Overview

The Corporation designs, produces and markets manufactured housing, modular housing and recreational vehicles (travel trailers, fifth wheels and park models) to independent dealers and manufactured housing communities located throughout the United States and Canada. To better serve the needs of its dealers and communities, the Corporation has eleven manufacturing facilities in ten states. Manufactured housing, modular housing and recreational vehicles are sold to dealers and communities either through floor plan financing with various financial institutions or on a cash basis. While the Corporation maintains production of manufactured housing, modular homes and recreational vehicles throughout the year, seasonal fluctuations in sales do occur. Sales and production of manufactured housing and modular housing are affected by winter weather conditions at the Corporation's northern plants. Recreational vehicle sales are generally higher in the spring and summer months than in the fall and winter months.

Manufactured and modular housing are marketed under a number of trademarks, and are available in a variety of dimensions. Manufactured housing products are built according to standards established by the U.S. Department of Housing and Urban Development. Modular homes are built according to state, provincial or local building codes. Recreational vehicles include travel trailers, fifth wheels and park models. Travel trailers and fifth wheels are marketed under the following trademarks: "Aljo"; "Bobcat"; "Koala"; "Layton"; "Mountain View"; "Nomad"; "Texan"; "Wagoneer"; "Walkabout"; and "Weekender". Park models are marketed under the following trademarks: "Cabin Series"; "Cedar Cove"; "Kensington"; "Shore Park Homes"; and "Vacation Villa". The Corporation's recreational vehicles are intended to provide temporary living accommodations for individuals seeking leisure travel and outdoor recreation.

Manufactured Housing, Modular Housing and Recreational Vehicle Industry Conditions

Sales of manufactured housing, modular housing and recreational vehicles are affected by the strength of the U.S. economy, interest rate and employment levels, consumer confidence and the availability of wholesale and retail financing. The manufactured housing industry has until recently been affected by declining or stagnating unit shipments. This decline or stagnation, caused primarily by adverse economic conditions, tightening retail and wholesale credit markets and a depressed site-built housing market, is resulting in historically low industry shipments. From January to July 2012 however, total industry shipments were approximately 32,000 units, an approximately 19 percent increase from the same period a year ago.

Tight credit markets for retail and wholesale financing have become a significant challenge for the manufactured housing industry. According to the Manufactured Housing Institute, a lack of retail financing options and restrictive credit standards has negatively affected manufactured home buyers. In addition, a significant decline has occurred in wholesale financing, especially as national floor plan lenders have decreased lending to industry dealers.

Manufactured Housing, Modular Housing and Recreational Vehicle Industry Conditions-(Continued)

The domestic modular housing industry has challenges similar to the manufactured housing industry, such as restrictive retail and wholesale financing, and a depressed site-built housing market. From calendar 2005 to 2011, total industry shipments decreased from approximately 43,000 to 12,000 units, a decline of 72 percent. Information related to the Canadian modular housing industry is not available.

Sales of recreational vehicles are influenced by changes in consumer confidence, employment levels, the availability of retail and wholesale financing and gasoline prices. Industry unit sales of travel trailers and fifth wheels have varied in recent years. From calendar 2007 to the first half of 2009 unit sales decreased as a result of recessionary conditions, decreased household wealth, tightening credit markets for retail and wholesale financing, and excess inventory of new recreational vehicles. Unit sales, however, started increasing in the last half of calendar 2009 and continue to date. The Recreational Vehicle Industry Association (RVIA), notes that uncertainty about job and income prospects, stagnating wages, depressed home values and the likelihood of rising taxes will adversely affect recreational vehicle sales.

First Quarter Fiscal 2013 Results

The Corporation experienced the following results during the first quarter of fiscal 2013:

• Total net sales were $49,920,000, an approximate 1 percent decrease from the $50,284,000 reported in the same period a year ago.

• Housing net sales were $30,912,000, an approximate 6 percent increase from the $29,143,000 realized in the first quarter of fiscal 2012.

• Recreational vehicle net sales were $19,008,000 in the first quarter of fiscal 2013, an approximate 10 percent decrease from $21,141,000 in the first quarter of fiscal 2012.

