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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 28, 2002
Commission file number 0-26188
PALM HARBOR HOMES, INC.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1036634
- --------------------------------------------- ---------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
15303 Dallas Parkway, Suite 800, Addison, Texas 75001-4600
----------------------------------------------------------
(Address of principal executive offices) (Zip code)
972-991-2422
------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) Yes X No ___ and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares of common stock $.01 par value, outstanding on August 1, 2002 -
22,945,545.
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
JUNE 28, MARCH 29,
2002 2002
--------- ---------
(Unaudited)
ASSETS
Cash and cash equivalents $ 31,344 $ 69,197
Investments 33,398 30,051
Receivables 87,050 80,111
Inventories 122,591 122,048
Other current assets 10,264 9,046
--------- ---------
Total current assets 284,647 310,453
Other assets 96,017 72,215
Property, plant and equipment, net 99,628 92,500
--------- ---------
TOTAL ASSETS $ 480,292 $ 475,168
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 29,743 $ 28,649
Floor plan payable 133,381 134,977
Accrued liabilities 56,310 50,246
Current portion of long-term debt 179 176
--------- ---------
Total current liabilities 219,621 214,048
Long-term debt, less current portion 2,535 2,566
Deferred income taxes 2,263 1,897
Shareholders' equity:
Common stock, $.01 par value 239 239
Additional paid-in capital 54,149 54,149
Retained earnings 219,053 220,359
Accumulated other comprehensive income 1,720 1,939
--------- ---------
275,161 276,686
Less treasury shares (14,193) (14,169)
Unearned compensation (5,095) (5,860)
--------- ---------
Total shareholders' equity 255,873 256,657
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 480,292 $ 475,168
========= =========
See accompanying notes.
1
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
JUNE 28, JUNE 29,
2002 2001
---------- ----------
Net sales $ 138,459 $ 172,560
Cost of sales 98,920 120,621
Selling, general and administrative expenses 40,474 40,929
---------- ----------
Income (loss) from operations (935) 11,010
Interest expense (1,711) (2,621)
Interest income and other 564 1,178
---------- ----------
Income (loss) before income taxes (2,082) 9,567
Income tax (expense) benefit 775 (3,790)
---------- ----------
Net income (loss) $ (1,307) $ 5,777
========== ==========
Net income (loss) per common share -
basic and diluted $ (0.06) $ 0.25
========== ==========
Weighted average common
shares outstanding - basic and diluted 22,949 22,840
========== ==========
See accompanying notes.
2
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
THREE MONTHS ENDED
JUNE 28, JUNE 29,
2002 2001
-------- --------
OPERATING ACTIVITIES
Net income (loss) $ (1,307) $ 5,777
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 3,248 2,926
Deferred income taxes (528) (684)
Loss on disposition of assets 228 --
Provision for long-term incentive plan 741 717
Equity earnings in subsidiary (94) --
Changes in operating assets and liabilities:
Accounts receivable (6,958) (12,740)
Inventories 5,376 8,535
Other current assets (109) 816
Other assets 685 (852)
Accounts payable and accrued liabilities (1,013) 9,641
-------- --------
Cash provided by operations 269 14,136
Loans originated (18,051) (26,113)
Sale of loans 18,516 26,095
-------- --------
Net cash provided by operating activities 734 14,118
INVESTING ACTIVITIES
Business acquired, net of cash acquired (31,329) --
Investment in limited partnership (3,000) --
Purchases of property, plant and equipment, net of proceeds
from disposition (2,216) (2,245)
Purchases of investments (2,233) (3,174)
Sales of investments 1,980 2,323
-------- --------
Net cash used in investing activities (36,963) (3,096)
FINANCING ACTIVITIES
Net payments on floor plan payable (1,596) (10,884)
Principal payments on long-term debt (28) (42)
Net purchases of treasury stock -- (6)
-------- --------
Net cash used in financing activities (1,624) (10,932)
Net increase (decrease) in cash and cash equivalents (37,853) 90
Cash and cash equivalents at beginning of period 69,197 61,290
-------- --------
Cash and cash equivalents at end of period $ 31,344 $ 61,380
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,457 $ 3,234
Income taxes 260 33
See accompanying notes.
3
PALM HARBOR HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements reflect all
adjustments, which include only normal recurring adjustments, which
are, in the opinion of management, necessary for a fair and accurate
presentation. Certain footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The condensed consolidated
financial statements should be read in conjunction with the audited
financial statements for the year ended March 29, 2002. Results of
operations for any interim period are not necessarily indicative of
results to be expected for a full year.
