Palm Harbor’s insurance operations are regulated by the state insurance boards where they underwrite their policies. Underwriting, premiums, investments and capital reserves are subject to the rules and regulations of these state agencies.
Cash deposits made by customers are classified as restricted cash in some states. As a result of continued governmental regulations regarding consumer protection, more states are requiring deposits to be restricted cash. See Note 1 to the Consolidated Financial Statements.
Seasonality
Our business is seasonal. Generally we experience higher sales volume during the months of March through October. Our sales are slower during the winter months and shipments can be delayed in areas of the country that experience harsh weather conditions.
Associates
Currently, we have approximately 2,900 associates. All of our associates are non-union. We have not experienced any labor-related work stoppages and believe that our relationship with our associates is good.
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Website Access to Company Reports and Other Documents
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website at www.palmharbor.com as soon as reasonably practicable after such material is electronically filed with the SEC. Those reports are also available at the SEC’s website, www.sec.gov. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Copies of our annual report will be made available, free of charge, upon written request to our corporate secretary at our principal executive office.
We have adopted a code of conduct. A copy of our code of conduct is available at our website, www.palmharbor.com.
| Item 1A. | 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:
The factory-built housing industry is currently in a prolonged slump with no recovery in sight.
Historically, the factory-built housing industry has been highly cyclical and seasonal and has experienced wide fluctuations in aggregate sales. The factory-built housing industry is currently in a prolonged slump with no recovery in sight. We are subject to volatility in operating results due to external factors beyond our control such as:
| • | general economic and political conditions, including the effects of a prolonged U.S. or global economic downturn or recession; |
| • | access to capital markets; |
| • | the level and stability of interest rates; |
| • | unemployment trends; |
| • | the availability of retail home financing; |
| • | the availability of wholesale financing; |
| • | the availability of homeowners’ insurance in coastal markets; |
| • | housing supply and demand; |
| • | international tensions and hostilities; |
| • | levels of consumer confidence; |
| • | inventory levels; |
| • | severe weather conditions; and |
| • | regulatory and zoning matters. |
Sales in our industry are also seasonal in nature, with sales of homes traditionally being stronger in the spring, summer and fall months. The cyclical and seasonal nature of our business causes our net sales and operating results to fluctuate and makes it difficult for management to forecast sales and profits in uncertain times. As a result of seasonal and cyclical downturns, results from any quarter should not be relied upon as being indicative of performance in future quarters.
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We reduced our manufacturing capacity and distribution channels to effectively align with current and expected regional demand to return the Company to profitability. If the economy continues to worsen, our return to profitability will be delayed.
During the fourth quarter of fiscal 2008, we closed three manufacturing plants and 18 retail sales centers to effectively align current and expected regional demand. We believe these measures will help us return to profitability in the next 6-12 months. If the U.S. economy continues to slow, financial markets continue to decline, and more layoffs occur nationally, our realignment will not return us to profitability and further cost savings measures will be required.
We face increased competition from site builders of residential housing, which may reduce our net sales.
Our homes compete with homes that are built on site. The sales of site built homes are declining, which is resulting in more site built homes being available at lower prices. Appraisal values of site built homes are declining with greater availability of lower priced site built homes in the market. The increase in availability, along with the decreased price of site built homes, could make them more competitive with our homes. As a result, the sales of our homes could decrease, which could negatively impact our results of operations.
Financing for our retail customers may be limited, which could affect our sales volume.
Our retail customers who do not use CountryPlace generally either pay cash or secure financing from third party lenders, which have been negatively affected by adverse loan experience. Several major lenders, which had previously provided financing for our customers, have exited the manufactured housing finance business. Reduced availability of such financing is currently having an adverse effect on both the manufactured housing business and our home sales. Availability of financing is dependent on the lending practices of financial institutions, financial markets, governmental policies and economic conditions, all of which are largely beyond our control. Quasi-governmental agencies such as FHA, Fannie Mae and Freddie Mac, which are important purchasers of loans from financial institutions, have tightened standards relating to the manufactured housing loans that they will buy. Most states classify manufactured homes as personal property rather than real property for purposes of taxation and lien perfection, and interest rates for manufactured homes are generally higher and the terms of the loans shorter than for site-built homes. There can be no assurance that affordable retail financing for manufactured homes will continue to be available on a widespread basis. If third party financing were to become unavailable or were to be further restricted, this could have a material adverse effect on our results of operations.
