<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PALM HARBOR HOMES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(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:
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<PAGE> 2
PALM HARBOR HOMES, INC.
15303 DALLAS PARKWAY, SUITE 800
DALLAS, TEXAS 75248
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 30, 1998
-------------------
To the Shareholders of Palm Harbor Homes, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Palm
Harbor Homes, Inc. (the "Company") will be held at 9:30 a.m. Dallas time on June
30, 1998, at The Hotel Inter-Continental, 15201 Dallas Parkway, Dallas, Texas,
to consider and act upon the following matters:
1. To elect nine members of the Company's Board of Directors to hold
office until the next Annual Meeting of Shareholders and until their
respective successors shall have been elected and qualified.
2. To approve an amendment of the Company's Amended and Restated Articles
of Incorporation to increase the number of authorized shares of Common
Stock from 20,000,000 to 50,000,000.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company for the year ending March 26, 1999.
4. Such other matters as may properly be brought before the Annual Meeting
or any adjournment thereof.
Only shareholders of record of the Company at the close of business on
May 15, 1998 will be entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof.
Your vote is important. To ensure that your shares will be represented
at the Annual Meeting, whether or not you plan to attend the Annual Meeting,
please complete, date, sign and mail the enclosed proxy promptly in the enclosed
postage-paid envelope. Shareholders who attend the Annual Meeting in person may
revoke their proxies and vote in person prior to the commencement of the meeting
if they so desire.
By Order of the Board of Directors
/s/ KELLY TACKE
Kelly Tacke
Secretary
June 1, 1998
<PAGE> 3
PALM HARBOR HOMES, INC.
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 30, 1998
-------------------
This Proxy Statement and the accompanying proxy are being furnished to
shareholders in connection with the solicitation of proxies by the Board of
Directors of Palm Harbor Homes, Inc., a Florida corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held at The Hotel
Inter-Continental, Dallas, Texas, at 9:30 a.m. Dallas time on June 30, 1998, and
at any adjournment or postponement thereof. This Proxy Statement and the related
form of proxy are first being sent to shareholders on or about June 5, 1998.
The close of business on May 15, 1998 (the "Record Date") has been
fixed as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournments or postponements
thereof. As of the Record Date, the Company had 19,029,057 outstanding shares of
Common Stock, $.01 par value per share ("Common Stock"), the only outstanding
voting security of the Company. Each shareholder of record on the Record Date is
entitled to one vote for each share of Common Stock. As of the Record Date, the
Company had 1,581 shareholders of record. A majority of the outstanding shares
of Common Stock, represented in person or by proxy, will constitute a quorum at
the Annual Meeting; however, if a quorum is not present or represented at the
Annual Meeting, the shareholders entitled to vote at such meeting, present in
person or represented by proxy, have the power to adjourn the Annual Meeting
from time to time, without notice, other than by announcement at the Annual
Meeting, until a quorum is present or represented. At any such adjourned Annual
Meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the original Annual Meeting.
All proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted FOR the proposals described in this Proxy Statement unless otherwise
directed. A shareholder may revoke his or her proxy at any time before it is
voted either by filing with the Secretary of the Company at its principal
executive office a written notice of revocation or a duly executed proxy bearing
a later date, or by attending the Annual Meeting and expressing a desire to vote
his or her shares in person prior to commencement of the meeting. A notice of
revocation need not be on any specific form.
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no business that will be presented for consideration at the
Annual Meeting other than the matters described in this Proxy Statement. If any
other matters are properly brought before the Annual Meeting, the persons named
in the accompanying form of proxy will vote the proxies in accordance with their
judgment.
Abstentions and broker non-votes (where a nominee holding Common Stock
has not received voting instructions from the beneficial owner with respect to a
particular matter and such nominee does not possess or choose to exercise
discretionary authority with respect thereto) will be included in the
determination of the number of shares of Common Stock present at the Annual
Meeting for quorum purposes. Abstentions and broker non-votes will not be deemed
to be outstanding and, therefore, will not be counted in the tabulations of
votes cast on proposals presented to shareholders.
The Company's principal executive office is located at 15303 Dallas
Parkway, Suite 800, Dallas, Texas 75248.
<PAGE> 4
PROPOSAL ONE: ELECTION OF DIRECTORS
The number of directors to be elected at the Annual Meeting is nine.
