<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section240.14a-11(c) or
Section240.14a-12
DAL-TILE INTERNATIONAL INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
----------------------------------------------------------
</TABLE>
<PAGE>
DAL-TILE INTERNATIONAL INC.
----------------
March 31, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Dal-Tile International Inc. to be held on Thursday, April 27, 2000, at
9:00 a.m., local time, at The Hotel Crescent Court, 400 Crescent Court, Dallas,
Texas 75201.
The Secretary's formal notice of the meeting and the Proxy Statement which
appear on the following pages will describe the matters to be acted upon at the
meeting.
We hope that you will be able to attend the meeting in person. However,
whether or not you plan to be present, please complete, sign, date and return
your proxy as soon as possible so that your vote will be counted.
Sincerely yours,
[LOGO]
Jacques R. Sardas
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
<PAGE>
DAL-TILE INTERNATIONAL INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
The 2000 Annual Meeting of Stockholders of Dal-Tile International Inc., a
Delaware corporation (the "Company"), will be held at The Hotel Crescent Court,
400 Crescent Court, Dallas, Texas 75201, on Thursday, April 27, 2000, at
9:00 a.m., local time, for the following purposes:
1. To elect seven directors for terms ending at the 2001 Annual Meeting of
Stockholders;
2. To ratify the appointment by the Board of Directors of Ernst & Young
LLP, independent public accountants, as independent auditors for the
Company for the fiscal year ending December 29, 2000; and
3. To transact such other business as may properly come before the meeting.
Stockholders of record as of the close of business on March 24, 2000 will be
entitled to vote at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY DELIVERY TO THE COMPANY OF A
SUBSEQUENTLY EXECUTED PROXY OR A WRITTEN NOTICE OF REVOCATION OR BY VOTING IN
PERSON AT THE MEETING.
By order of the Board of Directors,
[LOGO]
Mark A. Solls
SECRETARY
March 31, 2000
<PAGE>
DAL-TILE INTERNATIONAL INC.
7834 C.F. HAWN FREEWAY
DALLAS, TEXAS 75217
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 2000
------------------------
This proxy statement is furnished to stockholders of Dal-Tile
International Inc., a Delaware corporation (the "Company" or "Dal-Tile"), in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board" or "Board of Directors") for use at the 2000 Annual Meeting
of Stockholders of the Company (the "Annual Meeting") to be held at 9:00 a.m.,
local time, on Thursday, April 27, 2000, at The Hotel Crescent Court, 400
Crescent Court, Dallas, Texas 75201, and any adjournments thereof.
Stockholders of record as of the close of business on March 24, 2000 (the
"Record Date") will be entitled to vote at the Annual Meeting or any
adjournments thereof. As of the Record Date, the Company had outstanding
54,815,686 shares of common stock, par value $.01 per share ("Common Stock"),
each entitled to one vote on all matters to be voted upon. This proxy statement,
the accompanying form of proxy and the Company's annual report to stockholders
for the fiscal year ended December 31, 1999 are being mailed on or about
March 31, 2000 to each stockholder entitled to vote at the Annual Meeting.
VOTING AND REVOCATION OF PROXIES
VOTING
If the enclosed proxy is executed and returned in time and not revoked, all
shares represented thereby will be voted. Each proxy will be voted in accordance
with the stockholder's instructions. If no such instructions are specified,
signed proxies will be voted (a) FOR the election of each person nominated for
election as a director, and (b) FOR the ratification of the appointment by the
Board of Directors of Ernst & Young LLP as independent auditors for the Company
for the fiscal year ending December 29, 2000.
The holders of a majority in number of the total outstanding shares of
Common Stock entitled to vote at the Annual Meeting, present in person or by
proxy, constitutes a quorum. Assuming a quorum is present, the affirmative vote
of a plurality of the votes cast at the Annual Meeting and entitled to vote in
the election will be required for the election of directors and the affirmative
vote of a majority of the votes cast at the Annual Meeting and entitled to vote
thereon will be required to act on all other matters to come before the Annual
Meeting, including the ratification of the appointment by the Board of Directors
of Ernst & Young LLP as independent auditors for the Company. An automated
system administered by the Company's transfer agent will tabulate the votes. For
purposes of determining the number of votes cast with respect to any voting
matter, only those cast "for" or "against" are included; abstentions and broker
non-votes are excluded. Accordingly, with respect to the election of directors,
abstentions and broker non-votes will have no effect on the outcome. For
purposes of determining whether the affirmative vote of a majority of the votes
cast at the Annual Meeting and entitled to vote has been obtained, abstentions
will be included in, and broker non-votes will be excluded from, the number of
shares present and entitled to vote. Accordingly, with respect to any matter
other than the election of directors, abstentions will have the
1
<PAGE>
effect of a vote "against" the matter and broker non-votes will have the effect
of reducing the number of affirmative votes required to achieve the majority
vote.
REVOCATION
A stockholder giving a proxy may revoke it at any time before it is voted by
delivery to the Company of a subsequently executed proxy or a written notice of
revocation. In addition, returning your completed proxy will not prevent you
from voting in person at the Annual Meeting should you be present and wish to do
so.
ELECTION OF DIRECTORS
The Board of Directors currently consists of nine directors. Seven directors
are nominated to be elected at the Annual Meeting to hold office as directors
until the 2001 Annual Meeting of Stockholders of the Company or until their
respective successors have been duly elected and qualified. Unless otherwise
directed, signed proxies in the accompanying form will be voted FOR the nominees
listed below. All nominees have consented to be named and to serve if elected.
If any one or more of the nominees is unable to serve or for good cause will not
serve, proxies will be voted for the substitute nominee or nominees, if any,
proposed by the Board of Directors. The Board has no knowledge that any nominee
will or may be unable to serve or will or may withdraw from nomination. Each
nominee will be elected if he receives the affirmative vote of a plurality of
the votes cast by holders of shares of Common Stock at the Annual Meeting.
The Board of Directors proposes the election of the following nominees for a
term of one year. All of the nominees are presently directors of the Company.
Set forth below for each nominee are his name and age, all positions and offices
with the Company that he holds, if any, his principal occupations during at
least the last five years and any additional directorships in publicly held
companies or registered investment companies.
<TABLE>
<CAPTION>
NAME AGE POSITION OR OFFICE HELD
- ---- -------- -----------------------
<S> <C> <C>
Jacques R. Sardas................. 69 Chairman of the Board, President
and Chief Executive Officer
Douglas D. Danforth............... 77 Director
John F. Fiedler................... 61 Director
Vincent A. Mai.................... 59 Director
Martin C. Murrer.................. 42 Director
Charles J. Pilliod, Jr............ 81 Director
Norman E. Wells, Jr............... 51 Director
</TABLE>
JACQUES R. SARDAS, President, Chief Executive Officer and Chairman of the
Board of Directors--Mr. Sardas has been President and Chief Executive Officer of
the Company since July 1997 and Chairman of the Board of Directors since
September 1997. Prior to joining the Company, Mr. Sardas was Chairman and Chief
Executive Officer of Sudbury, Inc. from 1992 to 1997. Prior to that, he spent
34 years at Goodyear Tire and Rubber Company, concluding as President of
Goodyear Worldwide Tire.
