Palm Harbor Homes, Inc. Reports Fourth Quarter and Fiscal 2009 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 27, 2009.

Net sales for the fourth quarter totaled $78.9 million compared with $126.5
million in the year-earlier period. Net loss for the fourth quarter of 2009
totaled $8.6 million, or $0.37 per share, compared with a net loss of $12.7
million, or $0.55 per share, a year ago. The results for the fourth quarter of
fiscal 2009 include a pre-tax gain of $4.2 million, or $0.18 per share, on the
repurchase of convertible senior notes, and $2.3 million, or $0.10 per share,
for restructuring and impairment charges. The results for the fourth quarter of
fiscal 2008 included $8.3 million, or $0.36 per share, for restructuring charges
related to closing three factories and 18 retail sales centers. Excluding these
items, net loss for the fourth quarter of fiscal 2009 totaled $0.46 per share
compared with $0.19 in the year-earlier period.

Net sales for fiscal 2009 were $409.3 million compared with $555.1 million a
year ago. Net loss for fiscal 2009 totaled $26.3 million, or $1.15 per share,
compared with the net loss of $124.3 million, or $5.44 per share, for fiscal
2008. The results for fiscal 2009 include a pre-tax gain of $10.6 million, or
$0.46 per share, on the repurchase of convertible senior notes, and $2.3
million, or $0.10 per share, for restructuring and impairment charges. The
results for fiscal 2008 included 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. Results for fiscal 2008 also include $8.3 million, or $0.36 per
share, for restructuring charges related to closing three factories and 18
retail sales centers. Excluding these items, net loss for fiscal 2009 totaled
$1.51 per share compared with $0.89 in the year-earlier period.

Commenting on the results, Larry Keener, chairman and chief executive officer of
Palm Harbor Homes, Inc., said, "While Palm Harbor began fiscal 2009 on a
positive note, the overall economic concerns, credit crisis and escalating
unemployment have taken their toll on everyone associated with the housing
industry. Our results for the fourth quarter are indicative of the challenging
market conditions and decline in retail demand for factory-built housing. Total
industry shipments, including both HUD-code and modular products, were down over
47 percent through March 2009. Palm Harbor retail deliveries were down 37
percent as compared with the fourth quarter of fiscal 2008 and down 22 percent
for the fiscal year. However, our largest revenue drop was from the key states
of Florida, Arizona and California, with sales to independent retailers,
builders and developers in these markets down over $49 million for the year.

"In addition to the previously announced closed operations, we have taken
further steps to lower our quarterly selling, general and administrative
expenses, increase margins and reduce our receivables and inventory levels. As
of the end of fiscal 2009, we have reduced our breakeven point by approximately
$110 million in annual revenue and $24 million in selling, general and
administrative expenses compared with the end of fiscal 2008. More importantly,
we believe we will be better positioned to sustain a prolonged downturn and
benefit from any upside in demand when it occurs.

"Our financial services businesses continued to be a bright spot for Palm Harbor
with both Standard Casualty, our insurance subsidiary, and CountryPlace
Mortgage, the Company`s mortgage lending subsidiary, delivering a profitable
performance for the year. Standard Casualty has continued to grow, even in a
declining market, by gaining market share and by supplementing its traditional
point of sale business with aftermarket sales direct to homeowners. CountryPlace
Mortgage originated 71 loans during the fourth quarter worth $10.6 million. Both
of these businesses have followed a proven formula to only seek quality business
with minimal risk exposure. And, as a fully integrated company, having a
profitable insurance and finance operation provides a distinct competitive
advantage for Palm Harbor in today`s market."

Keener continued, "For the near term, the outlook for housing, both site-built
and factory-built, remains extremely challenging. A number of issues must be
resolved for any recovery to gain traction, and until inventories decline,
housing prices stabilize, credit is restored and general economic fundamentals
improve, we do not expect any short-term improvement. In the meantime, our
strategy is to manage our operations more efficiently and become a stronger and
leaner Company. Accordingly, we remain focused on three critical areas in our
business for fiscal 2010. Our top priority is to manage our cash and leverage
our balance sheet to maintain adequate liquidity through this uncertain business
climate. We are also streamlining our operations to reduce both marginal costs
and selling, general and administrative expenses, consistent with expected
revenues. And finally, we continue to look for new sources of revenue by
pursuing our creative efforts like flexible products, commercial and military
modular products, and targeted Internet marketing strategies. Regardless of
market conditions, we will continue to leverage Palm Harbor`s core strengths -
the most trusted brand name in the industry, a diverse and high-quality product
line, manufacturing excellence and exceptional customer service. Finally,
without any improvement in market conditions, we expect to return to positive
EBITDA sometime during fiscal 2010," Keener added.

