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Discontinued Operations
 6 Months Ended
Nov. 30, 2014
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

NOTE 2 Discontinued Operations

During September 2014, the Corporation decided to strategically focus on its core housing business and exit the recreational vehicle industry. As a result, on October 7, 2014 (“Closing Date”), the Corporation completed the sale of certain assets associated with its recreational vehicle segment (the “Transaction”) to Evergreen Recreational Vehicles, LLC (“ERV”). The Transaction was completed pursuant to the terms of an Asset Purchase Agreement entered into between the Corporation and ERV on the Closing Date, as well as the terms of a Real Property Purchase Agreement entered into on that same date between the Corporation and an affiliate of ERV, Skyline RE Holding LLC (which, collectively with ERV, is referred to herein as “Evergreen”). The assets of the recreational vehicle segment disposed of in the Transaction include:

 

  •   A recreational vehicle manufacturing facility consisting of approximately 135,000 square feet situated on 18.2 acres located in Bristol, Indiana;

 

  •   Intellectual properties such as trademarks, licenses, and product designs associated with the recreational vehicle segment;

 

  •   Furniture, machinery, software, and equipment;

 

  •   Raw material and work-in-process inventories;

 

  •   Product designs, plans, and specifications;

 

  •   Customer purchase orders and contracts, customer lists, and supplier lists; and

 

  •   All of the Corporation’s rights to the exhibit space at the 2014 RVIA Louisville Show and related show materials (although the Corporation will retain approximately 4,500 square feet of show space for its own use).

The amount and nature of the consideration received by the Corporation for the assets sold include:

 

  •   A cash payment of $175,000;

 

  •   A separate cash payment of approximately $806,000, less prorated property taxes of approximately $73,000 and selling expenses of approximately $2,000, for the Bristol, Indiana manufacturing facility;

 

  •   Evergreen will pay the Corporation a cash payment for the 2014 RVIA Louisville Show space (less the retained 4,500 square feet) at the per square foot lease rate paid by the Corporation for the space; and

 

  •   For six months following the Closing Date, Evergreen will pay the Corporation 50 percent of the Corporation’s cost for raw materials inventory purchased by the Corporation prior to the Closing Date within 10 days of Evergreen’s use of the raw material. After six months following the Closing Date, the Corporation will have the right to remove any remaining materials inventory from Evergreen’s possession.

In addition, under the Asset Purchase Agreement Evergreen will not assume or agree to pay, perform, or discharge any of the Corporation’s liabilities or obligations, which will remain the liabilities and obligations of the Corporation.

The Bristol facility, and assets other than raw material and finished goods inventories, was sold at approximately net book value. Evergreen has the right, but not the obligation, to purchase the raw material inventory at 50 percent of the Corporation’s cost of approximately $1,600,000. There can be no assurances as to how much of the raw material inventory Evergreen will purchase. Consequently, the Corporation incurred an approximate $901,000 charge in the second quarter reflecting the reduction in value of the raw material inventory plus raw material inventory that will not be used by Evergreen. Through November 30, 2014, Evergreen paid the Corporation approximately $69,000 for raw material inventory. In future periods, there may be additional charges that could be material related to the discontinued operations of the recreational vehicle segment disposed of in the Transaction.

 

The following table summarizes the results of discontinued operations:

 

     Three-Months Ended
November 30,		     Six-Months Ended
November 30,		  
     2014     2013     2014     2013  
     (Dollars in thousands)     (Dollars in thousands)  

Net Sales

    $ 1,890      $ 7,055      $ 9,715      $ 18,386   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating loss of discontinued operations

    $ (3,294 )    $ (1,474 )    $ (5,858 )    $ (1,863 ) 

Loss on disposal of discontinued operations

      (231 )      —          (231 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss before income taxes

      (3,525 )      (1,474 )      (6,089 )      (1,863 ) 

Income tax benefit

      —          —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss from discontinued operations, net of taxes

    $ (3,525 )    $ (1,474 )    $ (6,089 )    $ (1,863 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss on disposal of discontinued operations consisted of a $901,000 charge associated with the reduction in value of raw material inventory, less a gain of approximately $670,000 resulting from the sale of two idle recreational vehicle manufacturing facilities in Elkhart, Indiana to Forest River Manufacturing, LLC.

The Corporation’s park model business, which was formerly reported in the recreational vehicle segment, was not disposed as part of the transaction with Evergreen and is now reported in the housing segment because net sales do not warrant separate segment reporting.

The following is a summary of assets and liabilities of discontinued operations at November 30, 2014 and May 31, 2014:

 

     November 30, 2014      May 31, 2014  
     (Dollars in thousands)  

Current Assets:

      

Accounts receivable

    $ 1,567       $ 4,770   

Inventories

      805         2,703   
  

 

 

     

 

 

  
   $ 2,372       $ 7,473   
  

 

 

     

 

 

  

Property, Plant and Equipment:

      

Property, plant and equipment, at cost

    $ —         $ 9,812   

Less accumulated depreciation

      —           7,901   
  

 

 

     

 

 

  
   $ —         $ 1,911   
  

 

 

     

 

 

  

 

 

     November 30, 2014      May 31, 2014  
     (Dollars in thousands)  

Current Liabilities:

      

Accounts payable, trade

    $ 37       $ 2,089   

Accrued salaries and wages

      —           419   

Accrued marketing programs

      118         330   

Other accrued liabilities

      184         186   
  

 

 

     

 

 

  
   $ 339       $ 3,024   
  

 

 

     

 

 

  

In accordance with the Asset Purchase Agreement, the Corporation is responsible for the payment of product warranty claims associated with recreational vehicles sold by the Corporation. Consequently, this obligation is not included in the liabilities of discontinued operations on the Consolidated Balance Sheets at November 30 and May 31, 2014.