If CountryPlace’s customers are unable to repay their loans, CountryPlace may be adversely affected.
CountryPlace makes loans to borrowers that it believes are creditworthy based on its credit guidelines. However, the ability of these customers to repay their loans may be affected by a number of factors, including, but not limited to:
| • | national, regional and local economic conditions (approximately 41% of our borrowers are in Texas); |
| • | changes or continued weakness in specific industry segments; |
| • | natural hazard risks affecting the region in which the borrower resides; and |
| • | employment, financial or life circumstances. |
If customers do not repay their loans, CountryPlace may repossess or foreclose in order to liquidate its loan collateral and minimize losses. The homes and land securing the loan are subject to fluctuating market values, and proceeds realized from liquidating repossessed or foreclosed property are highly susceptible to adverse movements in collateral values. Recent trends in general house price depreciation may exacerbate actual loss severities upon collateral liquidation beyond those normally experienced by CountryPlace.
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Some of CountryPlace’s loans may be illiquid and their value difficult to determine or realize.
Some of the loans CountryPlace has originated or may originate in the future may not have a liquid market, or the market may contract rapidly in the future and the loans may become illiquid. Although CountryPlace offers loan products and prices its loans at levels that it believes are marketable at the time of credit application approval, market conditions for mortgage-related loans have deteriorated rapidly and significantly recently. CountryPlace’s ability to respond to changing market conditions is bound by credit approval and funding commitments it makes in advance of loan completion. In this environment, it is difficult to predict the types of loan products and characteristics that may be susceptible to future market curtailments and tailor our loan offerings accordingly. As a result, no assurances can be given that the market value of our loans will not decline in the future, or that a market will continue to exist for all of our loan products.
If CountryPlace is unable to develop sources of long-term funding it may be unable to resume originating chattel and non-conforming mortgage loans.
In the past, CountryPlace securitized loans as its primary source of long-term financing for chattel and non-conforming mortgages. CountryPlace used a warehouse borrowing facility to provide liquidity while aggregating loans prior to securitization. Because of recent significant and continued deterioration in the asset securitization market, CountryPlace is presently unable to rely on warehouse financing for liquidity and can no longer plan to securitize its loans. As a result, CountryPlace has ceased originating chattel and non-conforming mortgage loans for its own portfolio until it determines that a term financing market exists or can be developed for such products. At present, no such market exists, and no assurance can be given that one will develop, or that asset securitization will again be viable term financing method for CountryPlace. Further, no assurance can be given that warehouse financing will be available with economically favorable terms and conditions.
If interest rates increase, the market value of loans held for investment and loans available for sale may be adversely affected.
Fixed rate loans originated by CountryPlace prior to long-term financing or sale to investors are exposed to the risk of increased interest rates between the time of loan origination and term financing or sale. If interest rates for term financings or in the whole-loan market increase after loans are originated, the loans may suffer a decline in market value and our interest margin spreads could be reduced. From time to time, CountryPlace has entered into interest rate swap agreements to hedge its exposure to such interest rate risk. However, CountryPlace does not always maintain hedges or hedge the entire balances of all loans. Furthermore, interest rate swaps may be ineffective in hedging CountryPlace’s exposure to interest rate risk.
If CountryPlace is unable to adequately and timely service its loans, it may adversely affect its results of operations.
Although CountryPlace has originated loans since 1995, it has limited loan servicing and collections experience. In 2002, it implemented new systems to service and collect the portfolio of loans it originates. The management of CountryPlace has industry experience in managing, servicing and collecting loan portfolios; however, many borrowers require notices and reminders to keep their loans current and to prevent delinquencies and foreclosures. If there is a substantial increase in the delinquency rate that results from improper servicing or loan performance, the profitability and cash flow from the loan portfolio could be adversely affected and impair CountryPlace’s ability to continue to originate and sell loans to investors.
