10/09/00
9:33 a.m.
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, 2000
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:
Title of Class Shares Outstanding
Common stock October 9, 2000
8,478,044
SKYLINE CORPORATION
Form 10-Q Quarterly Report
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as 2 - 3
of August 31, 2000 and May 31, 2000
Consolidated Statements of Earnings and 4
Retained Earnings for the three-month
periods ended August 31, 2000 and 1999
Consolidated Statements of Cash 5
Flows for the three-month periods
ended August 31, 2000 and 1999
Notes to the Consolidated Financial 6 - 7
Statements for the three-month
period ended August 31, 2000
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 11
Security Holders
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
Dollars in thousands
August 31, 2000 May 31, 2000
(Unaudited)
ASSETS
Current Assets
Cash $ 6,221 $ 7,006
Treasury Bills, at cost plus accrued interest 106,109 101,932
Investment in U.S. Treasury Notes 25,055 -
Accounts receivable, trade, less allowance
for doubtful accounts of $40 35,242 35,430
Inventories 9,680 9,807
Other current assets 7,991 8,261
Total Current Assets 190,298 62,436
Investment in U.S. Treasury Notes - 25,072
Property, Plant and Equipment, At Cost
Land 6,662 6,662
Buildings and improvements 63,496 63,308
Machinery and equipment 25,906 25,770
96,064 95,740
Less accumulated depreciation 52,466 51,552
Net Property, Plant and Equipment 43,598 44,188
Other Assets 3,999 3,970
$237,895 $235,666
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
Dollars in thousands except per share data
August 31, 2000 May 31, 2000
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 8,039 $ 6,350
Accrued salaries and wages 5,563 5,540
Accrued profit sharing 642 2,518
Accrued marketing programs 11,658 8,435
Accrued warranty and related expenses 10,241 10,063
Other accrued liabilities 3,959 4,570
Income taxes 2,228 1,559
Total Current Liabilities 42,330 39,035
Other Deferred Liabilities 3,699 3,682
Commitments and Contingencies - -
Shareholders' Equity
Common stock, $.0277 per value,
15,000,000 shared authorized;
Issued 11,217,144 shares 312 312
Additional paid-in capital 4,928 4,928
Retained earnings 249,045 247,479
Treasury stock, at cost,
2,665,500 shares at August 31, 2000
2,534,200 shares at May 31, 2000 (62,419) (59,770)
Total Shareholders' Equity 191,866 192,949
$237,895 $235,666
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Earnings and Retained Earnings
For the three-month periods ended August 31, 2000 and 1999
(Unaudited)
Dollars in thousands except per share data
2000 1999
Sales $134,280 $166,712
Cost of sales 111,343 137,963
Gross profit 22,937 28,749
Selling and administrative expenses 19,733 22,112
Operating earnings 3,204 6,637
Interest income 1,928 1,536
Earnings before income taxes 5,132 8,173
Provision for income taxes:
Federal 1,728 2,694
State 274 584
2,002 3,278
Net earnings 3,130 4,895
Retained earnings, beginning of period 247,479 238,861
250,609 243,756
Less cash dividends paid 1,564 1,620
Retained earnings, end of period $249,045 $242,136
Basic earnings per share $ .36 $ .54
Cash dividends per share $ .18 $ .18
Weighted average common shares outstanding 8,612,930 8,999,944
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the three-month periods ended August 31, 2000 and 1999
Increase (Decrease) in Cash
(Unaudited)
Dollars in thousands
2000 1999
CASH FLOWS FROM OPERATION ACTIVITIES:
Net earnings $ 3,130 $ 4,895
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Interest income earned on U.S. Treasury Bills and
Notes (1,928) (1,536)
Depreciation 968 941
Amortization of premium on U.S. Treasury Notes 17 11
Working Capital Items:
Accounts receivable 188 (1,399)
Inventories 127 (208)
Other current assets 270 (171)
Accounts payable, trade 1,689 1,901
Accrued liabilities 937 (61)
Income taxes payable 669 1,142
Other assets (29) (31)
Other deferred liabilities 17 17
Total Adjustments 2,925 606
Net cash provided by operating activities 6,055 5,501
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale or maturity of U.S Treasury Bills 90,536 135,640
Purchase of U.S. Treasury Bills (93,504) (112,636)
Purchase of U.S. Treasury Notes - (25,133)
Interest received from U.S. Treasury Notes 719 -
Proceeds from sale of property, plant and equipment - 3
Purchase of property, plant and equipment (378) (1,338)
Net cash used in investing activities (2,627) (3,464)
CASH FLOWS FROM FINANICNG ACTIVITIES:
Cash dividends paid (1,564) (1,620)
Purchase of treasury stock (2,649) -
Net cash used in financing activities (4,213) (1,620)
Net (decrease) increase in cash (785) 417
Cash at beginning of year 7,006 4,266
Cash at end of quarter $ 6,221 $ 4,683
The accompanying notes are part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the three-month period ended August 31, 2000
NOTE 1 Nature of Operations and Accounting Policies
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, 2000, the
consolidated results of operations for the three-month periods ended
August 31, 2000 and 1999, and the consolidated cash flows for the three-month
periods ended August 31, 2000 and 1999.
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.
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. At August 31,2000 total inventories
consisted of raw materials, $4,560,000, work in process, $4,840,000, and
finished goods, $280,000. At May 31, 2000 total inventories consisted of raw
materials, $4,772,000, work in process, $4,771,000, and finished goods,
$264,000.
