Urges Stockholders to Vote FOR the Committee's Nominees on the GOLD
Proxy Card FORT WORTH, Texas, April 14 /PRNewswire/ -- The members
of the Cavalier Homes Committee for Change (the "Committee")
announced today that it has sent a letter to the stockholders of
Cavalier Homes, Inc. (the "Company") (NYSE Alternext US: CAV)
urging stockholders to elect its three highly qualified and
experienced director nominees, Michael R. O'Connor, Kenneth E.
Shipley and Curtis D. Hodgson, at the Company's 2009 annual meeting
of stockholders on May 19, 2009. The members of the Committee
beneficially own an aggregate of 1,694,892 shares of common stock
of the Company, representing approximately 9.6% of the outstanding
shares of the Company's common stock. The full text of the letter
follows: April 14, 2009 IT IS TIME FOR A CHANGE at cavalier! Dear
Fellow Stockholders: We are seeking your support on our GOLD proxy
card to elect our three highly qualified, independent director
nominees at Cavalier's Annual Meeting of Stockholders, scheduled to
be held on May 19, 2009. The members of the Cavalier Homes
Committee for Change are the beneficial owners of an aggregate of
1,694,892 shares of common stock of Cavalier Homes, Inc.
("Cavalier" or the "Company"), representing approximately 9.6% of
the Company's outstanding shares of common stock. As significant
stockholders, our interests are aligned with yours - to maximize
the value of our shares. Our nominees are committed to bringing
much needed improvement to the bottom line and restoring
profitability to the Company. 25 YEARS AND NOTHING TO SHOW FOR IT
Cavalier was founded in 1984 and went public in 1986. The current
Chairman, Barry B. Donnell, and one other director have been
directors since 1986. During the 1990s, the Company enjoyed
considerable growth. But for the last ten years, well before the
current financial and housing crisis began, the Company's
performance has suffered. We believe the Company's poor operating
performance, continued high administrative spending, and
ill-advised business strategies, have led to more than a 75%
decline in stockholder value over the last three years alone. After
25 years in the mobile home industry, Cavalier has no retained
earnings. In fact, it has an accumulated deficit! Over the past ten
years, this Board has overseen: -- An 83% drop in quarterly
revenues from $163,416,000 to $27,046,000; -- A 60% drop in
stockholder equity from $129,391,000 to $52,596,000; and -- A
cumulative LOSS of $75,418,000. In fact, the only numbers that seem
to rise at Cavalier are the amounts they pay in compensation and
perks. Stockholders have suffered but, nonetheless, the Board has:
-- Paid its current Chairman, Barry B. Donnell, cash compensation
of over $7,000,000 and, on top of that, granted him long-term
"incentive" options to buy hundreds-of-thousands of shares of
Company stock, at strike prices as low as $0.68 per share. The
Company has also continuously paid nearly $50,000 per year for his
separate office space in Wichita Falls, Texas. -- Adopted a pattern
of "incentive" pay, which we believe fails to take into account the
Company's losses and declining revenues. If the Company shows a
loss one year, and then books a profit the next year, the key
executives qualify for bonuses amounting to several times their
annual salary, plus stock options, plus 401(k) money, plus
automobiles (or trucks), plus life insurance. -- Continued to spend
stockholder money as if it were their own, on such luxury items as
a SKYBOX to watch Alabama football games! What possibly justifies
this expense? We, as significant stockholders, have "skin in the
game." We want nothing more than to restore profitability to the
Company and have Cavalier's stock price go up. While we purchased
our Cavalier stock in the open market over a period of years, only
one member of the Board has purchased any Cavalier stock in the
open market in the past five years. THIS BOARD HAS NO VIABLE PLAN
TO RESTORE PROFITABILITY Cavalier prospered enormously under the
leadership of its founder and initial CEO, Jerry Wilson. By 1996,
Mr. Wilson had expanded the Company, both horizontally and
vertically. He entered into new geographical territory. He expanded
into component manufacturing. Most importantly, he started the
Company's financial services subsidiary, CIS Financial Services
Inc. ("CIS") in 1991. At the time of his death in 1996, the
Company's stock had appreciated more than tenfold, reaching an
all-time high of $18.70 per share. As you know, the Company's share
price has never returned to 1996 levels. After Mr. Wilson's death,
management has failed to look after the interests of stockholders,
but they clearly have taken care of themselves. Each year the Board
tries to justify the Company's lackluster performance with industry
statistics and "market share" analysis. Each year they publish a
"strategy" which includes increasing sales and making a
"consistent" profit. Each year they report to us why their strategy
did not work the prior year. Their failure should not be tolerated
any longer. In this century, under the current Chairman, the
Company has not expanded into any segment of the mobile home
industry that could reverse this downward trend. Instead, the
Company has essentially been in a liquidation mode, selling asset
after asset after asset. (Photo:
http://www.newscom.com/cgi-bin/prnh/20090414/NY98268-a ) The two
most recent cases of asset sales are (i) the sale of CIS for
$750,000 and (ii) the sale of a brand-new, never-used, 179,000
square foot building in Cordele, Georgia for $2,975,000
(significantly less than cost). Cavalier's cash position is not the
result of operating earnings, but rather stems from paid-in capital
and asset liquidation. While this liquidation strategy has indeed
resulted in bolstering the Company's cash position (to over
$30,000,000), management clearly has no good plan for this cash.
