<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 (THE "EXCHANGE ACT")
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PALM HARBOR HOMES, INC.
(Name of Registrant as Specified in Its Charter)
Not Applicable
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
PALM HARBOR HOMES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1999
TO OUR SHAREHOLDERS:
You are invited to attend the annual meeting of shareholders of Palm
Harbor Homes, Inc. which will be held at the Colonnade Conference Center, 15303
Dallas Parkway, Addison, Texas, on Wednesday, June 30, 1999, at 10:00 a.m.,
Dallas time. The purpose of the meeting is to vote on the following proposals:
PROPOSAL 1: To elect eight directors to serve for a one year
term, and until their successors are duly elected and
qualified.
PROPOSAL 2: To ratify the selection of Ernst & Young LLP as
independent auditors for the fiscal year ending March
31, 2000.
PROPOSAL 3: To transact any other business that may properly be
brought before the annual meeting or any adjournments
thereof.
The Board of Directors has fixed the close of business on May 15, 1999
as the record date for determining shareholders entitled to receive notice of
and to vote at the annual meeting. A form of proxy card and a copy of our Annual
Report to Shareholders for the fiscal year ended March 26, 1999 are enclosed
with this notice of annual meeting and proxy statement.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING. IF YOU PLAN TO ATTEND THE ANNUAL MEETING TO VOTE IN PERSON AND
YOUR SHARES ARE REGISTERED WITH OUR TRANSFER AGENT, AMERICAN STOCK TRANSFER &
TRUST COMPANY, IN THE NAME OF A BROKER OR BANK, YOU MUST SECURE A PROXY FROM THE
BROKER OR BANK ASSIGNING VOTING RIGHTS TO YOU FOR YOUR SHARES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ KELLY TACKE
-----------------------------------------
Kelly Tacke,
Chief Financial Officer, Vice President -
Finance and Secretary
June 2, 1999
Dallas, Texas
<PAGE> 3
PROXY STATEMENT
----------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1999
----------
PALM HARBOR HOMES, INC.
15303 DALLAS PARKWAY, SUITE 800
ADDISON, TEXAS 75001
The Board of Directors is soliciting proxies to be used at the 1999
annual meeting of shareholders to be held at the Colonnade Conference Center,
15303 Dallas Parkway, Addison, Texas, on Wednesday, June 30, 1999, at 10:00
a.m., Dallas time. This proxy statement, accompanying proxy and annual report to
shareholders for the fiscal year ended March 26, 1999 are first being mailed to
shareholders on or about June 3, 1999. Although the annual report is being
mailed to shareholders with this proxy statement, it does not constitute part of
this proxy statement.
WHO CAN VOTE
Only shareholders of record as of the close of business on May 15, 1999
are entitled to notice of and to vote at the annual meeting. As of May 15, 1999,
we had 23,763,174 outstanding shares of common stock, our only outstanding
voting security. Each shareholder of record of our common stock on the record
date is entitled to one vote on each matter properly brought before the annual
meeting for each share of common stock held. IF YOU HOLD SHARES OF OUR COMMON
STOCK THROUGH ANY OF OUR STOCK PURCHASE OR SAVINGS PLANS, YOU WILL RECEIVE
VOTING INSTRUCTIONS FROM THE PLANS' ADMINISTRATOR. PLEASE SIGN AND RETURN THOSE
INSTRUCTIONS PROMPTLY TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING.
In accordance with our Bylaws, a list of shareholders entitled to vote
at the annual meeting will be available at the annual meeting and for 10 days
prior to the annual meeting, between the hours of 9:00 a.m. and 4:00 p.m. local
time at our offices located at 15303 Dallas Parkway, Suite 800, Addison, Texas.
HOW YOU CAN VOTE
Shareholders cannot vote at the annual meeting unless they are present
in person or represented by proxy. You are urged to complete, sign, date and
promptly return the proxy in the enclosed postage-paid envelope after reviewing
the information contained in this proxy statement and in the annual report.
Valid proxies will be voted at the annual meeting and at any adjournments of the
annual meeting as you direct in the proxy.
You may revoke your proxy at any time before it is exercised by:
o delivering a written notice of revocation to our Secretary, Kelly
Tacke, at Palm Harbor Homes, Inc., 15303 Dallas Parkway, Suite 800,
Addison, Texas 75001;
o timely delivering a properly executed, later-dated proxy; or
o voting in person at the annual meeting.