Reduced availability of wholesale financing may adversely affect our inventory levels of new homes.
We finance a portion of our new inventory at our retail sales centers through wholesale “floor plan” financing arrangements. Through these arrangements, financial institutions provide us with a loan for the
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purchase price of the home. Since the beginning of the industry downturn in 1999, several major floor plan lenders have exited the floor plan financing business. Although we currently have a floor plan facility with a financial institution totaling $70.0 million, there can be no assurance that we will continue to have access to such facility or that we will not be forced to reduce our new home inventory at our retail sales centers.
Our repurchase agreements with floor plan lenders could result in increased costs.
In accordance with customary practice in the manufactured housing industry, we enter into repurchase agreements with various financial institutions pursuant to which we agree, in the event of a default by an independent retailer in its obligation to these credit sources, to repurchase manufactured homes at declining prices over the term of the agreements, typically 12 to 18 months. The difference between the gross repurchase price and the price at which the repurchased manufactured homes can then be resold, which is typically at a discount to the original sale price, is an expense to us. Thus, if we were obligated to repurchase a large number of manufactured homes in the future, this would increase our costs, which could have a negative effect on our earnings. Tightened credit standards by lenders and more aggressive attempts to accelerate collection of outstanding accounts with retailers could result in defaults by retailers and consequently repurchase obligations on our part may be higher than has historically been the case. During fiscal 2008, 2007 and 2006, we did not incur any losses under these repurchase agreements.
We are dependent on our principal executive officer and the loss of his service could adversely affect us.
We are dependent to a significant extent upon the efforts of our principal executive officer, Larry H. Keener, Chairman of the Board and Chief Executive Officer. The loss of the services of our principal executive officer could have a material adverse effect upon our business, financial condition and results of operations. Our continued growth is also dependent upon our ability to attract and retain additional skilled management personnel.
We are controlled by two shareholders, who may determine the outcome of all elections.
Approximately 52% of our outstanding common stock is beneficially owned or controlled by the estate of our Chairman Emeritus, Lee Posey, Sally Posey, and Capital Southwest Corporation and its affiliates. As a result, these shareholders, acting together, are able to determine the outcome of elections of our directors and thereby control the management of our business.
Increased prices and unavailability of raw materials could have a material adverse effect on us.
Our results of operations can be affected by the pricing and availability of raw materials. In fiscal 2008, average prices of our raw materials decreased 2% compared to fiscal 2007. Average prices of our raw materials were flat in 2007 and increased 5% in 2006. Although we attempt to increase the sales prices of our homes in response to higher materials costs, such increases typically lag behind the escalation of materials costs. Although lumber costs have moderated, three of the most important raw materials used in our operations—lumber, gypsum wallboard and insulation—have experienced significant price fluctuations in the past several fiscal years. Although we have not experienced any shortage of such building materials today, there can be no assurance that sufficient supplies of lumber, gypsum wallboard and insulation, as well as other materials, will continue to be available to us on terms we regard as satisfactory.
If inflation increases, we may not be able to offset inflation through increased selling prices.
If there is a significant increase in inflation in the future, it is unlikely that we will be able to increase our selling prices to completely offset the significant increase in inflation and as a result, our operating results may be adversely affected.
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The manufactured housing industry is highly competitive and some of our competitors have stronger balance sheets and cash flow, as well as greater access to capital, then we do. As a result of these competitive conditions, we may not be able to sustain past levels of sales or profitability.
The manufactured housing industry is highly competitive, with relatively low barriers to entry. Manufactured and modular homes compete with new and existing site-built homes and to a lesser degree, with apartments, townhouses and condominiums. Competition exists at both the manufacturing and retail levels and is based primarily on price, product features, reputation for service and quality, retailer promotions, merchandising and terms of consumer financing. Some of our competitors have substantially greater financial, manufacturing, distribution and marketing resources than we do. As a result of these competitive conditions, we may not be able to sustain past levels of sales or profitability.