Last year they said they have no plan to buy back stock and no plan
for a dividend, even though it has been eight years since they paid
one. They have no plan for a distribution and no plan for any sort
of expansion. We believe the only "Plan" this Board has for
stockholder cash is to keep on paying high compensation to
themselves and senior management. OUR PLAN In June 2008, after we
had already purchased over 5% of Cavalier's stock, we met with the
Board (except they did not invite David A. Roberson, the Company's
former President and Chief Executive Officer) and outlined for them
the direction that we thought Cavalier should take. We firmly told
the Board that there was too much excess capacity in manufacturing,
noting that even a significant increase in retail demand would not
relieve pricing pressure on manufacturers. We also outlined several
steps to restore profitability and turn Cavalier around. We
proposed the following seven steps: 1. Focus on selling low and
medium-priced products; 2. De-emphasize higher-priced products; 3.
Provide wholesale "floor plan" financing arrangements to certain
existing dealers; 4. Create new retailers through wholesale "floor
plan" financing arrangements; 5. Expand CIS' retail financing
division; 6. Reduce "selling, general and administrative" expenses
to 10% of sales; and 7. Work on building brand names. At the June
meeting, we also discussed a possible business combination between
the Company and another public or private company in the home
manufacturing business, which included Legacy. We proposed a
possible stock-for-restricted stock merger of Legacy with Cavalier,
promising that Legacy would demonstrate at least $5,000,000 of
annual income. We also proposed to help Cavalier implement this
plan without taking salaries or compensation for ourselves. Nothing
came of the discussions and, as discussed below, we do not believe
any merger possibilities should be considered at this time. Despite
our efforts to introduce a new strategy to turn the Company around,
the Board dismissed our advice. No entry-level models were
introduced and no wholesale "floor plan" financing programs were
announced. Selling, general and administrative expenses remained at
18% and no effort was made to build a brand name. THIS BOARD SOLD
THE FUTURE OF CAVALIER FOR ONLY $750,000 The straw that broke the
camel's back.... the one event that convinced us to contest this
election...was the Board's decision to sell CIS. From our
perspective, CIS gave Cavalier a unique competitive advantage over
its competitors. With retail financing in extremely short supply,
CIS was a key reason why independent retailers chose Cavalier over
other manufacturers. Of the major competitors, only Palm Harbor and
Clayton had/have a retail financing arm. Established in 1991, CIS
became a Direct Endorsed Unsupervised FHA Title I and Title II
Lender, and was authorized to (i) sell loans directly to Freddie
Mac and Fannie Mae and (ii) provide servicing on the loans after
sale. Consistently profitable, CIS made gains from the sale of
installment contracts of $1,600,000 (or more) for each of the last
three years and it realized cumulative profit for Cavalier of more
than $2,400,000 over the last three years. We were shocked when we
heard in January 2009 that the Board was considering the sale of
CIS, particularly when just months earlier, in its Annual Report on
Form 10-K, the Company's stated business strategy was to: "....
pursue the financing, insurance and other activities of CIS and the
financial services segment." When we heard about the Board's
intention, we immediately contacted the Chairman and implored him
to reconsider. At this point (January 2009), we already had
publicly reported our 9.6% stake in Cavalier to the SEC.
