Fleetwood Enterprises Inc. today (Aug. 11) announced that Cavco Industries Inc. and an investment partner, Third Avenue Trust Value Fund , through FH Holding Inc., their jointly owned corporation, have been named the highest and best bidder for certain of the company’s manufactured housing assets.
The winning bid was determined through an auction held by the company, in consultation with the Committee of Creditors. A court hearing to approve the sale is scheduled for Wednesday at 1:30 p.m. PST in Riverside, Calif.
Cavco’s final offer of $21.8 million was an increase on a net basis after adjustments of approximately $3.8 million over Cavco’s previously announced offer for the same assets. In addition, Cavco agreed to buy Fleetwood’s idled Woodland, Calif., plant for $4.8 million.
Cavco, headquartered in Phoenix, Ariz., is a leading producer of manufactured housing, park model homes and vacation cabins in the United States. Third Avenue Management, the investment adviser to Third Avenue Value Fund, is a New York-based company with expertise in value and distressed investing.
Cavco opened for business in 1965. Cavco’s factory-built homes are produced under various trade names and in a variety of floor plans and price ranges. The company employs approximately 600 people and operates two manufacturing plants in the Phoenix area and one in Seguin, Texas. Additional information about Cavco can be found at www.cavco.com.
Third Avenue Management manages approximately $13 billion of assets for private and institutional clients. Most or all of Third Avenue’s proposed investment in Fleetwood Enterprises Inc. will be made by Third Avenue Value Fund, the company’s flagship mutual fund.
Founded in 1950, Fleetwood Enterprises Inc., and its various subsidiaries, historically produced, distributed and serviced recreational vehicles and manufactured housing. On March 10, however, the company filed for Chapter 11 protection and the former industry leader has been dismantled. Additional information about the company’s reorganization may be found online in the news section of www.fleetwood.com or www.kccllc.net/fleetwood.
Fleetwood Enterprises Inc. has extended until Saturday (Aug. 8) the bid deadline on the sale of its manufactured housing unit.
The auction, should it be required in the case of competing bids, will be delayed similarly to Aug. 10, at 2 p.m. The final hearing to approve the sale will remain as scheduled on Aug. 12.
As of Friday, Cavco Industries Inc., a manufactured housing and recreational park trailer manufacturer based in Phoenix, Ariz., and an investment partner, Third Avenue Trust Value Fund, have submitted the lone bid. The partners have offered $28.9 million for seven Fleetwood plants, trademarks and other assets.
Fleetwood filed for Chapter 11 bankruptcy protection on March 10. It has ceased travel trailer production and has already spun off most of its motorhome business to American Industrial Partners.
During an investors’ conference call last week, Cavco President and CEO Joe Stegmayer explained Cavco’s reasoning behind bringing in a partner to make the Fleetwood purchase. Each party would own 50% of the Fleetwood housing business. He called it “a prudent approach” and a way to conserve the company’s cash in these difficult times.
Despite recording a $1.5 million loss for the most recent quarter on sales of $13.6 million, Cavco is in “a strong financial condition” and has no long-term debt, he said.
“We want to preserve capital and have it available to inventory finance our distributors,” he said. “We have to be prepared for it (downturn) to continue for some time. This provides the opportunity to leave our balance sheet in a very pristine condition.”
All seven of the Fleetwood plants are operating but at a low level of utilization, he said. On average, each plant has the capacity to produce about 1,000 homes a year, he estimated. Cavco’s plants are operating at a 25% utilization rate, he added.
If successful, Cavco would take over the Fleetwood business “in a fairly short order” as it is Fleetwood’s intent to make a “fast transfer of assets,” Stegmayer during the onference call. The Fleetwood name would be retained.
If the Cavco/Third Avenue bid fails, Cavco has other options, Stegmayer continued in answer to one investor’s question. “We don’t feel we need to do anything immediately, but we have looked at other projects,” he said.
When first announcing its offer on June 30, Stegmayer noted, “The Fleetwood brand is one of the strongest in the industry, and we are excited to have this opportunity to integrate Fleetwood’s strong family of product offerings with our own growing business.”
Third Avenue Management, the investment adviser to Third Avenue Value Fund, is a New York-based company with expertise in value and distressed investing. Third Avenue Management manages approximately $13 billion of assets for private and institutional clients. Most or all of Third Avenue’s proposed purchase will be made by Third Avenue Value Fund, the company’s flagship mutual fund.