DOUGLAS D. DANFORTH, Director--Mr. Danforth has been a Director of the
Company since February 1997. He was Chairman and Chief Executive Officer of
Westinghouse Corporation from December 1983 to December 1987. Mr. Danforth is
also a director of Sola International Inc. and of Atlantic Express
Transportation Corporation.
JOHN F. FIEDLER, Director--Mr. Fiedler has been a Director of the Company
since July 1998. He is Chairman and Chief Executive Officer of Borg-Warner
Automotive, Inc. Prior to joining Borg-Warner in June 1994, he was Executive
Vice President of The Goodyear Tire & Rubber Company where he was
2
<PAGE>
responsible for North American Tires. Mr. Fiedler's 29 year career with Goodyear
included numerous sales, marketing and manufacturing positions in the U.S. and
Far East.
VINCENT A. MAI, Director--Mr. Mai has been a Director of the Company since
October 1989. Mr. Mai was the President, Chief Executive Officer and a Director
of AEA Investors (the managing member of DTI Investors LLC, a beneficial owner
of Common Stock) from April 1989 to December 1998, which included appointment to
Chairman in January 1998. From January 1999 to December 1999, Mr. Mai served as
Chairman and Chief Executive Officer and currently serves as Chairman of AEA
Investors. For the preceding 15 years, he was a Managing Director of Lehman
Brothers Inc., an investment banking firm. Mr. Mai is also a director of the
Federal National Mortgage Association.
MARTIN C. MURRER, Director--Mr. Murrer has been a Director of the Company
since February 2000. Mr. Murrer has been a Managing Director of AEA Investors
(the managing member of DTI Investors LLC, a beneficial owner of Common Stock)
since February 1999. From 1995 through 1999, Mr. Murrer was a Managing Director
at Donaldson, Lufkin & Jenrette. From 1990 through 1995, he was a Vice President
at Goldman Sachs. Mr. Murrer is also a Director of PC Connection, Inc.
CHARLES J. PILLIOD, JR., Director--Mr. Pilliod has been a Director of the
Company since March 1990 and served as Chairman of the Board of Directors from
October 1993 through September 1997. From October 1993 through April 1994,
Mr. Pilliod also served as President and Chief Executive Officer of the Company.
Mr. Pilliod served as U.S. Ambassador to Mexico from 1986 to 1989. Prior to
that, he was the Chairman and Chief Executive Officer of Goodyear Tire & Rubber
Company. Mr. Pilliod is also a director of Marvin & Palmer Associates, Inc.
NORMAN E. WELLS, JR., Director--Mr. Wells has been a Director of the Company
since December 1997. Mr. Wells was President and Chief Executive Officer of
Easco, Inc. from November 1996 to September 1999. From March 1993 to
November 1996, he was President and Chief Executive Officer of CasTech Aluminum
Group Inc. Mr. Wells is also a director of Sovereign Specialty Chemicals, Inc.
FURTHER INFORMATION CONCERNING THE BOARD
OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company directs the management of the business
and affairs of the Company, as provided by Delaware law, and conducts its
business through meetings of the Board and its standing committees. During the
fiscal year ended December 31, 1999 (such fiscal year sometimes referred to
herein as "fiscal 1999"), the Company maintained three standing committees:
Audit, 162(m) and Compensation. In addition, from time to time, special
committees may be established under the direction of the Board when necessary to
address specific issues. The Company has no nominating or similar committee.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of seven (7) meetings and
took one (1) action by written consent during fiscal 1999. Other than Henry F.
Skelsey, no director participated in fewer than 75% of the aggregate number of
meetings of the Board of Directors and meetings of the committees of the Board
on which he served.
The Audit Committee's principal functions are to review the scope of the
annual audit of the Company by its independent public accountants, review the
annual financial statements of the Company and the related audit report of the
independent auditors, review management's selection of an independent public
accounting firm each year and review audit and any non-audit fees paid to the
Company's independent public accountants. The Company's Chief Financial Officer
generally attends Audit Committee meetings and delivers reports to and answers
inquiries from the Audit Committee. The Audit Committee reports its findings and
recommendations to the Board. The Audit Committee is currently
3
<PAGE>
comprised of three non-employee directors. From January 1, 1999 through
February 18, 1999, the members of the Audit Committee were Douglas D. Danforth
and Norman E. Wells, Jr. From February 18, 1999 through December 31, 1999, the
members of the Audit Committee were Douglas D. Danforth, John F. Fiedler and
Norman E. Wells, Jr. The Audit Committee held three (3) meetings in fiscal 1999.
The Compensation Committee is generally responsible for establishing and
administering the Company's compensation plans and programs, including
establishing and administering the Company's executive compensation plans and
programs to the extent that such plans and programs relate to compensation which
the Company intends to qualify for an exemption from the deduction limitation of
Section 162(m) of the United States Internal Revenue Code of 1986, as amended
(the "Code"). From January 1, 1999 through February 18, 1999, the members of the
Compensation Committee were Douglas D. Danforth and Norman E. Wells, Jr. From
February 18, 1999 through December 31, 1999, the members of the Compensation
Committee were Douglas D. Danforth, John F. Fiedler and Norman E. Wells, Jr. The
Compensation Committee held three (3) meetings and took two (2) actions by
written consent in fiscal 1999.
On February 18, 1999, the Compensation Committee and the 162(m) Committee
were combined. The resulting committee was named the Compensation Committee,
with its members being Norman E. Wells, Jr., Douglas D. Danforth and John F.
Fiedler. The 162(m) Committee held one meeting in 1999, prior to its being
combined with the Compensation Committee. During fiscal 1999, its members were
Norman E. Wells, Jr. and Douglas D. Danforth.
DIRECTORS' COMPENSATION
Directors who are full-time employees of the Company receive no additional
compensation for serving on the Board or its committees. Directors who are not
full-time employees of the Company or employees of AEA Investors receive an
annual fee of $10,000 and $15,000 in market value of Common Stock, a quarterly
fee of $1,500, and $1,000 for each unscheduled Board and/or Committee meeting
attended, plus reimbursement for traveling costs and other out-of-pocket
expenses incurred in attending such meetings.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC") and the New York Stock Exchange
("NYSE"). Executive officers, directors and greater than 10% stockholders are
required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons,
the Company believes that, during fiscal 1999, all filing requirements
applicable to its executive officers and directors and greater than 10%
stockholders were complied with.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of the Record Date with respect to (i) each
person known to Dal-Tile to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of Dal-Tile's directors, (iii) each of the
executive officers named in the table under "Compensation of Executive
Officers-Executive Compensation-Summary Compensation Table", and (iv) all the
Company's directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF
COMMON
NUMBER OF STOCK
SHARES(1) OWNED
---------- -----------
<S> <C> <C>
DTI Investors LLC........................................... 28,604,811 52.2%
c/o AEA Investors Inc.
