<PAGE> 1
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE:)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-24268
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Palm Harbor Homes, Inc.
Employee Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Palm Harbor Homes, Inc.
15303 N. Dallas Pkwy. Suite 800
Addison, TX 75001-4600
<PAGE> 2
Financial Statements and
Supplemental Schedules
Palm Harbor Homes, Inc.
Employee Savings Plan
Years ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE> 3
Palm Harbor Homes, Inc.
Employee Savings Plan
Financial Statements and
Supplemental Schedules
Years ended December 31, 1998 and 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors....................................................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits...................................................... 3
Statements of Changes in Net Assets Available for Benefits........................................... 7
Notes to Financial Statements........................................................................ 11
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes........................................... 17
Line 27b - Schedule of Loans or Fixed Income Obligations............................................. 18
Line 27d - Schedule of Reportable Transactions....................................................... 19
</TABLE>
<PAGE> 4
Report of Ernst & Young LLP, Independent Auditors
Plan Administrator
Palm Harbor Homes, Inc. Employee Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Palm Harbor Homes, Inc. Employee Savings Plan as of December 31, 1998 and
1997, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes and loans or fixed income obligations as of
December 31, 1998, and reportable transactions for the year then ended, are
presented for purposes of additional analysis and are not a required part of the
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The Fund Information
in the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available for benefits
and the changes in net assets available for benefits of each fund. The
supplemental schedules and Fund
<PAGE> 5
Information have been subjected to the auditing procedures applied in our audits
of the financial statements and, in our opinion, are fairly stated in all
material respects in relation to the financial statements taken as a whole.
ERNST & YOUNG LLP
June 4, 1999
Dallas, Texas
<PAGE> 6
Palm Harbor Homes, Inc. Employee Savings Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
----------------------------------------------------------------------
PALM
HARBOR
STOCK PURITAN GNMA MAGELLAN
FUND FUND FUND FUND CONTRAFUND
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value $ 2,053,530 $ 263,538 $ 107,206 $ 7,750,722 $ 7,508,301
Participant loans receivable -- -- -- -- --
----------- ---------- ---------- ----------- -----------
Total investments 2,053,530 263,538 107,206 7,750,722 7,508,301
Receivables:
Participants'
contributions 53,884 7,019 6,059 92,833 70,370
Employer's contribution 15,443 2,272 1,640 36,703 28,128
Interest income 165 -- -- -- --
----------- ---------- ---------- ----------- -----------
69,492 9,291 7,699 129,536 98,498
----------- ---------- ---------- ----------- -----------
Total assets 2,123,022 272,829 114,905 7,880,258 7,606,799
LIABILITIES
Contributions refundable 24,093 3,709 3,649 89,257 117,608
----------- ---------- ---------- ----------- -----------
Net assets available for
benefits $ 2,098,929 $ 269,120 $ 111,256 $ 7,791,001 $ 7,489,191
=========== ========== ========== =========== ===========
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------------
RETIREMENT RETIREMENT
GROWTH AND ASSET DIVERSIFIED GOVERNMENT MONEY
INCOME VALUE MANAGER INTERNATIONAL MONEY MARKET
FUND FUND FUND FUND MARKET FUND FUND LOAN FUND TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$8,161,956 $311,272 $2,762,177 $247,229 $4,188,160 $92,682 $ -- $33,446,773
-- -- -- -- -- -- 1,302,062 1,302,062
---------- -------- ---------- -------- ---------- ------- ------------ -----------
8,161,956 311,272 2,762,177 247,229 4,188,160 92,682 1,302,062 34,748,835
93,748 11,677 27,209 10,908 71,547 -- -- 445,254
34,465 3,372 11,506 2,890 20,918 -- -- 157,337
-- -- -- -- -- -- -- 165
---------- -------- ---------- -------- ---------- ------- ------------ -----------
128,213 15,049 38,715 13,798 92,465 -- -- 602,756
---------- -------- ---------- -------- ---------- ------- ------------ -----------
8,290,169 326,321 2,800,892 261,027 4,280,625 92,682 1,302,062 35,351,591
87,917 1,745 18,986 1,122 12,606 -- -- 360,692
---------- -------- ---------- -------- ---------- ------- ------------ -----------
$8,202,252 $324,576 $2,781,906 $259,905 $4,268,019 $92,682 $1,302,062 $34,990,899
========== ======== ========== ======== ========== ======= ============ ===========
</TABLE>
See accompanying notes.