The election of directors requires the affirmative vote of a majority of
outstanding Common Stock represented in person or by proxy at the Annual
Meeting. Abstentions and broker non-votes will be disregarded and have no effect
on the outcome of the vote. Although it is not contemplated that any nominee
will decline or be unable to serve, the proxies will be voted by the proxy
holders in their discretion for another person, or for a lesser number of
persons, if such a contingency should arise. The term of each person elected as
a director will continue until the next annual meeting and until his successor
is duly elected and qualified. Unless such authority is withheld, it is the
intention of the persons named in the enclosed proxy to vote such proxy FOR the
election of such nine nominees. All of the nominees except Thomas G. Cannon
currently serve as directors of the Company. The following table sets forth the
name, age and year of election to the Board of each person who is a nominee for
director of the Company.
<TABLE>
<CAPTION>
NAME AGE YEAR FIRST ELECTED DIRECTOR
- ---- --- ---------------------------
<S> <C> <C>
Lee Posey 63 1977
Larry H. Keener 48 1980
William R. Thomas 69 1982
Walter D. Rosenberg, Jr. 71 1977
Frederick R. Meyer 70 1994
John H. Wilson 55 1994
A. Gary Shilling 60 1995
Scott W. Chaney 40 1996
Thomas G. Cannon 56 --
</TABLE>
Set forth below is a description of the backgrounds of the directors of
the Company.
LEE POSEY, founder of the Company, has served as Chairman of the Board
since December 1977, as Chief Executive Officer from December 1977 through June
1997, and as President from December 1977 through December 1993. From 1967
through 1977, Mr. Posey served as President of Redman Industries, Inc., a
manufactured housing company. Mr. Posey has 42 years of experience in the
manufactured housing industry.
LARRY H. KEENER, who joined the Company in 1979, has served as Chief
Executive Officer since June 1997, as President since June 1994, as Chief
Operating Officer from June 1994 to June 1997, as a director from 1980 to May
1994 and as Division President of Florida and other Southeastern operations from
June 1989 through May 1994. He was appointed as a director of the Company on May
15, 1995. Mr. Keener has 26 years of experience in the manufactured housing
industry.
WILLIAM R. THOMAS has served as a director since 1982. Mr. Thomas
joined Capital Southwest Corporation ("Capital Southwest"), a publicly-owned
venture capital investment company, in 1962 and has served as its President
since 1980 and Chairman of the Board since 1982. He has also served as President
of Capital Southwest Venture Corporation ("CSVC") since 1980. Mr. Thomas
currently serves on the Board of Directors of Alamo Group, Inc. and Encore Wire
Corporation. Mr. Thomas serves as a director of the Company pursuant to an
affirmative covenant under an agreement among the Company, Capital Southwest and
CSVC.
WALTER D. ROSENBERG, JR. has served as a director since 1977. Since
June 1991, Mr. Rosenberg has managed his personal investments. From December
1957 to June 1991, he was Chairman of the Board and Chief Executive Officer of
Duro Metal Manufacturing Company, Inc., a manufacturer of steel furniture and
components, acquired in 1991 by Leggett & Platt.
2
<PAGE> 5
FREDERICK R. MEYER has served as a director since May 1994. Since July
1985, Mr. Meyer has served as Chairman of the Board of Aladdin Industries, Inc.,
a diversified company engaged in the manufacture of thermosware, insulated food
delivery systems and related products. Since October 1995, he has served as
President and Chief Executive Officer of Aladdin Industries. He previously
served as its President from May 1987 to September 1994. From July 1983 through
December 1986, he served as President of Tyler Corporation. He currently serves
on the Board of Directors of Tyler Corporation, Arvin Industries, Inc. and
Southwest Securities Group, Inc.
JOHN H. WILSON has served as a director since May 1994. Mr. Wilson has
served as President of U.S. Equity Corporation, a venture capital firm, since
1983. He currently serves on the Board of Directors of Capital Southwest,
Whitehall Corporation, Norwood Promotional Products, Inc. and Encore Wire
Corporation.
A. GARY SHILLING has served as a director since September 1995. Since
1978, Dr. Shilling has served as President of A. Gary Shilling & Co., Inc.,
economic consultants to a number of financial institutions and industrial
corporations as well as investment advisors, managing individual and
institutional accounts. Before establishing his own firm, he was Senior Vice
President and Chief Economist of White, Weld & Co., Inc. He currently serves on
the Board of Directors of National Life of Vermont and the Heartland Group.
