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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Coachmen Industries, 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):
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1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
(COACHMEN LOGO)
COACHMEN INDUSTRIES, INC.
P. O. BOX 3300
ELKHART, INDIANA 46515
574-262-0123
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 4, 2006
------------------
To the Shareholders of
COACHMEN INDUSTRIES, INC.
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Coachmen
Industries, Inc., an Indiana corporation, will be held at Christiana Creek
Country Club, 116 West Bristol Street, Elkhart, Indiana, on May 4, 2006 at 10:00
A.M., for the following purposes:
1. To elect three directors of the Company to hold office for the terms
indicated in the proxy statement.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on March 20, 2006,
are entitled to notice of and to vote at the meeting. Each such shareholder is
entitled to one vote per share on all matters to be voted on at the meeting.
Whether or not you expect to attend the meeting, please sign, date and
return the enclosed proxy in the enclosed envelope.
By order of the Board of Directors,
RICHARD M. LAVERS
Secretary
March 30, 2006
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED WHICH REQUIRES NO POSTAGE FOR MAILING IN THE UNITED STATES. A PROMPT
RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.
COACHMEN INDUSTRIES, INC.
P. O. BOX 3300
ELKHART, INDIANA 46515
574-262-0123
------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 4, 2006
------------------
This Proxy Statement is being mailed to shareholders of COACHMEN
INDUSTRIES, INC. ("Coachmen" or the "Company") on or about March 30, 2006, and
is furnished in connection with the Board of Directors' solicitation of proxies
to be used at the Annual Meeting of Shareholders to be held on May 4, 2006, at
the time and place and for the purposes set forth in the Notice of Annual
Meeting of Shareholders accompanying this Proxy Statement. A shareholder
executing a proxy has the power to revoke it at any time prior to the voting
thereof. The Annual Report to Shareholders for the year 2005 accompanies this
Proxy Statement. Additional copies of the Report may be obtained by writing to
the Secretary of the Company.
The expenses in connection with the solicitation of the enclosed form of
proxy, including postage, printing and handling, and actual expenses incurred by
brokerage houses, custodians, nominees and fiduciaries in forwarding documents
to beneficial owners, will be paid by the Company. It is also expected that
solicitation in person or by telephone will be made of some shareholders by
certain directors, officers and employees of the Company without extra
compensation.
ITEMS TO BE VOTED ON
The following items will be voted on at the Annual Meeting:
(1) The election of three nominees to serve on the Company's Board of
Directors, and
(2) Any other business that may properly come before the meeting or
any adjournment thereof.
VOTING INFORMATION
For purposes of the Annual Meeting, a quorum means a majority of the
outstanding shares entitled to vote. As of the close of business on March 20,
2006, the record date for shareholders entitled to vote at the Annual Meeting,
there were outstanding 15,738,747 shares of Common Stock, entitled to one vote
each. In determining whether a quorum exists at the Annual Meeting, all shares
represented in person or by proxy, including abstentions and broker non-votes,
will be counted. A shareholder may, with respect to the election of directors,
(i) vote for the election of all named director nominees, (ii) withhold
authority to vote for all named director nominees or (iii) vote for the election
of all named director nominees other than any nominee with respect to whom the
shareholder withholds authority to vote by so indicating in the appropriate
space on the proxy. Proxies properly executed and received by the Company prior
to the Annual Meeting and not revoked will be voted as directed therein on all
matters presented at the meeting. In the absence of a specific direction from
the shareholder, proxies will be voted for the election of all named director
nominees.
Directors are elected by a plurality of the votes cast by shares present in
person or by proxy at the Annual Meeting and entitled to vote. For any other
matter that may properly come before the meeting, approval is obtained if the
votes cast in favor exceed the votes cast in opposition. Accordingly,
withholding authority to
vote in the election of directors, abstentions and broker non-votes will have no
effect on any matter voted on at the Annual Meeting.
SHAREHOLDER PROPOSALS
Shareholders wishing to include proposals in the Company's Proxy Statement
and form of proxy for the 2007 Annual Meeting of Shareholders must submit such
proposals so that they are received by the Secretary of the Company at the
address indicated on page 1 by no later than November 30, 2006.
NOMINATIONS FOR DIRECTOR
The Company's Bylaws provide that from and after March 6, 2006 notice of
proposed shareholder nominations for election of directors may be made by any
shareholder holding five percent (5%) or more of the outstanding shares entitled
to vote for the election of Directors, and must be made in writing and either
delivered or mailed by first-class United States mail, postage prepaid, to the
Secretary of the Company, and in either case must be received by the Secretary
of the Company not less than 90 days prior to the month and day of the
anniversary of the last meeting of the shareholders called for the election of
directors. Nominations for the 2007 meeting received after February 4, 2007 will
be considered untimely. The advance notice requirement affords the Board of
Directors the opportunity to consider the qualifications of all proposed
nominees and, to the extent deemed necessary or desirable by the Board, inform
shareholders about such qualifications. The notice must contain certain
information about each proposed nominee, including their age, business and
residence addresses and principal occupation, the number of shares of Common
Stock beneficially owned by them and such other information as would be required
to be included in a proxy statement soliciting proxies for the election of such
proposed nominee. If the chairman of the annual meeting of shareholders
determines that a nomination was not made in accordance with the foregoing
procedures, such nomination is void.
OTHER BUSINESS AT THE ANNUAL MEETING
For a shareholder to bring other business before the 2007 Annual Meeting of
Shareholders, but not have it included in the proxy statement, timely notice
must be submitted in writing, either delivered or mailed by first-class United
States mail, postage prepaid, to the Secretary of the Company, and in either
case be received by the Secretary of the Company not less than 60 days prior to
the month and day of the anniversary of the mailing of the prior year's proxy
statement. The notice must identify the proposing shareholder and his/her
address, and contain a description of the proposed business and such other
information as would be required to determine the appropriateness of including
the proposal in a proxy statement. Shareholder proposals for the 2007 annual
meeting received after January 29, 2007 will be considered untimely and the
proxy solicited by the Company for next year's annual meeting may confer
discretionary authority to vote on such matters without a description of them in
the proxy statement for that meeting.
2
ELECTION OF DIRECTORS
At the meeting, two directors of the Company are to be elected to hold
office for terms of three years or until their successors are elected and
qualified, and one director of the Company is to be elected to hold office for a
special term of one year or until a successor is elected and qualified, as
authorized by the Company's Bylaws. Unless otherwise indicated on the proxy
form, the authority conferred by the proxy will be used for the purpose of
voting in favor of the three nominees listed below. If any such nominee shall be
unable to serve, the proxies will be voted to fill any vacancy so arising in
accordance with the discretionary authority of the persons named in the proxies.
The Board of Directors has no reason to believe that any such nominee will be
unable to serve. All nominees have consented in writing to the nomination. The
Governance Committee has not received any recommendations from any of the
Company's shareholders in connection with this Annual Meeting. The Company has
not engaged a third party search firm to help identify Board nominees. The
Governance Committee nominated the nominees indicated for election.
<Table>
<Caption>
YEAR FIRST
ELECTED
NAME AND AGE PRINCIPAL OCCUPATION(1) DIRECTOR
------------ ----------------------- ----------
NOMINEES FOR ELECTION AS A DIRECTOR FOR A THREE-YEAR TERM EXPIRING IN 2009:
Claire C. Skinner (51) Chairman of the Board, and Chief Executive Officer of the 1993
Company
Donald W. Hudler (71) President & CEO, DDH Investments of Texas 1999
NOMINEES FOR ELECTION AS A DIRECTOR FOR A SPECIAL ONE-YEAR TERM EXPIRING IN 2007:
Philip G. Lux (77) Past President of the Company (Retired 1991) 1979
DIRECTORS WHOSE TERMS EXPIRE IN 2007:
Robert J. Deputy (67) Chairman & CEO, Godfrey Marine, Inc. 1998
Edwin W. Miller (60) Chairman & CEO, Millennium Capital Group 1998
DIRECTORS WHOSE TERMS EXPIRE IN 2008:
Geoffrey B. Bloom (64) Past Chairman of the Board Wolverine World Wide, Inc. 1999
(Retired 2005)
William P. Johnson (64) Chairman of the Board and CEO of Flying J, LLC 1978
</Table>
- ---------------
(1) All of the individuals have held the positions set opposite their names for
more than the past five years except as follows: Ms. Skinner was President,
CEO and Chairman of the Board until the hiring of M. J. Schafer as President
and COO, effective December 1, 2003, at which time Ms. Skinner continued as
Chairman and CEO. Ms. Skinner again assumed the positions of President and
COO following Mr. Schafer's termination on February 6, 2006. Mr. Hudler was
Chairman and CEO of Saturn Retail Enterprises, Inc. from January 1, 1999
through June 30, 2001.
