Palm Harbor Homes, Inc. Second Quarter Fiscal 2008 Results Include Non-Recurring

Net sales for the second quarter totaled $144.6 million comparedwith $179.4 million in the year-earlier period. Net loss for thesecond quarter of 2008 totaled $98.1 million, or ($4.29) per share,compared with net loss of $5.3 million, or ($0.23) per share, a yearago. These results include non-recurring, non-cash charges of $95.7million, or $4.19 per share, related to the impairment of all of theCompany's previously recorded goodwill and the establishment of avaluation allowance against all of the Company's net deferred taxassets. Excluding these non-recurring, non-cash charges, net loss forthe second quarter of fiscal 2008 was ($0.10) per share.

Net sales for the first six months of fiscal 2008 were $287.9million compared with $373.9 million in the year-earlier period. Netloss for the first half of fiscal 2008 totaled $102.3 million, or($4.48) per share, compared with a net loss of $1.7 million, or($0.08) per share, in the first half of fiscal 2007. Excluding thenon-recurring, non-cash charges noted above, net loss for the firsthalf of fiscal 2008 was ($0.29) per share.

Commenting on the results, Larry Keener, chairman and chiefexecutive officer of Palm Harbor Homes, Inc., said, "Our results forthe second quarter of fiscal 2008 were heavily influenced by difficultindustry conditions in key markets. The traditional HUD-codemanufacturing housing industry is down 23 percent through August, withthe three important manufactured housing states of Florida, Californiaand Arizona down a combined 45 percent. In spite of these conditions,we continued to demonstrate our ability to effectively manage ourbusiness with reduced operating costs and margin improvement comparedwith the prior year period.

"The recent fallout in the sub-prime mortgage market has createdadditional pressures as the number of defaults and repossessionscontinues to grow," added Keener. "At the same time, appraisal valuesare declining with greater availability of lower priced site-builthomes on the market. These factors are in turn affecting the demandfor factory-built housing products. We remain focused on managing theaspects of our business that we can control - increasing revenuesthrough our expanded product and marketing plans, reducing operatingexpenses and conserving cash - even if the overall direction of theindustry does not improve. We have made considerable progress duringthe quarter with respect to our strategic initiatives to increase ourmarket penetration. We are pleased with the favorable market responseto our less expensive manufactured and modular products, introducedduring the first quarter of fiscal 2008. As a result, factory backlogsare ahead of last year due to the planned expansion of our productlines to more attractive price points. The impact of both our newHUD-code products and our targeted multi-media advertising campaign ismost evident in our Texas markets, where incoming orders have remainedstrong. Accordingly, we plan to re-open our second production line atthe Company's Austin, Texas, plant during the third fiscal quarter.Modular sales have been concentrated in the eastern half of thecountry and now account for 37 percent of total Company revenues.Overall, it is encouraging to see the results from our aggressivemarketing efforts even in the face of a declining industry. As ourinitiatives continue to gain traction over the second half of fiscal2008, we believe we can further increase our market share."

Kelly Tacke, executive vice president and chief financial officerof Palm Harbor Homes, Inc., commented, "Our financial condition issolid. As of September 28, 2007, we had $37.9 million in cash and cashequivalents. We have reduced our selling, general and operatingexpenses by approximately 14 percent through the first half of fiscal2008. We will continue to pursue a conservative financial strategythat compliments our other strategic initiatives."

A conference call regarding this release is scheduled forWednesday, October 17, 2007, at 10:00 a.m. (Eastern Time). Interestedparties can access a live simulcast on the Internet at or . A 30-day replay will beavailable on both websites.

Palm Harbor Homes is one of the nation's leading manufacturers andmarketers of factory-built homes. The Company markets nationwidethrough vertically integrated operations, encompassing manufacturing,marketing, financing and insurance. For more information on theCompany, please visit .

This press release contains projections and other forward-lookingstatements within the meaning of Section 21E of the SecuritiesExchange Act of 1934. These projections and statements reflect theCompany's current views with respect to future events and financialperformance. No assurance can be given, however, that these eventswill occur or that these projections will be achieved and actualresults could differ materially from those projected as a result ofcertain factors. A discussion of these factors is included in theCompany's periodic reports filed with the Securities and ExchangeCommission.

