Discontinued Operations

12 Months Ended

May 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE 2 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 assets of the recreational vehicle segment disposed of in the Transaction include, but are not are limited to:

• 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 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; and

• Evergreen had the right, but not the obligation, to purchase the raw material inventory at 50 percent of the Corporation’s cost of approximately $1,631,000. Consequently, the Corporation incurred an approximate $910,000 charge in fiscal 2015 reflecting the reduction in value of the inventory plus inventory that will not be used by Evergreen. The Corporation received approximately $721,000 for inventory used by Evergreen.

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.

The following table summarizes the results of discontinued operations:

	Year Ended
	2016			2015
	(Dollars in thousands)
Net Sales	$	71		$	9,676
Operating loss of discontinued operations	$	(195	)	$	(5,986	)
Loss on disposal of discontinued operations		—			(240	)
Loss before income taxes		(195	)		(6,226	)
Income tax benefit		—			—
Loss from discontinued operations, net of taxes	$	(195	)	$	(6,226	)

For fiscal 2016, Operating loss of discontinued operations is primarily the result of a charge for future warranty claim payments. For fiscal 2015, Loss on disposal of discontinued operations consisted of a $910,000 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.

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.