SCOTT W. CHANEY has served as a director since August 1, 1996. Mr.
Chaney became President of the Company's retail operations effective July 1,
1996 and an Executive Vice President of the Company on March 28, 1997. Prior to
joining the Company, Mr. Chaney was President of Newco Homes, Inc. from March
1986 through June 30, 1996. The Company owned 41.6% of Newco Homes prior to its
merger into the Company which was effective as of July 1, 1996.
THOMAS G. CANNON became President of the Cannon Division of the Company
effective March 27, 1998. Prior to joining the Company, Mr. Cannon served as
President and Chief Executive Officer of the Cannon Manufactured Housing Group,
Inc. since 1972.
BOARD OF DIRECTOR COMMITTEES
The Company has two standing committees: an Audit Committee and a
Compensation Committee. The Audit Committee recommends to the Board of Directors
the appointment of independent auditors, reviews the plan and scope of audits,
reviews the Company's significant accounting policies and internal controls and
performs such other related duties and functions as are deemed appropriate by
the Audit Committee or the Board of Directors. Messrs. Thomas and Wilson serve
on the Audit Committee. The Compensation Committee reviews and approves salaries
and bonuses for the officers of the Company and management bonus plans and
compensation arrangements. Messrs. Thomas and Meyer serve on the Compensation
Committee. The Company does not have a Nominating Committee.
MEETINGS OF THE BOARD AND COMMITTEES
During the fiscal year ended March 27, 1998 ("Fiscal 1998"), there were
three meetings of the Board of Directors, one meeting of the Audit Committee and
one meeting of the Compensation Committee. Each Director attended 100% of all
meetings of the Board of Directors and 100% of the Committees on which such
Director served during such period.
DIRECTOR COMPENSATION
During Fiscal 1998, the Company paid each director who is not an
employee of the Company (an "Independent Director") $6,000 for services as a
director plus $1,000 for each meeting (other than telephonic meetings) of the
Board of Directors attended by each Independent Director. The total annual
compensation paid to any person for his services as an Independent Director in
Fiscal 1998 did not exceed $10,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company served as a member of the
Compensation Committee or as a director of any other entity, one of whose
executive officers served on the Compensation Committee or as a director of the
Company.
3
<PAGE> 6
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the
Board of Directors and are chosen annually by the Board of Directors. Set forth
below are the names, ages and positions of the executive officers of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Lee Posey 63 Chairman of the Board and Director
Larry H. Keener 48 President, Chief Executive Officer and Director
Scott Chaney 40 Executive Vice President and Director
Kelly Tacke 40 Chief Financial Officer, Vice President-Finance and Secretary
</TABLE>
Information concerning the business experience of Messrs. Posey, Keener
and Chaney is provided in "Proposal One: Election of Directors." Set forth below
is a description of the background of Ms. Tacke. There is no family relationship
between any directors or executive officers of the Company.
KELLY TACKE has served as Vice President-Finance and Chief Financial
Officer since October 1993, and as Secretary of the Company since March 1997.
From August 1979 through September 1993, Ms. Tacke was employed by Price
Waterhouse LLP where she most recently served as a Senior Audit Manager.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation paid or accrued during
the Company's fiscal years ended March 27, 1998, March 28, 1997 and March 29,
1996, respectively, to the Chairman of the Board and the three other executive
officers of the Company in all capacities in which they served.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)
NAME AND FISCAL ------------------------ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ------------------ ------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Lee Posey.............................. 1998 $225,000 $1,015,821 $12,035(2)
Chairman of the Board 1997 150,000 463,465 5,689(2)
1996 250,000 512,036 5,344(2)
Larry H. Keener........................ 1998 200,000 958,907 11,000(3)
President and Chief Executive 1997 200,000 623,591 14,249(3)
Officer 1996 150,000 363,493 10,069(3)
Scott Chaney........................... 1998 175,000 856,167 6,333(4)
Executive Vice President 1997 120,833(4) 537,573 3,167(4)
Kelly Tacke............................ 1998 100,000 260,274 5,499(5)
Chief Financial Officer, Vice 1997 100,000 180,473 5,015(5)
President-Finance and Secretary 1996 100,000 100,000 3,168(5)
</TABLE>
- ----------
(1) The named executive officers did not receive any annual compensation not
properly categorized as salary or bonus, except for certain perquisites and
other personal benefits which are not shown because the aggregate
incremental costs of these benefits to the Company for each officer did not
exceed the lesser of either $50,000 or 10% of the total of annual salary and
bonus reported for each such officer.