If our retail customers are unable to obtain insurance for factory-built homes, our sales volume and results of operations may be adversely affected.
We sell our factory-built homes to retail customers located throughout the United States including in coastal areas, such as Florida. In fiscal 2008, approximately 14% of our net sales were generated in Florida. Some of our retail customers in these areas have experienced difficulty obtaining insurance for our factory-built homes due to adverse weather-related events in these areas, primarily hurricanes. If our retail customers face continued and increased difficulty in obtaining insurance for the homes we build, our sales volume and results of operations may be adversely affected.
We are concentrated geographically, which could harm our business.
In fiscal 2008, approximately 31% of our net sales were generated in Texas and approximately 14% of our net sales were generated in Florida. A decline in the demand for manufactured housing in Florida has already impacted our operations (see the Executive Overview section of Management’s Discussion and Analysis for more details) and a decline in the economy of Texas could have a material adverse effect on our results of operations as well.
| Item 1B. | Unresolved Staff Comments |
None.
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| Item 2. | Properties |
The following table sets forth certain information with respect to our properties:
| Location |
Owned/Leased | Approximate Square Feet | ||
| Operating Manufacturing Facilities |
||||
| Albemarle, North Carolina |
Owned | 112,700 | ||
| Arabi, Georgia |
Owned | 97,970 | ||
| Austin, Texas (2 facilities) |
Owned | 180,800 | ||
| Buda, Texas |
Owned | 88,275 | ||
| Fort Worth, Texas |
Owned | 121,300 | ||
| Martinsville, Virginia (2 facilities) |
Owned | 131,855 | ||
| Millersburg, Oregon |
Owned | 168,650 | ||
| Plant City, Florida |
Owned | 87,200 | ||
| Siler City, North Carolina |
Owned | 91,200 | ||
| Leased | 40,000 | |||
| Tempe, Arizona |
Owned | 103,500 | ||
| Idled Manufacturing Facilities |
||||
| Burleson, Texas (1) |
Owned | 94,300 | ||
| Casa Grande, Arizona (2) |
Owned | 90,000 | ||
| LaGrange, Georgia (2) |
Owned | 200,000 | ||
| Martinsville, Virginia |
Owned | 43,505 | ||
| Plant City, Florida |
Owned | 93,600 | ||
| Sabina, Ohio (2) |
Owned | 85,000 | ||
| Component and Supply Facilities |
||||
| Martinsville, Virginia |
Owned | 148,346 | ||
| Corporate Headquarters |
||||
| Addison, Texas |
Leased | 48,000 | ||
| (1) | Facility was destroyed by fire on December 2, 2006. |
| (2) | Facility is permanently closed and listed for sale. |
We currently own all of our manufacturing facilities (except one building in Siler City, NC which is leased) and substantially all of the machinery and equipment used in the facilities. We believe our facilities are adequately maintained and suitable for the purposes for which they are used. Our capacity utilization rate was approximately 43% as of March 28, 2008.
In addition to our production facilities, we own 28 properties upon which 21 of our active retail centers are located. The remaining active sales centers are leased under operating leases with lease terms generally ranging from monthly to eight years.
| Item 3. | Legal Proceedings |
We are 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 our financial position or results of operations.
In late 1992, we removed an underground storage tank formerly used to store gasoline from the site of our Tempe, Arizona manufacturing facility. We worked in cooperation with the Arizona Department of Environmental Quality to assess and respond to gasoline related hydrocarbons detected in soil and groundwater at this site. We have closed the site and completed all the necessary paperwork required by the EPA to settle the
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claim. Under certain circumstances, a state fund may be available to compensate responsible parties for petroleum releases from underground storage tanks. Site characterization is complicated by the presence of contaminants associated with the Indian Bend Wash Area Superfund Site described below. The liability is not estimatable due to our inability to project whether any additional remediation is necessary. At this time, we do not expect that the costs of any corrective action or assessments related to the tank will have a material adverse effect on our financial condition, results of operations or cash flows.
