Palm Harbor Homes, Inc. Reports Fourth Quarter and Fiscal 2008 Year-End Results

DALLAS--(Business Wire)--
Palm Harbor Homes, Inc. (NASDAQ:PHHM) today reported financial
results for the fourth quarter and fiscal year ended March 28, 2008.

Net sales for the fourth quarter totaled $126.5 million compared
with $135.9 million in the year-earlier period. Palm Harbor reported
an operating loss of $7.7 million for the fourth quarter compared with
operating loss of $7.3 million in the same period last year. Net loss
for the fourth quarter of 2008 totaled $12.7 million, or $0.55 per
share, compared with a net loss of $7.2 million, or $0.32 per share, a
year ago. Results for the fourth quarter of fiscal 2008 included $8.3
million, or $0.36 per diluted share, for restructuring charges related
to closing three factories and 18 retail sales centers. Results for
the fourth quarter of fiscal 2007 included $4.1 million, or $0.18 per
diluted share, for restructuring charges related to closing one
factory and five retail sales centers.

Net sales for fiscal 2008 were $555.1 million compared with
$661.2 million a year ago. For fiscal 2008, the operating loss was
$95.3 million compared with the operating loss of $2.2 million in
fiscal 2007. Net loss for fiscal 2008 totaled $124.3 million, or $5.44
per share, compared with the net loss of $11.6 million, or $0.51 per
share, for fiscal 2007. 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, and the
restructuring charges noted above for the fourth fiscal quarter, net
loss for the fiscal year ended March 28, 2008, was $0.89 per share.
Results for fiscal 2007 included $12.1 million, or $0.53 per diluted
share, for restructuring charges taken in the second and fourth
quarters related to closing a total of two factories and 13 retail
sales centers and the write-off of the Company's investment in BSM
Financial, L.P.

Commenting on the results, Larry Keener, chairman and chief
executive officer of Palm Harbor Homes, Inc., said, "Palm Harbor's
results for the fourth quarter of fiscal 2008 reflect the continuation
of what has been the most challenging period in recent history for the
overall housing market. National HUD-code shipments were down 19
percent in calendar 2007 and have continued to decline through the
past quarter. The collapse has been the most dramatic in our key
manufactured housing markets of Florida, Arizona and California, the
mainstays of Palm Harbor's wholesale Lifestyle Community business. In
contrast to the drop in multi-section shipments, our single-section
manufactured housing sales were up over 51 percent for the year,
driven primarily by increased Texas retail deliveries. Modular sales
accounted for 35 percent of the Company revenues in the fourth
quarter. While the average retail selling price of our modular
products was up, sales volumes have been affected by increased
site-built competition and tightened mortgage financing. We continue
to believe that modular products represent an important growth
opportunity for Palm Harbor as market conditions improve.

"Considering the industry environment, we believe we have taken
the difficult, but necessary steps to reduce our manufacturing
capacity and distribution channels to effectively align with current
and expected regional demand," Keener added. "The restructuring
actions, which included the closure of three factories and 18 retail
sales centers, are expected to result in annual savings of
approximately $20 million, primarily in reduced selling, general and
administrative expenses. This restructuring was accomplished on time
and on budget and should lower our go forward breakeven point by
approximately $100 million in annual revenues. We believe we now have
a business model in place that will allow us to be profitable in this
environment while continuing to lead the industry in revenue and gross
margin per home sold.

"As a fully integrated company, we have the additional advantage
of a profitable insurance and finance operation. Standard Casualty,
our insurance subsidiary, had its best year in history and continued
to gain market share with both new policies and renewals ahead of
fiscal 2007 levels. As previously announced, Country Place Mortgage
("CPM"), our full-service lending subsidiary, sold approximately $51.3
million of its $69.4 million warehoused portfolio of chattel and
mortgage loans in April 2008. Notably, we sold these loans at book
value without incurring a loss. Approximately $41.5 million of the
proceeds were used to repay in full and terminate CPM's borrowing
facility. With our continued ability to originate and service
conforming mortgage products, we remain confident in our ability to
provide viable financing alternatives for our credit-worthy
customers."

Keener continued, "As we look to fiscal 2009, our primary
objective will be to return Palm Harbor to profitability by executing
in several key strategic areas. First, we will continue to introduce
new products at lower price points designed for both the manufactured
housing and modular markets we serve. We are focusing our promotional
and advertising efforts on Internet marketing, which has proven to be
a more cost-effective channel to reach new customers and generate
sales leads. We have also identified new distribution channels in the
commercial, military and multi-family markets and believe these each
offer additional growth opportunities for Palm Harbor. Along with
this, we have identified ways to improve our operating efficiencies as
we assimilate the consolidated production into our remaining
factories. Finally, we remain 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
are already realizing the benefits of these actions and remain
confident we will meet our goal to be profitable in fiscal 2009."