• Net loss for the first quarter of fiscal 2013 was $3,468,000 as compared to $6,845,000 for the first quarter of fiscal 2012. On a per share basis, net loss was $.41 as compared to $.82 for the same period a year ago.

The Corporation's housing segment experienced increased net sales in first quarter of fiscal 2013 as compared to the first quarter of fiscal 2012, and management cannot determine with certainty if this trend will continue. This uncertainty is based on continuing negative economic conditions previously referenced.

The recreational vehicle segment experienced decreased net sales in the first quarter of fiscal 2013; caused primarily by a decline in sales to Canadian dealers. Regarding the business environment for fiscal 2013, the RVIA forecasts calendar 2012 travel trailer and fifth wheel shipments of approximately 235,000 units; a 10 percent increase from calendar 2011's total of approximately 213,000 units. The RVIA also forecasts calendar 2013 travel trailer and fifth wheel shipments of approximately 238,000 units; an 1 percent increase from calendar year 2012's total. Despite this favorable trend, business conditions in fiscal 2013 could be negatively impacted by adverse factors previously referenced by the RVIA.

First Quarter Fiscal 2013 Results - (Continued)

The Corporation is actively pursuing strategies to increase sales and decrease costs. These strategies include but are not limited to:

• Increasing efforts to increase sales of modular homes and park models in both the United States and Canada

• Improving the process of developing homes and recreational vehicles to better meet ever changing preferences of consumers

• Increasing the number of display models at housing facilities in order to provide dealers, communities and consumers with examples of newly designed product

• Redesigning the Corporation's website and utilizing social media to improve product exposure to customers and to better connect dealers to potential customers

• Selling non-strategic assets

• Working with current and potential vendors to decrease costs

• Analyzing staffing needs and making reductions when appropriate.

By implementing these strategies, and having a significant position of its working capital in cash and U.S. Treasury Bills, the Corporation continues to remain diligent for any challenges that may occur.

Results of Operations - Three-Month Period Ended August 31, 2012 Compared to
Three-Month Period Ended August 31, 2011 (Unaudited)

Net Sales and Unit Shipments



                                        August 31,                     August 31,                      Increase
                                           2012          Percent          2011          Percent       (Decrease)
                                                                 (Dollars in thousands)
Net Sales
Domestic Manufactured Housing          $     23,133            46     $     23,676            47     $       (543 )

Modular Housing
Domestic                                      6,037            12            4,213             8            1,824
Canadian                                      1,742             4            1,254             3              488

                                              7,779            16            5,467            11            2,312

Total Housing                                30,912            62           29,143            58            1,769

Recreational Vehicles
Domestic                                     15,933            32           16,162            32             (229 )
Canadian                                      3,075             6            4,979            10           (1,904 )

Total Recreational Vehicles                  19,008            38           21,141            42           (2,133 )

Total Net Sales                        $     49,920           100     $     50,284           100     $       (364 )

Unit Shipments
Domestic Manufactured Housing                   525            27              519            25                6

Modular Housing
Domestic                                         90             5               72             3               18
Canadian                                         28             1               22             1                6

                                                118             6               94             4               24

Total Housing                                   643            33              613            29               30

Recreational Vehicles
Domestic                                      1,121            58            1,173            56              (52 )
Canadian                                        172             9              312            15             (140 )

Total Recreational Vehicles                   1,293            67            1,485            71             (192 )

Total Unit Shipments                          1,936           100            2,098           100             (162 )

Results of Operations - Three-Month Period Ended August 31, 2012 Compared to Three-Month Period Ended August 31, 2011 (Unaudited) - (Continued)

Net Sales and Unit Shipments - (Continued)

Housing net sales increased approximately 6 percent. The increase was the outcome of the following factors:

• Domestic manufactured housing net sales decreasing approximately 2 percent as a result of a decline in the average net sales price per unit which was more than offset by

• Domestic modular housing net sales increasing approximately 43 percent

• Canadian modular housing net sales increasing approximately 39 percent.

Housing unit shipments increased approximately 5 percent. The increase was the outcome of the following factors:

• Domestic manufactured housing shipments increasing approximately 1 percent

• Domestic modular shipments increasing approximately 25 percent

• Canadian modular shipments increasing approximately 27 percent.