<PAGE> 4
Voting by proxy will in no way limit your right to vote at the annual
meeting if you later decide to attend in person. If your shares are held in the
name of a bank, broker or other holder of record, you must obtain a proxy,
executed in your favor, to be able to vote at the annual meeting. If no
direction is given and the proxy is validly executed, the shares represented by
the proxy will be voted in favor of proposals one and two. The persons
authorized under the proxies will vote upon any other business that may properly
come before the annual meeting according to their best judgment to the same
extent as the person delivering the proxy would be entitled to vote. As of the
date of mailing of this proxy statement, we did not anticipate that any other
matters would be raised at the annual meeting.
REQUIRED VOTE
The presence, in person or represented by proxy, of the holders of a
majority of our outstanding common stock (11,881,588 shares) entitled to vote at
the annual meeting is necessary to constitute a quorum at the annual meeting.
However, if a quorum is not present at the annual meeting, the shareholders,
present in person or represented by proxy, have the power to adjourn the annual
meeting until a quorum is present or represented. Abstentions and broker
"non-votes" are counted as present and entitled to vote for purposes of
determining a quorum at the annual meeting. A broker "non-vote" occurs when a
nominee holding common shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner.
A plurality of the votes duly cast is required for the election of
directors (i.e., the nominees receiving the greatest number of votes will be
elected). Abstentions and broker non-votes are not counted for purposes of the
election of directors. All of the nominees for director served as our directors
during the fiscal year ended March 26, 1999.
COST OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by us. Proxies may be
solicited on our behalf by our directors, officers or employees in person, by
telephone, facsimile or by other electronic means. They will not be separately
compensated for their services.
In accordance with SEC regulations and the regulations of the Nasdaq
National Stock Market, we will also reimburse brokerage firms and other
custodians, nominees and fiduciaries for their expenses incurred in sending
proxies and proxy materials to the beneficial owners of shares of our common
stock and soliciting proxies from them.
GOVERNANCE OF THE COMPANY
Pursuant to the Florida Business Corporation Act, our Articles of
Incorporation and our Bylaws, our business, property and affairs are managed
under the direction of the Board of Directors. Members of the Board of Directors
are kept informed of our business through discussions with the Chairman of the
Board and officers, by reviewing materials provided to them and by participating
in meetings of the Board of Directors and its committees. During the fiscal year
ended March 26, 1999, the Board of Directors held three meetings and the
committees held three meetings. Each director attended 100% of all meetings of
the Board of Directors and 100% of the meetings of the committees on which such
director served.
2
<PAGE> 5
COMMITTEES OF THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
AUDIT COMPENSATION
NAME BOARD COMMITTEE COMMITTEE
- ------------------------ ----- --------- ------------
<S> <C> <C> <C>
Lee Posey x*
Larry H. Keener x
Walter D. Rosenberg, Jr. x
William R. Thomas x x x
Frederick R. Meyer x x
John H. Wilson x x
A. Gary Shilling x
Scott W. Chaney x
</TABLE>
- ----------
* Chairman
During the fiscal year ended March 26, 1999, the Board of Directors had
two ongoing committees: an audit committee and a compensation committee.
The audit committee consists of two independent directors. The
functions of the audit committee include recommending to the Board of Directors
the appointment of independent auditors, reviewing with the independent auditors
both the plans for and the results of internal audits, approving the services
provided by the independent auditors, reviewing the range of audit and nonaudit
fees and considering the adequacy of our internal accounting controls. The audit
committee met once during the fiscal year ended March 26, 1999.
The compensation committee consists of two independent directors. The
functions of the compensation committee include establishing the compensation of
executive officers and administering management incentive compensation plans.
The compensation committee met twice during the fiscal year ended March 26,
1999.
COMPENSATION OF DIRECTORS
During the fiscal year ended March 26, 1999, our non-employee directors
received compensation as follows:
<TABLE>
<S> <C>
Annual retainer fee ...................................................$6,000
Fee for each Board meeting attended (other than telephonic)............$1,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers served as a member of the compensation
committee of our Board of Directors. None of our executive officers served as a
director of any other entity whose executive officer served as a member of our
compensation committee.
