Palm Harbor Homes, Inc. Reports Third Quarter Fiscal 2008 Results

DALLAS--(Business Wire)--Palm Harbor Homes, Inc. (NASDAQ: PHHM) today reported financial
results for the third quarter and nine months of fiscal 2008 ended
December 28, 2007.

Net sales for the third quarter totaled $140.6 million compared
with $151.4 million in the year-earlier period. Net loss for the third
quarter totaled $9.3 million, or ($0.41) per diluted share, compared
with net loss of $2.6 million, or ($0.11) per diluted share, a year
ago.

Net sales for the nine months ended December 28, 2007, were $428.6
million compared with $525.3 million in the year-earlier period. Net
loss for the year-to-date period in fiscal 2008 totaled $111.6
million, or ($4.88) per diluted share, compared with net loss of $4.3
million, or ($0.19) per diluted share, in the prior-year period. These
results include non-recurring, non-cash charges of $95.7 million, or
$4.19 per share, taken in the second quarter of fiscal 2008 related to
the impairment of all of the Company's previously recorded goodwill
and the establishment of a valuation allowance against all of the
Company's net deferred tax assets. Excluding these non-recurring,
non-cash charges, net loss for the nine months ended December 28,
2007, was ($0.69) per share.

Commenting on the results, Larry Keener, chairman and chief
executive officer of Palm Harbor Homes, Inc., said, "Palm Harbor's
results for the third quarter of fiscal 2008 reflect the significant
issues and challenges facing the overall housing market. National
HUD-code shipments are down 19 percent through November. The key
states of Florida, Arizona and California are down 43 percent and
comprise 48 percent of the total national decline in shipments. Texas,
Florida, Arizona and California are the top four destination states
for Palm Harbor's HUD- code shipments. However, despite the weakness
in three of the four largest markets for our HUD-code products, our
same store unit sales increased 20 percent for the quarter driven
primarily by increased Texas retail deliveries.

"National modular shipments are off 18 percent through September,"
added Keener. Modular sales accounted for 36 percent of the Company
revenues in the quarter. While average selling prices were higher in
the third quarter, unit sales were down due to weaker housing demand
trends. The severe downturn of the overall housing market created by a
return to more prudent lending practices has produced excess
site-built inventory directly competitive with modular housing."

"We continue to focus on effectively managing our business in
tandem with market conditions," Keener added. "During the fourth
quarter of fiscal 2008, we will take the necessary steps to reduce our
manufacturing capacity and distribution channels to effectively align
with current and expected regional demand. As a result, we expect to
incur approximately $8.0 to $10.0 million in restructuring charges in
the fourth quarter of fiscal 2008.

"Going forward, we intend to execute in three key areas. First, we
must continue to drive revenues in this market environment through an
expanded product offering, including the less expensive manufactured
and modular products introduced during the first quarter of fiscal
2008, enhanced marketing and advertising efforts, and expanded
distribution channels. Along with this, we will continue to identify
ways to reduce our fixed costs and improve our operating efficiencies.
Finally, we are focused on cash generation and conservation throughout
our operations. While we do not see any near-term signs of recovery
for the factory-built housing industry, we believe these actions will
more effectively position Palm Harbor to be profitable in this
environment. Additionally, our unique structure as the only publicly
traded vertically-integrated company in our industry provides us with
the ability to operate a very profitable finance and insurance
business."

Kelly Tacke, executive vice president and chief financial officer
of Palm Harbor Homes, Inc., commented, "The restructuring actions we
will take in the fourth quarter of fiscal 2008 are expected to result
in annual savings of approximately $20 million. We are committed to
taking the necessary steps to return Palm Harbor to profitability."

A conference call regarding this release is scheduled for
tomorrow, January 23, 2008, at 10:00 a.m. (Eastern Time). Interested
parties can access a live simulcast on the Internet at
www.PalmHarbor.com or www.earnings.com. A 30-day replay will be
available on both websites.

Palm Harbor Homes is one of the nation's leading manufacturers and
marketers of multi-section manufactured homes. The Company markets
nationwide through vertically integrated operations, encompassing
manufacturing, marketing, financing and insurance. For more
information on the Company, please visit www.palmharbor.com.

This press release contains projections and other forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. These projections and statements reflect the
Company's current views with respect to future events and financial
performance. No assurance can be given, however, that these events
will occur or that these projections will be achieved and actual
results could differ materially from those projected as a result of
certain factors. A discussion of these factors is included in the
Company's periodic reports filed with the Securities and Exchange
Commission.