Nonetheless, the Board once again proceeded to disregard our advice
and sold CIS in the first quarter of 2009. HOW MUCH DID THEY SELL
CIS FOR? $750,000. They sold CIS for less than its average annual
profit (from 2006 through 2008)! We believe that Cavalier should
capitalize on profitable segments of the mobile home industry,
wherever they exist from time to time. Right now, the profitable
segments are wholesale floor-planning, retail finance, insurance
and selling or financing foreclosed land/home combinations. But
profit opportunities change, and it's the Board's responsibility to
be ahead of (rather than behind) the trend. Our three nominees,
Michael R. O'Connor, Kenneth E. Shipley and Curtis D. Hodgson have
spent their entire adult lives in the mobile home business. Our
nominees have consistently been ahead of (rather than behind) the
trend, and have changed course many times to take advantage of new
opportunities. Don't let the current Board tell you it is the
industry.... because it is not. We have made profits when others
have not, regardless of year-over-year industry woes. STRATEGIC
ALTERNATIVES? As we discussed above, now is not the time for
Cavalier to discuss merger or consolidation opportunities. With the
stock trading at a steep discount to book value (and at times even
a discount to cash), the first priority is to make Cavalier
consistently profitable in order to get its stock price up to
tradable levels. We therefore question why the Board would hire
Avondale Partners to explore "strategic alternatives," in one of
the worst markets in modern history. It seems to us that this is
just another poor decision the Board has made. As industry
columnist John Grissim stated in February 2009 with respect to the
hiring of Avondale Partners and the sale of CIS, "Together these
two actions suggest Cavalier is in serious trouble and may not
survive." We believe we can turn Cavalier around, and that its
stock price will then reflect an enterprise value greater than book
value. That is our goal. Then from a position of strength, Cavalier
can explore "strategic alternatives." DON'T LET "RECENT NUMBERS"
TELL AN UNTRUE STORY Soon after we announced our intention to
contest this year's Board election, Cavalier reported fourth
quarter earnings for 2008 of $2,161,000. We believe these numbers
are highly suspicious. For some reason, for the first time in the
Company's history, Cavalier suddenly reported "gross margin" of 25%
for the fourth quarter of 2008, despite reporting gross margins for
the prior ten years ranging from 12% to 18%. Hmmmm... why now? We
think the Company used some or all of the following "adjustments"
to book the reported profits: > Retrospective General Liability
Insurance Credit $403,000 > Retrospective Workers Comp Insurance
Credit 550,000 > Lowering "Estimated Warranties" 1,620,000 >
CIS 432,000 ------- $3,505,000 The truth is that 2008's fourth
quarter revenues ($27,046,000) were the lowest of any quarter in
the last ten years, down from 2008's third quarter revenues
($38,325,000), which were previously the lowest of any quarter in
the last ten years. We believe with Cavalier's rapidly declining
revenues, no amount of "right-sizing" or "down-sizing" will save
the day. The downtrend in revenues must be reversed! (Photo:
http://www.newscom.com/cgi-bin/prnh/20090414/NY98268-b ) We also
question the reason for the Board's decision to enlarge the Board
to eight directors without stockholder approval and appoint three
new directors (none of which have experience in our industry). We
believe the Board did this for no other reason than to counteract
the influence of our nominees if elected. This mind set is
precisely the kind of thinking that must end! RESPONSE TO THEIR
ATTACK ON US By now you may have heard from the Board their claim
that we are "direct" competitors and that our goal is to take over
Cavalier. To be clear, we are not seeking Board representation to
"take over" Cavalier. We are seeking minority representation on the
Board to protect our investment in Cavalier! The Board claims
Legacy and Cavalier are "direct" competitors of the Company. Do not
be fooled. They have omitted many relevant facts: -- In 2005,
Cavalier sold us their "idled" Fort Worth, Texas facility (one of
22 manufacturing facilities they have closed over the years). --
They knew our intent at the time was to manufacture mobile homes
and clearly were not concerned with us as competition at the time
of the sale, since they made no statements to that effect. -- Fort
Worth is about 700 miles from Cavalier's nearest manufacturing
plant in Addison, Alabama. The high cost of transportation over the
700 miles of separation prevents Legacy and Cavalier from being
"direct" competitors. In fact, none of our 150 dealers also
represent Cavalier, though many do represent various other
manufacturers. -- National companies such as Fleetwood, Champion,
Palm Harbor, Clayton, Patriot, Southern Energy and previously,
Oakwood, Tidwell and Cavalier, have all maintained manufacturing
facilities in both Texas and the southeast, separately serving the
different markets. Texas manufacturers simply do not directly
compete with southeastern manufacturers. -- We further believe our
plan for Cavalier, which emphasizes low-end manufacturing,
financing and other opportunities, involves little to no
competition between the two companies. As for our one meeting in
June 2008, at which we proposed a stock-for-restricted stock merger
between Legacy and Cavalier, there was absolutely no follow up.
