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:

--------------------------------------------------------------

(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:

-----------------------------------------------------------------------

PALM HARBOR HOMES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 2001

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 27, 2001, 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
29, 2002.

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 14, 2001
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 30, 2001 are enclosed
with this notice of annual meeting and proxy statement. You may also vote by
phone or via the Internet by following the steps detailed on the proxy card.

YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY, OR VOTE BY PHONE OR VIA THE INTERNET,
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

May 23, 2001
Addison, Texas

PROXY STATEMENT

----------

ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 2001

----------

PALM HARBOR HOMES, INC.
15303 DALLAS PARKWAY, SUITE 800
ADDISON, TEXAS 75001

The board of directors is soliciting proxies to be used at the 2001
annual meeting of shareholders to be held at the Colonnade Conference Center,
15303 Dallas Parkway, Addison, Texas, on Wednesday, June 27, 2001, at 10:00
a.m., Dallas time. This proxy statement, accompanying proxy and annual report to
shareholders for the fiscal year ended March 30, 2001 are first being mailed to
shareholders on or about May 23, 2001. 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 14, 2001
are entitled to notice of and to vote at the annual meeting. As of May 14, 2001,
we had 22,842,911 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. After you have reviewed the information
contained in this proxy statement, please take a moment to read the instructions
and choose the way to vote that you find most convenient and cast your vote as
soon as possible. You may vote by completing and returning the enclosed proxy.
Your proxy will be voted in accordance with your instructions. Alternatively, if
you are a shareholder of record (that is, if your stock is registered with the
company in your own name), you may vote by telephone or electronically through
the Internet by following the instructions set forth on your proxy. The deadline
for voting by telephone or electronically through the Internet as a shareholder
of record is 3:00 p.m., Dallas time, on June 26, 2001. 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 or otherwise change your vote 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;

o submitting a later-dated vote by telephone or via the
Internet; or

o voting in person at the annual meeting.

Voting by proxy or via the Internet 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 you submit a proxy and 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. 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 (11,421,456 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 30, 2001.

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
Stock Market's National 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.

2
5

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. During the fiscal year ended
March 30, 2001, the board of directors held three meetings. Each director
attended 100% of all meetings of the board of directors and each of the meetings
of the committees on which such director served.

COMMITTEES OF THE BOARD OF DIRECTORS

COMPENSATION
NAME BOARD AUDIT COMMITTEE COMMITTEE
- ------------------------------------- ----------- ----------------- --------------------

Lee Posey x*
Larry H. Keener x
Walter D. Rosenberg, Jr. x
William R. Thomas x x
Frederick R. Meyer x x x
John H. Wilson x x
A. Gary Shilling x
Scott W. Chaney x
Jerry D. Mallonee x x

- ---------------
* Chairman

During the fiscal year ended March 30, 2001, the board of directors had
two ongoing committees: an audit committee and a compensation committee. The
board of directors does not have a nominating committee.

The audit committee consists of three non-employee 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 non-audit
fees and considering the adequacy of our internal accounting controls. The audit
committee met three times during the fiscal year ended March 30, 2001.

The compensation committee consists of two non-employee directors. The
functions of the compensation committee include establishing the compensation of
executive officers and administering management incentive compensation plans.
The compensation committee met once during the fiscal year ended March 30, 2001.

COMPENSATION OF DIRECTORS

During the fiscal year ended March 30, 2001, our non-employee directors
received compensation as follows:

Annual retainer fee................................................................................. $8,000
Fee for each board meeting attended (other than telephonic)......................................... $2,000
Fee for each committee meeting (other than those on the same day as board meeting).................. $ 500

3
6

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.

REPORT OF THE COMPENSATION COMMITTEE

The following Report of the Compensation Committee on Executive
Compensation 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 high or relatively
low in comparison with bonus payments by companies of comparable size and type.

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 below base salaries paid to executives in similar
positions in companies of comparable size in the same industry or similar
industries. Effective March 27, 1999, the annual base salary of Lee Posey, our
Chairman of the Board, was set at $400,000 pursuant to a compensation agreement
which among other things established Mr. Posey's salary based on a minimum of
100 days of service in each of the first three years of the agreement and
precluded Mr. Posey's participation in the corporate bonus plan. For the fiscal
year ended March 30, 2001, Mr. Posey received a salary of $400,000. The base
salary of our President and Chief Executive Officer, Larry H. Keener, was
$200,000 for the fiscal year ended March 30, 2001, and is currently at an annual
rate of $200,000 for the fiscal year ending March 29, 2002.

Bonuses applicable to the first two quarters of the fiscal year ended
March 30, 2001 were determined 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.
During the remainder of the year, no bonuses were earned pursuant to the bonus
plan. However, bonuses applicable to the third and fourth quarters of the fiscal
year were determined on a discretionary basis authorized by the compensation
committee.

