SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended August 31, 1996
Commission File No. 1-4714
SKYLINE CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1038277
(State of Incorporation) (IRS Employer Identification No.)
P. O. Box 743, 2520 By-Pass Road Elkhart, IN 46515
(Address of principal executive offices) (Zip)
294-6521 (219)
(Registrant's telephone number) (Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Securities registered pursuant to Section 12 (b) of the Act:
Shares Outstanding
Title of Class October 11, 1996
Common stock 10,142,844<PAGE>
SKYLINE CORPORATION
Form 10-Q Quarterly Report
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as
of August 31, 1996 and May 31, 1996 3 - 4
Consolidated Statements of Earnings and 5
Retained Earnings for the three-month
periods ended August 31, 1996 and 1995
Consolidated Statements of Cash 6
Flows for the three-month
periods ended August 31, 1996
and 1995
Notes to the Consolidated Financial 7
Statements
Report of Independent Accountants 8
Item 2. Management's Discussion and Analysis 9 -10
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote
Of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12<PAGE>
Part I. Financial Information
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands)
August 31, 1996 May 31, 1996
(Unaudited)
ASSETS
Current Assets:
Cash $ 4,508 $ 10,712
Treasury Bills, at cost plus accrued
interest, which approximates market 47,688 44,381
Accounts receivable, trade, less allowance
for doubtful accounts of $40 55,287 48,727
Inventories
Raw materials 6,073 5,813
Work in process 4,975 4,809
Finished goods 160 -
Total Inventories 11,208 10,622
Investment in U.S. Treasury Notes, current
portion 30,007 -
Other current assets 8,743 9,425
TOTAL CURRENT ASSETS 157,441 123,867
Investment in U.S. Treasury Notes 29,898 59,907
Property, Plant and Equipment, at Cost:
Land 5,448 5,217
Buildings and improvements 56,734 56,684
Machinery and equipment 22,452 22,222
84,634 84,123
Less accumulated depreciation 41,587 40,723
Total Property, Plant and Equipment 43,047 43,400
Other Assets 3,154 3,162
$ 233,540 $ 230,336
The accompanying notes are a part of the consolidated financial
statements.<PAGE>
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands except per share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, 1996 May 31, 1996
(Unaudited)
Current Liabilities:
Accounts payable, trade $ 12,112 $ 10,249
Accrued salaries and wages 5,409 5,614
Accrued profit sharing 752 2,644
Accrued marketing programs 14,267 8,737
Accrued warranty expense 6,775 6,540
Other accrued liabilities 4,935 6,294
Income taxes 4,508 3,028
TOTAL CURRENT LIABILITIES 48,758 43,106
Other Deferred Liabilities 2,969 2,963
Commitments and Contingencies - -
Shareholders' Equity:
Common stock, $.0277 par value, 15,000,000
shares authorized; issued 11,217,144 shares 312 312
Additional paid-in capital 4,928 4,928
Retained earnings 195,274 190,393
Treasury stock, at cost, 931,600
shares at August 31, 1996 and 644,600
shares at May 31, 1996 (18,701) (11,366)
TOTAL SHAREHOLDERS' EQUITY 181,813 184,267
$ 233,540 $ 230,336
The accompanying notes are a part of the consolidated financial
statements.<PAGE>
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Earnings and Retained Earnings
For the three-month periods ended August 31, 1996 and 1995
(Unaudited)
(Dollars in thousands except per share data)
1996 1995
Sales $ 171,536 $ 163,855
Cost of sales 139,873 134,846
Gross profit 31,663 29,009
Selling and administrative expenses 22,512 22,797
Operating earnings 9,151 6,212
Interest income 1,626 1,550
Earnings before income taxes 10,777 7,762
Provision for income taxes:
Federal 3,500 2,550
State 810 580
4,310 3,130
Net earnings 6,467 4,632
Retained earnings, beginning of period 190,393 176,187
196,860 180,819
Less cash dividends paid 1,586 1,334
Retained earnings, end of period $ 195,274 $ 179,485
Net earnings per share $ .62 $.42
Cash dividends per share $ .15 $.12
Weighted average common shares outstanding 10,457,221 10,998,829
The accompanying notes are a part of the consolidated financial
statements.<PAGE>
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the three-month periods ended August 31, 1996 and 1995
