
Statement for any portion of a period in which a Director did not hold
office as a Director of the Company.
(2) Mr. Michaels is a Director of HON INDUSTRIES Inc. and Snap-On Tools, Inc.
(3) Mr. Robeson is a Director of Roberds, Inc. and Moto Photo, Inc.
(4) Mr. Rooney is a Director of Alltrista Corporation, Cooper Tire & Rubber
Company, and Sky Financial Group, Inc.
(5) Mr. Miller is a Director of Layne Christensen Company and RPM Inc.
(6) Mr. Viviano is a Director of Chesapeake Corporation and Hershey Foods
Corporation.
(7) Mr. Graber is a Director of Precision Castparts Corporation.
(8) Mr. Sullivan is a Director of Pioneer-Standard Electronics, Inc., RPM,
Inc., and Kaydon Corporation.
MEETINGS BY, AND CERTAIN COMMITTEES OF, THE COMPANY'S BOARD OF DIRECTORS
James F. Robeson (Chairman), Linda B. Keene and Donald K. Miller comprise
the Audit Committee of the Board of Directors. The Audit Committee meets with
the Company's independent public accountants, internal auditors, and financial
management executives and reviews the scope and results of audits as well as
recommendations made by the Company's auditors and executives with respect to
internal accounting controls. During the last fiscal year, the Audit Committee
met two times.
3
<PAGE> 7
Thomas C. Sullivan (Chairman), Patrick W. Rooney and Joseph P. Viviano
comprise the Compensation Committee of the Board of Directors. The Compensation
Committee sets salary and benefits policy, and determines compensation and
benefit levels for the Company's Officers and certain other key employees.
During the last fiscal year, the Compensation Committee met four times.
Jack D. Michaels (Chairman), W. Anthony Huffman and Linda B. Keene comprise
the Nominating and Governance Committee. This Committee seeks out and reviews
the qualifications of possible candidates for Board membership. Shareholders may
submit nominee recommendations, complete with qualifications, to any member of
the Committee at any time. The Committee recommends to the Board of Directors
candidates for election as Directors at annual meetings, candidates to fill
vacancies on the Board, and candidates for Committees of the Board. The
Committee also conducts the annual Chief Executive Officer and Board
assessments. During the last fiscal year, the Committee met two times.
During the last fiscal year, the Board of Directors met nine times. No
Director attended fewer than 75 percent of the aggregate number of meetings of
the Board of Directors and meetings of Committees thereof during the time such
person was a Director and member of any such Committee.
COMPENSATION OF DIRECTORS
In 1998, the Company's non-employee Directors ("Outside Directors")
received annual base compensation of $22,500. All Directors received additional
compensation of $1,000 per Board meeting attended. The Chairmen of the Audit
Committee, the Compensation Committee, and the Nominating and Governance
Committee received additional compensation of $3,000 per year. Each Committee
member (including the Chairman of the Committee) received $1,000 for each
Committee meeting attended. Additionally, Directors received consulting fees of
$500 for each half day of service provided outside their normal duties as
Directors when such services were provided at the request of management of the
Company and $500 for Board of Directors' visits to Company plant sites.
Directors received $2,500 for attendance at Board of Directors' retreat meetings
but such fee was in lieu of all meeting fees for Board and Committee meetings
held during such retreat. Mr. Donald K. Miller received $37,500 for services
rendered as a consultant to the Company in 1998. No Director who is an employee
of the Company receives any compensation for services as a Director.
DIRECTOR PLANS
Pursuant to the Company's 1998 Director Stock Option Plan (the "1998
Plan"), Outside Directors may elect to defer payment of their fees or take part
or all of their annual base fees in the form of stock options. The 1998 Plan
provides for the automatic grant of options to purchase 2,000 shares of the
Company's Common Stock on the second business day after each Annual Meeting of
Shareholders. Options are granted to Outside Directors at a purchase price equal
to 100 percent of the fair market value of the Common Stock on the date of
grant.
In addition to options granted automatically every year, if an Outside
Director files an irrevocable election with the Secretary of the Company prior
to May 1 of any year and on such other date(s) as may be designated from time to
time electing not to receive all or a portion of his or her annual base
compensation to be earned in the following 12 month period beginning May 1 and
ending April 30, then the Company shall grant options automatically on May 1 or
such other dates, if applicable, to such Outside Director. The Company's policy
is to encourage stock ownership and thus the formula used to determine the
number of shares for which an option may be granted pursuant to such an election
provides a premium for such deferrals and such formula is as follows:
<TABLE>
<C> <C> <S>
Portion of Annual Base
Compensation Not Received x 1.5 = Number of Shares
--------------------------
Fair Market
Value minus $1.00
</TABLE>
For the 12 month period beginning May 1, 1998, and ending April 30, 1999,
Outside Directors have elected not to receive, in the aggregate, $123,250 of
their annual base compensation and the Company granted options to them based on
such elections in accordance with the 1998 Plan. The option price per share of
4
<PAGE> 8
the Common Stock covered by such options is $1.00.
No options may be exercised until six months following the date upon which
it was granted, except upon a change in control (as defined in the 1998 Plan),
or due to retirement from the Board of Directors because of total and permanent
disability, expiration of a Director's term of office, or otherwise in
accordance with the current Board of Directors' policy or upon the death of the
option holder. A notice to exercise an option must be accompanied by full
payment of the purchase price for the Common Stock being purchased. The 1998
Plan is administered by a Committee consisting of not less than three Officers
of the Company who are not entitled to participate in the 1998 Plan.
In February, 1996, the Board of Directors discontinued the Directors'
Retirement Plan, freezing retirement benefits for those Board members vested in
such Plan through their current term. Under the Directors' Retirement Plan, each
Outside Director who served as a member of the Board of Directors five years or
more earned an annual retirement benefit of $5,000 plus $1,000 for each year of
service as an Outside Director (prorated for partial years) in excess of five
years service, not to exceed a maximum annual benefit of $10,000. Only one
Outside Director has vested retirement benefits under such plan.
