Palm Harbor Homes (PHHM) 8-K Palm Harbor Homes, Inc. Reports First Quarter 2005 Earnings

Exhibit 99.1

Contact:       Lee Posey
Chairman
(972) 991-2422

PALM HARBOR HOMES, INC. REPORTS FIRST QUARTER 2005 EARNINGS

DALLAS(July 20, 2004)-Palm Harbor Homes, Inc. (Nasdaq/NM:PHHM) today reported financial results for the first fiscal quarter ended June 25, 2004.

     Net sales for the first quarter of fiscal 2005 totaled $157.8 million compared with $155.9 million in the year-earlier period. Net income for the first quarter of fiscal 2005 totaled $1.1 million, or $0.05 per share, compared with net income of $0.8 million, or $0.04 per share, a year ago.

     Lee Posey, chairman of Palm Harbor Homes, Inc., remarked, “Fiscal 2005 is off to a positive start for Palm Harbor — as reflected in the favorable year-over-year trends we reported, the modest sequential improvement in revenues over the fourth quarter of fiscal 2004, and our return to profitability. While this improvement was largely driven by higher average sales prices, we believe these results reflect our proven ability to effectively manage our operations and control our costs. Notably, operating income for the first quarter was the best we have reported in the past six quarters. In addition, our backlog currently is higher than it has been in nine quarters, which further confirms a more favorable outlook for fiscal 2005. We believe Palm Harbor is well positioned to benefit from a sustained recovery in demand.”

     Larry Keener, president and chief executive officer of Palm Harbor Homes, Inc., commented, “Along with our continued focus on operational improvements, we remain intent on increasing sales of all of our product lines, including modular housing. We are pleased about the growing demand for modular housing and our first quarter sales of modular homes were up over 54 percent from the first quarter of fiscal 2004. Our innovative Discovery series is getting a lot of attention in the marketplace and we are enthusiastic about the momentum in our business as we continue to expand our market coverage. We are moving ahead on a slow and steady track. Furthermore, we remain confident about establishing our leadership position in this market, and believe that modular housing can be a key driver of Palm Harbor’s growth and profitability in fiscal 2005.”

“Our financial position remains very solid as we have continued to maintain tight control over key balance sheet items,” added Kelly Tacke, chief financial officer of Palm Harbor Homes, Inc. “As previously announced in May 2004, we completed a successful private offering of $75 million aggregate principal amount of senior notes that will be convertible into shares of Palm Harbor’s common stock, subject to certain conditions. We have used a portion of the proceeds from this offering to further strengthen our balance sheet. As such, we have reduced our floor plan payable to $46.7 million from $84.1 million at year-end. We will continue to pursue a fiscally conservative operating strategy and carefully monitor our expenses in fiscal 2005.”

     A conference call regarding this release is scheduled for tomorrow, July 21, 2004, at 10:00 a.m. (Eastern Time). Interested parties can access a live simulcast on the Internet at www.PalmHarbor.com or www.fulldisclosure.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 and modular homes. The Company markets nationwide through vertically integrated operations, encompassing manufacturing, marketing, financing and insurance.

PALM HARBOR HOMES, INC.
Condensed Consolidated Financial Results
(Unaudited)

	First Quarter Ended
	June 25,		June 27,
	2004		2003
Net sales	$	157,751,000	$	155,899,000
Net income		1,051,000		812,000
Net income per share — basic and diluted		0.05		0.04

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 Income

(Dollars in thousands, except earnings per share)
For the first quarter ended June 25, 2004 and June 27, 2003

	First Quarter Ended
	June 25,			June 27,
	2004			2003
	(Unaudited)
Net sales	$	157,751		$	155,899
Cost of sales		117,132			115,522
Selling, general and administrative expenses		37,537			40,295
Income from operations		3,082			82
Interest expense		(1,947	)		(1,691	)
Equity in earnings of limited partnership		445			2,358
Other income		142			586
Income before income taxes		1,722			1,335
Income tax expense		(671	)		(523	)
Net income	$	1,051		$	812
Net income per common share – diluted	$	0.05		$	0.04
Weighted average common shares outstanding – assuming dilution		22,835			22,859

Condensed Balance Sheets

(Dollars in thousands)
June 25, 2004 and March 26, 2004

	June 25,		March 26,
	2004		2004
	(Unaudited)
Assets
Cash and cash equivalents	$	67,552	$	50,915
Trade receivables		54,660		48,766
Loans held for investment, net		106,349		96,833
Inventories		115,230		113,799
Property, plant and equipment, net		79,820		82,547
Other assets		128,580		128,962
Total Assets	$	552,191	$	521,822
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities	$	88,432	$	105,252
Floor plan payable		46,746		84,069
Other liabilities		160,300		76,448
Shareholders’ equity		256,713		256,053
Total Liabilities and Shareholders’ Equity	$	552,191	$	521,822

PALM HARBOR HOMES, INC.
Quick Facts

	First Quarter Ended
	June 25,			June 27,
	2004			2003
FACTORY-BUILT HOUSING:
Company-owned superstores and builder locations:
Beginning		149			158
Added		1			2
Closed		(10	)		(2	)
Ending		140			158
Factory-built homes sold through:
Company-owned superstores and builder locations		1,411			1,683
Independent dealers, builders and developers		739			587
Total factory-built homes sold		2,150			2,270
Factory-built homes sold as:
Single-section		93			127
Multi-section		1,739			1,937
Modular		318			206
Total factory-built homes sold		2,150			2,270
Average sales prices:
Manufactured housing – retail	$	75,000		$	65,000
Manufactured housing – wholesale		51,000			43,000
Modular housing – retail		128,000			130,000
Modular housing – wholesale		72,000			65,000
Homes produced		2,097			2,143
Internalization rate (manufactured and modular)		66	%		74	%
FINANCIAL SERVICES:
Loan originations:
CPM		242			320
BSM		269			505