Total domestic manufactured housing unit shipments increased approximately 1 percent. Industry unit shipments for these products increased approximately 10 percent from May to July 2012, the latest three months available as compared to the same period the year prior. Current industry unit shipment data for modular housing is not available. Adverse conditions that caused the Corporation's unit shipments to lag the industry include:

• Competitors providing wholesale financing to dealers, thereby creating greater sales opportunities

• Unit shipment growth occurring in states where the Corporation has no or minimal sales activity due primarily to a lack of either manufacturing facilities or an established independent dealer network.

Compared to prior year, the average net sales price for domestic manufactured housing decreased approximately 3 percent; primarily due to homes sold with less square footage and fewer amenities. The average net sales price for domestic modular and Canadian modular housing products increased approximately 15 percent and 9 percent, respectively. These increases are the result of homes being sold with larger square footage and greater amenities.

Recreational vehicle net sales decreased approximately 10 percent. The decrease was the outcome of the following factors:

• Domestic recreational vehicle net sales decreasing approximately 1 percent

• Canadian recreational vehicle net sales decreasing approximately 38 percent

Results of Operations - Three-Month Period Ended August 31, 2012 Compared to Three-Month Period Ended August 31, 2011 (Unaudited) - (Continued)

Net Sales and Unit Shipments - (Continued)

Recreational vehicle unit shipments decreased approximately 13 percent. The decrease was the outcome of the following factors:

• Domestic recreational vehicle shipments decreasing approximately 4 percent

• Canadian recreational vehicle shipments decreasing approximately 45 percent.

Unit shipments for travel trailers and fifth wheels decreased approximately 13 percent. Industry shipments for these products from May to July 2012, the latest three months available, as compared to the same period the year prior increased approximately 11 percent. The Corporation's unit shipments lagged the industry due to decreased demand from Canadian dealers. In addition, some competitors maintained larger quantities of finished goods inventory; resulting in an ability to more quickly meet dealer demand. Current industry unit shipment data for park models is not available.

The average net sales price per unit for recreational vehicle products in the first quarter of fiscal year 2013 as compared to the first quarter of fiscal year 2012 increased approximately 3 percent; primarily due to sales price adjustments resulting from higher material costs.

Cost of Sales



                                    August 31,        Percent of         August 31,        Percent of          Increase
                                       2012          Net  Sales *           2011           Net  Sales*        (Decrease)
                                                                   (Dollars in thousands)
Housing                            $     28,831                 93      $     29,108                100      $       (277 )
Recreational vehicles                    18,030                 95            20,132                 95            (2,102 )

Consolidated                       $     46,861                 94      $     49,240                 98      $     (2,379 )

* The percentages for housing and recreational vehicles are based on segment net sales. The percentage for consolidated cost of sales is based on total net sales.

Housing cost of sales decreased primarily as a result of decreased manufacturing expenses. As a percentage of sales, cost of sales decreased due to improved margins and lower manufacturing expenses. Recreational vehicle cost of sales decreased due to lower sales.

Selling and Administrative Expenses



                                        August 31,        Percent of        August 31,        Percent of
                                           2012           Net Sales            2011           Net Sales         Decrease
                                                                     (Dollars in thousands)
Selling and administrative expenses    $      6,530                13      $      7,896                16      $    1,366

Results of Operations - Three-Month Period Ended August 31, 2012 Compared to Three-Month Period Ended August 31, 2011 (Unaudited) - (Continued)

Selling and Administrative Expenses - (Continued)

Selling and administrative expenses, in dollars and as a percent of net sales, decreased as a result of the Corporation's continuing efforts to reduce costs.

Operating Loss



                                       August 31,          Percent of           August 31,          Percent of
                                          2012             Net Sales *             2011             Net Sales *
                                                                (Dollars in Thousands)
Housing                               $     (1,637 )                 (5 )      $     (4,406 )                (15 )
Recreational vehicles                       (1,324 )                 (7 )            (1,875 )                 (9 )
General corporate expenses                    (510 )                 (1 )              (571 )                 (1 )

Total Operating loss                  $     (3,471 )                 (7 )      $     (6,852 )                (14 )

* The percentages for manufactured housing and recreational vehicles are based on segment net sales. The percentage for general corporate expenses and total operating loss earnings are based on total net sales.