4
<PAGE> 8
Palm Harbor Homes, Inc. Employee Savings Plan
Statements of Net Assets Available for Benefits (continued)
<TABLE>
<CAPTION>
----------------------------------------------------------------------
PALM
HARBOR
STOCK PURITAN GNMA MAGELLAN
FUND FUND FUND FUND CONTRAFUND
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value $ 510,248 $ 70,902 $ 53,581 $ 4,868,169 $ 5,310,067
Participant loans receivable -- -- -- -- --
---------- ---------- ---------- ----------- -----------
Total investments 510,248 70,902 53,581 4,868,169 5,310,067
Receivables:
Participants'
contributions 15,677 2,873 2,268 70,565 59,081
Employer's contribution 4,201 769 351 30,104 25,740
Interest income 160 -- -- -- --
---------- ---------- ---------- ----------- -----------
20,038 3,642 2,619 100,669 84,821
---------- ---------- ---------- ----------- -----------
Total assets 530,286 74,544 56,200 4,968,838 5,394,888
LIABILITIES
Contributions refundable 16,158 1,287 7 48,851 71,138
Fee Payable 78 -- -- -- --
---------- ---------- ---------- ----------- -----------
Net assets available for
benefits $ 514,050 $ 73,257 $ 56,193 $ 4,919,987 $ 5,323,750
========== ========== ========== =========== ===========
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------
RETIREMENT
GROWTH AND ASSET DIVERSIFIED GOVERNMENT
INCOME VALUE MANAGER INTERNATIONAL MONEY
FUND FUND FUND FUND MARKET FUND LOAN FUND TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,239,448 $ 168,231 $ 2,251,906 $ 110,048 $ 3,197,645 $ -- $ 21,780,245
-- -- -- -- -- 728,705 728,705
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
5,239,448 168,231 2,251,906 110,048 3,197,645 728,705 22,508,950
70,040 4,516 27,796 3,650 59,506 -- 315,972
29,361 963 12,320 821 17,754 -- 122,384
-- -- -- -- -- -- 160
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
99,401 5,479 40,116 4,471 77,260 -- 438,516
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
5,338,849 173,710 2,292,022 114,519 3,274,905 728,705 22,947,466
59,307 1,545 13,873 779 6,799 -- 219,744
-- -- -- -- -- -- 78
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
$ 5,279,542 $ 172,165 $ 2,278,149 $ 113,740 $ 3,268,106 $ 728,705 $ 22,727,644
=========== =========== =========== =========== =========== =========== ============
</TABLE>
See accompanying notes.