The Board of Directors approved a policy on Director Ownership of Huffy
Common Stock, effective April 17, 1998. This policy requires Outside Directors
to acquire periodically and own up to 3,200 shares of Common Stock of the
Corporation. Such ownership amounts are determined on the anniversary date of
such Director's nomination to the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of the Company's shares
of Common Stock reported to the Company as of January 2, 1999, for each Director
and Nominee and for each of the Executive Officers named in the Summary
Compensation Table (the "Named Executive Officers"), and for all Directors,
Nominees and Executive Officers as a group. For purposes of the table, a person
is considered to "beneficially own" any shares of Common Stock (i) over which
the person exercises sole or shared voting or investment power or (ii) of which
the person has the right to acquire beneficial ownership at any time within 60
days after January 2, 1999.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)
- ------------------------------ -------------
<S> <C>
Stanley H. Davis.............. 7,729(3)
Thomas A. Frederick........... 40,715(4)
Don R. Graber................. 160,136(5)
Timothy G. Howard............. 54,175(6)
W. Anthony Huffman............ 146,079(7)
Linda B. Keene................ 9,753(8)
Jack D. Michaels.............. 11,068(9)
Nancy A. Michaud.............. 33,279(10)
Donald K. Miller.............. 180,352(11)
James F. Robeson.............. 10,396(12)
Patrick W. Rooney............. 4,243(13)
Thomas C. Sullivan............ 10,784(14)
Joseph P. Viviano............. 10,800(15)
All Directors, Nominees and
Executive Officers,
including Named Executive
Officers, as a Group (13
persons).................... 679,509
</TABLE>
5
<PAGE> 9
<TABLE>
<C> <S>
(1) All shares are held with sole voting and
sole investment power unless otherwise
indicated in the footnotes below.
(2) Except for Don R. Graber, W. Anthony
Huffman and Donald K. Miller whose Com-
mon Stock ownership is 1.4 percent, 1.2
percent, and 1.5 percent, respectively,
no such beneficial owner owns more than
one percent of the issued and
outstanding shares of Common Stock of
the Company. All Directors, Nominees and
Executive Officers as a group own 5.8
percent of the issued and outstanding
shares of Common Stock of the Company as
of January 2, 1999.
(3) Mr. Davis has shared investment power
with respect to 100 shares held by his
spouse. The total amount also includes
4,129 shares as to which Mr. Davis holds
options exercisable within 60 days.
(4) Mr. Frederick has shared voting and
shared investment power with respect to
7,833 shares held jointly with his
spouse. The total amount also includes
29,741 shares as to which Mr. Frederick
holds options exercisable within 60
days.
(5) Mr. Graber has shared investment power
with respect to 1,000 shares held by his
spouse. The total amount also includes
126,666 shares as to which Mr. Graber
holds options exercisable within 60
days.
(6) Mr. Howard has shared voting and shared
investment power with respect to 8,772
shares held jointly with his spouse. The
total amount also includes 36,829 shares
as to which Mr. Howard holds options
exercisable within 60 days.
(7) Mr. Huffman has sole voting and sole
investment power with respect to 116,205
shares, of which 20,930 shares are held
by him as custodian for his children.
Mr. Huffman has shared investment power
with respect to 975 shares held by his
spouse. The total amount also includes
28,899 shares as to which Mr. Huffman
holds options exercisable within 60
days.
(8) Ms. Keene has shared voting and shared
investment power with respect to 2,128
shares held jointly with her spouse. The
total amount also includes 7,625 shares
as to which Ms. Keene holds options
exercisable within 60 days.
(9) The total amount also includes 7,868
shares as to which Mr. Michaels holds
options exercisable within 60 days.
(10) Ms. Michaud has shared investment power
with respect to 2,246 shares held by her
spouse as trustee. The total also
includes 24,408 shares as to which Ms.
Michaud holds options exercisable within
60 days.
(11) Mr. Miller has sole voting and sole
investment power with respect to 162,627
shares, of which 40,000 shares are held
by him as custodian for his children.
Mr. Miller has shared investment power
with respect to 4,475 shares held by his
spouse. The total amount also includes
13,250 shares as to which Mr. Miller
holds options exercisable within 60
days.
(12) Mr. Robeson has shared investment power
with respect to 1,000 shares held by his
spouse. The total amount also includes
7,625 shares as to which Mr. Robeson
holds options exercisable within 60
days.
(13) The total amount includes 2,000 shares
as to which Mr. Rooney holds options
exercisable within 60 days.
(14) The total amount includes 3,534 shares
as to which Mr. Sullivan holds options
exercisable within 60 days.
(15) Mr. Viviano has shared voting and shared
investment power with respect to 500
shares held jointly with his spouse. The
total amount also includes 2,000 shares
as to which Mr. Viviano holds options
exercisable within 60 days.
</TABLE>
6
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to Shareholders
known to the Company to be beneficial owners of more than five percent of the
Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT
AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS(4)
- -------------------------- ---------- ----------
<S> <C> <C>
David L. Babson and
Company, Inc.(1)
One Memorial Drive
Cambridge, Massachusetts
02142-1300 1,193,500 10.14%
Neuberger Berman, LLC(2)
605 Third Avenue
New York, New York
10158-3698 1,173,000 9.96%
Dimensional Fund
Advisors, Inc.(3)
1299 Ocean Avenue,
11th Floor
Santa Monica, California
96401 726,950 6.17%
</TABLE>
- ---------------
(1) This information is taken from the Schedule 13G, dated January 21, 1999,
filed by David L. Babson and Company, Inc. with the Securities and Exchange
Commission, which disclosed David L. Babson and Company, Inc. has sole
voting power with respect to 1,193,500 shares, shared voting power with
respect to 0 shares, sole investment power with respect to 1,193,500 shares,
and shared investment power with respect to 0 shares.
(2) This information is taken from the Schedule 13G, dated February 10, 1999,
filed by Neuberger Berman, LLC with the Securities and Exchange Commission,
which disclosed Neuberger Berman, LLC has sole voting power with respect to
753,100 shares, shared voting power with respect to 0 shares, sole
investment power with respect to 0 shares, and shared investment power with
respect to 1,173,000 shares.
(3) This information is taken from the Schedule 13G, dated February 11, 1999,
filed by Dimensional Fund Advisors Inc. with the Securities and Exchange
Commission which disclosed Dimensional Fund Advisors, Inc. has sole voting
power with respect to 726,950 shares, shared voting power with respect to 0
shares, sole investment power with respect to 726,950 shares, and shared
investment power with respect to 0 shares.
(4) Percentages listed are those disclosed in the referenced Schedules 13G and
are not verified by the Company.
REPORT OF COMPENSATION COMMITTEE
Decisions on compensation and stock options of the Company's Executive
Officers are made by the Compensation Committee of the Board of Directors (the
"Committee") which is comprised of non-employee Directors.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Company's executive compensation program is designed to tie a
significant portion of executive compensation to the Company's success in
meeting specified performance goals and to appreciation in the price of the
Company's Common Stock. This strategy is designed to attract and retain the best
possible executive talent, to motivate these executives to achieve the Company's
goals, to link executive and Shareholder interests, and to provide a
compensation package that recognizes individual contributions as well as overall
business results. In reviewing the individual performance of the Named Executive
Officers whose compensation is detailed in this Proxy Statement, other than that
of Mr. Don R. Graber, the Chief Executive Officer, the Committee takes into
account the views of Mr. Graber.
