SKYLINE CORP
10-Q, 1996-10-11
MOBILE HOMES
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                       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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