DETERMINATION OF INDEPENDENCE OF DIRECTORS
In 2003, the Board first adopted Corporate Governance Guidelines, which
have been amended from time to time ("Guidelines"). The Guidelines adopted by
the Board meet or exceed the listing standards adopted by the New York Stock
Exchange. The portion of the Guidelines addressing director independence can be
found on the Company's website at www.coachmen.com. A copy may also be obtained
upon request from the Company's Corporate Secretary.
The Governance Committee undertook a review of director independence in
February 2006 under the standards set forth in the Guidelines. During this
review, the Board considered transactions and relationships between each
director or member of that director's immediate family and the Company and its
subsidiaries and affiliates. The Board also examined transactions and
relationships between directors or their affiliates and members of the Company's
senior management or their affiliates. The purpose of this review was to
determine whether any such relationships or transactions were inconsistent with
a determination that the director is
3
independent. Any Director's relationship with Coachmen (including its
affiliates) is deemed immaterial unless it exceeds the materiality standards
adopted by the Board of Directors in February 2004. The materiality standards
are set forth in attached Appendix A.
As a result of the review, the Board affirmatively determined that the
following Directors have no material relationship with the Company and are
independent under the aforementioned materiality standards:
Geoffrey B. Bloom
Robert J. Deputy
Donald W. Hudler
William P. Johnson
Philip G. Lux
Edwin M. Miller
All of the directors nominated for election at the annual meeting are
independent of the Company and its management under such standards, except
Claire C. Skinner.
MEETINGS OF THE BOARD OF DIRECTORS
During 2005, the Board of Directors held four meetings. All of the
directors attended at least 75% of the meetings of the Board of Directors and
the committees of which they were members in 2005.
The Company expects the attendance of all Directors at the Annual Meeting.
All Directors attended the 2005 Annual Meeting.
Until September 9, 2005, the Board did not designate a specific
non-management director to preside at executive sessions of the non-management
directors. Instead, the Board assigned specific leadership functions to the
independent chairmen of the three standing committees, as described in the
Company's Governance Guidelines. From and after September 9, 2005, the Board has
provided for the designation of a "Lead Director" who shall have authority to
call and shall preside at all meetings of the independent and non-management
directors. The Lead Director is an independent, non-management director elected
by the independent directors. The Lead Director at this time is William P.
Johnson. There are two regularly scheduled meetings of the non-management
directors. In addition, any independent or non-management director can call for
a meeting of the independent or non-management directors at any time.
The Board of Directors has three committees as described below.
2005 COMMITTEES OF THE BOARD
AUDIT COMMITTEE
The Audit Committee has adopted a written Audit Committee Charter that
outlines the duties of the Audit Committee. That Charter was amended during 2003
and in 2004, and again reviewed and amended in 2005. See attached Appendix B.
Members: Directors Edwin W. Miller, Chairman; William P. Johnson, and
Philip G. Lux, members.
Functions:
- appoint, monitor and, if necessary, terminate the independent
registered public accounting firm serving as "independent auditors"
and oversee their activities and independence
- review the non-audit services provided by the independent auditors and
pre-approve such services
- review audit reports, periodic filings with the SEC of quarterly and
annual financial statements, and related financial matters
4
- oversee management's activities in:
- maintaining the reliability and integrity of the accounting
policies and financial reporting and disclosure practices of the
Company
- establishing and maintaining processes to assure that an adequate
system of internal control is functioning within the Company
- establishing and maintaining reasonable processes to assure
compliance by the Company with all applicable laws, regulations
and corporate policies, including compliance, risk management and
legal affairs
The Governance Committee has determined that the members of the Audit
Committee are "independent" as defined in the corporate governance listing
standards of the New York Stock Exchange relating to audit committees. All
Committee members, William P. Johnson, Philip G. Lux, and Edwin W. Miller, have
been designated as financial experts of the Audit Committee.
The Audit Committee met nine times in 2005, six of those were via
conference calls.
AUDIT COMMITTEE REPORT
The Audit Committee, in carrying out its role, relies on the Company's
senior management, including senior financial management, and its independent
auditors.
The Audit Committee of the Board of Directors oversees the Company's
financial reporting process on behalf of the Board of Directors. It met, either
in person or via conference calls, with management and the Company's independent
auditors nine times during 2005 and has reported the results of its activities
to the Board of Directors. In connection with these meetings, the Audit
Committee has:
- Reviewed and discussed the audited financial statements for the fiscal
year ended December 31, 2005 with the Company's management and the
independent auditors (both with and without management);
- Reviewed and discussed the unaudited quarterly financial information,
the quarterly earnings press releases, any interim financial press
releases, and Quarterly Reports on Form 10-Q with management and the
independent auditors;
- Discussed with Ernst & Young LLP, the Company's independent auditors,
the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards), as amended by Statement on Auditing
Standards No. 90 (Communication With Audit Committees), with respect
to the quality, not just the acceptability of the Company's accounting
principles; and
- Received the written disclosures and the Disclosure Communications
letter from Ernst & Young LLP as required by Rule 3600T of the Public
Company Accounting Oversight Board, which has adopted, on an interim
basis, Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with Ernst &
Young LLP its independence.
Based on the review and discussions described above with respect to the
Company's audited financial statements included in the Company's 2005 Annual
Report to Shareholders, we have recommended to the Board of Directors that such
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2005 for filing with the Securities and Exchange
Commission.
Members of the Audit Committee:
Edwin W. Miller, Chairman
William P. Johnson, Member
Philip G. Lux, Member
5
MANAGEMENT DEVELOPMENT/COMPENSATION COMMITTEE
Members: Directors Donald W. Hudler, Chairman; Robert J. Deputy and
Geoffrey B. Bloom, members.
Functions:
- develop and administer the compensation policies and practices of the
Company
- administer the Company's benefit, retirement programs and equity
incentive plans and recommend changes subject to the approval of the
Board of Directors
- establish executive compensation
The Committee met five times in 2005 and a separate conference call was
held on December 21, 2005.
MANAGEMENT DEVELOPMENT/COMPENSATION COMMITTEE REPORT
The Management Development/Compensation Committee of the Board of Directors
(the "Committee") is responsible for developing and administering the
compensation policies and practices of the Company to ensure that the Chief
Executive Officer and other senior officers are compensated in a manner
consistent with the stated objectives of the Company. The Committee also
oversees the Company's benefit, retirement programs and equity incentive plans
and recommends changes subject to approval by the Board of Directors. The
members of the Compensation Committee are independent, non-employee directors.
The Company's compensation philosophy is to provide a competitive
compensation program with incentives to achieve superior financial performance
for the Company's stockholders. The Company's executive compensation policies
are designed to achieve these primary objectives:
- Attract, retain, reward and motivate highly talented employees, who
will lead the Company and achieve and inspire superior performance;
- Provide incentives to improve the performance of Coachmen overall and
of each business sector to which an executive is assigned;
- Align the interests of management with those of the Company's
shareholders in both the short and long-term by placing a significant
portion of compensation "at risk", based upon the performance of the
Company and its business units.
Executive compensation consists primarily of the following components: Base
Salaries, Annual Incentive Plans and Long-Term Incentives.
BASE SALARIES
Salaries are typically reviewed annually, on or about March 31st of each
year. The Committee sets executive salaries based on competitive market levels,
experience, individual and Company performance, levels of responsibility and
inflationary factors. In order to attract and retain highly qualified talent,
base salaries are targeted at the 50th percentile, based on survey results of
companies in Coachmen's peer group, as well as a range of manufacturing
companies with whom Coachmen might reasonably compete for executive talent.
