Exhibit 99.1
PALM HARBOR HOMES, INC. REPORTS
SECOND QUARTER RESULTS FOR FISCAL 2007
DALLAS, Texas (October 17, 2006)–Palm Harbor Homes, Inc. (NASDAQ: PHHM) today reported financial results for the second quarter and first six months of fiscal 2007 ended September 29, 2006.
Net sales for the second quarter totaled $179.4 million compared with $171.0 million in the year-earlier period. Net loss for the second quarter of 2007 totaled $5.3 million, or ($0.23) per share, compared with net income of $1.0 million, or $0.04 per share, a year ago. Results for the second quarter of fiscal 2007 included $8.3 million, or ($0.22) per diluted share, for restructuring charges related to closing eight retail stores and one less-than-efficient factory in Alabama and the write-off of the Company’s investment in BSM Financial, L.P. Excluding these charges, the Company essentially would have reported a break-even quarter. For the second quarter of fiscal 2006, losses associated with Hurricane Rita incurred by the Company’s insurance company, Standard Casualty, and from transportation and delivery delays in Texas reduced profitability for the quarter by approximately $0.06 per share. Net sales for the first six months of fiscal 2007 were $373.9 million compared with $337.2 million in the year-earlier period. Net loss for the first half of fiscal 2007 totaled $1.7 million, or ($0.08) per share, compared with net income of $3.6 million, or $0.16 per share, in the first half of fiscal 2006.
Larry Keener, chairman and chief executive officer of Palm Harbor Homes, Inc., said, “We are pleased to report year-over-year improvement in sales in the second fiscal quarter, even as conditions in the HUD manufacturing industry continued to be challenging. Shipment levels for the industry reflect the underlying weakness for traditional HUD manufactured housing. The lower end of the market continues to be pressured by a lack of financing capacity for retail buyers, while the higher-end products are facing greater competition from site-built housing. As previously announced, in response to this trend, we have reduced our retail housing operations by eight retail stores and closed one less-than-efficient factory in Alabama. We remain focused on managing Palm Harbor for the long term and believe we have taken the right steps to operate profitably in the current business environment.
“Modular housing continues to be a bright spot for Palm Harbor,” added Keener. “Revenues for modular products were up approximately 63 percent through the first half of fiscal 2007 and now account for approximately 30 percent of our recurring revenues. We have continued to aggressively expand our modular home footprint and are excited about the opportunities to develop additional marketing channels. We recently introduced multi-family modular products and are pleased with the initial positive response from builders and developers. Our modular product line allows us to reach a high quality, credit-worthy customer base and continue to grow our business in a declining manufactured housing industry. We will continue to leverage our ability to build, distribute, and finance affordable, customized homes that represent an excellent value for today’s homebuyer. Above all, we are committed to a product offering and high customer satisfaction that clearly distinguishes Palm Harbor Homes in the marketplace.”
Kelly Tacke, executive vice president and chief financial officer of Palm Harbor Homes, Inc., commented, “The strategic actions we have taken to streamline our operations and improve our cost structure have positioned us to be more competitive in this environment. We will realize the benefit of approximately $5.0 million in annual cost savings beginning in the third fiscal quarter. At the same time, we have continued to reduce our receivables and carefully manage our inventories. Our financial position is strong with our balance sheet reflecting $46.4 million in cash and cash equivalents at the end of the second quarter of fiscal 2007. We are confident in our strategic direction and believe the second half of fiscal 2007 will show real progress for Palm Harbor even as market conditions remain challenging.”
A conference call regarding this release is scheduled for Wednesday, October 18, 2006, at 10:00 a.m. (Eastern Time). Interested parties can access a live simulcast on the Internet atwww.PalmHarbor.com orwww.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 factory-built homes. The Company markets nationwide through vertically integrated operations, encompassing manufacturing, marketing, financing and insurance. For more information on the Company, please visitwww.palmharbor.com.