4
7

We do not have a stock option plan for our key employees and executive
officers and have not had a stock option plan since our company was founded.

COMPENSATION COMMITTEE

William R. Thomas, Chairman
Frederick R. Meyer

REPORT OF THE AUDIT COMMITTEE

The following audit committee report shall not be deemed incorporated
by reference by any general statement incorporating this proxy statement into
any filing under the Securities Act or under the Securities Exchange Act, except
to the extent we specifically incorporate this information by reference, and
shall not otherwise be deemed filed under either Act.

Pursuant to the audit committee charter adopted by the board of
directors, the audit committee assists the board of directors in monitoring (1)
the integrity of the financial statements of Palm Harbor, (2) the compliance by
Palm Harbor with legal and regulatory requirements, and (3) the independence and
performance of Palm Harbor's external auditors. Management has the primary
responsibility for the financial statements and the reporting process including
the systems of internal controls. The audit committee reviewed the audited
annual financial statements with management including a discussion of the
quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the
financial statements.

The audit committee reviewed the audited annual financial statements
with Ernst & Young LLP, Palm Harbor's independent auditors, who are responsible
for expressing an opinion on the conformity of Palm Harbor's audited financial
statements with generally accepted accounting principles, their judgment as to
the quality, not just the acceptability, of Palm Harbor's accounting principles
and such other matters as are required to be discussed with the audit committee
under generally accepted auditing standards, including the Statement on Auditing
Standards No. 61, as amended, "Communication with Audit Committees." In
discharging its oversight responsibility as to the audit process, the audit
committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and Palm Harbor that might
bear on Ernst & Young LLP's independence consistent with Independent Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence.

The committee reviewed with Ernst & Young LLP the overall scope and
plans for their audit. The committee met with the independent auditors, with and
without management present, to discuss the results of their examination, their
evaluations of Palm Harbor's internal controls, and the overall quality of Palm
Harbor's financial reporting. The committee held three meetings relating to the
fiscal 2001 audit and financial statements.

In reliance on the reviews and discussions referred to above, the audit
committee recommended to the board of directors (and the board of directors has
approved) that the audited financial statements be included in the Annual Report
on Form 10-K for the year ended March 30, 2001 for filing with the SEC. The
audit committee and the board of directors have also recommended, subject to
shareholder ratification, the selection of Ernst & Young LLP as independent
auditors for the fiscal year ending March 29, 2002.

5
8

The full responsibilities of the audit committee are set forth in the
audit committee's charter, which is reviewed and updated annually, adopted by
the board of directors and is included as Appendix A to this proxy statement.

AUDIT COMMITTEE

Jerry D. Mallonee, Chairman
Frederick R. Meyer
John H. Wilson

6
9

SHARE OWNERSHIP OF PRINCIPAL SHAREHOLDERS,
DIRECTORS AND MANAGEMENT

The following table sets forth certain information regarding the
beneficial ownership of our shares of common stock as of May 14, 2001 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.

AMOUNT AND NATURE OF BENEFICIAL
NAME OWNERSHIP (1) PERCENT OF CLASS
- ------------------------------------------------------ --------------------------------- ----------------------

Lee Posey
15303 Dallas Parkway
Suite 800
Addison, Texas 75001 4,457,517 19.51%

Capital Southwest Corporation and
Capital Southwest Venture Corporation (2)
12900 Preston Road
Suite 700
Dallas, Texas 75230 7,855,121 34.39%

Larry H. Keener (3) 441,863 1.93%

Kelly Tacke (4) 55,522 *

W.D. Rosenberg, Jr. 213,624 *

William R. Thomas (2) (5) 268,953 *

Frederick R. Meyer (6) 109,023 *

John H. Wilson (2) 1,250 *

Jerry D. Mallonee 6,000 *

A. Gary Shilling (7) 51,832 *

Scott W. Chaney 844,733 3.70%

All directors and executive officers as a group (10
persons) (2)(3)(4)(5)(6)(7) 6,438,795 28.19%

- ----------------
* Beneficial ownership of less than 1% of the class is omitted.

7
10

(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 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 5,522 restricted shares received under the Fiscal Year 2002,
2001 and 2000 Long Term Incentive Plans, 1,760 shares of which are
restricted until March 29, 2002; 2,401 shares of which are restricted
until March 28, 2003 and 1,361 shares of which are restricted until
March 26, 2004. All 5,522 shares 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 25,794
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 25,794 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 30, 2001, 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. 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.

8
11

NOMINEES

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: 51.

JERRY D. MALLONEE. Retired from Arthur Andersen & Co. in December 1998
as the Tax Managing Partner of Pacific Northwest. Mr. Mallonee had been employed
by Arthur Andersen from February 1967 until his retirement. Mr. Mallonee
currently manages his personal investments. Age: 60.