Our Tempe facility is partially located within a large area that has been identified by the EPA as the Indian Bend Wash Area Superfund Site. Under federal law, certain persons known as potentially responsible parties (PRPs) may be held strictly liable on a joint and several basis for all cleanup costs and natural resource damages associated with the release of hazardous substances from a facility. The average cost to clean up a site listed on the National Priorities List is over $30 million. The Indian Bend Superfund Site is listed on the National Priorities List. Groups of PRPs may include current owners and operators of a facility, owners and operators of a facility at the time of disposal of hazardous substances, transporters of hazardous substance and those who arrange for the treatment or disposal of hazardous substances at a site. No government agency, including the EPA, has indicated that we have been or will be named as a PRP or that we are otherwise responsible for the contamination present at the Indian Bend Superfund Site. In general, although no assurance can be given as to the future actions of either the EPA or PRPs who may incur cleanup costs related to this site, we do not believe that our ownership of property partially located within the Indian Bend Superfund Site will have a material adverse effect on our financial condition, results of operations or cash flows.
In 1994, we removed two underground storage tanks used to store petroleum substances from property we own in Georgia. In November 2001, we received a letter from the Georgia Department of Natural Resources indicating no further action was necessary with respect to these storage tanks. The letter, however, did not preclude additional action by the State if contaminants were found in adjoining properties. At this time, we do not expect that the costs of future assessment and corrective action related to the tanks will have a material adverse effect on our financial condition, results of operations or cash flows.
| Item 4. | Submission of Matters to a Vote of Security Holders |
No matter was submitted during the fourth quarter of the fiscal year covered by this Report to a vote of security holders, through the solicitation of proxies or otherwise.
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PART II.
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Our common stock has been traded on the Nasdaq Stock Market under the symbol “PHHM” since July 31, 1995, the date on which we completed our initial public offering. The following table sets forth, for the periods indicated, the high and low sales information per share of the common stock as reported on the Nasdaq Stock Market.
| Fiscal 2008 |
High | Low | ||||
| First Quarter |
$ | 15.98 | $ | 14.04 | ||
| Second Quarter |
15.95 | 12.36 | ||||
| Third Quarter |
14.42 | 10.23 | ||||
| Fourth Quarter |
10.55 | 4.34 | ||||
| Fiscal 2007 |
High | Low | ||||
| First Quarter |
$ | 22.61 | $ | 17.14 | ||
| Second Quarter |
17.50 | 14.12 | ||||
| Third Quarter |
15.47 | 13.30 | ||||
| Fourth Quarter |
14.92 | 12.60 | ||||
On May 27, 2008, the last reported sale price of our common stock on the Nasdaq Stock Market was $8.36. As of May 27, 2008, there were approximately 580 record holders of our common stock, and approximately 2,500 holders of the common stock overall based on an estimate of the number of individual participants represented by security position listings.
We have never paid cash dividends on our common stock. Our board of directors intends to retain any future earnings we generate to support operations and to finance expansion and does not intend to pay cash dividends on our common stock for the foreseeable future. The payment of cash dividends in the future will be at the discretion of the board of directors and will depend upon a number of factors such as our earnings levels, capital requirements, financial condition and other factors deemed relevant by the board of directors. Future loan agreements may or may not restrict or prohibit the payment of dividends.
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PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for us, the Standard & Poor’s MidCap 400 Composite Stock Index and our peer group, assuming the investment of $100 on March 31, 2003, and the reinvestment of dividends. The companies in our peer group are as follows: Cavalier Homes, Inc., Champion Enterprises, Inc., Fleetwood Enterprises, Inc., Liberty Homes, Inc. and Skyline Corporation.