The Committee compares the Company's executive compensation structure
against those of other manufacturing businesses and retail service providers
whose size is adjusted to that of the Company. The Committee believes that such
manufacturing businesses and service providers generally represent the Company's
most direct competitors for executive talent. The Committee's policy is to
evaluate competitive base salary ranges and total compensation based on the 50th
percentile level of total compensation paid by manufacturing businesses and
service providers for comparable positions. The Company's actual overall
executive compensation levels are below such 50th percentile levels. The
Committee reviews competitive pay practices on an annual basis.
The key elements of the Company's 1998 executive compensation program
consist of Base Salary, the Annual Performance Incentive Plan, the Long-Term
Incentive Plan and Stock Options.
7
<PAGE> 11
In addition, while the elements of compensation described below are considered
separately, the Committee takes into account the full compensation package
afforded by the Company to the individual, including pension benefits,
supplemental retirement benefits, severance plans, insurance and other benefits,
as well as the programs described below. The Committee has reviewed Section
162(m) of the Internal Revenue Code of 1986, as amended, which limits the
deduction for certain executive compensation and, based on present levels of
compensation, does not anticipate the loss of deductibility for any compensation
paid over the next year.
BASE SALARY
Base salary ranges for Executive Officers are determined by periodic
recommendations (most recently in 1998) by an independent compensation
consultant who evaluates the responsibilities of each such position, and
compares the Company's salary level for the position to comparable positions at
other manufacturing businesses and retail service providers nationwide. The
Company's policy is to generally pay competitive base salaries by using the 50th
percentile levels at manufacturing businesses and service providers for
comparable positions as guidelines, and to review such salary levels annually.
Annual salary adjustments within such base salary ranges are determined by
evaluating the performance of the Executive Officer and the Executive Officer's
current base salary as compared to 50th percentile competitive pay practices and
the Company's overall annual salary increase budget. Performance of an Executive
Officer is evaluated based upon the employee's accomplishment of his or her
duties, objectives established by his or her supervisor (in the case of Mr.
Graber by the Board of Directors), and general management abilities. Elected
Chairman, President and Chief Executive Officer, in December, 1997, Mr. Graber's
base salary was increased, effective January 1, 1998, to $500,000.
ANNUAL PERFORMANCE INCENTIVE PLAN
Executive Officers may receive an annual bonus under the Annual Performance
Incentive Plan based upon corporate and individual performance objectives
established at the beginning of each year. The corporate performance measure for
bonus payments in 1998 recommended and approved by the Committee and approved by
the Board of Directors was based equally on return on average net assets
("RONA") and on earnings per share ("EPS"). In 1998, the performance measure was
established to motivate management to continue the 1996 turnaround in RONA and
EPS; in 1995, the Corporation had a RONA of 0 percent and a net loss per share
of $0.78. For 1998, threshold, target and maximum level bonus on corporate
performance would be achieved when RONA was at 6.5 percent, 7.7 percent, and 9.2
percent, respectively, and when EPS was at $0.78, $0.92 and $1.10, respectively
(prior to reconfiguration charges). As approved by the Committee, the Executive
Officers are eligible to earn annual incentive bonuses ranging from 7.5 percent
to 12.5 percent (12.5 percent for Mr. Graber) of their annual base salaries at
threshold level, from 30 percent to 50 percent (50 percent for Mr. Graber) of
such salaries at target level; and from 60 percent to 100 percent (100 percent
for Mr. Graber) of such salaries at maximum level, with 80 percent of the bonus
based on corporate performance and 20 percent on individual personal objectives.
Individual performance is based on achievement of personal objectives. Personal
objectives are both qualitative, such as certain business strategy development
and/or implementation, improved customer satisfaction, management effectiveness
and personal development, and quantitative, such as achieving cost reduction,
production and sales goals. In 1998, the Company reported a RONA of 7.1 percent
and an EPS of $1.02 (both prior to reconfiguration charges). Based on these
results, Mr. Graber was awarded a bonus of $311,600.
LONG-TERM INCENTIVE PLAN
The Executive Officers participate in the Company's Long-Term Incentive
Plan which is based on the Company's EPS, RONA and Total Shareholder Return
("TSR") during the period as compared to targets for each established by the
Compensation Committee prior to the commencement of the award period. Under this
plan, in 1998, Executive Officers are each eligible to earn awards ranging from
12.5 to 25 percent (25 percent for Mr. Graber) of their annual base salaries for
threshold awards; 25 to 50 percent (50 percent for Mr. Graber) of such salaries
for target awards; and 50 to 100 percent (100 percent for Mr. Graber) of such
salaries for maximum
8
<PAGE> 12
awards. For 1998, threshold, target and maximum level awards required an EPS of
$0.83, $0.92, and $1.06, respectively; RONA of 6.9 percent, 7.7 percent, and 8.9
percent, respectively; and TSR of 14.4 percent, 16 percent, and 18.4 percent,
respectively (prior to reconfiguration charges). Awards earned for 1998 are
payable in 1999. For 1998, EPS was $1.02, RONA was 7.1 percent and TSR was (8.5)
percent (all prior to reconfiguration charges). For the award cycle beginning
January 1, 1998, Mr. Graber received an award of $131,611 and for the award
period beginning January 1, 1997 (which is payable in three installments), based
on 1997 EPS of $.78 (including discontinued operations), Mr. Graber received the
second one-third of a target award payment of $66,667.
STOCK OPTIONS
Under the Company's 1998 Key Employee Stock Option Plan ("1998 Plan"),
stock options may be granted by the Committee to the Company's Executive
Officers and other key managers. The Committee sets guidelines for the size and
frequency of stock option grants which grants are based upon the Executive
Officers' performance and results achieved. In 1998, all such Officers were
eligible for stock option awards. Stock options are granted to Executive
Officers with an exercise price equal to the closing market price of the Common
Stock on the date of grant and become exercisable in four equal, annual
installments commencing one year from the date of grant. This approach is
designed to motivate the creation of Shareholder value over the long term since
the full benefit of the compensation package cannot be realized unless Common
Stock price appreciation occurs. Mr. Graber received an initial grant of stock
options in 1996 upon the commencement of his employment with the Corporation; in
1998, the Committee awarded Mr. Graber a subsequent grant of 155,000 options at
$18.25 per share. As of January 2, 1999, Mr. Graber beneficially owned 160,136
shares of Common Stock.