Cavco and Third Avenue’s $28.9 million “stalking horse” bid is subject to execution of a definitive acquisition agreement (with customary conditions to closing) and bankruptcy court approval. The purchase price is subject to adjustment for the assumption of certain warranty liabilities and other customary post-closing adjustments.
The Fleetwood assets proposed for purchase include seven manufactured housing plants, one office building, all related equipment, accounts receivable, inventory, certain trademarks and trade names, intellectual property, and specified contracts and leases. The manufactured housing plants are located in Nampa, Idaho; Woodburn, Ore.; Riverside, Calif.; Waco, Texas; Lafayette, Tenn.; Douglas, Ga.; and Rocky Mount, Va.
The proposed purchase does not include the company’s operating plants in Alma, Ga., Elizabethtown, Pa. and Garrett, Ind. The facilities included in the proposed purchase currently employ more than 700 people in seven states.
Cavco Industries Inc., a Phoenix, Ariz.-based manufacturer of recreational park trailers, manufactured housing and cabins, announced Wednesday (July 29) financial results for the first quarter of its fiscal year 2010 ended June 30.
Net sales for the first quarter of fiscal 2010 totaled $13,595,000, down 62% from $35,509,000 for the first quarter of fiscal year 2009, according to a news release.
Net loss for the fiscal 2010 first quarter was $1,449,000 compared to net income of $853,000 reported in the same quarter one year ago.
Joseph Stegmayer, chairman, president and CEO, said, “Our first fiscal quarter results are representative of the continued challenges faced by the general economy and our industry, which are especially poignant in our core Southwest market area. For the five months ended May 2009, industry-wide reported manufactured home shipments continue to be very low at 380 and 611 in Arizona and California, respectively. In an effort to further streamline our cost structure in this environment, we have moved our Phoenix, Ariz., park model and vacation cabin operation to one of our other nearby factories. The combining factory had excess capacity available for a second production line, which is now being utilized for these specialty products. The transition was completed by the end of the first quarter with no interruption to the customers of that business.”
He continued, “While business conditions are certainly challenging, we are well positioned to expand our presence in our current markets. Meanwhile, we are continuing the previously announced bid process for seven operating Fleetwood Enterprises Inc. manufacturing facilities in as many states across the nation. Through a 50% owned subsidiary, we signed an asset purchase agreement last week, and are now working toward potential ownership in the near term. There are no assurances that this transaction will close or that it will be in the form currently contemplated. We do believe that a successful purchase will be a positive long-term strategic move for both the Cavco and Fleetwood Homes brand names.”
The new owner of Fleetwood Enterprises Inc.’s RV manufacturing business in Decatur, Ind., will preserve about 650 jobs, but former employees who are rehired will take a pay cut, according to the Fort Wayne (Ind.) Journal Gazette.
Fleetwood eliminated about 700 jobs when the company completed a $33.2 million sale to American Industrial Partners Capital Fund IV LP on Friday (July 17), Fleetwood said in a statement. New York-based AIP will operate the business as Fleetwood RV Inc.
Decatur-based Fleetwood RV is expected to employ 650 by next month, President John Draheim said. Between 250 and 350 former Fleetwood employees started working for Fleetwood RV on Monday (July 20).
Anyone can apply to work at Fleetwood RV, but Draheim said former Fleetwood workers’ experience will give them an advantage in the hiring process. More than 1,000 applied for jobs Thursday and Friday, Draheim said. The company is accepting applications at its plant in Decatur.
But Fleetwood RV will pay employees less than its predecessor. Draheim said he was not sure what the average wage would be, but former Fleetwood workers who accept positions at the new company will earn 10% less.
Fleetwood RV is making minor adjustments in health insurance and 401(k) plans, but former workers will have to start over earning benefits such as vacation time.
Employees will work more consistent schedules at Fleetwood RV, Draheim said. He estimated that so far this year, production employees had worked the equivalent of only five to six full weeks because of weak RV orders. Employees will be able to earn more by working full weeks for reduced pay.
Although some Decatur residents are concerned about the ownership transition, Mayor John Schultz said most are relieved many local jobs will be preserved.