Kelly Tacke, executive vice president and chief financial officer of Palm Harbor
Homes, Inc., commented, "We remain laser focused on maintaining a strong balance
sheet during these unprecedented economic conditions. As a result of our
efforts, our inventories and receivables have declined by $34 million, floor
plan payable is down by $10 million and accounts payable and accrued liabilities
have been reduced by $32 million since the beginning of fiscal 2009. We have
also reduced our selling, general and administrative expenses by over 20 percent
this fiscal year. In addition, we have utilized approximately $10.6 million of
our cash to retire $21.2 million of our convertible senior notes, resulting in a
gain of $10.6 million. We continue to work with financial advisors to help us
leverage over $100 million in unlevered assets to replace the Textron credit
facility, which matures in March 2010, and generate cash through this uncertain
economic environment."

A conference call regarding this release is scheduled for tomorrow, May 28,
2009, 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.

PALM HARBOR HOMES, INC.
Statements of Operations

(Dollars in thousands, except earnings per share)

For the fourth quarter and fiscal year ended March 27, 2009 and March 28, 2008
Fourth Quarter Ended Fiscal Year Ended
March 27, March 28, March 27, March 28,
2009 2008 2009 2008

(Unaudited)
Net sales $ 78,895 $ 126,537 $ 409,274 $ 555,096
Cost of sales 59,686 95,803 312,428 421,371
Selling, general and administrative expenses 28,816 38,456 120,402 150,562
Goodwill impairment -- -- -- 78,506

Loss from operations (9,607 ) (7,722 ) (23,556 ) (95,343 )

Interest expense (3,625 ) (4,668 ) (15,417 ) (18,654 )
Gain on repurchase of convertible senior notes 4,200 -- 10,566 --
Other income 276 116 2,095 3,625

Loss before income taxes (8,756 ) (12,274 ) (26,312 ) (110,372 )
Income tax benefit (expense) 192 (389 ) 8 (13,890 )

Net loss $ (8,564 ) $ (12,663 ) $ (26,304 ) $ (124,262 )
Loss per common share:
Basic and diluted $ (0.37 ) $ (0.55 ) $ (1.15 ) $ (5.44 )
Weighted average common shares outstanding:
Basic and diluted 22,875 22,852 22,856 22,852

Condensed Balance Sheets

(Dollars in thousands)
March 27, 2009 and March 28, 2008
March 27, March 28,
2009 2008
Assets
Cash and cash equivalents $ 12,374 $ 28,206
Trade accounts receivables 23,458 31,616
Consumer loans receivable, net 191,597 267,636
Inventories 97,144 123,294
Property, plant and equipment, net 35,937 47,002
Other assets 51,172 67,646
Total Assets $ 411,682 $ 565,400

Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities $ 64,836 $ 96,853
Floor plan payable 49,401 59,367
Convertible senior notes 53,845 75,000
Warehouse revolving debt -- 42,175
Construction lending line 3,589 --
Securitized financings 140,283 165,430
Shareholders' equity 99,728 126,575
Total Liabilities and Shareholders' Equity $ 411,682 $ 565,400

PALM HARBOR HOMES, INC.
Quick Facts

Fourth Quarter Ended Fiscal Year Ended
March 27, March 28, March 27, March 28,
2009 2008 2009 2008

FACTORY-BUILT HOUSING:
Company-owned sales centers and builder locations:
Beginning 86 106 87 107
Added 1 -- 1 2
Closed (1 ) (19 ) (2 ) (22 )

Ending 86 87 86 87

Factory-built homes sold through:
Company-owned sales centers and builder locations 541 857 2,932 3,763
Independent dealers 145 348 954 1,686

Total factory-built homes sold 686 1,205 3,886 5,449

Factory-built homes sold as:
Single-section 127 152 661 658
Multi-section 407 698 2,254 3,163
Modular 152 355 971 1,628

Total factory-built homes sold 686 1,205 3,886 5,449
Commercial buildings:
Number of commercial buildings sold 21 -- 61 --
Net sales from commercial buildings sold (in 000`s) $ 6,007 $ -- $ 16,671 $ --

Average sales prices:
Manufactured housing - retail $ 72,000 $ 76,000 $ 73,000 $ 76,000
Manufactured housing - wholesale $ 50,000 $ 54,000 $ 54,000 $ 61,000
Modular housing - retail $ 183,000 $ 164,000 $ 175,000 $ 176,000
Modular housing - wholesale $ 76,000 $ 79,000 $ 72,000 $ 80,000

Homes produced 502 1,061 3,268 5,068
Internalization rate (manufactured and modular) 73 % 66 % 69 % 64 %

FINANCIAL SERVICES
Loan originations:
CPM 71 204 294 939

Insurance penetration:
Warranty 89 % 91 % 92 % 91 %
Physical damage 68 % 68 % 70 % 63 %

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

Copyright Business Wire 2009