3
<PAGE> 6
SHARE OWNERSHIP OF MAJOR SHAREHOLDERS,
DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our shares of common stock as of May 15, 1999 by (1)
each person known by us to own beneficially more than 5% of our outstanding
common stock, (2) each current director, (3) each named executive officer, and
(4) all current directors and named executive officers as a group. Unless
otherwise indicated, the shares listed in the table are owned directly by the
individual or entity, or by both the individual and the individual's spouse.
Except as otherwise noted, the individual or entity had sole voting and
investment power as to shares shown or, in the case of the individual, the
voting power is shared with the individual's spouse.
Certain of the shares listed below are deemed to be owned beneficially
by more than one shareholder under SEC rules.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
----------------------------------------- ------------------------ ----------------
<S> <C> <C>
Lee Posey
15303 Dallas Parkway
Suite 800
Addison, Texas 75001 4,583,529 19.29%
Capital Southwest Corporation and Capital
Southwest Venture Corporation (2)
12900 Preston Road
Suite 700
Dallas, Texas 75230 7,855,121 33.05%
Larry H. Keener (3) 441,863 1.86%
Kelly Tacke(4) 51,760 *
W. D. Rosenberg, Jr. 213,624 *
William R. Thomas (2) (5) 283,811 1.19%
Frederick R. Meyer (6) 109,023 *
John H. Wilson (2) 1,250 *
A. Gary Shilling (7) 52,960 *
Scott W. Chaney 852,367 3.59%
All directors and executive officers as a
group (10 persons) (2)(3)(4)(5)(6)(7) 6,588,427 27.73%
</TABLE>
- ----------
* Beneficial ownership of less than 1% of the class is omitted.
(1) The information contained in this table with respect to common stock
ownership reflects "beneficial ownership" as defined in Rule 13d-3
under the Securities Exchange Act of 1934.
(2) Mr. Thomas is President and Chairman of the Board of Capital Southwest
Corporation and Capital Southwest Venture Corporation, both of which
are our principal shareholders. Mr. Wilson is a member of the Board of
Directors of Capital Southwest Corporation and Capital Southwest
Venture Corporation. Mr. Thomas and Mr. Wilson may be deemed to share
voting and investment power with respect to the shares of
4
<PAGE> 7
common stock beneficially owned by Capital Southwest Corporation and
Capital Southwest Venture Corporation. Mr. Thomas and Mr. Wilson each
have disclaimed beneficial ownership of such shares.
(3) Includes an aggregate of 120,822 shares owned by Mr. Keener's spouse
and three daughters, over which shares he exercises voting and
investment power.
(4) Includes 1,760 restricted shares received under our Fiscal Year 2000
Long Term Incentive Plan. The shares are restricted until March 27,
2002, but may be currently voted by Ms. Tacke.
(5) Mr. Thomas has sole voting and investment power with respect to 113,282
shares personally held by Mr. Thomas. Mr. Thomas also has sole voting
and investment power with respect to 80,675 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
Corporation and its wholly-owned subsidiaries owning 89,855 shares,
with the power as one of three trustees to participate in the voting of
such shares. Under the rules and regulations of the SEC, Mr. Thomas is
deemed to be the beneficial owner of such 89,855 shares which are
included in the shares owned by Mr. Thomas.
(6) Includes 48,829 shares owned by a family partnership over which Mr.
Meyer exercises voting and investment power.
(7) Dr. Shilling is one of five members of an investment committee to
participate in the voting and investment decisions relating to 33,157
shares owned by clients of A. Gary Shilling & Co., Inc. Under the rules
and regulations of the SEC, Dr. Shilling is deemed to be the beneficial
owner of 26,922 shares which are included in the shares owned by Dr.
Shilling.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own more than 10% of our
common stock, to file reports of holdings and transactions in our securities
with the SEC and to furnish us with copies of all such reports. Based solely
upon a review of the reports furnished to us with respect to the fiscal year
ended March 26, 1999, we believe that all SEC filing requirements applicable to
our directors and executive officers were satisfied.
PROPOSAL ONE
ELECTION OF DIRECTORS
At the annual meeting, eight directors will be elected by the
shareholders to serve until their successors have been duly elected and
qualified, or until the earliest of their death, resignation or retirement.
The persons named in the enclosed proxy will vote your shares as you
specify on the enclosed proxy form. If you return your properly executed proxy
but fail to specify how you want your shares voted, the shares will be voted in
favor of the nominees listed below. The Board of Directors has proposed the
following nominees for election as directors at the annual meeting. Each of the
nominees is currently a member of the Board of Directors.