6
<PAGE> 10
Palm Harbor Homes, Inc. Employee Savings Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
PALM HARBOR PURITAN GNMA MAGELLAN
STOCK FUND FUND FUND FUND CONTRAFUND
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for benefits at
beginning of period $ 514,050 $ 73,257 $ 56,193 $ 4,919,987 $ 5,323,750
Additions to net assets:
Net appreciation (depreciation) in
fair value of investments (187,954) 9,587 (188) 1,507,324 1,214,295
Investment income 1,801 20,966 3,419 317,648 530,360
Interest on loans to participants 4,685 872 42 16,138 13,311
Participants' contributions 611,190 100,094 62,690 1,287,342 1,093,252
Employer contributions 178,009 31,380 19,866 485,288 427,848
Rollover contributions 63,344 4,378 2,489 47,676 20,208
Transfer from merged plans 112,142 26,237 20,827 92,304 83,460
----------- ----------- ----------- ----------- -----------
783,217 193,514 109,145 3,753,720 3,382,734
Deductions from net assets:
Distributions to participants 152,933 10,683 50,296 452,919 509,719
Miscellaneous 569 -- 225 7,256 1,694
----------- ----------- ----------- ----------- -----------
153,502 10,683 50,521 460,175 511,413
Other changes:
Net increase (decrease) in loans to
participants (45,632) (9,477) (8,614) (93,740) 16,891
Net interfund transfers 1,000,796 22,509 5,053 (328,791) (722,771)
----------- ----------- ----------- ----------- -----------
Net assets available for benefits at
end of period $ 2,098,929 $ 269,120 $ 111,256 $ 7,791,001 $ 7,489,191
=========== =========== =========== =========== ===========
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
RETIREMENT
GROWTH GOVERNMENT RETIREMENT
AND ASSET DIVERSIFIED MONEY MONEY
INCOME VALUE MANAGER INTERNATIONAL MARKET MARKET
FUND FUND FUND FUND FUND FUND LOAN FUND TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,279,542 $ 172,165 $ 2,278,149 $ 113,740 $ 3,268,106 $ -- $ 728,705 $22,727,644
1,273,402 (46,464) (112,793) 13,871 -- -- -- 3,671,080
388,270 43,336 494,177 9,135 187,000 1,063 -- 1,997,175
11,766 996 7,857 352 13,104 -- -- 69,123
1,318,080 147,627 409,675 126,388 828,477 -- -- 5,984,815
488,124 44,593 167,183 32,976 (15,522) -- -- 1,859,745
35,234 7,013 21,952 3,800 3,170 -- -- 209,264
134,058 24,692 45,737 45,996 295,786 91,619 49,847 1,022,705
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
3,648,934 221,793 1,033,788 232,518 1,312,015 92,682 49,847 14,813,907
402,142 19,816 215,549 11,894 580,845 -- 116,256 2,523,052
5,128 -- 4,789 -- 10,284 -- (2,345) 27,600
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
407,270 19,816 220,338 11,894 591,129 -- 113,911 2,550,652
(248,992) (792) (59,501) (2,529) (185,035) -- 637,421 --
(69,962) (48,774) (250,192) (71,930) 464,062 -- -- --
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 8,202,252 $ 324,576 $ 2,781,906 $ 259,905 $ 4,268,019 $ 92,682 $ 1,302,062 $34,990,899
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
8
<PAGE> 12
Palm Harbor Homes, Inc. Employee Savings Plan
Statements of Changes in Net Assets Available for Benefits (continued)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
PALM HARBOR PURITAN GNMA MAGELLAN
STOCK FUND FUND FUND FUND CONTRAFUND
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for benefits
at beginning of period $ -- $ -- $ -- $ 2,675,825 $ 2,583,309
Additions to net assets:
Net appreciation (depreciation)
in fair value of investments 32,578 561 741 535,326 277,738
Investment income -- 4,044 1,655 280,005 490,764
Interest on loans to participants 655 293 -- 10,334 7,605
Participants' contributions 124,903 21,477 18,261 1,051,877 1,051,082
Employer contributions 32,920 6,211 3,432 457,104 497,930
Rollover contributions 1,022 -- 296 108,428 61,137
Transfer from Newco Homes, L.P.
