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, 1997
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 12, 1998
Common stock 9,433,144
<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, 1997 and May 31, 1997 2 - 3
Consolidated Statements of Earnings and 4
Retained Earnings for the three and
six-month periods ended November 30,
1997 and 1996
Consolidated Statements of Cash 5
Flows for the six-month periods
ended November 30, 1997 and 1996
Notes to the Consolidated Financial 6 - 7
Statements
Report of Independent Accountants 8
Item 2. Management's Discussion and Analysis 9 - 11
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands)
November 30, 1997 May 31, 1997
(Unaudited)
ASSETS
Current Assets:
Cash $ 7,429 $ 9,489
Treasury Bills, at cost plus accrued
interest, which approximates market 84,038 71,059
Investment in U.S. Treasury Notes 29,983 29,949
Accounts receivable, trade, less allowance
for doubtful accounts of $40 36,545 43,360
Inventories
Raw materials 4,628 5,237
Work in process 4,574 4,756
Finished goods 216 -
Total Inventories 9,418 9,993
Other current assets 8,101 8,678
TOTAL CURRENT ASSETS 175,514 172,528
Property, Plant and Equipment, at Cost:
Land 5,115 5,336
Buildings and improvements 56,498 55,711
Machinery and equipment 23,513 22,996
85,126 84,043
Less accumulated depreciation 43,812 42,091
Total Property, Plant and Equipment 41,314 41,952
Other Assets 3,416 3,387
$ 220,244 $ 217,867
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, 1997 May 31, 1997
(Unaudited)
Current Liabilities:
Accounts payable, trade $ 7,424 $ 9,742
Accrued salaries and wages 3,427 5,194
Accrued profit sharing 1,430 2,659
Accrued marketing programs 14,899 8,068
Accrued warranty expense 7,810 7,368
Other accrued liabilities 4,360 4,906
Income taxes 501 649
TOTAL CURRENT LIABILITIES 39,851 38,586
Other Deferred Liabilities 3,157 3,060
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 213,056 205,126
Treasury stock, at cost, 1,784,000 shares
at November 30, 1997 and 1,551,000 shares
at May 31, 1997 (41,060) (34,145)
TOTAL SHAREHOLDERS' EQUITY 177,236 176,221
$ 220,244 $ 217,867
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, 1997 and 1996
(Unaudited)
(Dollars in thousands except per share data)
Three-months Ended Six-months Ended
November 30, November 30,
1997 1996 1997 1996
Sales $ 160,279 $ 164,378 $ 321,911 $ 335,914
Cost of sales 132,143 135,171 265,234 275,043
Gross profit 28,136 29,207 56,677 60,871
Selling and administrative
expenses 20,712 21,170 41,635 43,683
Operating earnings 7,424 8,037 15,042 17,188
Interest income 1,518 1,560 2,992 3,186
(Loss) gain on sale of
property, plant and
equipment (7) 962 (5) 962
Earnings before income taxes 8,935 10,559 18,029 21,336
Provision for income taxes:
Federal 2,940 3,430 5,920 6,930
State 640 790 1,280 1,600
3,580 4,220 7,200 8,530
Net earnings 5,355 6,339 10,829 12,806
Retained earnings,
beginning of period 209,150 195,274 205,126 190,393
214,505 201,613 215,955 203,199
Less, cash dividends paid 1,449 1,538 2,899 3,124
Retained earnings,
end of period $ 213,056 $ 200,075 $ 213,056 $ 200,075
Net earnings per share $ .56 $ .62 $1.13 $1.24
Cash dividends per share $ .15 $ .15 $ .30 $ .30
Weighted average common
shares outstanding 9,509,957 10,162,287 9,588,477 10,310,560
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, 1997 and 1996
Increase (Decrease) in Cash
(Unaudited)
(Dollars in thousands)
1997 1996
Cash Flows From Operating Activities:
Net earnings $ 10,829 $12,806
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury
Bills and Notes (2,992) (3,186)
Loss (gain) on sale of property, plant &
equipment 5 (962)
Depreciation 1,803 1,796
Amortization of discount or premium on
U.S. Treasury Notes (34) (8)
Working capital items:
Accounts receivable 6,815 10,869
Inventories 575 (287)
Other current assets 577 317
Accounts payable, trade (2,318) (607)
Accrued liabilities 3,731 4,775
Income taxes payable (148) (2,814)
Other assets (29) (25)
Other deferred liabilities 97 30
Total adjustments 8,082 9,898
Net cash provided by operating activities 18,911 22,704
Cash Flows From Investing Activities:
Proceeds from sale or maturity of
U.S. Treasury Bills 254,243 234,932
Purchase of U.S. Treasury Bills (264,998) (274,390)
Proceeds from maturity of U.S. Treasury Notes - 30,000
Interest received from U.S. Treasury Notes 768 1,478
Proceeds from sale of property, plant
and equipment 224 1,442
Purchase of property, plant and equipment (1,394) (1,748)
Net cash used in investing activities (11,157) (8,286)
Cash Flows From Financing Activities:
Cash dividends paid (2,899) (3,124)
Purchase of treasury stock (6,915) (14,243)
Net cash used in financing activities (9,814) (17,367)
Net decrease in cash (2,060) (2,949)
Cash at beginning of year 9,489 10,712
Cash at end of quarter $ 7,429 $ 7,763
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, 1997 and 1996
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, 1997, the consolidated results of
operations for the three and six-month periods ended November 30, 1997
and 1996, and the consolidated cash flows for the six-month periods
ended November 30, 1997 and 1996.