NOMINEES
LEE POSEY, Chairman of the Board of Directors since December 1977.
Chief Executive Officer from December 1977 to June 1997. President from December
1977 to December 1993. President of Redman Industries, Inc. from 1967 to 1977.
Director of Monaco Coach Corporation. Age: 64.
LARRY H. KEENER, Director since 1995. Chief Executive Officer since
June 1997 and President since June 1994. Chief Operating Officer from June 1994
to June 1997. Division President from June 1989 to May 1994.
Director from 1980 to May 1994. Age: 49.
WILLIAM R. THOMAS, Director since 1982 pursuant to an agreement among
us, Capital Southwest Corporation and Capital Southwest Venture Corporation.
Chairman of the Board since 1982 and President since 1980 of Capital Southwest
Corporation. President of Capital Southwest Venture
5
<PAGE> 8
Corporation since 1980. Director of Alamo Group, Inc., Encore Wire Corporation
and Mail-Well, Inc. Age: 70.
WALTER D. ROSENBERG, JR., Director since 1977. Managed his personal
portfolio since June 1991. Chairman of the Board and Chief Executive Officer of
Duro Metal Manufacturing Company, Inc. from December 1957 to June 1991. Age: 72.
FREDERICK R. MEYER, Director since 1994. Chairman of the Board of
Aladdin Industries LLC since July 1985. President and Chief Executive Officer of
Aladdin Industries LLC from October 1995 to May 1999 and from May 1987 to
September 1994. President of Tyler Corporation from July 1983 to December 1986.
Director of Tylor Corporation, Arvin Industries, Inc. and Southwest Securities
Group, Inc. Age: 71.
JOHN H. WILSON, Director since 1994. President of U.S. Equity
Corporation since 1983. Director of Capital Southwest Corporation and Encore
Wire Corporation. Age: 56.
GARY SHILLING, Director since 1995. President of A. Gary Shilling &
Co., Inc. since 1978. Senior Vice President and Chief Economist of White, Weld &
Co., Inc. from 1972 to 1978. Director of National Life of Vermont and The
Heartland Group. Age: 61.
SCOTT A. CHANEY, Director since 1996. Executive Vice President since
March 28, 1997. President of our retail operations since July 1, 1996. President
of Newco Homes, Inc. from March 1986 to June 1996. Age: 41.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF DIRECTORS AS SET FORTH IN PROPOSAL ONE.
EXECUTIVE OFFICERS
Our executive officers 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 our executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Lee Posey 64 Chairman of the Board and Director
Larry H. Keener 49 President, Chief Executive Officer and Director
Scott Chaney 41 Executive Vice President and Director
Kelly Tacke 41 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 of our directors or executive officers.
KELLY TACKE has served as Vice President-Finance and Chief Financial
Officer since October 1993, and as Secretary since March 1997. From August 1979
through September 1993, Ms. Tacke was employed by PriceWaterhouseCoopers LLP
where she most recently served as a Senior Audit Manager.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation paid by us for the
fiscal years ended March 26, 1999, March 27, 1998 and March 28, 1997 to the
Chief Executive Officer and the other four most highly compensated executive
officers who received a total annual salary and bonus in excess of $100,000 in
fiscal year ended March 26, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1)
Name and Fiscal --------------------------- All Other
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Lee Posey 1999 $250,000 $ 663,989 $ 9,652 (2)
Chairman of the 1998 225,000 1,015,821 12,035 (2)
Board 1997 150,000 463,465 5,689 (2)
Larry H . Keener 1999 200,000 1,059,926 11,000 (3)
President and Chief Executive 1998 200,000 958,907 11,000 (3)
Officer 1997 200,000 623,591 14,249 (3)
Scott Chaney 1999 175,000 956,697 5,000 (5)
Executive Vice President 1998 175,000 856,167 6,333 (5)
1997 120,833(4) 537,573 3,167 (5)
Kelly Tacke 1999 100,000 298,125 4,886 (5)
Chief Financial Officer, 1998 100,000 260,274 5,499 (5)
Vice President-Finance 1997 100,000 180,473 5,015 (5)
And Secretary
</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 us 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 $4,654, $8,625 and $2,590 contributed in fiscal year 1999, 1998 and
1997, respectively, by us pursuant to the employee savings plan and $5,000,
$3,410 and $3,099 paid in fiscal year 1999, 1998 and 1997, respectively, by
us as a car allowance.