65 East 55th Street
New York, NY 10022
AEA Investors Inc.(2)....................................... 28,604,811 52.2
65 East 55th Street
New York, NY 10022
Jacques R. Sardas........................................... 2,367,926(3) 4.2
Douglas D. Danforth......................................... 5,962(4) *
John F. Fiedler............................................. 3,762 *
John M. Goldsmith........................................... 14,000(4)(5) *
Vincent A. Mai.............................................. 135,000(4)(6) *
Martin C. Murrer............................................ 10,000(5) *
Charles J. Pilliod, Jr...................................... 313,762(4)(7) *
Henry F. Skelsey............................................ 33,000(4)(8) *
Norman E. Wells, Jr......................................... 9,762 *
W. Christopher Wellborn..................................... 256,448(9) *
H. Clay Orme................................................ 1,000 *
Javier Eugenio Martinez Serna............................... 139,780(10) *
Harold G. Turk.............................................. 216,307(11) *
All directors and executive officers as a group (23
persons).................................................. 4,212,195 7.2
</TABLE>
- ------------------------
* Less than 1%.
(1) For purposes of this table, a person or group of persons is deemed to have
beneficial ownership of any shares as of a given date which such person has
the right to acquire within 60 days after such date. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above on a given date, any shares that such person or
persons have the right to acquire within 60 days after such date is deemed
to be outstanding, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(2) AEA Investors is the managing member of DTI Investors LLC, and accordingly
may be deemed to beneficially own such shares.
(3) Includes 2,000,000 shares subject to options, 38,267 held directly, 230,000
shares held in a family limited partnership, and 99,659 shares held in a
family trust.
5
<PAGE>
(4) Such director is a member of DTI Investors LLC. Under the rules of the SEC,
as such director does not have voting or investment power over the shares
of Common Stock owned by DTI Investors LLC, such director does not have
beneficial ownership of such shares. Such director's membership interest in
DTI Investors LLC represents a less than 1% indirect interest in the Common
Stock, which interest is in addition to any stock options held, or shares
of Common Stock identified herein as beneficially owned, by such director.
(5) Excludes 28,604,811 shares owned by DTI Investors LLC, the managing member
of which is AEA Investors. Messrs. Goldsmith and Murrer serve as officers
of AEA Investors. Messrs. Goldsmith and Murrer disclaim beneficial
ownership of the shares beneficially owned by DTI Investors LLC and AEA
Investors.
(6) Excludes 28,604,811 shares owned by DTI Investors LLC, the managing member
of which is AEA Investors. Mr. Mai is a member of DTI Investors LLC, and
serves as an officer and director of AEA Investors. Mr. Mai disclaims
beneficial ownership of the shares beneficially owned by DTI Investors LLC
and AEA Investors. Includes 10,000 shares held in a family trust and 5,000
shares held in a family foundation.
(7) Consists of 311,000 shares subject to options. 111,000 shares are held in
nominee name, Hertrus and Company.
(8) Excludes 28,604,811 shares owned by DTI Investors LLC, the managing member
of which is AEA Investors. Mr. Skelsey is a member of DTI Investors LLC and
serves as a consultant to AEA Investors. Mr. Skelsey disclaims beneficial
ownership of the shares beneficially owned by DTI Investors LLC and AEA
Investors.
(9) Includes 232,500 shares subject to options.
(10) Consists of 139,780 shares subject to options.
(11) Consists of 216,307 shares subject to options.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
each of the Company's other four most-highly compensated executive officers
during fiscal 1999 who were serving in such capacity on December 31, 1999, in
each case for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS SECURITIES
------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS ALL OTHER COMPENSATION
- --------------------------- -------- -------- -------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Jacques R. Sardas.................... 1999 $600,822 $900,000(1) 0 $60,228(7)(8)(9)(10)(11)
Chairman of the Board, 1998 600,000 900,000 2,343,000(2) 43,854
President and Chief Executive
Officer 4,250,000(3)
1997 286,153 300,000 4,250,000(3) 18,410
W. Christopher Wellborn.............. 1999 308,077 307,800 0 23,633(7)(8)(9)(10)(11)
Executive Vice President and 1998 307,800 307,800 210,000(2) 13,920
Chief Financial Officer 610,000(4)
1997 99,877 166,300 610,000(4) 87,423
Harold G. Turk....................... 1999 263,022 262,800 0 20,641(7)(8)(9)(10)(11)
Vice President, Sales Service 1998 262,800 262,800 116,000(2) 11,490
Centers 1997 256,800 0 0 18,700
Javier Eugenio Martinez Serna........ 1999 250,000 218,908 0 60,494(8)(12)
Vice President, Mexico Operations 1998 250,000 237,138 102,000(2) 35,393
57,631(5)
1997 227,710 32,153 0 36,494
H. Clay Orme......................... 1999 211,539 209,566 100,000(6) 24,064(7)(8)(9)(13)
Vice President, Operations 1998 0 0 0 0
1997 0 0 0 0
</TABLE>
- ------------------------
(1) The amount shown represents a cash payment of 150% of Mr. Sardas' annual
base salary for achievement of the 1999 bonus targets. Additionally, in
January 2000, Mr. Sardas was granted options to acquire 80,000 shares of
Common Stock at a per share exercise price of $9.13 (market value on the
date of the grant).
(2) Options granted in 1998.
(3) The amount shown includes 2,000,000 options and 2,250,000 SARs originally
granted in 1997. On February 20, 1998, the per share exercise price of the
options was reduced from $13.69 to $11.94 (market value on such date) and
the per share ceiling price of 2,000,000 of the SARs was reduced to $11.94
(250,000 SARs retained the per share ceiling price of $13.69). See
Option/SAR Repricing Table.
(4) The amount shown includes 310,000 options and 300,000 SARs originally
granted in 1997. On February 20, 1998, the per share exercise price of the
options was reduced from $13.69 to $11.94 (market value on such date) and
the per share ceiling price of 300,000 of the SARs was reduced to $11.94.
See Option/SAR Repricing Table.
7
<PAGE>
(5) The amount shown includes options originally granted in 1996. On
December 10, 1998, the per share exercise price of the options was reduced
from $9.91 to $9.01. See Option/SAR Repricing Table.