2. Acquisitions/Investments
On June 7, 2002, the Company acquired Nationwide Custom Homes
("Nationwide"), a manufacturer and marketer of modular homes, for $32.5
million in cash. The acquisition was accounted for using the purchase
method of accounting. A tentative purchase price allocation was made as
of June 28, 2002, which resulted in goodwill related to the acquisition
of approximately $26 million. The proforma net income/(loss) for the
year ended March 29, 2002, and the three months ended June 28, 2002,
respectively, are not materially different than the historical results.
In June 2002, the Company invested $3.0 million to become the sole
limited partner and 50% owner of an existing mortgage banking firm, BSM
Financial L. P. ("BSM").
3. Inventories
Inventories consist of the following (in thousands):
JUNE 28, MARCH 29,
2002 2002
---------- ----------
Raw materials $ 9,121 $ 7,631
Work in process 4,893 3,339
Finished goods - manufacturing 2,351 659
Finished goods - retail 106,226 110,419
---------- ----------
$ 122,591 $ 122,048
========== ==========
4. Floor Plan Payable
The Company currently has three floor plan credit facilities with
financial institutions totaling $140.0 million to finance a major
portion of the Company's home inventory at its retail superstores.
These facilities are secured by a portion of the Company's home
inventory and receivables from financial institutions. The interest
rates on the facilities range from prime (4.75% at June 28, 2002) to
prime plus 2.0%. These facilities require notification from the
financial institution six months prior to cancellation. Such
notification has not been received by the Company from any of the
financial institutions. The Company had another facility which expired
June 30, 2002 and the amount outstanding of $10.7 million will be
reduced to zero as the homes are sold. The Company had $133.4 million
and $135.0 million outstanding on its floor plan credit facilities at
June 28, 2002 and March 29, 2002, respectively.
4
The Company's three floor plan facilities contain certain provisions
regarding minimum financial requirements which the Company must
maintain in order to borrow against the facilities. As of June 28,
2002, the Company was in compliance with two of the floor plan facility
agreements, as amended, and had obtained a waiver to be in compliance
with the third agreement. The Company is currently in the process of
amending all three agreements in order to continue to comply with the
terms of the floor plan arrangements. While the Company believes it
will be successful in obtaining the satisfactory amendments to all
three of the floor plan facilities, there can be no assurances that the
Company will be successful in this regard.
Two of the Company's floor plan financing agreements permit the Company
to earn interest on investments made with the financial institutions,
which can be withdrawn without any imposed restrictions. These
investments have certain limitations depending upon the amount of floor
plan balance outstanding. The interest rate earned on the amounts
invested is prime (4.75% at June 28, 2002) minus 0.5%. The Company had
$14.9 million and $14.3 million invested at June 28, 2002 and March 29,
2002, respectively, and has classified these amounts as Cash and cash
equivalents in the accompanying Condensed Consolidated Balance Sheets.
5. Lines of Credit
The Company had two revolving lines of credit - one $20.0 million
committed and one $15.0 million uncommitted - from a financial
institution for general corporate purposes. The lines of credit bear
interest, at the option (under certain conditions) of the Company, at
either the LIBOR rate (1.86% at June 28, 2002) plus 2.0% or the prime
rate (4.75% at June 28, 2002) minus 0.25%. The lines of credit contain
provisions regarding minimum financial requirements and certain
indebtedness limitations which would limit the amount available for
future borrowings. The Company's borrowing capacity on the lines of
credit is reduced by letters of credit totaling $3.8 million. The
Company had no amounts outstanding on the lines of credit at June 28,
2002 and March 29, 2002. The lines of credit expired June 26, 2002 and
the Company has received a commitment letter from the financial
institution to extend the availability of the committed line through
June 2003.
6. Commitments and Contingencies
The Company is contingently liable under the terms of repurchase
agreements covering independent retailers' floor plan financing. Under
such agreements, the Company agrees to repurchase homes at declining
prices over the term of the agreement, generally 12 to 18 months. At
June 28, 2002, the Company estimates that its potential obligations
under all repurchase agreements were approximately $13.2 million. It is
management's opinion that no material loss will occur from the
repurchase agreements.