ANNUAL INCENTIVE PLANS
The Executive Annual Performance Incentive Plan for Senior Executives
emphasizes key performance factors that drive shareholder value. The plan
provides opportunities for bonuses based on the performance of the Company
and/or the performance of its operating divisions or profit-centers. Performance
goals may be based on one or more financial criteria, either separately or
combined, as well as other business criteria, such as measurements of compliance
with Company policies or legal requirements, human resources criteria, measures
of customer satisfaction and subjective evaluations of the executive's
performance and personal
6
development. For 2005, performance goals were based on sales, pre-tax income,
and net operating working capital (NOWC). In 2005, no bonuses were paid to
executive officers under the plan.
For 2006, an annual bonus percentage of pre-tax income is set by the
Committee, and a minimum earnings threshold must be achieved before bonus can be
earned. The threshold earnings level is based on the net cost of assets
employed. Once the threshold earnings level is achieved, an employee's bonus
percentage is applied to all pre-tax earnings of the profit center during the
measurement period. Special consideration may be given to recognize unusual
circumstances, and bonus rates may vary according to operating unit.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM COMPENSATION
--------------------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------------------ STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) OTHER(2) AWARDS(3) OPTIONS(#)(4) COMPENSATION(5)
- ------------------ ---- -------- -------- -------- ---------- ------------- ---------------
Claire C. Skinner 2005 $351,000 $ -- $20,268 $ -- -- $61,317
Chairman of the 2004 345,000 410,429 18,353 -- -- 35,033
Board, Chief 2003 335,000 50,250 19,484 -- 2,000 47,002
Executive Officer
Matthew Schafer(6) 2005 305,000 -- 1,492 -- -- 20,033
President and Chief 2004 300,000 285,516 29,265 -- -- 81,642
Operating Officer 2003 23,077 -- -- 121,800 -- --
Michael R. Terlep, Jr. 2005 297,000 -- 3,648 42,630 -- 18,740
President, CLI dba 2004 285,000 424,054 3,304 -- -- 19,128
Coachmen RV 2003 275,000 70,290 3,507 -- 1,600 18,203
Group & President,
Coachmen Recreational
Vehicle Company, LLC
Joseph P. Tomczak 2005 239,558 -- -- -- -- 9,999
Executive Vice 2004 240,000 185,585 10,488 -- -- 23,188
President and Chief 2003 230,000 22,425 13,415 -- 1,600 21,933
Financial Officer
through December 19,
2005
Richard M. Lavers 2005 241,363 -- 3,229 28,420 -- 28,846
Executive Vice 2004 223,000 159,175 2,795 -- -- 24,391
President, 2003 215,000 19,350 2,649 -- 1,600 24,757
General Counsel and
Secretary, and as of
December 20, 2005
Chief Financial
Officer and Chief
Administrative
Officer
Steven E. Kerr 2005 201,000 -- 2,824 -- -- 23,850
President, 2004 197,000 55,928 2,427 -- -- 21,865
All American Homes, 2003 190,000 24,225 2,259 -- -- 24,024
LLC through
September 29, 2005
</Table>
- ---------------
(1) For 2004, bonuses were paid under the Executive Annual Performance Incentive
Plan. For 2003, a bonus of $37,950 was paid to Mr. Terlep under the
Executive Annual Performance Incentive Plan. The remaining bonuses paid in
2003 represent discretionary bonuses approved by the Management
Development/Compensation Committee.
7
(2) The Management Development/Compensation Committee has approved deferred
compensation agreements for certain corporate and subsidiary officers. These
agreements provide either lump sum or monthly payments to executives upon
retirement based upon the executive's election under the plan. The benefits
are funded from Company owned life insurance policies. The amounts in this
column include the Company's contributions under the deferred compensation
plan and interest earned above 120% of the applicable federal rate. The
interest earned above 120% of the applicable federal rate for 2005 is as
follows: Ms. Skinner, $20,268, Mr. Schafer, $0, Mr. Terlep, $3,648, Mr.
Tomczak, $0, Mr. Lavers, $2,229, and Mr. Kerr, $1,824. In addition, the
Company's contribution under this plan for 2005 was $1,000 to Mr. Lavers.
The interest earned above 120% of the applicable federal rate for 2004 are
as follows: Ms. Skinner, $18,353, Mr. Schafer, $0, Mr. Terlep, $3,304, Mr.
Tomczak, $0, Mr. Lavers, $1,795, and Mr. Kerr, $1,427. In addition, the
Company's contribution under this plan for 2004 was $1,000 to Mr. Lavers and
Mr. Kerr. The interest earned above 120% of the applicable federal rate for
2003 are as follows: Ms. Skinner, $19,484, Mr. Schafer, $0, Mr. Terlep,
$3,507, Mr. Tomczak, $0, Mr. Lavers, $1,649, and Mr. Kerr, $1,259. In
addition, the Company's contribution under this plan for 2003 was $1,000 to
Mr. Lavers, and Mr. Kerr.
In 2005, Mr. Schafer received a tax "gross up" reimbursement on taxable
moving expenses of $1,492. In 2004, Mr. Schafer received tax "gross up"
reimbursement in the amount of $29,265 on his taxable moving expenses. In
2004, Mr. Tomczak received tax "gross up" reimbursement on restricted stock
grants of $10,488. In 2003, Mr. Tomczak received tax "gross up"
reimbursement on restricted stock grants of $13,415.
(3) Represents the closing market price of the stock on the date of grant,
multiplied by the number of shares awarded. Mr. Terlep's and Mr. Lavers'
2005 stock awards vest over a 3-year period at a rate of thirty-three
percent (33%) per year beginning with their first anniversary. Mr. Schafer's
2003 stock award vests over a 5-year period at a rate of 20% per year
beginning with his first anniversary. No dividends are paid on the unvested
portion of the awards. At December 31, 2005 Mr. Terlep held 3,000 shares of
restricted stock valued at $35,430, and Mr. Lavers held 2,000 shares of
restricted stock valued at $23,620, based on the closing market price of the
stock on that date. At December 31, 2005, Mr. Schafer held 4,200 shares of
restricted stock valued at $49,602, based on the closing market price of the
stock on that date; however, due to Mr. Schafer's termination subsequent to
year end, these remaining shares were forfeited in 2006.
(4) The options are for terms of five to ten years and become exercisable at the
rate of 25% per year commencing at the end of the first year.
(5) The Company established a retirement plan under Section 401(k) effective
January 1, 2000. Company contributions for 2005 under this plan were $3,360
each for Ms. Skinner, Mr. Terlep, Mr. Tomczak, Mr. Lavers and Mr. Kerr, and
$3,253 for Mr. Schafer. Company contributions for 2004 under this plan were
$4,100 each for Ms. Skinner, Mr. Terlep, Mr. Tomczak, and Mr. Lavers, $3,895
for Mr. Kerr, and $0 for Mr. Schafer. Company contributions for 2003 under
this plan were $4,000 each for Ms. Skinner, Mr. Terlep, Mr. Tomczak, and Mr.
Lavers, and Mr. Kerr and $0 for Mr. Schafer.
In addition, the Management Development Compensation Committee has approved
an Executive Savings Plan for certain corporate and subsidiary officers. The
participants select certain mutual fund investments and Company stock whose
performance is tracked by the Company. In addition, the Company matches a
certain level of participant contributions that vests after a five-year
period. Under the plan, the investments are not funded directly, including
the matching contributions and investments in Company stock. Instead, the
plan administrator tracks the performance of investments in mutual funds and
Company stock as directed by the participant and a liability to the
participants is recorded by the Company based on the performance of the
phantom investments. Participant benefits are limited to the value of the
vested benefits recorded on their behalf. The benefits are funded from the
purchase of life insurance policies. The plan also provides a split dollar
life insurance benefit. The Company's contributions under this plan for
2005, are as follows: (a) for the Life Insurance Premium: Ms. Skinner, $850,
Mr. Schafer, $1,530, Mr. Terlep, $530, Mr. Tomczak, $800, Mr. Lavers, $1,480
and Mr. Kerr, $1,220; (b) for the Executive Savings Plan matching benefit:
Ms. Skinner, $57,107, Mr. Schafer, $15,250, Mr. Terlep, $14,850, Mr.