In order to align the interests of Shareholders and management, the Board
of Directors approved an Executive Stock Ownership program in 1994, commencing
in 1995, which sets guidelines for share ownership for Executive Officers and
other key personnel. Under the guidelines, the Chief Executive Officer and all
other Executive Officers are required to own Common Stock equal to 1.5 times
(for the Chief Executive Officer) and 0.5 times their salaries (for all other
Officers), with measured interim ownership goals to be attained over a ten year
period. All Executive Officers currently exceed the applicable ownership
requirement.
PERFORMANCE GRAPHS
For the three year period beginning December 31, 1995 through December 31,
1998, Total Shareholder Return was 174 percent as reflected on the performance
graph on page 13, contrasting favorably to the return reflected on the
performance graph for the five year period beginning December 31, 1993. This
dramatic improvement in Total Shareholder Return is the result of corporate
strategies which were implemented beginning in 1995.
Through the programs described above, a significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance and returns to Shareholders, a policy the Committee intends to
continue.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS(1)
Patrick W. Rooney, Thomas C. Sullivan and Joseph P. Viviano
- ---------------
(1) Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, this report
and the graphs set forth on page 13 shall not be incorporated by reference
into any such filings.
CERTAIN RELATIONSHIPS AND OTHER RELATED TRANSACTIONS
The Company, through a wholly owned subsidiary, provides certain services
in the ordinary course of business to Rust-Oleum Corporation, a subsidiary of
RPM, Inc. Mr. Thomas C. Sullivan, a Director of the Company, is the Chairman and
Chief Executive Officer of RPM, Inc. During the year ended December 31, 1998,
Rust-Oleum Corporation paid $129,074 for such services
9
<PAGE> 13
which were provided on terms, conditions, and prices competitive with those
offered to other purchasers of such services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for 1998 were Patrick W. Rooney,
Thomas C. Sullivan, and Joseph P. Viviano, none of whom is or was a current or
former officer or employee of the Company or any of its subsidiaries. No
Executive Officer of the Company serves as a Director or as a member of a
Committee of any company of which any of the Company's Directors are executive
officers.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER INFORMATION
The following table shows, for the fiscal years ended December 31, 1996,
1997 and 1998, the cash compensation paid by the Company as well as certain
other compensation paid or accrued for those years, to each of the five most
highly compensated Executive Officers, including Don R. Graber, the Chairman,
President and Chief Executive Officer of the Company, in all capacities in which
they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ---------------------- ----------
OTHER NUMBER ALL
ANNUAL RESTRICTED OF OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) SATION(2) AWARD(S)(3) SARS(5) PAYOUTS(6) SATION(7)
- ------------------------- ---- --------- -------- --------- ----------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don R. Graber 1998 $519,236 $311,600 $13,186 $ 94,380 155,000 $ 131,611 $22,838
Chairman of the Board 1997 407,693 396,000 5,073 111,916 0 66,667 16,321
President and Chief 1996 164,616 300,000 50,971 922,500(4) 100,000 0 4,292
Executive Officer
Thomas A. Frederick 1998 202,442 71,525 8,841 13,147 13,000 32,155 9,887
Vice President- 1997 181,692 105,750 2,578 41,594 12,503 18,841 15,222
Finance, Chief 1996 159,769 87,000 2,039 0 13,449 8,458 14,068
Financial Officer and
Treasurer
Stanley H. Davis 1998 184,469 64,600 1,427 0 10,000 22,093 8,107
Vice President- 1997 77,404 90,675 41,456 0 11,516 10,208 1,548
Human Resources and 1996 -- -- -- -- -- -- --
Organization
Development
Nancy A. Michaud 1998 179,254 63,625 2,657 10,340 16,500 29,670 9,363
Vice President-General 1997 159,692 92,875 2,347 33,670 11,055 17,850 15,370
Counsel and Secretary 1996 151,462 89,700 1,366 0 11,787 8,750 13,825
Timothy G. Howard 1998 173,388 60,950 3,083 23,016 10,000 28,618 9,602
Vice President- 1997 158,462 93,600 3,461 63,378 10,792 17,383 8,636
Controller 1996 149,577 85,200 4,535 0 11,787 8,283 11,966
</TABLE>
- ---------------
(1) "Salary" and "Bonus" include amounts that would have been payable currently,
but were deferred at an election of an Executive Officer, such as through
the Company's 401(k) Savings Plan.
(2) No perquisites were provided or other personal benefits paid to a Named
Executive Officer in 1998 which exceeded the lesser of $50,000 or ten
percent of the total annual salary and bonus reported for such Named
Executive Officer.
(3) The 1998 Restricted Share Plan replaces a portion of the cash retirement
benefits accrued under the Company's Supplemental/Excess Benefit Plan (the
"Benefit Plan") with the Company's Common Stock granted as restricted
shares. The Benefit Plan provides that each recipient will be entitled to an
annual grant of restricted shares in an amount having a fair market value
equal to one-half of the total dollar amount of such recipient's then
accrued and unfunded benefit under the Benefit Plan as determined by the
Company's actuary. There were a total of 9,058 restricted shares awarded to
Named Executive Officers on June 10, 1998, which vest, following a six month
period upon the earlier of death, disability, retirement or vesting under
the Company's Benefit Plan in accordance with the terms of the 1998
Restricted Share Plan and which have a value, in the
10
<PAGE> 14
aggregate at December 31, 1998 of $140,883. Dividends will be paid on the
restricted stock from date of grant for all the grants made in 1998.
(4) Upon acceptance of employment with the Company, Mr. Graber was awarded a
restricted share grant of 90,000 shares of Common Stock at a purchase price
of $1.00 per share. The value of the restricted shares, as of December 31,
1998 was $1,485,000. When the restricted shares are exercisable and Mr.
Graber subscribes for them, dividends will be paid on the subscribed shares.
(5) These numbers represent options for shares of the Company's Common Stock
granted pursuant to the Company's 1988 Stock Option Plan and Restricted
Share Plan and the 1998 Key Employee Stock Plan. See next table labeled
"Option Grants in Last Fiscal Year" for more detailed information on such
options.
(6) Long Term Incentive Pay consists of amounts paid to each of the Named
Executive Officers under the Company's Long-Term Incentive Plan discussed
later in this Proxy Statement under the table labeled "Long Term Incentive
Plans."
(7) "All Other Compensation" includes (i) Company contributions to the Company's
401(k) Savings Plan in the amount of $3,200 for Don R. Graber, Thomas A.