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
November 30, 1997 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>
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the three and six-month periods ended November 30, 1997 and 1996
In the first six months of calendar 1997, the Financial Accounting
Standards Board issued three statements of financial accounting
standards pertaining to earnings per share, reporting comprehensive
income, and disclosures about segments of an enterprise. The
Corporation has determined the effects on the consolidated financial
statements from the adoption of these accounting standards will not be
material.
Certain prior year amounts have been reclassified to conform with the
current year presentation.<PAGE>
Report of Independent Accountants
December 15, 1997
To The Board of Directors and
Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet as of
November 30, 1997 and the related consolidated statements of earnings
and retained earnings for the three-month and six-month periods ended
November 30, 1997 and 1996 and the consolidated statements of cash
flows for the six-month periods ended November 30, 1997 and 1996 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, 1997, 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 16, 1997 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, 1997, 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, 1997 cash and investments in U.S. Treasury Bills and
Notes totaled $121,450,000, an increase of $10,953,000 from $110,497,000
at May 31, 1997. Current assets exclusive of cash and investments in
U.S. Treasury Bills totaled $54,064,000 at November 30, 1997, a decrease
of $7,967,000 from the balance at May 31, 1997 of $62,031,000. A
reduction in trade accounts receivable ($6,815,000) and inventories
($575,000) contributed to this decrease. Current liabilities increased
$1,265,000 from May 31, 1997 to $39,851,000 at November 30, 1997. This
increase is mainly attributable to a seasonal increase in marketing
program accruals ($6,831,000) coupled with decreases in trade accounts
payable ($2,318,000), accrued salaries and wages ($1,767,000), accrued
liabilites ($546,000), and accrued profit sharing ($1,229,000). Working
capital at November 30, 1997 amounted to $135,663,000 compared to
$133,942,000 at May 31, 1997. Capital expenditures totaled $1,394,000
in the first half of fiscal 1998 compared to $1,748,000 in the first
half of the prior year. Capital expenditures during the current fiscal
year were made primarily to replace or refurbish machinery and equipment
and increase manufacturing efficiencies. An unused production facility
was sold in the second quarter of fiscal 1997, resulting in a net gain
of $577,000. Cash was also used to purchase $6,915,000 of Company stock
in fiscal 1998, compared to $14,243,000 in fiscal 1997. The cash
provided by operating activities in fiscal 1998 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,
1997
Sales in the quarter ended November 30, 1997 amounted to $160,279,000, a
2.5 percent decrease from $164,378,000 in the comparable quarter of the
prior year. Manufactured housing sales decreased 0.6 percent to
$135,851,000 in fiscal 1998 compared to $136,657,000 in fiscal 1997.
<PAGE>
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Manufactured housing unit sales decreased to 4,620 compared to 4,796 in
fiscal 1997. Recreational vehicle sales decreased 11.9 percent to
$24,428,000 in the second quarter of fiscal 1998 compared to $27,721,000
in fiscal 1997. Recreational vehicle unit sales decreased to 1,896
compared to 2,055 in fiscal 1997.
Sales during the first half of fiscal 1998 amounted to $321,911,000, a
4.2 percent decrease from $335,914,000 in the comparable period of the
prior year. Manufactured housing sales decreased 4.1 percent to
$269,001,000 in fiscal 1998 compared to $280,381,000 in fiscal 1997.
Manufactured housing unit sales decreased to 9,181 compared to 9,871 in
1996. Recreational vehicle sales decreased 4.7 percent to $52,910,000 in
the first half of fiscal 1998 compared to $55,533,000 in fiscal 1997.
Recreational vehicle unit sales decreased to 4,190 compared to 4,289 in
fiscal 1997. Sales for this business segment declined because of a
reduction in fifth wheel and truck camper sales. Manufactured housing
sales for the first half of fiscal 1998 reflect a softening in demand
for manufactured housing which began in late calendar 1996.
Cost of sales in the second quarter increased slightly to 82.4 percent
of sales from 82.2 in the prior year, while the cost of sales for the
first half of the year also increased (82.4 percent in fiscal 1998 vs
81.9 percent in fiscal 1997). The increase in costs is due to the
larger proportion of fixed and semi-fixed costs resulting from decreased
sales volume.
Selling and administrative expenses for the second quarters of fiscal
1998 and 1997 remained unchanged at 12.9 percent. Selling and
administrative expenses for the first half of the fiscal year decreased
as a percentage of sales to 12.9 percent from 13.0 percent.
An unused production facility was sold for a $962,000 gain in the second
quarter of fiscal 1997. This sale had an impact on net earnings for the
period of $577,000 or $.06 per share.
<PAGE>
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Interest income amounted to $1,518,000 in the second quarter of fiscal
1998 compared to $1,560,000 one year earlier. Interest income is
directly related to the amount available for investment and the
prevailing yields of U.S. Government securities.
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.
Other Matters
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. However,
the Corporation believes that inflation has not had a material effect on
its operations during the past three years. On a long-term basis the
Corporation has demonstrated an ability to adjust the selling prices of
its products in reaction to changing costs due to inflation.
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, 1997,
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
1998.
The Exhibit filed as part of this report is listed below.
Exhibit No. Description
27 Financial Data Schedule
<PAGE>
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 12, 1998
James R. Weigand
V.P. Finance & Treasurer,
Chief Financial Officer
DATE: January 12, 1998
Jon S. Pilarski
Controller
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