(6) Options granted in 1999. See Option / SAR Grant Table.
(7) The amounts shown include premium payments for long-term disability paid by
the Company during fiscal 1999 for Jacques R. Sardas, in the amount of
$2,623, W. Christopher Wellborn, in the amount of $2,623, Harold G. Turk,
in the amount of $2,367, and H. Clay Orme, in the amount of $2,250.
(8) The amounts shown include premiums paid by the Company for life insurance
during fiscal 1999 for Jacques R. Sardas, in the amount of $11,121, W.
Christopher Wellborn, in the amount of $418, Harold G. Turk, in the amount
of $907, Javier Eugenio Martinez Serna, in the amount of $1,893 and H. Clay
Orme, in the amount of $2,196.
(9) The amounts shown include contributions made by the Company to the
Company's 401(k) Plan for fiscal 1999 to Jacques R. Sardas, in the amount
of $5,000, to W. Christopher Wellborn, in the amount of $5,000, to Harold
G. Turk, in the amount of $5,000, and H. Clay Orme, in the amount of
$3,750.
(10) The amounts shown include matching contributions made by the Company to the
Company's Supplemental Retirement Plan for fiscal 1999 to Jacques R. Sardas,
in the amount of $40,000, to W. Christopher Wellborn, in the amount of
$14,415, and to Harold G. Turk, in the amount of $11,071.
(11) The amounts shown include payments made by the Company for annual physicals
during fiscal 1999 for Jacques R. Sardas, in the amount of $1,484,
W. Christopher Wellborn, in the amount of $1,177 and Harold G. Turk, in the
amount of $1,296.
(12) The amount shown includes payments to Javier Eugenio Martinez Serna for
fiscal 1999 in the amount of $902 for contributions to a workers profit
sharing plan, $12,917 for vacation allowance, $14,501 for scholarships,
$1,201 for meals, $1,581 for contributions to a savings fund, $27,252 for a
car payment allowance and $247 for medical insurance.
(13) The amount shown includes payments to H. Clay Orme for fiscal 1999 in the
amount of $15,868 for relocation.
OPTION/SAR GRANT TABLE
The following table sets forth certain information regarding options and
SARs granted during fiscal 1999 by the Company to the individuals named in the
Summary Compensation Table:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES PERCENT OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS/SARS GRANTED EXERCISE OR FOR OPTION TERM(1)
OPTIONS/SARS(2) TO EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- --------------- -------------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPTIONS
H. Clay Orme............ 100,000 21.1% $8.81 3/01/2009 $554,056 $1,404,087
</TABLE>
- ------------------------
(1) In accordance with SEC rules, these columns show gains that might exist for
the options, assuming the market price of Dal-Tile's Common Stock
appreciates from the date of grant over a period of ten years at the
annualized rates of five and ten percent, respectively. If the stock price
does not increase above the exercise price at the time of exercise, realized
value to the named executive from these options will be zero.
(2) No SARs were granted in 1999.
8
<PAGE>
OPTION/SAR EXERCISE TABLE
The following table sets forth the number of shares covered by both
exercisable and unexercisable stock options and SARs as of December 31, 1999.
Also reported are values for "in-the-money" options and SARs that represent the
positive spread between the respective exercise or base prices of outstand ing
stock options and SARs and the value of the Common Stock as of December 31, 1999
based on its closing price on the New York Stock Exchange of $10.13. The table
also sets forth options and SARs exercised during fiscal 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
NUMBER OF SECURITIES UNDERLYING UNEXERCISED MONEY OPTIONS/SARS AT
SHARES OPTIONS/SARS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON --------------------------------------------- -----------------------------
NAME EXERCISE (#) VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
OPTIONS
Jacques R. Sardas....... 0 0 2,000,000(1) 2,343,000(2) $ 0 $2,722,205
W. Christopher
Wellborn.............. 0 0 232,500(1) 287,500(3) 0 262,950
Harold G. Turk.......... 0 0 216,307(4) 102,667(5) 241,183 138,793
Javier E.M. Serna....... 0 0 139,780(4) 92,000(6) 155,855 125,620
H. Clay Orme............ 0 0 0 100,000(7) 0 131,500
SARS
Jacques R. Sardas....... 117,926(8) $4,391,251(8) 750,000(9) 0 836,250 0
W. Christopher
Wellborn.............. 11,948(10) $ 439,125(10) 75,000(9) 75,000(9) 83,625 83,625
Harold G. Turk.......... 0 0 0 0 0 0
Javier E.M. Serna....... 0 0 0 0 0 0
H. Clay Orme............ 0 0 0 0 0 0
</TABLE>
- --------------------------
(1) At fiscal year-end, the per share exercise price of such options was
$11.94.
(2) At fiscal year-end, the per share exercise price of such options was $9.01
for options to acquire 2,000,000 shares of Common Stock, and $8.69 for
options to acquire 343,000 shares of Common Stock.
(3) At fiscal year-end, the per share exercise price of such options was $11.94
for options to acquire 77,500 shares of Common Stock, $9.01 for options to
acquire 120,000 shares of Common Stock, and $8.69 for options to acquire
90,000 shares of Common Stock.
(4) At fiscal year-end, the per share exercise price of such options was $9.01.
(5) At fiscal year-end, the per share exercise price of such options was $9.01
for options to acquire 26,667 shares of Common Stock, and $8.69 for options
to acquire 76,000 shares of Common Stock.
(6) At fiscal year-end, the per share exercise price of such options was $9.01
for options to acquire 20,000 shares of Common Stock, and $8.69 for options
to acquire 72,000 shares of Common Stock.
(7) At fiscal year-end, the per share exercise price of such options was $8.81.
(8) During fiscal 1999, Mr. Sardas exercised a total of 1,500,000 SARs. The
payments included cash of $2,927,523 and 79,659 shares of Common Stock
valued at $12.25 per share and 38,267 shares of Common Stock valued at
$12.75 per share.
(9) At fiscal year-end, the per share base price of such SARs was $9.01 and the
per share ceiling price of such SARs was $11.94, except for 250,000 SARs
granted to Mr. Sardas which have a ceiling price of $13.69.
(10) During fiscal 1999, Mr. Wellborn exercised 150,000 SARs. The payment
included cash of $292,762 and 11,948 shares of Common Stock valued at $12.25
per share.
9
<PAGE>
OPTION/SAR REPRICING TABLE
The following table sets forth certain information regarding options and
SARs granted to all executive officers which were repriced during the last ten
fiscal years. See Compensation Committee Report on Executive Compensation for a
discussion of the basis for repricings.
