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Discontinued Operations
 3 Months Ended
Aug. 31, 2015
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
NOTE 3 Discontinued Operations

During September 2014, the Corporation made a strategic decision to exit the recreational vehicle industry in order to focus on its core housing business. 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; and

 

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

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

 

  •   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; and

 

  •   Evergreen had the right, but not the obligation, to purchase raw material inventory at 50 percent of the Corporation’s cost of approximately $1,600,000, which was exercised. Consequently, the Corporation incurred an approximate $910,000 charge in fiscal 2015 reflecting the reduction in realizable value of the inventory. The Corporation received final payment for the inventory in the first quarter of fiscal 2016.

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

The Bristol facility, and assets other than raw material and finished goods inventories, were sold at approximately net book value.

The following table summarizes the results of discontinued operations:

 

     Three-Months Ended August 31,  
         2015              2014      
     (Unaudited)  
     (Dollars in thousands)  

Net Sales

    $ 21       $ 7,825   
  

 

 

     

 

 

  

Operating income (loss) of discontinued operations

    $ 61       $ (2,564 ) 
  

 

 

     

 

 

  

Income (loss) before income taxes

      61         (2,564 ) 

Income tax benefit

      —           —     
  

 

 

     

 

 

  

Income (loss) from discontinued operations, net of taxes

    $ 61       $ (2,564 ) 
  

 

 

     

 

 

  

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 continuing operations because the level of net sales do not warrant separate segment reporting

 

The following is a summary of assets and liabilities of discontinued operations at the dates indicated:

 

     August 31, 2015      May 31, 2015  
     (Unaudited)         
     (Dollars in thousands)  

Current Assets:

   

Accounts receivable

    $ 87       $ 30   

Inventories

      50         110   
  

 

 

     

 

 

  
   $ 137       $ 140   
  

 

 

     

 

 

  

Current Liabilities:

      

Accounts payable, trade

    $ 40       $ 8   

Accrued marketing programs

      —           37   

Other accrued liabilities

      68         59   
  

 

 

     

 

 

  
   $ 108       $ 104   
  

 

 

     

 

 

  

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 August 31, 2015 and May 31, 2015.