In March 2002, the largest floor plan lender in the industry, Conseco
Finance Servicing Corp. ("Conseco"), announced that they were exiting
the wholesale financing, or floor plan lending, business. The Company's
floor plan agreement with Conseco expired on June 30, 2002 and the
amount outstanding will be reduced to zero as the units are sold. On
May 16, 2002, Conseco indicated its commitment to continue to provide
retail financing; however, they also began notifying manufacturers and
independent retailers that amounts due under floor plan financing
agreements were to be paid in full on or prior to July 17, 2002.
Conseco also indicated in the notification that certain options would
be made available to the retailers. The Company has contacted its
independent retailers where it has repurchase obligations regarding the
impact of this cancellation on their floor plan financing needs. These
retailers
5
have made other arrangements for their financing needs. As of July 31,
2002, the Company had floor plan borrowings of $8.3 million with
Conseco and receivables due from Conseco of approximately $6.0 million.
The Company believes amounts due from Conseco will be collected in the
normal course of business and the Company will not incur significant
losses as the result of doing business with Conseco.
With respect to certain installment contracts sold prior to April 1,
1999, the Company is contingently liable, as guarantor, for up to 50%
of any losses. At June 28, 2002, the outstanding principal balance of
these contracts sold with partial recourse was $32.8 million. With
respect to the installment contracts sold after April 1, 1999, the
Company's contingent liability is limited to a loss of up to $5,000 per
contract. At June 28, 2002, the number of these outstanding contracts
sold with partial recourse was 2,884. Management has consistently
provided for its estimated recourse obligation exposure and has
recorded a reserve of $2.6 million at June 28, 2002.
The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management,
the amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of
the Company.
7. Business Segment Information
The Company operates primarily in two business segments - a "housing"
segment which combines the retail and factory built manufacturing
operations and a financial services segment which combines the
insurance and finance operations. The following table summarizes
information with respect to the Company's business segments for the
three month periods ending June 28, 2002 and June 29, 2001 (in
thousands):
JUNE 28, JUNE 29,
2002 2001
---------- ----------
Net sales
Housing $ 133,659 $ 166,630
Financial services 4,800 5,930
---------- ----------
$ 138,459 $ 172,560
========== ==========
Income (loss) from operations
Housing $ 750 $ 12,739
Financial services 1,889 2,516
General corporate expenses (3,574) (4,245)
---------- ----------
$ (935) $ 11,010
========== ==========
Interest expense $ (1,711) $ (2,621)
Interest income and other 564 1,178
---------- ----------
Income (loss) before income taxes $ (2,082) $ 9,567
========== ==========
6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
See pages 1 through 5.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Fiscal 2003 continues to be impacted by the three major issues that affected
fiscal 2002 - retail financing availability, repossessions and retail inventory
levels. The tightening of credit standards, which began in mid-1999, has
resulted in reduced retail sales levels, declining wholesale shipments and
declining margins for most industry participants.
In March 2002, the largest floor plan lender in the industry, Conseco Finance
Servicing Corp. ("Conseco"), announced that they were exiting the wholesale
financing, or floor plan lending, business. The Company's floor plan agreement
with Conseco expired on June 30, 2002 and the amount outstanding will be reduced
to zero as the units are sold. On May 16, 2002, Conseco indicated its commitment
to continue to provide retail financing; however, they also began notifying
manufacturers and independent retailers that amounts due under floor plan
financing agreements were to be paid in full on or prior to July 17, 2002.
Conseco also indicated in the notification that certain options would be made
available to the retailers. The Company has contacted its independent retailers
where it has repurchase obligations regarding the impact of this cancellation on
their floor plan financing needs. These retailers have made other arrangements
for their financing needs. As of July 31, 2002, the Company had floor plan
borrowings of $8.3 million with Conseco and receivables due from Conseco of
approximately $6.0 million. The Company believes amounts due from Conseco will
be collected in the normal course of business and the Company will not incur
significant losses as the result of doing business with Conseco.
Texas House Bill 1869, which was enacted in January 2002, requires all
manufactured houses in Texas which are not placed in manufactured home rental
communities to be financed with conforming mortgages. Conforming mortgages are
subject to higher credit standards than chattel loans and therefore this new
regulation may cause certain consumers who would have otherwise qualified for
financing under a chattel loan to not qualify under a conforming loan.
During the first quarter of fiscal 2002, the Company entered into an agreement
to become the sole limited partner and 50% owner in BSM Financial L.P. ("BSM"),
a major Dallas mortgage banking firm that has experience and capability in
generating conforming loans in the site built, modular and manufactured housing
markets.