<TABLE>
<CAPTION>
LENGTH OF
SECURITIES ORIGINAL
UNDERLYING OPTION TERM
NUMBER OF MARKET PRICE OF EXERCISE OR CEILING REMAINING AT
OPTIONS/SARS STOCK AT TIME OF PRICE AT TIME OF NEW EXERCISE DATE OF
REPRICED OR REPRICING OR REPRICING OR OR CEILING REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
- ---- -------- ------------ ---------------- ------------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPTIONS
Jacques R. Sardas.... 10/10/97(1) 2,000,000 $ 13.69 $16.00 $13.69 6/13/2007
2/20/98(2) 2,000,000 11.94 13.69 11.9 6/13/2007
12/10/98(3) 2,000,000 8.69 9.44 49.01 7/17/2008
W. Christopher 10/10/97(4) 400,000 13.69 16.81 13.69 8/25/2007
Wellborn........... 2/20/98(2) 310,000 11.94 13.69 11.94 8/25/2007
12/10/98(3) 120,000 8.69 9.44 9.01 7/17/2008
Harold G. Turk....... 12/10/98(3) 40,000 8.69 9.44 9.01 7/17/2008
Javier E.M. Serna.... 12/10/98(3) 30,000 8.69 9.44 9.01 7/17/2008
12/10/98(6) 57,631 8.69 9.91 9.01 1/1/2006
Dan L. Cooke......... 2/20/98(2) 50,000 11.94 13.69 11.94 4/18/2007
12/10/98(3) 30,000 8.69 9.44 9.01 7/17/2008
D.D. Agostinelli..... 12/10/98(5) 40,000 8.69 12.31 9.01 2/27/2008
12/10/98(3) 30,000 8.69 9.44 9.01 7/17/2008
Silvano Cornia....... 12/10/98(3) 30,000 8.69 9.44 9.01 7/17/2008
12/10/98(6) 32,023 8.69 9.91 9.01 1/1/2006
David F. Finnigan.... 2/20/98(2) 65,000 11.94 13.69 11.94 9/1/2007
12/10/98(6) 76,845 8.69 9.91 9.01 1/1/2006
12/10/98(3) 40,000 8.69 9.44 9.01 7/17/2008
William R. Hanks..... 12/10/98(6) 73,182 8.69 9.91 9.01 1/1/2006
12/10/98(3) 30,000 8.69 9.44 9.01 7/17/2008
William L. Justus.... 12/10/98(7) 50,000 8.69 9.88 9.01 9/23/2008
Matthew J. Kahny..... 12/10/98(6) 96,059 8.69 9.91 9.01 1/1/2006
12/10/98(3) 30,000 8.69 9.44 9.01 7/17/2008
Mark A. Solls........ 12/10/98(8) 100,000 8.69 12.63 9.01 12/10/2007
12/10/98(3) 10,000 8.69 9.44 9.01 7/17/2008
SARS
Jacques R. Sardas.... 2/20/98(9) 2,000,000 11.94 13.69 11.94 6/13/2007
W. Christopher 2/20/98(10) 300,000 11.94 13.69 11.94 8/25/2007
Wellborn...........
Harold G. Turk....... N/A N/A N/A N/A N/A N/A
Javier E.M. Serna.... N/A N/A N/A N/A N/A N/A
Dan L. Cooke......... 2/20/98(10) 50,000 11.94 13.69 11.94 4/18/2007
David F. Finnigan.... 2/20/98(10) 60,000 11.94 13.69 11.94 9/1/2007
</TABLE>
- ------------------------
(1) The per share exercise price of the options granted to Mr. Sardas in
June 1997 was reduced on October 10, 1997 from $16.00 to $13.69 (market
value on such date). The option term was not amended.
10
<PAGE>
(2) The per share exercise price of the options granted to Messrs. Sardas,
Wellborn, Cooke and Finnigan in 1997 was reduced on February 20, 1998 from
$13.69 to $11.94 (market value on such date). The option term was not
amended.
(3) The per share exercise price of the options granted to Messrs. Sardas,
Wellborn, Turk, Serna, Cooke, Agostinelli, Cornia, Finnigan, Hanks, Justus,
Kahny and Solls in July 1998 was reduced on December 10, 1998 from $9.44 to
$9.01 (the market value on such date was $8.69). The option term was not
amended.
(4) The per share exercise price of the options granted to Mr. Wellborn in
August 1997 was reduced on October 10, 1997 from $16.81 to $13.69 (market
value on such date). In connection with such repricing, Mr. Wellborn
forfeited 90,000 options. The option term was not amended.
(5) The per share exercise price of the options granted to Mr. Agostinelli in
February 1998 was reduced on December 10, 1998 from $12.31 to $9.01 (the
market value on such date was $8.69). The option term was not amended.
(6) The per share exercise price of the options granted to Messrs. Serna,
Cornia, Finnigan, Hanks and Kahny on January 1, 1996 was reduced on
December 10, 1998 from $9.91 to $9.01 (the market value on such date was
$8.69). The option term was not amended.
(7) The per share exercise price of the options granted to Mr. Justus in
September 1998 was reduced on December 10, 1998 from $9.88 to $9.01 (the
market value on such date was $8.69). The option term was not amended.
(8) The per share exercise price of the options granted to Mr. Solls in
December 1997 was reduced on December 10, 1998 from $12.63 to $9.01 (the
market value on such date was $8.69). The option term was not amended.
(9) The per share ceiling price of 2,000,000 of the 2,250,000 SARs granted to
Mr. Sardas in October 1997 was reduced on February 20, 1998 from $13.69 to
$11.94. The per share ceiling price of 250,000 SARs remained at $13.69.
(10) The per share ceiling price of the SARs granted to Messrs. Wellborn, Cooke
and Finnigan in October 1997 was reduced on February 20, 1998 from $13.69 to
$11.94.
EMPLOYMENT AGREEMENTS
The Company has entered into an agreement with Jacques R. Sardas providing
for his employment as the Company's President and Chief Executive Officer
through December 31, 2001. Pursuant to the agreement, Mr. Sardas receives a
minimum annual salary of $600,000 and is eligible to receive an annual bonus
equal to 100% of his annual salary upon attainment of a "target" performance
goal (up to a maximum of 200% of annual salary upon attainment of a "maximum"
performance goal as set forth in the Company's Annual Incentive Plan).
If the Company terminates Mr. Sardas' employment without cause (as defined
in the employment agreement) or Mr. Sardas terminates his employment for good
reason (as defined in the employment agreement), the Company shall pay to
Mr. Sardas (i) any salary accrued and unpaid as of the date of termination,
(ii) his annual salary through December 31, 2001, and (iii) the greater of
(A) a PRO RATA portion of Mr. Sardas' annual bonus for the year of termination
based on the performance of the Company from the beginning of the relevant bonus
period to the date of termination or (B) the annual bonus for the fiscal year
preceding the fiscal year of termination, PRO RATED based on the number of days
elapsed in the year of termination. The employment agreement also contains
customary non-competition, non-solicitation and non-disclosure covenants.
