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 November 30, 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 January 14, 1997
Common stock 9,995,844<PAGE>
SKYLINE CORPORATION
Form 10-Q Quarterly Report
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as
of November 30, 1996 and May 31, 1996 2 - 3
Consolidated Statements of Earnings and 4
Retained Earnings for the three and
six-month periods ended November 30,
1996 and 1995
Consolidated Statements of Cash 5
Flows for the six-month periods
ended November 30, 1996 and 1995
Notes to the Consolidated Financial 6
Statements
Report of Independent Accountants 7
Item 2. Management's Discussion and Analysis 8 - 9
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10<PAGE>
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands)
November 30, 1996 May 31, 1996
(Unaudited)
ASSETS
Current Assets:
Cash $ 7,763 $ 10,712
Treasury Bills, at cost plus accrued
interest, which approximates market 85,547 44,381
Accounts receivable, trade, less allowance
for doubtful accounts of $40 37,858 48,727
Inventories
Raw materials 5,830 5,813
Work in process 5,000 4,809
Finished goods 79 -
Total Inventories 10,909 10,622
Other current assets 9,108 9,425
TOTAL CURRENT ASSETS 151,185 123,867
Investment in U.S. Treasury Notes 29,915 59,907
Property, Plant and Equipment, at Cost:
Land 5,409 5,217
Buildings and improvements 56,069 56,684
Machinery and equipment 22,440 22,222
83,918 84,123
Less accumulated depreciation 41,046 40,723
Total Property, Plant and Equipment 42,872 43,400
Other Assets 3,187 3,162
$ 227,159 $ 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
November 30, 1996 May 31, 1996
(Unaudited)
Current Liabilities:
Accounts payable, trade $ 9,642 $ 10,249
Accrued salaries and wages 4,130 5,614
Accrued profit sharing 1,620 2,644
Accrued marketing programs 15,590 8,737
Accrued warranty expense 7,001 6,540
Other accrued liabilities 6,263 6,294
Income taxes 214 3,028
TOTAL CURRENT LIABILITIES 44,460 43,106
Other Deferred Liabilities 2,993 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 200,075 190,393
Treasury stock, at cost, 1,192,500 shares
at November 30, 1996 and 644,600 shares
at May 31, 1996 (25,609) (11,366)
TOTAL SHAREHOLDERS' EQUITY 179,706 184,267
$ 227,159 $ 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 and six-month periods ended November 30, 1996 and 1995
(Unaudited)
(Dollars in thousands except per share data)
Three-months Ended Six-months Ended
November 30, November 30,
1996 1995 1996 1995
Sales $ 164,378 $ 172,469 $ 335,914 $ 336,324
Cost of sales 135,171 141,853 275,043 276,699
Gross profit 29,207 30,616 60,871 59,625
Selling and administrative
expenses 20,208 22,612 42,721 45,409
Operating earnings 8,999 8,004 18,150 14,216
Interest income 1,560 1,576 3,186 3,126
Earnings before income taxes 10,559 9,580 21,336 17,342
Provision for income taxes:
Federal 3,430 3,135 6,930 5,685
State 790 719 1,600 1,299
4,220 3,854 8,530 6,984
Net earnings 6,339 5,726 12,806 10,358
Retained earnings,
beginning of period 195,274 179,485 190,393 176,187
201,613 185,211 203,199 186,545
Less, cash dividends paid 1,538 1,280 3,124 2,614
Retained earnings,
end of period $ 200,075 $ 183,931 $ 200,075 $ 183,931
Net earnings per share $ .62 $ .54 $1.24 $ .96
Cash dividends per share $ .15 $ .12 $ .30 $ .24
Weighted average common
shares outstanding 10,162,287 10,655,689 10,310,560 10,828,196
The accompanying notes are a part of the consolidated financial
statements.<PAGE>
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the six-month periods ended November 30, 1996 and 1995
Increase (Decrease) in Cash
(Unaudited)
(Dollars in thousands)
1996 1995
Cash Flows From Operating Activities:
Net earnings $ 12,806 $ 10,358
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury
Bills and Notes (3,177) (3,006)
Gain of sale of property, plant & equipment (962) -
Depreciation 1,796 1,636
Amortization of discount or premium on
U.S. Treasury Notes (8) 5
Working capital items:
Accounts receivable 10,519 4,213
Inventories (287) 3,246
Other current assets 317 (1,502)
Accounts payable, trade (607) 3,306
Accrued liabilities 4,775 9,827
Income taxes payable (2,814) (571)
Other assets (25) (12)
Other deferred liabilities 30 69
Total adjustments 9,557 17,211
Net cash provided by operating activities 22,363 27,569
Cash Flows From Investing Activities:
Proceeds from sale or maturity of
U.S. Treasury Bills 234,932 84,492
Purchase of U.S. Treasury Bills (274,390) (106,336)
Proceeds from maturity of U.S. Treasury Notes 30,000 -
Interest received from U.S. Treasury Notes 1,819 1,799
Proceeds from sale of property, plant
and equipment 1,442 555
Purchase of property, plant and equipment (1,748) (1,517)
Net cash used in investing activities (7,945) (21,007)
Cash Flows From Financing Activities:
Cash dividends paid (3,124) (2,614)
Purchase of treasury stock (14,243) (8,207)
Net cash used in financing activities (17,367) (10,821)
Net decrease in cash (2,949) (4,259)
Cash at beginning of year 10,712 10,754
Cash at end of quarter $ 7,763 $ 6,495
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 and six-month periods ended November 30, 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 November 30, 1996, the consolidated results of
operations for the three and six-month periods ended November 30, 1996
and 1995, and the consolidated cash flows for the six month periods
ended November 30, 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 7 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
November 30, 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
December 16, 1996
To The Board of Directors and
Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet as of
November 30, 1996 and the related consolidated statements of earnings
and retained earnings for the three-month and six-month periods ended
November 30, 1996 and 1995 and the consolidated statements of cash
flows for the six-month periods ended November 30, 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.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of May 31, 1996, and the
related consolidated statements of earnings and retained earnings and of
cash flows for the year then ended (not presented herein), and in our report
dated June 18, 1996 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of May 31, 1996, is
fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
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 November 30, 1996 cash and investments in U.S. Treasury Bills totaled
$93,310,000, an increase of $38,217,000 from $55,093,000 at May 31,
1996. The majority of this increase was due to the reinvestment of the
proceeds from the maturity of $30,000,000 in U.S. Treasury Notes into
U.S. Treasury Bills. Current assets exclusive of cash and investments
in U.S. Treasury Bills totaled $57,875,000 at November 30, 1996, a
decrease of $10,899,000 from the balance at May 31, 1996 of $68,774,000.