“It’s very important to us they bring the production back,” he said.
Fleetwood’s Decatur operations employed more than 1,000 in early 2008. The company cut 550 jobs in Decatur last year.
Fleetwood RV’s decision to establish a local headquarters is a positive sign, Schultz said. The previous owner was based in Riverside, Calif.
AIP purchased two RV manufacturing plants, two RV service plants and Fleetwood’s Gold Shield fiberglass subsidiary in Decatur. The company also acquired some Fleetwood equipment in Riverside.
Local investors plan to buy Fleetwood’s manufactured-housing plant in Garrett, Ind., for $1.75 million in a separate deal.
RV shipments during the first four months of this year plunged almost 62% from the same period in 2008, according to the Recreation Vehicle Industry Association’s (RVIA) most recent data. RV manufacturers shipped 43,700 vehicles through April 30.
Almost 450 Fleetwood workers in Decatur worked fewer than half their normal hours during that four-month period, the company said in April.
Industry projections are brighter for next year. Manufacturers are expected to ship 169,500 units in 2010, according to the association. That would be a 24%increase from this year’s projected sales.
The RV industry is close to hitting its low point, Draheim said. If the industry grows, Fleetwood RV will expand with it.
“We’re looking at improvement going forward,” he said.
The city council in Decatur, Ind., bent over backwards earlier this month to seal the deal to keep Fleetwood RV’s motorized operations in business in Decatur under new ownership.
The purchase was announced late Friday (July 17).
As reported by the Decatur Daily Democrat, the American Investment Partners (AIP) purchase of the Fleetwood Enterprises properties in Decatur took a giant step closer to completion on July 7 when the Decatur City Council quickly and without hesitation granted the company the first step of what will lead to a 10-year tax abatement on equpment it will be bringing to the buildings in Decatur.
The preliminary granting of the abatement was termed the “deal sealer” by officials working with AIP. Final approval of the abatement is expected by the end of this month.
The state of Indiana has also put together an incentive package to support the AIP purchase.
The Decatur City Council had only supportive words for the New York-based firm’s purchase and subsequent move into Decatur. It will be bringing approximately $15 million in equipment (legally called personal property) here, and is virtually certain to receive a 10-year tax abatement.
The council bent its own rules in doing do. Normally, the city grants only five-year abatements on personal property and 10 years on buildings. “But as has been said here tonight (July 7), these are extraordinary times,” Mayor John Schultz said. “This will be a change from what we’ve done in the past, but I don’t think we have much choice.”
Under Indiana law, the equipment must come from outside Indiana to be eligible for a tax abatement.
On a unanimous 5-0 vote, the council approved a declaratory resolution and even went so far as to unanimously agree to support a tax abatement for the Gold Shield building should one be sought later.
Adams County Economic Development Director Larry Macklin was the first speaker at the July 7 meeting, asking for support of the tax abatement and adding, “This is huge … we are in competition with other communities.”
Riverside, Calif., home to Fleetwood Enterprises Inc., was cited as one of the competing communities.
He said he has been working with state officials to put together the incentive package now being offered. “We need to open our arms and embrace AIP,” he added.
Macklin introduced Mark Soltys, with RSM McGladrey, an accounting, tax and business consulting firm based in Elkhart, Ind. Soltys, who represents AIP, praised “the tremendous job” Macklin has done in working with him, and pointed to the current “extraordinary times” for manufacturers.
He said granting the abatement and subsequent closing of the deal “will retain jobs locally and new jobs as well – good paying jobs.”
Of the tax abatement, he said, it “will surely make a difference” in getting AIP to close the deal.
Following Soltys was Steve Heim, an official with Fleetwood for many years, including the last 13 in Decatur. “You really have an asset here … the people of this community,” Heim told the council and the mayor. He spoke of the local workforce’s “devotion, commitment, work ethic and industriousness.”
Mayor Schultz asked if the tax abatement related to only “the RV industry,” and was informed that that was correct.
But there is “the potential for Gold Shield in the future” to seek an abatement,” Soltys noted.
“This is our chance to show our support for the Fleetwood employees” and some suppliers, such as Alberding Woodworking and Habegger Abbey Floors, Councilman Ken Meyer said.