Tax Savings Plan 26,210 7,999 969 260,882 1,061,310
----------- ----------- ----------- ----------- -----------
218,288 40,585 25,354 2,703,956 3,447,566
Deductions from net assets:
Distributions to participants 14,097 1,351 1,081 374,311 293,147
Miscellaneous 81 -- -- 3,019 481
----------- ----------- ----------- ----------- -----------
14,178 1,351 1,081 377,330 293,628
Other changes:
Net increase (decrease) in loans
to participants (724) 820 (1,395) (58,864) (17,151)
Net interfund transfers 310,664 33,203 33,315 (23,600) (396,346)
----------- ----------- ----------- ----------- -----------
Net assets available for benefits
at end of period $ 514,050 $ 73,257 $ 56,193 $ 4,919,987 $ 5,323,750
=========== =========== =========== =========== ===========
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------------------
RETIREMENT
GROWTH GOVERNMENT
AND ASSET DIVERSIFIED MONEY
INCOME VALUE MANAGER INTERNATIONAL MARKET
FUND FUND FUND FUND FUND LOAN FUND TOTAL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,532,217 $ -- $ 1,535,417 $ -- $ 2,390,581 $ 404,504 $12,121,853
734,568 (12,067) 187,867 (3,614) -- -- 1,753,698
215,197 22,005 190,651 4,282 151,905 -- 1,360,508
6,476 284 6,192 13 10,068 -- 41,920
1,052,792 34,867 424,603 34,860 810,775 -- 4,625,497
460,578 11,060 195,766 11,340 (8,643) -- 1,667,698
120,925 -- 5,092 148 6,190 -- 303,238
479,627 23,938 52,513 49,062 410,695 -- 2,373,205
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
3,070,163 80,087 1,062,684 96,091 1,380,990 -- 12,125,764
221,813 12,473 133,317 13,430 344,320 55,545 1,464,885
2,250 -- 3,994 -- 45,263 -- 55,088
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
224,063 12,473 137,311 13,430 389,583 55,545 1,519,973
(128,226) (144) (45,691) (340) (128,031) 379,746 --
29,451 104,695 (136,950) 31,419 14,149 -- --
- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 5,279,542 $ 172,165 $ 2,278,149 $ 113,740 $ 3,268,106 $ 728,705 $22,727,644
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
10
<PAGE> 14
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements
December 31, 1998
1. DESCRIPTION OF PLAN
The following description of the Palm Harbor Homes, Inc. Employee Savings Plan
(Plan) provides only general information. Participants should refer to the
Summary Plan Description for a more complete description of the Plan's
provisions.
GENERAL
The Plan is a defined contribution plan covering all employees of Palm Harbor
Homes, Inc. (the Company), and certain unrelated employers who have at least
three consecutive months of service. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA).
Effective January 1, 1997, the Company merged the Newco Homes, L.P. Tax Savings
Plan into the Plan. In conjunction with the merger, the Company amended the Plan
to decrease the service requirements for eligibility.
Effective April 1, 1997, the Company amended the Plan to change the Plan's
definition of Predecessor Employer.
Effective January 1, 1998, the Company amended the Plan to change a
participant's vested interest in his employer-matching contributions and to
allow for the merger of the participants of the Cedar Creek Pro Plan from Ken
McGee Enterprises, Inc., into the Plan.
Effective July 1, 1998, the Company merged the Countryside Mobile Homes, Inc.
401(k) Plan, Carna Mobile Homes, Inc. 401(k) Plan, All Star Homes, Inc. 401(k)
Plan, Cannon Manufacturing Housing Group 401(k) Plan, and the Star Mobile Homes,
Inc. 401(k) Plan (collectively, the merged plans) into the Plan. Additionally,
the participants of the merged plans are eligible to participate in the Palm
Harbor Homes, Inc. Employee Savings Plan effective July 1, 1998. The assets of
the merged plans were transferred in August 1998.
CONTRIBUTIONS
Each year, participants may contribute up to 15% of pretax annual compensation,
as defined in the Plan. Participants may also contribute amounts representing
distributions from other qualified plans. The Company contributes on a Plan-year
basis 50% of the first 6% of compensation that a participant contributes to the
Plan.
11
<PAGE> 15
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions, the
Company's matching contributions and allocations of Plan earnings. Allocations
of plan earnings are based on participant account balances, as defined. The
benefit to which a participant is entitled is the benefit that can be provided
from the participant's account. Forfeited balances of terminated participants'
nonvested accounts are used to reduce Plan expenses and/or future Company
contributions. At December 31, 1998 and 1997, $10,257 and $20,245, respectively,
were available to be used for future Plan expenses or Company contributions.