Increase (decrease) in Cash
(Unaudited)
(Dollars in thousands)
1996 1995
Cash Flows From Operating Activities:
Net earnings $ 6,467 $ 4,632
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury
Bills and Notes (1,488) (1,432)
Depreciation 898 818
Amortization of discount or premium on
U.S. Treasury Notes 2 3
Working Capital Items:
Accounts receivable (6,560) (2,658)
Inventories (586) 3,178
Other current assets 682 (1,136)
Accounts payable, trade 1,863 3,661
Accrued liabilities 2,309 4,028
Income taxes payable 1,480 2,465
Other assets 8 23
Other deferred liabilities 6 31
Total Adjustments (1,386) 8,981
Net cash provided by operating activities 5,081 13,613
Cash Flows From Investing Activities:
Proceeds from sale or maturity of
U.S. Treasury Bills 128,469 15,461
Purchase of U.S. Treasury Bills (131,057) (25,328)
Interest received from U.S. Treasury Notes 769 892
Proceeds from sale of property, plant
and equipment 44 46
Purchase of property, plant and equipment (589) (879)
Net cash used in investing activities (2,364) (9,808)
Cash Flows From Financing Activities:
Cash dividends paid (1,586) (1,334)
Purchase of treasury stock (7,335) (7,835)
Net cash used in financing activities (8,921) (9,169)
Net decrease in cash (6,204) (5,364)
Cash at beginning of year 10,712 10,754
Cash at end of quarter $ 4,508 $ 5,390
The accompanying notes are a part of the consolidated financial
statements.<PAGE>
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the three-month periods ended August 31, 1996 and 1995
The accompanying unaudited interim consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the consolidated financial position as of
August 31, 1996 and the consolidated results of operations and changes in
cash for the three-month periods ended August 31, 1996 and 1995.
The unaudited interim consolidated financial statements included herein
have been prepared pursuant to the rules and regulations for reporting on
Form 10-Q. Accordingly, certain information and footnote disclosures
normally accompanying the annual consolidated financial statements have
been omitted. The interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Corporation's latest annual report on Form 10-K.
The financial data included herein has been subjected to a limited review
by Price Waterhouse LLP, the registrant's independent accountants, whose
report is included on page 8 of this filing.
Inventories are stated at cost, determined under the first-in, first-out
method, which is not in excess of market. Physical inventory counts are
taken at the end of each reporting quarter.
The Corporation and its subsidiaries were contingently liable at August
31, 1996 under agreements to purchase repossessed units on floor plan
financing made by financial institutions to its customers. Losses, if
any, would be the difference between repossession cost and the resale
value of the units. There have been no material losses in past years
under these agreements, and none are anticipated in the future.
The Corporation is a party to various pending legal proceedings in the
normal course of business. Management believes that any losses resulting
from such proceedings would not have a material adverse effect on the
Corporation's results of operations or financial position.<PAGE>
Report of Independent Accountants
September 16, 1996
To The Board of Directors and
Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet as of August
31, 1996 and the related consolidated statements of earnings and retained
earnings for the three-month periods ended August 31, 1996 and 1995 and
the consolidated statements of cash flows for the three-month periods
ended August 31, 1996 and 1995 of Skyline Corporation and Subsidiary
Companies. This financial information is the responsibility of the
company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquires of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial information for it to be in
conformity with generally accepted accounting principles.
PRICE WATERHOUSE LLP
Chicago, Illinois<PAGE>
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
At August 31, 1996 cash and investments in U.S. Treasury Bills totaled
$52,196,000 a decrease of $2,897,000 from $55,093,000 at May 31, 1996.