PALM HARBOR HOMES, INC.
Condensed Consolidated Financial Results
| | | | | | | |
| | | Second Quarter Ended |
| | | Sept. 29, 2006 | | | Sept. 23, 2005 |
Net sales | | $ | 179,409,000 | | | $ | 171,005,000 |
Net income (loss) | | | (5,279,000 | ) | | | 1,011,000 |
Net income (loss) per share - basic and diluted | | | (0.23 | ) | | | 0.04 |
| |
| | | Six Months Ended |
| | | Sept. 29, 2006 | | | Sept. 23, 2005 |
Net sales | | $ | 373,939,000 | | | $ | 337,166,000 |
Net income (loss) | | | (1,723,000 | ) | | | 3,642,000 |
Net income (loss) per share - basic and diluted | | | (0.08 | ) | | | 0.16 |
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 Operation
(Dollars in thousands, except earnings per share)
For the second quarter and six months ended September 29, 2006 and September 23, 2005
| | | | | | | | | | | | | | | | |
| | | Second Quarter Ended | | | Six Months Ended | |
| | | Sept. 29,
2006 | | | Sept. 23,
2005 | | | Sept. 29,
2006 | | | Sept. 23,
2005 | |
| | | (Unaudited) | | | (Unaudited) | |
Net sales | | $ | 179,409 | | | $ | 171,005 | | | $ | 373,939 | | | $ | 337,166 | |
Cost of sales | | | 138,784 | | | | 127,733 | | | | 281,826 | | | | 251,297 | |
Selling, general and administrative expenses | | | 42,277 | | | | 39,896 | | | | 86,280 | | | | 77,973 | |
| | | | | | | | | | | | | | | | |
Income (loss) from operations | | | (1,652 | ) | | | 3,376 | | | | 5,833 | | | | 7,896 | |
| | | | |
Interest expense | | | (3,702 | ) | | | (2,856 | ) | | | (7,124 | ) | | | (5,775 | ) |
Equity in earnings (loss) of limited partnership and impairment charges | | | (4,535 | ) | | | 475 | | | | (4,709 | ) | | | 1,029 | |
Interest income and other | | | 1,092 | | | | 716 | | | | 2,296 | | | | 2,805 | |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | (8,797 | ) | | | 1,711 | | | | (3,704 | ) | | | 5,955 | |
Income tax benefit (expense) | | | 3,518 | | | | (700 | ) | | | 1,981 | | | | (2,313 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (5,279 | ) | | $ | 1,011 | | | $ | (1,723 | ) | | $ | 3,642 | |
| | | | | | | | | | | | | | | | |
Net income (loss) per common share – basic and diluted | | $ | (0.23 | ) | | $ | 0.04 | | | $ | (0.08 | ) | | $ | 0.16 | |
| | | | | | | | | | | | | | | | |
Weighted average common shares outstanding – basic and diluted | | | 22,831 | | | | 22,823 | | | | 22,831 | | | | 22,823 | |
| | | | | | | | | | | | | | | | |
Condensed Balance Sheets
(Dollars in thousands)
September 29, 2006 and March 31, 2006
| | | | | | |
| | | Sept. 29, 2006 | | March 31,
2006 |
| | | (Unaudited) | | |
Assets | | | | | | |
Cash and cash equivalents | | $ | 46,378 | | $ | 73,407 |
Trade receivables | | | 47,860 | | | 54,901 |
Consumer loans receivable, net | | | 196,239 | | | 163,112 |
Inventories | | | 150,524 | | | 149,568 |
Property, plant and equipment, net | | | 64,401 | | | 65,512 |
Other assets | | | 171,510 | | | 147,551 |
| | | | | | |
Total Assets | | $ | 676,912 | | $ | 654,051 |
| | | | | | |
Liabilities and Shareholders’ Equity | | | | | | |
Accounts payable and accrued liabilities | | $ | 123,466 | | $ | 135,327 |
Securitized financing | | | 98,010 | | | 105,379 |
Convertible senior notes | | | 75,000 | | | 75,000 |
Other liabilities | | | 119,302 | | | 75,321 |
Shareholders’ equity | | | 261,134 | | | 263,024 |
| | | | | | |
Total Liabilities and Shareholders’ Equity | | $ | 676,912 | | $ | 654,051 |
| | | | | | |
PALM HARBOR HOMES, INC.