A reduction in trade accounts receivable ($10,869,000) contributed to
this decrease. Current liabilities increased $1,354,000 from May 31,
1996 to $44,460,000 at November 30, 1996. This increase can mainly be
attributed to a seasonal increase in marketing program accruals
($6,853,000) and decreased income taxes ($2,814,000). Working capital
at November 30, 1996 amounted to $106,725,000 compared to $80,761,000 at
May 31, 1996. Capital expenditures totaled $1,748,000 in the first half
of fiscal 1997 compared to $1,517,000 in the first half of the prior
year. Capital expenditures during the current fiscal year were made
primarily to adopt new manufacturing processes and increase
manufacturing efficiencies. An unused production facility was sold in
the second quarter, resulting in a net gain of $577,000. Cash was also
used to purchase $14,243,000 of Company stock in fiscal 1997, compared
to $8,207,000 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 Quarter and Six-months Ended November 30,
1996
Sales in the quarter ended November 30, 1996 amounted to $164,378,000, a
4.7 percent decrease from $172,469,000 in the comparable quarter of the
prior year. Manufactured housing sales decreased 8.9 percent to
$136,657,000 in 1996 compared to $150,079,000 in 1995.<PAGE>
Manufactured housing unit sales decreased to 4,796 compared to 5,657 in
1995. Recreational vehicle sales increased 23.8 percent to $27,721,000
in the second quarter of fiscal 1997 compared to $22,390,000 in fiscal
1996. Recreational vehicle unit sales increased to 2,055 compared to
1,776 in fiscal 1996.
Sales during the first half of fiscal 1997 amounted to $335,914,000 a
0.1 percent decrease from $336,324,000 in the comparable period of the
prior year. Manufactured housing sales decreased 3.8 percent to
$280,381,000 in 1996 compared to $291,377,000 in 1995. Manufactured
housing unit sales decreased to 9,871 compared to 11,027 in 1995.
Recreational vehicle sales increased 23.6 percent to $55,533,000 in the
first half of fiscal 1997 compared to $44,947,000 in fiscal 1996.
Recreational vehicle unit sales increased to 4,289 compared to 3,637 in
1995. Sales for the first half of fiscal 1997 reflect a softening in
demand for manufactured housing and a reversal of last year's overall
industry slowdown in the RV marketplace. In addition, second quarter
results were negatively affected by the unusually early November onset
of winter weather conditions, particularly in the Midwest.
Cost of sales in the second quarter remained unchanged at 82.2 percent
of sales, while the cost of sales for the first half of the year
decreased slightly (81.9 percent in fiscal 1997 vs 82.3 percent in
fiscal 1996). The decrease in costs is due to continued cost
containment efforts.
Selling and administrative expenses for the second quarter of fiscal
1997 decreased as a percentage of sales to 12.3 percent from 13.1
percent last year. Selling and administrative expenses for the first
half of the fiscal year also decreased as a percentage of sales to 12.7
percent from 13.5 percent. Both decreases were due primarily to the
reduction in the cost of marketing programs.
Interest income amounted to $1,560,000 in the second quarter of fiscal
1997 compared to $1,576,000 one year earlier. Interest income is
directly related to the amount available for investment and the
prevailing yields of U.S. Government securities.<PAGE>
Income Taxes
The provision for federal income taxes in each year approximates the
statutory rate and for state income taxes reflects current state rates
effective for the period based upon activities within the taxable
entities.
PART II
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 6. Exhibits and Reports on Form 8-K
No reports on Form 8K were filed during the second quarter of fiscal
1996.
The Exhibit filed as part of this report is 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: January 14, 1997
Joseph B. Fanchi
V.P. Finance & Treasurer,
Chief Financial Officer
DATE: January 14, 1997
James R. Weigand
Corporate Controller<PAGE>
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