Frederick, Stanley H. Davis, Nancy A. Michaud, and Timothy G. Howard to
match 1998 pre-tax elective deferral contributions (included under "Salary"
and "Bonus") made by each Named Executive Officer to such plan; (ii) accrued
interest of $146, $363, $715 (being interest earned in excess of 120 percent
of the applicable federal long term rate provided under Section 1274(d) of
the Internal Revenue Code of 1986, as amended), by Thomas A. Frederick,
Nancy A. Michaud, and Timothy G. Howard, respectively, on the Company's
Capital Accumulation Plan (Timothy G. Howard deferred salary in 1986, and
Thomas A. Frederick and Nancy A. Michaud deferred salary in 1987 pursuant to
such plan); and (iii) the principal amounts of $19,638, $6,541, $4,907,
$5,800, and $5,687 credited by the Company for Don R. Graber, Thomas A.
Frederick, Stanley H. Davis, Nancy A. Michaud, and Timothy G. Howard,
respectively, pursuant to the Company's Special Deferred Compensation
Agreements. Refer to "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" later in this Proxy Statement for
descriptions of such special deferred compensation agreements.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1998 Key Employee Stock Plan ("1998 Plan") to the
Named Executive Officers for the year ended December 31, 1998, all of which are
reflected in the Company's Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------
% OF POTENTIAL REALIZABLE VALUE
NUMBER TOTAL AT ASSUMED ANNUAL RATES
OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION RATES
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM(4)
OPTIONS IN FISCAL PRICE PER EXPIRATION ------------------------------
NAME GRANTED(1) YEAR SHARE(2) DATE 0% 5% 10%
---- ---------- ---------- --------- ---------- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Don R. Graber........... 155,000 31.59% $18.25(3) 06-29-08 0 $1,778,986 $4,508,299
Thomas A. Frederick..... 13,000 2.65% 15.00(3) 12-10-08 0 122,634 310,780
Stanley H. Davis........ 10,000 2.04% 15.00(3) 12-10-08 0 94,334 239,061
Nancy A. Michaud........ 16,500 3.36% 15.00(3) 12-10-08 0 155,651 394,451
Timothy G. Howard....... 10,000 2.04% 15.00(3) 12-10-08 0 94,334 239,061
</TABLE>
- ---------------
(1) The options were granted pursuant to the Company's 1998 Plan which was
approved by the Shareholders. All options granted under the 1998 Plan in
1998 are non-qualified stock options. No stock appreciation rights were
granted under the 1998 Plan in 1998.
(2) Upon a change in control (as defined in the 1998 Plan), all options then
outstanding become fully and immediately exercisable and the then
outstanding option of an employee whose employment is terminated, except for
cause, within twenty-four months of such change in control, or if more than
one of the events leading to a change in control occurs, then within
twenty-four months after the last event to occur, shall remain exercisable
for three months from the date of such termination, but not after the
expiration of the exercise period. Those employees who terminate employment
due to disability or retirement may exercise non-qualified stock options
after such termination of employment until five years after such retirement
or disability. Under the 1998 Plan, upon the death of an employee or a
retired or disabled former employee, all options under the 1998 Plan shall
remain exercisable for six months following the date of death. Except as set
forth above, upon termination of employment, all options terminate.
(3) For the grant of options to Don R. Graber, the Common Stock closing market
price on date of grant was $18.25. For the grant of options to the other
Named Executive Officers, the Common Stock closing market price on date of
grant was $15.00. The exercise price may be paid in cash or in shares of
Common Stock valued at fair market value on the date of delivery or by a
combination of cash and Common Stock. The options become exercisable ratably
over a four-year period beginning in 1999.
11
<PAGE> 15
(4)For the grant of options to Don R. Graber, the options are calculated on
option terms of ten years beginning June 29, 1998 through June 29, 2008. For
the grant of options to the other Named Executive Officers, the options are
calculated on option terms of ten years beginning December 10, 1998 through
December 10, 2008. The dollar amounts under these columns are the result of
calculations at the zero percent, the five percent and the ten percent rates
set by the Securities and Exchange Commission and therefore are not intended
to forecast possible future appreciation of the Company's Common Stock. The
Company did not use an alternative formula for a grant date valuation, as the
Company is not aware of any formula which will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the year ended
December 31, 1998, and unexercised options held as of December 31, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF VALUE REALIZED OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
SHARES (MARKET PRICE AT END(1) AT FISCAL YEAR-END(1)(2)
ACQUIRED EXERCISE LESS --------------------------- ---------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Don R. Graber...................... 0 $ 0 126,666 218,334 $1,279,997 $640,004
Thomas A. Frederick................ 0 0 29,741 41,954 80,090 116,337
Stanley H. Davis................... 0 0 4,129 22,387 8,173 39,518
Nancy A. Michaud................... 0 0 24,408 42,537 63,854 113,748
Timothy G. Howard.................. 4950 31,871 36,829 36,008 111,380 104,344
</TABLE>
- ---------------
(1) The number of unexercised options includes options granted under the
Company's 1988 Stock Option Plan and Restricted Share Plan (the "1988 Plan")
and the Company's 1998 Plan. No SARs were issued or outstanding as of
December 31, 1998 under the 1988 Plan or 1998 Plan.
(2) The value of "in-the-money" options is calculated on a per share basis as
the amount by which the fair market value of a share of the underlying
Common Stock represented by an option exceeds, as of December 31, 1998, the
per share exercise price of the option.
LONG-TERM INCENTIVE PLANS
The following table provides information concerning awards made to the
Named Executive Officers during the last fiscal year under the Company's
Long-Term Incentive Plan ("LTIP"). Payments made under the LTIP in the year
ended December 31, 1998 are included in the Summary Compensation Table.
LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, PERFORMANCE OR NON-STOCK PRICED BASE PLAN
UNITS OTHER PERIOD UNTIL --------------------------------
NAME OTHER RIGHTS MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
---- ----------------- ----------------------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Don R. Graber............... (1) 3 years ending 12/31/01 $132,500 $265,000 $530,000
Thomas A. Frederick......... (1) 3 years ending 12/31/01 25,175 50,350 100,700
Stanley H. Davis............ (1) 3 years ending 12/31/01 23,188 46,375 92,750
Nancy A. Michaud............ (1) 3 years ending 12/31/01 22,260 44,520 89,040
Timothy G. Howard........... (1) 3 years ending 12/31/01 21,730 43,460 86,920
</TABLE>
- ---------------
(1) Awards earned under the Company's 1999 Long-Term Incentive Plan ("Plan")
cycle are payable during the year following the end of a three-year award
cycle in 2002. For the Named Executive Officers, the Plan is based one-
third on earnings per share, one-third on return on net assets, and
one-third on total shareholder return over the performance period compared
to targets approved by the Compensation Committee at the beginning of the
performance period.