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 Technologies, Inc. from July 1983 to December
1986. Director of Southwest Securities Group, Inc. Age: 73.

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.
Age: 66.

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: 74.

A. 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 Heartland Funds. Age: 64.

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 Corporation since 1980.
Director of Alamo Group, Inc., Encore Wire Corporation and Mail-Well, Inc. Age:
72.

JOHN H. WILSON, Director since 1994. President of U.S. Equity
Corporation since 1983. Director of Capital Southwest Corporation and Encore
Wire Corporation. Age: 58.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF DIRECTORS AS SET FORTH IN PROPOSAL ONE.

9
12

EXECUTIVE OFFICERS

Our executive officers serve at the discretion of the board of
directors and are appointed annually by the board of directors. Set forth below
are the names, ages and positions of our executive officers.

NAME AGE POSITION
---- --- --------

Lee Posey 66 Chairman of the Board and Director
Larry H. Keener 51 President, Chief Executive Officer and Director
Kelly Tacke 43 Chief Financial Officer, Vice President-Finance and Secretary

SCOTT CHANEY, age 43, currently serves as a director and as our
Executive Vice President. Mr. Chaney will resign effective June 20, 2001 as a
director and effective June 30, 2001 as our Executive Vice President. Mr. Chaney
became Executive Vice President in March 1997, and has served as President of
our retail operations since July 1996. Prior to that, he served as President of
Newco Homes, Inc. from March 1986 to June 1996.

Information concerning the business experience of Messrs. Posey and
Keener 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.

COMPENSATION OF EXECUTIVE OFFICERS

The following table summarizes the compensation paid by us for the
fiscal years ended March 30, 2001, March 31, 2000 and March 26, 1999 to the
Chief Executive Officer and the four most highly compensated executive officers
who received a total annual salary and bonus in excess of $100,000 in fiscal
year ended March 30, 2001.

10
13

SUMMARY COMPENSATION TABLE

Long Term
Annual Compensation (1) Compensation
---------------------------------- ----------------
Name and Fiscal Restricted Stock All Other
Principal Location Year Salary Bonus Awards Compensation
------------------ ------ ------ -------- ---------------- ------------

Lee Posey 2001 $400,000 $ 0 -- $ 6,774 (2)
Chairman of the Board 2000 400,000 0 -- 6,751 (2)
1999 250,000 663,989 -- 9,652 (2)

Larry H. Keener 2001 200,000 432,431 -- 11,250 (3)
President and Chief 2000 200,000 661,841 -- 11,250 (3)
Executive Officer 1999 200,000 1,059,926 -- 11,000 (3)

Scott Chaney 2001 175,000 691,099 -- 5,250 (4)
Executive Vice President 2000 175,000 590,931 -- 5,250 (4)
1999 175,000 956,697 -- 5,000 (4)

Kelly Tacke 2001 100,000 123,552 $20,671 5,250 (4)
Chief Financial 2000 100,000 201,736 36,915 4,540 (4)
Officer, Vice 1999 100,000 298,125 39,811 4,886 (4)
President-Finance and
Secretary

- -------------
(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 $5,250, $3,000 and $4,654 contributed in fiscal year 2001,
2000 and 1999, respectively, by us pursuant to the employee savings
plan and $1,524, $3,751 and $5,000 paid in fiscal year 2001, 2000 and
1999, respectively, by us as a car allowance.

(3) Includes $5,250, $5,250 and $5,000 contributed in fiscal year 2001,
2000 and 1999, respectively, by us pursuant to the employee savings
plan and $6,000 paid in fiscal year 2001, 2000 and 1999 by us as a car
allowance.

(4) 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
provided services as an employee under the agreement. This agreement replaced an
agreement between us and Mr. Posey entered into on April 1, 1995.

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

11
14

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.

LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR

Effective the 2000 fiscal year, we adopted a Long Term Incentive Plan.
We have also adopted such a plan for fiscal 2001 and 2002. Each plan has a term
of one year. All key employees and executive officers (excluding the chairman,
president and chief executive officer, and executive vice president) are
eligible for consideration for grants under the plan. Subject to their continued
employment, plan participants are entitled to receive shares of our common stock
in an amount equivalent to 10% of the cash compensation that each participant
received during the applicable fiscal year. The shares do not vest for three
years.

PERFORMANCE
NUMBER OF SHARES OR OTHER PERIOD UNTIL MATURATION
NAME OF COMMON STOCK OR PAYOUT
- ----------------------------------------- --------------------------------- -----------------------------------

Kelly Tacke 1,361 March 26, 2004(1)
Chief Financial Officer, Vice
President-Finance and Secretary

- -------------
(1) The shares of common stock issued under our Fiscal Year 2002 Long Term
Incentive Plan may not be transferred until they are fully vested. The
grants of shares vest on the third anniversary of the date of grant.
Recipients of stock grants under this plan have the right to currently
vote these shares.

