Palm Harbor Homes says recovery signs are mixed
Executives of the struggling factory-built home manufacturer Palm Harbor Homes, Inc. (Nasdaq: PHHM) said the market outlook is unclear in a Wednesday morning conference call. Acknowledging difficult business conditions, CEO Larry Keener warned investors that the company, which sells homes through 107 of its own retail stores and 350 independent retailers, is experiencing margin and downward pricing pressures.
“Are we finally at the bottom of a long slump?” Keener said on the call. “The signs are mixed for recovery.”
For the current first quarter ending June 30, Keener also said “nothing has significantly changed” regarding customer applications from the fourth quarter.
Still, the company feels sales this summer and early fall will be better than a year ago, Keener said, but he refrained from providing specific guidance. There are encouraging trends in Texas that started in late January, but the company is not sure if the increased consumer demand is going to be a continuing trend, he said.
After the close of Tuesday’s trading, Palm Harbor Homes reported weak fourth-quarter results after charges related to closing five retail stores and an unprofitable factory. The Dallas-based company reported revenues of $135.9 million for the fourth quarter ended March 30, down from $180.3 million a year earlier. The net loss for the quarter was $7.2 million, or $0.32 a share, down from a profit of $3.2 million, or $0.14 a share, in the fourth quarter of 2006.
Keener said in a press release the fourth quarter results were affected by “a very challenging business environment.” Falling home prices and excess inventory in several states have “kept home buyers on the sidelines,” he said.
Also on the call, Keener said:
• The company is considering reopening and modernizing the idle Austin, Texas, factory. If the company decides to reopen the factory, he said it will take two to three months for the facility to be operational.
• The company has not decided whether to reopen the Burleson, Texas, factory, which was destroyed by a fire last December, or use the funds to modernize the Austin factory
• The retail closings in the fourth quarter will provide the company with “$12 million to $15 million of ongoing savings”
• It won’t be until the late fall or “maybe later” before the company sees improvement in the California, Arizona and Florida markets, which have been weak for the company
• Palm Harbor’s TV advertising campaign generated a 300% increase in website and 800-number sales leads over the fourth quarter
• The company constructed 164 sites in the fourth quarter
Over the last 52 weeks, shares of the company’s stock have ranged between $12.36 and $21.00. In midday trading, Palm Harbor Homes shares were up 0.51% at $15.72.
