Palm Harbor expecting to replace credit facility by fiscal year-end

By Jennifer Lanning Drey

Portland, Ore., May 28 - Palm Harbor Homes Inc. is in serious conversations with a handful of potential lenders and expects to replace its Textron credit facility before the end of fiscal 2010, Kelly Tacke, chief financial officer of Palm Harbor, said Thursday during the company's earnings conference call for the fourth quarter of fiscal 2009.

The $50 million facility matures in March 2010.

"We think we've been proactive, and we expect to replace it long before fiscal year-end," Tacke said.

At the March 27 fiscal 2009 year-end, Palm Harbor had $49.4 million outstanding on the facility. The company has agreed to gradually reduce the facility to $40.0 million by Dec. 31, 2009.

Palm Harbor had $12.4 million of cash and cash equivalents at fiscal year-end, down $15.8 million from the start of the year. The decrease was due to $10.0 million of investments made in a military project, which will not be repaid by the government until the first quarter of fiscal 2010, Tacke said.

During the fiscal year, Palm Harbor used $10.6 million of cash to retire $21.2 million of its convertible senior notes, leaving $53.8 million of the notes outstanding at fiscal year-end. Most of the repurchases were made during the first quarter, Tacke said.

Palm Harbor's quarterly cash burn rate is about $3 million, Larry Keener, chief executive officer of the company, said during the question-and-answer portion of the call.

Focus on cash

"In light of the current economic crisis and with no near-term signs of recovery for the factory-built housing industry, our top priorities continue to be cash generation and cash preservation in every area of our business," Tacke said.

Other cash conservation measures taken by Palm Harbor in fiscal 2009 included reductions of inventories and receivables and the closure of three manufacturing facilities.

The company also boosted liquidity through two sale-leaseback transactions totaling $6.5 million.

Until a rebound occurs, the company will remain focused on maintaining adequate liquidity, streamlining operations and costs to reach positive EBITDA later this year and maintaining creative efforts, Keener said.

Palm Harbor's fourth-quarter net sales were $78.9 million, down from $126.5 million in the comparable period of fiscal 2008. The net loss for the period was $8.6 million, compared with a net loss of $12.7 million in the prior-year period.

Palm Harbor Homes is a Dallas-based maker of multi-section manufactured and modular homes.

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