12
15

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.

- --------------------------------------------------------------------------------
3/96 3/97 3/98 3/99 3/00 3/01
- --------------------------------------------------------------------------------

Palm Harbor Homes,
Inc. $ 100 $ 104 $ 224 $ 165 $ 117 $ 115
S&P MidCap 400 $ 100 $ 111 $ 165 $ 166 $ 229 $ 213
Custom Peer Group $ 100 $ 87 $ 151 $ 93 $ 54 $ 52

The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating 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 other 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.

13
16

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 29, 2002. Ernst &
Young has served as our independent auditors since our inception and is familiar
with our affairs and financial procedures.

Aggregate Ernst & Young fees for the fiscal year ended March 30, 2001
were:

Audit...................................................................................... $240,000
Financial Information Systems Designs and Implementation .................................. $ 0
Employee Benefit Plan...................................................................... $ 18,000
Other ..................................................................................... $ 68,966(1)

- --------
(1) The audit committee has considered whether the provision of these services
by Ernst & Young LLP is compatible with maintaining the principal accountant's
independence.

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 2002, and who wishes to have the proposal included in our proxy
statement and proxy for that meeting, must deliver the proposal to our corporate
secretary, Kelly Tacke, at 15303 Dallas Parkway, Suite 800, Addison, Texas 75001
by January 23, 2002. 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.

Any shareholder who intends to bring business before the annual meeting
in the year 2002 in a form other than a shareholder proposal in accordance with
the preceding paragraph must give written notice to our corporate secretary at
the address set forth in the preceding paragraph on or before April 8, 2002.

ANNUAL REPORT

We have provided without charge a copy of the annual report to
shareholders for fiscal year ended March 30, 2001 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.

14
17

APPENDIX A

PALM HARBOR HOMES
AUDIT COMMITTEE CHARTER

The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements and (3) the
independence and performance of the Company's internal and external auditors.

The three members of the Audit Committee shall meet the independence
and experience requirements of the Nasdaq Stock Market. The members of the Audit
Committee shall be appointed by the Board.

The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.

The Audit committee shall make regular reports to the Board.

The Audit Committee shall:

Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.

Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could significantly
affect the Company's financial statements.

Review an analysis prepared by management and the independent auditor
of significant financial reporting issues and judgments made in connection with
the preparation of the Company's financial statements.

Review with management and the independent auditor the Company's
quarterly financial statements prior to the release of quarterly earnings. The
chair of the committee may represent the entire committee for purposes of this
review.

Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.

Review major changes to the Company's accounting principles and
practices as suggested by the independent auditor or management.

Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the Board.

Review the fees to be paid to the independent auditor.

Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the board take appropriate
action to satisfy itself of the independence of the auditor.

Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.

A-1
18

Meet with the independent auditor prior to the audit to review the
planning of the audit.

Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit.

Review with the independent auditor any problems or difficulties the
auditor may have encountered during the course of the audit and any management
letter provided by the auditor and the Company's response to that letter.

Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.

Review with the Company legal matters that may have a material impact
on the financial statements, the Company's compliance policies and any material
reports or inquiries received from regulators or governmental agencies.

Meet at least annually with the chief financial officer and the
independent auditor in separate executive sessions.

While the Audit Committee has the responsibilities and powers set forth
in the Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's Code of Conduct.

A-2

19
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!

ANNUAL MEETING OF SHAREHOLDERS
PALM HARBOR HOMES, INC.

JUNE 27, 2001

o PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED o

[X] PLEASE MARK YOUR
VOTE AS IN THIS
EXAMPLE.

FOR all nominees WITHHOLD
listed at the right AUTHORITY NOMINEES:
(except as marked below to vote for all nominees Larry H. Keener
to the contrary) listed at right Jerry D. Mallonee
Frederick R. Meyer
ELECTION [ ] [ ] Lee Posey
OF Walter D. Rosenberg, Jr.
DIRECTORS A. Gary Shilling
William R. Thomas
INSTRUCTION: To withhold authority to vote for any John H. Wilson
individual nominee, strike a line through that
nominee's name at right)

FOR AGAINST ABSTAIN
2. RATIFICATION OF THE APPOINTMENT OF [ ] [ ] [ ]
ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING
MARCH 29, 2002.

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 Shareholders(s)) Dated: ,2001
------------------------------------------------------------ ----------------------

Note: (Joint owners must each sign. Please sign exactly as your name(s) appears(s) on this card. When signing as attorney,
trustee, executor, administrator, guardian, or corporate officer, please give your full title.)

20
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 27, 2001 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]