Councilwoman Barb Engle then moved to grant the declaratory resolution and Councilman Bill Crone seconded, followed by a 5-0 vote. Another 5-0 vote expressed support for Gold Shield, should a tax abatement be sought for it at a later date.
American Industrial Partners Capital Fund IV LP (AIP) has completed the acquisition of the motorized recreational vehicle business of Riverside, Calif.-based Fleetwood Enterprises Inc.
The purchase price of $33.2 million is inclusive of certain assumed liabilities and is subject to customary post-closing adjustments, according to an AIP press release.
Concurrently, Fleetwood terminated approximately 700 employees associated with this portion of its business.
The final purchase price was well off the $53 million figure initially mentioned when the offer became public on May 15.
Fleetwood started trying to sell its RV and manufactured housing businesses Feb. 6, before it filed for bankruptcy March 10. Fleetwood contacted or heard from more than 75 companies. Of those, 10 met with management or visited Fleetwood’s operations.
In May, Fleetwood Enterprises Inc. had $20.7 million in assets compared to at least $265.2 million worth of debts, according to financial filings the company made in bankruptcy court. Of that, at least $183 million was money owed to unsecured creditors.
What You Get for $33.2 Million
The transaction with AIP was an asset purchase and included two motorhome manufacturing facilities, two motorhome service facilities and Fleetwood’s Gold Shield supply subsidiary, all presently located in Decatur, Ind. It also includes the intellectual property for Fleetwood’s existing motorhome brands and certain machinery and equipment in Riverside.
Fleetwood RV is one of North America’s leading manufacturers of Class A and Class C motorized RVs and has established one of the industry’s broadest and most respected distribution channels and product lines. Fleetwood RV will be jointly run by Chuck Wilkinson, CEO, and John Draheim, president.
Following company meetings with all associates in Decatur, Wilkinson stated, “Our veteran work force is enthusiastic and excited to return to their jobs building the best coaches in the industry.”
Draheim added, “We are confident that the new company can capitalize on the strength of the Fleetwood RV brand and strong relationships with the distribution channel that have been developed over the past 60 years.”
“AIP builds and invests in great American headquartered businesses and we believe Fleetwood RV represents an attractive investment opportunity,” said Dino Cusumano, an AIP partner. “We are pleased to be partners with Chuck, John and all the talented associates at Fleetwood RV. We respect the long and successful history of the company and greatly value the relationships that Fleetwood RV has with its dealers, customers, suppliers and associates and look forward to continuing and improving those relationships over time.”
Cusumano added, “The company’s headquarters and manufacturing operations will be in Decatur, Ind. We would like to thank the city of Decatur and the state of Indiana for their significant support during this process.”
Fleetwood was the country’s largest manufacturer of Class A motorhomes in 2008, accounting for an 18.6% share of the market, according to Statistical Surveys Inc. (SSI). The company held a 20.4% market share the year prior.
According to the latest SSI numbers through May, Fleetwood remained No. 1 in Class A retail sales with a 19.1% market share and No. 3 in Class C sales with a an 11.4% market share.
Paul Bamatter, another AIP partner, said, “Fleetwood RV will be organized as a separate standalone company within our portfolio of companies. Fleetwood RV will have one of the best balance sheets in the industry with no-third party debt and a significant cash balance at close.”
Wilkinson said, “We look forward to partnering with the American Industrial Partners team and have charted a going forward operating agenda focused on developing new and leading products, further improving our quality and service levels and our cost position.”
Draheim noted that, “Our customers and dealers have been extremely loyal to us over the years and we expect to repay that loyalty by ensuring that they are afforded innovative products built with exceptional quality, all at affordable prices. Our near-term outlook has turned positive as our dealer inventories have bottomed and retail sales have accelerated in the past few months.”
American Industrial Partners was founded in 1989 and is a private equity firm that makes control equity investments in mid-sized industrial companies that can benefit from the firm’s systematic approach to implementing strategic and operational improvements. It is investing its fourth fund which recently closed with $405.5 million of committed capital.
For more information, visit www.aipartners.com or American Industrial Partners can be reached at (212) 627-2360.
While the RV industry generally is in the doldrums, Ron Nash, president of Northwood Manufacturing Inc., La Grande, Ore., hasn’t let that stop a major expansion effort on his part in the Northwest.