(2) Includes $8,625, $2,590 and $3,175 contributed in fiscal year 1998, 1997 and
1996, respectively, by the Company pursuant to the Employee Savings Plan and
$3,410, $3,099 and $2,169 paid in fiscal year 1998, 1997 and 1996,
respectively, by the Company as a car allowance.
(3) Includes $5,000, $8,249 and $4,069 contributed in fiscal year 1998, 1997 and
1996, respectively, by the Company pursuant to the Employee Savings Plan and
$6,000 paid in fiscal year 1998, 1997 and 1996 by the Company as a car
allowance.
(4) Mr. Chaney became Executive Vice President effective July 1, 1996. In that
position, his annualized salary was $175,000. All other compensation
represents contributions by the Company pursuant to the Employee Savings
Plan.
(5) Represents contributions by the Company pursuant to the Employee Savings
Plan.
4
<PAGE> 7
COMPENSATION ARRANGEMENTS
Effective April 1, 1995, the Company entered into a compensation
agreement with Mr. Posey. The agreement was amended effective October 1, 1995 to
provide that Mr. Posey's annual base salary be $150,000 (subject to increase by
the Company's Compensation Committee) for the next two fiscal years following
the date of the agreement. In July, 1997, the Compensation Committee increased
Mr. Posey's base salary to $250,000. Effective April 1, 1996, Mr. Posey agreed
that for a period of eight years from the date he ceases to be an employee of
the Company, he will serve as a consultant to the Company for a specified number
of days per year at an annual fee of $200,000. If the compensation agreement is
terminated for any reason, Mr. Posey or his beneficiary shall be entitled to
receive the lesser of (i) $1,500,000 or (ii) $16,667 multiplied by the remainder
of 132 minus the number of months Mr. Posey provided services as an employee or
as a consultant under the agreement. Any amounts payable upon termination shall
be paid in cash at Mr. Posey's or his estate's, as applicable, option, (i) in
equal monthly installments over a number of months selected by the recipient of
the payments, or (ii) in one lump sum payment within 30 days of termination.
The Company's Corporate Bonus Plan (the "Plan"), which was amended
effective March 28, 1998 and extends through fiscal 2001, defines the basis for
determining a potential bonus pool in each fiscal quarter equal to 20% of the
excess of Actual Earnings (as defined in the Plan) over Base Earnings (as
defined in the Plan). The Plan defines Actual Earnings in each fiscal period to
be the Company's consolidated earnings before deducting bonuses determined
pursuant to the Plan and before state and federal income taxes. Bonuses under
the Plan are paid promptly following each quarter.
Mr. Posey was entitled to receive as much as 21% of the bonus pool
under the Plan, but elected to receive approximately 14.8% for Fiscal 1998. In
Fiscal 1998, Mr. Keener received 14%, Mr. Chaney received 12.5% and Ms. Tacke
received 3.8% of the bonus pool. There are no dollar limits on bonus amounts
awarded.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, precludes a public corporation from taking a deduction
in 1994 or subsequent years for compensation in excess of $1 million paid to its
chief executive officer or any of its four other highest-paid officers unless
such compensation is performance based compensation as defined in Section 162(m)
of the Code.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with certain of
its officers and each of its directors, requiring the Company to indemnify such
persons against judgments, claims, damages, losses and expenses incurred as a
result of the fact that such officer or director, in his or her capacity as
such, is made or threatened to be made a party to any suit or proceeding, to the
maximum extent permitted by Florida law. The indemnification agreements provide
for the advancement of expenses to such officers and directors in connection
with any such suit or proceeding.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE OFFICER COMPENSATION
Decisions on compensation of the Company's executive officers are made
by the two member Compensation Committee of the Board of Directors. Each member
of the Compensation Committee is an outside director. None of the members of the
Compensation Committee has ever been an officer or employee of the Company or
any of its subsidiaries. The Compensation Committee, in consultation with the
Company's Chairman of the Board, is responsible for establishing the policies
that govern compensation of the executive officers and key employees at the
corporate level of the Company.