7
In addition, the Company purchased Nationwide Custom Homes ("Nationwide"), a
leading manufacturer and marketer of modular homes. This acquisition should
enable the Company to appeal to creditworthy buyers who are not attracted to the
manufactured housing business as they prefer a builder versus a retailer.
The Company ended the quarter with cash and cash equivalents of $31.3 million,
after investing $35.5 million during the quarter on Nationwide and BSM, and
virtually no long-term debt. The Company's practice of manufacturing only to
retail customer order coupled with closely monitored retail receivables and
stocking levels has enabled the Company to tightly manage retail receivables and
inventory levels. New home inventory per retail superstore declined 5% during
the quarter.
The following table sets forth certain items of the Company's statements of
income as a percentage of net sales for the period indicated.
THREE MONTHS ENDED
JUNE 28, JUNE 29,
2002 2001
-------- --------
Net sales 100.0% 100.0%
Cost of sales 71.4 69.9
-------- --------
Gross profit 28.6 30.1
Selling, general and administrative expenses 29.2 23.7
-------- --------
Income (loss) from operations (0.6) 6.4
Interest expense (1.2) (1.5)
Interest income and other 0.4 0.7
-------- --------
Income (loss) before income taxes (1.4) 5.6
Income tax (expense) benefit 0.5 (2.3)
-------- --------
Net income (loss) (0.9)% 3.3%
======== ========
8
The following table summarizes certain key sales statistics as of and for the
three months ended June 28, 2002 and June 29, 2001.
THREE MONTHS ENDED
JUNE 28, JUNE 29,
2002 2001
-------- --------
Company homes sold through
Company-owned retail superstores 1,675 2,358
Total new homes sold 2,021 2,761
Internalization rate (1) 83% 86%
Average new home price - retail $ 63,000 $ 60,000
Number of retail superstores at
end of period 152 146
Homes sold to independent retailers 343 397
(1) The internalization rate is the percentage of new homes that are
manufactured by the Company and sold through Company-owned retail
superstores.
Table does not include Nationwide Custom Homes which was insignificant for the
quarter.
THREE MONTHS ENDED JUNE 28, 2002 COMPARED TO THREE MONTHS ENDED JUNE 29, 2001
NET SALES. Net sales decreased 19.8% to $138.5 million in the first
quarter of fiscal 2003 from $172.6 million in the first quarter of fiscal 2002.
The decrease in net sales was primarily due to competitive conditions in the
manufactured housing industry as indicated by a decrease of 29.0% in the volume
of homes sold through Company-owned retail superstores while overall unit
volume, which includes sales to independent retailers, declined 26.8% in the
current quarter. This decline in volume is partially offset by an increase in
the average selling price of a new home to $63,000 in the first quarter of
fiscal 2003 versus $60,000 in the first quarter of fiscal 2002. The increase in
average selling price resulted from a slight shift in product mix towards
multi-section homes. Multi-section homes represented 91% of the Company's homes
sold in the first quarter of fiscal 2003 versus 90% in the first quarter of
fiscal 2002. The number of superstores increased from 146 at the end of the
first quarter of fiscal 2002 to 152 at the end of the first quarter of fiscal
2003.
GROSS PROFIT. In the quarter ended June 28, 2002, gross profit as a
percentage of net sales declined to 28.6% from 30.1% in the quarter ended June
29, 2001. Gross profit decreased 23.9% to $39.5 million in the first quarter of
fiscal 2003 from $51.9 million in the first quarter of fiscal 2002. This
decrease is the result of a decline in unit volume caused by competitive
industry conditions coupled with a decrease in the percentage of homes sold
through Company-owned retail superstores from 86% in the first quarter of fiscal
2002 to 83% in the first quarter of fiscal 2003.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As a percentage of net
sales, selling, general and administrative expenses increased to 29.2% in the
first quarter of fiscal 2003 from 23.7% in the first quarter of fiscal 2002.
Selling, general and administrative expenses decreased slightly from $40.9
million in the quarter ended June 29, 2001 to $40.5 million in the quarter ended
June 28, 2002, reflecting the Company's continued commitment to building brand
awareness via advertising, startup expenses associated with the three new retail
superstores opened during the current quarter as well as the six retail
superstores expected to be opened in the second quarter and training costs
associated with people development.