In recent months Nash has:
- Purchased for just over $2 million Fleetwood Enterprises Inc.’s 86,000-square-foot La Grande factory that Fleetwood closed before declaring chapter 11 bankruptcy in March.
- Started another company — Outdoors RV Manufacturing Inc. — hiring about 100 former Fleetwood employees to build four new towable brands in the former Fleetwood plant.
- Acquired more than $200,000 in parts and supplies from Riverside, Calif.-based Fleetwood as part of a new program to enable Outdoors RV to repair orphaned Fleetwood Prowler, Wilderness, Terry, Mallard and Backpack travel trailers.
- Built a 40,000-square-foot chassis shop adjacent to Northwood’s factory in La Grande, leasing part of it to axle manufacturer Al-Ko Kober, to supply chassis for both Northwood and Outdoors RV products.
Nash, for his part, says he’s in for the long haul.
”This is my job,” Nash told RVBusiness. ”This is what I love doing. Whether there are half as many people in the business when this is all over with, it’s not going to be me that is going to be gone. We have been low key about spending money, and we socked a lot away so that we can do what we need to do.”
The new chassis facility and recently created Outdoors RV lines greatly increase Nash’s presence as a regional manufacturer in the Northwest U.S. and Western Canada. Outdoors RV also puts Nash in the entry-level and lightweight towable markets for the first time.
Outdoors RV has completed 50 units and signed up about 40 dealers since going into production May 19 with the entry-level CreekSide (wood and aluminum), lightweight TamarackTrail (aluminum and fiberglass), TimberRidge (aluminum and laminated fiberglass) and luxury lightweight WindRiver (aluminum and laminated fiberglass) travel trailers. Base MSRPs range from $15,000 for the CreekSide to $29,000 for WindRiver.
Nash reported a backlog of 450 units, an impressive number for a new company in a tough market. ”A lot of our units are being sold through the good Fleetwood dealers who were there before,” Nash said.
Former Fleetwood Vice President Jim Croxton serves as general manager of the new Outdoors RV operations and Darin Nelson is sales manager.
While Nash has focused recently on getting the Outdoors operation up and running, he reported that sales of Northwood’s Nash and Arctic Fox travel trailers and fifth-wheels, Arctic Fox truck campers and Desert Fox sport utility RVs have increased substantially from a year ago.
”Production is down from a few years ago, but last week we did 63 units,” Nash said. ”Truck campers have really taken off. Last year, there were times when we were only six or seven a week.”
Production of the newly named Outdoors units — CreekSide, TamarackTrail, TimberRidge and WindRiver travel trailers — is expected to result in $28 million to $30 million in sales the first year, according to Nash, the former general manager in the early 1990s of the Fleetwood La Grande plant that he bought for just over $2 million.
Fleetwood should emerge soon from Chapter 11 bankruptcy as a motorized RV builder under new ownership, but not in towables.
Although moving to fill the market vacuum in travel trailers created by Fleetwood exit, Outdoors RV will not replicate Fleetwood’s offerings.
”We are changing some things to make the product more bulletproof,” Nash said, noting that front caps on Outdoors RV products will be fiberglass instead of ABS to better withstand cold temperatures. Units also will be better insulated and equipped with heated and enclosed holding tanks while radius rubber roofs have replaced fiberglass roofs for the same reason.
”We want to make sure our stuff is more durable,” Nash said. ”Our whole thrust is that customer want units that will stay together, and they want companies that stay together. If the customers aren’t happy, you’re toast.”
The U.S. Bankruptcy Court will allow Riverside, Calif.-based Fleetwood Enterprises Inc. to pay key executives a total of $873,669 in incentives and bonuses and $571,508 worth of severance payments, after lawyers with the company, the U.S. trustee and the attorney representing unsecured creditors in the case supported the plan’s approval.
Executives who have been promised incentive bonuses ranging from $232,000 to $51,450 include Andrew M. Griffiths, senior vice president and chief accounting officer; Leonard J. McGill, senior vice president, general counsel and secretary; James F. Smith, vice president and operations controller; Paul C. Eskritt, president of the RV division; Charles E. Lott, president of the housing division; and Michael B. Shearin, senior vice president human resources, according to the Riverside Press-Enterprise.
