Form 11-K
Annual Report
Pursuant to Section 15(D) of the
Securities and Exchange Act of 1934
ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
Palm Harbor Homes, Inc. Employee Savings Plan
Palm Harbor Homes, Inc.
15303 N. Dallas Parkway, Suite 800
Addison, TX 75001
FINANCIAL STATEMENTSAND
SUPPLEMENTAL SCHEDULES
Palm Harbor Homes, Inc. Employee Savings Plan
Years Ended December 31, 2007 and 2006
Palm Harbor Homes, Inc.
Employee Savings Plan
Financial Statements and Supplemental Schedules
Years Ended December 31, 2007 and 2006
Contents
Report of Independent Registered Public Accounting Firm
The Plan Administrator
Palm Harbor Homes, Inc. Employee Savings Plan
We have audited the accompanying statements of net assets available for benefits of the Palm Harbor Homes, Inc. Employee Savings Plan as of December 31, 2007 and 2006, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2007 and 2006, and the changes in its net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2007, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Dallas, Texas
June 26, 2008
1
Palm Harbor Homes, Inc. Employee Savings Plan
Statements of Net Assets Available for Benefits
| | | | | | |
| | | December 31 |
| | 2007 | | 2006 |
Assets | | | | | | |
Investments | | $ | 69,570,512 | | $ | 68,131,016 |
| | |
Receivables: | | | | | | |
Participant contributions | | | 324,129 | | | 333,134 |
Employer contributions | | | 55,936 | | | 59,819 |
Interest income | | | 678 | | | 735 |
| | | | | | |
Total receivables | | | 380,743 | | | 393,688 |
| | | | | | |
Total assets | | | 69,951,255 | | | 68,524,704 |
| | |
Liabilities | | | | | | |
Contributions and earnings refundable | | | 398,930 | | | 436,634 |
Other payables | | | 835 | | | — |
| | | | | | |
Total liabilities | | | 399,765 | | | 436,634 |
| | | | | | |
Net assets available for benefits | | $ | 69,551,490 | | $ | 68,088,070 |
| | | | | | |
See accompanying notes.
2
Palm Harbor Homes, Inc. Employee Savings Plan
Statements of Changes in Net Assets Available for Benefits
| | | | | | | | |
| | | Year Ended December 31 | |
| | 2007 | | | 2006 | |
Additions | | | | | | | | |
Net investment income (loss): | | | | | | | | |
Net depreciation in fair value of investments | | $ | (338,848 | ) | | $ | (87,237 | ) |
Interest and dividends | | | 5,149,500 | | | | 6,222,747 | |
| | | | | | | | |
| | | 4,810,652 | | | | 6,135,510 | |
| | |
Contributions: | | | | | | | | |
Participant | | | 4,637,881 | | | | 5,124,642 | |
Employer | | | 750,741 | | | | 995,466 | |
Rollover | | | 205,660 | | | | 539,040 | |
| | | | | | | | |
Total contributions | | | 5,594,282 | | | | 6,659,148 | |
| | | | | | | | |
Total additions | | | 10,404,934 | | | | 12,794,658 | |
| | |
Deductions | | | | | | | | |
Benefit payments | | | 8,901,493 | | | | 5,568,613 | |
Administrative expenses | | | 40,021 | | | | 40,597 | |
| | | | | | | | |
Total deductions | | | 8,941,514 | | | | 5,609,210 | |
| | | | | | | | |
Net increase | | | 1,463,420 | | | | 7,185,448 | |
| | |
Net assets available for benefits at beginning of year | | | 68,088,070 | | | | 60,902,622 | |
| | | | | | | | |
Net assets available for benefits at end of year | | $ | 69,551,490 | | | $ | 68,088,070 | |
| | | | | | | | |
See accompanying notes.
3
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements
December 31, 2007 and 2006
1. Description of Plan
The following description of the Palm Harbor Homes, Inc. Employee Savings Plan (the Plan) provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering all employees of Palm Harbor Homes, Inc., and certain participating employers who have adopted the Plan (collectively, the Company), who have attained age 18. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Contributions
Participants may contribute up to 18% of pretax annual compensation, as defined in the Plan. Participants may also contribute amounts representing distributions from other qualified plans. The Plan allows for catch-up contributions for eligible participants who have attained age 50 before the close of the Plan year up to the maximum of 75% of compensation, as defined in the Plan. Effective May 1, 2006, the Company implemented automatic enrollment at the rate of 3% for all new and rehired employees. Employees are given the opportunity to decline participation in automatic enrollment by contacting the service provider within 30 days from their date of hire.