11
<PAGE>
The Company has entered into an agreement with W. Christopher Wellborn
providing for his employment as the Company's Chief Financial Officer through
December 31, 2001. Pursuant to that agreement, Mr. Wellborn receives a minimum
annual salary of $300,000 and is eligible to receive an annual bonus of up to
100% of his annual salary upon attainment of certain financial performance
goals. Notwithstanding the foregoing, for fiscal 1997, the Company and
Mr. Wellborn agreed upon a fixed bonus of $150,000, which was PRO RATED for
1997. In addition, the Company paid to Mr. Wellborn a "sign-on" bonus equal to
$140,000, subject to reimbursement to the Company by Mr. Wellborn of up to
$40,000 thereof, in accordance with the "price protection" arrangement between
the Company and Mr. Wellborn pertaining to the sale of Mr. Wellborn's
Pennsylvania residence (after a $25,000 adjustment, Mr. Wellborn's sign-on bonus
was $115,000).
If the Company terminates Mr. Wellborn's employment without cause (as
defined in the employment agreement) or Mr. Wellborn terminates his employment
for good reason (as defined in the employment agreement), the Company shall pay
to Mr. Wellborn (i) any salary accrued and unpaid as of the date of termination,
(ii) his annual salary through December 31, 2001, (iii) the greater of (A) a PRO
RATA portion of Mr. Wellborn's annual bonus for the year of termination based on
the performance of the Company from the beginning of the relevant bonus period
to the date of termination or (B) the annual bonus for the fiscal year preceding
the fiscal year of termination, PRO RATED based on the number of days elapsed in
the year of termination, and (iv) a PRO RATA portion of any other bonus plan(s)
in which Mr. Wellborn participated for the year of termination based on the
performance of the Company from the beginning of the relevant bonus period to
the date of termination. If the Company does not renew Mr. Wellborn's employment
agreement at the end of the term (December 31, 2001), the Company shall pay or
provide, as the case may be, to Mr. Wellborn (i) any salary accrued and unpaid
as of the effective date of non-renewal, (ii) his annual salary and (iii) any
benefits to which he may be entitled under any Company employee benefit plan or
program from the effective date of non-renewal until the earlier of (A) one year
from the effective date of non-renewal, and (B) the acceptance by Mr. Wellborn
of employment other than with the Company. The employment agreement also
contains customary non-competition, non-solicitation and non-disclosure
covenants.
The Company entered into an employment agreement with Harold G. Turk, which
term expired on December 31, 1999. The employment agreement contains provisions
prohibiting Mr. Turk from competing with the Company during the term of
employment and, in certain cases, for a period thereafter.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
During fiscal 1999, the Company's Compensation Committee (the "Committee")
was responsible for executive compensation, including establishing the Company's
compensation philosophy and policies. The Committee also was responsible for
administering the Company's executive compensation plans and programs. The
Committee reviews the Company's executive compensation plans on at least an
annual basis to ensure that the programs continue to meet the goals of the
Committee's compensation philosophy. The Committee performs these duties to the
extent that they relate to compensation which the Company intends to qualify for
an exception to the deduction limitation of Section 162(m) of the Code. In
fiscal 1999, such compensation constituted the annual cash bonus payable under
the 1999 Management Incentive Plan, options granted under the Company's stock
option plan and the stock appreciation rights held by five officers of the
Company.
COMPENSATION PHILOSOPHY
The Committee has four principal objectives in determining executive
compensation policies: (1) to support the development of a high-caliber
executive management team; (2) to establish a strong pay/ performance linkage;
(3) to focus executive management on the critical financial and operating
objectives
12
<PAGE>
of the Company; and (4) to attract, reward, motivate and retain key executive
talent. To achieve these objectives, the Committee has adopted the following
overriding policies:
- The Company will compensate competitively with the practices of other
leading companies in both the distribution and manufacturing sector.
- Generally, total compensation will be targeted at the 75th percentile of
the pay scale of other leading companies in both the distribution and
manufacturing sector if the Company and individual performance meet
expected levels or better. However, if necessary, the Company will offer
enhanced compensation packages to attract talented executives to the
Company.
- To achieve total compensation objectives that have a strong performance
emphasis, the use of variable incentive plans will be emphasized,
utilizing both annual cash bonus and longer term stock-based plans and
awards.
- It is expected that in future fiscal years stock options and other
incentive-based compensation will continue to constitute a significant
portion of the compensation of executive officers so that the interests of
executive officers will coincide with the interests of stockholders.
The Committee's specific executive compensation practices discussed below
are designed to implement the foregoing policies.
ELEMENTS OF EXECUTIVE COMPENSATION
The elements of the Company's compensation of executive officers are:
(1) annual cash compensation in the form of base salary and incentive bonuses;
(2) long-term incentive compensation in the form of stock options granted under
the Company's 1998 Amended and Restated Stock Option Plan and in the form of
stock appreciation rights; and (3) other compensation and employee benefits
generally available to all employees of the Company, such as life and health
insurance and employer matching contributions under the Company's Employee
Retirement Savings Plan, a "401(k)" plan.
BASE SALARY
The Compensation Committee reviews base salary levels of the executive
officers annually. Adjustments, if any, generally are made effective March 1 of
each year. Salary ranges for each executive officer are determined by the
Compensation Committee. Historically, a mid-point base salary has been
established around the 75th percentile of the pay scale of other leading
companies in both the distribution and manufacturing sector. An executive
officer's progression through the salary range is based upon the Compensation
Committee's evaluation of the individual's job performance. Two executive
officers received salary increases in fiscal 1999 to raise their salaries to
market levels.
INCENTIVE BONUSES
The Committee's process for determining annual bonuses is designed to
motivate the Company's executive officers to perform to the best of their
abilities and to enhance stockholder value through achievement of the Company's
performance objectives. Therefore, a target bonus percentage is established for
each executive and is related to his or her potential impact on Company results,
while the percentage of bonus awarded is determined with reference to
performance-related criteria. Incentive bonuses are paid annually upon
certification by the Compensation Committee of achievement of the relevant
performance targets.
The amount of an executive's bonus for fiscal 1999 was based on
pre-established performance measures based on the attainment by the Company of
certain levels of corporation or operating unit economic value added (EVA). EVA
is a financial measure of profitability compared to invested capital. The
establishment of EVA as the performance measure incentivized the Company's
managers to focus on
13
<PAGE>
all aspects of the Company's performance. As a result of the Company's
performance in fiscal 1999, all but five executive officers received the maximum
bonus payment for which they were eligible.
