Palm Harbor Homes Inc. (PHHM) filed Quarterly Report for the period ended 2009-06-26.
Palm Harbor Homes Inc. is one of the largest producers of multi-section manufactured homes in the United States. The company\'s operations are vertically integrated and encompass manufacturing marketing financing and insurance. The company manufactures a variety of single and multi-section homes under various brand names including Palm Harbor(R) Masterpiece Keystone River Bend and Windsor Homes(TM). Palm Harbor Homes Inc. has a market cap of $56 million; its shares were traded at around $2.45 with and P/S ratio of 0.1.
Highlight of Business Operations:
Selling, General and Administrative Expenses. In dollars, selling, general and administrative expenses decreased $6.8 million to $24.4 million in the first quarter of fiscal 2010 from $31.2 million in the first quarter of fiscal 2009. Of this $6.8 million decrease, $6.6 million related to the factory-built housing segment and $0.6 million related to financial services and was offset by a $0.3 million increase in general corporate expenses. The decline in selling, general and administrative expenses related to the factory-built housing segment resulted from a reduction of six operating sales centers and one factory versus prior year, in addition to a 35% head count decrease and a major decrease in the fixed expenses of our ongoing operations. As a percentage of net sales, selling, general and administrative expenses increased to 29.6% of net sales in the first quarter of fiscal 2010 as compared to 24.0% of net sales in the first quarter of fiscal 2009.
Interest Expense. Interest expense increased 1.7% to $5.0 million in the first quarter of fiscal 2010 from $4.9 million in the first quarter of fiscal 2009. Interest expense increased due to noncash interest expense of $0.8 million related to warrants issued in connection with $4.5 million of short term Promissory Notes, offset by decreased interest expense of $0.3 million related to securitized financings and $0.3 million related to convertible senior notes.
Gain on Repurchases of Convertible Senior Notes. During the first quarter of fiscal 2009, we repurchased $10.8 million principal amount of our convertible senior notes, which had a book value of $9.3 million net of debt discount, for $6.3 million in cash. We recorded a gain of $3.0 million in connection with the repurchases.
Cash and cash equivalents totaled $22.3 million at June 26, 2009, up $9.9 million from $12.4 million at March 27, 2009. Net cash provided by operating activities was $10.6 million in the first quarter of fiscal 2010 as compared to $59.8 million in the first quarter of fiscal 2009. The decrease in net cash provided by operating activities is primarily attributable to $53.7 million of consumer loans sold in the first quarter of fiscal 2009.
Net cash used in financing activities was $5.4 million in the first quarter of fiscal 2010 as compared to $56.3 million in the first quarter of fiscal 2009. Net cash used in financing activities in the first quarter of fiscal 2010 was primarily the result of $6.0 million used to pay down the floor plan facility, and $5.1 million used for payments on securitized financings. These cash outflows were offset by $4.5 million in proceeds from notes payable to related parties and $1.2 million in proceeds from borrowings on the construction lending line. Net cash used in financing activities in the first quarter of fiscal 2009 was primarily attributable to $42.2 million used to repay in full and terminate the warehouse borrowing facility, $8.8 million used for payments on securitized financings, and $6.3 million used to repurchase $10.8 million principal amount of our convertible senior notes.
In 2004, Palm Harbor issued $75.0 million aggregate principal amount of 3.25% Convertible Senior Notes due 2024 (the “Notes”) in a private, unregistered offering. Interest on the Notes is payable semi-annually in May and November. The note holders may require the Company to repurchase all or a portion of their notes for cash on May 15, 2011, May 15, 2014 and May 15, 2019 at a repurchase price equal to 100% of the principal amount of the notes to be repurchased plus accrued and unpaid interest, if any. During the first quarter of fiscal 2009, we repurchased $10.8 million principal amount of the Notes, which had a book value of $9.3 million net of debt discount, for $6.3 million in cash. We recorded a gain of $3.0 million in connection with the repurchase. We did not repurchase any Notes in the first quarter of fiscal 2010. For the three months ended June 26, 2009 and June 27, 2008, the effect of converting the senior notes to approximately 2.1 million and 2.5 million shares, respectively, of common stock was anti-dilutive, and therefore, was not considered in determining diluted earnings per share.
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