12
<PAGE> 16
PERFORMANCE GRAPHS
Set forth below are two line graphs comparing the yearly percentage change
in the Company's cumulative total Shareholder return on its Common Stock with
the Standard & Poor's 500 Composite Stock Index ("S&P 500") and the Standard &
Poor's Leisure Time Products Index ("Leisure Index"). The first performance
graph is for the five-year period and the second performance graph is for the
three year period, both ended December 31, 1998:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
HUFFY CORPORATION, S&P 500, AND LEISURE TIME PRODUCTS INDEX*
<TABLE>
<CAPTION>
HUFFY S&P 500 LEISURE INDEX
----- ------- -------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 82.93 101.29 98.80
'1995' 57.90 138.88 131.71
'1996' 84.21 170.38 165.29
'1997' 81.11 226.74 216.27
'1998' 101.12 290.92 169.88
</TABLE>
* Assumes $100 invested on December 31, 1993 in Company Common Stock, the S&P
500 and the Leisure Time Products Index and the reinvestment of dividends.
For the three year period beginning December 31, 1995 through December 31,
1998, Total Shareholder Return was 174 percent contrasting favorably to the
return reflected on the performance graph for the five year period beginning
December 31, 1993. This dramatic improvement in Total Shareholder Return is the
result of corporate strategies which were implemented beginning in 1995.
COMPARISON OF THREE-YEAR CUMULATIVE TOTAL RETURN
HUFFY CORPORATION, S&P 500, AND LEISURE TIME PRODUCTS INDEX**
<TABLE>
<CAPTION>
HUFFY S&P 500 LEISURE INDEX
----- ------- -------------
<S> <C> <C> <C>
'1995' 100.00 100.00 100.00
'1996' 145.34 122.68 125.50
'1997' 139.87 163.26 164.21
'1998' 174.41 209.48 128.98
</TABLE>
** Assumes $100 invested on December 31, 1995 in Company Common Stock, the S&P
500 and the Leisure Time Products Index and the reinvestment of dividends.
13
<PAGE> 17
PENSION PLAN TABLE
The Company's Salaried Employees' Retirement Plan (the "Retirement Plan")
is a defined benefit pension plan which provides benefits to salaried employees
not otherwise covered under another pension plan of the Company. The following
table shows the estimated annual benefits (assuming payments made on the normal
life annuity with 12 months certain) payable upon retirement at age 65 to an
employee in specified compensation and years of service classifications.(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 20,881 $ 27,008 $ 33,135 $ 39,262 $ 39,262
250,000 54,631 72,008 89,385 106,762 106,762
500,000 110,881 147,008 183,135 219,262 219,262
750,000 167,131 222,008 276,885 331,762 331,762
1,000,000 223,381 297,008 370,635 444,262 444,262
1,250,000 279,631 372,008 464,385 556,762 556,762
1,500,000 335,881 447,008 558,135 669,262 669,262
</TABLE>
- ---------------
(1) The Internal Revenue Code of 1986, as amended (the "Code"), places certain
limitations on the annual pension benefits which can be paid from the
Retirement Plan. Such limitations are not reflected in the table. This table
reflects the total aggregate benefits payable annually upon retirement
represented by the combination of benefits under the Retirement Plan, the
Restricted Share Plan, and the Company's Supplemental/Excess Benefit Plan
("Benefit Plan"), which is discussed below. The Benefit Plan requires an
offset of one-half of the Social Security primary insurance amount ("PIA"),
and such amount has been deducted from the figures in the table. ThePIA
amount used in developing the above figures is $16,476. Thus, the offset is
$8,238 for a person with 30 or more years of service.
Monthly benefits upon normal retirement (age 65) are the sum of (i) 0.9
percent of final average monthly compensation (as defined under the Retirement
Plan to include salary, incentive compensation, commissions and overtime pay and
based upon the highest three consecutive years in the last ten) up to the
monthly Social Security Covered Compensation Amount, plus 1.3 percent of the
amount by which final average monthly compensation exceeds the monthly Social
Security Covered Compensation Amount, times years of service (to a maximum of 30
years) and (ii) .075 percent of final average monthly compensation (to a maximum
of $4,166.67) times years of service (to a maximum of 20 years). Additional
provisions for early retirement are included. Mr. Graber has 8 years of credited
service, Mr. Frederick has 12 years of credited service, Mr. Davis has 1 year of
credited service, Ms. Michaud has 12 years of credited service, and Mr. Howard
has 25 years of credited service.
The Company has established the Benefit Plan which provides additional
benefits to participants in the Retirement Plan whose benefits are reduced by
limitations imposed under Sections 415 and 401(a)(17) of the Code and Section
2004 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Under the Benefit Plan, Executive Officers and certain key employees
will receive at the same time and in the same form as benefits paid under the
Retirement Plan, additional benefits in a monthly amount which, when added to
the benefits paid to the participant under the Retirement Plan, will equal the
benefit amount such participant would have earned but for the limitations
imposed by the Code and ERISA to the extent such limitations apply, and the
amount by which the sum of 45 percent of final average monthly compensation (as
defined under the Benefit Plan to include salary and bonus and based upon the
highest three years in the last ten) less 50 percent of the monthly PIA payable
under Social Security, with the difference prorated for less than 30 years of
service, plus $2,500 per year, exceeds benefits payable only under the
Retirement Plan, less the portion of such participant's benefit which has been
replaced by benefits under the Restricted Share Plan, as described in footnote 3
to the Summary Compensation Table. The Benefit Plan also provides that Executive
Officers and certain key employees will be provided benefits beginning at age
58, in an amount equal to such participants' then accrued benefits without
actuarial reduction for early commencement in the event of (i) a
"change-in-control" of
14
<PAGE> 18
the Company, as defined in the Benefit Plan, and (ii) subsequent termination of
employment. Except as noted in the preceding sentence, benefits under the
Benefit Plan will be reduced to an actuarial equivalent to reflect early
distribution in the same manner as benefits under the Retirement Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are no employment contracts between the Company and any Executive
Officers of the Company.
The Named Executive Officers and certain other key employees of the Company
each have a Special Deferred Compensation Agreement pursuant to which on each
January 1 the Company credits to an account for such employee an amount equal to
two percent of the aggregate of the base salary paid in the preceding calendar
year and bonus paid or credited to such employee under the Profit Sharing Bonus
Plan for preceding calendar year results. The aggregate amount in such account
is to be paid to the employee, subject to certain forfeitures, following
termination of employment. Such amounts for calendar year 1998 have been
included in the Summary Compensation Table.
