Palm Harbor Homes, Inc. Reports Third Quarter Fiscal 2009 Results

Business Wire, Jan 27, 2009

DALLAS -- Palm Harbor Homes, Inc. (NASDAQ: PHHM) today reported financial results for the third quarter and nine months of fiscal 2009 ended December 26, 2008.

Net sales for the third quarter totaled $89.6 million compared with $140.6 million in the year-earlier period. Net loss for the third quarter totaled $12.9 million, or ($0.56) per share, compared with a net loss of $9.3 million, or ($0. 41) per share, a year ago. The results for the third quarter of fiscal 2009 include a pre-tax gain of $570,000, or $0.02 per share, on the repurchase of convertible senior notes. Excluding this gain, net loss for the third of fiscal 2009 was ($0.58) per share.

Net sales for the nine months ended December 26, 2008, were $330.4 million compared with $428.6 million in the year-earlier period. Net loss for the year-to-date period in fiscal 2009 totaled $17.7 million, or ($0.78) per share, compared with net loss of $111.6 million, or ($4.88) per share, in the prior-year period. The results for the first nine months of fiscal 2009 include a pre-tax gain of $6.4 million, or $0.28 per share, on the repurchase of convertible senior notes. Excluding this non-recurring item, net loss for the first nine months of fiscal 2009 was ($1.06) per share. The results for the nine months ended December 28, 2007 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. Excluding these 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, "Our financial results for the third quarter of fiscal 2009 reflect the severe state of our industry and the weakness in the overall housing market. The prevailing economic uncertainties, credit crisis and general consumer paralysis are keeping potential homebuyers on the sidelines. Manufactured housing shipments for the latest reported three months to the key states of Texas, Florida, Arizona and California declined 37.7 percent from last year's already historically low levels. This drastic slowdown in demand for factory-built homes and decline in retail traffic that began in the second quarter has continued to adversely affect our business and we expect this trend to continue through calendar 2009.

"In light of the economic crisis and challenging business conditions, our top priorities are cash generation and cash preservation in every area of our operations," noted Keener. "The Company has in excess of $100 million of unlevered assets and we are working with a financial advisor to leverage these assets to generate cash through this uncertain economic environment. We are pleased to report that CountryPlace Mortgage, our finance subsidiary, has obtained a $10 million construction lending line, which is especially noteworthy in this credit environment. As previously announced, Textron Financial Corporation (TFC), the Company's floor plan lender, is in the process of an orderly liquidation of certain commercial finance businesses including their housing inventory finance business. We have obtained a waiver from TFC as to a covenant violation as of December 26, 2008, as well as agreed to certain modifications to our credit facility with TFC including a new committed amount of $50.0 million and a new facility expiration date of March 31, 2010. We currently have $58.3 million outstanding under the facility which will be reduced to $50.0 million through normal payoffs.

"In spite of these difficulties, we have continued to manage our operations as efficiently as possible and we have made considerable progress with respect to a number of key initiatives. With the decline in retail demand, we have focused on new areas of business, including commercial and military projects, which present new revenue opportunities for Palm Harbor. These institutions are looking for a quality provider and we are well positioned as the preferred supplier to meet this demand. During the third quarter, we were awarded a new government contract on a $14 million military installation with construction expected to commence in late January. In addition, in spite of current economic conditions, both CountryPlace Mortgage and Standard Casualty, our insurance subsidiary, remain profitable and continue to generate positive cash flow for the Company. These actions demonstrate Palm Harbor's ability to move forward in spite of the challenges we are facing."

Keener continued, "During the fourth fiscal quarter, we are taking additional actions to further reduce our operating costs in light of current and expected demand. We are closing the Nationwide modular plant in Siler City, North Carolina, and several additional underperforming sales centers. Additionally, we are taking steps to lower our quarterly selling, general and administrative expenses, increase margins and further reduce our receivables and inventory levels. The net effect of these actions should lower our go forward breakeven point by approximately $100 million in annual revenues. More importantly, we believe we will be better positioned to sustain a prolonged downturn and benefit from any upside in demand when it occurs. Regardless of market conditions, Palm Harbor remains the most trusted brand name in the industry with a diverse and high-quality product line, an excellent retail and manufacturing team and exceptional customer service."