Kelly Tacke, executive vice president and chief financial officer
of Palm Harbor Homes, Inc., commented, "We have remained intensely
focused on maintaining a strong financial position and following a
disciplined fiscal strategy through this market cycle. We ended the
year with a solid financial position with our balance sheet reflecting
over $28.2 million in cash and cash equivalents as of March 28, 2008.
As we enter fiscal 2009, we believe we have taken the necessary steps
to reduce our costs and effectively align our overhead with current
demand."

A conference call regarding this release is scheduled for
tomorrow, May 21, 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 fourth quarter and fiscal year ended March 28, 2008 and March
30, 2007
----------------------------------------------------------------------
Fourth Quarter Ended Fiscal Year Ended
----------------------------------------------------------------------
March 28, March 30, March 28, March 30,
2008 2007 2008 2007
----------------------------------------------------------------------
(Unaudited)
Net sales $126,537 $135,906 $ 555,096 $661,247
Cost of sales 95,803 106,025 421,371 503,419
Selling, general and
administrative expenses 38,456 37,159 150,562 160,016
Goodwill impairment -- -- 78,506 --
----------------------------------------------------------------------

Loss from operations (7,722) (7,278) (95,343) (2,188)

Interest expense (4,668) (4,397) (18,654) (15,695)
Equity in loss of limited
partnership and impairment
charges -- -- -- (4,709)
Interest income and other 116 1,356 3,625 4,901
----------------------------------------------------------------------

Loss before income taxes (12,274) (10,319) (110,372) (17,691)
Income tax benefit (expense) (389) 3,092 (13,890) 6,126
----------------------------------------------------------------------

Net loss $(12,663) $ (7,227) $(124,262) $(11,565)
======================================================================
Loss per common share:
Basic and diluted $ (0.55) $ (0.32) $ (5.44) $ (0.51)
======================================================================
Weighted average common
shares outstanding:
Basic and diluted 22,852 22,852 22,852 22,852
======================================================================

Condensed Balance Sheets

(Dollars in thousands)
March 28, 2008 and March 30, 2007
----------------------------------------------------------------------
March 28, March 30,
2008 2007
----------------------------------------------------------------------
Assets
Cash and cash equivalents $ 28,206 $ 44,292
Trade accounts receivables 31,616 33,978
Consumer loans receivable,
net (including $51,300 of
loans sold in April 2008) 267,636 228,289
Total inventories 123,294 138,690
Property, plant and
equipment, net 47,002 60,247
Other assets 67,646 177,768
----------------------------------------------------------------------
Total Assets $ 565,400 $683,264
======================================================================

Liabilities and
Shareholders' Equity
Accounts payable and
accrued liabilities $ 96,853 $108,081
Floor plan payable 59,367 43,603
Convertible debt 75,000 75,000
Warehouse revolving debt 42,175 12,045
Securitized financings 165,430 194,405
Shareholders' equity 126,575 250,130
----------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 565,400 $683,264
======================================================================
*T

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PALM HARBOR HOMES, INC.
Quick Facts

----------------------------------------------------------------------
Fourth Quarter Ended Fiscal Year Ended
March 28, March 30, March 28, March 30,
2008 2007 2008 2007
----------------------------------------------------------------------

FACTORY-BUILT HOUSING:
Company-owned sales centers
and builder locations:
Beginning 106 111 107 116
Added -- 1 2 7
Closed (19) (5) (22) (16)
----------------------------------------------------------------------

Ending 87 107 87 107
======================================================================

Factory-built homes sold
through:
Company-owned sales centers
and builder locations 857 842 3,763 4,003
Independent dealers 348 426 1,686 2,734
----------------------------------------------------------------------

Total factory-built
homes sold 1,205 1,268 5,449 6,737
======================================================================

Factory-built homes sold as:
Single-section 152 107 658 434
Multi-section 698 769 3,163 4,453
Modular 355 392 1,628 1,850
----------------------------------------------------------------------

Total factory-built
homes sold 1,205 1,268 5,449 6,737
======================================================================

Average sales prices:
Manufactured housing -
retail $ 76,000 $ 79,000 $ 76,000 $ 79,000
Manufactured housing -
wholesale $ 54,000 $ 64,000 $ 61,000 $ 66,000
Modular housing - retail $164,000 $164,000 $176,000 $165,000
Modular housing - wholesale $ 79,000 $ 84,000 $ 80,000 $ 80,000
======================================================================

Homes produced 1,061 1,226 5,068 6,306
Internalization rate
(manufactured and modular) 66% 63% 64% 58%
======================================================================

FINANCIAL SERVICES
Loan originations:
CPM 204 211 939 1,013
BSM -- 102 -- 632

Insurance penetration:
Warranty 91% 90% 91% 91%
Physical damage 68% 61% 63% 61%
======================================================================
*T

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

Copyright Business Wire 2008