The goals of the Company's compensation program are to attract, retain
and motivate competent executive officers and key employees who have the
experience and ability to contribute materially to the long-term success of the
Company. The Company's compensation philosophy for its executive officers and
key employees is predicated on base salaries which are in most instances below
salaries for comparable industry positions and potential bonuses which,
depending on the Company's earnings performance in relation to pre-established
base levels, may be relatively high or relatively low in comparison with bonus
payments by companies of comparable size and type. The significant influence of
earnings growth on compensation levels effectively aligns the interests of the
executive officers and key employees with the interests of the Company's
shareholders.
5
<PAGE> 8
Base salaries are determined by the Compensation Committee for each of
the executive officers on an individual basis, taking into consideration level
of responsibility, individual contributions to the Company's performance, length
of tenure with the Company, compensation levels of comparable positions and
internal equities among positions. In most instances, base salaries are set at
subjectively-determined levels below base salaries paid to executives in similar
positions in companies of comparable size in the same industry or similar
industries. Despite the Committee's authorization of a base salary of $200,000
for the fiscal year ended March 28, 1997 ("Fiscal 1997"), Lee Posey, the
Company's Chairman of the Board, chose to receive a lesser salary of $150,000.
Effective July 1, 1997, Lee Posey's base salary was increased to $250,000 per
year. The base salary of the Company's President and Chief Executive Officer,
Larry H. Keener, was $200,000 in Fiscal 1998, representing no change from the
preceding fiscal year.
Bonuses were determined largely on the basis of a bonus plan which
provides for a corporate level bonus pool to be distributed on a predetermined
basis among those executives and key employees specified by the Compensation
Committee. The amount of the bonus pool in each year is based on the extent to
which the Company's annual earnings exceed a base level equivalent to a 20%
pre-tax return on the Company's shareholders' equity at the beginning of the
period. Individual participation in the bonus pool is based on a percentage
amount specified for each participant. For Fiscal 1998 and Fiscal 1997, Lee
Posey was entitled to receive as much as 21% of the bonus pool, but elected to
receive a lesser amount equivalent to approximately 14.8% of the bonus pool in
Fiscal 1998 and 10.4% in Fiscal 1997.
The combined effect of low base salaries and a profit-sharing plan
which generates bonuses only after earnings exceed an annual hurdle level,
results in relatively low executive compensation if the Company's performance is
unfavorable and a significantly higher level if performance is favorable,
thereby increasing the importance of performance-based bonuses as a material
determinant of total compensation.
During Fiscal 1998, the Company's net income and earnings per share
increased by 28.8% and 26.1%, respectively, over the previous year. During the
same period, the combined base salary and bonus of the Chairman of the Board,
Lee Posey, increased by 102% and the combined base salary and bonus of the
President and Chief Executive Officer, Larry H. Keener, increased by 41%. The
base salaries paid to Mr. Posey and Mr. Keener represented 18% and 17%,
respectively, of each officer's combined base salary and bonus.
The Company's executives and key employees, especially Mr. Posey, own a
significant amount of the Company's stock. The Company has not adopted an
incentive stock option plan and does not at this time intend to adopt any type
of stock option plan. Instead, the management of the Company believes that a
bonus plan similar to the present plan is a more equitable and effective
compensation device.
Compensation Committee
William R. Thomas, Chairman
Frederick R. Meyer
6
<PAGE> 9
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for
the Company, the Standard & Poor's MidCap 400 Composite Stock Index and the
Company's peer group (the "PHH Peer Group"), assuming the investment of $100 on
July 31, 1995 (the date the Common Stock began trading) and the reinvestment of
dividends. The companies in the PHH Peer Group are as follows: Cavalier Homes,
Inc., Champion Enterprises, Inc., Clayton Homes, Inc., Fleetwood Enterprises,
Inc., Liberty Homes, Inc., Oakwood Homes Corporation, Schult Homes Corporation
and Skyline Corporation.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
7/95 3/96 3/97 3/98
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Palm Harbor Homes, Inc. $100 $215 $229 $488
- --------------------------------------------------------------------------
S&P Midcap 400 $100 $112 $124 $185
- --------------------------------------------------------------------------
Peer Group $100 $139 $118 $204
- --------------------------------------------------------------------------
</TABLE>
CERTAIN TRANSACTIONS
Effective March 27, 1998, the Company purchased all of the outstanding
stock of Cannon Manufactured Housing Group, Inc., Cannon Mobile Homes, Inc.,
Pleasant Valley Mobile Homes, Inc., Countryside Mobile Homes, Inc., Cumberland
Homes, Inc., All Star Mobile Homes, Inc., and First Home Mortgage Corporation
(collectively, the "Cannon Companies"). The Cannon Companies were Georgia-based
retailers of manufactured homes with 18 locations. The stock in the Cannon
Companies was purchased pursuant to a Stock Purchase Agreement dated February 9,
1998 and amended March 7, 1998, by and among the Cannon Companies and Thomas G.