The bonuses are based on the senior executives’ ability to complete a reorganization plan that is confirmed by the court by Oct. 30. The bonus amount decreases the longer it takes. In court filings Fleetwood also said incentives were offered to keep key personnel with the company rather than risk they would leave for work elsewhere during reorganization.
Five other executives would also be eligible for bonuses. Another 32 employees would be eligible for severance.
Elden Smith, Fleetwood’s CEO, agreed to cut his salary from $873,000 annually to $60,000 to compensate for some cost of the incentives.
Hamid Rafatjoo, a lawyer representing the committee of creditors in the case, said he took issue with an earlier proposal with a larger amount of bonuses but was happy with the plan approved by the court Wednesday.
“People did in fact work late in the night and into weekends,” he told Judge Meredith Jury, adding that they did so in an effort to get higher bids for the company’s RV division, to no avail.
“They do deserve combat pay for dealing with that RV buyer,” he said, referring to American Industrial Partners. The New York equity firm bid $53 million for the RV division. The deal hasn’t closed.
Jury agreed, saying an “enormous amount of work” has been done by Fleetwood to attempt to get multiple bidders for its assets.
“To have one bidder is probably lucky,” she said, considering the economy and state of the RV industry.
At the same hearing, Fleetwood informed the judge that a deal to sell its Douglas, Ga., plant had fallen through because the buyer couldn’t get financing.
Businesses in Decatur, Ind., are receiving a much-needed economic boost thanks to hundreds of RV enthusiasts.
Hundreds of RV owners have returned to the birthplace of their home on wheels, Fleetwood RV in Decatur, according to the Indiana News Center, Fort Wayne.
Watch Featured Video at right.
Rally organizers say the annual gathering is more important this year, because of Fleetwood Enterprises Inc.’s economic troubles.
Hundreds of Fleetwood employees have recently had their hours cut, or lost their job when Fleetwood filed for bankruptcy in March.
The gathering is a good opportunity for Fleetwood officials to show the latest RV accessories, in hopes of making additional sales.
Coach owners say they want to give back to the struggling town that made their rolling home.
“This is our third trip down here and so we got to spend a lot of time getting to know the community and just showing them that we are actually coming back home,” rally organizer Marcia Bratsburg said.
Fleetwood officials say despite a 50% loss in sales, inventory is coming into line and the desire to buy an RV is still there, the trick is finding a bank that will lend the money.
“Customers are still using RVs,” said Fleetwood Director of Sales Justin Humphreys. “They still want to see the country. And at times we kinda get upset because there’s not a lot of business out there but I think it’s a great sign for business. The customers are out there using them. They want to go out and use their motor home and eventually they’re going to want a new one and that’s what we’re really excited about, is to build some new ones for them.”
But they will have to make RVs under a new owner. A U.S. bankruptcy court gave Fleetwood officials the green light to sell their motorhome assets.
American Industrial Partners will pay $53 million for assets including several facilities and service centers.
Two months of steady growth in the retail sales of motorized RVs came to an end in May with a decline in both Class A and Class C retail registrations, according to the latest report from Statistical Surveys Inc.
The Grand Rapids, Mich., firm reported total registrations of 1,709 units, compared with 3,508 in May 2008, for a 51.3% decline.
The May registration total of 1,709 fell short of the 2,221 sold in April.
The breakdown by class for May was as follows:
- Class A, 928 sold compared with 1,887 in May 2008.
- Class C, 781 sold compared with 1,621 in May 2008.
Winnebago Industries Inc. regained the No. 1 position for motorhome sales with 370 units retailed in May, compared with runner-up Thor Industries Inc.’s 318. The two were locked in a dead heat in April.
Winnebago’s market share for May was 21.7% and 19.1% year-to-date, while Thor’s was 18.6% for May and 18.4% year-to-date.
By class, Winnebago was No. 1 in Class A sales with 184 units sold (19.8% market share) in May, while Thor and Fleetwood Enterprises Inc. were tied for second each with 153 units sold (16.5% market share). And Winnebago held the top spot in Class C sales with 186 (23.8% market share). Thor was second with 165 sales (21.1% market share).
The reporting firm revealed that the state of Alaska experienced a two-year decline of 91.8%
“Alaska is a big rental fleet state. We believe that the 2008 (total) contains rental fleet registrations. The May 2009 data reflects the retail accurately without any rentals,” Statistical Surveys noted.