Quick Facts
| | | | | | | | | | | | | | | | |
| | | Second Quarter Ended | | | Six Months Ended | |
| | | Sept. 29,
2006 | | | Sept. 23,
2005 | | | Sept. 29,
2006 | | | Sept. 23,
2005 | |
FACTORY-BUILT HOUSING: | | | | | | | | | | | | | | | | |
Company-owned superstores and builder locations: | | | | | | | | | | | | | | | | |
Beginning | | | 117 | | | | 120 | | | | 116 | | | | 121 | |
Added | | | 2 | | | | 1 | | | | 5 | | | | 2 | |
Closed | | | (8 | ) | | | (3 | ) | | | (10 | ) | | | (5 | ) |
| | | | | | | | | | | | | | | | |
Ending | | | 111 | | | | 118 | | | | 111 | | | | 118 | |
| | | | | | | | | | | | | | | | |
Factory-built homes sold through: | | | | | | | | | | | | | | | | |
Company-owned superstores and builder locations | | | 1,085 | | | | 1,092 | | | | 2,292 | | | | 2,267 | |
Independent dealers and builders | | | 724 | | | | 911 | | | | 1,688 | | | | 1,851 | |
| | | | | | | | | | | | | | | | |
Total factory-built homes sold | | | 1,809 | | | | 2,003 | | | | 3,980 | | | | 4,118 | |
| | | | | | | | | | | | | | | | |
Factory-built homes sold as: | | | | | | | | | | | | | | | | |
Single-section | | | 119 | | | | 113 | | | | 236 | | | | 220 | |
Multi-section | | | 1,215 | | | | 1,518 | | | | 2,762 | | | | 3,185 | |
Modular | | | 475 | | | | 372 | | | | 982 | | | | 713 | |
| | | | | | | | | | | | | | | | |
Total factory-built homes sold | | | 1,809 | | | | 2,003 | | | | 3,980 | | | | 4,118 | |
| | | | | | | | | | | | | | | | |
Average sales prices: | | | | | | | | | | | | | | | | |
Manufactured housing – retail | | $ | 82,000 | | | $ | 77,000 | | | $ | 79,000 | | | $ | 76,000 | |
Manufactured housing – wholesale | | $ | 67,000 | | | $ | 62,000 | | | $ | 65,000 | | | $ | 61,000 | |
Modular housing – retail | | $ | 162,000 | | | $ | 143,000 | | | $ | 162,000 | | | $ | 145,000 | |
Modular housing – wholesale | | $ | 81,000 | | | $ | 75,000 | | | $ | 80,000 | | | $ | 75,000 | |
| | | | | | | | | | | | | | | | |
Homes produced | | | 1,663 | | | | 1,990 | | | | 3,798 | | | | 4,008 | |
Internalization rate (manufactured and modular) | | | 59 | % | | | 54 | % | | | 57 | % | | | 55 | % |
| | | | | | | | | | | | | | | | |
FINANCIAL SERVICES | | | | | | | | | | | | | | | | |
Loan originations: | | | | | | | | | | | | | | | | |
CPM | | | 291 | | | | 192 | | | | 574 | | | | 435 | |
BSM | | | 195 | | | | 201 | | | | 368 | | | | 407 | |
| | | | |
Insurance penetration: | | | | | | | | | | | | | | | | |
Warranty | | | 92 | % | | | 91 | % | | | 92 | % | | | 90 | % |
Physical damage | | | 60 | % | | | 56 | % | | | 60 | % | | | 56 | % |
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