Cannon, Dale F. Cannon, Jack H. Coffey, John G. Blake, Todd R. Cannon and the
Estate of Grover R. Cannon (collectively, the "Selling Shareholders").
7
<PAGE> 10
As consideration for the outstanding shares of the Cannon Companies,
the Selling Shareholders received an aggregate of $26,757,215 and 157,975 shares
of the Company's Common Stock. Of that amount, Thomas Cannon, a nominee for
Director of the Company, received $21,270,837 and 126,380 shares of the
Company's Common Stock. The Company has filed a registration statement
registering the shares received by Thomas Cannon.
Effective March 27, 1998, all of the Cannon Companies except First Home
Mortgage Corporation were merged with and into the Company.
The sources of funds for the cash portion of the acquisition was
internal funds and the Company's line of credit with Chase Bank of Texas.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of May 15, 1998 by (i) each person who
is the beneficial owner of more than 5% of the Company's outstanding Common
Stock; (ii) each director of the Company; (iii) each executive officer named in
the Summary Compensation Table; and (iv) all directors and executive officers of
the Company as a group. Unless otherwise indicated, each of the shareholders
listed below has sole voting and investment power with respect to the shares
beneficially owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
- --------------------------------------------- --------------------- ----------
<S> <C> <C>
Lee Posey ................................... 3,756,856 19.74%
15303 Dallas Parkway
Suite 800
Dallas, Texas 75248
Capital Southwest Corporation and
Capital Southwest Venture
Corporation(2) ............................ 6,284,096 33.02
12900 Preston Road
Suite 700
Dallas, Texas 75230
Larry H. Keener(3) .......................... 353,489 1.86
Kelly Tacke ................................. 39,904 *
W.D. Rosenberg, Jr. ......................... 170,899 *
William R. Thomas(2)(4) ..................... 239,848 1.26
Frederick R. Meyer(5) ....................... 87,218 *
John H. Wilson(2) ........................... 1,000 *
A. Gary Shilling(6) ......................... 42,368 *
Scott W. Chaney ............................. 669,893 3.52
Thomas G. Cannon ............................ 140,053 *
All directors and executive officers
as a group (10 persons)(2)(3)(4)(5)(6) ...... 5,501,528 28.91%
</TABLE>
- -------------------------
* Represents less than 1%
(1) The information contained in this table with respect to Common Stock
ownership reflects "beneficial ownership" as defined in Rule 13d-3 under the
Exchange Act.
(2) Mr. Thomas is President and Chairman of the Board of Capital Southwest and
CSVC, both of which are principal shareholders of the Company. Mr. Wilson is
a member of the Board of Directors of Capital Southwest and CSVC. Mr. Thomas
and Mr. Wilson may be deemed
8
<PAGE> 11
to share voting and investment power with respect to the shares of Common
Stock beneficially owned by Capital Southwest and CSVC. Mr. Thomas and Mr.
Wilson each have disclaimed beneficial ownership of such shares.
(3) Includes an aggregate of 97,657 shares owned by Mr. Keener's spouse and
three daughters, over which shares he exercises voting and investment power.
(4) Mr. Thomas has sole voting and investment power with respect to 90,625
shares personally held by Mr. Thomas. Mr. Thomas also has sole voting and
investment power with respect to 64,540 shares held by a family partnership.
Mr. Thomas is a trustee of certain trusts pursuant to employee stock
ownership plans for employees of Capital Southwest and its wholly-owned
subsidiaries owning 84,683 shares, with the power as one of three trustees
to participate in the voting of such shares. Under the rules and regulations
of the Securities and Exchange Commission, Mr. Thomas is deemed to be the
beneficial owner of such 84,683 shares which are included in the shares
owned by Mr. Thomas.
(5) Includes 39,063 shares owned by a family partnership over which Mr. Meyer
exercises voting and investment power.
