Palm Harbor Homes, Inc. (NASDAQ:PHHM) today reported financial
results for the third quarter and nine months of fiscal 2010 ended
December 25, 2009.
Net sales for the third quarter totaled $71.8 million compared
with $89.6 million in the prior year period. Net loss for the third
quarter totaled $9.2 million, or ($0.40) per share, compared with a
net loss of $13.7 million, or ($0.60) per share, a year ago.
Net sales for the nine months ended December 25, 2009, were
$229.0 million compared with $330.4 million in the nine months
ended December 26, 2008. Net loss for the year-to-date period in
fiscal 2010 totaled $29.6 million, or ($1.29) per share, compared
with net loss of $22.1 million, or ($0.97) per share, in the
prior-year period.
Financing and Restructuring Initiatives
Commenting on the results, Larry Keener, chairman and chief
executive officer of Palm Harbor Homes, Inc., said, "Our results
for the third quarter reflect the current market environment in the
overall housing industry. We have continued to revise our operating
strategy and better position the Company to sustain this downturn
and, at the same time, benefit from any market improvement when it
occurs. Our primary focus has been to maintain adequate liquidity
for operations. On January 27, 2010, we reached an agreement with
Textron Financial Corporation to amend the terms of our floor plan
facility and extend the expiration date until April 2011, and in
certain circumstances, further extend through June 2012. The
Company, through Country Place Mortgage, has also closed on a new,
four-year, $20 million secured term loan from entities managed by
Virgo Investment Group LLC (“Virgo”). Proceeds will be used for
working capital and general corporate purposes. We are very pleased
to secure this new term loan from Virgo, which represents a
creative financing transaction at a critical inflection point in
our business. We believe this transaction reflects the financial
community’s confidence in Palm Harbor’s business strategy and the
strength of our asset base.
“We have also taken additional steps to reduce our manufacturing
capacity and distribution channels and realign our operational
overhead to meet current and expected demand. As a result, we will
be closing two factories and 21 underperforming sales centers and
will have seven factories in operation and a total of 57 sales
locations. We expect to incur restructuring charges of
approximately $6.0 million over the next two fiscal quarters.
Additionally, we continue to identify ways to lower our quarterly
selling, general and administrative expenses, increase margins and
further reduce our receivables and inventory levels.
Further Improvement in Operating Efficiencies
“In spite of the decline in sales, we have made considerable
progress in managing our costs and improving our operating
efficiencies in this current sales environment,” added Keener.
“While revenues declined 19 percent over the prior year period, our
gross margin for the quarter was a solid 23.4 percent, compared
with 21.2 percent a year ago. This improvement indicates improved
manufacturing efficiencies, a higher internalization rate and a
strong performance by Standard Casualty and Country Place Mortgage.
For the third quarter of fiscal 2010, our selling, general and
administrative expenses declined by $5.2 million, or 18 percent,
reflecting continued cost control initiatives and seven fewer
retail locations. With the additional restructuring actions, we
expect to realize annual savings of approximately $8.0 million.
Overall, we reduced our quarterly operating loss by $4.6 million
from the same period a year ago. These results include a one-time
gain of $1.8 million from the sale of renewal rights for a division
of Standard Casualty included in other income.
“Going forward, we will continue to focus on carefully managing
our costs, achieving further gross margin improvement and
maintaining adequate liquidity to sustain our business through this
cycle. At the same time, we are pursuing innovative ways to both
expand our product offering and reach new distribution channels to
further drive revenues. 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, a profitable insurance and finance operation,
manufacturing excellence and exceptional customer
satisfaction.”
Profitable Insurance and Finance Businesses
“Our financial services operations have remained a bright spot
for Palm Harbor through this challenging environment. Standard
Casualty, our insurance subsidiary, has remained a very consistent
performer for the Company with a profitable third quarter and
steady growth in policies written. Country Place Mortgage, Palm
Harbor’s mortgage lending subsidiary, also remains profitable and
year-to-date loan originations are up four percent in spite of a
very tight lending environment. During the third quarter, Country
Place also became a Ginnie Mae approved lender, a significant
advantage in today’s market. Country Place’s reputation and track
record clearly demonstrates that a good factory-built lending
practice can continue to perform well in a challenging economy,”
added Keener.
Cash Management
Kelly Tacke, executive vice president and chief financial
officer of Palm Harbor Homes, Inc., commented, “We continue to
maintain a very disciplined focus on controlling our costs and
carefully managing our cash. As a result of our efforts and
previous restructuring actions, we have reduced our selling,
general and administrative expenses by over 20 percent through the
first nine months of this fiscal year. Positive cash flows from
operating activities for the same period were approximately $11.5
million. We remain committed to maintaining a strong balance sheet
in light of today’s challenging economic conditions.”