(3) Includes $5,000, $5,000 and $8,249 contributed in fiscal year 1999, 1998 and
1997, respectively, by us pursuant to the employee savings plan and $6,000
paid in fiscal year 1999, 1998 and 1997 by us as a car allowance.
(4) Mr. Chaney became Executive Vice President effective July 1, 1996. In that
position, his annualized salary was $175,000.
(5) Represents contributions by us pursuant to the employee savings plan.
COMPENSATION ARRANGEMENTS
Effective March 27, 1999, we entered into a compensation agreement with
Lee Posey, our Chairman of the Board. The agreement is for a term of eight
years. Mr. Posey will provide 100 days of service per year for three years and
receive $400,000 per year for his services. He will provide 75 days of service
per year for five years and receive $300,000 per year for his services. If the
agreement terminates for any reason, Mr. Posey or his estate, as applicable, is
entitled to receive a payment equal to the lesser of (1) $1,000,000 or (2)
$16,667 multiplied by the remainder of 96 minus the number of months Mr. Posey
7
<PAGE> 10
provided services as an employee under the agreement. This agreement replaced an
agreement between us and Mr. Posey entered into on April 1, 1995.
Our corporate bonus 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 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 21.0% of the bonus pool
under the plan, but elected to receive approximately 8.8% for the fiscal year
ended March 26, 1999. Mr. Keener received 14.0%, Mr. Chaney received 12.5% and
Ms. Tacke received 4.0% of the bonus pool. There are no dollar limits on bonus
amounts awarded.
Sections 162(m) of the Internal Revenue Code of 1986, as amended,
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. Our corporate bonus plan is a performance-based plan.
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with certain of our
officers and each of our directors, requiring us 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee on Executive
Compensation and the performance graph shall not be deemed incorporated by
reference by any general statement incorporating this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent we specifically
incorporate this information by reference, and shall not otherwise be deemed
filed under either Act.
Decisions on compensation of our 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 Palm Harbor or
any of its subsidiaries. The compensation committee, in consultation with the
Chairman of the Board, is responsible for establishing the policies that govern
compensation of executive officers and key employees at the corporate level.
The goals of our compensation program are to attract, retain and
motivate competent executive officers and key employees who have the experience
and ability to contribute materially to our long-term success. Our compensation
philosophy for our 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 our earnings performance in
relation to pre-established base levels, may be relatively
8
<PAGE> 11
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 our shareholders.
Base salaries are determined by our compensation committee for each of
the executive officers on an individual basis, taking into consideration the
level of responsibility, individual contributions to our performance, length of
tenure with us, compensation levels of comparable positions and internal
equities among positions. In most instances, base salaries are set at
subjectively-determined levels substantially below base salaries paid to
executives in similar positions in companies of comparable size in the same
industry or similar industries. For the fiscal year ended March 26, 1999, Lee
Posey, our Chairman of the Board, received a salary of $250,000. Effective March
27, 1999, Mr. Posey's base salary became $400,000 per year pursuant to a
compensation agreement which among other things established Mr. Posey's annual
salary at $400,000 for 100 days of service in each of the next three years and
did not provide for Mr. Posey's participation in the corporate bonus plan. The
base salary of our President and Chief Executive Officer, Larry H. Keener, was
$200,000 for the fiscal year ended March 26, 1999, and is $200,000 for the
fiscal year ending March 31, 2000.
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 annual earnings exceed a base level equivalent to a 20% pre-tax return on
our 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 the fiscal year ended March 26, 1999, Mr. Posey was
entitled to receive as much as 21.0% of the bonus pool, but elected to receive a
lesser amount equivalent to approximately 8.8% of the bonus pool.
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 our 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 the fiscal year ended March 26, 1999, our net income and
earnings per share increased by 26.1% and 25.2%, respectively, over the previous
year. During the same period, the combined base salary and bonus of the Chairman
of the Board, Lee Posey, decreased by 26.3% and the combined base salary and
bonus of the President and Chief Executive Officer, Larry H. Keener, increased
by 8.7%. The base salaries paid to Mr. Posey and Mr. Keener represented 27.4%
and 15.9%, respectively, of each officer's combined base salary and bonus.