Named Executive Officers, except for Don R. Graber and Stanley H. Davis,
have deferred compensation and receive benefits under the Company's Capital
Accumulation Plan (the "Capital Accumulation Plan") adopted in 1985. No current
compensation is being deferred by Named Executive Officers under the Capital
Accumulation Plan. Based upon the amount of such compensation deferred in 1985,
1986, and 1987, the Company has agreed to pay certain annual amounts generally
beginning at age 65 or upon retirement, whichever occurs later, to each such
participant or to designated beneficiaries upon such participant's death after
retirement, until such participant reaches (or would have reached) age 80. These
annual amortized amounts will be calculated on the basis of attributing from 19
to 24 percent per annum interest to the deferrals. A lump sum benefit equal to
any remaining balance of deferred amounts, with annual interest at the rate
noted below, will be paid in lieu of any annual benefits if (i) a participant
terminates employment with the Company other than by death or disability prior
to retirement (10 percent interest) or the Company terminates the participant's
employment for certain reasons other than cause or competing with the Company
(20 percent interest); (ii) a participant dies prior to retirement (20 percent
interest); or (iii) the Capital Accumulation Plan is terminated by the Company
because a change in federal or state laws, or judicial or administrative
interpretation thereof, has materially affected its cost to the Company (20
percent interest). The Company will make supplemental pension payments to
persons participating in the Capital Accumulation Plan to the extent pension
benefits are reduced due to participation in such plan. Distributions made and
interest accrued in excess of 120 percent of the applicable federal long term
interest rate provided under Section 1274(d) of the Code for the benefit of the
Named Executive Officers have been included in the Summary Compensation Table.
The Named Executive Officers have each entered into a severance agreement
with the Company pursuant to which the Company has agreed to provide an
irrevocable letter of credit from a commercial bank (or to fund an escrow
account if such letter of credit cannot be promptly issued) in the event a
change-in-control (as defined in the agreements) of the Company is threatened.
The letter of credit is to be for an amount equal to three times the sum of each
such person's current annual salary, bonus award at the target level, and
long-term incentive compensation plan award at the target level, plus two times
the Company's cost of current benefits for three years (unless the Company
agrees to provide the same), and a gross up amount for applicable excise taxes,
if any. In addition, such Officers will be vested in and receive thirty-six
months of credited service under the Benefit Plan. If the employment of said
person terminates, for any reason other than disability, retirement or death,
within two years after a change-in-control of the Company occurs, the person or
the person's beneficiaries shall be entitled to the above described amount in a
lump sum payment. If proper demand for such payment is not made within two years
from the date of the change-in-control event, the Company may terminate the
letter of credit or withdraw the funds in the escrow account. If such person's
employment is
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<PAGE> 19
terminated prior to the occurrence of a change in control of the Company,
payment under the severance agreement is forfeited.
In connection with his acceptance of employment with the Company, Don R.
Graber entered into an agreement, dated June 11, 1996, as amended, whereby he
may receive an annual pension benefit of $115,000 per year beginning at age 57
if during his first three years of employment he is involuntarily terminated or
an annual pension benefit of $169,118 per year beginning at age 65 if during his
first three years of employment he should become totally and permanently
disabled.
Generally, a "change-of-control" or "change-in-control", with respect to
the above-referenced plans and agreements, is the acquisition by another person
or persons other than directly from the Company of more than 20 percent of the
Company's outstanding shares of Common Stock; a merger, consolidation or other
combination of the Company with one or more corporations as a result of which
more than 49 percent of the voting stock of the merged, consolidated or combined
corporation is held by former shareholders of the corporations other than the
Company; a tender offer for, or a request for invitations for the tender of,
shares of Common Stock of the Company by any person; or the election to the
Board of Directors of the Company by the Shareholders of two or more persons not
nominated as candidates for the Board of Directors in proxy statements furnished
during such period on behalf of the Board of Directors of the Company.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of KPMG LLP as independent public accountants for the Company
for calendar year 1999, subject to ratification by the Shareholders and any
future contingencies that may require reconsideration. The firm of KPMG LLP has
served as independent public accountants for the Company since 1962. The Board
of Directors recommends ratification of this appointment although it is not
required by law. One or more members of KPMG LLP will attend the Annual Meeting
with an opportunity to make a statement if they desire to do so and to respond
to such appropriate questions as may be asked by Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. The proposal to
ratify the appointment of KPMG LLP requires the affirmative vote of the holders
of the majority of the shares of Common Stock present in person or represented
by proxy at the meeting. Abstentions and shares not voted by brokers and other
entities holding shares on behalf of beneficial owners will have the same effect
as votes cast against the resolution, provided such shares are properly present
at the meeting in person or by proxy.
SHAREHOLDER PROPOSAL
Franklin Research & Development, 711 Atlantic Avenue, Boston, Massachusetts
02111, submitted the following proposal on behalf of Margaret Seeger, beneficial
owner of 256 shares of Huffy Corporation Common Stock:
"A SHAREHOLDER RESOLUTION CONCERNING
EXECUTIVE COMPENSATION
WHEREAS, in June 1998 Huffy announced the closing of its Celina Ohio
bicycle factory, forcing the layoff of more than 1,000 workers many of whom
had more than 20 years service to our company. This plant, one of the most
efficient bicycle factories in the world, was a model of positive labor
relations: in 1995, the plant's workers agreed to 20% pay cuts to help
reduce the company's operating costs. In announcing the plant's closing
management cited the ability to lower costs further by moving jobs to
lower-wage workers in Missouri and Mexico;
WHEREAS, while Huffy's leaders have been focusing on cutting costs on the
factory floor, they have not focused similar attention on containing costs
in the executive suite or in the Boardroom. In 1997, the six named officers
in last year's proxy statement enjoyed increases in salary and bonus of
almost 23%. Even excluding the additional costs entailed in the change in
CEO, the remaining four officers saw their 1997 salary and bonuses rise
more than 11%, more than twice the increase seen by the average
16
<PAGE> 20
Huffy employee. Only two months prior to the plant closing announcement,
Huffy's Board voted itself an 18.4% increase in their annual retainer fee
(to $22,500). During 1997, Huffy's shareholders experienced a total return
loss on their investment of -3.7%, compared to the company's self-defined
peer groups, the S&P 500 and the Leisure Time Products indices which rose
33% and 29.9% respectively;
WHEREAS, during the short-term (one year) and long-term (five year) periods
ending October 31, 1998, Huffy stock price has under performed its
self-defined industry peer groups;
WHEREAS, the widening gap between Huffy's executives and the company's
average workers as well as Huffy's inability to contain executive
compensation costs is part of a broader national trend. In 1997, U.S. CEOs
earned an average 326 times the average factory workers' pay, a dramatic
rise from the 42 times reported in 1980;
WHEREAS, growing research on effective organizations stresses the
importance of empowering front-line workers, a goal undermined by
compensation policies that reward top executives at the expense of workers
closest to the customers and production;
WHEREAS, business leaders and thinkers ranging from J.P. Morgan to Peter
Drucker have argued against wide pay gaps within enterprises and called for
limits on executive pay based on multiples of worker compensation;
THEREFORE, BE IT RESOLVED, that shareholders urge the Board of directors to
address the issue of runaway remuneration of CEOs and the widening gap
between highest and lowest paid workers. In so doing, shareholders request
the company publish a report listing the ratio between total CEO
compensation (including the value of stock options) and compensation for
the average Huffy worker (including the value of stock options) for each of
the last ten years. The report, published at reasonable cost and omitting
proprietary information, should be made available to all shareholders no
later than September 30, 1999."