Tomczak, $5,839, Mr. Lavers, $24,006 and Mr. Kerr, $19,270. The Company's
8
contributions under this plan for 2004, are as follows: (a) for the Life
Insurance Premium: Ms. Skinner, $800, Mr. Schafer, $0, Mr. Terlep, $490, Mr.
Tomczak, $750, Mr. Lavers, $1,350 and Mr. Kerr, $1,100; (b) for the
Executive Savings Plan matching benefit: Ms. Skinner, $30,133, Mr. Schafer,
$14,423, Mr. Terlep, $14,538, Mr. Tomczak, $18,338, Mr. Lavers, $18,941 and
Mr. Kerr, $16,870. The Company's contributions under this plan for 2003, are
as follows: (a) for the Life Insurance Premium: Ms. Skinner, $750, Mr.
Schafer, $0, Mr. Terlep, $460, Mr. Tomczak, $700, Mr. Lavers, $1,220 and Mr.
Kerr, 1,040; (b) for the Executive Savings Plan matching benefit: Ms.
Skinner, $41,849, Mr. Schafer, $0, Mr. Terlep, $13,743, Mr. Tomczak,
$17,233, Mr. Lavers, $19,537, and Mr. Kerr, $18,984.
In 2003, Ms. Skinner earned a service award of Company Stock valued at $403,
and in 2004 Mr. Schafer received $67,219 for reimbursement of his moving
costs.
(6) Subsequent to December 31, 2005, Mr. Schafer was terminated and Ms. Skinner
assumed his duties on an interim basis.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
Long-term incentive compensation opportunities are provided to executives
in positions with significant responsibilities, accountabilities and potential
impact on long-term corporate performance. Long-term incentive compensation is
generally made available in the form of stock options and restricted stock.
These awards are available under the 2000 Omnibus Stock Incentive Plan, as
approved by the shareholders. The Committee approves participation in and the
level of stock option grants and stock awards made to individual executives. No
options were granted during 2005.
In 2002 a long-term incentive program, (the "PERFORMANCE BASED RESTRICTED
STOCK PLAN"), was approved for senior managers for implementation in 2003. The
purpose of the Performance Based Restricted Stock Plan is to further align the
interests of executives and senior management with those of the shareholders, to
motivate and reward superior performance, to enhance recruitment and retention
and to advance stock ownership by senior company executives. The plan provides
senior managers an opportunity for an incentive award consisting of restricted
stock grants.
The awards under the Performance Based Restricted Stock Plan are based on
the actual financial performance of the Company at the conclusion of the
Performance Measurement Period, as measured against a three year plan
(Performance Measurement Target) approved by the Board of Directors. The
financial performance measurement for the Performance Based Restricted Stock
Plan is consolidated net income.
The following table sets forth certain information concerning awards made
under the Performance Based Restricted Stock Plan to the named executives during
2005:
<Table>
<Caption>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLAN
NUMBER OF OTHER PERIOD ---------------------------------------
SHARES, UNITS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME OR OTHER RIGHTS OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
---- ---------------- ---------------- --------- -------- --------
Claire C. Skinner 11,000 3 Years 9,350 11,000 12,650
Matthew Schafer 8,800 3 Years 7,480 8,800 10,120
Michael R. Terlep, Jr. 5,300 3 Years 4,505 5,300 6,095
Richard M. Lavers 5,300 3 Years 4,505 5,300 6,095
Joseph P. Tomczak 5,300 3 Years 4,505 5,300 6,095
Steven E. Kerr 5,300 3 Years 4,505 5,300 6,095
</Table>
In order to earn any award for any three year Performance Measurement
Period, at least 85% of the Performance Measurement Target must be achieved. The
maximum level award is 115% of the Performance Measurement Target. The amount of
the participant's long-term incentive award is determined at the end of each
Performance Measurement Period. The amount of the award earned by a participant
will be determined by multiplying (i) the participant's target award for the
Performance Measurement Period by (ii) the percentage obtained as a result of
dividing the Company's actual consolidated net income during the
9
Performance Measurement Period by the consolidated net income target established
for the Performance Measurement Period.
In the event of a "Change in Control" all shares subject to restricted
stock awards will vest immediately, and will be delivered to the participants,
without restrictions.
To be eligible for a distribution a participant must have participated as a
full time employee of the Company, continuously from the beginning of the
Performance Measurement Period, unless the participant's employment is
terminated by reason of death, disability, or normal retirement, or the
Committee, in its discretion, determines otherwise. In the event a participant's
employment is terminated for other than cause or early retirement, said
termination must be in compliance with the Company's Code of Conduct and any
applicable Business Protection Agreements.
The Committee believes that long-term incentives encourage equity ownership
interest in the Company, assuring that the interests of the Company's senior
executives are closely aligned with the interests of the shareholders.
During 2005, there were 35,700 restricted shares granted under the
Performance Based Restricted Stock Plan to the named executive officers. Based
upon the Company's performance in the period 2003-2005, the shares awarded in
2003 did not vest and thus were forfeited in 2005. Mr. Schafer and Mr. Tomczak
are no longer with the Company, and accordingly are ineligible for any award
under the Plan. In addition, based upon performance in 2004 and 2005, it appears
probable that none of the shares awarded under this Plan in 2004 and 2005 will
vest.
STOCK OPTION GRANTS
During 2005, there were no stock option grants awarded from the Company's
2000 Omnibus Stock Incentive Program to the executives named in this proxy
statement.
STOCK OPTION EXERCISES AND VALUES TABLE
The following table shows information with respect to options for the
Company's Common Stock either exercised or having value outstanding under the
Company's 1994 and 2000 Omnibus Stock Incentive Programs.
AGGREGATED OPTION EXERCISES IN FISCAL 2005 AND YEAR END OPTION VALUES
<Table>
<Caption>
OPTIONS EXERCISED NUMBER OF
IN 2005 SECURITIES UNDERLYING VALUE OF UNEXERCISED
---------------------- UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2005 DECEMBER 31, 2005*
ACQUIRED VALUE --------------------------- -------------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
Claire C. Skinner -- $ -- 57,000 3,000 $91,130 $630
Matthew J. Schafer -- -- 2,500 2,500 -- --
Michael J. Terlep, Jr. -- -- 34,925 2,175 54,804 504
Richard M. Lavers -- -- 40,925 2,175 65,664 504
Joseph P. Tomczak -- -- 40,925 -- 504 --
Steven E. Kerr -- -- 15,925 2,175 20,414 504
</Table>
- ---------------
* Market value of the underlying securities at exercise date or year-end as the
case may be, minus the exercise price of the options.
BENEFITS
In addition to the Company's 401(k) qualified retirement plan, the more
senior managers of the Company (approximately 25) are eligible to participate in
a non-qualified retirement plan. This plan has two levels, an Executive Savings
Plan (ESP)for senior executives and a MIRROR Plan for other senior managers.
10
Together with the Company's 401(k) plan, these benefits create a competitive
retirement benefit that includes matching Company stock contributions and
vesting requirements. Each senior manager has elected a lump sum distribution
upon retirement. The projected benefits payable upon retirement, assuming
retirement occurs at age 65, are as follows: Ms. Skinner, $7,901,381; Mr.
Terlep, Jr., $3,649,323; Mr. Lavers, $1,376,577, and Mr. Kerr, $1,582,691.
EXECUTIVE LIFE INSURANCE
The Committee approved an Executive Life Insurance Plan that provides the
ESP and MIRROR Plan participants with either $1,000,000 or $500,000 of life
insurance. The Committee believes that this benefit enhances the Company's
ability to attract and retain executive talent.
STOCK OWNERSHIP GUIDELINES
Stock ownership guidelines have been established for senior executives and
officers. The established guidelines range from four times to one times base
salary for key officers that may be designated by the Committee. The targeted
stock ownership should be achieved within four (4) years. Shares to be counted
include shares held in the executives' 401(k), LTI Plan or IRA, Executive
Savings Plan, restricted shares, shares held in trust or in beneficial ownership
by or for an immediate family member, shares purchased on the open market or
through the Employee Stock Purchase Plan, or shares held following the exercise
of stock options. Stock options are not counted towards the executive's stock
ownership position until exercised.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Management Development Committee meets each year in executive session
to determine the compensation of the Chief Executive Officer. This session
follows a full Board evaluation of the performance of the CEO, which evaluation
is considered by the Committee in determining the compensation.