There was no counter-offer or negotiation of any sort. We first
learned of the Board's claim that they "carefully considered" our
proposal by reading their recent letter to stockholders dated April
7, 2009. In any event, our only plan for Cavalier is to work with
the other five members of the Board to (i) reverse the downward
trend in revenue, (ii) restore consistent profitability and (iii)
endeavor to have Cavalier's stock price reflect a healthy
enterprise value. Then, and only then, would we believe it
appropriate to explore consolidation or merger opportunities with
another public or private company in the industry. Regarding their
claim of "improved profitability," we believe the numbers speak for
themselves. Revenues continue to decline, assets continue to be
liquidated at bargain prices, profits are anemic and the stock
continues to trade substantially below book value, although we note
that Cavalier's stock price has indeed climbed 26% since our March
12, 2009 press release announcing our intention to nominate
directors to the Board. VOTE GOLD FOR CHANGE We are stockholders
who made an investment in Cavalier just like you. We believe we
have the experience and know-how to add value to your investment.
The current Board has a noticeable lack of experience in the mobile
home business, which we believe is essential. We believe that this
lack of experience has resulted in a stock price that is down 90%
from its high, an "accumulated loss" rather than retained earnings,
a steady decline of revenues and questionable compensation
practices. Moreover, the Board has failed to take the necessary
action to achieve profitability. These factors motivated us to form
the Cavalier Homes Committee for Change and to contest three of the
Board's nominees with our own independent nominees, each of whom
has a proven track record of success in the mobile home business.
Our three independent nominees have experience in nearly all
segments of the mobile home business, including retail sales,
wholesale sales, inventory financing, retail financing, community
development, park development and manufacturing. However, unlike
our nominees, the Company's nominees have virtually no experience
in the mobile home industry (other than their years on Cavalier's
Board). Our nominees have the plan, resources and experience to
develop new opportunities for Cavalier. And, most importantly, our
nominees have the integrity to put the interests of stockholders
above their own. Our nominees will not prosper at the expense of
stockholders. YOUR SUPPORT on the enclosed GOLD proxy will make a
difference! Feel free to call us any time. /s/ Curt Hodgson /s/
Kenny Shipley /s/ Mike O'Connor Curt Hodgson Kenny Shipley Mike
O'Connor 972-333-0216 806-894-7212 505-328-7744 To elect the
Committee's nominees, we urge all stockholders to sign and return
the GOLD Proxy whether or not you have already returned a white
proxy sent to you by the Company. The Committee urges all
stockholders not to sign or return any white proxy sent to you by
the Company. Instead, the Committee recommends that you use the
GOLD Proxy and vote by mail or if you own your shares through a
bank or a broker, you may vote by telephone or internet. If you
have already returned the white proxy, you can effectively revoke
it by voting the GOLD Proxy. Only your latest-dated proxy will be
counted. If you have any questions or need assistance in voting the
GOLD Proxy, please contact our proxy solicitor, Okapi Partners, at
the toll-free number or email address listed below. Call Toll-Free:
1-877-259-6290 Or Email: CERTAIN INFORMATION CONCERNING
PARTICIPANTS The Cavalier Homes Committee for Change (the
"Committee") has made a definitive filing with the Securities and
Exchange Commission ("SEC") of a proxy statement and an
accompanying GOLD proxy card to be used to solicit votes for the
election of its slate of nominees at the 2009 annual meeting of
stockholders of Cavalier Homes, Inc. (the "Company"). THE COMMITTEE
ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE DEFINITIVE
PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS
ARE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT
http://www.sec.gov/. IN ADDITION, THE PARTICIPANTS IN THE PROXY
SOLICITATION WILL PROVIDE COPIES OF THE DEFINITIVE PROXY STATEMENT
WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED
TO THE PARTICIPANTS' PROXY SOLICITOR, OKAPI PARTNERS LLC, AT ITS
TOLL FREE NUMBER: (877) 259-6290. The members of the Committee are
Legacy Housing, LTD. ("Legacy"), GPLH, LC ("GPLH"), Shipley
Brothers, LTD. ("Shipley Brothers"), K-Shipley, LLC ("K-Shipley"),
D-Shipley, LLC ("D-Shipley"), B-Shipley, LLC ("B-Shipley"), Federal
Investors Servicing, LTD ("Federal Investors"), Federal Investors
Management, L.C. ("Federal Management"), Kenneth E. Shipley, Curtis
D. Hodgson, Douglas M. Shipley, Billy G. Shipley and Michael R.
O'Connor. Legacy owns 155,000 shares of common stock of the Company
(the "Shares"). GPLH is the general partner of Legacy. By virtue of
this relationship, GPLH may also be deemed to beneficially own the
155,000 Shares owned by Legacy. Shipley Brothers is a member and
manager of GPLH. Shipley Brothers owns 637,932 Shares. By virtue of
its relationship with GPLH, Shipley Brothers may also be deemed to
beneficially own the 155,000 Shares owned by Legacy. K-Shipley,
D-Shipley and B-Shipley are the general partners of Shipley
Brothers. By virtue of these relationships, K-Shipley, D-Shipley
and B-Shipley may each be deemed to beneficially own the 637,932
Shares owned by Shipley Brothers and the 155,000 Shares owned by
Legacy. Federal Investors owns 137,200 Shares. Federal Management
is the general partner of Federal Investors. By virtue of this
relationship, Federal Management may be deemed to beneficially own
the 137,200 Shares owned by Federal Investors. Kenneth Shipley is
manager, president and assistant secretary of GPLH, the sole
member, manager and president of K-Shipley and a member and manager
of Federal Management. By virtue of his relationship with GPLH and
K-Shipley, Kenneth Shipley may be deemed to beneficially own the
155,000 Shares owned by Legacy and the 637,932 Shares owned by
Shipley Brothers. By virtue of his relationship with Federal
Management, Kenneth Shipley may also be deemed to beneficially own
the 137,200 Shares owned by Federal Investors. Douglas Shipley is
the sole member, manager and president of D-Shipley, the secretary
of Federal Management and is employed by Shipley Brothers as an
installer of manufactured homes. By virtue of his relationship with
D-Shipley, Douglas Shipley may be deemed to beneficially own the
155,000 Shares owned by Legacy and the 637,932 Shares owned by
Shipley Brothers. By virtue of his relationship with Federal
Management, Douglas Shipley may also be deemed to beneficially own
the 137,200 Shares owned by Federal Investors. Billy Shipley is the
sole member, manager and president of B-Shipley, the vice president
of Federal Management and is employed by Shipley Brothers as an
installer of manufactured homes. By virtue of his relationship with
B-Shipley, Billy Shipley may be deemed to beneficially own the
155,000 Shares owned by Legacy and the 637,932 Shares owned by
Shipley Brothers. By virtue of his relationship with Federal
Management, Billy Shipley may also be deemed to beneficially own
the 137,200 Shares owned by Federal Investors. Curtis Hodgson is a
member, manager and the vice president and secretary of GPLH.
Curtis Hodgson owns 765,000 Shares. By virtue of his relationship
with GPLH, Mr. Hodgson may also be deemed to beneficially own the
155,000 Shares owned by Legacy. Michael O'Connor owns 300 Shares.
Each member of the Committee, as members of a "group" for the
purposes of Rule 13d-5(b)(1) of the Securities Exchange Act of
1934, as amended, may be deemed to beneficially own the Shares
owned in the aggregate by the other members of the Committee. Each
member of the Committee disclaims beneficial ownership of the
Shares he/it does not directly own.
http://www.newscom.com/cgi-bin/prnh/20090414/NY98268-b
http://www.newscom.com/cgi-bin/prnh/20090414/NY98268-a
http://photoarchive.ap.org/ DATASOURCE: Cavalier Homes Committee
for Change CONTACT: Steven Balet, +1-212-297-0724
Copyright