The foregoing report is given by the following members of the
compensation committee:
WILLIAM R. THOMAS
FREDERICK R. MEYER
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for
us, the Standard & Poor's MidCap 400 Composite Stock Index and our peer group,
assuming the investment of $100 on July 31, 1995 (the date our common stock
began trading) and the reinvestment of dividends. The companies in our Peer
Group are as follows: Cavalier Homes, Inc., Champion Enterprises, Inc., Clayton
Homes, Inc., Fleetwood Enterprises, Inc., Liberty Homes, Inc., Oakwood Homes
Corporation and Skyline Corporation.
[GRAPH]
<TABLE>
<CAPTION>
7/95 3/96 3/97 3/98 3/99
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Palm Harbor Homes, Inc. $100 $215 $229 $488 $354
S&P MidCap 400 $100 $112 $124 $185 $186
Peer Group $100 $139 $118 $204 $128
</TABLE>
The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporation by reference of
this proxy statement into any filing under the Securities Act or Securities
Exchange Act, except to the extent that we specifically incorporate this graph
by reference, and shall not otherwise be deemed filed under the Acts.
There can be no assurance that our share performance will continue into
the future with the same or similar trends depicted in the graph above. We will
not make or endorse any predictions as to future share performance.
10
<PAGE> 13
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
Based upon the recommendation of the audit committee, the shareholders
are urged to ratify the appointment by the Board of Directors of Ernst & Young
LLP as independent auditors for the fiscal year ending March 31, 2000. Ernst &
Young has served as our independent auditors since our inception and is familiar
with our affairs and financial procedures.
A representative of Ernst & Young is expected to be present at the
annual meeting and will have an opportunity to make a statement, if he desires
to do so, and to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the annual meeting
in the year 2000, and who wishes to have the proposal included in our proxy
statement for that meeting, must deliver the proposal to our corporate
secretary, Kelly Tacke, at 15303 Dallas Parkway, Suite 800, Addison, Texas 75001
by February 4, 2000. All proposals must meet the requirements set forth in the
rules and regulations of the SEC in order to be eligible for inclusion in the
proxy statement for that meeting.
ANNUAL REPORT
We have provided without charge a copy of the annual report to
shareholders for fiscal year ended March 26, 1999 to each person being solicited
by this proxy statement. UPON THE WRITTEN REQUEST BY ANY PERSON BEING SOLICITED
BY THIS PROXY STATEMENT, WE WILL PROVIDE WITHOUT CHARGE A COPY OF THE ANNUAL
REPORT ON FORM 10-K AS FILED WITH THE SEC (EXCLUDING EXHIBITS, FOR WHICH A
REASONABLE CHARGE SHALL BE IMPOSED). All requests should be directed to: Kelly
Tacke, Chief Financial Officer, Vice-President Finance and Secretary, at Palm
Harbor Homes, Inc., 15303 Dallas Parkway, Suite 800, Addison, Texas 75001.
11
<PAGE> 14
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
PALM HARBOR HOMES, INC.
June 30, 1999
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
FOR all nominees WITHHOLD
listed at the right AUTHORITY
(except as marked below to vote for all nominees
to the contrary) listed at right Nominees:
<S> <C> <C> <C>
Lee Posey
1. ELECTION [ ] [ ] Larry H. Keener
OF William R. Thomas
DIRECTORS Walter D. Rosenberg, Jr.
Frederick R. Meyer
(INSTRUCTIONS: To withhold authority to vote for any John H. Wilson
individual nominee, strike a line through that A. Gary Shilling
nominee's name at right) Scott W. Chaney
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS THE INDEPENDENT [ ] [ ] [ ]
AUDITORS FOR THE FISCAL YEAR ENDING
MARCH 31, 2000.
</TABLE>
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments thereof.
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) AND (2) ABOVE, THIS PROXY WILL BE VOTED "FOR" SUCH
PROPOSALS. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
(Signature of Shareholder(s)) Dated: , 1999
------------------------------- ------
Note: (Joint owners must each sign. Please sign exactly as your name(s)
[ILLEGIBLE] trustee, executor, administrator, guardian or corporate
officer, please give your full title.)
<PAGE> 15
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 10:00 a.m. Dallas time on June 30, 1999 at The Colonnade Conference
Center, 15303 Dallas Parkway, Addison, Texas, 75001, and at any adjournments
thereof, as follows:
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON REVERSE SIDE)
SEE REVERSE
SIDE