(6) Dr. Shilling is one of five members of an investment committee to
participate in the voting and investment decision relating to 26,525 shares
owned by clients of A. Gary Shilling & Co., Inc. Under the rules and
regulation of the Securities and Exchange Commission, Dr. Shilling is deemed
to be the beneficial owner of such 26,525 shares which are included in the
shares owned by Dr. Shilling.
- ----------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires that Company directors,
executive officers and persons who own more than 10% of the Common Stock of the
Company file initial reports of ownership and reports of changes in ownership of
Common Stock with the Securities and Exchange Commission (the "SEC"). Officers,
directors and shareholders who own more than 10% of the Common Stock are
required by the SEC to furnish the Company with copies of all Section 16(a)
reports they file.
To the Company's knowledge, based solely upon the review of the copies
of such reports furnished to the Company during Fiscal 1998, the Company's
officers, directors and 10% shareholders complied with all Section 16(a) filing
requirements applicable to them.
PROPOSAL TWO: AMENDMENT OF THE COMPANY'S AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Subject to approval by shareholders, the Board of Directors has
unanimously approved a proposed amendment to the Amended and Restated Articles
of Incorporation to increase the number of authorized shares of the Company's
Common Stock from 20,000,000 to 50,000,000 shares.
As of May 15, 1998, there were 19,029,057 shares of Common Stock issued
and outstanding, accordingly, only a total of approximately 970,943 authorized
but unissued shares are now available for future issuance.
The Board of Directors believes the Company's ability to meet business
requirements and to take advantage of financial opportunities would be enhanced
substantially if the proposed increase in authorized shares is approved. The
Board believes that the adoption of the proposed amendment will enable the
Company to respond promptly and appropriately to business opportunities, such as
to finance acquisitions of other companies or businesses or other transactions
with Common Stock and to meet any proper corporate purpose, including, without
limitation, opportunities to raise additional funds through equity based
financings, or stock splits or dividends.
If the proposed amendment is approved, the Board of Directors could
authorize the issuance of additional shares (up to the new maximum number of
authorized shares) for any proper purpose, at such time and for such
consideration as the Board may determine to be appropriate, without further
shareholder approval, unless otherwise required by applicable law or by the
rules of the Nasdaq National Market or any other stock exchange on which the
Company's securities are listed. The Board of Directors believes that if
authorization of any increase in the Common Stock were postponed until a
specific need arose, the delay and expense incident to obtaining the approval of
shareholders at that time might deprive the Company of the flexibility the Board
views as important in facilitating the effectiveness of the Company's shares,
eliminate the opportunity to effect corporate actions or reduce the anticipated
benefits and impair the Company's ability to meet its financing or other
objectives. The Company has no current plans to sell any of the additional
shares of Common Stock in a public or private offering of stock or to use the
shares to acquire a company or business.
9
<PAGE> 12
The additional shares of Common Stock for which authorization is sought
would become part of the existing class of Common Stock and, when issued, would
be identical to the shares of Common Stock now authorized and issued. The
authorization of additional shares of Common Stock would not have any effect on
the rights of existing security holders. No shareholder of the Company has, or
as a result of the proposed amendment would have, any pre-emptive right to
subscribe for, purchase or otherwise acquire any stock of the Company.
Accordingly, if the proposed amendment is approved, a substantial amount of
Common Stock would be available for issuance to any entity which might wish to
make an investment in the Company on terms deemed by the Board of Directors to
be in the best interests of the Company and its shareholders. There are no
current active discussions concerning such an investment. However, issuance of
additional shares of Common Stock, other than on a pro rata basis to all current
shareholders, would dilute the voting rights of present holders. It is possible
that issuance of such Common Stock could have a dilutive effect on the
shareholders' equity and earnings per share attributable to such present
holders.
While not the intent of the Board of Directors, approval of the
proposed amendment could have the effect of discouraging a takeover attempt in
that the Board of Directors could consider issuing the additional shares of
Common Stock to impede any unsolicited bid for control of the Company which the
Board of Directors believed was not in the best interests of the Company and its
shareholders. Availability as a defensive response to a takeover attempt was not
a motivating factor in the Board's approval of the proposed amendment. No
takeover bid has been proposed to or discussed with the Company and, to the
Company's best knowledge, no such bid is under consideration.
The affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of Common Stock is required for approval of this amendment.