In January 2005, based upon a review of 2004 performance, the Committee
approved a 1.74% salary increase for Ms. Skinner, increasing her base from
$345,000 to $351,000. Ms. Skinner did not earn an annual incentive payment for
2005, which was determined according to a mathematical formula based on the lack
of achievement of pre-set performance metrics pursuant to the plan described on
page 6 and 7 for the CEO and other senior officers.
The Committee believes that the total compensation program for Ms. Skinner
is consistent with the overall compensation and benefits philosophy of the
Company.
COMPLIANCE WITH SECTION 162(M)
Federal tax law establishes certain requirements in order for compensation
exceeding $1 million earned by certain executives to be deductible. Because the
total compensation for any executive officer is significantly below the $1
million threshold, the Committee has not had to address the issues relative
thereto. However, the Committee attempts to preserve the tax deductibility of
all executive compensation while maintaining flexibility with respect to its
compensation programs.
CHANGE IN CONTROL AGREEMENTS
The Company has entered into Change in Control Agreements with certain key
employees, including the named executive officers. Each Change in Control
Agreement provides for the payment of benefits in the event that, within a
three-year period following the date of a "change in control," (i) the
executive's employment is terminated by the Company without "cause," or (ii) the
executive terminates employment for "good reason". The terms "change in
control," "cause" and "good reason" are defined in the Agreements. The amount of
the benefits payable to an executive entitled thereto would be an amount equal
to accrued salary through the termination date and an annual bonus based upon
performance of the business plan approved by the Committee for that year, plus
either 2 or 3 times the sum of (i) the executive's annual base salary at the
rate in effect at the time of the change in control or upon termination,
whichever is greater, plus (ii) the
11
executive's anticipated annual bonus based upon the business plan approved by
the committee for that year. The Agreements also provide for the full vesting of
an executive's 401(k) account and a payment in an amount equal to the matching
contribution for a two or three-year period, as well as the acceleration of
vesting of any outstanding options or shares of restricted stock and the
continuation of certain fringe benefits for a two or three-year period. In
addition, several of the benefit plans provide for modified vesting and
contribution provisions upon a change in control. Certain Change in Control
Agreements provide a gross-up of the amount of benefits provided to hold the
executives harmless from the impact of any excise tax imposed under the
"parachute payment" provisions of the Internal Revenue Code. The term of the
agreements shall extend through the executive's term of employment, or the third
anniversary of the date of a change in control of the Company, if sooner. Upon
triggering of the Change in Control Agreements, money sufficient to fund these
payments will be deposited in a rabbi trust.
SUMMARY
The Committee believes that the foregoing compensation programs serve the
long-term interests of shareholders. These programs create a strong link between
long-term executive rewards and long-term shareholder rewards; they attract,
retain and motivate outstanding executive talent; and they further the Company's
long-term leadership succession objectives. The Committee will continue to
emphasize variable, performance based compensation programs that it believes
positively affect long-term shareholder value.
Members of the Management/Development Compensation Committee:
Donald W. Hudler, Chairman
Geoffrey B. Bloom, Member
Robert J. Deputy, Member
GOVERNANCE COMMITTEE
Members: Directors Geoffrey B. Bloom, Chairman; and Robert J. Deputy,
William P. Johnson and Philip G. Lux, members.
Functions:
- oversee compliance with the Statement of Business Principles and Code
of Conduct
- review any material related party transactions
- ensure good performance of Board governance system
- recommend to full Board its organization, procedures and governance
principles
- recommend to full Board committee assignments and charters
- work with the CEO to establish agendas
- manage and oversee evaluation of the Board, Board committees and
individual Directors
- evaluate desired Board composition and identify individuals qualified
to become Board members
- recommend Director nominees for vacancies and at each annual meeting
of shareholders
- consider Director nominees recommended by shareholders if such
recommendations are submitted in writing to the Committee in
accordance with the Company's Bylaws
- oversee Board member orientation and education
- recommend to full Board outside Director compensation
- work with Management Development/Compensation Committee on management
objectives, CEO evaluation, management development and succession
The Governance Committee met five times in 2005.
12
GOVERNANCE COMMITTEE REPORT
The Governance Committee (formerly the Nominating Committee) was created in
1997, with the purpose of finding and recommending qualified candidates for the
Board of Directors. In response to changing practices in corporate governance,
in October 2002, the name of the Committee was changed to the
Nominating/Governance Committee, and subsequently to just the Governance
Committee. From and after November 11, 2003, the Committee has been composed
entirely of independent directors, as independence is defined in the NYSE
listing standards and the Company's Corporate Governance Guidelines. Definitions
regarding independence in the Company's Corporate Governance Guidelines were
updated at the February, 2004 meeting.
In 2005, the Committee evaluated the appropriate composition for the Board
in view of the impending retirement of a Board Member during the next year, and
considered several possible candidates. The Committee recommended a revision of
the By-laws, which was adopted, permitting service on the Board for a temporary
period under special circumstances after the mandatory retirement age. The
Committee met twice in 2005 specifically to review related party transactions.
Annual self-evaluations of the Board and its Committees and the evaluation of
the CEO were all completed in 2005 in accordance with the process established in
2003, and a skills and needs analysis of the Board was completed at the August,
2004 meeting. The Committee also reviewed the independence of the Directors and
the materiality of their relationships with the Company under the standards set
forth in the Corporate Governance Guidelines, and made the affirmative
determinations of independence set forth in this proxy statement under
Determination of Independence of Directors.
The Company does accept and always has accepted and will consider
recommendations for nominations for Director from its shareholders, if such
recommendation or nomination is submitted in accordance with Article II of the
Company's ByLaws, which process is set forth under Nominations for Director in
this proxy statement. The qualifications for nominees and the process for
identifying and evaluating nominees are set forth in the Corporate Governance
Guidelines. There is no difference in the evaluation process if a qualified
shareholder recommends the nominee.
It is intended that the Board be small enough to permit substantive
discussions of the entire Board in which each Director can participate
meaningfully, and large enough so that committee work does not become unduly
burdensome. It is the policy of the Board to have a majority of independent
directors in accordance with NYSE listing standards. Directors who do not meet
the NYSE's independence standards also make valuable contributions to the Board
and to the Company by reason of their experience and wisdom. The Committee
believes that the principal qualities of an effective corporate director include
strength of character, an inquiring and independent mind, practical wisdom, and
mature judgment. In addition to these qualities, Coachmen's criteria include
recognized achievement, an ability to contribute to an important aspect of the
Company's business, and the willingness to make the commitment of time and
effort required of a Coachmen director.
In order to find the most valuable talent available to meet these criteria,
the Board considers candidates with varied backgrounds and experiences that
would be valuable to the Company in the implementation of its strategies. The
goal is to include members with the skills and characteristics that taken
together will assure a strong Board. Directors must be willing to devote
sufficient time to carrying out their duties and responsibilities effectively,
and should be committed to serving on the Board for an extended period of time.
The Corporate Governance Guidelines also require that Directors who also serve
as CEOs or in equivalent positions should not serve on more than two boards of
public and/or private companies in addition to the Coachmen Board, and other
directors should not serve on more than four other boards of public companies in
addition to the Coachmen Board. In addition, Directors will not be nominated for
election to the Board after their 75(th) birthday, except for limited terms
under special circumstances.
13
The Board itself is responsible, in fact as well as procedure, for
selecting new Board members who will join the Board between shareholder meetings
as well as those to be nominated by the Board for election by shareholders at
the annual meeting. The Governance Committee, with input from the CEO, screens
potential candidates. Candidates may be recommended to the Governance Committee
by other directors, shareholders and third parties. After a review of Board
candidates by the Governance Committee with the aid of the CEO, candidates
designated by the Governance Committee are interviewed. The results of the
interviews are then reviewed with the full Governance Committee, which may then
recommend the candidate(s) to the full Board for approval.
The Company's Statement of Business Principles and Code of Conduct,
Corporate Governance Guidelines, and Charters for the Governance, Audit and
Management/Development Compensation Committees may be found on the Company's
website at www.coachmen.com, and are available in print to any shareholder who
requests them.