During 1998 and 1997, the Company funded many of its contributions using these
forfeitures as evidenced by the negative employer contribution in the Retirement
Government Money Market Fund which held the forfeited monies.
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company contribution portion of their accounts plus
actual earnings thereon is based on years of continuous service. Prior to
January 1, 1998, there was no vesting of Company contributions prior to the
completion of five years of service. However, effective January 1, 1998,
participants vest in Company contributions as follows: two years - 20%, three
years - 40%, four years - 60%, and five years - 100%.
INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may direct employer and employee
contributions in 1% increments in any of ten investment options.
Participants may change their investment options daily.
PARTICIPANT LOANS RECEIVABLE
Participants may borrow from their fund accounts a minimum of $1,000 up to the
lesser of 50% of their vested account balance or $50,000 (adjusted for loan
payments during the previous year). A participant may have only one loan
outstanding at any time. Loan transactions are treated as a transfer from (to)
the investment fund to (from) the loan fund. Loan terms range from up to five
years or up to ten years for the purchase of a primary
12
<PAGE> 16
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
residence. The loans are secured by the balance in the participant's account and
bear interest at a rate commensurate with local prevailing rates at the prime
rate plus 1% as determined by the Plan Administrator.
Principal and interest is paid ratably through monthly payroll deductions.
PAYMENT OF BENEFITS
On termination of service, a participant or beneficiary may receive a lump-sum
amount equal to the vested value of his or her account, or, upon death,
disability, or retirement, elect to receive annual installments over a certain
period which does not extend beyond the life expectancy of the participant or
his beneficiary. Upon the death of a participant who is a current employee, the
account is automatically 100% vested. If a participant's account is $3,500 or
less, the balance of such account will be distributed in a lump-sum amount upon
retirement, disability, death, or termination of employment.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
2. SUMMARY OF ACCOUNTING POLICIES
INVESTMENTS
Investments in mutual funds are recorded at fair value as determined by quoted
market prices in an active market. Investments in the unitized stock fund are
recorded at fair value as determined by the combined market values of the
underlying common stock and short-term cash position. The market value of the
common stock portion of the fund is based on the closing price of the common
stock on its primary exchange times the number of shares held in the fund.
Participant loans are recorded at cost which approximates fair value.
ADMINISTRATIVE EXPENSES
Costs and expenses of administering the Plan are paid by the Company, unless
paid by the Plan.
13
<PAGE> 17
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
BASIS OF ACCOUNTING
The financial statements are prepared on the accrual basis of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. INVESTMENTS
Investments are held by the Plan's trustee, Fidelity Management Trust Company.
Individual investments that represent 5% or more of the Plan's net assets at
December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Investments, at fair value:
Palm Harbor Common Stock $ 2,016,574 $ --
Fidelity Magellan Fund 7,750,722 4,868,169
Fidelity Contrafund 7,508,301 5,310,067
Fidelity Growth and Income Fund 8,161,956 5,239,448
Fidelity Asset Manager Fund 2,762,177 2,251,906
Fidelity Retirement Government Money Market Fund 4,188,160 3,197,645
</TABLE>
4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated August 11, 1995, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the Code) and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
14
<PAGE> 18
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
5. CONTRIBUTIONS REFUNDABLE
Contributions refundable represents excess contributions refundable to certain
participants in order to comply with certain nondiscrimination requirements.
6. ADMINISTRATION
The Plan is administered by the Company. Fidelity Management Trust Company
serves as trustee, and Fidelity Institutional Retirement Services Company serves
as recordkeeper.
7. YEAR 2000 ISSUE (UNAUDITED)
The Company has determined that it will be necessary to take certain steps in
order to ensure that the Plan's information systems are prepared to handle year
2000 dates. The Company is taking a two-phase approach. The first phase
addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications and test the software and equipment for
the year 2000 modifications. The Company anticipates substantially completing
this phase of the project by September 30, 1999. Costs associated with modifying
software and equipment are not estimated to be significant and will be paid by
the Company.