The operating loss for the housing segment decreased due to increased unit shipments, improved margins and decreased selling and administrative expenses.

The operating loss for the recreational vehicle segments decreased primarily as a result of decreased selling and administrative expenses.

General corporate expenses decreased primarily due to the closure of the Corporation's aviation department.

Liquidity and Capital Resources



                                                  August 31,        May 31,          Increase
                                                     2012             2012          (Decrease)
                                                             (Dollars in thousands)
Cash and U.S. Treasury Bills                     $     25,010       $ 29,009       $     (3,999 )
Current assets, exclusive of cash and U.S.
Treasury Bills                                   $     24,712       $ 22,461       $      2,251
Current liabilities                              $     15,881       $ 14,681       $      1,200
Working capital                                  $     33,841       $ 36,789       $     (2,948 )

The Corporation's policy is to invest its excess cash, which exceeds its operating needs, in U.S. Government Securities. Cash and U.S. Treasury Bills decreased due primarily to a net loss of $3,468,000. Current assets, exclusive of cash and U.S. Treasury Bills, increased primarily due to a $1,391,000 increase in inventories, and a $1,048,000 increase in other assets.

Liquidity and Capital Resources - (Continued)

Inventories increased primarily as a result of a greater number of homes and recreational vehicles being used as displays at trade shows and the Corporation's facilities. In addition, inventories increased as a result of greater production occurring at August 31, 2012 as compared to May 31, 2012.

Other current assets increased due to an insurance claim receivable. The Corporation owns an insurance policy that reimburses the Corporation when medical claims exceed a certain threshold. In the first quarter of fiscal 2013, the Corporation filed a claim under this policy.

Current liabilities increased as a result of changes that occurred in accounts payable, accrued salaries and wages and accrued marketing programs. Accounts payable increased $964,000 primarily due to increased production at August 31, 2012 as compared to May 31, 2012; in addition to the timing of payment to vendors. Accrued salaries and wages decreased $580,000 due to the timing of payments to employees at August 31, 2012 as compared to May 31, 2012. Accrued marketing programs increased $833,000 due to accruals for an ongoing marketing program for manufactured housing dealers. Accruals are made monthly, and the majority of payments are made during the Corporation's fourth fiscal quarter.

Capital expenditures totaled $15,000 for the first quarter of fiscal 2013 as compared to $353,000 for the first quarter of fiscal 2012.

The Corporation's current cash and other short-term investments are expected to be adequate to fund operating cash needs in addition to any capital expenditures for the current fiscal year. Although the Corporation has experienced decreased liquidity, its financing needs have been met with a combination of cash on hand and funds generated through the sale of assets. In addition, various strategies are being pursued to improve financial performance. These strategies are referenced in the "First Quarter Fiscal 2013 Results" section of Item 2.

Impact of Inflation

The consolidated financial statements included in this report reflect transactions in the dollar values in which they were incurred and, therefore, do not attempt to measure the impact of inflation. On a long-term basis, the Corporation has demonstrated an ability to adjust selling prices in reaction to changing costs due to inflation.

Forward Looking Information

Certain statements in this report are considered forward looking as indicated by the Private Securities Litigation Reform Act of 1995. These statements involve uncertainties that may cause actual results to materially differ from expectations as of the report date. These uncertainties include but are not limited to:

• Consumer confidence and economic uncertainty

• Availability of wholesale and retail financing

• The health of the U.S. housing market as a whole

• Cyclical nature of the manufactured housing and recreational vehicle industries

• General or seasonal weather conditions affecting sales

• Potential impact of natural disasters on sales and raw material costs

• Potential periodic inventory adjustments by independent retailers

• Interest rate levels

• Impact of inflation

• Impact of rising fuel costs

• Cost of labor and raw materials

• Competitive pressures on pricing and promotional costs

• Catastrophic events impacting insurance costs

• The availability of insurance coverage for various risks to the Corporation

• Market demographics

• Management's ability to attract and retain executive officers and key personnel.