There can be no assurance that our share performance will continue into the future with the same or similar trends depicted in the graph above. We will not make or endorse any predictions as to future share performance.
| * | $100 invested on 3/31/03 in stock or index-including reinvestment of dividends. |
| Fiscal year ending March 31. |
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| Item 6. | Selected Financial Data |
The following table sets forth selected financial information regarding our financial position and operating results which has been extracted from our audited financial statements for the five fiscal years ended March 28, 2008. The information should be read in conjunction with Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and accompanying Notes in Item 8 of this report.
| Fiscal Year Ended | ||||||||||||||||||||
| March 28, 2008 (52 weeks) |
March 30, 2007 (52 weeks) |
March 31, 2006 (53 weeks) |
March 25, 2005 (52 weeks) |
March 26, 2004 (52 weeks) |
||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| Statements of Operations: |
||||||||||||||||||||
| Net sales |
$ | 555,096 | $ | 661,247 | $ | 710,635 | $ | 610,538 | $ | 578,465 | ||||||||||
| Cost of sales |
421,371 | 503,419 | 525,023 | 455,960 | 427,826 | |||||||||||||||
| Gross profit |
133,725 | 157,828 | 185,612 | 154,578 | 150,639 | |||||||||||||||
| Selling, general and administrative expenses |
150,562 | 160,016 | 161,154 | 154,931 | 157,414 | |||||||||||||||
| Goodwill impairment |
78,506 | — | — | — | — | |||||||||||||||
| Income (loss) from operations |
(95.343 | ) | (2,188 | ) | 24,458 | (353 | ) | (6,775 | ) | |||||||||||
| Interest expense |
(18,654 | ) | (15,695 | ) | (11,739 | ) | (8,990 | ) | (5,566 | ) | ||||||||||
| Equity in earnings (loss) of limited partnership and Impairment charges |
— | (4,709 | ) | 574 | (763 | ) | 1,848 | |||||||||||||
| Interest income and other |
3,625 | 4,901 | 5,007 | 4,165 | 1,440 | |||||||||||||||
| Income (loss) before income taxes |
(110,372 | ) | (17,691 | ) | 18,300 | (5,941 | ) | (9,053 | ) | |||||||||||
| Income tax benefit (expense) |
(13,890 | ) | 6,126 | (7,186 | ) | 2,118 | 3,036 | |||||||||||||
| Net income (loss) |
$ | (124,262 | ) | $ | (11,565 | ) | $ | 11,114 | $ | (3,823 | ) | $ | (6,017 | ) | ||||||
| Net income (loss) per common share—basic and diluted |
$ | (5.44 | ) | $ | (0.51 | ) | $ | 0.49 | $ | (0.17 | ) | $ | (0.26 | ) | ||||||
| Weighted average common shares outstanding—basic and diluted |
22,852 | 22,852 | 22,831 | 22,832 | 22,857 | |||||||||||||||
| Balance Sheet Data (1): |
||||||||||||||||||||
| Total assets |
$ | 565,400 | $ | 683,264 | $ | 654,051 | $ | 571,980 | $ | 521,822 | ||||||||||
| Convertible senior notes |
75,000 | 75,000 | 75,000 | 75,000 | — | |||||||||||||||
| Warehouse revolving debt |
42,175 | 12,045 | 37,413 | 106,298 | 74,071 | |||||||||||||||
| Securitized financings |
165,430 | 194,405 | 105,379 | — | — | |||||||||||||||
| Shareholders’ equity |
126,575 | 250,130 | 263,024 | 252,907 | 256,053 | |||||||||||||||
| Operating Data (unaudited): |
||||||||||||||||||||
| Number of new factory-built homes sold (2) |
5,449 | 6,737 | 8,911 | 7,948 | 8,216 | |||||||||||||||
| Multi-section manufactured homes sold as a percentage of total manufactured homes sold |
83 | % | 91 | % | 86 | % | 95 | % | 93 | % | ||||||||||
| Modular homes sold as a percentage of total factory-built homes sold |
30 | % | 27 | % | 18 | % | 17 | % | 12 | % | ||||||||||
| Number of manufacturing facilities (1) |
12 | 14 | 18 | 18 | 19 | |||||||||||||||
| Number of company-owned retail sales centers and builder locations (1) |
87 | 107 | 116 | 121 | 149 | |||||||||||||||
| (1) | As of the end of the applicable period. |
| (2) | Includes 583 homes sold to FEMA in fiscal 2006. |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Executive Overview
We are one of the nation’s leading manufacturers and marketers of factory-built homes. We market nationwide through vertically integrated operations, encompassing manufactured and modular housing, financing and insurance. As of March 28, 2008, we operated 12 manufacturing facilities that sell homes through 87 company-owned retail sales centers and builder locations and approximately 275 independent retail dealers, builders and developers. Through our subsidiary, CountryPlace, we currently offer conforming mortgages to purchasers of factory-built homes sold by company-owned retail sales centers and certain independent retail dealers, builders and developers. The loans originated through CountryPlace are either held for our own investment portfolio, sold to investors, or included as part of securitized financing transactions. We also provide property and casualty insurance for owners of manufactured homes through our subsidiary, Standard Casualty.