9
INTEREST EXPENSE. Interest expense decreased 34.7% to $1.7 million for
the first quarter of fiscal 2003 from $2.6 million in the first quarter of
fiscal 2002. This decrease was primarily due to a decrease in the prime interest
rate from 6.75% in the first quarter of fiscal 2002 to 4.75% in the first
quarter of fiscal 2003.
LIQUIDITY AND CAPITAL RESOURCES. The Company currently has three floor
plan credit facilities with financial institutions totaling $140.0 million to
finance a major portion of the Company's home inventory at its retail
superstores. These facilities are secured by a portion of the Company's home
inventory and receivables from financial institutions. The interest rates on the
facilities range from prime (4.75% at June 28, 2002) to prime plus 2.0%. These
facilities require notification from the financial institution six months prior
to cancellation. Such notification has not been received by the Company from any
of the financial institutions. The Company had another facility which expired
June 30, 2002 and the amount outstanding will be reduced to zero as the homes
are sold. The Company had $133.4 million and $135.0 million outstanding on its
floor plan credit facilities at June 28, 2002 and March 29, 2002, respectively.
The Company's three floor plan facilities contain certain provisions
regarding minimum financial requirements which the Company must maintain in
order to borrow against the facilities. As of June 28, 2002, the Company was in
compliance with two of the floor plan facility agreements, as amended, and had
obtained a waiver to be in compliance with the third agreement. The Company is
currently in the process of amending all three agreements in order to continue
to comply with the terms of the floor plan arrangements. While management
believes it will be successful in obtaining the satisfactory amendments to all
three of the floor plan facilities, there can be no assurances that the Company
will be successful in this regard.
Two of the Company's floor plan financing agreements permit the Company
to earn interest on investments made with the financial institutions, which can
be withdrawn without any imposed restrictions. These investments have certain
limitations depending upon the amount of floor plan balance outstanding. The
interest rate earned on the amounts invested is prime (4.75% at June 28, 2002)
minus 0.5%. The Company had $14.9 million and $14.3 million invested at June 28,
2002 and March 29, 2002, respectively, and has classified these amounts as Cash
and Cash Equivalents in the accompanying Condensed Consolidated Balance Sheets.
The Company had two revolving lines of credit - one $20.0 million
committed and one $15.0 million uncommitted - from a financial institution for
general corporate purposes. The lines of credit bear interest, at the option
(under certain conditions) of the Company, at either the LIBOR rate (1.86% at
June 28, 2002) plus 2.0% or the prime rate (4.75% at June 28, 2002) minus 0.25%.
The lines of credit contain provisions regarding minimum financial requirements
and certain indebtedness limitations which would limit the amount available for
future borrowings. The Company's borrowing capacity on the lines of credit is
reduced by letters of credit totaling $3.8 million. The Company had no amounts
outstanding on the lines of credit at June 28, 2002 and March 29, 2002. The
lines of credit expired June 26, 2002 and the Company has received a commitment
letter from the financial institution to extend the availability of the
committed line through June 2003.
In July 1999, the Company's Board of Directors authorized, subject to
certain business and market conditions, the use of up to $20.0 million to
repurchase the Company's common stock. In July 2000, the Board of Directors
authorized another $20.0 million for common stock repurchases. As of August 1,
2002, the Company had invested $20.5 million in the common stock buyback
program.
10
Management believes that cash flow from operations, together with floor
plan financing and other potential borrowings, will be adequate to support the
Company's working capital, currently planned capital expenditure needs and
potential future share repurchases in the foreseeable future. The Company may,
from time to time, obtain additional floor plan financing for its retail
inventories. Such practice is customary in the industry. However, because future
cash flows and the availability of financing will depend on a number of factors,
including prevailing economic and financial conditions, business and other
factors beyond management's control, no assurances can be given in this regard.
FORWARD-LOOKING INFORMATION/RISK FACTORS
Certain statements contained in this annual report are forward-looking
statements within the safe harbor provisions of the Securities Litigation Reform
Act. Forward-looking statements give our current expectations or forecasts of
future events and can be identified by the fact that they do not relate strictly
to historical or current facts. Investors should be aware that all
forward-looking statements are subject to risks and uncertainties and, as a
result of certain factors, actual results could differ materially from these
expressed in or implied by such statements. These risks include such
assumptions, risks, uncertainties and factors associated with the following:
o AVAILABILITY OF RETAIL FINANCING. Since mid-1999, loans to
purchase manufactured houses have been subjected to elevated
credit standards, resulting in reduced lending volumes and
consequently reduced sales in the manufactured housing
industry. A further tightening of credit standards may cause
the Company to experience significant sales declines.
