Cavco Industries Inc. announced Friday (Sept. 26) its interest in a potential acquisition of Skyline Corp., a publicly-traded company, at “a significant market premium.” The announcement came shortly after news of a tentative agreement to sell Skyline’s RV division to EverGreen Recreational Vehicles LLC was released.
According to a press release, over the past several weeks, Cavco has attempted to open a dialogue with the board of directors of Skyline through a series of formal communications. Cavco has suggested that it would be in the best interest of Skyline shareholders for its board to discuss the various proposals by Cavco to improve shareholder value, including a purchase by Cavco of all outstanding shares of Skyline at an attractive premium to current market prices.
Cavco, a leading producer of manufactured homes, said that Skyline did not respond to any of its attempts over an approximately 30-day period to engage in a productive dialogue, which included a series of letters addressed to Skyline’s board of directors, phone calls to Skyline’s longest serving board member and former CEO, and Joseph Stegmayer, president and CEO of Cavco, attending Skyline’s annual meeting of shareholders in an effort to discuss the matter with any of Skyline’s directors who would be open to exploring options for maximizing shareholder value.
After Cavco sent two additional written communications addressed to Skyline’s board of directors, one of which asked Skyline to respond within one week to simply schedule a time for preliminary discussions between the companies, Cavco received a letter on Sept. 25 from Skyline’s lead director stating without further explanation that the board would not be able to respond to Cavco’s request within the requested time frame. To view the Sept. 22 communication from Cavco with Skyline click here.
Cavco’s proposed offer set forth in its letter would provide liquidity for Skyline shareholders at a substantial premium of 29% to 66% above the Sept. 24 closing price of $2.71 per share. Cavco’s offer would have no financing contingencies. Cavco also offered other possible concepts that would assist Skyline.
Skyline reported in a press release issued Friday that it is pursuing the sale of its RV division. While a successful sale of that division may provide short-term liquidity for Skyline, it would not address the substantially larger operating losses incurred by the housing segment in the last seven fiscal years, Cavco said. The RV division of Skyline’s business represented less than half of Skyline’s fiscal 2014 loss before income taxes of $11.9 million. In contrast, Cavco has proposed to purchase all of Skyline’s operations at a significant premium to market that Cavco believes will provide a greater and more assured and definitive return to Skyline’s shareholders.
Stegmayer commented, “Cavco has a great deal of respect for the Skyline brand and for Skyline’s experienced and highly credentialed board members. Unfortunately, Skyline has experienced difficult times during the past seven years and has meaningfully underperformed.”
Skyline has reported annual losses before income taxes for seven consecutive fiscal years, 2008 through 2014. These cumulative losses total approximately $122 million before income taxes, the majority of which were incurred by the housing segment. Skyline shareholders’ equity declined from approximately $178 million at the beginning of fiscal 2008 to approximately $34 million at May 31, 2014. On August 22, 2014, Skyline’s independent accounting firm issued a qualified opinion regarding Skyline’s ability to continue as a going concern.
Skyline’s Form 10-K for the fiscal year ended May 31, 2014, further disclosed, “Due to recurring losses, the corporation experienced negative cash flows from operating activities. As a result, the corporation has utilized its cash, investments in U.S. Treasury Bills, proceeds from the sale of assets and borrowings from the cash surrender of life insurance policies. The level of historical negative cash flows from operations and not having available funding from outside financing sources raise substantial doubt about the corporation’s ability to continue as a going concern.”
Cavco said it remains interested in holding productive discussions with Skyline. With the cooperation of Skyline’s officers and directors, Cavco and its advisors are prepared to conduct an expedited due diligence review and expect that a transaction can be concluded in a relatively quick time frame.
The release stated, “Although Skyline’s operating losses and financial distress and its board’s unwillingness to even entertain preliminary discussions have made it difficult for Cavco to determine the precise valuation it will apply in a transaction, Cavco has been able to establish the range mentioned in the letter attached based on Cavco’s and its advisors’ analysis of Skyline’s public filings. It is possible that a higher figure could be justified following open discussions with Skyline.”
Cavco Industries Inc., a leading provider of RV rental cabins and cottages for campgrounds, RV parks and resorts across North America, will be featured in the April 13 episode of NBC’s American Dream Builders, which airs at 8 p.m. Eastern, 7 p.m. Central.
The Phoenix-based company is supplying several custom-built modules from its park model and modular eco-cottages, whose interiors will be designed from scratch in the reality show’s weekly design competition, hosted by renowned designer Nate Berkus.
“This is a terrific opportunity for us to showcase our eco-cottages,” said Tim Gage, Cavco’s vice president of park models, cabins and specialty products, adding that the units featured on Sunday’s episode of American Dream Builders will be installed at the Ventura Ranch KOA in Santa Paula, Calif.
“We’re excited to be able to use these cottages as rental accommodations,” said Scott Cory, general manager of the Ventura Ranch KOA, which already has 15 Cavco park models cabins. “The Eco-Cottages on American Dream Builders is an example of Cavco’s progressive thinking on design and creativity for our industry. They are always one step ahead in terms of innovation in design.”