COMMUNICATIONS WITH BOARD OF DIRECTORS
SHAREHOLDERS AND OTHER INTERESTED PARTIES
Shareholders and other interested parties may communicate concerns about
the Company's governance, corporate conduct, business ethics, financial
practices or other matters to the Board of Directors. Concerns may be submitted
in writing to an individual director or to the non-management or independent
directors as a group, in care of either the Corporate Secretary or the Chairman
of the Governance Committee at the Company's headquarters:
Corporate Secretary or Chairman, Governance Committee
Coachmen Industries, Inc.
P.O. Box 3300
Elkhart, IN 46515
The process for collecting and organizing shareholder communications was
approved by a majority of the independent directors.
Members of the Governance Committee:
Geoffrey B. Bloom, Chairman
Robert J. Deputy, Member
William P. Johnson, Member
Philip G. Lux, Member
OUTSIDE DIRECTOR COMPENSATION
Directors who are also employees of the Company receive no additional
compensation for service as a director. Non-employee Directors are compensated
as follows: for the 2005-2006 service year which began in May 2005, each
non-employee Director of the Company was entitled to the following annual
retainers as compensation for his or her services on the Board of Directors: a)
a Board Retainer of Twenty-two thousand dollars ($22,000), payable half in cash
and half in common stock; b) a Committee Fee for each committee on which the
Director serves as a member, in the cash amount of: Five thousand five hundred
dollars ($5,500) for the Audit Committee and Three thousand five hundred
dollars($3,500) for the Management Development/Compensation Committee and Three
thousand five hundred dollars ($3,500) for the Governance Committee; c) a
Committee Chairman's Fee in lieu of (b) above, for each committee on which the
Director serves as the Chairman, in the cash amount of Seven thousand five
hundred dollars ($7,500) for the Audit Committee, and Five thousand five hundred
dollars ($5,500) for the Management Development/Compensation Committee, and Five
thousand five hundred dollars ($5,500) for the Governance Committee; and d) a
grant of One thousand (1,000) shares of restricted common stock. In addition,
Directors are, from time to time, permitted to use the Company airplane on
either a non-reimbursed or partially reimbursed basis in circumstances that do
not interfere with its use for business purposes. For the 2006-2007 service year
that
14
begins in May 2006, each non-employee Director of the Company shall be entitled
to the same compensation as outlined for 2005-2006 for his or her services on
the Board of Directors however, effective November 3, 2005, the Lead Director
will receive twice the normal retainer, or Forty-four thousand dollars
($44,000), payable half in cash and half in common stock, in addition to the
normal committee fees and stock grants.
The number of shares issued for the common stock half of the non-employee
Director compensation is determined by the closing price of the Common Stock on
the NYSE Composite Transactions Tape, as reported in The Wall Street Journal,
Midwest Edition on the date of the annual shareholders' meeting. The
compensation for the coming year is payable promptly following the election of
the Directors at the annual shareholders' meeting, in advance for the coming
service year.
At least fifteen (15) days prior to each annual shareholders' meeting, each
Director may irrevocably elect in writing to receive any portion of his or her
cash compensation: in unrestricted Common Stock valued at one hundred ten
percent (110%) of the cash amount elected, plus an amount calculated by the
Company necessary to gross up the Director's income to cover the Director's
federal income taxes for that year for the additional 10% of stock; or, in
restricted Common Stock valued at one hundred forty percent (140%) of the cash
amount elected. All restricted Common Stock is held by the Company until the
Director's completion of two years of service. The award is non-transferable
until the completion of the two year period of service. However, said two year
period of service is deemed satisfied where the Director's service terminates as
the result of death, disability, mandatory retirement or in the event of a
Change in Control, in which circumstances the stock subject to the award shall
be delivered to the Director without any restrictions. In the event of a
termination of the Director's service on the Board, prior to the completion of
the two year period, for reasons other than those stated above, the shares shall
be forfeited to the Company without any payments to the Director.
All stock delivered and restricted stock grants under the compensation plan
for non-employee directors are authorized under the Coachmen Industries, Inc.
2000 Omnibus Stock Incentive Program as approved by the shareholders.
STOCK OWNERSHIP GUIDELINES -- NON-EMPLOYEE DIRECTORS
The Board has adopted stock ownership guidelines for its non-employee
Directors at a multiple of four times the amount of the Director's annual cash
and stock retainer. The targeted stock ownership should be achieved within three
years of appointment to the Board. Shares to be counted included restricted
shares, shares held in trust or in beneficial ownership by or for an immediate
family member, shares purchased on the open market, or shares held following the
exercise of stock options. Stock options are not counted towards the
non-employee directors' stock ownership position until exercised.
15
DIRECTORS' AND OFFICERS' STOCK OWNERSHIP
The following table shows the amount of Company Common Stock each named
executive officer, nominee and incumbent director beneficially owned as of March
20, 2006, including shares covered by stock options exercisable within 60 days
of March 20, 2006. Please note that, as reported in this table, beneficial
ownership includes those shares each individual has the power to vote or
transfer, as well as shares owned by immediate family members that reside in the
same household.
<Table>
<Caption>
EXEC.
DIRECTOR SHARES OFFICERS'
COMPENSATION HELD IN DEFERRED
SHARES EXERCISABLE GRANT VESTING 401(K) COMMON TOTAL SHARES % OF
BENEFICIALLY WITHIN WITHIN PLAN AS OF STOCK BENEFICIALLY SHARES
NAME OWNED 60 DAYS 60 DAYS DECEMBER 31, 2005 UNITS OWNED OUTSTANDING
---- ------------ ----------- ------------- ----------------- --------- ------------ -----------
C. C. Skinner 211,891(1&2) 59,500 302 7,053 278,746 1.8%
G. B. Bloom 17,187 2,750 1,000 0 0 20,937 *
R. J. Deputy 40,604 2,750 1,000 0 0 44,354 *
D. W. Hudler 15,272 2,750 1,000 0 0 19,022 *
W. P. Johnson 40,349 2,750 1,000 0 0 44,099 *
R. M. Lavers 17,438(2&3) 42,700 306 3,659 64,103 *
P. G. Lux 105,423 2,750 1,000 0 0 109,173 *
E. W. Miller 17,572 2,750 1,000 0 0 21,322 *
M. J. Schafer 0(2) 2,500 0 1,090 3,590 *
M. R. Terlep, Jr. 16,539(2&3) 36,700 309 2,589 56,137 *
J. P. Tomczak 71 -- 225 1,992 2,288 *
S. E. Kerr 15,425 17,700 -- 302 7,432 40,859 *
All Current Directors
and Executive
Officers as a group
(12 persons) 497,771 175,600 6,000 1,444 23,815 704,630 4.5%
</Table>
- ---------------
* Less than 1%
(1) Includes shares, as to which beneficial ownership is disclaimed, held by or
for the benefit of family members as follows: C.C. Skinner, 100 shares held
by her spouse, J.P. Skinner.
(2) Includes Performance Based Stock Grants as follows: C.C. Skinner, 26,000;
R.M. Lavers, 12,500; M.R. Terlep Jr., 12,500; S.E. Kerr, 12,500.
(3) Includes Discretionary Stock Grant that vested on March 14, 2006 as follows:
R.M. Lavers, 667; M.R. Terlep, 1000.
16
STOCK OWNERSHIP INFORMATION
The following table sets forth information concerning the only parties
known to Coachmen having beneficial ownership of more than five percent (5%) of
its outstanding Common Stock, as of the record date.
<Table>
<Caption>
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
------------------- ------------ --------
First Pacific Advisors, Inc. 2,274,900 14.4%
11400 West Olympic Blvd., Suite 1200
Los Angeles, California 90064
Dimensional Fund Advisors, Inc. 1,348,700 8.5%
1299 Ocean Avenue
Santa Monica, California 90401
Brandes Investment Partners, L.P. 1,318,205 8.3%
11988 El Camino Real, Suite 500
San Diego, California 92130
Donald Smith & Co., Inc. 1,102,500 7.0%
152 West 57(th) Street
New York, New York 10019
Third Avenue Management LLC 896,000 5.7%
622 Third Avenue, 32(nd) Floor
New York, New York 10017
Thomas H. Corson 567,947(1)(2) 3.6%
Past Chairman of the Board
P.O. Box 504
Middlebury, Indiana 46540
Dorthy S. Corson 507,540(2) 3.2%
(Wife of Thomas H. Corson)
P.O. Box 504
Middlebury, Indiana 46540
</Table>
- ---------------
(1) Includes 1,750 stock options exercisable within 60 days of March 20, 2006.