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. The
Compensation Committee has always and continues to perform an analysis of Chief
Executive Officer and Officer compensation relative to the Company's financial
performance and competitive comparable positions (see Report of Compensation
Committee, pages 7 to 9 in this Proxy Statement).
The Compensation Committee's regular practice is to review annually with an
outside consultant the executive compensation program from a number of
perspectives including competitive analysis of pay level, linkage of program
design to results of operations, strategic goals, and consistency with
compensation trends. These considerations helped to shape the design of various
aspects of the 1998 compensation program and were important factors in the 1998
compensation awards to the Chairman, President and Chief Executive Officer.
It is important to note the following:
- In 1995 and 1996, Corporate Officer salaries were "frozen" for 18 months.
- In 1996, EPS from continuing operations increased 212% over 1995; in 1997
EPS increased 63% over 1996; and in 1998 EPS increased 28% over 1997.
- In 1998, the Corporate Officer staff was reduced in size from seven to
five, reducing aggregate Officer base salary paid in 1998 by 21% over
1997.
The Company believes that the proxy disclosure process already provides an
opportunity for shareholders to become informed of and express concerns about
compensation matters. This process requires detailed and highly specific
descriptions of compensation matters and, in fact, 61% of the total number of
pages of this Proxy Statement relate to compensation. Consequently, Management
believes that the time, effort and cost to produce the report requested is not
justified.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST
THIS PROPOSAL. The affirmative vote of a majority of shares participating in the
voting on this pro-
17
<PAGE> 21
posal is required for adoption of this proposal. Proxies will be voted AGAINST
the proposal unless instructed otherwise. Abstentions indicated on such a proxy
card will not be counted as either "for" or "against" this proposal. "Broker
non-votes" specified on proxies returned by brokers holding shares for
beneficial owners who have not provided instructions as to voting on this issue
will be treated as not present for voting on this issue.
OTHER MATTERS
Proposals of Shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Company by November 5, 1999 for
inclusion in the Company's Proxy Statement and proxy relating to the 2000 Annual
Meeting of Shareholders.
The Company may use its discretion in voting proxies with respect to
shareholder proposals not included in the Proxy Statement for the fiscal year
ended December 31, 1999, unless the Company receives notice of such proposals
prior to January 20, 2000.
The Board of Directors does not intend to present to the meeting any
matters other than those mentioned herein. It does not know of anything that
will be presented by other parties, other than those mentioned herein. However,
if any other matters shall properly come before the meeting, it is the intention
of the persons named in the enclosed form of proxy to vote thereon according to
their discretion and best judgment.
By order of the Board of Directors
/s/ Nancy A. Michaud
Nancy A. Michaud
Secretary
Dayton, Ohio
March 5, 1999
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<PAGE> 22
NOTES
<PAGE> 23
P
R
O
X
Y
HUFFY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 22, 1999
The undersigned hereby appoints Don R. Graber, Linda B. Keene, and Thomas C.
Sullivan, and each of them, his or her proxies, with power of substitution, to
vote all shares of Common Stock of HUFFY CORPORATION, an Ohio corporation,
which he or she may be entitled to vote at the Annual Meeting of Shareholders
of said Corporation to be held April 22, 1999, and at any adjournment(s)
thereof, on the following matters, all of which are described in the Proxy
Statement, receipt of which is hereby acknowledged:
ELECTION OF DIRECTORS, NOMINEES
(For a term of three years)
Jack D. Michaels
James F. Robeson
Patrick W. Rooney
This proxy will be voted as directed. If no choice is specified, this proxy
will be voted (A) FOR the nominated Directors, (B) FOR the appointment of
auditors, and (C) AGAINST the shareholder proposal. Except for the matters
listed on the reverse side of this card, the Board of Directors at present
knows of no business other than of a routine nature to be brought before the
meeting. If any other business is brought before the meeting, this proxy will
be voted according to the appointed proxies' discretion and best judgment. If
cumulative voting is elected for the election of Directors, votes cast pursuant
to this proxy will be distributed among the above nominees at the discretion of
said proxies.
SEE REVERSE
SIDE
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DETACH CARD
[MAP]
- -----------------------------------------------------------------------------
DIRECTIONS TO SINCLAIR CENTER
- - Take the Third Street exit 53A off of I-75 (northbound or Southbound)
- - Turn right on Perry Street
- - Right on Fourth Street then right into the underground parking in the
Sinclair Center.
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<PAGE> 24
<TABLE>
HUFFY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
<S> <C>
For Withheld For All
Your Board of Directors recommends All All Except Your Board of Directors recommends
a vote FOR the following: [ ] [ ] [ ] a vote AGAINST the following
For Against Abstain
1. Election of Directors: 3. Shareholder Proposal 1. [ ] [ ] [ ]
Nominees: Jack D. Michaels, James F. Robeson,
and Patrick W. Rooney
___________________________________________________
(Except nominees written above)
For Against Abstain
2. Ratification of appointment of KPMG LLP as [ ] [ ] [ ]
independent public accountants for 1999.
Will Attend Annual Meeting [ ]
Please indicate number attending: ____
Change of Address [ ]
Mark here for address change and revise
pre-printed address as necessary.
Signature(s)______________________Date:________1999
Signature(s)______________________Date:________1999
IMPORTANT: PLEASE SIGN AND RETURN PROMPTLY. Please
sign exactly as name appears. If signing in fiduciary
or representative capacity, please give full title as
such. If shares are registered in more than one name,
all holders must sign. If signature is for a
corporation, the handwritten signature and title of
an authorized officer is required, together with the
full corporate name.
</TABLE>
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- FOLD AND DETACH HERE -
HUFFY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
ADMISSION TICKET
April 22, 1999
Frederick C. Smith Auditorium
Sinclair Community College, Bldg. 12
444 W. Third Street
Dayton, Ohio 45402
If you plan to attend the meeting, please check the box above and indicate the
number attending on the proxy form above. Please detach this card and bring it
with you to the meeting for presentation at the meeting.