The tightening of credit standards, limited retail and wholesale financing availability, increased levels of repossessions, excessive retail inventory levels and manufacturing capacities caused the manufactured housing industry to enter a cyclical downturn in mid-1999. Our fiscal 2008 results were heavily influenced by these difficult industry conditions. Industry shipments have continued to decline with calendar year 2007 manufactured housing shipments down 18% from calendar year 2006 and the three significant (to both us and the industry) manufactured housing states of Florida, California and Arizona down a combined 43% and comprising 50% of the total national decline in shipments.
Industry modular shipments are down 16% for calendar year 2007 as compared to calendar year 2006. Modular sales accounted for approximately 36% of our revenues in fiscal 2008. While average selling prices of modular homes were higher in fiscal 2008, unit sales were down 12% due to weaker housing demand trends. The severe downturn of the overall housing market created by a return to more prudent lending practices has produced excess site-built inventory which is directly competitive with modular housing.
During the fourth quarter of fiscal 2008, we closed our Sabina, Ohio, Casa Grande, Arizona and one of our Plant City, Florida manufacturing facilities as well as 18 under-performing retail sales centers to more effectively align our manufacturing capacity and distribution channels with current and expected regional demand. In connection with these actions, we recorded restructuring charges totaling $8.3 million primarily related to facility closure costs. Of this $8.3 million, $2.9 million is included in cost of sales and $5.4 million is included in selling, general and administrative expenses on our consolidated statement of operations. Also, as part of this restructuring, we listed three of our manufacturing facilities for sale. We expect to sell these facilities during fiscal 2009. The carrying value of these facilities is included in assets held for sale on the consolidated balance sheets. No significant additional charges are expected to be incurred in connection with this restructuring.
The deterioration of the credit markets that we depend on for warehouse lending for originations and securitizations of our loans has also impacted our business during fiscal 2008. CountryPlace’s warehouse borrowing facility was originally scheduled to expire March 14, 2008; however, they negotiated an extension with the lender until April 30, 2008. During the extension period, CountryPlace stopped taking applications for chattel loans and non-conforming mortgages but continued to originate conforming mortgage loans. On April 25, 2008, CountryPlace sold approximately $51.3 million of its warehoused portfolio of chattel and mortgage loans without incurring a loss. Approximately $41.5 million of the proceeds were used to repay in full and terminate the warehouse borrowing facility scheduled to expire on April 30, 2008. CountryPlace will continue to originate and service conforming mortgages for our credit-worthy customers.
With these difficult market conditions worsening and no near-term signs of recovery for the factory-built housing industry, we have focused on executing three key strategies to improve our operating results. First, the Company plans to increase revenues through an expanded product offering (including the less expensive manufactured and modular products introduced during the first quarter of fiscal 2008), enhanced marketing and advertising efforts, and expanded distribution channels. Along with this, we will continue to identify ways to
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reduce our fixed costs and improve operating efficiencies. We will also focus on cash generation and conservation throughout our operations. In addition, we have amended certain debt agreements subsequent to March 28, 2008 (see Liquidity and Capi