For the second phase of the project, Plan management established formal
communications with its third-party service providers to determine that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. All third-party service providers have indicated that
they will be year 2000 compliant by mid 1999. If modification of data processing
systems of either the Plan, the Company, or its service providers are not
completed timely, the year 2000 problem could have a material impact on the
operations of the Plan. Plan management has not developed a contingency plan;
however, the year 2000 issue is being closely monitored by the Company and
additional measures will be taken as risks are determined.
8. RECONCILIATION OF FINANCIAL STATEMENTS TO THE FORM 5500
The following is a reconciliation of net assets per the financial statements to
the Form 5500:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
-------------
<S> <C>
Net assets per the financial statements $ 34,990,899
Amounts allocated to withdrawing participants (83,438)
------------
Net assets per Form 5500 $ 34,907,461
============
</TABLE>
15
<PAGE> 19
Palm Harbor Homes, Inc. Employee Savings Plan
Notes to Financial Statements (continued)
8. RECONCILIATION OF FINANCIAL STATEMENTS TO THE FORM 5500 (CONTINUED)
The following is a reconciliation of distributions to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Distributions to participants per the financial
statements $ 2,523,052
Amounts allocated to withdrawing participants at
end of year 83,438
-----------
Distributions to participants per the Form 5500 $ 2,606,490
===========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
distributions that have been processed and approved for payment prior to
December 31 but not yet paid as of that date.
16
<PAGE> 20
Palm Harbor Homes, Inc. Employee Savings Plan
EIN: 59-1036634
Plan #: 333
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
(c)
DESCRIPTION OF INVESTMENT
(b) INCLUDING MATURITY DATE, RATE OF
IDENTITY OF ISSUE, BORROWER, LESSOR, INTEREST, COLLATERAL, PAR, OR (d) (e)
(a) OR SIMILAR PARTY MATURITY VALUE COST CURRENT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* Fidelity Management Trust Company:
Magellan Fund;
64,151 shares $ 5,831,489 $ 7,750,722
Contrafund; 132,212 shares 6,093,046 7,508,301
Growth and Income Fund;
178,053 shares 6,109,594 8,161,956
Asset Manager Fund;
158,837 shares 2,702,740 2,762,177
Retirement Government Money Market
Fund; 4,188,160 shares 4,188,160 4,188,160
Palm Harbor Common Stock;
80,063 shares 2,196,642 2,016,574
Institutional Cash Portfolio;
36,956 shares 36,956 36,956
Puritan Fund; 13,131 shares 254,235 263,538
GNMA Fund; 9,844 shares 107,221 107,206
Value Fund; 6,716 shares 357,671 311,272
Diversified International Fund;
13,952 shares 236,741 247,229
Retirement Money Market Fund;
92,682 shares 92,682 92,682
* Participants Loans with interest rates from
7% - 10%; various maturity dates
through 2008; secured by
participant vested accrued benefits -- 1,302,062
----------- -----------
$28,207,177 $34,748,835
=========== ===========
</TABLE>
*Denotes party-in-interest
17
<PAGE> 21
Palm Harbor Homes, Inc. Employee Savings Plan
EIN: 59-1036634
Plan #: 333
Line 27b - Schedule of Loans and Fixed Income Obligations
December 31, 1998
<TABLE>
<CAPTION>
AMOUNT RECEIVED DURING
ORIGINAL REPORTING YEAR UNPAID BALANCE
IDENTITY AND ADDRESS AMOUNT ------------------------ AT END
OF OBLIGOR OF LOAN PRINCIPAL INTEREST OF YEAR
- --------------------------- ------------ ------------- ---------- --------------