STOCK OPTIONS/STOCK APPRECIATION RIGHTS
The Committee believes that the use of stock options as long-term
compensation serves to motivate executive officers to maximize stockholder value
and to remain in the Company's employment. The number of options granted to each
executive is determined by the Committee, in its discretion. In making its
determination, the Committee considers the executive's position at the Company,
his or her individual contribution, the number of options (if any) to purchase
the Common Stock held by the executive and other factors, including an analysis
of the estimated amount potentially realizable from the options.
The options held by the Company's current executive officers were granted
using the above stated criteria. The Committee believes these holdings will
encourage retention of key officers. To induce two executives to accept
employment with the Company, options were granted to them at an exercise price
equal to the fair market value of the underlying shares of Common Stock on the
grant date.
In October 1997, the 162(m) Committee (which was combined with the
Compensation Committee during fiscal 1999) granted stock appreciation rights
(the "SARs") to five of the Company's most senior executive officers. The SARs
entitle a holder to a payment per share upon exercise equal to the excess of the
fair market value of the shares at the time of exercise over $9.01; provided
that the amount of such fair market value per share which can be taken into
account is limited to a "ceiling price" of $11.94, except in the case of certain
of the SARs held by Mr. Sardas, where the "ceiling price" of 250,000 of such
SARs is $13.69 per share. The Committee believes that granting the SARs was
necessary to retain, motivate and adequately compensate certain of its most
valuable executives by appropriately supplementing their equity-based
compensation represented by stock options. During 1999, the executives exercised
the vested SARs and received compensation equal to 33% in the form of shares of
Common Stock and 67% in cash.
CEO COMPENSATION
Mr. Sardas joined the Company as its Chief Executive Officer on July 1,
1997, replacing Mr. Howard Bull. The Committee determined Mr. Sardas'
compensation on the same basis and under the same philosophy it uses in
determining the compensation of other executive officers of the Company. In
addition, Mr. Sardas' compensation reflects the Committee's views as to the
appropriate amount of compensation that was necessary to incentivize Mr. Sardas
to accept employment with the Company.
Mr. Sardas' annual base salary of $600,000 is consistent with industry
practice. To link Mr. Sardas' cash compensation to Company performance, a
substantial amount of Mr. Sardas' potential cash compensation for the fiscal
year ending December 29, 2000 (such fiscal year sometimes referred to herein as
"fiscal 2000") will be tied to the Company's achievement of objective financial
and operating targets. Mr. Sardas' maximum bonus opportunity for fiscal 2000
will be 200% of his annual salary upon attainment of certain financial
performance goals.
Mr. Sardas' annual base salary did not increase in 1999. Mr. Sardas earned a
cash bonus payment equal to 150% of his annual salary. Additionally, in January
2000, Mr. Sardas received a grant of stock options to acquire 80,000 shares of
Common Stock. (See Summary Compensation Table.)
The Committee believes that stock options and SARs are critical to linking
Mr. Sardas' compensation to Company performance and to aligning Mr. Sardas'
interests with those of the Company's shareholders. Upon commencement of
employment, the 162(m) Committee granted Mr. Sardas options to acquire 2,000,000
shares of Common Stock at a per share exercise price of $16.00, the market value
of the shares on the grant date. The Committee granted that number of options so
that a significant, if not the largest, portion of Mr. Sardas' compensation
would be tied to the value of the Company's stock. To ensure that Mr. Sardas
would continue to be properly motivated, on October 10, 1997 and February 20,
1998, the
14
<PAGE>
Committee reduced the exercise price of the options to $13.69 per share and
$11.94 per share, respectively, the market value of the underlying shares at the
time of the repricings.
On October 10, 1997, the 162(m) Committee granted to Mr. Sardas SARs
covering 2,250,000 shares of Common Stock. The SARs entitle Mr. Sardas to a
payment per share upon exercise equal to the excess of the market value of the
shares at the time of exercise over $9.01; provided that the amount of such
market value per share which can be taken into account is limited to $13.69 in
the case of 250,000 of the SARs and $11.94 in the case of 2,000,000 of the SARs.
The Committee believes that the SARs are essential to supplement Mr. Sardas'
other equity-based compensation represented by stock options.
On July 17, 1998 and on December 10, 1998, the 162(m) Committee granted to
Mr. Sardas options to acquire 2,000,000 shares of Common Stock at a per share
exercise price of $9.44 and options to acquire 343,000 shares of Common Stock at
a per share exercise price of $8.69 respectively, both representing the market
value of the underlying shares at the time of the grant. On December 10, 1998,
the 162(m) Committee reduced the exercise price of the options to acquire
2,000,000 shares from $9.44 to $9.01 (the market value of the shares on
December 10, 1998 was $8.69). Mr. Sardas did not receive any grants of stock
options or SARs during fiscal 1999.
SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a deduction to any publicly-held corporation for compensation paid in
excess of $1 million in a taxable year to its chief executive officer or any of
the four other most highly compensated executive officers employed by such
corporation on the last day of its taxable year. The Committee considered the
impact of Section 162(m) on the compensation of its executive officers. The
Committee expects that the deduction limitation does not, and will not, in the
near future, apply to executive officers' compensation. The Committee intends to
monitor the impact of Section 162(m) and consider structuring executive
compensation arrangements so that the deduction limitation will continue not to
apply.
Respectfully submitted,
COMPENSATION COMMITTEE
Norman E. Wells, Jr., Chairman
Douglas D. Danforth
John F. Fiedler
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on $100 invested on
August 14, 1996 in each of the Common Stock of the Company, the Standard &
Poor's 500 Index and the Dow Jones Building Materials Index. The returns of the
Standard & Poor's Index and the Dow Jones Building Materials Index are
calculated assuming reinvestment of dividends. The Company has not paid any
dividends. The graph covers a period commencing August 14, 1996, when the
Company's Common Stock was first publicly traded, through December 31, 1999. The
stock price performance shown on the graph below is not necessarily indicative
of future price performance.
<TABLE>
<CAPTION>
AUGUST 14, JANUARY 3, JANUARY 2, JANUARY 1, DECEMBER 31,
1996 1997 1998 1999 1999
---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Dal-Tile International Inc........................ 100 138 85 74 72
Building Materials................................ 100 118 141 166 154
S&P Composite..................................... 100 117 156 200 243
</TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG DAL-TILE INTERNATIONAL INC.,
THE S&P 500 INDEX AND THE DOW JONES BUILDING MATERIALS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DAL-TILE INTERNATIONAL S&P 500 INDEX DOW JONES BUILDING MATERIALS INDEX
<S> <C> <C> <C>
8/14/96 $100.00 $100.00 $100.00
1/3/97 $138.39 $116.85 $117.84
1/2/98 $84.82 $155.83 $141.30
1/1/99 $74.11 $200.36 $165.78
12/31/99 $72.32 $242.53 $153.55
</TABLE>
ASSUMES $100 INVESTED ON AUG. 14, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1999
16
<PAGE>
CERTAIN TRANSACTIONS
The Company receives the benefit of volume discounts for certain office
services and supplies made available to various companies associated with AEA
Investors (the managing member of DTI Investors LLC, which is a beneficial owner
of Common Stock) pursuant to arrangements managed by a subsidiary of AEA
Investors. Messrs. Mai, Skelsey, Goldsmith, and Murrer are directors of the
Company; Mr. Mai is the Chairman of AEA Investors; Messrs. Goldsmith and Murrer
act as Vice President and Managing Director of AEA Investors; and Mr. Skelsey
provides consulting services to AEA Investors.