(2) Thomas H. Corson is also the beneficial owner of 507,540 shares owned by
Dorthy S. Corson. Dorthy S. Corson is also the beneficial owner of 567,947
shares owned by Thomas H. Corson. Claire C. Skinner, CEO, is the daughter of
Thomas H. Corson and Dorthy S. Corson
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that certain
of the Company's directors, officers and stockholders file with the Securities
and Exchange Commission and the New York Stock Exchange an initial statement of
beneficial ownership and certain statements of changes in beneficial ownership
of Common Stock of the Company. Based solely on its review of such forms
received by the Company and written representation from the directors and
officers that no other reports were required, the Company is unaware of any
instances of noncompliance with the requirements during the fiscal year ended
December 31, 2005 by its officers, directors or stockholders.
17
PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return of
the Company's Common Stock as compared to the S&P 500 and a group of peer
issuers selected by the Company. The stock price performance shown on the graph
below is not necessarily indicative of future price performance. The companies
comprising the Peer Group are Fleetwood Enterprises, Inc., Skyline Corporation,
Thor Industries, Inc., Winnebago Industries, Inc., National RV Holdings, and
Monaco Coach. The total return of each company in the Peer Group has been
weighted according to Coachmen's stock market capitalization as of the beginning
of each period.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
COACHMEN, S&P 500, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/05)
(PERFORMANCE GRAPH)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
- ------------------------------------------------------------------------------------------------------------------------
Coachmen Industries, Inc. $100.00 $116.39 $155.29 $181.36 $176.43 $122.38
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index 100.00 88.12 68.64 88.32 97.92 100.86
- ------------------------------------------------------------------------------------------------------------------------
Peer Group 100.00 167.05 174.27 272.72 322.71 301.64
- ------------------------------------------------------------------------------------------------------------------------
</Table>
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in Coachmen common stock, S&P
500, and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Company's auditors for the year 2005 and 2004 were Ernst & Young LLP,
and that firm has been selected as the Company's accountants for fiscal year
2006. Such accounting firm is expected to have a representative at the Annual
Meeting of Shareholders and will be available to respond to appropriate
questions at that time and have an opportunity to make a statement if they
desire to do so.
18
AUDIT AND ALL OTHER FEES
The fees billed to the Company by Ernst & Young LLP in each of the last two
fiscal years, in each of the following categories are as follows:
<Table>
<Caption>
2005 2004
---- ----
Annual Audit Fees $ 582,000 $ 562,975
Audit-Related Fees 0 4,120
Tax Fees (Preparation & Compliance) 0 280,703
---------- ----------
Total Audit, Audit-Related and Tax Fees -- Preparation &
Compliance 582,000 847,798
Other Non-Audit Fees
Tax Fees -- Other 442,596 356,113
All Other Fees 1,500 1,500
---------- ----------
Total Other Non-Audit Fees 444,096 357,613
Total Fees $1,026,096 $1,205,411
</Table>
The Annual Audit Fees include amounts billed for the audit of the Company's
annual consolidated financial statements and the timely review of the financial
statements included in the forms 10-Q filed by the Company during the year, and
for services related to rendering opinions on management's assessment on the
Company's internal controls and the effectiveness thereof. Audit-Related Fees
for 2004 were primarily related to attendance at the Company's steering
committee meetings involving implementation of Section 404 of the Sarbanes-Oxley
Act of 2002. Tax Fees -- Other for 2005 included providing assistance with State
tax audits and voluntary disclosures and assistance in filing for Federal and
State Research and Development (R&D) credits. Ernst & Young LLP has also been
engaged to continue to provide assistance in filing for the 2005 Federal and
State R&D credits. Tax Fees -- Other for 2004 included tax advice, tax planning
and assistance in obtaining business tax incentives. All other fees relate to
the subscription to a web-based technical guidance service.
The Audit Committee has adopted a policy that requires advance approval of
all audit, audit-related, tax services, and other services performed by the
independent auditor. The policy provides for pre-approval by the Audit Committee
of specifically defined audit and non-audit services. Unless the specific
service has been previously pre-approved with respect to that year, the Audit
Committee must approve the permitted service before the independent auditor is
engaged to perform it. All non-audit engagements and their associated fees
during 2005 and 2004 were approved in advance by the Audit Committee.
The Company's engagement letter with Ernst & Young is subject to
alternative dispute resolution procedures and an exclusion of punitive damages.
19
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
to the Annual Meeting and does not intend to bring other matters before the
Annual Meeting. However, if any other matters properly come before the Annual
Meeting, it is intended that the persons named in the accompanying proxy form
will vote thereon according to their best judgment and interest of the Company.
No shareholder has informed the Company of any intention to propose any other
matter to be acted upon at the Annual Meeting. Accordingly, the persons named in
the accompanying proxy form are allowed to exercise their discretionary
authority to vote upon any such proposal without the matter having been
discussed in this Proxy Statement.
By Order of the Board of Directors,
RICHARD M. LAVERS
Secretary
Dated: March 30, 2006
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APPENDIX A
Each year, the Board of Directors will make and disclose an affirmative
determination as to the independence of each of the directors according to the
standards set forth below.
Any Director's relationship with Coachmen (including its affiliates) will
be deemed immaterial unless it exceeds the following standards:
1. There may be no commercial, industrial, banking, or consulting
(including legal and accounting firm) relationship between any enterprise the
Director owns, controls or of which he or she is an officer (which does not
include a directorship of such enterprise), or for which he or she is an agent
or employee, where the sales to, or purchases from such enterprise, in any
single year, exceed the greater of $1 million, or 2% of such enterprise's
consolidated gross revenues, until three (3) years after falling below such
threshold;
2. There may be no personal loans between the Director and Coachmen; and,
3. A Director may not be a trustee, director or officer of a charitable
organization to which Coachmen paid in either of the preceding two calendar
years, or is anticipated to pay in the current or next calendar year, more than
the greater of fifty thousand dollars ($50,000), or thirty percent (30%) of the
total amount paid to all charities in the preceding calendar year, in both cases
excluding any matching of employee contributions to charities that are not
actively promoted by the company to its employees;
For relationships not covered by the above standards, the determination of
whether the relationship is material or not, and therefore whether the director
would be independent or not, shall be made by the directors who satisfy the
independence standards set forth above.
In addition: (i) A director who is an employee, or whose immediate family
member is an executive officer, of Coachmen is not independent until three (3)
years after the end of such employment relationship; (ii) A director who
receives, or whose immediate family member receives, more than $100,000 per year
in direct compensation from Coachmen, other than director and committee fees and
pension or other forms of deferred compensation for prior service (provided such
compensation is not contingent in any ways on continued service), is not
independent until three (3) years after he or she ceases to receive more than
$100,000 per year in such compensation; (iii) A director who is affiliated with
or employed by, or whose immediate family member is affiliated with or employed
in a professional capacity by, a present or former internal or external auditor
of the Company is not "independent" until three (3) years after the end of
either the affiliation or the auditing relationship; (iv) A director who is
employed, or whose immediate family member is employed as an executive office of
another company where any of Coachmen's present executives serve on that
company's compensation committee is not "independent" until three (3) years
after the end of such service or the employment relationship; (iv) A director
who is an executive officer or an employee, or whose immediate family is an
executive officer of a company that makes payments to, or receives payments
from, Coachmen for property or services in an amount which, in any single year,
exceeds the greater of $1 million, or 2% of such other company's consolidated
gross revenues, in each case is not "independent" until three (3) years after
falling below such threshold.