o AVAILABILITY OF WHOLESALE FINANCING. The largest floor plan
lender has chosen to exit the manufactured housing business,
thereby reducing the amount of credit available to industry
retailers. Further reductions in the availability of floor
plan lending may affect the Company's inventory levels of new
homes.
o MANAGEMENT'S ABILITY TO ATTRACT AND RETAIN EXECUTIVE OFFICERS
AND OTHER KEY PERSONNEL. The Company is dependent on the
services and performance of its executive officers, including
its Chairman of the Board, Lee Posey and its President and
Chief Executive Officer, Larry Keener. The loss of the
services of one or more of its executive officers could have a
material adverse effect upon the Company's business, financial
condition and results of operations.
o CONTROL BY EXISTING SHAREHOLDERS. Approximately 55% of the
outstanding Common Stock of the Company is beneficially owned
or controlled by Mr. Posey, Capital Southwest Corporation and
its wholly-owned subsidiary, Capital Southwest Venture
Corporation, and William R. Thomas, President of Capital
Southwest Corporation. As a result, these shareholders, acting
together, will be able to determine the outcome of elections
of the Company's directors and thereby control the management
of the Company's business.
o IMPACT OF INFLATION. The past several years have shown a
relatively moderate rate of inflation which the Company has
been able to offset through increased selling prices. A
material increase in inflation in the future could adversely
affect the Company's operating results.
o COMPETITIVE PRODUCT ADVERTISING, PROMOTIONAL AND PRICING
ACTIVITY. There are numerous manufactured housing companies in
the industry and many have their own retail distribution
11
systems and consumer finance operations. In addition to
competition within the manufactured housing industry, the
Company's products also compete with other forms of lower to
moderate-cost housing, including site-built homes, apartments,
townhouses and condominiums. If the Company is unable to
address this competition, growth in each segment of its
business could be limited.
o CYCLICALITY OF THE MANUFACTURED HOUSING INDUSTRY. The cyclical
and seasonal nature of the industry causes the Company's
revenues and operating results to fluctuate and makes it hard
for management to forecast sales and profits in uncertain
times. As a result of seasonal and cyclical downturns, the
Company may experience fluctuations in its operating results
that make difficult period-to-period comparisons.
o VOLATILITY IN THE COMPANY'S STOCK PRICE. The Company's stock
is traded on the Nasdaq National Stock Market and is therefore
subject to market fluctuations.
o TERRORIST ATTACKS. Market disruptions and other effects
resulting from the terrorist attacks on September 11, 2001 and
actions, including armed conflict by the United States and
other governments in reaction thereto.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not applicable
Item 2. Changes in Securities - Not applicable
Item 3. Defaults upon Senior Securities - Not applicable
Item 4. Submission on Matters to a Vote by Security Holders
a) The Annual Meeting of Shareholders of Palm Harbor Homes, Inc.
was held on June 26, 2002.
b) The following nominees were elected Directors until the next
Annual Meeting of Shareholders and until their respective
successors shall have been elected and qualified.
Lee Posey
Larry H. Keener
William R. Thomas
Walter D. Rosenberg, Jr.
Frederick R. Meyer
John H. Wilson
A. Gary Shilling
Jerry Mallonee
c) The tabulation of votes for each Director nominee was as
follows:
Election of Directors: For Withheld
---------------------- ----------- --------
Lee Posey 15,992,546 262,956
Larry H. Keener 15,992,543 262,959
William R. Thomas 16,043,643 206,859
Walter D. Rosenberg, Jr. 16,220,593 34,909
Frederick R. Meyer 16,220,593 34,909
John H. Wilson 16,220,596 34,906
A. Gary Shilling 16,220,543 34,959
Jerry Mallonee 16,220,596 34,906
d) To appoint Ernst & Young LLP as independent auditors for the
year ending March 28, 2003.
For Withheld Abstaining
16,181,818 63,246 10,438
Item 5. Other Information - Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - 99.1 and 99.2
(b) Reports on Form 8-K - Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: August 1, 2002
Palm Harbor Homes, Inc.
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(Registrant)
By: /s/ Kelly Tacke
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Kelly Tacke
Chief Financial and Accounting
Officer
By: /s/ Lee Posey
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Lee Posey
Chairman of the Board
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