<S> <C> <C> <C> <C>
Raymond H. Lewis
234 Inskeep Roalm
Lucasville, OH 45648 $1,200.00 $23.04 $9.50 $1,176.96
<CAPTION>
DETAILED DESCRIPTION OF LOAN INCLUDING DATES OF
MAKING AND MATURITY, INTEREST RATE, THE TYPE AND
VALUE OF COLLATERAL, AND RENEGOTIATING OF THE AMOUNT OVERDUE
IDENTITY AND ADDRESS LOAN AND THE TERMS OF THE ------------------------
OF OBLIGOR RENEGOTIATING, AND OTHER MATERIAL ITEMS PRINCIPAL INTEREST
- --------------------------- -------------------------------------------------- ------------ -----------
<S> <C> <C> <C>
Raymond H. Lewis Date of making July 30, 1998, 9.50%, matures
234 Inskeep Roalm July 15, 1999, collaterized by participant's
Lucasville, OH 45648 account $463.25 $30.36
</TABLE>
18
<PAGE> 22
Palm Harbor Homes, Inc. Employee Savings Plan
EIN: 59-1036634
Plan #: 333
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
<TABLE>
<CAPTION>
(c) (d) (e)
(a) (b) PURCHASE SELLING LEASE
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE RENTAL
- -------------------------------------------------------------------------------------------------------------
Category (iii) - Series of transactions in excess of 5% of Plan assets
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity Mgmt. Trust Co. Magellan Fund $2,820,872 $ -- $ --
-- 1,445,645 --
Fidelity Mgmt. Trust Co. Contrafund Fund 2,672,206 -- --
-- 1,688,266 --
Fidelity Mgmt. Trust Co. Growth and Income Fund 3,259,145 -- --
-- 1,610,041 --
Fidelity Mgmt. Trust Co. Asset Manager Fund 1,215,769 -- --
-- 592,706 --
Fidelity Mgmt. Trust Co. Retirement Government Money Market 2,573,604 -- --
Fund -- 1,583,091 --
Fidelity Mgmt. Trust Co. Institutional Cash Portfolio 2,641,855 -- --
-- 2,613,702 --
Fidelity Mgmt. Trust Co. Palm Harbor Common Stock 2,409,844 -- --
-- 705,802 --
<CAPTION>
(h)
(f) CURRENT VALUE OF
EXPENSE (g) ASSET ON (i)
(a) (b) INCURRED WITH COST TRANSACTION NET GAIN
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTION OF ASSET DATE OR (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
Category (iii) - Series of transactions in excess of 5% of Plan assets
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity Mgmt. Trust Co. Magellan Fund $ $2,820,872 $2,820,872 $ --
-- 1,269,272 1,445,645 176,373
Fidelity Mgmt. Trust Co. Contrafund Fund -- 2,672,206 2,672,206 --
-- 1,408,354 1,688,266 279,912
Fidelity Mgmt. Trust Co. Growth and Income Fund -- 3,259,145 3,259,145 --
-- 1,341,001 1,610,041 269,040
Fidelity Mgmt. Trust Co. Asset Manager Fund -- 1,215,769 1,215,769 --
-- 533,942 592,706 58,764
Fidelity Mgmt. Trust Co. Retirement Government Money Market -- 2,573,604 2,573,604 --
Fund -- 1,583,091 1,583,091 --
Fidelity Mgmt. Trust Co. Institutional Cash Portfolio -- 2,641,855 2,641,855 --
-- 2,613,702 2,613,702 --
Fidelity Mgmt. Trust Co. Palm Harbor Common Stock -- 2,409,844 2,409,844 --
-- 705,802 705,802 --
</TABLE>
There were no category (i), (ii), or (iv) reportable transactions during the
year ended December 31, 1998.
19
<PAGE> 23
INDEX TO EXHIBIT
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23 Consent of Ernst & Young LLP, Independent Auditors
</TABLE>
<PAGE> 1
EXHIBIT 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-30994) pertaining to the Palm Harbor Homes, Inc. Employee Savings
Plan of our report dated June 4, 1999, with respect to the financial statements
and supplemental schedules of the Palm Harbor Homes, Inc. Employee Savings Plan
included in this Annual Report (Form 11-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
June 28, 1999
Dallas, Texas