21
APPENDIX B
COACHMEN INDUSTRIES, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE CHARTER
As amended and adopted February 15, 2005
I. PURPOSE
The Audit Committee shall provide assistance to the corporate directors in
fulfilling their responsibility to oversee that management has: maintained the
reliability and integrity of the accounting policies and financial reporting and
disclosure practices of the Company; established and maintained processes to
assure that an adequate system of internal control is functioning within the
Company; and established and maintained reasonable processes to assure
compliance by the Company with all applicable laws, regulations and corporate
policy, including compliance, risk management and legal affairs. The Audit
Committee shall also review and monitor the Company's investment policy.
The Audit Committee will fulfill these responsibilities primarily by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of no less than three (3) or more
Directors (as determined from time to time by the Board) each of whom shall meet
the independence and experience requirements of the New York Stock Exchange. All
members of the Audit Committee shall have a working familiarity with basic
finance and accounting practices, and at least two members of the Audit
Committee shall have accounting or related executive financial management
expertise. The Committee may in its discretion delegate tasks to sub-committees
from time to time.
III. MEETINGS
The Audit Committee shall meet at least four times annually, or more
frequently as it deems necessary to fulfill its responsibilities.
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee does not itself prepare financial statements or perform
audits, and its members are not auditors or certifiers of the Company's
financial statements. It is not the duty of the Audit Committee to determine
that the Company's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles, to conduct
investigations, to resolve disagreements, if any, between management and the
Outside Auditors, or to assure compliance with laws and regulations and the
Company's policies.
To fulfill its responsibilities and duties, the Audit Committee shall
perform the following functions and report regularly to the Board thereon:
1. Review and reassess, at least annually, the adequacy of this Charter.
Make recommendations to the Board, as conditions dictate, to update this Charter
and publish the Committee's purpose in the proxy statement to its shareholders.
2. Review with management and the Outside Auditors the Company's Annual
Report on Form 10-K and financial statements, including a discussion with the
Outside Auditors of the matters required to be discussed by Statement of
Auditing Standards No. 61 ("SAS no. 61"), Communication with Audit Committees,
and including the company's disclosures under MD&A; and discuss the Company's
earnings press releases, as well as financial information and earnings guidance
provided to analysts and rating agencies.
22
3. Review with management and the Outside Auditors the Quarterly Report on
Form 10-Q prior to its filing or prior to the release of earnings, including a
discussion with the Outside Auditors of the matters to be discussed under
generally accepted accounting standards, and including the company's disclosures
under MD&A; and discuss the Company's earnings press releases, as well as
financial information and earnings guidance provided to analysts and rating
agencies. The Chairperson of the Audit Committee may represent the entire Audit
Committee for purposes of this review.
4. Select, evaluate and, where appropriate, replace independent certified
accountants as the auditors of the Company ("Outside Auditors"), and review the
performance of the Outside Auditors. The Audit Committee shall approve all fees
payable to Outside Auditors, and shall approve all non-audit services to be
performed by the Outside Auditors. The Audit Committee shall report to the full
Board of Directors as to the performance and independence of the Outside
Auditors. The Audit Committee shall set clear hiring policies for employees or
former employees of the independent auditors.
5. Oversee independence of the Outside Auditors by receiving from and
discussing with them at least annually: a report concerning their internal
quality-control procedures; a report concerning any material issues raised by
the most recent internal quality-control review, or peer review, of the firm, or
by any inquiry or investigation by governmental or professional authorities,
within the preceding five (5) years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such issues; and,
a formal written statement delineating all relationships between the Outside
Auditors and the Company, and any other relationships that might impact the
objectivity and independence of the Outside Auditors, and including those
disclosures required under standards issued by the Independence Standards Board.
Based on such review the Audit Committee shall assess the independence of the
Outside Auditors and take appropriate action.
6. In conjunction with the Outside Auditors, review the integrity and
quality of the Company's financial reporting processes (internal and external),
accounting principles, judgments and estimates, and any material financial or
other arrangements which do not appear in the financial statements of the
Company, and review any major changes in the Company's auditing and accounting
principles and practices as suggested by the Outside Auditors, internal auditors
or management.
7. Review and discuss with management and the Outside Auditors the adequacy
of the Company's internal controls and internal audit procedures, including the
appointment or replacement of the senior internal auditing executive.
8. Review and discuss the Company's policies with respect to risk
assessment and risk management;
9. Review in conjunction with the General Counsel legal and regulatory
matters which may have a material effect on the financial statements, including
material pending legal proceedings and other contingent liabilities, and any
material reports or inquiries received from regulators or governmental agencies.
10. Meet at least quarterly with the Chief Financial Officer, the senior
internal auditing executive, and the Outside Auditors in separate executive
sessions, and with management present, to discuss the results of their
examinations, any audit problems or difficulties, and other matters, including
management's responses.
11. Have the authority to retain such outside counsel, experts or other
advisors as it determines appropriate to assist in the full performance of its
functions.
12. Have the authority to investigate any matter brought to its attention
with full access to all books, records, facilities and personnel of the Company.
13. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
14. Annually assess its performance of the duties specified in this
Charter, and report its findings to the Board.
23
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[COA LOGO] c/o National City Bank V O T E B Y T E L E P H O N E
Corporate Trust Operations ---------------------------------
Locator 5352
P. O. Box 92301 Have your proxy card available
Cleveland, OH 44101-4301 when you call TOLL-FREE
1-888-693-8683 using a touch-tone
phone and follow the simple
instructions to record your vote.
---------------------------------
V O T E B Y I N T E R N E T
---------------------------------
Have your proxy card available
when you access the website
WWW.CESVOTE.COM and follow the
simple instructions to record
your vote.
---------------------------------
V O T E B Y M A I L
---------------------------------
Please mark, sign and date your
proxy card and return it in the
POSTAGE-PAID ENVELOPE provided or
return it to: National City Bank,
P. O. Box 535300, Pittsburgh PA
15253.
------------------------ ---------------------------- -------------------------
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call Toll-Free using Access the Website and Return your proxy
a touch-tone telephone: cast your vote: in the postage-paid
1-888-693-8683 WWW.CESVOTE.COM envelope provided
------------------------ ---------------------------- -------------------------
VOTE 24 HOURS A DAY, 7 DAYS A WEEK.
IF YOU VOTE BY TELEPHONE OR OVER THE INTERNET, DO NOT MAIL YOUR PROXY CARD.
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--->
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Proxy card must be signed and dated below.
\/ Please fold and detach card at perforation before mailing. \/
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COACHMEN INDUSTRIES, INC.
PROXY THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
The undersigned shareholder(s) of Coachmen Industries, Inc., an Indiana corporation, hereby appoints Claire C. Skinner and William
P. Johnson, and each of them, as my (our) proxies, each with the power to appoint a substitute, and hereby authorizes them, and each
of them individually, to represent and to vote, as designated below, all of the shares of Coachmen Industries, Inc. which the
undersigned is or may be entitled to vote at the Annual Meeting of Shareholders to be held at the Christiana Creek Country Club,
Elkhart, Indiana, at 10:00 a.m. local time, on May 4, 2006, or any adjournment thereof, with the same authority as if the
undersigned were personally present.
YOUR SIGNATURE ON THIS PROXY IS YOUR ACKNOWLEDGEMENT OF RECEIPT OF THE NOTICE OF MEETING AND PROXY STATEMENT.
Dated: 2006
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Signature
---------------------------------------
Signature if held jointly
NOTE: Please sign exactly as name
appears above. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee, or guardian,
please give title as such. If
shareholder is a corporation, please
sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in
partnership name by authorized person.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.
YOUR VOTE IS IMPORTANT
If you do not vote by telephone or Internet, please sign and date this proxy card and return it promptly in the
enclosed postage-paid envelope, or otherwise to National City Bank, P. O. Box 535300, Pittsburgh, PA 15253, so your
shares may be represented at the Annual Meeting. If you vote by telephone or Internet, it is not necessary to
return this proxy card.
Proxy card must be signed and dated below.
\/ Please fold and detach card at perforation before mailing. \/
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COACHMEN INDUSTRIES, INC. PROXY
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS BELOW:
1. Election of two (2) directors, (1) Claire C. Skinner and (2) Donald W. Hudler, each to serve for a three-year term expiring in
2009, and election of one (1) director, (3) Philip G. Lux, to serve for a special one-year term expiring in 2007.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed above
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW:
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(Continued and to be dated and signed on reverse side.)