The Corporation and its subsidiaries were contingently liable at
August 31, 2000 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.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the three-month period ended August 31, 2000
NOTE 2 Industry Segment Information
(Unaudited)
Dollars in thousands
2000 1999
SALES
Manufactured Housing $104,789 $132,536
Recreational Vehicles 29,491 34,176
Total sales $134,280 $166,712
EARNINGS BEORE INCOME TAXES
OPERATING EARNINGS
Manufactured housing 3,758 6,257
Recreational vehicles 643 1,609
General corporate expense (1,197) (1,229)
Total operating earnings 3,204 6,637
Interest income 1,928 1,536
Earnings before income taxes $ 5,132 $ 8,173
Operating earnings represent earnings before interest income, gain (loss) on
sale of property, plant and equipment and provision for income taxes with
non-traceable operating expenses being allocated to industry segments based on
percentage of sales.
Report of Independent Accountants
September 15, 2000
To The Board of Directors and Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet of Skyline
Corportaion and Subsidiary Companies as of August 31, 2000, and the related
consolidated statements of earnings and retained earnings for each of the
three-month periods ended August 31, 2000 and 1999 and the consolidated
statement of cash flows for the three-month periods ended August 31, 2000 and
1999. These financial statements are 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 inquiries 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 consolidated interim financial information for it
to be in conformity with accounting principles generally accepted in the United
States of America.
We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of May 31,
2000, 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 15, 2000 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, 2000,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations for the Current Quarter Compared to the Same Quarter Last
Year
Sales in the quarter ended August 31, 2000 were $134,280,000, a decrease of
$32,432,000 from $166,712,000 in the comparable quarter of the prior year.
Manufactured housing sales totaled $104,789,000 compared to $132,536,000.
Manufactured housing unit sales decreased from 3,981 to 3,105. Sales were
negatively affected by industry-wide excessive retail inventories, higher
interest rates, and tightening of credit standards by lenders. These
conditions emerged in early fiscal 2000. First quarter recreational vehicle
sales decreased from $34,176,000 in fiscal 2000 to $29,491,000 in fiscal 2001.
Recreational vehicle unit sales decreased from 2,649 to 2,262. The decrease in
this segment's sales is primarily due to declining demand for fifth wheels and
travel trailers.
Cost of sales in the first quarter of fiscal 2001 was 82.9 percent of sales
compared to 82.8 percent in fiscal 2000.
Quarterly selling and administrative expenses increased from 13.3 percent in
fiscal 2000 to 14.7 percent in fiscal 2001. The increase is primarily due to a
larger proportion of fixed and semi-fixed costs resulting from lower sales
volume.
Operating earnings as a percentage of sales for manufactured housing were 3.6
percent in fiscal 2001 and 4.7 percent in fiscal 2000. Operating earnings as a
percentage of sales for recreational vehicles decreased from 4.7 percent to 2.2
percent. Both segments were affected by decreased sales volume.
Interest income amounted to $1,928,000 compared to $1,536,000. Interest income
is directly related to the amount available for investment and the prevailing
yields of U.S. Government securities.
Liquidity and Capital Resources
At August 31, 2000 cash and short-term investments in U.S. Treasury Bills
totaled $112,330,000, an increase of $3,392,000 from $108,938,000 at
May 31, 2000. Current assets exclusive of cash and investments in U.S.
Treasury Bills totaled $77,968,000 at August 31, 2000, an increase of
$24,470,000 from May 31, 2000 balance of $53,498,000. The increase was due to
the current classification of investment in U.S. Treasury Notes.
Current liabilities increased $3,295,000 from $39,035,000 at May 31, 2000 to
$42,330,000 at August 31, 2000. An increase in accrued marketing programs
($3,223,000) was a contributing cause to the increase. Working capital at
August 31, 2000 amounted to $147,968,000 compared to $123,401,000 at
May 31, 2000. Capital expenditures totaled $378,000 in the first quarter of
fiscal 2000 compared to $1,338,000 in the previous year. Capital expenditures
during the first three months were made primarily to replace or refurbish
machinery and equipment, and improve manufacturing efficiencies. Cash was also
used to purchase $2,649,000 of the corporation's stock.
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The cash provided by operating activities, along with current cash and other
short-term investments, 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.
Other Matters
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.
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.
Forward Looking Information
Certain statements in this report are considered forward looking as indicated
by the Private Securities Litigation Reform Act of 1995. These statements
involve uncertainties that may cause actual results to materially differ from
expectations as of the report date. These uncertainties include but are not
limited to general economic conditions, interest rate levels, consumer
confidence, market demographics, competitive pressures, and the success of
implementing administrative strategies.
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, 2000 heretofore filed by the
registrant with the Commission.
Item 4. Submission of Matters to a Vote of Security Holders
On September 25, 2000, 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 Against Votes Withheld
Arthur J. Decio 7,952,136 0 79,442
Terrence M. Decio 7,952,226 0 79,352
Jerry Hammes 7,966,581 0 64,997
Ronald F. Kloska 7,952,176 0 79,402
William H. Lawson 7,966,591 0 64,987
David T. Link 7,965,470 0 66,108
Andrew J. McKenna 7,899,781 0 131,797
William H. Murschel 7,951,966 0 79,612
Dale Swikert 7,966,550 0 65,028
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of fiscal 2001.
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:
James R. Weigand
V.P. Finance & Treasurer,
Chief Financial Officer
DATE:
Jon S. Pilarski
Controller