Current assets exclusive of cash and investments in U.S. Treasury Bills
totaled $105,245,000 at August 31, 1996, an increase of $36,471,000 from
the balance at May 31, 1996 of $68,774,000. This increase is due to the
classification of U.S. Treasury Notes due within one year as current
assets ($30,007,000) and the seasonal increase in accounts receivable
($6,560,000). Current liabilities increased $5,652,000 from May 31, 1996
to $48,758,000 at August 31, 1996. This increase in current liabilities
can be attributed to increased trade account payable due to increased
production ($1,863,000), increased marketing program accruals
($5,530,000), and increased income taxes payable ($1,480,000). Working
capital at August 31, 1996 amounted to $108,683,000 compared to
$80,761,000 at May 31, 1996. Capital expenditures amounted to $589,000 in
1996 compared to $879,000 in the first quarter of the prior year. Capital
expenditures during the current fiscal year were made primarily to
increase manufacturing capacity, adopt new manufacturing processes and
increase manufacturing efficiencies. Cash was also used to purchase
$7,335,000 of company stock in fiscal 1997, compared to $7,835,000 in
fiscal 1996. The cash provided by operating activities in fiscal 1997 is
expected to be adequate to fund any capital expenditures and treasury
stock purchases during the year. Historically, the Corporation's
financing needs have been met through funds generated internally.
Results of Operations for the Three Months Ended August 31, 1996
Sales in the quarter ended August 31, 1996 amounted to $171,536,000 a 4.7
percent increase from $163,855,000 in the comparable quarter of the prior
year. Manufactured housing sales increased 1.7 percent to $143,724,000 in
1996 compared to $141,299,000 in 1995. Recreational vehicle sales
increased 23.3 percent to $27,812,000 in the first quarter of 1996
compared to $22,556,000 in 1995. Sales for the quarter reflect continuing
demand for manufactured housing in most sections of the country and a
reversal of an overall industry slowdown in the RV marketplace.<PAGE>
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations for the Three Months Ended August 31, 1996,
continued
Cost of sales decreased in 1996 to 81.5 percent of sales compared with
82.3 percent in 1995. This decrease is due to efficiencies gained by
increased sales volume, higher product selling prices in the manufactured
housing segment, and continued cost containment efforts.
Selling and administrative expenses in 1996 decreased as a percentage of
sales to 13.1 percent from 13.9 percent in 1995 due primarily to cost
containment efforts.
Interest income amounted to $1,626,000 in 1996 compared to $1,550,000 in
1995. Interest income is directly related to the amount available for
investment and the prevailing yields of U.S. Government securities. The
increase in interest income was due to slightly higher investment levels
during the period.
Income Taxes
The provision for federal income tax approximates the statutory rate and
for state income taxes reflects current state rates effective for the
period based upon activities within the taxable entities.
Purchase of Treasury Stock
The Corporation's board of directors authorized the repurchase of up to
1.2 million shares of common stock, or approximately ten percent of the
shares outstanding, effective December 16, 1993. Approximately 250,000
shares remain to be purchased under this authorization. On September 16,
1996, the board authorized the repurchase of an additional 1.0 million
shares of common stock. The purchases will be made in the open market, or
in negotiated transactions, at such times and at such prices management
may decide.<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
Information with respect to this Item for the period covered by this Form
10-Q has been previously reported in Item 3, entitled "Legal Proceedings"
of the Form 10-K for the fiscal year ended May 31, 1996, heretofore filed
by the registrant with the Commission.
Item 4. Submission of Matters to a Vote of Security Holders
On September 16, 1996, Skyline Corporation held its Annual Meeting of
Shareholders at which the following matters were submitted to a vote of
the security holders:
1. Election of Directors
Nominee Votes For Votes Votes
Against Withheld
Arthur J. Decio 9,301,067 1,200 166,483
Terrence M. Decio 9,300,307 1,200 167,243
Jerry Hammes 9,427,942 1,200 39,608
Ronald F. Kloska 9,301,842 1,200 165,708
William H. Lawson 9,426,742 1,200 40,808
David T. Link 9,425,342 1,200 42,208
Andrew J. McKenna 9,426,042 1,200 41,508
William H. Murschel 9,300,242 1,200 167,308
Dale Swikert 9,427,142 1,200 40,408<PAGE>
Item 6. Exhibits and reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of fiscal 1996.
The Exhibits filed as a part of this report are listed below.
Exhibit No. Description
27) Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SKYLINE CORPORATION
DATE: October 11, 1996
Joseph B. Fanchi
V.P. Finance & Treasurer,
Chief Financial Officer
DATE: October 11, 1996
James R. Weigand
Corporate Controller<PAGE>
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