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*T
PALM HARBOR HOMES, INC.
Statements of Operations

(Dollars in thousands, except earnings per share)
For the third quarter and nine months ended December 28, 2007 and
December 29, 2006
----------------------------------------------------------------------
Third Quarter Ended Nine Months Ended
----------------------------------------------------------------------
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2007 2006 2007 2006
----------------------------------------------------------------------

(Unaudited) (Unaudited)
Net sales $140,626 $151,402 $ 428,559 $525,341
Cost of sales 108,524 115,568 325,568 397,394
Selling, general and
administrative expenses 37,552 36,577 112,106 122,857
Goodwill impairment 0 0 78,506 0
----------------------------------------------------------------------

Income (loss) from
operations (5,450) (743) (87,621) 5,090

Interest expense (4,814) (4,174) (13,986) (11,298)
Equity in loss of limited
partnership and impairment
charges 0 0 0 (4,709)
Interest income and other 1,013 1,249 3,509 3,545
----------------------------------------------------------------------

Loss before income taxes (9,251) (3,668) (98,098) (7,372)
Income tax benefit (expense) 0 1,052 (13,501) 3,033
----------------------------------------------------------------------

Net loss $ (9,251) $ (2,616) $(111,599) $ (4,339)
======================================================================
Net loss per common share -
basic and diluted $ (0.41) $ (0.11) $ (4.88) $ (0.19)
======================================================================
Weighted average common
shares outstanding - basic
and diluted 22,852 22,852 22,852 22,852
======================================================================

Condensed Balance Sheets

(Dollars in thousands)
December 28, 2007 and March 30, 2007
----------------------------------------------------------------------
Dec. 28, March 30,
2007 2007
----------------------------------------------------------------------
(Unaudited)
Total Assets:
Cash and cash equivalents $ 29,816 $ 44,292
Trade accounts receivables 32,676 33,978
Consumer loans receivable,
net 263,770 228,289
Inventories 132,245 138,690
Property, plant and
equipment, net 56,967 59,996
Other assets 59,392 169,877
----------------------------------------------------------------------
Total assets $ 574,866 $675,122
======================================================================

Total Liabilities and
Shareholders' Equity:
Accounts payable and
accrued liabilities $ 90,757 $ 99,939
Floor plan payable 48,296 43,603
Convertible debt 75,000 75,000
Warehouse revolving debt 50,642 12,045
Securitized financings 171,392 194,405
Shareholders' equity 138,779 250,130
----------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 574,866 $675,122
======================================================================

PALM HARBOR HOMES, INC.
Quick Facts

----------------------------------------------------------------------
Third Quarter Ended Nine Months Ended
----------------------------------------------------------------------
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2007 2006 2007 2006
----------------------------------------------------------------------

FACTORY-BUILT HOUSING:
Company-owned superstores
and builder locations:
Beginning 108 111 107 116
Added 1 1 2 6
Closed (3) (1) (3) (11)
----------------------------------------------------------------------

Ending 106 111 106 111
======================================================================

Factory-built homes sold
through:
Company-owned superstores
and builder locations 971 869 2,906 3,161
Independent dealers,
builders & developers 389 620 1,338 2,308
----------------------------------------------------------------------

Total factory-built
homes sold 1,360 1,489 4,244 5,469
======================================================================

Factory-built homes sold as:
Single-section 170 91 506 327
Multi-section 790 922 2,465 3,684
Modular 400 476 1,273 1,458
----------------------------------------------------------------------

Total factory-built
homes sold 1,360 1,489 4,244 5,469
======================================================================

Average sales prices:
Manufactured housing -
retail $ 77,000 $ 78,000 $ 76,000 $ 78,000
Manufactured housing -
wholesale $ 63,000 $ 68,000 $ 63,000 $ 66,000
Modular housing - retail $176,000 $171,000 $ 180,000 $165,000
Modular housing -
wholesale $ 81,000 $ 77,000 $ 80,000 $ 79,000
======================================================================

Homes produced 1,250 1,282 4,007 5,080
Internalization rate
(manufactured and modular) 65% 57% 63% 57%
======================================================================

FINANCIAL SERVICES
Loan originations:
CPM 291 228 735 802
BSM - 162 - 530

Insurance penetration:
Warranty 94% 93% 91% 92%
Physical damage 64% 62% 61% 61%
======================================================================
*T

Palm Harbor Homes, Inc.
Kelly Tacke, 972-991-2422
Executive Vice President and Chief Financial Officer

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