A conference call regarding this release is scheduled for
tomorrow, Tuesday, February 2, 2010, at 9:00 a.m.
(Central Time), 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 third quarter and nine months ended December 25, 2009 and
December 26, 2008
Third Quarter Ended
Nine Months Ended
Dec. 25,
Dec. 26,
Dec. 25,
Dec. 26,
2009
2008
2009
2008
(Unaudited)
(Unaudited)
Net sales $ 71,802 $ 89,642 $ 229,020 $ 330,379 Cost of sales
54,981 70,597 174,862 252,742 Selling, general and administrative
expenses 24,119 29,323
73,154 91,586
Loss from operations (7,298 ) (10,278 ) (18,996 ) (13,949 )
Interest expense (4,046 ) (4,637 ) (13,064 ) (14,009 ) Gain
or repurchase of convertible senior notes 0 467 0 4,242 Other
income 2,232 655
2,671 1,819 Loss before
income taxes (9,112 ) (13,793 ) (29,389 ) (21,897 ) Income tax
benefit (expense) (66 ) 58
(163 ) (184 ) Net loss $
(9,178 ) $ (13,735 ) $ (29,552 ) $ (22,081 )
Net loss per common share - basic
and diluted
$ (0.40 ) $ (0.60 ) $ (1.29 ) $ (0.97 )
Weighted average common shares
outstanding – basic and diluted
22,875 22,875
22,875 22,857
Condensed Balance
Sheets
(Dollars in thousands)
December 25, 2009 and March 27,
2009
December 25,
March 27,
2009
2009 (1)
Assets
(Unaudited)
Cash and cash equivalents $ 7,711 $ 12,374 Trade accounts
receivables 18,359 23,458 Consumer loans receivable, net 178,544
191,597 Inventories 78,559 97,144 Property, plant and equipment,
net 32,049 35,937 Other assets 44,269
51,172 Total Assets $ 359,491 $ 411,682
Liabilities and Shareholders' Equity Accounts payable and
accrued liabilities $ 58,086 $ 64,836 Floor plan payable 44,402
49,401 Convertible debt 49,794 47,939 Warehouse revolving debt
2,398 3,589 Securitized financings 126,130 140,283 Shareholders'
equity 78,681 105,634 Total
Liabilities and Shareholders' Equity $ 359,491 $
411,682
(1) Included in the Company’s
third quarter results for fiscal 2010 and 2009 is the impact of
approximately $677,000 and $741,000, respectively, of non-cash
interest expense related to the retrospective adoption of the new
accounting rules related to convertible debt instruments that may
be settled in cash upon conversion. For the year-to-date period for
fiscal 2010 and 2009, the impact is approximately $1,900,000 and
$2,200,000, respectively. This additional non-cash interest expense
represents the amortization of a debt discount recorded against the
Company’s convertible debt as required under the new accounting
rules, applied retrospectively.
PALM HARBOR HOMES, INC.
Quick Facts
Third Quarter Ended
Nine Months Ended
Dec. 25,
Dec. 26,
Dec. 25,
Dec. 26,
2009
2008
2009
2008
FACTORY-BUILT HOUSING:
Company-owned sales centers and
builder locations:
Beginning 78 87 86 87 Added 1 0 1 0 Closed (1 )
(1 ) (9 ) (1 )
Ending 78 86
78 86 Factory-built homes
sold through:
Company-owned sales centers and
builder locations
578 654 1,754 2,391 Independent dealers, builders & developers
177 213 496
809 Total factory-built homes
sold 755 867
2,250 3,200 Factory-built
homes sold as: Single-section 177 148 482 534 Multi-section 409 459
1,262 1,847 Modular 169 260
506 819
Total factory-built homes sold 755
867 2,250 3,200
Commercial buildings: Number of commercial buildings
sold 7 9 47 40
Net sales from commercial
buildings sold (in 000’s)
$ 655 $ 856 $ 10,300 $ 10,664 Average sales prices:
Manufactured housing – retail $ 64,000 $ 69,000 $ 67,000 $ 74,000
Manufactured housing – wholesale $ 50,000 $ 65,000 $ 52,000 $
54,000 Modular housing – consumer $ 158,000 $ 178,000 $ 165,000 $
174,000 Modular housing – wholesale $ 77,000 $
67,000 $ 75,000 $ 71,000 Homes
produced 650 694 2,022 2,766
Internalization rate (manufactured
and modular)
73 % 69 % 74 %
69 % FINANCIAL SERVICES Loan originations: CPM 88 52
231 223 Insurance penetration: Warranty 82 % 90 % 86 % 92 %
Physical damage 65 % 73 %
67 % 70 %
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