In addition to being shown on American Dream Builders, the winning designer’s home from this episode will also be featured in a photo spread in an upcoming edition of Better Homes & Gardens.
“We are always excited for the opportunity to showcase the unique flexibility and quality of modular construction,” said Joe Stegmayer, chairman, president and CEO of Cavco Industries. “Smaller, more energy efficient homes are a growing part of our industry. It is a special assignment for us to be providing small footprint living spaces for these designers to demonstrate tips and techniques to maximize every area of the home for multi-purpose use while keeping it stylish and livable. We are proud to be the first modular home building company to work with American Dream Builders in its inaugural season.”
Campground operators attending next week’s KOA Convention and Trade Expo in Las Vegas will be the first in the country to see Cavco Industries’ newest off-grid, solar-powered park model cottage.
“This is the first of a new generation of off-grid, solar powered park models,” said Joseph Stegmayer, president and CEO of Phoenix, Ariz.-based Cavco, adding that the company’s newest unit is “the most environmentally friendly park model cottage on the market.”
NTA Inc., a Nappanee, Ind.-based company that specializes in certifying “green” manufacturers, said Cavco’s newest off-grid solar-powered park model not only has “Emerald” status, its highest rating, but is the most eco-friendly park model the company has evaluated to date.
“Cavco is definitely raising the bar for the industry,” said Alan Reder, NTA’s senior project manager.
Built with 2-by-6 sidewalls, the unit features cork flooring, formaldehyde-free fiberglass wall insulation and phase change insulation in the ceiling, which help maintain relatively stable interior temperatures as outside temperatures rise and fall. Environmentally friendly adhesives, sealants and coatings are also used to maximize insulation while also improving indoor air quality.
Other features include composite decking, an instant hot-water heater, a dual flush toilet that uses about 1.2 gallons per flush, Energy Star appliances and energy-saving LED lighting.
The unit is equipped with solar panels, but it can also receive electricity from wind turbines and even hydroelectric power. It also comes equipped with a 6-KW Generac battery charging system for backup power. “If there’s no sun, wind or hydroelectric power available and the battery dips below a pre-set voltage level, it sends a signal to the generator to provide electrical backup,” said Bob Cramer, a technical trainer with Waukesha, Wis.-based Generac Power Systems.
Representatives from more than 500 KOA franchisees are expected to see the off-grid unit next week, while it’s on display at the South Point Hotel and Casino in Las Vegas. From there, Cavco literally plans to take its off-grid, solar powered park model on the road.
Steve Lefler, an Advanced Certified Green building professional in California, will be taking the unit to campgrounds, RV parks and resorts throughout California and the West so they can see first-hand what an off-grid, solar powered park model looks like and how they can incorporate it into their business.
“We’re going to be pulling this unit up and down California, helping people understand what it is,” said Tim Gage, Cavco’s national vice president of park models, cabins and specialty products.
Cavco is also bringing two of its custom designed park model rental cabins to the Las Vegas convention, which are built to KOA’s 2012 specifications. The new units have been upgraded to include commercial grade flooring, which is more wear resistant, as well as a special area with multiple outlets so that laptop computers, cell phones and other electronic devices can be conveniently recharged in one place.
More information about Cavco’s off grid, solar-powered park model as well as its last cabin rental products is available at www.cavco.com and www.koalodges.com.
The jobs of about 70 people employed by Fleetwood Homes in Rocky Mount, N.C., hinge now on the answers to two questions, according to the Roanoke (Va.) Times.
First, will a buyer emerge for Fleetwood Homes, a subsidiary of bankrupt Fleetwood Enterprises Inc.? And if an acquisition of Fleetwood Homes proceeds and is approved by a bankruptcy judge, will the new owner continue to operate the Rocky Mount plant?
For now, there seems to be reason for optimism that Fleetwood Homes will be acquired. One potential buyer already has stepped forward. Arizona-based Cavco Industries, a leading producer of manufactured housing, and investment partner Third Avenue Trust Value Fund have made an offer on some of Fleetwood’s related assets.
“If, for some reason, a sale does not go through, Fleetwood would terminate the employees in Rocky Mount,” said Sydney Rosencranz, a spokeswoman for Fleetwood Enterprises.
That possibility led the company to comply with state regulations by filing a related termination notice last week, she said.
But Rosencranz said it is “more likely that a buyer will come in.”
Once that happens, the new owner will decide whether to continue to build manufactured homes in Rocky Mount, she said.
Scott Martin, Franklin County’s director of commerce and leisure services, said Monday (July 13) the county is cautiously optimistic that the Cavco purchase option, as reported to date, will provide “long-term viability” for the production facility and its employees.
On March 10, Fleetwood Enterprises filed for Chapter 11 bankruptcy protection. At the time, it listed assets of $558.3 million and liabilities of $518 million.