On August 5, 1999, the Company entered into a Demand Registration Rights
Letter Agreement with DTI Investors LLC and Jacques R. Sardas in which the
Company granted certain registration rights to DTI Investors LLC and amended the
registration rights that were granted to Mr. Sardas in his employment agreement.
In addition, on August 5, 1999 the Company entered into a letter agreement with
DTI Investors LLC and Mr. Sardas, in which DTI Investors LLC and Mr. Sardas
agreed to certain transfer restrictions until December 31, 2001. These
agreements are filed as exhibits to the Company's Form 10-Q for the quarterly
period ended July 2, 1999.
RATIFICATION OF APPOINTMENT OF AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP, independent public accountants, to audit and report
on the consolidated financial statements of the Company for fiscal 2000 and to
perform such other services as may be required of them. Ernst & Young LLP has
served as auditors for the Company since 1980. The Board of Directors has
directed that management submit the appointment of independent auditors for
ratification by the stockholders at the Annual Meeting. Representatives of
Ernst & Young LLP are expected to be present at the meeting, will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate stockholder questions.
Proxies will be voted FOR ratification of the appointment of Ernst & Young
LLP as independent auditors for the Company for fiscal 2000, unless otherwise
specified in the proxy. The Board of Directors recommends a vote FOR
ratification of the appointment of Ernst & Young LLP as independent auditors.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by use of the mail, some of the officers, directors
and regular employees of the Company and its subsidiaries, none of whom will
receive additional compensation therefore, may solicit proxies in person or by
telephone, telegraph or other means. As is customary, the Company will, upon
request, reimburse brokerage firms, banks, trustees, nominees and other persons
for their out-of-pocket expenses in forwarding proxy materials to their
principals.
STOCKHOLDER PROPOSALS FOR THE 2001
ANNUAL MEETING OF STOCKHOLDERS
Stockholders may present proposals that may be proper subjects for inclusion
in the proxy statement and for consideration at an annual meeting of
stockholders. To be considered, proposals must be submitted on a timely basis.
Proposals for the 2001 Annual Meeting of Stockholders must be received by the
Company no later than December 15, 2000. Proposals, as well as any questions
related thereto, should be submitted in writing to the Secretary of the Company.
Proposals may be included in the proxy statement for the 2001 Annual Meeting of
Stockholders if they comply with certain rules and regulations promulgated by
the SEC and in connection with certain procedures described in the Company's
By-Laws, a copy of which may be obtained from the Secretary of the Company.
17
<PAGE>
OTHER MATTERS
The Company knows of no other matter to be brought before the Annual
Meeting. If any other matter requiring a vote of the stockholders should come
before the Annual Meeting, it is the intention of the persons named in the proxy
to vote the same with respect to any such matter in accordance with their best
judgment.
The Company will furnish, without charge, to each person whose proxy is
being solicited upon written request, a copy of its Annual Report on Form 10-K
for fiscal 1999, as filed with the SEC (excluding exhibits). Copies of any
exhibits thereto also will be furnished upon the payment of a reasonable
duplicating charge. Requests in writing for copies of any such materials should
be directed to Mark A. Solls, Secretary, 7834 C.F. Hawn Freeway, Dallas, TX
75217.
By order of the Board of Directors,
[LOGO]
Mark A. Solls
SECRETARY
Dallas, Texas
March 31, 2000
18
<PAGE>
DAL-TILE INTERNATIONAL INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 2000
THIS PROXY IS SOLICITED ON BEHALF OF DAL-TILE INTERNATIONAL INC.'S
BOARD OF DIRECTORS.
P The undersigned hereby appoints Jacques R. Sardas, W. Christopher
Wellborn and Mark A. Solls, and each of them, Proxies for the
R undersigned, with full power of substitution, to represent and to vote
all shares of Dal-Tile International Inc. Common Stock which the
O undersigned may be entitled to vote at the 2000 Annual Meeting of
Stockholders of Dal-Tile International Inc. to be held in Dallas, Texas
X on Thursday, April 27, 2000 at 9:00 a.m., or at any adjournment
thereof, upon the matters set forth on the reverse side and described
Y in the accompanying Proxy Statement and upon such other business as
may properly come before the meeting or any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE
ON ANY ITEM. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES
NEED TO BE CHECKED. IF THIS PROXY IS SIGNED BUT NO SPECIFICATIONS ARE
MADE, THE PROXY SHALL BE VOTED FOR ITEMS 1 AND 2. IN THEIR DISCRETION,
THE APPOINTED PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
_____________________________________________________________________
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS ON REVERSE SIDE
_____________________________________________________________________
___________
SEE REVERSE
SIDE
___________
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
________________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
PLEASE MARK
YOUR VOTES AS
INDICATED IN / X /
THIS EXAMPLE
<TABLE>
<S><C>
To elect seven directors for terms ending at the 2001 Annual Meeting of Stockholders.
FOR all nominees WITHHOLD Nominees: Jacques R. Sardas, Douglas D. Danforth,
listed to the right AUTHORITY John F. Fiedler, Vincent A. Mai, Martin C. Murrer,
(except as marked to the to vote for all nominees Charles J. Pilliod, Jr., Norman E. Wells, Jr.
contrary) listed to the right
WITHHELD FOR: To withhold authority to vote for
/ / / / any individual nominee(s), write that nominee(s)
name on the line provided:
_________________________________________________
To ratify the appointment by the Board of Directors of I PLAN TO ATTEND MEETING
Ernst & Young L.L.P. independent public accountants, as IF YOU CHECK THIS BOX TO THE RIGHT AN / /
independent auditors for the Company for the fiscal year ADMISSION CARD WILL BE SENT TO YOU.
ending December 29, 2000.
ADDRESS CHANGE
FOR AGAINST ABSTAIN PLEASE MARK THIS BOX IF YOU HAVE / /
/ / / / / / ADDRESS CHANGES ON THE REVERSE SIDE.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE
DAL-TILE INTERNATIONAL INC. NOTICE OF
MEETING AND PROXY STATEMENT.
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
Signature _________________________________ Signature _________________________________ Date __________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such. Corporate and partnership
proxies should be signed by any authorized person indicating the person's title.
- ------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