The Company contributes on a Plan-year basis 25% of the first 6% of compensation that a participant contributes to the Plan. For participants in the Nationwide Homes and Silver City Manufacturing Plant divisions, the Company contributes 50% of the first 4% of compensation that a participant contributes to the Plan. Participants are eligible for an allocation of the employer contributions beginning on the enrollment date coinciding with or following the date on which they have completed one year of eligible service.
4
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Participant Accounts
Each participant’s account is credited with the participant’s contributions, the Company’s matching contributions, and allocations of Plan earnings and charged with an allocation of administrative expenses, if applicable. Allocations of Plan earnings and administrative expenses are based on participant account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account balance. Forfeited balances of terminated participants’ nonvested accounts are used to reduce Plan expenses and/or future Company contributions. At December 31, 2007 and 2006, $85,696 and $8,456, respectively, were available to be used for future Plan expenses or Company contributions. During 2007 and 2006, forfeitures of $174,048 and $160,103, respectively, were used to supplement the Company contributions.
Upon enrollment in the Plan, a participant may direct employer and employee contributions in 1% increments in various investment options offered by the Plan. Participants may change their investment options daily.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company contribution portion of their accounts plus actual earnings thereon is based on years of continuous service. Participants vest in Company contributions as follows: two years – 20%; three years – 40%; four years – 60%; and five years – 100%. Participants in the Nationwide Homes division vest in Company contributions as follows: one year – 20%; two years – 40%; three years – 60%; four years – 80%; and five years – 100%.
Participant Loans Receivable
Participants may borrow from their fund accounts a minimum of $1,000 up to the lesser of 50% of their vested account balance or $50,000 (adjusted for loan payments during the previous year). A participant may have only one loan outstanding at any time. Loan terms range from up to five years or up to ten years for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear interest at a rate commensurate with local prevailing rates at the prime rate plus 1% as determined by the Benefits Committee. Principal and interest are paid ratably through monthly payroll deductions.
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Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Benefit Payments
Upon termination of service, death, disability, or retirement, a participant or beneficiary may receive a lump-sum amount equal to the vested value of his or her account. Upon the death of a participant who is a current employee, the account is automatically 100% vested. If a participant’s account is $5,000 or less, but greater than $1,000, the balance of such account will be rolled over into a Rollover IRA with Fidelity Investments. If a participant’s account is $1,000 or less, the balance of such account will be distributed in a lump-sum amount upon retirement, disability, death, or termination of employment.
Administration
The Plan is administered by the Company. Fidelity Management Trust Company (Fidelity) serves as trustee, and Fidelity Investments Institutional Operations Company, Inc., serves as record-keeper.
Costs and expenses of administering the Plan are paid by the Company unless paid by the Plan.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, all participants are 100% vested in their account balances. The assets of the Plan would then be distributed to participants in proportion to their vested interests.
Basis of Accounting
The financial statements are prepared on the accrual basis of accounting. Benefit payments are recorded when paid.
6
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
2. Summary of Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Valuation of Investments
Investments in registered investment companies held by Fidelity are valued at fair value based on published market prices that represent the net asset values of the shares held by the Plan at year-end. Investments in the unitized stock fund are determined by the combined value of the underlying common stock and short-term cash position. The fair value of the common stock portion of the fund is based on the closing price of the common stock on its primary exchange. Participant loans are recorded at the unpaid principal balances, which approximate fair value. The short-term cash portion of the unitized stock fund is recorded at cost, which approximates fair value.
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
Purchases and sales of investments are recorded on a trade-date basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis.
New Account Pronouncement
In September 2006, the Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 157 (FAS 157), Fair Value Measurement. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Plan management is currently evaluating the effect that the provisions of FAS 157 will have on the Plan’s financial statements.