Abstentions and broker non-votes will be disregarded and have no effect on the
outcome of the vote. The members of the Board of Directors, the Company's
executive officers, Capital Southwest and CSVC, who have voting control over an
aggregate of 11,785,624 shares of Common Stock (61.93% of the Company's
outstanding stock on the Record Date) have advised the Company that they intend
to vote their shares in favor of Proposal Two.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES TO 50,000,000.
PROPOSAL THREE: RATIFICATION OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
of the Company has appointed the firm of Ernst & Young LLP as the Company's
independent auditors for the year ending March 26, 1999. The affirmative vote of
the majority of the Common Stock present or represented and entitled to vote at
the Annual Meeting is required to ratify the appointment of Ernst & Young LLP.
Abstentions and broker non-votes will be disregarded and have no effect on the
outcome of the vote.
Ernst & Young LLP served as the Company's independent auditors for
Fiscal 1998. A representative of Ernst & Young LLP is expected to be present at
the Annual Meeting. The representative will be afforded the opportunity to make
a statement and to respond to appropriate questions of shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY'S AUDITORS FOR THE YEAR ENDING
MARCH 26, 1999.
PROPOSALS OF SHAREHOLDERS
A proper proposal submitted by a shareholder for presentation at the
Company's 1999 Annual Meeting and received at the Company's executive offices
located at 15303 Dallas Parkway, Suite 800, Dallas, Texas 75248, no later than
February 5, 1999, will be included in the Company's Proxy Statement and form of
proxy relating to the 1999 Annual Meeting.
10
<PAGE> 13
EXPENSES
The entire cost of soliciting proxies will be borne by the Company.
Solicitation may be made by mail, telephone, facsimile and personal contact by
officers and other employees of the Company, who will not receive additional
compensation for such services. The Company will request brokerage houses,
nominees, custodians, fiduciaries and other like parties to forward soliciting
material to the beneficial owners of the Company's Common Stock held of record
by them and will reimburse such persons for their reasonable charges and
expenses in connection therewith.
GENERAL
The Company's Annual Report for Fiscal 1998 is being mailed to
shareholders together with this Proxy Statement. The Annual Report is not to be
considered part of the soliciting materials.
The information set forth in this Proxy Statement under the captions
"Report of the Compensation Committee on Executive Officer Compensation" and
"Performance Graph" shall not be deemed to be (i) incorporated by reference into
any filing by the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that in any such filing the Company
expressly so incorporates such information by reference, and (ii) "soliciting
material" or to be "filed" with the SEC.
11
<PAGE> 14
PALM HARBOR HOMES, INC.
The undersigned shareholder of Palm Harbor Homes, Inc. does
hereby nominate, constitute and appoint Kelly Tacke and Colleen Rogers, or
either one of them, as Proxies, each with full power to appoint her substitute,
to represent and vote all of the shares of Common Stock of Palm Harbor Homes,
Inc. held of record by the undersigned at the Annual Meeting of shareholders to
be held at 9:30 a.m. Dallas time on June 30, 1998 at The Hotel
Inter-Continental, 15201 Dallas Parkway, Dallas, Texas, 75248, and at any
adjournments thereof, as follows:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote for all
(except as marked below to the contrary) nominees listed below
[ ] [ ]
Lee Posey, Larry H. Keener, William R. Thomas, Walter D. Rosenberg, Jr.,
Frederick R. Meyer, John H. Wilson, A. Gary Shilling, Scott W. Chaney,
Thomas G. Cannon (To withhold authority to vote for any individual
nominee, strike a line through that nominee's name above.)
FOR AGAINST ABSTAIN
2. AMENDMENT OF THE COMPANY'S AMENDED AND RESTATED ARTICLES OF [ ] [ ] [ ]
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK TO 50,000,000.
FOR AGAINST ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT [ ] [ ] [ ]
AUDITORS FOR THE FISCAL YEAR ENDING MARCH 26, 1999.
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments
thereof.
</TABLE>
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE ABOVE. IF A CHOICE IS NOT INDICATED WITH
RESPECT TO ITEMS (1), (2) AND (3) ABOVE, THIS PROXY WILL BE VOTED "FOR" SUCH
PROPOSALS. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
Dated: , 1998
-----------------------------
---------------------------------------------
---------------------------------------------
(Signature of Shareholder(s))
(Joint owners must each sign. Please sign
exactly as your name(s) appear(s) on this
card. When signing as attorney, trustee,
executor, administrator, guardian or
corporate officer, please give your full
title.)
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