                       PALM HARBOR HOMES, INC.                       Statements of Operation(Dollars in thousands, except earnings per share)For the second quarter and six months ended September 28, 2007 and September 29, 2006----------------------------------------------------------------------                         Second Quarter Ended     Six Months Ended----------------------------------------------------------------------                         Sept. 28,  Sept. 29,   Sept. 28,   Sept. 29,                            2007       2006       2007        2006----------------------------------------------------------------------                              (Unaudited)            (Unaudited)Net sales                $ 144,639  $ 179,409  $  287,933  $  373,939Cost of sales              108,151    138,784     217,044     281,826Selling, general and administrative expenses    37,527     42,277      74,554      86,280Goodwill impairment         78,506          -      78,506           -----------------------------------------------------------------------Income (loss) from operations                (79,545)    (1,652)    (82,171)      5,833Interest expense            (4,691)    (3,702)     (9,172)     (7,124)Equity in loss of limited partnership and impairment charges              -     (4,535)          -      (4,709)Interest income and other                       1,456      1,092       2,496       2,296----------------------------------------------------------------------Loss before income taxes   (82,780)    (8,797)    (88,847)     (3,704)Income tax benefit (expense)                 (15,317)     3,518     (13,501)      1,981----------------------------------------------------------------------Net loss                 $ (98,097) $  (5,279) $ (102,348) $   (1,723)======================================================================Net loss per common share - basic and diluted                 $   (4.29) $   (0.23) $    (4.48) $    (0.08)======================================================================Weighted average common shares outstanding - basic and diluted          22,852     22,831      22,852      22,831======================================================================                       Condensed Balance Sheets(Dollars in thousands)September 28, 2007 and March 30, 2007----------------------------------------------------------------------                                                Sept. 28,   March 30,                                                  2007        2007----------------------------------------------------------------------                                               (Unaudited)Total Assets:   Cash and cash equivalents                   $   37,924  $   44,292   Trade receivables                               41,369      33,978   Consumer loans receivable, net                 250,684     228,289   Inventories                                    140,327     138,690   Property, plant and equipment, net              57,389      59,996   Other assets                                    62,048     169,877----------------------------------------------------------------------Total assets                                   $  589,741  $  675,122======================================================================Total Liabilities and Shareholders' Equity:   Accounts payable and accrued liabilities    $  106,474  $   99,939   Floor plan payable                              49,158      43,603   Convertible senior notes                        75,000      75,000   Warehouse revolving debt                        32,863      12,045   Securitized financings                         178,389     194,405   Shareholders' equity                           147,857     250,130----------------------------------------------------------------------   Total liabilities and shareholders' equity  $  589,741  $  675,122======================================================================

                       PALM HARBOR HOMES, INC.                             Quick Facts                           Second Quarter Ended    Six Months Ended----------------------------------------------------------------------                           Sept. 28,  Sept. 29,  Sept. 28,  Sept. 29,                              2007       2006       2007       2006----------------------------------------------------------------------FACTORY-BUILT HOUSING:Company-owned superstores and builder locations:      Beginning                  107        117        107        116      Added                        1          2          1          5      Closed                       -         (8)         -        (10)----------------------------------------------------------------------         Ending                  108        111        108        111======================================================================Factory-built homes sold through:   Company-owned    superstores and    builder locations            995      1,085      1,935      2,292   Independent dealers and    builders                     478        724        949      1,688----------------------------------------------------------------------      Total factory-built       homes sold              1,473      1,809      2,884      3,980======================================================================Factory-built homes sold as:   Single-section                169        119        336        236   Multi-section                 857      1,215      1,675      2,762   Modular                       447        475        873        982----------------------------------------------------------------------      Total factory-built       homes sold              1,473      1,809      2,884      3,980======================================================================Average sales prices:   Manufactured housing -    retail                 $  74,000  $  82,000  $  75,000  $  79,000   Manufactured housing -    wholesale              $  65,000  $  67,000  $  63,000  $  65,000   Modular housing -    retail                 $ 183,000  $ 162,000  $ 181,000  $ 162,000   Modular housing -    wholesale              $  78,000  $  81,000  $  79,000  $  80,000======================================================================Homes produced                 1,383      1,663      2,757      3,798Internalization rate (manufactured and modular)                         62%        59%        63%        57%======================================================================FINANCIAL SERVICES   Loan originations:      CPM                        257        291        444        574      BSM                          -        195          -        368   Insurance penetration:      Warranty                    92%        92%        90%        92%      Physical damage             61%        60%        60%        60%======================================================================