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Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
3. Investments
During 2007 and 2006, the Plan’s investments (including investments purchased and sold as well as held during the year) appreciated (depreciated) in fair value as determined by published market prices as follows:
| | | | | | | | |
| | | Year Ended December 31 | |
| | 2007 | | | 2006 | |
Palm Harbor Homes, Inc., common stock | | $ | (432,110 | ) | | $ | (686,369 | ) |
Shares of registered investment companies | | | 93,262 | | | | 599,132 | |
| | | | | | | | |
Net depreciation in fair value of investments | | $ | (338,848 | ) | | $ | (87,237 | ) |
| | | | | | | | |
The fair value of individual investments that represent 5% or more of the Plan’s net assets is as follows:
| | | |
| | | December 31,
2007 |
Fidelity Contrafund | | $ | 15,251,708 |
Davis NY Venture A | | | 13,624,424 |
Fidelity Retirement Government Money Market Fund | | | 8,182,131 |
Fidelity Diversified International Fund | | | 5,665,939 |
Fidelity Puritan Fund | | | 4,439,075 |
Fidelity Value Fund | | | 3,974,468 |
| |
| | | December 31,
2006 |
Fidelity Diversified International Fund | | $ | 4,775,892 |
Fidelity Puritan Fund | | | 4,465,615 |
Fidelity Growth and Income Fund | | | 15,202,612 |
Fidelity Contrafund | | | 13,258,323 |
Fidelity Retirement Government Money Market Fund | | | 7,100,869 |
Fidelity Low Price Stock Fund | | | 4,085,023 |
Fidelity Value Fund | | | 4,791,336 |
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Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service (IRS) dated September 11, 2003, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code), and therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator has indicated that it will take the necessary steps, if any, to bring the Plan’s operations into compliance with the Code.
5. Contributions and Earnings Refundable
Contributions and earnings refundable represents excess contributions and earnings refundable to certain participants in order to comply with certain nondiscrimination requirements.
6. Related Party Transactions
Certain Plan investments in registered investment companies are managed by Fidelity Management Trust Company. Fidelity Management Trust Company is the trustee, and therefore, these transactions qualify as party-in-interest transactions. Additionally, a portion of the Plan’s assets are invested in the Company’s common stock. Because the Company is the Plan Sponsor, transactions involving the Company’s common stock qualify as party-in-interest transactions. All of these party-in-interest transactions are exempt from the prohibited transaction rules.
9
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
7. Reconciliation of Financial Statements to the Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
| | | | | | |
| | | December 31 |
| | 2007 | | 2006 |
Net assets available for benefits per the financial statements | | $ | 69,551,490 | | $ | 68,088,070 |
Add contributions and earnings refundable at end of year | | | 398,930 | | | 436,634 |
| | | | | | |
Net assets available for benefits per the Form 5500 | | $ | 69,950,420 | | $ | 68,524,704 |
| | | | | | |
The following is a reconciliation of benefit payments to participants per the financial statements to the Form 5500:
| | | | | | |
| | | Year Ended December 31 |
| | 2007 | | 2006 |
Benefit payments to participants per the financial statements | | $ | 8,901,493 | | $ | 5,568,613 |
Add contributions and earnings refundable at beginning of year | | | 436,634 | | | 597,956 |
| | | | | | |
Benefit payments to participants per the Form 5500 | | $ | 9,338,127 | | $ | 6,166,569 |
| | | | | | |
10
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
7. Reconciliation of Financial Statements to the Form 5500 (continued)
The following is a reconciliation of total contributions and investment income per the financial statements to the Form 5500:
| | | | | | |
| | | Year Ended December 31 |
| | 2007 | | 2006 |
Total contributions per the financial statements | | $ | 5,594,282 | | $ | 6,659,148 |
Add contributions refundable at end of year | | | 396,338 | | | 402,389 |
| | | | | | |
Total contributions per the Form 5500 | | $ | 5,990,620 | | $ | 7,061,537 |
| | | | | | |
| | | | | | |
| | | Year Ended December 31 |
| | 2007 | | 2006 |
Total investment income per the financial statements | | $ | 4,810,652 | | $ | 6,135,510 |
Add earnings refundable at end of year | | | 2,592 | | | 34,245 |
| | | | | | |
Total investment income per the Form 5500 | | $ | 4,813,244 | | $ | 6,169,755 |
| | | | | | |
Excess contributions and earnings refundable to certain participants in order to comply with certain nondiscrimination requirements for the years ended December 31, 2007 and 2006, were not accrued for Form 5500.
11
Supplemental Schedule
Palm Harbor Homes, Inc. Employee Savings Plan
Schedule H; Line 4i – Schedule of Assets (Held At End of Year)
EIN: 59-1036634
Plan #: 003
December 31, 2007
| | | | | | | | | | |
(a) | | (b) Identity of Issue, Borrower, Lessor, or Similar Party | | (c) Description of Investment,
Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value | | (d)
Cost | | | (e)
Current Value |
* | | Fidelity Management Trust Company | | ContraFund; 208,613.155 shares | | * | * | | $ | 15,251,708 |
* | | Fidelity Management Trust Company | | Retirement Government Money Market Fund; 8,182,130.670 shares | | * | * | | | 8,182,131 |
| | BAMCO, Inc. | | Baron Growth Fund; 27,429.932 shares | | * | * | | | 1,389,875 |
* | | Fidelity Management Trust Company | | Diversified International Fund; 142,003.485 shares | | * | * | | | 5,665,939 |
* | | Fidelity Management Trust Company | | Value Fund; 52,985.848 shares | | * | * | | | 3,974,468 |
* | | Fidelity Management Trust Company | | Puritan Fund; 233,267.213 shares | | * | * | | | 4,439,075 |
* | | Fidelity Management Trust Company | | Intermediate Bond Fund; 147,965.880 shares | | * | * | | | 1,501,854 |
* | | Fidelity Management Trust Company | | Low Price Stock Fund; 83,642.189 shares | | * | * | | | 3,440,203 |
* | | Fidelity Management Trust Company | | Spartan U.S. Equity Index Fund; 25,243.864 shares | | * | * | | | 1,310,157 |
* | | Fidelity Management Trust Company | | Institutional Cash Portfolio; 105,822 shares | | * | * | | | 105,822 |
| | Davis Selected Advisers, LP | | Davis NY Venture A; 340,525.460 shares | | * | * | | | 13,624,424 |
| | Westwood Management Corp. | | WHG Large Cap Value Institutional Fund; 1,434.634 shares | | * | * | | | 17,359 |
| | Westwood Management Corp. | | WHG Small Cap Value Institutional Fund; 39,567.938 shares | | * | * | | | 378,665 |
| | Westwood Management Corp. | | WHG Income OPP Institutional Fund; 1,226.35 shares | | * | * | | | 12,251 |
* | | Fidelity Management Trust Company | | Fidelity Freedom Income Fund; 14,141.518 shares | | * | * | | | 161,920 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2000 Fund; 11,089.072 shares | | * | * | | | 137,172 |
12
Palm Harbor Homes, Inc. Employee Savings Plan
Schedule H; Line 4i – Schedule of Assets (Held At End of Year) (continued)
EIN: 59-1036634
Plan #: 003
| | | | | | | | | | |
(a) | | (b) Identity of Issue, Borrower, Lessor, or Similar Party | | (c) Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value | | (d)
Cost | | | (e)
Current Value |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2005 Fund; 426.952 shares | | * | * | | $ | 5,034 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2010 Fund; 84,163.698 shares | | * | * | | | 1,247,306 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2015 Fund; 30,636.042 shares | | * | * | | | 382,031 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2020 Fund; 76,345.706 shares | | * | * | | | 1,207,026 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2025 Fund; 54,648.324 shares | | * | * | | | 720,265 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2030 Fund; 54,444.265 shares | | * | * | | | 899,419 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2035 Fund; 18,095.375 shares | | * | * | | | 247,545 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2040 Fund; 65,084.470 shares | | * | * | | | 633,272 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2045 Fund; 9,446.080 shares | | * | * | | | 107,213 |
* | | Fidelity Management Trust Company | | Fidelity Freedom 2050 Fund; 6,402.591 shares | | * | * | | | 73,182 |
* | | Palm Harbor Homes, Inc. | | Common stock; 209,898.819 shares | | * | * | | | 1,449,770 |
* | | Participant loans | | Interest rates ranging from 5.0% to 10.5% | | — | | | | 3,005,426 |
| | | | | | | | | | |
| | Total investments | | | | | | | $ | 69,570,512 |
| | | | | | | | | | |
| * | Indicates party-in-interest to the Plan. |
| ** | Investments are participant-directed; thus, cost information is not applicable. |
13
The Plan pursuant to the requirements of the Securities Exchange Act of 1934, the Trustee of the Palm Harbor Homes, Inc. Employee Savings Plan has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
June 26, 2008
| | |
| Palm Harbor Homes, Inc. Employee Savings Plan |
| Name of Plan |
| |
| By | | /s/ Kelly Tacke |
| | Kelly Tacke |
| | Vice President – Finance |
| | Chief Financial Officer and Secretary |
14
